Term Loan I
In May 2020, the Group acquired DP Bluegrass LLC (“Bluegrass”), a limited-purpose, bankruptcy-remote, wholly owned subsidiary, to enter into a
securitized financing agreement for $160,000, which was structured as a secured term loan. The Group issued the Term Loan I at a 1% discount and
used the proceeds of $158,400 to fund the Carbon and EQT acquisitions. The Term Loan I is secured by certain producing assets acquired in connection
with the Carbon and EQT acquisitions.
The Term Loan I accrues interest at a stated 6.50% annual rate and has a maturity date of May 2030. Interest and principal payments on the Term
Loan I are payable on a monthly basis. During the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023, the Group
incurred $3,398, $3,911 and $7,573 in interest related to the Term Loan I, respectively. The fair value of the Term Loan I was approximately $93,152 as
of June 30, 2024.
ABS I Notes
In November 2019, the Group formed Diversified ABS LLC (“ABS I”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB-
rated asset-backed securities for an aggregate principal amount of $200,000 at par. The ABS I Notes are secured by certain of the Group’s upstream
producing Appalachian assets. Natural gas production associated with these assets was hedged at 85% at the close of the agreement with long-term
derivative contracts.
Interest and principal payments on the ABS I Notes are payable on a monthly basis. During the six months ended June 30, 2024 and 2023 and the year
ended December 31, 2023, the Group incurred $2,419, $2,993 and $5,660 of interest related to the ABS I Notes, respectively. The legal final maturity
date is January 2037 with an amortizing maturity of December 2029. The ABS I Notes accrue interest at a stated 5% rate per annum. The fair value of
the ABS I Notes was approximately $86,852 as of June 30, 2024.
In the event that ABS I has cash flow in excess of the required payments, ABS I is required to pay between 50% to 100% of the excess cash flow,
contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular,
(a) with respect to any payment date prior to March 1, 2030, (i) if the debt service coverage ratio (the “DSCR”) as of such payment date is greater than
or equal to 1.25 to 1.00, then 25%, (ii) if the DSCR as of such payment date is less than 1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then
50%, and (iii) if the DSCR as of such payment date is less than 1.15 to 1.00, the production tracking rate for ABS I is less than 80%, or the loan to
value ratio is greater than 85%, then 100%, and (b) with respect to any payment date on or after March 1, 2030, 100%. During the six months ended
June 30, 2024, the Group made $1,536 in excess cash flow payments on the ABS I Notes.
ABS II Notes
In April 2020, the Group formed Diversified ABS Phase II LLC (“ABS II”), a limited-purpose, bankruptcy-remote, wholly owned subsidiary, to issue BBB-
rated asset-backed securities in an aggregate principal amount of $200,000. The ABS II Notes were issued at a 2.775% discount. The Group used the
proceeds of $183,617, net of discount, capital reserve requirement, and debt issuance costs, to pay down its Credit Facility. The ABS II Notes are
secured by certain of the Group’s upstream producing Appalachian assets. Natural gas production associated with these assets was hedged at 85% at
the close of the agreement with long-term derivative contracts.
The ABS II Notes accrue interest at a stated 5.25% rate per annum and have a maturity date of July 2037 with an amortizing maturity of September
2028. Interest and principal payments on the ABS II Notes are payable on a monthly basis. During the six months ended June 30, 2024 and 2023 and
the year ended December 31, 2023, the Group incurred $3,557, $4,174 and $8,040 in interest related to the ABS II Notes, respectively. The fair value of
the ABS II Notes was approximately $108,782 as of June 30, 2024.
In the event that ABS II has cash flow in excess of the required payments, ABS II is required to pay between 50% to 100% of the excess cash flow,
contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular,
(a) (i) if the DSCR as of any payment date is less than 1.15 to 1.00, then 100%, (ii) if the DSCR as of such payment date is greater than or equal to
1.15 to 1.00 and less than 1.25 to 1.00, then 50%, or (iii) if the DSCR as of such payment date is greater than or equal to 1.25 to 1.00, then 0%; (b) if
the production tracking rate for ABS II is less than 80%, then 100%, else 0%; (c) if the loan-to-value ratio (“LTV”) as of such payment date is greater
than 65%, then 100%, else 0%; (d) with respect to any payment date after July 1, 2024 and prior to July 1, 2025, if LTV is greater than 40% and ABS
II has executed hedging agreements for a minimum period of 30 months starting July 2026 covering production volumes of at least 85% but no more
than 95% (the “Extended Hedging Condition”), then 50%, else 0%; (e) with respect to any payment date after July 1, 2025 and prior to October 1,
2025, if LTV is greater than 40% or ABS II has not satisfied the Extended Hedging Condition, then 50%, else 0%; and (f) with respect to any payment
date after October 1, 2025, if LTV is greater than 40% or ABS II has not satisfied the Extended Hedging Condition, then 100%, else 0%. During the six
months ended June 30, 2024, the Group made no excess cash flow payments on the ABS II Notes.
ABS III Notes
In February 2022, the Group formed Diversified ABS III LLC (“ABS III”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB
rated asset-backed securities in an aggregate principal amount of $365,000 at par. The ABS III Notes were secured by certain of the Group’s upstream
producing, as well as certain midstream, Appalachian assets.
The ABS III Notes accrued interest at a stated 4.875% rate per annum and had a final maturity date of April 2039 with an amortizing maturity of
November 2030. Interest and principal payments on the ABS III Notes were payable on a monthly basis. During the six months ended June 30, 2024
and 2023 and the year ended December 31, 2023, the Group incurred $5,507, $7,509 and $14,515 in interest related to the ABS III Notes, respectively.
In the event that ABS III had cash flow in excess of the required payments, ABS III was required to pay between 50% to 100% of the excess cash flow,
contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular,
(a) (i) if the DSCR as of any payment date was greater than or equal to 1.25 to 1.00, then 0%, (ii) if the DSCR as of such payment date was less than
1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then 50%, and (iii) if the DSCR as of such Payment Date was less than 1.15 to 1.00, then 100%;
(b) if the production tracking rate for ABS III (as described in the ABS III Indenture) was less than 80%, then 100%, else 0%; and (c) if the LTV for
ABS III was greater than 65%, then 100%, else 0%. During the six months ended June 30, 2024, the Group made no excess cash flow payments on
the ABS III Notes.
