(10) DEBT

The components of debt as of September 30, 2016 and December 31, 2015 consisted of the following:



	September 30, 2016
	Debt Instrument		Unamortized Issuance Cost		Unamortized Debt Discount		Total
		(in millions)
Short-term debt:
7.15% Senior Notes due June 2018	$	1	$	–	$	–	$	1
Total short-term debt	$	1	$	–	$	–	$	1

Long-term debt:
Variable rate (2.960% at September 30, 2016) term loan facility, due December 2020 (1)	$	327	$	(2)	$	–	$	325
Variable rate (2.960% at September 30, 2016) term loan facility, due December 2020 (2)		1,191		(11)		–		1,180
7.35% Senior Notes due October 2017		15		–		–		15
7.125% Senior Notes due October 2017		25		–		–		25
3.30% Senior Notes due January 2018 (3) (4)		38		–		–		38
7.50% Senior Notes due February 2018 (3)		212		–		–		212
7.15% Senior Notes due June 2018		26		–		–		26
4.05% Senior Notes due January 2020 (4)		850		(5)		–		845
4.10% Senior Notes due March 2022		1,000		(5)		(1)		994
4.95% Senior Notes due January 2025 (4)		1,000		(7)		(2)		991
Total long-term debt	$	4,684	$	(30)	$	(3)	$	4,651

Total debt	$	4,685	$	(30)	$	(3)	$	4,652

(1)

In July 2016, $375 million was repaid on the term loan facility, extending the maturity from November 2018 to December 2020, which will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its 2020 Senior Notes. In September 2016, an additional $48 million was repaid.

(2)

The maturity date will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its 2020 Senior Notes.

(3)

In July 2016, the Company purchased approximately $312 million of the 3.30% Senior Notes due January 2018 and $388 million of the 7.50% Senior Notes due February 2018.

(4)

In February and June 2016, Moody’s and S&P downgraded certain senior notes, increasing the interest rates by 175 basis points effective July 2016. As a result of the downgrades, interest rates increased to 5.05% for the 2018 Notes, 5.80% for the 2020 Notes and 6.70% for the 2025 Notes.


	December 31, 2015
	Debt Instrument		Unamortized Issuance Cost		Unamortized Debt Discount		Total
		(in millions)
Short-term debt:
7.15% Senior Notes due June 2018	$	1	$	–	$	–	$	1
Total short-term debt	$	1	$	–	$	–	$	1

Long-term debt:
Variable rate (1.886% at December 31, 2015) credit facility, expires December 2018	$	116	$	–	$	–	$	116
Variable rate (1.775% at December 31, 2015) term loan facility, due November 2018		750		(3)		–		747
7.35% Senior Notes due October 2017		15		–		–		15
7.125% Senior Notes due October 2017		25		–		–		25
3.30% Senior Notes due January 2018		350		(2)		–		348
7.50% Senior Notes due February 2018		600		(2)		–		598
7.15% Senior Notes due June 2018		26		–		–		26
4.05% Senior Notes due January 2020		850		(5)		(1)		844
4.10% Senior Notes due March 2022		1,000		(5)		(1)		994
4.95% Senior Notes due January 2025		1,000		(7)		(2)		991
Total long-term debt	$	4,732	$	(24)	$	(4)	$	4,704

Total debt	$	4,733	$	(24)	$	(4)	$	4,705

2016 Credit Facility

In June 2016, the Company reduced its existing $2.0 billion unsecured revolving credit facility to $66 million and entered into a new credit agreement for $1,934 million, consisting of a $1,191 million secured term loan and a new $743 million unsecured revolving credit facility, which matures in December 2020. The maturity date will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its 2020 Senior Notes. The $1,191 million secured term loan is fully drawn, with approximately $285 million of this balance used to pay down the previous revolving credit facility balance in its entirety. As of September 30, 2016, there were no borrowings under either revolving credit facility, however, there was $174 million in letters of credit outstanding against the 2016 revolving credit facility.

Loans under the 2016 credit agreement are subject to varying rates of interest based on whether the loan is a Eurodollar loan or an alternate base rate loan. Eurodollar loans bear interest at the Eurodollar rate, which is adjusted LIBOR plus applicable margins ranging from 1.750% to 2.500%. Alternate base rate loans bear interest at the alternate base rate plus the applicable margin ranging from 0.750% to 1.500%. The interest rate on the term loan facility is determined based upon the Company’s public debt ratings and was 250 basis points over the LIBOR as of September 30, 2016.

The new term loan and revolving credit facility contain financial covenants that impose certain restrictions on the Company. Under the new credit agreement, the Company must maintain a minimum interest coverage of 0.75x in 2016, increasing by 0.25x increments per year to 1.50x in 2019 and 2020. The Company is also subject to a minimum liquidity requirement of $300 million, which could be increased up to $500 million upon certain conditions, as well as an anti-hoarding provision, requiring unrestricted cash in excess of $100 million to pay down any amounts borrowed under the new revolving credit facility. The financial covenant with respect to minimum interest coverage consists of EBITDAX divided by consolidated interest expense. EBITDAX excludes the effects of interest expense, income taxes, depreciation, depletion and amortization, any non-cash impacts from impairments, certain non-cash hedging activities, stock-based compensation expense, non-cash gains or losses on asset sales, unamortized issuance cost, unamortized debt discount and certain restructuring costs. Collateral for the new secured term loan is principally the Company’s E&P properties in the Fayetteville Shale area, and the new credit agreement requires a minimum collateral coverage ratio of 1.50x the new secured term loan. This collateral also may support all or a part of revolving credit extensions depending on restrictions in the Company’s senior notes indentures.

As of September 30, 2016, the Company was in compliance with all of the covenants of this credit agreement. Although the Company does not anticipate any violations of the financial covenants, its ability to comply with these covenants is dependent upon the success of its exploration and development program and upon factors beyond the Company’s control, such as the market prices for natural gas and oil.

2013 Credit Facility

In December 2013, the Company entered into a credit agreement that exchanged its previous revolving credit facility. Under the revolving credit facility, the Company had a borrowing capacity of $2.0 billion. The revolving credit facility was unsecured and was not guaranteed by any subsidiaries. In June 2016, this credit facility was substantially exchanged for a new credit facility comprised of a $1,191 million secured term loan and a new $743 million revolving credit facility. The borrowing capacity of the original 2013 credit agreement was reduced from $2.0 billion to $66 million, remains unsecured and the maturity remains December 2018. As of September 30, 2016, there were no borrowings under this facility.

The existing unsecured 2013 revolving credit facility includes a financial covenant under which the Company may not have total debt in excess of 60% of its total adjusted book capital. This financial covenant with respect to capitalization percentages excludes the effects of any full cost ceiling impairments, certain hedging activities and the Company’s pension and other postretirement liabilities.

2015 Term Facility

In November 2015, the Company entered into a $750 million unsecured three-year term loan credit agreement with various lenders that was utilized to repay borrowings under the revolving credit facility. The interest rate on the term loan facility is determined based upon the Company’s public debt ratings from Moody’s and S&P and was 250 basis points over LIBOR as of September 30, 2016. The term loan facility requires prepayment under certain circumstances from the net cash proceeds of sales of equity or certain assets and borrowings outside the ordinary course of business. In June 2016, the 2015 term loan agreement was amended to extend the maturity date upon a repayment threshold. As a result of the July 2016 equity offering, the Company repaid $375 million of the $750 million term loan, which had the effect of extending the term loan maturity from November 2018 to December 2020, which will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its 2020 Senior Notes. As a result of the repayment, the Company expensed $3 million of unamortized debt issuance costs, recognized in other interest charges on the unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2016. In September 2016, the Company repaid an additional $48 million from the proceeds received from the closing of the sale of approximately 55,000 net acres in West Virginia to Antero Resources Corporation, resulting in an additional $0.4 million of interest expense related to unamortized debt issuance costs.

Senior Notes

In January 2015, the Company completed a public offering of $350 million aggregate principal amount of its 3.30% senior notes due 2018 (the “2018 Notes”), $850 million aggregate principal amount of its 4.05% senior notes due 2020 (the “2020 Notes”) and $1.0 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes” together with the 2018 and 2020 Notes, the “Notes”), with net proceeds from the offering totaling approximately $2.2 billion after underwriting discounts and offering expenses. The proceeds from this offering were used to repay the remaining principal and interest outstanding under the Company’s $4.5 billion 364-day bridge term loan facility, which was first reduced with proceeds from the Company’s concurrent underwritten public offerings of common and preferred stock, and were also used to repay a portion of amounts outstanding under the Company’s revolving credit facility. As a result of this repayment, the Company expensed $47 million of short-term unamortized debt issuance costs related to the bridge facility in January 2015, recognized in other interest charges on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2015. The Notes were sold to the public at a price of 99.949% of their face value for the 2018 Notes, 99.897% of their face value for the 2020 Notes and 99.782% of their face value for the 2025 Notes. The interest rates on the Notes are determined based upon the public bond ratings from Moody’s and S&P. Downgrades on the Notes from either rating agency increase interest costs by 25 basis points per downgrade level and upgrades decrease interest costs by 25 basis points per upgrade level on the following semi-annual bond interest payment. In February and June 2016, Moody’s and S&P downgraded the Notes, increasing the interest rates by 175 basis points effective July 2016. As a result of the downgrades, interest rates increased to 5.05% for the 2018 Notes, 5.80% for the 2020 Notes and 6.70% for the 2025 Notes. In the event of future downgrades, the coupons for this series of notes are capped at 5.30%, 6.05% and 6.95%, respectively. The first coupon payment to bondholders at the higher interest rates will be paid in January 2017.

In July 2016, the Company used a portion of the proceeds from the July 2016 equity offering to settle certain tender offers by purchasing an aggregate principal amount of approximately $700 million of the Company’s outstanding senior notes due in the first quarter of 2018, resulting in a loss of $51 million for the early retirement and redemption of these senior notes including $50 million of premiums paid. Additionally, the Company expensed $2 million of unamortized debt issuance costs and debt discounts, recognized in other interest charges.