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Long-Term Debt
12 Months Ended
Dec. 31, 2014
Debt Disclosure [Abstract]  
Long-Term Debt
Long-Term Debt
On August 19, 2010, PetroQuest issued $150 million in principal amount of Notes (the "Existing Notes") in a public offering. On July 3, 2013, PetroQuest issued an additional $200 million in aggregate principal amount of Notes. PetroQuest subsequently registered the Notes in an exchange offer completed in September 2013 (the "New Notes" and together with the Existing Notes, the "Notes"). The New Notes were issued at a price equal to 100% of their face value plus accrued interest from March 1, 2013 and are substantially identical to the Existing Notes. The net proceeds from the offering were used to finance the $188.8 million aggregate cash purchase price of the Gulf of Mexico Acquisition, which also closed on July 3, 2013. The Notes are guaranteed by certain of PetroQuest's subsidiaries. The subsidiary guarantors are 100% owned by PetroQuest and all guarantees are full and unconditional and joint and several. PetroQuest has no independent assets or operations and the subsidiaries not providing guarantees are minor, as defined by the rules of the Securities and Exchange Commission.
The Notes have numerous covenants including restrictions on liens, incurrence of indebtedness, asset sales, dividend payments and other restricted payments. Interest is payable semi-annually on March 1 and September 1. At December 31, 2014, $11.7 million had been accrued in connection with the March 1, 2015 interest payment and the Company was in compliance with all of the covenants contained in the Notes.
The Company and PetroQuest Energy, L.L.C. (the “Borrower”) have a Credit Agreement (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., Capital One, N.A., IberiaBank, Bank of America, N.A. and The Bank of Nova Scotia (collectively the “Lenders”). The Credit Agreement provides the Borrower with a $300 million revolving credit facility that permits borrowings based on the commitments of the Lenders and the available borrowing base as determined in accordance with the Credit Agreement. The Credit Agreement also allows the Borrower to use up to $25 million of the borrowing base for letters of credit. The credit facility matures on October 3, 2016. As of December 31, 2014, the Borrower had $75.0 million of borrowings outstanding under (and no letters of credit issued pursuant to) the Credit Agreement.
The borrowing base under the Credit Agreement is based upon the valuation of the reserves attributable to the Borrower's oil and gas properties as of January 1 and July 1 of each year. On September 29, 2014 the borrowing base was increased from $200 million to $220 million (subject to the aggregate commitments of the Lenders then in effect). As of December 31, 2014, the aggregate commitments of the Lenders is $170 million and can be increased to up to $300 million by either adding new lenders or increasing the commitments of existing Lenders, subject to certain conditions. The next borrowing base redetermination is scheduled to occur by March 31, 2015. The Borrower or the Lenders may request two additional borrowing base redeterminations each year. Each time the borrowing base is to be re-determined, the administrative agent under the Credit Agreement will propose a new borrowing base as it deems appropriate in its sole discretion, which must be approved by all Lenders if the borrowing base is to be increased, or by Lenders holding two-thirds of the amounts outstanding under the Credit Agreement if the borrowing base remains the same or is reduced.
The Credit Agreement is secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries, including a lien on all equipment and at least 80% of the aggregate total value of the Borrower's oil and gas properties. Outstanding balances under the Credit Agreement bear interest at the alternate base rate (“ABR”) plus a margin (based on a sliding scale of 0.5% to 1.5% depending on total commitments) or the adjusted LIBO rate (“Eurodollar”) plus a margin (based on a sliding scale of 1.5% to 2.5% depending on total commitments). The alternate base rate is equal to the highest of (i) the JPMorgan Chase prime rate, (ii) the Federal Funds Effective Rate plus 0.5% or (iii) the adjusted LIBO rate plus 1%. For the purposes of the definition of alternative base rate only, the adjusted LIBO rate is equal to the rate at which dollar deposits of $5,000,000 with a one month maturity are offered by the principal London office of JPMorgan Chase Bank, N.A. in immediately available funds in the London interbank market. For all other purposes, the adjusted LIBO rate is equal to the rate at which Eurodollar deposits in the London interbank market for one, two, three or six months (as selected by the Borrower) are quoted, as adjusted for statutory reserve requirements for Eurocurrency liabilities. Outstanding letters of credit are charged a participation fee at a per annum rate equal to the margin applicable to Eurodollar loans, a fronting fee and customary administrative fees. In addition, the Borrower pays commitment fees based on a sliding scale of 0.375% to 0.5% depending on total commitments.
The Company and its subsidiaries are subject to certain restrictive financial covenants under the Credit Agreement, including a maximum ratio of total debt to EBITDAX, determined on a rolling four quarter basis, of 3.5 to 1.0, and a minimum ratio of consolidated current assets to consolidated current liabilities of 1.0 to 1.0, all as defined in the Credit Agreement. The Credit Agreement also includes customary restrictions with respect to debt, liens, dividends, distributions and redemptions, investments, loans and advances, nature of business, international operations and foreign subsidiaries, leases, sale or discount of receivables, mergers or consolidations, sales of properties, transactions with affiliates, negative pledge agreements, gas imbalances and swap agreements. However, the Credit Agreement permits the Borrower to repurchase up to $10 million of the Company’s common stock during the term of the Credit Agreement, as long as after giving effect to such repurchase the Borrower’s Liquidity (as defined therein) is greater than 20% of the total commitments of the Lenders at such time. As of December 31, 2014, the Borrower was in compliance with all of the covenants contained in the Credit Agreement.
During February 2015, the Company and the Lenders amended the Credit Agreement in order to modify certain restrictive financial covenants. Specifically, the amendment removed the 3.5 to 1.0 maximum ratio of total debt to EBITDAX and replaced that with a maximum ratio of total senior secured debt to EBITDAX, determined on a rolling four quarter basis, not to exceed 2.25 to 1.0. In addition, the amendment added a minimum ratio of EBITDAX to total cash interest expense, determined on a rolling four quarter basis, of 2.0 to 1.0. The modification to the covenants described above will become effective with the quarter ended March 31, 2015 and will remain in effect through the Credit Agreement's maturity in October 2016.