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Debt
 12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Debt
Note 7Debt
a.
January 2025 Notes and January 2028 Notes
On January 24, 2020, the Company completed an offer and sale (the "Offering") of $600.0 million in aggregate principal amount of 9.500% senior unsecured notes due 2025 (the "January 2025 Notes") and $400.0 million in aggregate principal amount of 10.125% senior unsecured notes due 2028 (the "January 2028 Notes"). Interest for both the January 2025 Notes and January 2028 Notes is payable semi-annually, in cash in arrears on January 15 and July 15 of each year. The first interest payment was made on July 15, 2020, and consisted of interest from closing to that date. The terms of the January 2025 Notes and January 2028 Notes include covenants, which are in addition to but different than similar covenants in the Senior Secured Credit Facility, which limit the Company's ability to incur indebtedness, make restricted payments, grant liens and dispose of assets.
The January 2025 Notes and January 2028 Notes are fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain automatic customary releases, including the sale, disposition or transfer of all of the capital stock or of all or substantially all of the assets of a subsidiary guarantor to one or more persons that are not the Company or a restricted subsidiary, exercise of legal defeasance or covenant defeasance options or satisfaction and discharge of the applicable indenture, designation of a subsidiary guarantor as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the applicable indenture, release from guarantee under the Senior Secured Credit Facility, or liquidation or dissolution (collectively, the "Releases").
The Company received net proceeds of $982.0 million from the Offering, after deducting underwriting discounts and commissions and estimated offering expenses. The proceeds from the Offering were used (i) to fund Tender Offers (defined below) for the Company's January 2022 Notes and March 2023 Notes (defined below), (ii) to repay the Company's January 2022 Notes and March 2023 Notes that remained outstanding after settling the Tender Offers and (iii) for general corporate purposes, including repayment of a portion of the borrowings outstanding under the Company's Senior Secured Credit Facility.
In November 2020, the Company's board of directors authorized a $50.0 million bond repurchase program. During the year ended December 31, 2020, the Company repurchased $22.1 million in aggregate principal amount of the January 2025 Notes and $39.0 million in aggregate principal amount of the January 2028 Notes for aggregate consideration of $13.9 million and $24.2 million, respectively, plus accrued and unpaid interest. The Company recognized a gain on extinguishment of $22.3 million related to the difference between the consideration paid and the net carrying amounts of the extinguished portions of the January 2025 Notes and January 2028 Notes.
b.
January 2022 Notes and March 2023 Notes
On January 23, 2014, the Company completed an offering of $450.0 million in aggregate principal amount of 5 5/8% senior unsecured notes due 2022 (the "January 2022 Notes"). The January 2022 Notes were due to mature on January 15, 2022 and bore an interest rate of 5 5/8% per annum, payable semi-annually, in cash in arrears on January 15 and July 15 of each year, commencing July 15, 2014. The January 2022 Notes were fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain Releases.
On March 18, 2015, the Company completed an offering of $350.0 million in aggregate principal amount of 6 1/4% senior unsecured notes due 2023 (the "March 2023 Notes"). The March 2023 Notes were due to mature on March 15, 2023 and bore an interest rate of 6 1/4% per annum, payable semi-annually, in cash in arrears on March 15 and September 15 of each year, commencing September 15, 2015. The March 2023 Notes were fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain Releases.
On January 6, 2020, the Company commenced cash tender offers and consent solicitations for any or all of its outstanding January 2022 Notes and March 2023 Notes (collectively, the "Tender Offers"). On January 24, 2020 and February 6, 2020, the Company settled the Tender Offers for the principal outstanding amounts of $428.9 million and $299.4 million, respectively, for consideration for tender offers and early tender premiums of $431.6 million and $304.1 million for the January 2022 Notes and March 2023 Notes, respectively, plus accrued and unpaid interest. On January 29, 2020, the Company redeemed the remaining $21.1 million of January 2022 Notes not tendered under the Tender Offers at a redemption price of 100.000% of the principal amount thereof, plus accrued and unpaid interest. On March 15, 2020, the Company redeemed the remaining $50.6 million of March 2023 Notes not tendered under the Tender Offers at a redemption price of 101.563% of the principal amount thereof, plus accrued and unpaid interest. The Company recognized a loss on extinguishment of $13.3 million related to the difference between the consideration for tender offers, early tender premiums and redemption prices and the net carrying amounts of the extinguished January 2022 Notes and March 2023 Notes.
c.Senior Secured Credit Facility
The Fifth Amended and Restated Credit Agreement (as amended, the "Senior Secured Credit Facility") matures on April 19, 2023. As of December 31, 2020, the Senior Secured Credit Facility had a maximum credit amount of $2.0 billion and a borrowing base and an aggregate elected commitment of $725.0 million each, with $255.0 million outstanding and was subject to an interest rate of 2.688%. The borrowing base is subject to a semi-annual redetermination occurring by May 1 and November 1 of each year based on the lenders' evaluation of the Company's oil, NGL and natural gas reserves. As defined in the Senior Secured Credit Facility, (i) the Adjusted Base Rate advances under the facility bear interest payable quarterly at an
Adjusted Base Rate plus applicable margin, which ranges from 1.25% to 2.25%, based on the ratio of outstanding revolving credit to the borrowing base under the Senior Secured Credit Facility; and (ii) the Eurodollar advances under the facility bear interest, at the Company's election, at the end of one-month, two-month, three-month, six-month or, to the extent available, 12-month interest periods (and in the case of six-month and 12-month interest periods, every three months prior to the end of such interest period) at an Adjusted London Interbank Offered Rate plus an applicable margin, which ranges from 2.25% to 3.25%, based on the ratio of outstanding revolving credit to the borrowing base under the Senior Secured Credit Facility. Laredo is required to pay a quarterly commitment fee on the unused portion of the financial institutions' commitment of 0.375% to 0.5%, based on the ratio of outstanding revolving credit to the aggregate elected commitment under the Senior Secured Credit Facility.
The Senior Secured Credit Facility is secured by a first-priority lien on Laredo and the Guarantors' assets and stock, including oil and natural gas properties constituting at least 85% of the present value of the Company's proved reserves. Further, the Company is subject to various financial and non-financial covenants on a consolidated basis, including a current ratio at the end of each calendar quarter, of not less than 1.00 to 1.00. As defined by the Senior Secured Credit Facility, the current ratio represents the ratio of current assets to current liabilities, inclusive of available capacity and exclusive of current balances associated with derivative positions. Additionally, the Company must maintain as of the last day of each calendar quarter a ratio of (a) its total debt (excluding reimbursement obligations in respect of undrawn letters of credit, if no loans are outstanding under the Senior Secured Credit Facility) minus a maximum of $50 million of unrestricted and unencumbered cash and cash equivalents, to (b) "Consolidated EBITDAX," as defined in the Senior Secured Credit Facility, for any period of four consecutive calendar quarters ending on the last day of such applicable calendar quarter of not greater than 4.25 to 1.00 through the quarterly period ended September 30, 2020, and 4.00 to 1.00 beginning on December 31, 2020. The Company was in compliance with these covenants for all periods presented. The Company's measurements of Adjusted EBITDA (non-GAAP) for financial reporting differs from the measurement used for compliance under its debt agreements.
Additionally, the Senior Secured Credit Facility provides for the issuance of letters of credit, limited to the lesser of total capacity or $80.0 million. As of December 31, 2020 and 2019, the Company had one letter of credit outstanding of $44.1 million and $14.7 million, respectively, under the Senior Secured Credit Facility.
See Note 19.a for discussion of a borrowing and payment on the Senior Secured Credit Facility subsequent to December 31, 2020.
d.Debt issuance costs
The following table presents debt issuance costs capitalized and debt issuance costs write-offs for the periods presented:
Years ended December 31,
(in thousands)202020192018
Debt issuance costs capitalized(1)
$18,479 $— $2,469 
Debt issuance costs write-offs(2)
$6,163 $935 $— 
______________________________________________________________________________
(1)The Company capitalized $0.1 million and $2.5 million in debt issuance costs during the years ended December 31, 2020 and 2018, respectively, in connection with entering into amendments to the Senior Secured Credit Facility pursuant to the semi-annual redeterminations. The Company capitalized $18.4 million in debt issuance costs during the year ended December 31, 2020 in connection with the issuance of the January 2025 Notes and January 2028 Notes.
(2)The Company wrote off $1.1 million and $0.9 million of debt issuance costs during the years ended December 31, 2020 and 2019, respectively, which are the "Write-off of debt issuance costs" on the consolidated statements of operations, in connection with reductions in borrowing base and aggregate elected commitment under the Senior Secured Credit Facility pursuant to the semi-annual redeterminations. The Company wrote off $5.1 million in debt issuance costs during the year ended December 31, 2020, which are included in "Gain on extinguishment of debt, net" on the consolidated statement of operations, in connection with the extinguishment of the January 2022 Notes and March 2023 Notes and portions of the January 2025 Notes and January 2028 Notes.
The Company had total debt issuance costs of $17.0 million and $9.0 million, net of accumulated amortization of $22.1 million and $27.5 million, as of December 31, 2020 and 2019, respectively. Debt issuance costs related to the Company's January
2025 and January 2028 Notes are included in "Long-term debt, net" on the consolidated balance sheets. Debt issuance costs related to the Senior Secured Credit Facility are included in "Other noncurrent assets, net" on the consolidated balance sheets. Debt issuance costs are amortized on a straight-line basis over the respective terms of the notes and the Senior Secured Credit Facility. See Note 7.f for additional discussion of debt issuance costs.
The following table presents future amortization expense of debt issuance costs:
(in thousands)December 31, 2020
20214,031 
20224,031 
20233,362 
20243,027 
2025865 
Thereafter1,717 
Total17,033 
e.Interest expense
The following table presents amounts that have been incurred and charged to interest expense:
 Years ended December 31,
(in thousands)202020192018
Cash payments for interest$80,420 $59,021 $54,969 
Amortization of debt issuance costs and other adjustments3,708 3,111 3,655 
Change in accrued interest23,900 220 268 
Interest costs incurred108,028 62,352 58,892 
Less capitalized interest(3,019)(805)(988)
Total interest expense$105,009 $61,547 $57,904 
f.Long-term debt, net
The following table presents the Company's long-term debt and debt issuance costs, net included in "Long-term debt, net" on the consolidated balance sheets as of the dates presented:
 December 31, 2020December 31, 2019
(in thousands)Long-term debtDebt issuance costs, netLong-term debt, netLong-term debtDebt issuance costs, netLong-term debt, net
January 2022 Notes$— $— $— $450,000 $(2,034)$447,966 
March 2023 Notes— — — 350,000 (2,549)347,451 
January 2025 Notes577,913 (8,676)569,237 — — — 
January 2028 Notes361,044 (6,015)355,029 — — — 
Senior Secured Credit Facility(1)
255,000 — 255,000 375,000 — 375,000 
Total$1,193,957 $(14,691)$1,179,266 $1,175,000 $(4,583)$1,170,417 
_____________________________________________________________________________
(1)Debt issuance costs, net related to the Senior Secured Credit Facility of $2.3 million and $4.5 million as of December 31, 2020 and 2019, respectively, are included in "Other noncurrent assets, net" on the consolidated balance sheets.