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Bank Debt
6 Months Ended
Jun. 30, 2011
Bank Debt  
Bank Debt

(10) Bank Debt

     At June 30, 2011, the Company had a revolving credit facility with F&M Bank & Trust Company ("F&M Bank").

     Under the credit facility, loans and letters of credit are available to the Company on a revolving basis in an amount outstanding not to exceed the lesser of $40 million or the Company's borrowing base in effect from time to time. The credit facility is secured by substantially all of the Company's producing and non-producing oil and gas properties and pipeline and the Company's Methane Project assets. The credit facility includes certain covenants in which the Company is required to comply. These covenants include leverage, interest coverage, minimum liquidity, and general and administrative coverage ratios.

     As of September 30, 2009, the Company was out of compliance on the Leverage Ratio and Interest Coverage Ratio covenants under the credit facility prior to the assignment to F&M Bank. The Company was in compliance with the remaining financial covenants under the credit facility. The noncompliance occurred primarily as a result of the low commodity prices in the last quarter of 2008 and first and second quarters of 2009 that are included in the covenant compliance calculations. The Company received a waiver for noncompliance of these covenants for the quarter ended September 30, 2009. There can be no assurances that the lender will waive noncompliance of covenants should future instances occur. As of June 30, 2011, the Company was in compliance with all covenants.

     On July 30, 2010, the Company and F&M Bank entered into an amendment to the credit facility as assigned to F&M Bank which increased the borrowing base from $11 million to $14 million, set the interest rate to the greater of prime plus 0.25% or 5.25% per annum, eliminated the then existing monthly commitment reduction, and changed the maturity date to January 27, 2012.

     On February 22, 2011, the Company and F&M Bank entered into an amendment to the credit facility which increased the borrowing base from $14 million to $20 million, increased the maximum line of the Company's credit amount from $20 million to $40 million, and extended the term of the facility to January 27, 2013.

     On July 14, 2011, F&M Bank reaffirmed the Company's borrowing base at $20 million. The next borrowing base review will take place in January 2012. The total borrowing by the Company under the facility at June 30, 2011 and December 31, 2010 was $11 million and $9.5 million, respectively.