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Long-Term Debt
12 Months Ended
Dec. 31, 2015
Debt Disclosure [Abstract]  
Long-Term Debt
Long-Term Debt
On August 19, 2010, the Company issued $150 million in principal amount of the Notes and on July 3, 2013, the Company issued an additional $200 million in principal amount of its 10% Senior Notes due 2017 (collectively, the "Notes"). 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.
Interest is payable semi-annually on March 1 and September 1. At December 31, 2015, $11.7 million had been accrued in connection with the March 1, 2016 interest payment (which amount was reduced to $4.5 million as a result of the Exchange Offering) 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. The Credit Agreement provides the Company 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 Company to use up to $25 million of the borrowing base for letters of credit. The credit facility matures on the earlier of June 4, 2020 or February 19, 2017 if any portion of the Company’s 10% Senior Notes due 2017 remains outstanding as of such date that has not been refinanced with either permitted refinancing debt or permitted second lien debt with a maturity date no earlier than 180 days after June 4, 2020, all as defined in the Credit Agreement. As of December 31, 2015 the Company had no borrowings outstanding under (and no letters of credit issued pursuant to) the Credit Agreement.
The borrowing base under the Credit Agreement is determined by March 31 and September 30 of each year and based upon the valuation of the reserves attributable to the Company’s oil and gas properties as of January 1 and July 1 of each year. As of December 31, 2015, the borrowing base was $55 million (subject to the aggregate commitments of the lenders then in effect and the Company's compliance with the financial covenants thereunder). During January 2016, the borrowing base and the aggregate commitments of the lenders were reduced to $42 million. Based on the Company's expectations for the first quarter of 2016, the Company anticipates that, pursuant to the applicable financial covenants, the Company's utilization of the borrowing base will be limited to 25% of the aggregate commitments of the lenders, or $10.5 million. The next scheduled borrowing base redetermination is scheduled to occur by March 31, 2016 with additional interim redeterminations to occur on July 31 and December 31 of each year commencing on July 31, 2016. The Company or the lenders may request two additional borrowing base re-determinations 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 90% 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 1.0% to 2.0% depending on total commitments) or the adjusted LIBO rate (“Eurodollar”) plus a margin (based on a sliding scale of 2.0% to 3.0% 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 (subject to a floor of 0.0%) plus 1%.  For the purposes of the definition of alternate base rate only, the adjusted LIBO rate for any day is based on the LIBO Rate at approximately 11:00 a.m. London time on such day. 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 Company) 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 Company 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 (i) a maximum ratio of total debt to EBITDAX, determined on a rolling four quarter basis, of (a) if the Company has unused availability greater than or equal to 75% of the aggregate commitments of the Lenders at all times during the consecutive three month period prior to and including the date of each fiscal quarter end, the maximum ratio of total debt to EBITDAX is 5.0 to 1.0 as of the last day of the fiscal quarter ending March 31, 2016, 5.5 to 1.0 as of the last day of the fiscal quarter ending June 30, 2016 and 5.75 to 1.0 as of the last day of the fiscal quarters ending September 30, 2016 and December 31, 2016, with in each case the amount of total debt for such quarterly period reduced by the amount of unencumbered and unrestricted cash of the Company and cash subject to an account control agreement, (b) if the Company has unused availability of less than 75% of the aggregate commitments of the Lenders at any time during the consecutive three month period prior to and including the date of calculating the ratio, the maximum ratio of total debt to EBITDAX will be 5.75 to 1.00 as of the last day of the fiscal quarters ending March 31, 2016, June 30, 2016 and September 30, 2016 and 5.25 to 1.00 as of the last day of the fiscal quarter ending December 31, 2016, and (c) 5.00 to 1.00 as of the last day of any fiscal quarter ending on or after March 31, 2017 and (ii) a minimum ratio of EBITDAX to total cash interest expense of 1.0 to 1.0, all as defined in the Credit Agreement.
In addition, the Credit Agreement permits a sale of the majority of the Company’s remaining oil and gas assets in Oklahoma, provided that such sale is consummated on or prior to March 31, 2016, all of the consideration received in such sale is cash, and the borrowing base will be reduced by $10 million upon the consummation of such sale. The Credit Agreement currently prohibits the Company from declaring and paying dividends on its Series B Preferred Stock.
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. As of December 31, 2015, the Company was in compliance with all such covenants contained in the Credit Agreement.