Long-Term Debt

The following is a description of our debt as of

March 31, 2020

and

December 31, 2019

, respectively:

	March 31, 2020			December 31, 2019
First Lien Credit Facility	$	101,778		$	95,778
Second Lien Credit Facility		100,000			100,000
Real estate lien note		3,021			3,091
		204,799			198,869
Less current maturities		(284	)		(280	)
		204,515			198,589
Deferred financing fees, net		(5,434	)		(5,871	)
Total long-term debt, net of deferred financing fees	$	199,081		$	192,718

First Lien Credit Facility

The Company has a senior secured First Lien Credit Facility with Société Générale, as administrative agent and issuing lender, and certain other lenders. As of

March 31, 2020,

$102.0

million was outstanding under the First Lien Credit Facility.

Prior to the refinancing described in Note

10,

“Subsequent Events”, the First Lien Credit Facility had a maximum commitment of

$200.0

million and availability is subject to a borrowing base. At

March 31, 2020,

the Company had a borrowing base of

$135.0

million. The Company's borrowing base could never exceed the

$200.0

million maximum commitment amount. Outstanding amounts under the First Lien Credit Facility accrued interest at a rate per annum equal to (a)(i) for borrowings that we elect to accrue interest at the reference rate at the greater of (

) the reference rate announced from time to time by Société Générale, (y) the federal funds rate plus

0.5%,

and (z) daily

one

-month LIBOR plus, in each case,

1.5%

2.5%,

depending on the utilization of the borrowing base, and (ii) for borrowings that we elect to accrue interest at the Eurodollar rate, LIBOR plus

2.5%

3.5%

depending on the utilization of the borrowing base and (b) at any time an event of default exists,

3.0%

plus the amounts set forth above. At

March 31, 2020,

the interest rate on the First Lien Credit Facility was approximately

4.8%.

Subject to earlier termination rights and events of default, the stated maturity date of the First Lien Credit Facility is

May

16,

2022.

Interest is payable quarterly on reference rate advances and

not

less than quarterly on LIBOR advances. The Company is permitted to terminate the First Lien Credit Facility and is able, from time to time, to permanently reduce the lenders’ aggregate commitment under the First Lien Credit Facility in compliance with certain notice and dollar increment requirements.

Each of the Company's subsidiaries has guaranteed our obligations under the First Lien Credit Facility on a senior secured basis. Obligations under the First Lien Credit Facility are secured by a

first

priority perfected security interest, subject to certain permitted encumbrances, in all of the Company and its subsidiary guarantors’ material property and assets. As of

March 31, 2020,

the collateral is required to include properties comprising at least

90%

of the PV-

of the Company's proven reserves and

95%

of the PV-

of the Company's PDP reserves.

Under the First Lien Credit Facility, the Company is subject to customary covenants, including certain financial covenants and reporting requirements. Prior to the refinancing described in Note

10,

"Subsequent Events", the Company was required to maintain a current ratio, as defined in the First Lien Credit Facility, as of the last day of each quarter of

not

less than

1.00

and an interest coverage ratio of

not

less than

2.50

1.00.

Prior to the refinancing described in Note

10,

"Subsequent Events", the Company was also required as of the last day of each quarter to maintain a total debt to EBITDAX ratio of

not

more than

3.50

1.00.

The current ratio was defined as the ratio of consolidated current assets to consolidated current liabilities. The interest coverage ratio was defined as the ratio of consolidated EBITDAX to consolidated interest expense for the

four

fiscal quarters ended on the calculation date. The total debt to EBITDAX ratio was defined as the ratio of total debt to consolidated EBITDAX for the

four

fiscal quarters ended on the calculation date. In connection with the

November 13, 2019

amendment to the First Lien Credit Facility and prior to the refinancing described in Note

10,

Subsequent Events", a minimum asset coverage ratio was added to the covenants. The minimum asset coverage ratio was defined as the ratio of (a) the sum of (i) PV-

of proven reserves classified as "developed" and "producing" and (ii) the PV-

of proven reserves classified as "drilled uncompleted" (up to

20%

of the sum (i) and (ii) to (b) total debt. Prior to the refinancing described in Note

10,

"Subsequent Events", the Company was required as of the last day of each fiscal quarter to maintain a minimum asset coverage ratio of

not

less than

1.45

1.00

(for the period between

March 31, 2021

and

December 31, 2021)

and

not

less than

1.55

1.00

after

December 31, 2021).

As of

March 31, 2020

we were in compliance with the financial following covenants under the First Lien Credit Facility, with the exception of the asset coverage ratio. And, as noted previously, the Company failed to

(i) deliver the

2019

Audited Financials

not

later than

days after the end of such fiscal year (ii) file this Form

-Q Quarterly Report for the period ended

March 31, 2020

later than

days after the end of such fiscal quarter and (iii) prevent existing hedge agreements from exceeding the maximum coverage permitted pursuant to the First Lien Credit Facility and (iv) failure to comply with the minimum Asset Coverage Ratio requirement with respect to the fiscal quarter ended

March 31, 2020,

which resulted in violations of certain covenants under the First Lien Credit Facility (as in effect prior to the First Lien Credit Facility Amendment (the

"1L

Amendment"), as defined in Note

10,

"Subsequent Events"). Subject to the terms and conditions of the

Amendment, Société Générale and each of the other lenders permanently waived such events of default and agreed

not

to charge default interest with respect to such defaults.

The First Lien Credit Facility contains a number of covenants that, among other things, restrict our ability to:

•

incur or guarantee additional indebtedness;

•

transfer or sell assets;

	•	create liens on assets;
	•	pay dividends of make other distributions on capital stock or make other restricted payments;

•

engage in transactions with affiliates other than on an “arm’s length” basis;

•

make any change in the principal nature of our business; and

•

permit a change of control.

The First Lien Credit Facility also contains customary events of default, including nonpayment of principal or interest, violations of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments and liabilities.

Second Lien Credit Facility

November 13, 2019,

we entered into the Term Loan Credit Agreement, with Angelo Gordon Energy Servicer, LLC, as administrative agent, and certain other lenders party thereto, which we refer to as the Second Lien Credit Facility. The Second Lien Credit facility was amended on

June 25, 2020.

The Second Lien Credit Facility has a maximum commitment of

$100.0

million. On

November 13, 2019,

$95.0

million of the net proceeds obtained from the Second Lien Credit Facility were used to permanently reduce the borrowings outstanding on the First Lien Credit Facility. As of

March 31, 2020,

the outstanding balance on the Second Lien Credit Facility was

$100.0

million. Prior to the refinancing described in Note

10,

"Subsequent Events", outstanding amounts under the Second Lien Credit Facility accrues interest at a rate per annum equal (a)(i) for borrowings that we elect to accrue interest at the reference rate, the greater of (w) the reference rate utilized by Angelo Gordon Energy Servicer, LLC, (

) the federal funds rate plus

0.5%,

(y) daily

three

-month LIBOR and (z)

2.75%,

plus, in each case

8.00%

(ii) for borrowings that we elect to accrue interest at the Eurodollar rate, the greater of (

) LIBOR and (y)

1.75%,

plus, in each case,

9.0%

and (b) at any time an event of default exists, after as well as before judgment,

per annum plus the amount set forth above. At

March 31, 2020,

the interest rate on the Second Lien Credit Facility was approximately

10.9%.

The Loans under the Second Lien Credit Facility were issued with an original issue discount of

3.50%

of par.

The stated maturity date of the Second Lien Credit Facility is

November 13, 2022.

Prior to the refinancing described in Note

"Subsequent Events", accrued interest was payable quarterly on reference rate loans and at the end of each

three

-month interest period on Eurodollar loans. We are permitted to prepay the loans in whole or in part, in compliance with certain notice and dollar increment requirements, and , if such prepayment is made prior to

November 13,

2020,

subject to payment of a Make Whole Amount, where applicable. “Make Whole Amount” is defined as, the sum of the interest payments (calculated on the basis of the interest rate as of the date of the relevant prepayment without discount) that would have accrued and been paid from the date of prepayment to

November 13, 2020

on the principal amount of such prepaid loans, whether such prepayments are optional, mandatory or as a result of acceleration.

Each of our subsidiaries has guaranteed our obligations under the Second Lien Credit Facility. Obligations under the Second Lien Credit Facility are secured by a

first

priority perfected security interest, subject to certain permitted liens, including those securing the indebtedness under the First Lien Credit Facility to the extent permitted by the Intercreditor Agreement, of even date with the Second Lien Credit Facility, among us, our subsidiaries, Angelo Gordon Energy Servicer, LLC and Société Générale, in all of our subsidiary guarantors’ material property and assets. As of

March 31, 2020,

the collateral is required to include properties comprising at least

90%

of the PV-

of the Company's our proven reserves and

95%

of the PV-

of the Company's PDP reserves.

Under the Second Lien Credit Facility, the Company is subject to customary covenants, including certain financial covenants and reporting requirements. Prior to the refinancing described in Note

10,

"Subsequent Events" , the Company was required to maintain a current ratio, as of the last day of each fiscal quarter, of

not

less than

1.00

and a total debt to consolidated EBITDAX ratio as of the last day of each fiscal quarter of

not

more than

4.00

1.00.

Prior to the refinancing described in Note

" Subsequent Events" the Company was also are required as of the last day of each fiscal quarter to maintain a minimum asset coverage ratio of

not

less than

1.25

1.00

(for the period between

December 31, 2019

and

December 31, 2020),

not

less than

1.45

1.00

(for the period between

March 31, 2021

and

December 31, 2021),

and

not

less than

1.55

1.00

(after

December 31, 2021).

The current ratio is defined as the ratio of consolidated current assets to consolidated current liabilities. The total debt to consolidated EBITDAX ratio was defined as the ratio of total debt to consolidated EBITDAX for the

four

fiscal quarters ended on the calculation date. The minimum asset coverage ratio was defined as the ratio of (a) the sum of (i) PV-

of proven reserves classified as “developed” and “producing” and (ii) the PV-

of proven reserves classified as “drilled uncompleted” (up to

20%

of the sum (i) and (ii)) to (b) total debt.

As of

March 31, 2020

we were in compliance with the financial following covenants under the Second Lien Credit Facility, with the exception of the asset coverage ratio. And, as noted previously, the Company (i) failed to deliver the

2019

Audited Financials

not

later than

days after the end of such fiscal year, (ii) failed to file this Quarterly Report on Form

-Q for the period ended

March 31, 2020

later than

days after the end of such fiscal quarter, which resulted in violations of certain covenants under the Second Lien Credit Facility (as in effect prior to the Second Lien Credit Facility Amendment (the

"2L

Amendment"), as defined in Note

10,

"Subsequent Events"). Additionally, the Company failed to maintain the required hedges under the Second Lien Credit Facility with respect to the fiscal quarter ended

March 31, 2020,

which resulted in a violation of the Company’s covenant under the Second Lien Credit Facility (as in effect prior to the

Amendment). Subject to the terms and conditions of the Second Lien Credit Facility, Angelo Gordon Energy Servicer, LLC and each of the other lenders permanently waived such events of default and agreed

not

to charge default interest with respect to such defaults.

The Second Lien Credit Facility contains a number of covenants that, among other things, restrict our ability to:

●

incur or guarantee additional indebtedness;

●

transfer or sell assets;

	●	create liens on assets;
	●	pay dividends or make other distributions on capital stock or make other restricted payments;

●

engage in transactions with affiliates other than on an “arm’s length” basis;

●

make any change in the principal nature of our business; and

●

permit a change of control

The Second Lien Credit Facility also contains customary events of default, including nonpayment of principal or interest, violation of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments and liabilities.

Real Estate Lien Note

We have a real estate lien note secured by a

first

lien deed of trust on the property and improvements which serves as our corporate headquarters. The outstanding principal accrues interest at a fixed rate of

4.9%.

The note is payable in monthly installments of principal and accrues interest in the amount of

$35,672.

The maturity date of the note is

July 20, 2023.

As of

December 31, 2019,

and

March 31, 2020,

$3.1

million and

$3.0

million, respectively, were outstanding on the note.