Debt Obligations

The following table summarizes our debt obligations as of the dates presented:



	As of
	March 31, 2016					December 31, 2015
	Principal			Unamortized Issuance Costs		Principal			Unamortized Issuance Costs
Revolving credit facility ¹	$	147,065				$	170,000
Senior notes due 2019	300,000			$	3,076	300,000			$	3,295
Senior notes due 2020	775,000			16,497		775,000			17,322
Totals	1,222,065			$	19,573	1,245,000			$	20,617
Less: Unamortized issuance costs	(19,573		)			(20,617		)
Debt obligations, net of unamortized issuance costs	$	1,202,492				$	1,224,383

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¹ Issuance costs attributable to the Revolver, which represent costs attributable to the access to credit over the Revolver’s contractual term, are presented as a component of Other assets (see Note 10).

Revolving Credit Facility

In January 2016, the Revolver was amended to (i) allow us to convert to or continue LIBOR loans without having to make a solvency representation and (ii) increase our mortgage requirement from 80 percent to 100 percent (subject to certain exceptions) of our proved reserves. On March 15, 2016, we entered into the Eleventh Amendment (the “Eleventh Amendment”) to the Revolver, which provided (i) for an extension before certain events of default under the Revolver will occur, (ii) for an initial reduction in commitments to $171.8 million and (iii) that the borrowing base under the Revolver is not subject to scheduled redetermination until May 15, 2016. Specifically, the extension period with respect to events of default was through 12:01 am on April 12, 2016, which was further extended through 12:01 am on May 10, 2016, as certain conditions were satisfied. The extension period can be terminated early upon certain triggering events. The key conditions to the first extension (April 12, 2016) and entry into the Eleventh Amendment were: (i) termination of certain hedge agreements and application of the proceeds against the loans (which resulted in a further reduction in our lenders’ commitments), (ii) entry into control agreements over deposit accounts, subject to customary exceptions, (iii) payment of adviser fees and (iv) agreement to certain changes to the Revolver, including increasing the interest rate by 1.00%, tightening certain restrictive covenants and agreeing that monthly hedge settlements will be applied against the loans. The key conditions to the second extension (May 10, 2016) were: (i) termination of certain additional hedges and application of a portion of the proceeds against the loans (which resulted in a further reduction in our lenders’ commitments) and (ii) no notification by the representative of the ad hoc committee of unsecured noteholders that they do not support such extension.

In connection with the first and second extensions, we terminated certain derivative contracts representing hedges and proceeds of $22.9 million and $16.6 million were applied to reduce the amounts outstanding under the Revolver in March 2016 and April 2016, respectively.

Pursuant to the Eleventh Amendment, as of March 31, 2016, the commitments under the Revolver were reduced to $148.9 million. As a result of the April hedge termination transaction referenced above, the total commitment was further reduced to $126.9 million, which is equal to our currently outstanding loans ($125.0 million) and issued letters of credit ($1.9 million). Because we do not have any unused commitment capacity, we are not able to draw on the Revolver to pay our second quarter interest payments on our senior notes or for any other purpose. Moreover, our lenders may in the future exercise their right to redetermine our borrowing base under the Revolver. If our borrowing base is redetermined below the amount of our outstanding borrowings, a deficiency will result, and any deficiency must be repaid within 60 days.

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 2.500% to 3.500%) or (ii) the greater of (a) the prime rate, (b) the federal funds effective rate plus 0.5% or (c) the one-month Adjusted LIBOR plus 1.0% (clauses (a), (b) and (c) (the “Base Rate”)), and, in each case, plus an applicable margin (ranging from 1.500% to 2.500%). The applicable margin is determined based on the ratio of our outstanding borrowings to the available Revolver capacity. As of March 31, 2016, the actual interest rate on the outstanding borrowings under the Revolver was 4.125% which is derived from an Adjusted LIBOR rate of 0.625% plus an applicable margin of 3.5000%. 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 March 31, 2016, commitment fees were charged at a rate of 0.500%.

The Revolver is guaranteed by the Company and all of our material subsidiaries (the “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 Revolver includes current ratio, leverage ratio and credit exposure financial covenants. Under the current ratio covenant, the ratio of current assets to current liabilities as of the last day of any fiscal quarter may not be less than 1.0 to 1.0. Current assets and current liabilities attributable to derivative instruments are excluded. In addition, current assets include the amount of any unused commitment under the Revolver. Under the leverage ratio covenant, the ratio of total debt to EBITDAX, for any four consecutive quarters may not exceed 4.75 to 1.0 through March 31, 2016; 5.25 to 1.0 through June 30, 2016; 5.50 to 1.0 through December 31, 2016; 4.50 to 1.0 through March 31, 2017; and 4.0 to 1.0 through maturity in September 2017. Furthermore, we are precluded from the payment of cash dividends on our outstanding convertible preferred stock if the leverage ratio for the preceding four quarters exceeds 5.0 to 1.0. Pursuant to the Eleventh Amendment, we are precluded from paying dividends on our outstanding convertible preferred stock and common stock. Under the credit exposure covenant, the ratio of credit exposure to EBITDAX for any four consecutive quarters ending on or prior to March 31, 2017 may not exceed 2.75 to 1.0. Credit exposure consists of all outstanding borrowings under the Revolver, including any outstanding letters of credit.

As of March 31, 2016 and through the date upon which the Consolidated Financial Statements were issued, we were not in compliance with the current ratio covenant or the leverage ratio covenant under the Revolver. Due primarily to substantial doubt with respect to our ability to continue as a going concern, our registered independent public accountants have expressed an opinion with a going concern explanatory paragraph on our consolidated audited financial statements for the year ended December 31, 2015. A going concern explanatory paragraph represents a violation of one of our non-financial affirmative covenants under the Revolver, which is characterized as a default, thereby making the outstanding borrowings under the Revolver subject to acceleration. Accordingly, the amounts outstanding under the Revolver were reclassified to current at December 31, 2015 and remain as such as of March 31, 2016. These defaults, however, are currently subject to the extension provided by the Eleventh Amendment, as described above. Due to various cross-default provisions under the indentures governing our senior notes, our senior notes are also classified as current liabilities as of March 31, 2016.

2019 Senior Notes

Our 7.25% Senior Notes due 2019 (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. We may redeem all or part of the 2019 Senior Notes at a redemption price of 103.625% of the principal amount reducing to 100% in April 2017 and thereafter. The 2019 Senior Notes are senior to our existing and future subordinated indebtedness and are effectively subordinated to 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. Additionally, the 2019 Senior Notes contain certain cross-default provisions, which could result in an event of default under the notes if the lenders under the Revolver accelerate the Revolver obligations. Such an event of default, if it occurs, would permit the noteholders to accelerate the 2019 Senior Notes. We elected not to make the $10.9 million interest payment on the 2019 Senior Notes due April 15, 2016. If we do not make such interest payment by May 15, 2016, there will be an event of default pursuant to the indenture governing the 2019 Senior Notes.

2020 Senior Notes

Our 8.50% Senior Notes due 2020 (the “2020 Senior Notes”), which were issued at par in April 2013, bear interest at an annual rate of 8.50% payable on May 1 and November 1 of each year. Beginning in May 2017, we may redeem all or part of the 2020 Senior Notes at a redemption price of 104.250% of the principal amount reducing to 100% in May 2019 and thereafter. The 2020 Senior Notes are senior to our existing and future subordinated indebtedness and are effectively subordinated to our secured indebtedness, including the Revolver, to the extent of the collateral securing that indebtedness. The obligations under the 2020 Senior Notes are fully and unconditionally guaranteed by the Guarantor Subsidiaries. Additionally, the 2020 Senior Notes contain certain cross-default provisions, which could result in an event of default under the notes if the lenders under the Revolver accelerate the Revolver obligations. Such an event of default, if it occurs, would permit the noteholders to accelerate the 2020 Senior Notes. We do not expect to make the scheduled $32.9 million interest payment on the 2020 Senior Notes that is due on May 1, 2016.

Guarantees

The guarantees under the Revolver and the 2019 Senior Notes and 2020 Senior Notes 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, advances or loans.