Long-Term Debt And Other Long-Term Liabilities

12 Months Ended

Dec. 31, 2020

Long-term debt and other long-term liabilites [Abstract]

Long-term Debt

LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES

Long-Term Debt

Long-term debt consisted of the following as of December 31:

	Successor		Predecessor
	2020		2019
	(In thousands)
Current portion of long-term debt:
Predecessor credit facility with an average interest rate of 4.0%	$	—	$	108,200
Successor Exit Facility with an average interest rate of 6.6%	600		—
Long-term debt:
Successor Exit Facility with an average interest of 6.6%	98,400		—
Superior credit agreement with an average interest rate of 3.9% at December 31, 2019	—		16,500
Predecessor 6.625% senior subordinated notes due 2021	—		650,000
Total principal amount	$	98,400	$	666,500
Less: unamortized discount	—		(971)
Less: debt issuance costs, net	—		(2,313)
Total long-term debt	$	98,400	$	663,216

Successor Exit Credit Agreement. On the Effective Date, under the Plan, we entered into the Exit Credit Agreement, providing for a $140.0 million senior secured revolving credit facility and a $40.0 million senior secured term loan facility, among (i) the company, UDC, and UPC, (ii) the guarantors, including the company and all its subsidiaries existing as of the Effective Date (other than Superior Pipeline Company, L.L.C. and its subsidiaries), (iii) the lenders under the agreement, and (iv) BOKF, NA dba Bank of Oklahoma as administrative agent and collateral agent (the Administrative Agent).

The maturity date of borrowings under the Exit Credit Agreement is March 1, 2024. Revolving Loans and Term Loans (each as defined in the Exit Credit Agreement) may be Eurodollar Loans or ABR Loans (each as defined in the Exit Credit Agreement). Revolving Loans that are Eurodollar Loans will bear interest at a rate per annum equal to the Adjusted LIBO Rate (as defined in the Exit Credit Agreement) for the applicable interest period plus 525 basis points. Revolving Loans that are ABR Loans will bear interest at a rate per annum equal to the Alternate Base Rate (as defined in the Exit Credit Agreement) plus 425 basis points. Term Loans that are Eurodollar Loans will bear interest at a rate per annum equal to the Adjusted LIBO Rate for the applicable interest period plus 625 basis points. Term Loans that are ABR Loans will bear interest at a rate per annum equal to the Alternate Base Rate plus 525 basis points.

The Exit Credit Agreement requires the company to comply with certain financial ratios, including a covenant that the company will not permit the Net Leverage Ratio (as defined in the Exit Credit Agreement) as of the last day of the fiscal quarters ending (i) December 31, 2020 and March 31, 2021, to be greater than 4.00 to 1.00, (ii) June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, and June 30, 2022, to be greater than 3.75 to 1.00, and (iii) September 30, 2022 and any fiscal quarter thereafter, to be greater than 3.50 to 1.00. In addition, beginning with the fiscal quarter ending December 31, 2020, the company may not (a) permit the Current Ratio (as defined in the Exit Credit Agreement) as of the last day of any fiscal quarter to be less than 0.50 to 1.00 or (b) permit the Interest Coverage Ratio (as defined in the Exit Credit Agreement) as of the last day of any fiscal quarter to be less than 2.50 to 1.00. The Exit Credit Agreement also contains provisions, among others, that limit certain capital expenditures, restrict certain asset sales and the related use of proceeds, and require certain hedging activities. The Exit Credit Agreement further requires that we provide quarterly financial statements within 45 days after the end of each of the first three quarters of each fiscal year and annual financial statements within 90 days after the end of each fiscal year. As of December 31, 2020, we were in compliance with these covenants.

The Exit Credit Agreement is secured by first-priority liens on substantially all the personal and real property assets of the borrowers and the guarantors, including our ownership interests in Superior Pipeline Company, L.L.C.

On the Effective Date, we had (i) $40.0 million in principal amount of Term Loans outstanding, (ii) $92.0 million in principal amount of Revolving Loans outstanding, and (iii) approximately $6.7 million of outstanding letters of credit. At December 31, 2020, we had $0.6 million and $98.4 million outstanding current and long-term borrowings, respectively, under the Exit Credit Agreement.

Predecessor's Credit Agreement. Before the filing of the Chapter 11 Cases, the Unit credit agreement had a scheduled maturity date of October 18, 2023 that would have accelerated to November 16, 2020 if, by that date, all the Notes were not repurchased, redeemed, or refinanced with indebtedness having a maturity date at least six months following October 18, 2023 (Credit Agreement Extension Condition). The Debtors' filing of the Chapter 11 Cases constituted an event of default that accelerated the Debtors' obligations under the Unit credit agreement and the indenture governing the Notes. Due to the Credit Agreement Extension Condition, our debt associated with the Unit credit agreement is reflected as a current liability in our Consolidated Balance Sheets as of December 31, 2019. The classification as a current liability due to the Credit Agreement Extension Condition was based on the uncertainty regarding our ability to repay or refinance the Notes before November 16, 2020. In addition, on May 22, 2020, the lenders' remaining commitments under the Unit credit agreement were terminated.

Before filing the Chapter 11 Cases, we were charged a commitment fee of 0.375% on the amount available but not borrowed. That fee varied based on the amount borrowed as a percentage of the total borrowing base. Total amendment fees of $3.3 million in origination, agency, syndication, and other related fees were being amortized over the life of the Unit credit agreement. Due to the remaining commitments under the Unit credit agreement being terminated by the lenders', the unamortized debt issuance costs of $2.4 million were written off during the second quarter of 2020. Under the Unit credit agreement, we pledged as collateral 80% of the proved developed producing (discounted as present worth at 8%) total value of our oil and gas properties. Under the mortgages covering those oil and gas properties, UPC also pledged certain items of its personal property.

Before filing the Chapter 11 Cases, any part of the outstanding debt under the Unit credit agreement could be fixed at a London Interbank Offered Rate (LIBOR). LIBOR interest was computed as the LIBOR base for the term plus 1.50% to 2.50% depending on the level of debt as a percentage of the borrowing base and was payable at the end of each term, or every 90 days, whichever is less. Borrowings not under LIBOR bear interest equal to the higher of the prime rate specified in the Predecessor credit agreement and the sum of the Federal Funds Effective Rate (as defined in the Unit credit agreement) plus 0.50%, but in no event would the interest on those borrowings be less than LIBOR plus 1.00% plus a margin. Interest was payable at the end of each month or at the end of each LIBOR contract and the principal may be repaid in whole or in part at any time, without a premium or penalty.

Filing the bankruptcy petitions on May 22, 2020 constituted an event of default that accelerated our obligations under the Unit credit agreement, and the lenders’ rights of enforcement under the Unit credit agreement were automatically stayed because of the Chapter 11 Cases.

On the Effective Date, each lender under the Unit credit agreement and the DIP Credit Agreement received its pro rata share of revolving loans, term loans and letter-of-credit participations under the Exit Credit Agreement, in exchange for that lender’s allowed claims under the Unit credit agreement or the DIP Credit Agreement.

Superior Credit Agreement. On May 10, 2018, Superior entered into a five-year, $200.0 million senior secured revolving credit facility with an option to increase the credit amount up to $250.0 million, subject to certain conditions. The amounts borrowed under the Superior credit agreement bear annual interest at a rate, at Superior’s option, equal to (a) LIBOR plus the applicable margin of 2.00% to 3.25% or (b) the alternate base rate (greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) the Thirty-Day LIBOR Rate (as defined in the Superior credit agreement) plus the applicable margin of 1.00% to 2.25%. The obligations under the Superior credit agreement are secured by mortgage liens on certain of Superior’s processing plants and gathering systems. The credit agreement provides that if ICE Benchmark Administration no longer reports the LIBOR or Administrative Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to Lender in the London Interbank Market or if such index no longer exists or accurately reflects the rate available to Administrative Agent in the London Interbank Market, Administrative Agent may select a replacement index.

Superior is charged a commitment fee of 0.375% on the amount available but not borrowed which varies based on the amount borrowed as a percentage of the total borrowing base. Superior paid $1.7 million in origination, agency, syndication, and other related fees. These fees are being amortized over the life of the Superior credit agreement.

The Superior credit agreement requires that Superior maintain a Consolidated EBITDA to interest expense ratio for the most-recently ended rolling four quarters of at least 2.50 to 1.00, and a funded debt to Consolidated EBITDA ratio of not greater than 4.00 to 1.00. The agreement also contains several customary covenants that restrict (subject to certain exceptions) Superior’s ability to incur additional indebtedness, create additional liens on its assets, make investments, pay distributions, sign sale and leaseback transactions, engage in certain transactions with affiliates, engage in mergers or consolidations, sign hedging arrangements, and acquire or dispose of assets. As of December 31, 2020, Superior was in compliance with these covenants.

Borrowings under the Superior credit agreement will fund capital expenditures and acquisitions, provide general working capital, and for letters of credit for Superior.

Unit is not a party to and does not guarantee Superior's credit agreement. Superior and its subsidiaries were not debtors in the Chapter 11 Cases, and the Superior credit agreement was not affected by Unit's bankruptcy.

Predecessor 6.625% Senior Subordinated Notes. The Notes were issued under an Indenture dated as of May 18, 2011, between the company and Wilmington Trust, National Association (successor to Wilmington Trust FSB), as Trustee (Trustee), as supplemented by the First Supplemental Indenture dated as of May 18, 2011, between us, the Guarantors, and the Trustee, and as further supplemented by the Second Supplemental Indenture dated as of January 7, 2013, between us, the Guarantors, and the Trustee (as supplemented, the 2011 Indenture), establishing the terms of and providing for issuing the Notes.

As a result of Unit's emergence from bankruptcy, the Notes were cancelled and our liability under the Notes was discharged as of the Effective Date. Holders of the Notes were issued shares of New Common Stock in accordance with the Plan.

Predecessor DIP Credit Agreement. As contemplated by the Restructuring Support Agreement between the company and certain of the Note holders and our lenders, the company and the other Debtors entered into a Superpriority Senior Secured Debtor-in-Possession Credit Agreement dated May 27, 2020 ( DIP credit agreement), among the Debtors, the lenders under the facility (the DIP lenders), and BOKF, NA dba Bank of Oklahoma, as administrative agent, under which the DIP lenders agreed to provide us with the $36.0 million multiple-draw loan facility (DIP credit facility). The bankruptcy court entered an interim order on May 26, 2020 approving the DIP credit facility, permitting the Debtors to borrow up to $18.0 million on an interim basis. On June 19, 2020, the bankruptcy court granted final approval of the DIP credit facility.

Before its repayment and termination on the Effective Date, borrowings under the DIP credit facility matured on the earliest of (i) September 22, 2020 (subject to a two-month extension to be approved by the DIP Lenders), (ii) the sale of all or substantially all the assets of the Debtors under Section 363 of the Bankruptcy Code or otherwise, (iii) the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases, (iv) the entry of an order by the bankruptcy court dismissing any of the Chapter 11 Cases or converting such Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code and (v) the date of termination of the DIP lenders’ commitments and the acceleration of any outstanding extensions of credit, in each case, under the DIP credit facility under and subject to the DIP Credit Agreement and the bankruptcy court’s orders.

On the Effective Date, the DIP credit facility was paid in full and terminated. On the Effective Date, each holder of an allowed claim under the DIP credit facility received its pro rata share of revolving loans, term loans, and letter-of-credit participations under the Exit Credit Agreement. In addition, each holder was issued its pro rata share of an equity fee under the

Exit Credit Agreement equal to 5% of the New Common Stock (subject to dilution by shares reserved for issuance under a management incentive plan and on exercise of the Warrants).

For further information about the DIP Credit Agreement, please see Note 2 – Emergence From Voluntary Reorganization Under Chapter 11.

Other Long-Term Liabilities

Other long-term liabilities consisted of the following as of December 31:

	Successor		Predecessor
	2020		2019
	(In thousands)
ARO liability	$	23,356	$	66,627
Workers’ compensation	10,164		11,510
Separation benefit plans (1)	4,201		10,122
Contract liability	4,172		7,061
Gas balancing liability	3,997		3,838
Finance lease obligations	3,216		7,379
Other long-term liability	1,321		—
Deferred compensation plan	—		6,180
	50,427		112,717
Less current portion	11,168		17,376
Total other long-term liabilities	$	39,259	$	95,341

_______________________ 

1.As of the Effective Date, the Board adopted (i) the Amended and Restated Separation Benefit Plan of Unit Corporation and Participating Subsidiaries (Amended Separation Benefit Plan), (ii) the Amended and Restated Special Separation Benefit Plan of Unit Corporation and Participating Subsidiaries (Amended Special Separation Benefit Plan) and (iii) the Separation Benefit Plan of Unit Corporation and Participating Subsidiaries (New Separation Benefit Plan). In accordance with the Plan, the Amended Separation Benefit Plan and the Amended Special Separation Benefit Plan allow former employees or retained employees with vested severance benefits under either plan to receive certain cash payments in full satisfaction for their allowed separation claim under the Chapter 11 Cases. In accordance with the Plan, the New Separation Benefit Plan is a comprehensive severance plan for retained employees, including retained employees whose severance did not already vest under the Amended Separation Benefit Plan or the Amended Special Separation Benefit Plan. The New Separation Benefit Plan provides that eligible employees will be entitled to two weeks of severance pay per year of service, with a minimum of four weeks and a maximum of 13 weeks of severance pay.