Long-Term Debt

Long-term debt consists of the following:



	September 30, 2014		December 31, 2013
	(In thousands)
7.75% Senior Notes due 2019, net of unamortized original issue discount of $318 at September 30, 2014 and $362 at December 31, 2013	$	599,682	$	599,638
Revolving credit facility, due April 2019^(a)	32,000		40,000
	$	631,682	$	639,638

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(a)	Renewed and extended in April 2014.

Senior Notes

In March 2011, we issued $300 million of aggregate principal amount of 7.75% Senior Notes due 2019 (the “2019 Senior Notes”). The 2019 Senior Notes were issued at par and bear interest at 7.75% per year, payable semi-annually on April 1 and October 1 of each year. In April 2011, we issued an additional $50 million aggregate principal amount of the 2019 Senior Notes with an original issue discount of 1% or $0.5 million. In October 2013, we issued $250 million of aggregate principal amount of the 2019 Senior Notes at par to yield 7.75% to maturity. These 2019 Senior Notes and the 2019 Senior Notes originally issued in March and April 2011 are treated as a single class of debt securities under the same indenture. 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 September 30, 2014 and December 31, 2013.

Revolving Credit Facility

In April 2014, we entered into an amended and restated credit facility with a syndicate of 16 banks led by JPMorgan Chase Bank, N.A. to provide for a revolving line of credit of up to $1 billion, limited to the lesser of the borrowing base amount, as determined by the banks, and the aggregate lender commitments, as determined by us. 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, (3) prepay the deficiency in not more than five equal monthly installments plus accrued interest, or (4) take any combination of options (1) through (3). Increases in aggregate lender commitments require the consent of each lender.

The initial borrowing base and the aggregate lender commitments under the new facility equaled $415 million at September 30, 2014. The new facility, which matures in April 2019, requires an accelerated maturity of October 1, 2018 unless our existing 2019 Senior Notes are refinanced or extended in accordance with the terms of the facility prior to October 1, 2018. At September 30, 2014, we had $32 million of borrowings outstanding on our revolving credit facility, leaving $377.1 million available under the facility after allowing for outstanding letters of credit totaling $5.9 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 except for CWEI Andrews Properties, GP, LLC (see Note 17).

At our election, annual interest rates under our revolving credit facility are determined by reference to (1) LIBOR plus an applicable margin between 1.50% and 2.50% 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 0.50% and 1.50% 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 nine months ended September 30, 2014 was 2.3%.

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 funded indebtedness are defined in our revolving credit facility. We were in compliance with all financial and non-financial covenants at September 30, 2014 and December 31, 2013.