5. Long-Term Debt

Bankruptcy Filing. The Chapter 11 filing of the Company and the Chapter 11 Subsidiaries constituted an event of default with respect to our then-existing debt obligations. As a result, the Company's pre-petition unsecured senior notes and secured debt under the Prior First Lien Credit Facility became immediately due and payable, but any efforts to enforce such payment obligations were automatically stayed as a result of the Chapter 11 filing. On April 22, 2016, upon the Company's emergence from bankruptcy, the senior notes and borrowing under the DIP Credit Agreement (along with certain unsecured claims) were exchanged for 88.5% of the common stock of the reorganized entity. Additional information regarding the bankruptcy proceedings is included in Note 1A of the consolidated financial statements.

Our debt balances as of December 31, 2016 and 2015, were as follows (in thousands):



	Successor		Predecessor
	December 31, 2016		December 31, 2015
7.125% senior notes due in 2017 ⁽¹⁾	—		—
8.875% senior notes due in 2020 ⁽¹⁾	—		—
7.875% senior notes due in 2022 ⁽¹⁾	—		—
Bank Borrowings	$	198,000	$	324,900
Total Debt	198,000		324,900
Less: Current portion of long-term debt ⁽²⁾	$	—	$	(324,900	)
Long-Term Debt	$	198,000	$	—
(1) Classified as Liabilities Subject to Compromise as of December 31, 2015
(2) As a result of our Chapter 11 filing, we classified our credit facility borrowings as current at December 31, 2015.

New Credit Facility. As discussed in Note 1A of these consolidated financial statements, on the Effective Date, the Prior First Lien Credit Facility was terminated and paid in full, and the Company entered the New Credit Facility among the Company, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, and certain lenders party thereto. The New Credit Facility matures on April 22, 2019 and provides for advancing loans of up to the maximum credit amount that the lenders, in the aggregate, make available, subject to the Company meeting certain financial requirements, including certain financial tests. As of the Effective Date, the maximum credit amount was $500.0 million with an initial borrowing base of $320.0 million. The obligations under the New Credit Facility are secured, subject to certain exceptions, by a first priority lien of the Company's, and certain of its subsidiaries, oil and natural gas properties containing at least 95% of the Company's estimated proved producing reserves. The terms of the New Credit Facility also include the following, based on terms as defined in the New Credit Facility agreement:

•

As of the Effective Date and through December 31, 2016 , the initial borrowing base of $320.0 million was allocated between a non-conforming borrowing base of $70.0 million which was originally scheduled to terminate on November 1, 2017, and a conforming borrowing base of $250.0 million. Effective January 26, 2017 the Company and the lenders agreed to terminate the non-conforming borrowing base leaving only the conforming borrowing base of $250.0 million. As of December 31, 2016, the Company had borrowings of $198.0 million drawn on the credit facility.


•	Borrowing base redeterminations are scheduled to occur semi-annually in November and May and are determined by the lenders in their discretion and in the usual and customary manner.


•	The interest rate for Alternative Base Rate ("ABR") loans will be based on the ABR plus the applicable margin, and the interest rate for Eurodollar loans will be based on the adjusted London Interbank Offered Rate (“LIBOR”), plus the applicable margin.

•

As of December 31, 2016, the applicable margins varied and had escalating rates of either (a) 500 to 600 basis points for ABR loans and 600 to 700 basis points for Eurodollar loans, during the non-conforming period, and depending on the level of the non-conforming borrowing base and the non-conforming borrowing base loans outstanding, or (b) 200 to 300 basis points for ABR loans and 300 to 400 basis points for Eurodollar loans depending on the borrowing base utilization percentage, after the non-conforming period or when the non-conforming borrowing base is zero. Given the termination of the non-conforming borrowing base effective January 26, 2017, the applicable margins going forward are 200 to 300 basis points for ABR loans and 300 to 400 basis points for Eurodollar loans. As of December 31, 2016, our average borrowing rate was 7.9%.

•

Certain covenants, including (a) a ratio of total debt to EBITDA (as defined in the agreement) not to exceed 6.0 to 1.0 for the quarter ending December 31, 2016, declining gradually over time to 3.5 to 1.0 for the quarter ending March 31, 2019, and thereafter, (b) a current ratio of not less than 1.0 to 1.0 and (c) a minimum liquidity requirement of $10.0 million. As of December 31, 2016, the Company was in compliance with these covenants and liquidity requirements.

Interest expense on the New Credit Facility, including commitment fees and amortization of debt issuance costs, totaled $15.3 million for the period of April 23, 2016 through December 31, 2016 (successor). The amount of commitment fees amortization included in interest expense, net was $0.2 million for the period of April 23, 2016 through December 31, 2016 (successor).

Additionally, we capitalized interest on our unproved properties in the amount of $0.5 million for the period of April 23, 2016 through December 31, 2016 (successor).

Debtor-In-Possession Financing. As part of the Chapter 11 filings, we entered into the DIP Credit Agreement. The proceeds of borrowings under the DIP Credit Agreement were primarily used to pay down the pre-petition Prior First Lien Credit Facility upon emergence from bankruptcy, and were also used to pay certain costs, fees and expenses related to the Chapter 11 cases, authorized pre-petition claims, and amounts due in connection with the DIP Credit Agreement, including on account of certain “adequate protection” obligations. Pursuant to the Plan, the DIP Credit Agreement, at the option of the lenders, converted into the post-emergence Company’s common stock, which was part of the 88.5% of the common stock distributed to the then current holders of the senior notes and certain unsecured creditors upon emergence from the bankruptcy proceedings. As a result, the $75.0 million borrowed under the DIP Credit Agreement was not required to be repaid and the DIP Credit Agreement was terminated upon the Company’s exit from bankruptcy.

We paid the lenders under the DIP Credit Agreement a 3.0% commitment fee, at the time funds were made available under the facility, totaling $0.9 million. The commitment fee was included in interest expense during the period of January 1, 2016 through April 22, 2016 (predecessor). Total interest expense on the DIP Credit Agreement was $6.4 million during the period of January 1, 2016 through April 22, 2016 (predecessor).

Prior First Lien Credit Facility Bank Borrowings. Amounts outstanding under our pre-petition Prior First Lien Credit Facility due in 2017 of $324.9 million were classified as a current liability in the Consolidated Balance Sheet dated as of December 31, 2015 due to cross-default provisions as a result of the bankruptcy filings. The interest rate on our Prior First Lien Credit Facility was either (a) the lead bank’s prime rate plus an applicable margin or (b) the Eurodollar rate plus an applicable margin. However with respect to (a), if the lead bank’s prime rate was not higher than each of the federal funds rate plus 0.5%, and the adjusted London Interbank Offered Rate (“LIBOR”) plus 1%, the greatest of these three rates then applied. The applicable margins varied depending on the level of outstanding debt with escalating rates of 100 to 200 basis points above the Alternative Base Rate and escalating rates of 200 to 300 basis points for Eurodollar rate loans. The commitment fee terms associated with the Prior First Lien Credit Facility were 0.50%. During the bankruptcy proceedings we paid interest on our Prior First Lien Credit Facility in the normal course.

Interest expense on the Prior First Lien Credit Facility, including commitment fees and amortization of debt issuance costs, totaled $6.8 million, $9.4 million and $7.5 million for the period of January 1, 2016 through April 22, 2016 (predecessor) and the years ended December 31, 2015 and 2014 (predecessor), respectively. The amount of commitment fees included in interest expense, net was not material for the period of January 1, 2016 through April 22, 2016 (predecessor) and $0.5 million and $0.8 million for the years ended December 31, 2015 and 2014 (predecessor), respectively.

Additionally, we have capitalized interest on our unproved properties in the amount of $4.9 million and $5.0 million for the years ended December 31, 2015 and 2014 (predecessor), respectively. Capitalized interest on our unproved properties would have been immaterial for the period of January 1, 2016 through April 22, 2016 (predecessor), and therefore we did not capitalize any interest.

Senior Notes Liabilities. Senior Notes due in 2017 of $250.0 million, Senior Notes due in 2020 of $225.0 million and Senior Notes due in 2022 of $400.0 million are included in Liabilities subject to compromise in the Consolidated Balance Sheet as of December 31, 2015. These notes were canceled upon emergence from bankruptcy.

Senior Notes Due In 2022. These notes consist of $400.0 million of 7.875% senior notes that were scheduled to mature on March 1, 2022. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled pursuant to the plan of reorganization and the holders thereof were issued common stock of the post-emergence entity in exchange therefor.

Senior Notes Due In 2020. These notes consist of $225.0 million of 8.875% senior notes issued at 98.389% of par, which equates to an effective yield to maturity of 9.125%. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled pursuant to the plan of reorganization and the holders thereof were issued common stock of the post-emergence entity in exchange therefor.

Senior Notes Due In 2017. These notes consist of $250.0 million of 7.125% senior notes due in 2017, which were issued on June 1, 2007 at 100% of the principal amount and were scheduled to mature on June 1, 2017. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled pursuant to the plan of reorganization and the holders thereof were issued common stock of the post-emergence entity in exchange therefor.

Debt Issuance Costs. Our policy is to capitalize legal fees, accounting fees, underwriting fees, printing costs, and other direct expenses associated with issuing debt. The costs associated with our senior notes were amortized on an effective interest basis over the term of the senior notes, while issuance costs related to our line of credit arrangement are capitalized and then amortized ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings.

Interest Expense on Senior Notes. There was no interest expense on the senior notes, for the period of January 1, 2016 through April 22, 2016 (predecessor) due to bankruptcy proceedings. Contractual interest on the senior notes for the period of January 1, 2016 through April 22, 2016 (predecessor) totaled $21.6 million. Interest expense on the senior notes, including amortization of debt issuance costs, debt discount and debt premium, totaled $70.8 million and $70.7 million for the years ended December 31, 2015 and 2014 (predecessor), respectively.