Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

DEBT

DEBT

At September 30, 2020 and October 27, 2020, the Company had (i) $1.05 billion of outstanding senior notes due 2026 (the “Notes”), (ii) $475.0 million in borrowings outstanding under its reserves-based revolving credit facility (the “Credit Agreement”), (iii) approximately $45.1 million in outstanding letters of credit issued pursuant to the Credit Agreement and (iv) $7.5 million outstanding under an unsecured U.S. Small Business Administration loan.

At September 30, 2020 and October 27, 2020, San Mateo I had $326.4 million in borrowings outstanding under its revolving credit facility (the “San Mateo Credit Facility”) and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility.

Credit Agreements

MRC Energy Company

The borrowing base under the Credit Agreement is determined semi-annually as of May 1 and November 1 by the lenders based primarily on the estimated value of the Company’s proved oil and natural gas reserves at December 31 and June 30 of each year, respectively. The Company and the lenders may each request an unscheduled redetermination of the borrowing base once between scheduled redetermination dates. In October 2020, the lenders completed their review of the Company’s proved oil and natural gas reserves, and, as a result, the borrowing base was affirmed at $900.0 million. The Company elected to keep the borrowing commitment at $700.0 million, the maximum facility amount remained $1.5 billion and no changes were made to the terms of the Credit Agreement. This October 2020 redetermination constituted the regularly scheduled November 1 redetermination. Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, the maximum facility amount and the elected commitment (subject to compliance with the covenant noted below). The Credit Agreement matures October 31, 2023.

The Credit Agreement requires the Company to maintain a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $50.0 million of cash or cash equivalents), divided by a rolling four quarter EBITDA calculation, of 4.00 or less. The Company believes that it was in compliance with the terms of the Credit Agreement at September 30, 2020.

San Mateo Midstream, LLC

The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries, as well as San Mateo II and its subsidiaries, but is guaranteed by San Mateo I’s subsidiaries and secured by substantially all of San Mateo I’s assets, including real property. Following the merger of San Mateo II with and into San Mateo I, the assets of San Mateo II are expected to be included as collateral under the San Mateo Credit Facility. The San Mateo Credit Facility includes an accordion feature, which provides for potential increases to up to $400.0 million, and matures December 19, 2023. At September 30, 2020, the lender commitments under the San Mateo Credit Facility were $375.0 million (subject to San Mateo I’s compliance with the covenants noted below).

The San Mateo Credit Facility requires San Mateo I to maintain a debt to EBITDA ratio, which is defined as total consolidated funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.00 or less, subject to certain exceptions. The San Mateo Credit Facility also requires San Mateo I to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo I’s consolidated interest expense, of 2.50 or more. The San Mateo Credit Facility also restricts the ability of San Mateo I to distribute cash to its members if San Mateo I’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility. The Company believes that San Mateo I was in compliance with the terms of the San Mateo Credit Facility at September 30, 2020.

Senior Unsecured Notes

At September 30, 2020, the Company had $1.05 billion of outstanding Notes, which have a 5.875% coupon rate. The Notes will mature September 15, 2026, and interest is payable on the Notes semi-annually in arrears on each March 15 and September 15. The Notes are guaranteed on a senior unsecured basis by certain subsidiaries of the Company.