Long-Term Debt

The following table summarizes our long-term debt as of the dates presented:



	September 30, 2012			December 31, 2011
Revolving credit facility	$	77,000		$	99,000
Senior notes due 2016, net of discount (principal amount of $300,000)	294,447			293,561
Senior notes due 2019	300,000			300,000
Convertible notes due 2012, net of discount (principal amount of $4,915)	4,884			4,746
	676,331			697,307
Less: Current portion of long-term debt	(4,884		)	(4,746		)
	$	671,447		$	692,561

Revolving Credit Facility

In September 2012, we entered into the Revolver which replaced our previous revolving credit facility that was entered into in August 2011. The Revolver provides for a $300 million revolving commitment and an accordion feature that allows us to increase the commitment by up to an aggregate of $300 million upon receiving additional commitments from one or more lenders. The Revolver also includes a $20 million sublimit for the issuance of letters of credit. The Revolver is governed by a borrowing base calculation and the availability under the Revolver may not exceed the lesser of the aggregate commitments and the borrowing base. The initial borrowing base under the Revolver is $300 million. The borrowing base will be re-determined based on a semi-annual review of our total proved oil, NGL and natural gas reserves starting in the spring of 2013. The Revolver is available to us for general purposes including working capital, capital expenditures and acquisitions. The Revolver matures in September 2017. We had letters of credit of $1.6 million outstanding as of September 30, 2012. As of September 30, 2012, our available borrowing capacity under the Revolver, as reduced by outstanding borrowings and letters of credit, was $221.4 million.

In September 2012, we capitalized $1.9 million of debt issuance costs in connection with the Revolver which will be amortized as a component of interest expense over the five year term. Capitalized debt issuance costs attributable to our previous revolving credit facility of $3.2 million were expensed as a loss on the extinguishment of debt during the quarter ended September 30, 2012.

Borrowings under the Revolver bear interest, at our option, at either (i) a rate derived from the London Interbank Offered Rate, as adjusted for statutory reserve requirements for Eurocurrency liabilities (“Adjusted LIBOR”), plus an applicable margin (ranging from 1.500% to 2.500%) or (ii) the greater of (a) the prime rate, (b) the federal funds effective rate plus 0.5% and (c) the one-month Adjusted LIBOR plus 1.0%, and, in each case, plus an applicable margin (ranging from 0.500% to 1.500%). The applicable margin is determined based on the ratio of our outstanding borrowings to the available Revolver capacity. Commitment fees are charged at 0.375% to 0.500% on the undrawn portion of the Revolver depending on our ratio of outstanding borrowings to the available Revolver capacity. As of September 30, 2012, the actual interest rate on the borrowings under the Revolver was 4.0%. This rate represents the prime rate option which applied to the initial borrowings through October 3, 2012 at which time the Adjusted LIBOR interest rate went into effect. The Adjusted LIBOR margin applicable to the initial borrowings subsequent to the conversion from the prime rate option was 1.75%.

The Revolver is guaranteed by Penn Virginia and all of our material subsidiaries (“Guarantor Subsidiaries”). The obligations under the Revolver are secured by a first priority lien on substantially all of our proved oil and gas reserves and a pledge of the equity interests in the Guarantor Subsidiaries.

The guarantees provided by the parent company and the Guarantor Subsidiaries under the Revolver as well as those provided for the senior indebtedness described below are full and unconditional and joint and several. Substantially all of our consolidated assets are held by the Guarantor Subsidiaries. The parent company and its non-guarantor subsidiaries have no material independent assets or operations. There are no significant restrictions on the ability of the parent company or any of the Guarantor Subsidiaries to obtain funds through dividends or other means, including advances and intercompany notes, among others.

The Revolver includes both current ratio and leverage ratio financial covenants. The current ratio is defined in the Revolver to include, among other things, adjustments for undrawn availability and may not be less than 1.0 to 1.0. The ratio of total net debt to EBITDAX, a non-GAAP financial measure defined in the Revolver, may not exceed 4.5 to 1.0 through December 31, 2013, 4.25 to 1.0 through June 30, 2014 and then 4.0 to 1.0 through maturity.

2016 Senior Notes

The 2016 Senior Notes were originally sold at 97% of par equating to an effective yield to maturity of approximately 11%. The 2016 Senior Notes bear interest at an annual rate of 10.375% payable on June 15 and December 15 of each year. Beginning in June 2013, we may redeem all or part of the 2016 Senior Notes at a redemption price starting at 105.188% of the principal amount and reducing to 100% in June 2015 and thereafter. The 2016 Senior Notes are senior to our existing and future subordinated indebtedness and are effectively subordinated to all of our secured indebtedness, including the Revolver, to the extent of the collateral securing that indebtedness. The obligations under the 2016 Senior Notes are fully and unconditionally guaranteed by the Guarantor Subsidiaries.

2019 Senior Notes

The 2019 Senior Notes, which were issued at par in April 2011, bear interest at an annual rate of 7.25% payable on April 15 and October 15 of each year. Beginning in April 2015, we may redeem all or part of the 2019 Senior Notes at a redemption price starting at 103.625% of the principal amount and reducing to 100% in June 2017 and thereafter. The 2019 Senior Notes are senior to our existing and future subordinated indebtedness and are effectively subordinated to all of our secured indebtedness, including the Revolver, to the extent of the collateral securing that indebtedness. The obligations under the 2019 Senior Notes are fully and unconditionally guaranteed by the Guarantor Subsidiaries.

Convertible Notes

The 4.50% Convertible Senior Subordinated Notes due 2012 (“Convertible Notes”) bear interest at an annual rate of 4.50% payable on May 15 and November 15 of each year. The Convertible Notes are convertible into cash up to the principal amount thereof and shares of our common stock, if any, in respect of the excess conversion value, based on an initial conversion rate of 17.3160 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $57.75 per share of common stock), subject to adjustment. The Convertible Notes are unsecured senior subordinated obligations, ranking junior in right of payment to any of our senior indebtedness and to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and equal in right of payment to any of our future unsecured senior subordinated indebtedness. The Convertible Notes rank senior in right of payment to any of our future junior subordinated indebtedness and structurally rank junior to all existing and future indebtedness of our Guarantor Subsidiaries.

The Convertible Notes are represented by a liability component classified as current maturities of long-term debt, net of discount, and an equity component representing the convertible feature which is included in additional paid-in capital in shareholders’ equity. The effective interest rate on the liability component of the Convertible Notes for all periods presented was 8.5%. The $4.9 million of outstanding principal amount due on the Convertible Notes will be paid on November 15, 2012 and will be funded by cash on hand or by borrowings under the Revolver.

In connection with a tender offer completed in April 2011, the Company repurchased $225.1 million aggregate principal amount of the Convertible Notes for $233.0 million, including a premium of $35 per $1,000 principal amount. The tender offer resulted in the extinguishment of approximately 98% of the outstanding Convertible Notes. The tender offer was funded from the net proceeds of the 2019 Senior Notes offering.

The following table summarizes the carrying amount of the components of the Convertible Notes as of the dates presented:



	September 30, 2012			December 31, 2011
Principal	$	4,915		$	4,915
Unamortized discount	(31		)	(169		)
Net carrying amount of liability component	$	4,884		$	4,746
Carrying amount of equity component	$	35,201		$	35,201

The following table summarizes the amounts recognized as components of interest expense attributable to the Convertible Notes for the periods presented:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Contractual interest expense	$	55	$	55	$	166	$	3,064
Accretion on original issue discount	47		43		138		2,308
Amortization of debt issuance costs	8		7		22		396
	$	110	$	105	$	326	$	5,768