Long-Term Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Long-term Debt

NOTE 8 - LONG-TERM DEBT

Long-term debt, net of unamortized discounts, premiums, and debt issuance costs totaling $9.1 million and $17.8 million as of September 30, 2021 and December 31, 2020, respectively, consists of the following:

	September 30, 2021		December 31, 2020
	(in thousands)
Revolving credit facility due May 2023	$	—	$	168,000
1.125% Convertible Notes due September 2021	—		193,014
6.125% Senior Notes due September 2024	397,103		396,368
6.25% Senior Notes due December 2025	103,081		103,204
5.75% Senior Notes due May 2026	743,051		741,976
Total debt, net of unamortized discount, premium and debt issuance costs	1,243,235		1,602,562
Less: Current portion of long-term debt	—		193,014
Total long-term debt	$	1,243,235	$	1,409,548

Revolving Credit Facility

In May 2018, we entered into a Fourth Amended and Restated Credit Agreement, which provides for a maximum credit amount of $2.5 billion, subject to certain limitations. The revolving credit facility is available for working capital requirements, capital investments, acquisitions, to support letters of credit and for general corporate purposes. The borrowing base is based on, among other things, the loan value assigned to the proved reserves attributable to our crude oil and natural gas interests. The borrowing base is subject to a semi-annual redetermination on November 1 and May 1 based upon quantification of our reserves at June 30 and December 31, and is also subject to a redetermination upon the occurrence of certain events. Substantially all of our crude oil and natural gas properties have been mortgaged or pledged as security for our revolving credit facility.

As of September 30, 2021, we had a borrowing base of $1.8 billion, an elected commitment of $1.6 billion and availability under our revolving credit facility of $1.6 billion, which was net of $18.7 million of letters of credit outstanding.

The outstanding principal amount under the revolving credit facility accrues interest at a varying interest rate that fluctuates with an alternate base rate (equal to the greatest of the administrative agent's prime rate, the federal funds rate plus a premium and the rate for dollar deposits in the London interbank market (“LIBOR”) for one month, plus a premium) or, at our election, a rate equal to LIBOR for certain time periods. Additionally, commitment fees, interest margin and other bank fees, charged as a component of interest, vary with our utilization of the facility. As of September 30, 2021, the applicable interest margin is 0.75 percent for the alternate base rate option or 1.75 percent for the LIBOR option, and the unused commitment fee is 0.375 percent. Principal payments are generally not required until the revolving credit facility expires in May 2023, unless the borrowing base falls below the outstanding balance.

The revolving credit facility contains various restrictive covenants and compliance requirements, which include, among other things: (i) maintenance of certain financial ratios, as defined per the revolving credit facility, including a minimum current ratio of 1.0:1.0 and a maximum leverage ratio of 4.0:1.0; (ii) restrictions on the payment of cash dividends; (iii) limits on the incurrence of additional indebtedness; (iv) prohibition on the entry into commodity hedges exceeding a specified percentage of our expected production; and (v) restrictions on mergers and dispositions of assets. As of September 30, 2021, we were in compliance with all covenants related to our revolving credit facility.

As of September 30, 2021 and December 31, 2020, debt issuance costs related to our revolving credit facility were $5.6 million and $8.1 million, respectively, and are included in other assets on our condensed consolidated balance sheets.

On November 2, 2021, we entered into a Fifth Amended and Restated Credit Agreement (the “New Credit Facility”) on substantially similar terms as those in our existing revolving credit facility. The New Credit Facility, led by JPMorgan Chase Bank, provides for an aggregate maximum credit amount of $2.5 billion, has an initial borrowing base of $2.4 billion and matures in November 2026. We elected an initial commitment amount of $1.5 billion. Other significant changes in terms include: (i) a decrease in the maximum leverage ratio from 4.0:1.00 to 3.50:1.00; (ii) replacement of all provisions and related definitions regarding LIBOR with a Secured Overnight Financing Rate based benchmark rate (“SOFR”); (iii) the ability to add certain sustainability-linked key performance indicators to be agreed upon between parties that may impact the applicable margin and commitment fee rate; (iv) the addition of an investment grade period election pursuant to which we have an option to remove our borrowing base limitations and terminate the liens securing the New Credit Facility when certain debt ratings are achieved; and (v) changes to certain of our covenant baskets and event of default provisions.

Senior Notes and Convertible Notes

The following table summarizes the face values, interest rates, maturity dates, semi-annual interest payment dates, and optional redemption periods related to our outstanding senior note obligations as of September 30, 2021:

	2024 Senior Notes			2025 Senior Notes			2026 Senior Notes
Outstanding principal amounts (in thousands)	$	400,000		$	102,324		$	750,000
Interest rate	6.125		%	6.25		%	5.75		%
Maturity date	September 15, 2024			December 1, 2025			May 15, 2026
Interest payment dates	March 15, September 15			June 1, December 1			May 15, November 15
Redemption periods (1)	September 15, 2022			December 1, 2023			May 15, 2024

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(1) At any time prior to the indicated dates, we have the option to redeem all or a portion of our senior notes of the applicable series at the “make-whole” or other redemption amounts specified in the respective senior note indentures plus accrued and unpaid interest to the date of redemption. On or after the indicated dates, we may redeem all or a portion of the senior notes at a redemption amount equal to 100% of the principal amount of the senior notes being redeemed plus accrued and unpaid interest to the date of redemption.

Our wholly-owned subsidiary, PDC Permian, Inc., is a guarantor of our obligations under the 2024 Senior Notes, the 2025 Senior Notes and the 2026 Senior Notes (collectively, the “Senior Notes”).

The Senior Notes are senior unsecured obligations and rank senior in right of payment to our future indebtedness that is expressly subordinated to the notes; equal in right of payment to our existing and future indebtedness that is not so subordinated; effectively junior in right of payment to all of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our non-guarantor subsidiaries.

Upon the occurrence of a “change of control”, as defined in the indentures for the Senior Notes, holders will have the right to require us to repurchase all or a portion of the notes at a price equal to 101 percent of the aggregate principal amount of the notes repurchased, together with accrued and unpaid interest to the date of purchase. In connection with certain asset sales, we may, under certain circumstances, be required to use the net cash proceeds of such asset sale to make an offer to purchase the notes at 100 percent of the principal amount, together with accrued and unpaid interest to the date of purchase.

The indentures governing the Senior Notes contain covenants and restricted payment provisions that, among other things, limit our ability and the ability of our subsidiaries to incur additional indebtedness; pay dividends or make distributions on our stock; purchase or redeem stock or subordinated indebtedness; make investments; create certain liens; enter into agreements that restrict distributions or other payments by restricted subsidiaries to us; enter into transactions with affiliates; sell assets; consolidate or merge with or into other companies or transfer all or substantially of our assets; and create unrestricted subsidiaries. As of September 30, 2021, we were in compliance with all covenants and all restricted payment provisions related to our Senior Notes.

Retirement of Convertible Notes. On September 15, 2021, we redeemed and retired our 2021 Convertible Notes with a cash payment for the principal amount of $200 million plus accrued and unpaid interest.

Pending Retirement of Senior Notes. In October 2021, we notified the trustee of our 2024 Senior Notes of our intention to redeem approximately $200 million in aggregate principal amount of the notes at a redemption price of 101.531% of the principal plus accrued and unpaid interest. We made our payment on November 3, 2021, leaving an aggregate principal amount outstanding of $200 million. In addition, in October 2021, we notified the trustee of our 2025 Senior Notes of our intention to redeem all of the remaining outstanding principal amount of $102.3 million at a redemption price of 103.125 percent of the principal plus accrued and unpaid interest. We expect to repay our 2025 Senior Notes in December 2021.