Debt | (11) DEBT The components of debt as of September 30, 2018 and December 31, 2017 consisted of the following: September 30, 2018 (in millions) Debt Instrument Unamortized Issuance Expense Unamortized Debt Discount Total Variable rate ( 3.590% at September 30, 2018) 2018 revolving credit facility, due April 2023 (1) $ 360 $ – $ – $ 360 4.05% Senior Notes due January 2020 (2)(3) 92 – – 92 4.10% Senior Notes due March 2022 (3) 1,000 (5) – 995 4.95% Senior Notes due January 2025 (2)(3) 1,000 (8) (1) 991 7.50 % Senior Notes due April 2026 650 (9) – 641 7.75 % Senior Notes due October 2027 500 (7) – 493 Total debt $ 3,602 $ (29) $ (1) $ 3,572 December 31, 2017 (in millions) Debt Instrument Unamortized Issuance Expense Unamortized Debt Discount Total Variable rate ( 3.980% at December 31, 2017) 2016 term loan facility, due December 2020 (4) $ 1,191 $ (8) $ – $ 1,183 4.05% Senior Notes due January 2020 (2)(3) 92 – – 92 4.10% Senior Notes due March 2022 (3) 1,000 (7) – 993 4.95% Senior Notes due January 2025 (2)(3) 1,000 (8) (2) 990 7.50% Senior Notes due April 2026 650 (10) – 640 7.75% Senior Notes due October 2027 500 (7) – 493 Total debt $ 4,433 $ (40) $ (2) $ 4,391 (1) The $12 million of unamortized issuance expense associated with the 2018 revolving credit facility is classified as other long-term assets on the consolidated balance sheet and includes approximately $4 million in unamortized issuance expense associated with the Company’s previous 2016 revolving credit facility. (2) In February and June 2016, Moody’s and S&P downgraded certain senior notes, increasing the interest rates by 175 basis points effective July 2016. As a result of the downgrades, interest rates increased to 5.80% for the 2020 Notes and 6.70% for the 2025 Notes. In April and May 2018, S&P and Moody’s upgraded certain senior notes. As a result of these upgrades, interest rates decreased to 5.30% for the 2020 Notes and 6.20% for the 2025 Notes effective July 2018. The first coupon payment to the bondholders at the lower interest rate will be paid in January 2019. (3) In September 2018, the Company announced the initial results from its tender offers to repurchase certain outstanding senior notes contingent upon the closing of the Fayetteville Shale sale. Based on the tenders received, the Company expects to repurchase $787 million of its 4.10% senior notes due March 2022, $40 million of its 4.05% senior notes due January 2020 and $73 million of its 4.95% senior notes due January 2025. (4) In April 2018, the Company repaid the $1,191 million secured term loan balance with cash on hand and borrowings under the 2018 credit facility. Credit Facilities 2013 Credit Facility In December 2013, the Company entered into a credit agreement that exchanged its previous revolving credit facility. Under the revolving credit facility, the Company had a borrowing capacity of $2.0 billion. The revolving credit facility was unsecured and was not guaranteed by any subsidiaries. In June 2016, this credit facility was substantially exchanged for a new credit facility comprised of a $1,191 million secured term loan and a new $743 million revolving credit facility. The borrowing capacity of the original 2013 credit agreement was reduced from $2.0 billion to $66 million, remained unsecured and the maturity remained December 2018 . At December 31, 2017, there were no borrowings under the 2013 credit facility. On April 26, 2018 the Company replaced its 2016 credit facility with the 2018 credit facility and terminated the 2013 credit facility. 2016 Credit Facility In June 2016, the Company reduced its existing $2.0 billion unsecured revolving credit facility entered into in December 2013 to $66 million and entered into a new credit agreement for $1,934 million, consisting of a $1,191 million secured term loan and a new $743 million unsecured revolving credit facility, maturing in December 2020 . Concurrent with the closing of the new 2018 credit facility agreement on April 26, 2018, the Company repaid the $1,191 million secured term loan balance and recognized a loss on early debt extinguishment of $8 million on the consolidated income statement related to the unamortized issuance expense. In addition, approximately $4 million of unamortized issuance expense associated with the closed $743 million revolving credit facility was carried forward into the unamortized issuance expenses of the 2018 credit facility. At December 31, 2017 the $1,191 million secured term loan was fully drawn, there were no borrowings under the revolving credit facility, but $323 million in letters of credit was outstanding under the 2016 revolving credit facility. 2018 Revolving Credit Facility On April 26, 2018, as part of the Company’s strategic effort to simplify the capital structure, increase financial flexibility and reduce costs, the Company replaced its 2016 credit facility (which consisted of a $1,191 million secured term loan and an unsecured $743 million revolving credit facility) with a new revolving credit facility (the “2018 credit facility”). The 2018 credit facility has an aggregate maximum revolving credit amount of $3.5 billion and at September 30, 2018, had current borrowing base of $3.2 billion. In October 2018, the borrowing base was reduced to $3.1 billion. The Company’s current aggregate commitment is $2.0 billion. Upon the closing of the Fayetteville Shale sale expected to occur in December 2018, the Company’s borrowing base will be further reduced to $2.1 billion with no change in borrowing commitment. The 2018 credit facility is secured by substantially all of the assets owned by the Company and its subsidiaries. The 2018 credit facility matures on April 26, 2023 , provided that if the Company has not amended, redeemed or refinanced at least $700 million of its 2022 Senior Notes on or before December 14, 2021, the 2018 credit facility will mature on December 14, 2021 . The Company has successfully tendered for more than $700 million of its 2022 Senior Notes contingent on the closing of the Fayetteville Shale sale, which would eliminate this acceleration of maturity. Loans under the 2018 credit facility are subject to varying rates of interest based on whether the loan is a Eurodollar loan or an alternate base rate loan. Eurodollar loans bear interest at the Eurodollar rate, which is adjusted LIBOR for such interest period plus the applicable margin (as those terms are defined in the 2018 credit facility documentation). The applicable margin for Eurodollar loans under the 2018 credit facility ranges from 1.50% to 2.50% based on the Company’s utilization of the borrowing base under the 2018 credit facility. Alternate base rate loans bear interest at the alternate base rate plus the applicable margin. The applicable margin for alternate base rate loans under the 2018 credit facility ranges from 0.50% to 1.50% based on the Company’s utilization of the borrowing base under the 2018 credit facility. The 2018 credit facility contains customary representations and warranties and contains covenants including, among others, the following: • a prohibition against incurring debt, subject to permitted exceptions; • a restriction on creating liens on assets, subject to permitted exceptions; • restrictions on mergers and asset dispositions; • restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business; and • maintenance of the following financial covenants, commencing with the fiscal quarter ending June 30, 2018: 1. Minimum current ratio of no less than 1.00 to 1.00, whereby current ratio is defined as the Company’s consolidated current assets (including unused commitments under the credit agreement, but excluding non-cash derivative assets) to consolidated current liabilities (excluding non-cash derivative obligations and current maturities of long-term debt). 2. Maximum total net leverage ratio of no less than (i) with respect to each fiscal quarter ending during the period from June 30, 2018 through March 31, 2019, 4.50 to 1.00, (ii) with respect to each fiscal quarter ending during the period from June 30, 2019 through March 31, 2020, 4.25 to 1.00, and (iii) with respect to each fiscal quarter ending on or after June 30, 2020, 4.00 to 1.00. Total net leverage ratio is defined as total debt less cash on hand (up to the lesser of 10% of credit limit or $150 million) divided by consolidated EBITDAX for the last four consecutive quarters. EBITDAX, as defined in the Company’s 2018 credit agreement, excludes the effects of interest expense, depreciation, depletion and amortization, income tax, any non-cash impacts from impairments, certain non-cash hedging activities, stock-based compensation expense, non-cash gains or losses on asset sales, unamortized issuance cost, unamortized debt discount and certain restructuring costs. The 2018 credit facility contains customary events of default that include, among other things, the failure to comply with the financial covenants described above, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments and cross-defaults to material indebtedness. If an event of default occurs and is continuing, all amounts outstanding under the 2018 credit facility may become immediately due and payable. Each United States domestic subsidiary of the Company for which the Company owns 100% guarantees the 2018 credit facility. Pursuant to requirements under the indentures governing its senior notes, each subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of the Company’s senior notes. See Note 18 for the Company’s Condensed Consolidated Financial Information, presented in accordance with Rule 3-10 of Regulation S-X. At the closing of the Fayetteville Shale sale, its subsidiaries being sold will be released from these guarantees. Concurrent with the closing of the 2018 credit agreement, the Company repaid the $1,191 million secured term loan balance with cash on hand and borrowings under the new revolving credit facility. As of September 30, 2018, the Company’s borrowings under the 2018 revolving credit facility were $360 million. Additionally, at September 30, 2018 the Company had $169 million in letters of credit outstanding under the 2018 revolving credit facility. As of September 30, 2018, the Company was in compliance with all of the covenants of this credit agreement in all material respects. Senior Notes In January 2015, the Company completed a public offering of $350 million aggregate principal amount of its 3.30% senior notes due 2018 (the “2018 Notes”), $850 million aggregate principal amount of its 4.05% senior notes due 2020 (the “2020 Notes”) and $1.0 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes” together with the 2018 and 2020 Notes, the “Notes”), with net proceeds from the offering totaling approximately $2.2 billion after underwriting discounts and offering expenses. The interest rates on the Notes are determined based upon the public bond ratings from Moody’s and S&P. Downgrades on the Notes from either rating agency increase interest costs by 25 basis points per downgrade level and upgrades decrease interest costs by 25 basis points per upgrade level, up to the stated coupon rate, on the following semi-annual bond interest payment. In February and June 2016, Moody’s and S&P downgraded the Notes, increasing the interest rates by 175 basis points effective July 2016. As a result of these downgrades, interest rates increased to 5.80% for the 2020 Notes and 6.70% for the 2025 Notes. In the event of future downgrades, the coupons for this series of notes are capped at 6.05% and 6.95% , respectively. The first coupon payment to the bondholders at the higher interest rates was paid in January 2017. S&P and Moody’s upgraded the Notes in April and May 2018, respectively. As a result of these upgrades, interest rates decreased to 5.30% for the 2020 Notes and 6.20% for the 2025 Notes effective July 2018. The first coupon payment to the bondholders at the lower interest rates will be paid in January 2019. During the first half of 2017, the Company redeemed or repurchased (i) the remaining $38 million principal amount of its outstanding 2018 Notes, (ii) the remaining $212 million principal amount of its outstanding 7.50% Senior Notes due February 2018 and (iii) the remaining $26 million principal amount of its outstanding 7.15% Senior Notes due June 2018 , and recognized an $11 million loss on the extinguishment of debt, $10 million of which was recognized in the three months ended June 30, 2017. In September 2017, the Company completed a public offering of $650 million aggregate principal amount of its 7.50% senior notes due 2026 (the “2026 Notes”) and $500 million aggregate principal amount of its 7.75% senior notes due 2027 (the “2027 Notes”), with net proceeds from the offering totaling approximately $1.1 billion after underwriting discounts and offering expenses. Both series of senior notes were sold to the public at face value. The proceeds from this offering were used to purchase $758 million of the Company’s 2020 Notes in a tender offer and to repay the outstanding balance of $327 million on the Company’s 2015 term loan. The Company recognized a loss on extinguishment of debt of $59 million, which included $53 million of premiums paid. As discussed in Note 2 above, on August 30, 2018, the Company entered into an agreement to sell its subsidiaries that own and operate its Fayetteville Shale E&P and related midstream gathering assets for $1.865 billion in cash, subject to customary closing adjustments. The Company expects to use a portion of the proceeds to retire certain of its senior notes upon closing of the transaction. In September 2018, the Company announced the initial results from its tender offers to repurchase certain outstanding senior notes contingent upon the successful closing of its Fayetteville Shale divestiture. The Company intends to repurchase $787 million of its 4.10% senior notes due March 2022, $40 million of its 4.05% senior notes due January 2020 and $73 million of its 4.95% senior notes due January 2025. |