Long-Term Debt

Long-term debt consists of the following:



	December 31, 2012		December 31, 2011
	(In thousands)
Revolving credit facility, due November 2015	$	460,000	$	180,000
7.75% Senior Notes due 2019, net of unamortized original issue discount of $415 at December 31, 2012 and $465 at December 31, 2011	349,585		349,535
	$	809,585	$	529,535

Aggregate maturities of long-term debt at December 31, 2012 are as follows: 2015- $460 million; 2019 - $349.6 million net of unamortized original issue discount of $415,000.

Revolving Credit Facility

We have a credit facility with a syndicate of banks that provides for a revolving line of credit of up to $585 million, limited to the amount of a borrowing base as determined by the banks. The borrowing base, which is based on the discounted present value of future net cash flows from oil and gas production, is redetermined by the banks semi-annually in May and November. We or the banks may also request an unscheduled borrowing base redetermination at other times during the year. If, at any time, the borrowing base is less than the amount of outstanding credit exposure under our revolving credit facility, we will be required to (1) provide additional security, (2) prepay the principal amount of the loans in an amount sufficient to eliminate the deficiency (or by a combination of such additional security and such prepayment eliminate such deficiency), or (3) prepay the deficiency in not more than five equal monthly installments plus accrued interest.

In May 2012, the banks increased the borrowing base from $475 million to $565 million and then to $585 million in November 2012 and increased the maximum credit facility from $500 million to $565 million in May 2012 and then to $585 million in November 2012. The banks also increased the aggregate commitment from $350 million to $475 million in April 2012, to $555 million in August 2012 and then to $585 million in November 2012. At December 31, 2012, after allowing for outstanding letters of credit totaling $4.1 million, we had $121 million available under our revolving credit facility based on then-existing commitments. During 2012, we increased indebtedness outstanding under our revolving credit facility by $280 million.

Our revolving credit facility is collateralized primarily by 80% or more of the adjusted engineered value (as defined in our revolving credit facility) of our oil and gas interests evaluated in determining the borrowing base. The obligations under our revolving credit facility are guaranteed by each of CWEI’s material domestic subsidiaries.

At our election, annual interest rates under our revolving credit facility are determined by reference to (1) LIBOR plus an applicable margin between 1.75% and 2.75% per year or (2) if an alternate base rate loan, the greatest of (A) the prime rate, (B) the federal funds rate plus 0.50%, or (C) one-month LIBOR plus 1% plus, if any of (A), (B) or (C), an applicable margin between 0.75% and 1.75% per year. We also pay a commitment fee on the unused portion of our revolving credit facility at a rate between 0.375% and 0.50%. The applicable margins are based on actual borrowings outstanding as a percentage of the borrowing base. Interest and fees are payable no less often than quarterly. The effective annual interest rate on borrowings under our revolving credit facility, excluding bank fees and amortization of debt issue costs, for the year ended December 31, 2012 was 2.7%.

Our revolving credit facility also contains various covenants and restrictive provisions that may, among other things, limit our ability to sell assets, incur additional indebtedness, make investments or loans and create liens. One such covenant requires that we maintain a ratio of consolidated current assets to consolidated current liabilities of at least 1 to 1. Another financial covenant prohibits the ratio of our consolidated funded indebtedness to consolidated EBITDAX (determined as of the end of each fiscal quarter for the then most-recently ended four fiscal quarters) from being greater than 4 to 1. The computations of consolidated current assets, current liabilities, EBITDAX and indebtedness are defined in our revolving credit facility. We were in compliance with all financial and non-financial covenants at December 31, 2012.

Senior Notes

In July 2005, we issued $225 million of aggregate principal amount of 7¾% Senior Notes due 2013 (“2013 Senior Notes”). The 2013 Senior Notes were issued at face value and bore interest at 7¾% per year, payable semi-annually on February 1 and August 1 of each year, beginning February 1, 2006. In March 2011, we redeemed $143.2 million in aggregate principal amount of 2013 Senior Notes in a tender offer and recorded a $4.6 million loss on early extinguishment of long-term debt, consisting of a $2.8 million premium and a $1.8 million write-off of debt issuance costs. On August 1, 2011, we called at par and redeemed in full the remaining $81.8 million of 2013 Senior Notes and recorded an additional $907,000 loss on early extinguishment of long-term debt related to the write-off of debt issuance costs.

In March 2011, we issued $300 million of aggregate principal amount of 7.75% Senior Notes due 2019 (“2019 Senior Notes”). The 2019 Senior Notes were issued at face value and bear interest at 7.75% per year, payable semi-annually on April 1 and October 1 of each year, beginning October 1, 2011. In April 2011, we issued an additional $50 million aggregate principal amount of 2019 Senior Notes with an original issue discount of 1% or $500,000. We may redeem some or all of the 2019 Senior Notes at redemption prices (expressed as percentages of principal amount) equal to 103.875% beginning on April 1, 2015, 101.938% beginning on April 1, 2016, and 100% beginning on April 1, 2017 or for any period thereafter, in each case plus accrued and unpaid interest.

The Indenture contains covenants that restrict our ability to: (1) borrow money; (2) issue redeemable or preferred stock; (3) pay distributions or dividends; (4) make investments; (5) create liens without securing the 2019 Senior Notes; (6) enter into agreements that restrict dividends from subsidiaries; (7) sell certain assets or merge with or into other companies; (8) enter into transactions with affiliates; (9) guarantee indebtedness; and (10) enter into new lines of business. One such covenant provides that we may only incur indebtedness if the ratio of consolidated EBITDAX to consolidated interest expense (as these terms are defined in the Indenture) does not exceed certain ratios specified in the Indenture. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. We were in compliance with these covenants at December 31, 2012.