| LONG-TERM DEBT | NOTE 7. LONG–TERM DEBT
Long–term debt, net consisted of the following:
March 31,
December 31,
2016
2015
Credit facility
$ 242,000
$ 265,000
8.0% senior notes due 2019:
Principal outstanding
426,022
426,022
Unamortized discount and debt issuance costs (1)
(4,755)
(5,116)
Unaccreted premium (2)
2,525
2,708
423,792
423,614
Total
$ 665,792
$ 688,614
_____________
(1) Imputed interest rate of 8.47 % and 8.87% for March 31, 2016 and December 31, 2015, respectively.
(2) Imputed interest rate of 7.49 % and 7.35% for March 31, 2016 and December 31, 2015, respectively.
Credit Facility
As of March 31, 2016, we have a $ 1.0 billion credit facility that expires in February 2020 . Borrowings under the facility are secured by a first priority lien on substantially all of our oil and natural gas properties. We may use borrowings under the facility for acquiring and developing oil and natural gas properties, for working capital purposes, for general corporate purposes and for funding distributions to partners. We also may use up to $ 100.0 million of available borrowing capacity for letters of credit. As of March 31, 2016, we have a $0.4 million letter of credit outstanding. The facility requires the maintenance of a current ratio (as defined in the facility) of greater than 1.0 and a ratio of senior secured debt to earnings plus interest expense, taxes, depreciation, depletion and amortization expense and exploration expense (“EBITDAX”) of no greater than 3. 0 to 1.0. As of March 31, 2016, we were in compliance with these financial covenants.
The facility does not require any repayments of amounts outstanding until it expires in February 2020. Borrowings under the facility bear interest at a floating rate based on, at our election, a base rate or the London Inter–Bank Offered Rate plus applicable premiums based on the percent of the borrowing base that we have outstanding (weighted average effective interest rate of 3.38 % and 2.94% at March 31, 2016 and 2015, respectively).
Borrowings under the facility may not exceed a “borrowing base” determined by the lenders under the facility based on our oil and natural gas reserves. As of March 31, 2016, the borrowing base under the facility was $ 625.0 million. The borrowing base is subject to scheduled redeterminations as of April 1 and October 1 of each year with an additional redetermination once per calendar year at our request or at the request of the lenders and with one calculation that may be made at our request during each calendar year in connection with material acquisitions or divestitures of properties.
In April 2016, we entered into an amendment to the credit facility that, among other things :
·
decreased the borrowing base to $450.0 million ;
·
changed the senior secured funded debt to EBITDAX ratio covenant to be no greater than (a) for the fiscal quarters ending March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016, 3.0 to 1.0, (b) for the fiscal quarters ending March 31, 2017 and June 30, 2017, 3.5 to 1.0 and (c) for the fiscal quarter ending September 30, 2017 and December 31, 2017, 4.0 to 1.0;
·
changed the total funded debt to EBITDAX ratio covenant to be no greater than (a) for the fiscal quarters ending March 31, 2018, 5.50 to 1.0, (b) for the fiscal quarters ending June 30, 2018 and September 30, 2018, 5.25 to 1.0 and (c) for the fiscal quarter ending December 31, 2018 and thereafter, 4.25 to 1.0;
·
added a cash interest expense to EBITDAX ratio covenant to be no less than (a) for the fiscal quarters ending March 31, 2016, June 30, 2016 and September 30, 2016, 2.5 to 1.0, (b) for the fiscal quarters ending and December 31, 2016, March 31, 2017 and June 30, 2017, 2.0 to 1.0 and (c) for the fiscal quarter ending September 30, 2017 and thereafter, 1.5 to 1.0;
·
allowed for up to $35.0 million of cash , reduced by the amount of any quarterly distributions for the remainder of 2016, to be used for the redemption of our senior notes due 2019 ; and
·
limited cash held by us to the greater of 5% of the current borrowing base or $30.0 million.
S hould prices decline significantly from current levels, the borrowing base could be reduced again in future redeterminations, which would impact our short–term liquidity.
8.0% Senior Notes due 2019
Our senior notes due 2019 are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by all of our existing subsidiaries other than EV Energy Finance Corp. (“Finance”), which is a co–issuer of the Notes. Neither EV Energy Partners, L.P. nor Finance have independent assets or operations apart from the assets and operations of our subsidiaries. |
