Long-Term Debt | 9 Months Ended |
Sep. 30, 2014 |
Debt Disclosure [Abstract] | ' |
Long-Term Debt | ' |
Long-Term Debt |
As of the dates indicated, the Company’s long-term debt consisted of the following (in thousands): |
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| | 30-Sep-14 | | 31-Dec-13 | | | | | | | |
Credit Facility due April 2018 | | $ | 870,000 | | | $ | 708,000 | | | | | | | | |
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2019 Notes due December 2019 | | 800,000 | | | 800,000 | | | | | | | | |
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Unamortized Premium on 2019 Notes | | 4,459 | | | 4,976 | | | | | | | | |
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2021 Notes due January 2021 | | 350,000 | | | 350,000 | | | | | | | | |
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2022 Notes due February 2022 | | 400,000 | | | 400,000 | | | | | | | | |
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Total Long-Term Debt | | $ | 2,424,459 | | | $ | 2,262,976 | | | | | | | | |
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Less: Current Portion of Long Term Debt | | — | | | — | | | | | | | | |
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Total Long-Term Debt, Net of Current Portion | | $ | 2,424,459 | | | $ | 2,262,976 | | | | | | | | |
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Credit Facility |
Kodiak Oil & Gas (USA) Inc. (the “Borrower”) has in place a $1.5 billion credit facility with a syndicate of banks, which is subject to a borrowing base. The credit facility matures on April 2, 2018. As of September 30, 2014, the credit facility was subject to a borrowing base of $1.35 billion. Redetermination of the borrowing base occurs semi-annually, on April 1 and October 1. Additionally, the Company may elect a redetermination of the borrowing base one time during any six month period. In April 2014, the redetermination was completed and the existing borrowing base was affirmed. The Company has postponed the scheduled October 2014 redetermination until December 2014. |
Interest on the credit facility is payable at one of the following two variable rates: the alternate base rate for ABR loans or the adjusted rate for Eurodollar loans, as selected by the Company, plus an additional percentage that can vary on a daily basis and is based on the daily unused portion of the credit facility. This additional percentage is referred to as the “Applicable Margin” and varies depending on the type of loan. The Applicable Margin for the ABR loans is a sliding scale of 0.50% to 1.50%, depending on borrowing base usage. The Applicable Margin on the adjusted London interbank offered ("LIBO") rate is a sliding scale of 1.50% to 2.50%, depending on borrowing base usage. Additionally, the credit facility provides for a commitment fee of 0.375% to 0.50%, depending on borrowing base usage. The grid below shows the Applicable Margin options depending on the applicable Borrowing Base Utilization Percentage (as defined in the credit facility) as of the date of this filing: |
Borrowing Base Utilization Grid |
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Borrowing Base Utilization Percentage | | <25.0% | | >25.0% <50.0% | | >50.0% <75.0% | | >75.0% <90.0% | | >90.0% |
Eurodollar Loans | | 1.5 | % | | 1.75 | % | | 2 | % | | 2.25 | % | | 2.5 | % |
ABR Loans | | 0.5 | % | | 0.75 | % | | 1 | % | | 1.25 | % | | 1.5 | % |
Commitment Fee Rate | | 0.375 | % | | 0.375 | % | | 0.5 | % | | 0.5 | % | | 0.5 | % |
The credit facility contains representations, warranties, covenants, conditions and defaults customary for transactions of this type, including but not limited to: (i) limitations on liens and incurrence of debt covenants; (ii) limitations on dividends, distributions, redemptions and restricted payments covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations on the sale of property, mergers, consolidations and other similar transactions covenants. Additionally, the credit facility requires the Borrower to enter hedging agreements necessary to support the borrowing base. |
The credit facility also contains financial covenants requiring the Borrower to comply with a current ratio of consolidated current assets (including unused borrowing capacity) to consolidated current liabilities of not less than 1.0 to 1.0 and to maintain, on the last day of each quarter, a ratio of total debt to EBITDAX of not greater than 4.0 to 1.0. The Company was in compliance with all financial covenants under the credit facility as of September 30, 2014, and through the filing of this report. |
As of September 30, 2014, the Company had $870.0 million in outstanding borrowings under the credit facility and as such, the available credit under the credit facility at that date was $480.0 million. Subsequent to September 30, 2014, the Company made borrowings of $25.0 million to the credit facility, bringing the outstanding balance as of the date of this filing under the credit facility to $895.0 million. Any borrowings under the credit facility are collateralized by the Borrower’s oil and gas producing properties, the Borrower’s personal property and the equity interests of the Borrower held by the Company. The Company has entered into crude oil commodity derivative instruments with several counterparties that are also lenders under the credit facility. The Company’s obligations under these derivative instruments are secured by the credit facility. |
Senior Notes |
In November 2011, the Company issued at par $650.0 million principal amount of 8.125% Senior Notes due December 1, 2019 and in May 2012, the Company issued at a price of 104.0% of par an additional $150.0 million aggregate principal amount of 8.125% Senior Notes due December 1, 2019 (the "2019 Notes"). The 2019 Notes bear an annual interest rate of 8.125%. The interest on the 2019 Notes is payable on June 1 and December 1 of each year. The issuance of the 2019 Notes resulted in aggregate net proceeds of approximately $784.2 million after deducting discounts and fees. The Company used the proceeds from the 2019 Notes to fund its acquisition program, repay outstanding borrowings under its credit facility and second lien credit agreement and for general corporate purposes. |
In January 2013, the Company issued at par $350.0 million principal amount of 5.50% Senior Notes due January 15, 2021 (the "2021 Notes"). The 2021 Notes bear an annual interest rate of 5.50%. The interest on the 2021 Notes is payable on January 15 and July 15 of each year. The Company received net proceeds of approximately $343.1 million after deducting discounts and fees. All of the net proceeds from the 2021 Notes were used to repay borrowings on the Company's credit facility. |
In July 2013, the Company issued at par $400.0 million principal amount of 5.50% Senior Notes due February 1, 2022 (the "2022 Notes" and, together with the 2019 Notes and 2021 Notes, the "Senior Notes"). The 2022 Notes bear an annual interest rate of 5.50%. The interest on the 2022 Notes is payable on February 1 and August 1 of each year commencing on February 1, 2014. The Company received net proceeds of approximately $391.8 million after deducting discounts and fees. All of the net proceeds from the 2022 Notes were used to repay borrowings on the Company's credit facility. |
The 2019 Notes and 2021 Notes were issued under separate indentures among the Company, Kodiak Oil & Gas (USA) Inc., as guarantor, U.S. Bank National Association, as trustee, and Computershare Trust Company of Canada, as Canadian trustee (the “2019 Indenture” and the “2021 Indenture”, respectively). The 2022 Notes were issued under an indenture among the Company, Kodiak Oil & Gas (USA) Inc., Kodiak Williston, LLC and KOG Finance, LLC (collectively, the “Guarantors”), U.S. Bank National Association, as trustee, and Computershare Trust Company of Canada, as Canadian trustee (the “2022 Indenture”, and together with the 2019 Indenture and the 2021 Indenture, the “Indentures”). In July 2013, Kodiak Williston, LLC and KOG Finance, LLC entered into Supplemental Indentures to the 2019 Indenture and 2021 Indenture to guarantee the 2019 Notes and 2021 Notes. On October 3, 2014, KOG Oil & Gas ULC entered into Supplemental Indentures to guarantee the 2019 Notes, the 2021 Notes and the 2022 Notes. The Indentures contain affirmative and negative covenants that, among other things, limit the Company's and the Guarantors' ability to make investments; incur additional indebtedness or issue preferred stock; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company; engage in transactions with the Company's affiliates; pay dividends or make other distributions on capital stock or prepay subordinated indebtedness; and create unrestricted subsidiaries. The Indentures also contain customary events of default. Upon the occurrence of events of default arising from certain events of bankruptcy or insolvency, the Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of the Senior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of the Senior Notes may declare all outstanding Senior Notes to be due and payable immediately. The Company was in compliance with all financial covenants under the Indentures as of September 30, 2014, and through the filing of this report. |
The 2019 Notes are redeemable by the Company at any time on or after December 1, 2015, the 2021 Notes are redeemable by the Company at any time on or after January 15, 2017, and the 2022 Notes are redeemable by the Company at any time on or after August 1, 2017, in each case, at the redemption prices set forth in the indentures. Further, the 2019 Notes are redeemable by the Company prior to December 1, 2015, the 2021 Notes are redeemable by the Company prior to January 15, 2017, and the 2022 Notes are redeemable by the Company prior to August 1, 2017, in each case, at the redemption prices plus a “make-whole” premium set forth in the Indentures. The Company is also entitled to redeem up to 35% of the aggregate principal amount of the 2019 Notes before December 1, 2014, up to 35% of the aggregate principal amount of the 2021 Notes before January 15, 2016, and up to 35% of the aggregate principal amount of the 2022 Notes before August 1, 2016, with net proceeds that the Company raises in equity offerings at a redemption price equal to 108.125% of the principal amount of the 2019 Notes being redeemed and 105.5% of the principal amount of the 2021 Notes being redeemed and 105.5% of the principal amount of the 2022 Notes being redeemed, plus, in each case, accrued and unpaid interest. If the Company undergoes a change of control, it must offer to purchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes purchased plus accrued and unpaid interest. The Company may redeem the Senior Notes if, as a result of changes in applicable law, it is required to pay additional amounts related to tax-withholdings, at a price equal to 100% of the principal amounts of the Senior Notes redeemed plus accrued and unpaid interest. The Company must offer to purchase the Senior Notes if it sells assets under certain circumstances. |
On July 13, 2014, the Company entered into the Arrangement Agreement with Whiting and Whiting Canadian Sub whereby Whiting Canadian Sub would acquire all of the outstanding common shares as part of a plan of arrangement. In connection with the Arrangement, Whiting solicited and received the required consents of the holders of the Company’s outstanding Senior Notes, to adopt certain amendments to the Indentures (the “Consent Solicitations”). In connection with the Consent Solicitations, Whiting offered to (i) issue an unconditional and irrevocable guarantee (the “Whiting Guarantee”) of the prompt payment, when due, of any amount owed to the holders of the Senior Notes under the Senior Notes and the Indentures and any other amounts due pursuant to the Indentures and (ii) make a cash payment in respect of consents delivered in the Consent Solicitations (the “Consent Solicitations and Offers to Guarantee”). The Consent Solicitations and Offers to Guarantee expired at 5:00 p.m., New York City time, on October 17, 2014 and all required consents were received. |
On October 17, 2014, the Company, Whiting, the Company’s subsidiary guarantors, U.S. Bank National Association, as trustee, and Computershare Trust Company of Canada, as Canadian trustee, entered into a supplemental indenture to each Indenture that includes the amendments to the Indenture and the Whiting Guarantee. These supplemental indentures became effective on October 17, 2014, but the amendments will not become operative and the Whiting Guarantee will not be issued until the completion of the Arrangement. |
Deferred Financing Costs |
As of September 30, 2014, the Company had deferred financing costs of $37.0 million related to its credit facility and Senior Notes. Deferred financing costs include origination, legal, engineering, and other fees incurred in connection with the Company’s credit facility and Senior Notes. For the three and nine months ended September 30, 2014, the Company recorded amortization expense of $1.6 million and $4.7 million, respectively, as compared to $1.4 million and $3.5 million for the three and nine months ended September 30, 2013, respectively. |
Interest Incurred On Long-Term Debt |
For the three and nine months ended September 30, 2014, the Company incurred interest expense on long-term debt of $32.7 million and $96.1 million, respectively, as compared to $29.5 million and $73.3 million for the three and nine months ended September 30, 2013, respectively. Of the total interest incurred, the Company capitalized interest costs of $7.2 million and $23.2 million for the three and nine months ended September 30, 2014, respectively, as compared to $9.7 million and $25.6 million for the three and nine months ended September 30, 2013, respectively. Additionally, for the three and nine months ended September 30, 2014 interest expense was reduced for the amortization of the bond premium in the amounts of $176,000 and $517,000, respectively, as compared to $163,000 and $480,000 for the three and nine months ended September 30, 2013, respectively. |