Credit Facility

3 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Credit Facility

4. Credit Facility

The Company has a loan agreement with Bank of America, N.A. (the “Agreement”)(“Bank”), which provided for a credit facility of $5,570,000 with no monthly commitment reductions and a borrowing base to be evaluated on July 30 and January 1 of each year or at any additional time in the Bank’s discretion. The borrowing base also resets to the extent the Company sells or otherwise disposes of any of its oil and gas properties as the Company is required to pay 100% of such net proceeds to the lender resulting in a permanent reduction of the borrowing base unless prior approval by Bank states otherwise. As of June 30, 2018, the borrowing base was set at $750,000. Subsequently, the borrowing base was evaluated on July 31, 2018 and set at $525,000.

The Agreement was renewed eleven times with the eleventh amendment effective as of March 8, 2017 with a maturity date of November 30, 2020. Under such renewal agreement, interest on the facility accrues at an annual rate equal to the British Bankers Association London Interbank Offered Rate (“BBA LIBOR”) daily floating rate, plus 3.0 percentage points, which was 5.10% on June 30, 2018. Interest on the outstanding amount under the credit agreement is payable monthly. There was no availability of this facility at June 30, 2018. No principal payments are anticipated to be required through November 30, 2020. Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $650,000 for each trailing four fiscal quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter. The Company is in compliance with all covenants as of June 30, 2018 and believes it will remain in compliance for the next fiscal year.

The amended Agreement allows for up to $500,000 of the facility to be used for outstanding letters of credits. As of June 30, 2018, one letter of credit for $50,000, in lieu of a plugging bond with the Texas Railroad Commission covering the properties the Company operates is outstanding under the facility. The Company will pay a fee in an amount equal to 1 percent (1.0%) per annum of the outstanding undrawn amount of each standby letter of credit, payable monthly in arrears, on the basis of the face amount outstanding on the day the fee is calculated. This letter of credit renews annually and was subsequently renewed on July 20, 2018 with an amended amount of $25,000.

In addition, this Agreement prohibits the Company from paying cash dividends on its common stock. The Agreement does grant the Company permission to enter into hedge agreements however, it is under no obligation to do so.

The balance outstanding on the line of credit as of June 30, 2018 was $500,000. The following table is a summary of activity on the Bank of America, N.A. line of credit for the three months ended June 30, 2018:

	Principal
Balance at April 1, 2018:	$	700,000
Borrowings		-
Repayments		(200,000	)
Balance at June 30, 2018:	$	500,000