Credit Facility

12 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Credit Facility

5. Credit Facility

The Company has a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which provided for a credit facility of $1,000,000. The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (.5%) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter.

No principal payments are anticipated to be required through the maturity date of the credit facility, December 28, 2021. Upon closing with WTNB on the Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording expenses totaling $34,532, which were deferred over the life of the credit facility.

Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing fiscal quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter. The Company is in compliance with all covenants as of March 31, 2019 and believes it will remain in compliance for the next fiscal year.

In addition, the Agreement prohibits the Company from paying cash dividends on its common stock without prior written permission of WTNB. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices.

There is no balance outstanding on the WTNB credit facility as of March 31, 2019.

Prior thereto, the Company had a loan agreement with Bank of America, N.A. which provided for a credit facility of $5,570,000 with no monthly commitment reductions and a borrowing base to be evaluated on July 30 and January 1 of each year or at any additional time in the bank’s discretion. The borrowing base was evaluated on July 31, 2018 and set at $525,000. The Agreement was renewed eleven times with the eleventh amendment effective as of March 8, 2017 with a maturity date of November 30, 2020. Under such renewal agreement, interest on the facility accrued at an annual rate equal to the British Bankers Association London Interbank Offered Rate (“BBA LIBOR”) daily floating rate, plus 3.0 percentage points. Interest on the outstanding amount under the credit agreement was payable monthly. The Company was in compliance with the loan agreement as the date of repayment.

On December 28, 2018, in connection with entering into the loan agreement with WTNB described above, the Company repaid in full and terminated its loan agreement with Bank of America, N.A. The $450,000 amount owed was repaid using Company funds and no early termination fees were incurred.

The following table is a summary of activity on the Bank of America, N.A. line of credit for the year ended March 31, 2019:

	Principal
Balance at April 1, 2018:	$	700,000
Borrowings		-
Repayments		700,000
Balance at March 31, 2019:	$	-

On December 26, 2018, the Company deposited $26,250 into a Cash Collateral Account at Bank of America, N.A. to collateralize one outstanding letter of credit for $25,000 in lieu of a plugging bond with the Texas Railroad Commission covering the properties the Company operates. This letter of credit renews annually.