(7) DEBT

The components of debt as of December 31, 2017 and 2016 consisted of the following:


	December 31, 2017
(in millions)	Debt Instrument		Unamortized Issuance Expense		Unamortized Debt Discount		Total
Long-term debt:
Variable rate (3.980% at December 31, 2017) 2016 term loan facility, due December 2020 (1)	$	1,191	$	(8)	$	–	$	1,183
4.05% Senior Notes due January 2020 (2) (3)		92		–		–		92
4.10% Senior Notes due March 2022		1,000		(7)		–		993
4.95% Senior Notes due January 2025 (2)		1,000		(8)		(2)		990
7.50 % Senior Notes due April 2026		650		(10)		–		640
7.75 % Senior Notes due October 2027		500		(7)		–		493
Total long-term debt	$	4,433	$	(40)	$	(2)	$	4,391


	December 31, 2016
(in millions)	Debt Instrument		Unamortized Issuance Expense		Unamortized Debt Discount		Total
Short-term debt:
7.35% Senior Notes due October 2017	$	15	$	–	$	–	$	15
7.125% Senior Notes due October 2017		25		–		–		25
7.15% Senior Notes due June 2018 (3)		1		–		–		1
Total short-term debt	$	41	$	–	$	–	$	41

Long-term debt:
Variable rate (3.220% at December 31, 2016) term loan facility, due December 2020 (3)	$	327	$	(2)	$	–	$	325
Variable rate (3.220% at December 31, 2016) term loan facility, due December 2020 (1)		1,191		(10)		–		1,181
3.30% Senior Notes due January 2018 (2) (3)		38		–		–		38
7.50% Senior Notes due February 2018 (3)		212		–		–		212
7.15% Senior Notes due June 2018 (3)		25		–		–		25
4.05% Senior Notes due January 2020 (2) (3)		850		(5)		–		845
4.10% Senior Notes due March 2022		1,000		(4)		(1)		995
4.95% Senior Notes due January 2025 (2)		1,000		(7)		(2)		991
Total long-term debt	$	4,643	$	(28)	$	(3)	$	4,612

Total debt	$	4,684	$	(28)	$	(3)	$	4,653

(1)

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 senior notes due in January 2020. As of December 31, 2017, the Company has redeemed and refinanced $758 million principal amount of the 2020 senior notes.

(2)

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.

(3)

In 2017, the Company repurchased $38 million principal amount of its outstanding 3.30% Senior Notes due January 2018, $212 million principal amount of its outstanding 7.50% Senior Notes due February 2018, $26 million principal amount of its outstanding 7.15% Senior Notes due June 2018 and $758 million principal amount of its outstanding 4.05% Senior Notes due January 2020. The Company also repaid the outstanding $25 million of its outstanding 7.125% Senior Notes and $15 million of its 7.35% Senior Notes due October 2017 and the remaining $327 million principal amount of its term loan entered into in November 2015. The Company recognized a $70 million loss on the extinguishment of debt.

The following is a summary of scheduled debt maturities by year as of December 31, 2017:


		(in millions)
2018	$	−
2019		−
2020		1,283
2021		−
2022		1,000
Thereafter		2,150
	$	4,433

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 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, up to the stated coupon rate, 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 these 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 the bondholders at the higher interest rates was paid in January 2017.

During the first half of 2017, the Company redeemed or repurchased (i) $38 million principal amount of its outstanding 2018 Notes, (ii) $212 million principal amount of its outstanding 7.50% Senior Notes due February 2018 and (iii) $26 million principal amount of its outstanding 7.15% Senior Notes due June 2018, and recognized an $11 million loss on the extinguishment of debt.

In September 2017, the Company completed a public offering of $650 million aggregate principal amount of its 7.50% senior notes due 2026 (the “2026 Notes”) and $500 million aggregate principal amount of its 7.75% senior notes due 2027 (the “2027 Notes”), with net proceeds from the offering totaling approximately $1.1 billion after underwriting discounts and offering expenses. Both series of senior notes were sold to the public at face value. The proceeds from this offering were used to purchase $758 million of the Company’s 2020 Notes in a tender offer and to repay the outstanding balance of $327 million on the Company’s 2015 Term Loan. The Company recognized a loss on extinguishment of debt of $59 million, which included $53 million of premiums paid.

In October 2017, the Company retired $40 million principal amount outstanding on its 2017 Senior Notes.

In November 2017, the Company solicited and received consent to amend certain restrictive covenants contained in the indentures governing the Company’s 2022 Notes and the 2025 Notes. These amendments conform certain covenants of the 2022 Notes and 2025 Notes to all other series of senior notes.

2016 Credit Facility

In June 2016, the Company reduced its existing $2.0 billion unsecured revolving credit facility, entered into in December 2013, 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 senior notes due January 2020. In September 2017, the Company used a portion of the proceeds from the September 2017 debt offering to settle a tender offer by purchasing an aggregate principal amount of approximately $758 million of its outstanding senior notes due in January 2020. 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 December 31, 2017, there were no borrowings under either revolving credit facility; however, $323 million in letters of credit was outstanding under 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 LIBOR as of December 31, 2017.

The 2016 term loan and revolving credit facility contain financial covenants that impose certain restrictions on the Company. In September 2017, the Company amended its 2016 credit agreement to reflect the following:

Increase the minimum interest coverage ratio to 2.00x commencing with the fiscal quarter ended June 30, 2017 and continued over the life of the 2016 credit agreement;

Modify the minimum liquidity covenant such that either (1) if leverage is less than 4.00x or if the 2016 revolving credit facility has been terminated, there is no minimum liquidity covenant, or (2) the Company can elect to replace the minimum liquidity covenant with a maximum leverage ratio of no more than 5.50x for the fiscal quarter ending December 31, 2017, 5.00x for the fiscal quarters ending March 31, 2018 and June 30, 2018 and 4.50x thereafter; and

Modify the mandatory prepayment and commitment reduction provisions to permit the Company to retain the first $500.0 million of net cash proceeds from asset sales that would have otherwise been required to prepay amounts outstanding under the 2016 revolving credit facility and/or reduce commitments under the 2016 revolving credit facility.

As of December 31, 2017, the Company has not elected to replace the minimum liquidity covenant with a maximum leverage covenant. Therefore, under the amended credit agreement, should the leverage ratio exceed 4.00x, the Company would be subject to a minimum liquidity requirement of $300 million. The financial covenant with respect to the maximum leverage ratio consists of total debt divided by EBITDAX. The financial covenant with respect to minimum interest coverage consists of EBITDAX divided by consolidated interest expense. EBITDAX, as defined in the Company’s 2016 credit agreement, 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 secured term loan is principally the Company’s E&P properties in the Fayetteville Shale area, the equity of its subsidiaries and cash and marketable securities on hand, and the credit agreement requires a minimum collateral coverage ratio of 1.50x for the 2016 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 December 31, 2017, 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, oil and NGLs.

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 December 31, 2017, 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. At December 31, 2017, debt constituted 31% of the Company’s adjusted book capital.

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. In 2016, the Company repaid $423 million of the $750 million unsecured term loan from a portion of the net proceeds of the July 2016 equity offering along with proceeds received from a non-core asset sale. In September 2017, the remaining outstanding balance of $327 million was repaid, and this term loan was terminated.