(16) SUBSEQUENT EVENTS

On April 26, 2018, as part of the Company’s strategic effort to simplify the capital structure, increase financial flexibility and reduce costs, the Company replaced its 2016 credit facility (which consisted of a $1,191 million secured term loan and an unsecured $743 million revolving credit facility) with a new credit facility (the “2018 credit facility”), with initial aggregate commitments of $2,000 million, an initial borrowing base of $3,200 million and an aggregate maximum revolving credit amount of $3,500 million. The 2018 credit facility is secured by substantially all of the assets owned by the Company and its subsidiaries.

The 2018 credit facility matures on April 26, 2023, provided that if the Company has not amended, redeemed or refinanced at least $700 million of its 2022 Senior Notes on or before December 14, 2021, the 2018 credit facility will mature on December 14, 2021.

Loans under the 2018 credit facility 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 for such interest period plus the applicable margin (as those terms are defined in the 2018 credit facility documentation). The applicable margin for Eurodollar loans under the 2018 credit facility ranges from 1.50% to 2.50% based on the Company’s utilization of the borrowing base under the 2018 credit facility. Alternate base rate loans bear interest at the alternate base rate plus the applicable margin. The applicable margin for alternate base rate loans under the 2018 credit facility ranges from 0.50% to 1.50% based on the Company’s utilization of the borrowing base under the 2018 credit facility.

The 2018 credit facility contains customary representations and warranties and contains covenants including, among others, the following:

a prohibition against incurring debt, subject to permitted exceptions;

a restriction on creating liens on assets, subject to permitted exceptions;

restrictions on mergers and asset dispositions;

restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business; and

maintenance of the following financial covenants, commencing with the fiscal quarter ending June 30, 2018:

Minimum current ratio of no less than 1.00 to 1.00, whereby current ratio is defined as the Company’s consolidated current assets (including unused commitments under the credit agreement, but excluding non-cash derivative assets) to consolidated current liabilities (excluding non-cash derivative obligations and current maturities of long-term debt).

Maximum total net leverage ratio of no less than (i) with respect to each fiscal quarter ending during the period from June 30, 2018 through March 31, 2019, 4.50 to 1.00, (ii) with respect to each fiscal quarter ending during the period from June 30, 2019 through March 31, 2020, 4.25 to 1.00, and (iii) with respect to each fiscal quarter ending on or after June 30, 2020, 4.00 to 1.00. Total net leverage ratio is defined as total debt less cash on hand (up to the lesser of 10% of credit limit or $150 million) divided by consolidated EBITDAX for the last four consecutive quarters. EBITDAX, as defined in the Company’s 2018 credit agreement, excludes the effects of interest expense, depreciation, depletion and amortization, income tax, 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.

The 2018 credit facility contains customary events of default that include, among other things, the failure to comply with the financial covenants described above, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments and cross-defaults to material indebtedness. If an event of default occurs and is continuing, all amounts outstanding under the 2018 credit facility may become immediately due and payable.

The foregoing description of the 2018 credit facility is a summary only and is qualified in its entirety by reference to the Credit Agreement, a copy of which is attached as Exhibits 10.1, to the Company’s Current Report on Form 8-K dated April 26, 2018, and is incorporated herein by reference.

Pursuant to requirements under the indentures governing its senior notes, the Company will cause each subsidiary that becomes a guarantor of the 2018 credit facility to also become a guarantor of each of the Company’s senior notes.

Concurrent with the closing of the 2018 credit facility agreement, the Company repaid the $1,191 million secured term loan balance with cash on hand and borrowings under the new credit facility. The Company’s initial borrowings under the 2018 credit facility were $360 million, a portion of which related to other working capital needs. Additionally, the $323 million in letters of credit outstanding under the 2016 revolving credit facility at March 31, 2018 were converted to letters of credit under the new 2018 credit facility.