Long-Term Debt | 7. LONG-TERM DEBT Credit Agreement On March 31, 2015, the Partnership, as borrower, entered into a Third Amended and Restated Credit Agreement with Royal Bank of Canada, as administrative agent and collateral agent and the lenders party thereto, providing for a reserve-based credit facility with a borrowing base of $110 million, a maximum commitment of $500 million and a maturity date of March 31, 2020 (the “Credit Agreement”). The Partnership used $106.0 million in borrowings under the Credit Agreement on March 31, 2015 to finance the Eagle Ford acquisition, in part, and to repay $42.5 million due under the Second Amended and Restated Credit Agreement, with Societe Generale as administrative and collateral agent and a syndicate of five lenders, which had a maximum commitment of $350 million and a borrowing base of $70.0 million immediately prior to its retirement. Borrowings under the Credit Agreement are secured by various mortgages of oil and natural gas properties that the Partnership and certain of its subsidiaries own as well as various security and pledge agreements among the Partnership and certain of its subsidiaries and the administrative agent. The amount available for borrowing at any one time under the Credit Agreement is limited to the borrowing base for the Partnership’s oil and natural gas properties. Borrowings under the Credit Agreement are available for acquisition, exploration, operation, maintenance and development of oil and natural gas properties, payment of expenses incurred in connection with the Credit Agreement, working capital and general business purposes. The Credit Agreement has a sub-limit of $15 million which may be used for the issuance of letters of credit. The borrowing base as of September 30, 2015 was $110 million, of which we had $106 million outstanding. The borrowing base is re-determined semi-annually in the second and fourth quarters of the year, and may be re-determined at our request more frequently and by the lenders, in their sole discretion, based on reserve reports as prepared by petroleum engineers, using, among other things, the oil and natural gas pricing prevailing at such time. Outstanding borrowings in excess of our borrowing base must be repaid or we must pledge other oil and natural gas properties as additional collateral. We may elect to pay any borrowing base deficiency in three equal monthly installments such that the deficiency is eliminated in a period of three months. Any increase in our borrowing base must be approved by all of the lenders. At the Partnership’s election, interest for borrowings under the Credit Agreement are determined by reference to (i) the London interbank rate, or LIBOR, plus an applicable margin between 1.75% and 2.75% per annum based on utilization or (ii) a domestic bank rate (“ABR”) plus an applicable margin between 0.75% and 1.75% per annum based on utilization plus (iii) a commitment fee between 0.375% and 0.500% per annum based on the unutilized borrowing base. Interest on the borrowings for ABR loans and the commitment fee are generally payable quarterly. Interest on the borrowings for LIBOR loans are generally payable at the applicable maturity date. The Credit Agreement contains various covenants that limit, among other things, the Partnership’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell all or substantially all of the Partnership’s assets, make certain loans, acquisitions, capital expenditures and investments, and pay distributions. Furthermore, the Credit Agreement contains financial covenants that require the Partnership to satisfy certain specified financial ratios, including (i) current assets to current liabilities of at least 1.0 to 1.0 at all times and (ii) total net debt to consolidated Adjusted EBITDA for the last twelve months of not greater than 4.5 to 1.0 as of the last day of any fiscal quarter. The Credit Agreement also includes customary events of default, including events of default related to non-payment of principal, interest or fees, inaccuracy of representations and warranties when made or when deemed made, violation of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid and a change in control. A change in control is generally defined as the occurrence of one of the following events: (i) the Partnership’s existing general partner (the “General Partner”) ceases to be the sole general partner of the Partnership or (ii) certain specified persons shall cease to own more than 50% of the equity interests of the General Partner or shall cease to control, directly or indirectly, such General Partner. If an event of default occurs, the lenders may accelerate the maturity of the Credit Agreement and exercise other rights and remedies. The Credit Agreement limits the Partnership’s ability to pay distributions to unitholders. The Partnership has the ability to pay distributions to unitholders from available cash, including cash from borrowings under the Credit Agreement, as long as no event of default exists and provided that no distributions to unitholders may be made if the borrowings outstanding, net of available cash, under the Credit Agreement exceed 90% of the borrowing base determined with respect to the Partnership’s oil and natural gas properties, after giving effect to the proposed distribution. The Partnership’s available cash is reduced by any cash reserves established by the board of directors of the General Partner for the proper conduct of the Partnership’s business and the payment of fees and expenses. The Credit Agreement permits us to hedge our projected monthly production from oil and natural gas properties, provided that (a) for the immediately ensuing twenty four-month period, the volumes of production hedged in any month may not exceed our projected monthly production from proved developed and producing reserves (or 90% of our projected monthly production from proved reserves, if greater); (b) for the immediately following twenty-four month period, volumes of production hedged in any month may not exceed 90% of our projected monthly production from proved developed and producing reserves (or 85% of our projected monthly production from proved reserves, if greater); (c) for the immediately following twelve month period, volumes of production hedged in any month may not exceed 85% our projected monthly production from proved developed and producing reserves (or 80% of our projected monthly production from proved reserves, if greater); and (d) no hedges may have a tenor beyond five years. The Credit Agreement also permits us to hedge the interest rate on up to 75% of the then-outstanding principal amounts of our indebtedness for borrowed money. On October 14, 2015, in conjunction with the closing of the Western Catarina Midstream acquisition, the Partnership entered into the Joinder, Assignment and Second Amendment to the Credit Agreement with a syndicate of nine lenders (the “Amended Credit Agreemen t”). Pursuant to the amendment , the borrowing base under the Credit Facility increased from $110 million to $200 million, excluding the value of the Partnership’s Oklahoma and Kansas assets. Debt outstanding as of the date of the amendments was unchanged at $106 million . As a result of the amendment , which resulted in lower utilization of the borrowing base, the interest rate paid by the Partnership on the debt outstanding decreased by 0.50% . The borrowing base under the Amended Credit Agreement is re-determined semi-annually in the second and fourth quarters of the year with respect to our oil and gas properties and quarterly with respect to our midstream properties based on, among other things, reserve reports as prepared by petroleum engineers, prevailing oil and natural gas prices, and our operating results. The borrowing base may be re-determined at our request more frequently and by the lenders, at any time, in their sole discretion. The next regularly scheduled borrowing base redetermination is expected to occur in the second quarter 2016. The Amended Credit Agreement contains various covenants that limit, among other things, the Partnership’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell all or substantially all of the Partnership’s assets, make certain loans, acquisitions, capital expenditures and investments, and pay distributions. In addition, the Partnership is required to maintain the following financial covenants: (i) current assets to current liabilities of at least 1.0 to 1.0 at all times; (ii) senior secured net debt to consolidated Adjusted EBITDA for the last twelve months, as of the last day of any fiscal quarter, of not greater than 4.5 to 1.0 if the Adjusted EBITDA of the Partnership’s midstream operations equals or exceeds one-third of total Adjusted EBITDA or 4.0 to 1.0 if the Adjusted EBITDA of the Partnership’s midstream operations is less than one-third of total Adjusted EBITDA; and (iii) minimum interest coverage ratio of at least 2.5 to 1.0 if the Adjusted EBITDA of the Partnership’s midstream operations is greater than one-third of the Partnership’s total Adjusted EBITDA. The Partnership has the ability to pay distributions to unitholders from available cash, including cash from borrowings under the Amended Credit Agreement, as long as no event of default exists and provided that no distributions to unitholders may be made if the borrowings outstanding, net of available cash, under the Amended Credit Agreement exceed 90% of the borrowing base attributable to the Partnership’s oil and gas properties, after giving effect to the proposed distribution. The Partnership’s available cash is reduced by any cash reserves established by the board of directors of the General Partner for the proper conduct of the Partnership’s business and the payment of fees and expenses. We monitor compliance with the covenants of the Credit Agreement on an ongoing basis. As of September 30, 2015, the Partnership's ratio of total net debt to Adjusted EBITDA, calculated in accordance with the terms of the Credit Agreement in effect as of September 30, 2015, exceeded 4.5 to 1.0. However, as a result of the Amended Credit Agreement, we are not required to provide a compliance certificate for the quarter ended September 30, 2015 as part of the normal quarterly compliance materials submitted to our lenders. As a result, the Partnership was deemed to be in compliance with its covenants as of September 30, 2015 and currently forecasts that its ratio of total net debt to Adjusted EBITDA will not exceed 4.5 to 1.0 for the next twelve months. Debt Issuance Costs As of September 30, 2015, our unamortized debt issuance costs were $1.6 million. These costs are amortized to interest expense in our consolidated statement of operations over the life of our Credit Agreement. At December 31, 2014, our unamortized debt issuance costs were $0.7 million. |