Indebtedness

6 Months Ended

Jun. 30, 2011

Indebtedness [Abstract]

INDEBTEDNESS

(9) INDEBTEDNESS

     We had the following debt outstanding as of the dates shown below (in thousands). No interest expense was capitalized during the three months and the six months ended June 30, 2011 and 2010.

	June 30,		December 31,
	2011		2010
Bank debt	$	—	$	274,000
Subordinated debt:
6.375% Senior Subordinated Notes due 2015		—		150,000
7.5% Senior Subordinated Notes due 2016, net of discount		—		249,683
7.5% Senior Subordinated Notes due 2017		250,000		250,000
7.25% Senior Subordinated Notes due 2018		250,000		250,000
8.0% Senior Subordinated Notes due 2019, net of discount		287,398		286,853
6.75% Senior Subordinated Notes due 2020		500,000		500,000
5.75% Senior Subordinated Notes due 2021		500,000		—
Total debt	$	1,787,398	$	1,960,536

Bank Debt

     In February 2011, we entered into an amended and restated revolving bank facility, which we refer to as our bank debt or our bank credit facility, which is secured by substantially all of our assets. Our new borrowing base was set without our Barnett Shale assets. The bank credit facility provides for an initial commitment equal to the lesser of the facility amount or the borrowing base. On June 30, 2011, the borrowing base was $2.0 billion and our facility amount was $1.5 billion. The bank credit facility provides for a borrowing base subject to redeterminations semi-annually and for event-driven unscheduled redeterminations. Our current bank group is comprised of twenty-seven commercial banks with no one bank holding more than 7% of the total facility. The facility amount may be increased up to the borrowing base amount with twenty days notice, subject to payment of a mutually acceptable commitment fee to those banks agreeing to participate in the facility amount increase. At June 30, 2011, we had no outstanding balances under our bank credit facility and we had $13.9 million of undrawn letters of credit leaving approximately $1.5 billion of borrowing capacity available under the facility amount. The facility matures in February 2016. Borrowing under the bank credit facility can either be the Alternate Base Rate (as defined) plus a spread ranging from 0.50% to 1.50% or LIBOR borrowings at the Adjusted LIBO Rate (as defined) plus a spread ranging from 1.50% to 2.50%. The applicable spread is dependent upon borrowings relative to the borrowing base. We may elect, from time to time, to convert all or any part of our LIBOR loans to base rate loans or to convert all or any part of the base rate loans to LIBOR loans. The weighted average interest rate on the bank credit facility was 2.0% for the three months ended June 30, 2011 compared to 2.2% for the three months ended June 30, 2010. The weighted average interest rate on the bank credit facility was 2.2% for the six months ended June 30, 2011 compared to 2.2% for the six months ended June 30, 2010. A commitment fee is paid on the undrawn balance based on an annual rate of between 0.375% and 0.50%. At June 30, 2011, the commitment fee was 0.375%.

Senior Subordinated Notes

     In May 2011, we issued $500.0 million aggregate principal amount of 5.75% senior subordinated notes due 2021 (“5.75% Notes”) for net proceeds after underwriting discounts and commissions of $491.3 million. The 5.75% Notes were issued at par. Interest on the 5.75% Notes is payable semi-annually in June and December and is guaranteed by all of our current subsidiaries. We may redeem the 5.75% Notes, in whole or in part, at any time on or after June 1, 2016, at redemption prices of 102.875% of the principal amount as of June 1, 2016 declining to 100.0% on June 1, 2019 and thereafter. Before June 2014, we may redeem up to 35% of the original aggregate principal amount of the 5.75% Notes at a redemption price equal to 105.75% of the principal amount thereof, plus accrued and unpaid interest, if any, with the proceeds of certain equity offerings, provided that 65% of the aggregate principal amount of 5.75% Notes remain outstanding immediately after the occurrence of such redemption and also provided such redemption shall occur within 60 days of the date of the closing of the equity offering. On closing, we used $112.9 million of the proceeds to purchase our 6.375% senior subordinated notes due 2015 and $207.1 million of the proceeds to purchase our 7.5% senior subordinated notes due 2016 as part of the tender offer and redemption described below.

     On May 11, 2011, we commenced cash tender offers to purchase the entire outstanding $150.0 million principal amount of our 6.375% senior subordinated notes due 2015 and $250.0 million principal amount of our 7.5% senior subordinated notes due 2016. On May 25, 2011, after the expiration of the tender offers, we accepted for purchase $108.9 million in principal of the 2015 notes at 102.375% of par and $198.8 million in principal of the 2016 notes for 104.00% of par. We subsequently called the remaining 2015 and 2016 notes, redeeming all of the remaining outstanding 2015 notes ($41.1 million) at 102.125% of par on June 24, 2011 and redeeming all of the remaining outstanding 2016 notes ($51.2 million) at 103.75% of par on June 24, 2011. During the second quarter 2011, we recognized an $18.6 million loss on extinguishment of debt, including transaction call premium cost as well as expensing of deferred financing cost on repurchased debt.

Debt Covenants

     Our bank credit facility contains negative covenants that limit our ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain hedging contracts, change the nature of our business or operations, merge, consolidate, or make investments. In addition, we are required to maintain a ratio of debt to EBITDAX (as defined in the credit agreement) of no greater than 4.25 to 1.0 and a current ratio (as defined in the credit agreement) of no less than 1.0 to 1.0. We were in compliance with our covenants under the bank credit facility at June 30, 2011.

     The indentures governing our senior subordinated notes contain various restrictive covenants that are substantially identical to each other and may limit our ability to, among other things, pay cash dividends, incur additional indebtedness, sell assets, enter into transactions with affiliates or change the nature of our business. At June 30, 2011, we were in compliance with these covenants.