| LONG-TERM DEBT | 4 . LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 2016 and December 31, 2015 (in thousands):
September 30,
December 31,
2016
2015
Credit agreement
$ 650,000
$ 800,000
6.5% Senior Subordinated Notes due 2018
275,121
350,000
6.5% Mandatory Convertible Senior Subordinated Notes due 2018
5,975
-
5% Senior Notes due 2019
961,409
1,100,000
5% Mandatory Convertible Senior Notes due 2019
4,651
-
1.25% Convertible Senior Notes due 2020
562,075
1,250,000
1.25% Mandatory Convertible Senior Notes due 2020, Series 1
380,385
-
1.25% Mandatory Convertible Senior Notes due 2020, Series 2
87,404
-
5.75% Senior Notes due 2021
873,609
1,200,000
5.75% Mandatory Convertible Senior Notes due 2021
125,218
-
6.25% Senior Notes due 2023
408,296
750,000
6.25% Mandatory Convertible Senior Notes due 2023
117,333
-
Total principal
4,451,476
5,450,000
Unamortized debt discounts and premiums
(331,338)
(203,082)
Unamortized debt issuance costs on notes
(34,509)
(49,214)
Total long-term debt
$ 4,085,629
$ 5,197,704
Credit Agreement —Whiting Oil and Gas, the Company’s wholly-owned subsidiary, has a credit agreement with a syndicate of banks that as of September 30, 2016 had a borrowing base of $2.6 billion, with aggregate commitments of $2.5 billion. Upon closing of the sale of the North Ward Estes Properties on July 27, 2016, the borrowing base was reduced from $2.75 billion to $2.6 billion. In October 2016, the borrowing base under the facility was reduced to $2.5 billion in connection with the November 1, 2016 regular borrowing base redetermination, with no change to the aggregate commitments of $2.5 billion. As of September 30, 2016 , the Company had $1.8 billion of available borrowing capacity, which was net of $650 million in borrowings and $11 million in letters of credit outstanding.
The borrowing base under the credit agreement is determined at the discretion of the lenders, based on the collateral value of the Company’s proved reserves that have been mortgaged to such lenders, and is subject to regular redeterminations on May 1 and November 1 of each year, as well as special redeterminations described in the credit agreement, in each case which may reduce the amount of the borrowing base. Upon a redetermination of the borrowing base, either on a periodic or special redetermination date, if borrowings in excess of the revised borrowing capacity were outstanding, the Company could be forced to immediately repay a portion of its debt outstanding under the credit agreement. The credit agreement permits the Company to dispose of its ownership interests in certain gas gathering and processing plants located in North Dakota without reducing the borrowing base.
A portion of the revolving credit facility in an aggregate amount not to exceed $50 million may be used to issue letters of credit for the account of Whiting Oil and Gas or other designated subsidiaries of the Company. As of September 30, 2016 , $39 million was available for additional letters of credit under the agreement.
The credit agreement provides for interest only payments until December 2019, when the credit agreement expires and all outstanding borrowings are due. Interest under the revolving credit facility accrues at the Company’s option at either (i) a base rate for a base rate loan plus the margin in the table below, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.5% per annum, or an adjusted LIBOR rate plus 1.0% per annum, or (ii) an adjusted LIBOR rate for a Eurodollar loan plus the margin in the table below. Additionally, the Company also incurs commitment fees as set forth in the table below on the unused portion of the aggregate commitments of the lenders under the revolving credit facility, which are included as a component of interest expense. At September 30, 2016 and December 31, 2015 , the weighted average interest rate on the outstanding principal balance under the credit agreement was 2.9% and 1.9% , respectively .
Applicable
Applicable
Margin for Base
Margin for
Commitment
Ratio of Outstanding Borrowings to Borrowing Base
Rate Loans
Eurodollar Loans
Fee
Less than 0.25 to 1.0
1.00%
2.00%
0.50%
Greater than or equal to 0.25 to 1.0 but less than 0.50 to 1.0
1.25%
2.25%
0.50%
Greater than or equal to 0.50 to 1.0 but less than 0.75 to 1.0
1.50%
2.50%
0.50%
Greater than or equal to 0.75 to 1.0 but less than 0.90 to 1.0
1.75%
2.75%
0.50%
Greater than or equal to 0.90 to 1.0
2.00%
3.00%
0.50%
The credit agreement contains restrictive covenants that may limit the Company’s ability to, among other things, incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, enter into hedging contracts, incur liens and engage in certain other transactions without the prior consent of its lenders. However, the credit agreement permits the Company and certain of its subsidiaries to issue second lien indebtedness of up to $1.0 billion subject to certain conditions and limitations. Except for limited exceptions, the credit agreement also restricts the Company’s ability to make any dividend payments or distributions on its common stock. These restrictions apply to all of the Company’s restricted subsidiaries (as defined in the credit agreement) . As of September 30, 2016 , there were no retained earnings free from restrictions. The credit agreement requires the Company, as of the last day of any quarter, to maintain the following ratios (as defined in the credit agreement): (i) a consolidated current assets to consolidated current liabilities ratio (which includes an add back of the available borrowing capacity under the credit agreement) of not less than 1.0 to 1.0, (ii) a total senior secured debt to the last four quarters’ EBITDAX ratio of less than 3.0 to 1.0 during the Interim Covenant Period (defined below), and thereafter a total debt to EBITDAX ratio of less than 4.0 to 1.0 , and (iii) a ratio of the last four quarters’ EBITDAX to consolidated cash interest charges of not less than 2.25 to 1.0 during the Interim Covenant Period. Under the credit agreement, the “Interim Covenant Period” is defined as the period from June 30, 2015 until the earlier of (a) April 1, 2018 or (b) the commencement of an investment-grade debt rating period (as defined in the credit agreement) . The Company was in compliance with its covenants under the credit agreement as of September 30, 2016 .
The obligations of Whiting Oil and Gas under the credit agreement are collateralized by a first lien on substantially all of Whiting Oil and Gas’ and Whiting Resource Corporation’s properties. The Company has guaranteed the obligations of Whiting Oil and Gas under the credit agreement and has pledged the stock of its subsidiaries as security for its guarantee.
Senior Notes and Senior Subordinated Notes —In September 2010, the Company issued at par $350 million of 6.5% Senior Subordinated Notes due October 2018 (the “2018 Senior Subordinated Notes”).
In September 2013, the Company issued at par $1.1 billion of 5% Senior Notes due March 2019 (the “2019 Senior Notes”) and $800 million of 5.75% Senior Notes due March 2021, and issued at 101% of par an additional $400 million of 5.75% Senior Notes due March 2021 (collectively, the “2021 Senior Notes”). The debt premium recorded in connection with the issuance of the 2021 Senior Notes is being amortized to interest expense over the term of the notes using the effective interest method, with an effective interest rate of 5.5% per annum.
In March 2015, the Company issued at par $750 million of 6.25% Senior Notes due April 2023 (the “2023 Senior Notes” and together with the 2019 Senior Notes and 2021 Senior Notes, the “Senior Notes”).
Exchange of Senior Notes and Senior Subordinated Notes for Convertible Notes . O n March 23, 2016, the Company completed the exchange of $477 million aggregate principal amount of Senior Notes and 2018 Senior Subordinated Notes, consisting of (i) $49 million aggregate principal amount of its 2018 Senior Subordinated Notes, (ii) $97 million aggregate principal amount of its 2019 Senior Notes, (iii) $152 million aggregate principal amount of its 2021 Senior Notes , and (iv) $179 million aggregate principal amount of its 2023 Senior Notes , for (i) $49 million aggregate principal amount of new 6.5% Convertible Senior Subordinated Notes due 2018 (the “2018 Convertible Senior Subordinated Notes”), (ii) $97 million aggregate principal amount of new 5% Convertible Senior Notes due 2019 (the “2019 Convertible Senior Note s”), (iii) $152 million aggregate p rincipal amount of new 5.75% Convertible Senior Notes due 2021 (the “202 1 Convertible Senior Notes”), and (iv) $179 million aggregate principal amount of new 6.25% Convertible Senior Notes due 2023 (the “2023 Convertible Senior Notes” and together with the 2018 Convertible Senior Subordinated Notes, the 2019 Convertible Senior Notes and the 2021 Convertible Senior Notes, the “New Con vertible Notes”).
The redemption provisions, covenants, interest payments and maturity terms applicable to each series of New Convertible Notes were substantially identical to those applicable to the corresponding series of Senior Notes and 2018 Senior Subordinated Notes.
This exchange transaction was accounted for as an extinguishment of debt for each portion of the Senior Notes and 2018 Senior Subordinated Notes that was exchanged. As a result, Whiting recognized a $91 million gain on extinguishment of debt, which is net of a $4 million non-cash charge for the acceleration of unamortized debt issuance costs and debt premium on the original notes. Each series of New Convertible Notes was recorded at fair value upon issuance, with the difference between the principal amount of the notes and their fair values, totaling $95 million, recorded as a debt discount. The aggregate debt discount of $185 million recorded upon issuance of the New Convertible Notes also included $90 million related to the fair value of the holders’ conversion options, which were embedded derivatives that met the criteria to be bifurcated from their host contracts and accounted for separately. Refer to the “Derivative Financial Instruments” and “Fair Value Measurements” footnotes for more information on these embedded derivatives. The debt discount and transaction costs of $8 million attributable to the New Convertible Notes issuance were being amortized to interest expense over the respective terms of the notes using the effective interest method.
The New Convertible Notes were convertible, at the option of the holders, into shares of the Company’s common stock at an initial conversion rate of 86.9565 common shares per $1,000 principal amount of the notes (representing an initial conversion price of $11.50 per share) for the 2018 Convertible Senior Subordinated Notes, the 2021 Convertible Senior Notes and the 2023 Convertible Senior Notes and an initial conversion rate of 90.9091 common shares per $1,000 principal amount of the notes (representing an initial conversion price of $11.00 per share) for the 2019 Convertible Senior Notes. Upon exercise of this option, the holder was entitled to receive an early conversion cash payment as well as a cash payment of all accrued and unpaid interest through the conversion date.
During the second quarter of 2016, holders of the New Convertible Notes voluntarily converted all $ 477 million aggregate principal amount of the New Convertible Notes for approximately 41.8 million shares of the Company’s common stock. Upon conversion, the Company paid $46 million in cash consisting of early conversion payments to the holders of the notes, as well as all accrued and unpaid interest on such notes. As a result of the conversions , Whiting recognized a $188 million loss on extinguishment of debt, which consisted of a non-cash charge for the acceleration of unamortized debt issuance costs and debt discount on the n otes. As of June 30, 2016, no New Convertible Notes remained outstanding.
Exchange of Senior Notes and Senior Subordinated Notes for Mandatory Convertible Notes. On July 1, 2016, the Company completed the exchange of $405 million aggregate principal amount of Senior Notes and 2018 Senior Subordinated Notes for the same aggregate principal amount of new mandatory convertible senior notes and mandatory convertible senior subordinated notes. Refer to “Exchange of Senior Notes, Convertible Senior Notes and Senior Subordinated Notes for Mandatory Convertible Notes” below for more information on these exchange transactions and the terms of the new mandatory convertible notes.
Kodiak Senior Notes. In conjunction with the acquisition of Kodiak Oil & Gas Corp. (the “Kodiak Acquisition”) in December 2014 , Whiting US Holding Company, a wholly-owned subsidiary of the Company, became a co-issuer of Kodiak’s $800 million of 8.125% Senior Notes due December 2019 (the “2019 Kodiak Notes”), $350 million of 5.5% Senior Notes due January 2021 (the “2021 Kodiak Notes”), and $400 million of 5.5% Senior Notes due February 2022 (the “2022 Kodiak Notes” and together with the 2019 Kodiak Notes and the 2021 Kodiak Notes, the “Kodiak Notes”).
I n January 2015, Whiting offered to repurchase at 101% of par all $1,550 million principal amount of Kodiak Notes then outstanding. I n March 2015, Whiting paid $760 million to repurchase $2 million aggregate principal amount of the 2019 Kodiak Notes, $346 million aggregate principal amount of the 2021 Kodiak Notes and $399 million aggregate principal amount of the 2022 Kodiak Notes, which payment consisted of the 101% redemption price and all accrued and unpaid interest on such notes. I n May 2015, Whiting paid an additional $5 million to repurchase the remaining $4 million aggregate principal amount of the 2021 Kodiak Notes and $1 million aggregate principal amount of the 2022 Kodiak Notes, which payment consisted of the 101% redemption price and all accrued and unpaid interest on such notes. I n December 2015, Whiting paid $834 million to repurchase the remaining $798 million aggregate principal amount of the 2019 Kodiak Notes, which payment consisted of the 104.063% redemption price and all accrued and unpaid interest on such notes. As a result of the repurchases, Whiting recognized a n $18 million loss on extinguishment of debt, which consisted of a $40 million cash charge related to the redemption premium on the Kodiak Notes, partially offset by a $22 million non-cash credit related to the acceleration of unamortized debt premiums on such notes. As of December 31, 2015, no Kodiak Notes remained outstanding.
2020 Convertible Senior Notes —In March 2015, the Company issued at par $1,250 million of 1.25% Convertible Senior Notes due April 2020 (the “ 2020 Convertible Senior Notes” ) f or net proceeds of $1.2 billion, net of initial purchasers’ fees of $25 million. On June 29, 2016, the Company exchanged $129 million aggregate principal amount of its 2020 Convertible Senior Notes for the same aggregate principal amount of new mandatory convertible senior notes, and on July 1, 2016, t he Company exchanged $559 million aggregate principal amount of its 2020 Convertible Senior Notes for the same aggregate principal amount of new mandatory convertible senior notes. Refer to “Exchange of Senior Notes, Convertible Senior Notes and Senior Subordinated Notes for Mandatory Convertible Notes” below for more information on these exchange transactions and the terms of the new mandatory convertible notes.
For the remaining $ 562 million aggregate principal amount of 2020 Convertible Senior Notes, t he Company has the option to settle conversions of these notes with cash, shares of common stock or a combination of cash and common stock at its election. The Company’s intent is to settle the principal amount of the 2020 Convertible Senior Notes in cash upon conversion. Prior to January 1, 2020, the 2020 Convertible Senior Notes will be convertible at the holder’s option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2015 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2020 Convertible Senior Notes for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after January 1, 2020, the 2020 Convertible Senior Notes will be convertible at any time until the second scheduled trading day immediately preceding the April 1, 2020 maturity date of the notes. The notes will be convertible at an initial conversion rate of 25.6410 shares of Whiting’s common stock per $1,000 principal amount of the notes, which is equivalent to an initial conversion price of approximately $39.00 . The conversion rate will be subject to adjustment in some events. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase, in certain circumstances, the conversion rate for a holder who elects to convert its 2020 Convertible Senior Notes in connection with such corporate event. As of September 30, 2016 , none of the contingent conditions allowing holders of the 2020 Convertible Senior Notes to convert these notes had been met.
Upon issuance, the Company separately accounted for the liability and equity components of the 2020 Convertible Senior Notes. The liability component was recorded at the estimated fair value of a similar debt instrument without the conversion feature. The difference between the principal amount of the 2020 Convertible Senior Notes and the estimated fair value of the liability component was recorded as a debt discount and is being amortized to interest expense over the term of the notes using the effective interest method, with an effective interest rate of 5.6% per annum. The fair value of the 2020 Convertible Senior Notes as of the issuance date was estimated at $1.0 billion, resulting in a debt discount at inception of $238 million. The equity component, representing the value of the conversion option, was computed by deducting the fair value of the liability component from the initial proceeds of the 2020 Convertible Senior Notes issuance. This equity component was recorded, net of deferred taxes and issuance costs, in additional paid-in capital within shareholders’ equity, and will not be remeasured as long as it continues to meet the conditions for equity classification.
Transaction costs related to the 2020 Convertible Senior Notes issuance were allocated to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component were recorded as a reduction to the carrying value of long-term debt on the consolidated balance sheet and are being amortized to expense over the term of the notes using the effective interest method. Issuance costs attributable to the equity component were recorded as a charge to additional paid-in capital within shareholders’ equity.
The 2020 Convertible Senior Notes consist of the following at September 30, 2016 and December 31, 2015 (in thousands):
September 30,
December 31,
2016
2015
Liability component:
Principal
$ 562,075
$ 1,250,000
Less: unamortized note discount
(77,680)
(205,572)
Less: unamortized debt issuance costs
(6,436)
(17,277)
Net carrying value
$ 477,959
$ 1,027,151
Equity component (1)
$ 136,522
$ 237,500
(1)
Recorded in additional paid-in capital, net of $5 million of issuance costs and $ 50 million of deferred taxes as of September 30, 2016 and $ 5 million of issuance costs and $88 million of deferred taxes as of December 31, 2015 .
The following table presents the i nterest expense recognized on the 2020 Convertible Senior Notes related to the stated interest rate and amortization of the debt discount for the three and nine months ended September 30, 2016 and 2015 (in thousands):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
Interest expense on 2020 Convertible Senior Notes
$ 6,745
$ 14,395
$ 36,068
$ 29,276
Mandatory Convertible Notes
Exchange of Senior Notes , Convertible Senior Notes and Senior Subordinated Notes for Mandatory Convertible Notes. O n June 29, 2016, the Company completed the exchange of $129 million aggregate principal amount of its 2020 Convertible Senior Notes for the same aggregate principal amount of new 1.25% Mandatory Convertible Senior Notes due 2020, Series 2 (the “2020 Mandatory Convertible Notes, Series 2”). O n July 1, 2016, the Company completed the exchange of $964 million aggregate principal amount of Senior Notes, 2020 Convertible Senior Notes and 2018 Senior Subordinated Notes, consisting of (i) $26 million aggregate principal amount of its 2018 Senior Subordinated Notes, (ii) $42 million aggregate principal amount of its 2019 Senior Notes, (iii) $559 million aggregate principal amount of its 2020 Convertible Senior Notes, (iv) $174 million aggregate principal amount of its 2021 Senior Notes , and (v) $163 million aggregate principal amount of its 2023 Senior Notes , for (i) $26 million aggregate principal amount of new 6.5% Mandatory Convertible Senior Subordinated Notes due 2018 (the “2018 Mandatory Convertible Notes”), (ii) $42 million aggregate principal amount of new 5% Mandatory Convertible Senior Notes due 2019 (the “2019 Mandatory Convertible Note s”), (iii) $559 million aggregate principal amount of new 1.25% Mandatory Convertible Senior Notes due 2020, Series 1 (the “2020 Mandatory Convertible Notes, Series 1”, and together with the 2020 Mandatory Convertible Notes, Series 2, the “2020 Mandatory Convertible Notes”), (iv) $174 million aggregate p rincipal amount of new 5.75% Mandatory Convertible Senior Notes due 2021 (the “202 1 Mandatory Convertible Notes”), and (v) $163 million aggregate principal amount of new 6.25% Mandatory Convertible Senior Notes due 2023 (the “2023 Mandatory Convertible Notes” and, together with the 2018 Mandatory Convertible Notes, the 2019 Mandatory Convertible Notes , the 2020 Mandatory Convertible Notes and the 2021 Mandatory Convertible Notes, the “ Mandatory Convertible Notes”).
The redemption provisions, covenants, interest payments and maturity terms applicable to each series of Mandatory Convertible Notes are substantially identical to those applicable to the corresponding series of Senior Notes, 2020 Convertible Senior Notes and 2018 Senior Subordinated Notes except that the 2020 Mandatory Convertible Notes will mature on June 5, 2020 unless earlier converted in accordance with their terms.
These transactions were accounted for as extinguishment s of debt for the portion s of Senior Notes, 2020 Convertible Senior Notes and 2018 Senior Subordinated Notes that were exchanged. As a result, Whiting recognized a $57 million gain on extinguishment of debt, which was net of a $113 million charge for the non-cash write-off of unam ortized debt issuance costs, debt discount s and debt premium on the original notes. In addition, Whiting recorded a $ 63 million reduction to the equity component of the 2020 Convertible Senior Notes, which is net of deferred taxes. The Mandatory Convertible Notes were recorded at fair value upon issuance with the difference between the principal amount of the notes and their fair value s , totaling $69 million, recorded as a debt discount . The Mandatory Convertible Notes contain contingent beneficial conversion features, the intrinsic value of which was recognized in additional paid-in capital at the time the contingency was resolved, resulting in an additional debt discount of $233 million. The aggregate debt discount of $302 million is being amortized to interest expense over the respective term s of the notes using the effective interest method.
T ransaction costs of $14 million attributable to th ese note issuance s were recorded as a reduction to the carrying value of long-term debt on the consolidated balance sheet and are being amortized to interest expense over the respective term s of the notes using the effective interest method.
The July 1, 2016 note exchange transactions triggered an ownership shift as defined under Section 382 of the Internal Revenue Code due to the “deemed share issuance” that resulted from the note exchanges. This triggering event will limit the Company’s usage of certain of its net operating losses and tax credits in the future. Refer to the “Income Taxes” footnote for more information.
The Mandatory Convertible Notes contain mandatory conversion features whereby four percent of the aggregate principal amount of the Mandatory Convertible Notes were converted into shares of the Company’s common stock for each day of the 25 trading day period that commenced on June 23, 20 16 (the “Observation Period”) if the daily volume weighted average price (the “Daily VWAP” ) ( as defined in the indentures governing the Mandatory Convertible Notes) of the Company’s common stock on such day , rounded to four decimal places for the 2020 Mandatory Convertible Notes and rounded to two decimal places for the 2018 Mandatory Convertible Notes, the 2019 Mandatory Convertible Notes, the 2021 Mandatory Convertible Notes and the 2023 Mandatory Convertible Notes, was above $8.75 (the “Threshold Price”) . Upon conversion , the common stock issue price per share is equal to the higher of (i) the Daily VWAP for the Company’s c ommon s tock for such trading day multiplied by one plus zero for the 2018 Mandatory Convertible Notes, one plus 0.5% for the 2019 Mandatory Convertible Notes, one plus 8.0% for the 2020 Mandatory Convertible Notes, one plus 2.5% for the 2021 Mandatory Convertible Notes and one plus 3.5% for the 2023 Mandatory Convertible Notes or (ii) $8.75 for the 2018 Mandatory Convertible Notes (equivalent to 114.29 common shares per $1,000 principal amount of the notes), $8.79 for the 2019 Mandatory Convertible Notes (equivalent to 113.72 common shares per $1,000 principal amount of the notes), $9.45 for the 2020 Mandatory Convertible Notes (equivalent to 105.82 common shares per $1,000 principal amount of the notes), $8.97 for the 2021 Mandatory Convertible Notes (equivalent to 111.50 common shares per $1,000 principal amount of the notes) and $9.06 for the 2023 Mandatory Convertible Notes (equivalent to 110.42 common shares per $1,000 principal amount of the notes) (the “Minimum Conversion Price s ”) .
After the Observation Period, the Company has the right to mandatorily convert any remaining Mandatory Convertible Notes if the Daily VWAP of the Company’s c ommon s tock exceeds $8.75 for at least 20 trading days during a 30 consecutive trading day period and holders have the right to convert the Mandatory Convertible Notes at any time. T he conversion price after the Observation Period will be the Minimum Conversion Price for each applicable series of Mandatory Convertible Notes . As of September 30, 2016, none of the conditions allowing the Company to convert the remaining Mandatory Convertible N otes had been met , and no holders of the Mandatory Convertible Notes had voluntarily converted any such notes .
Conversion of Mandatory Convertible Notes to Common Stock . During the Observation Period, the Daily VWAP of the Company’s common stock was above the Threshold Price (i) for 7 of the 25 trading days for the 2018 Mandatory Convertible Notes, the 2019 Mandatory Convertible Notes, the 2021 Mandatory Convertible Notes and the 2023 Mandatory Convertible Notes and (ii) for 8 of the 25 trading days for the 2020 Mandatory Convertible Notes. As a result, $333 million aggregate principal amount of the Mandatory Convertible Notes were converted into approximately 33.2 million shares of the Company’s common stock, and the Company paid $3 million in cash consisting of all accrued and unpaid interest on such notes. As a result of the conversions, Whiting recognized a $3 million gain on extinguishment of debt, which was net of a non-cash charge for the acceleration of unamortized debt issuance costs and debt discount on the notes.
Induced Exchange of Mandatory Convertible Notes. On August 12, 2016, the Company completed the exchange of (i) $13 million aggregate principal amount of the 2018 Mandatory Convertible Notes which had a conversion price of $8.75 per share (equivalent to 114.29 common shares per $1,000 principal amount of the notes) for shares of the Company’s common stock at an issuance price of $7.77 per share (equivalent to 128.69 common shares per $1,000 principal amount of the notes) and (ii) $25 million aggregate principal amount of the 2019 Mandatory Convertible Notes which had a conversion price of $8.79 per share (equivalent to 113.72 common shares per $1,000 principal amount of the notes) for shares of the Company’s common stock at an issuance price of $7.80 per share (equivalent to 128.17 shares per $1,000 principal amount of the notes). Upon acceptance of this inducement offer by the holders of the notes, such notes were immediately cancelled in exchange for approximately 4.9 million shares of the Company’s common stock and the Company paid $1 million in cash consisting of all accrued and unpaid interest on such notes. As a result of the exchanges, Whiting recognized (i) $4 million of debt inducement expense related to the fair value of the incremental shares issued in the inducement offer over the original conversion terms of the notes, which expense is included in (gain) loss on extinguishment of debt in the consolidated statements of operations, and (ii) a $14 million non-cash charge for the acceleration of unamortized debt discount on the notes, which is included in interest expense in the consolidated statements of operations.
Security and Guarantees
The Senior Notes, the 2 020 Convertible Senior Notes , the 2019 Mandatory Convertible Notes, the 2020 Mandatory Convertible Notes, the 2021 Mandatory Convertible Notes and the 2023 Mandatory Convertible Notes (collectively, the “Whiting Senior Notes”) a re unsecured obligations of Whiting Petroleum Corporation and these unsecured obligations are subordinated to all of the Company’s secured indebtedness, which consists of Whiting Oil and Gas’ credit agreement. The 2018 Senior Subordinated Notes and the 2018 Mandatory Convertible Notes are also unsecured obligations of Whiting Petroleum Corporation and are subordinated to all of the Company’s senior debt, which currently consists of the Whiting Senior Notes and borrowings under Whiting Oil and Gas’ credit agreement.
The Company’s obligations under the Whiting Senior Notes, the 2018 Senior Subordinated Note s and the 2018 Mandatory Convertible Notes are guaranteed by the Company’s 100% -owned subsidiaries, Whiting Oil and Gas, Whiting US Holding Company, Whiting Canadian Holding Company ULC and Whiting Resources Corporation (the “Guarantors”). These guarantees are full and unconditional and joint and several among the Guarantors. Any subsidiaries other than these Guarantors are minor subsidiaries as defined by Rule 3-10(h)(6) of Regulation S ‑X of the SEC. Whiting Petroleum Corporation has no assets or operations independent of this debt and its investments in its consolidated subsidiaries. |
