Long-Term Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Long-Term Debt

Note 8. Long-Term Debt

The table below reflects long-term debt outstanding as of December 31, 2021 and 2020:

	Successor
In thousands	December 31, 2021		December 31, 2020
Senior Secured Bank Credit Agreement	$	35,000	$	70,000
Pipeline financings	—		68,008
Total debt principal balance	35,000		138,008
Less: current maturities of long-term debt	—		(68,008)
Long-term debt	$	35,000	$	70,000

The ultimate parent company in our corporate structure, Denbury Inc., is the sole issuer of all our outstanding obligations under our Successor Bank Credit Agreement. Denbury Inc. has no independent assets or operations.  Each of the subsidiary guarantors of such obligations is 100% owned, directly or indirectly, by Denbury Inc, and the guarantees of such obligations are full and unconditional and joint and several.

Prior to our emergence from bankruptcy, our debt consisted of the Predecessor’s Bank Credit Agreement, senior secured second lien notes, convertible senior notes, senior subordinated notes, pipeline financings, and capital lease obligations. On the Emergence Date, pursuant to the terms of the Plan, all outstanding obligations under the senior secured second lien notes, convertible senior notes, and senior subordinated notes were fully extinguished, relieving approximately $2.1 billion of debt by issuing equity and/or warrants in the Successor to the holders of that debt. See Note 1, Nature of Operations and Summary of Significant Accounting Policies – Emergence from Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code, for additional information.

Senior Secured Bank Credit Facility

In connection with our emergence from Chapter 11 proceedings on September 18, 2020, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto. The Successor Bank Credit Agreement is a senior secured revolving credit facility with an initial borrowing base and lender commitments of $575 million. Additionally, under the Successor Bank Credit Agreement, letters of credit are available in an aggregate amount not to exceed $100 million, and short-term swingline loans are available in an aggregate amount not to exceed $25 million, each subject to the available commitments under the Successor Bank Credit Agreement. Availability under the Successor Bank Credit Agreement is subject to a borrowing base, which is redetermined semiannually on or around May 1 and November 1 of each year, with our next scheduled redetermination around May 1, 2022. The borrowing base is adjusted at the lenders’ discretion and is based, in part, upon external factors over which we have no control. The borrowing base is subject to a reduction by twenty-five percent (25%) of the principal amount of any unsecured or subordinated debt issued or incurred. The borrowing base may also be reduced if we sell borrowing base properties and/or cancel commodity derivative positions with an aggregate value in excess of 5% of the then-effective borrowing base between redeterminations. If our outstanding debt under the Successor Bank Credit Agreement exceeds the then-effective borrowing base, we would be required to repay the excess amount over a period not to exceed six months. The Successor Bank Credit Agreement matures on January 30, 2024.

The Successor Bank Credit Agreement limits our ability to pay dividends on our common stock or make other restricted payments in an amount not to exceed Distributable Free Cash Flow (as defined in the Successor Bank Credit Agreement), but only if (1) no event of default or borrowing base deficiency exists; (2) our total leverage ratio is 2 to 1 or lower; and (3) availability under the Successor Bank Credit Agreement is at least 20%. The Successor Bank Credit Agreement also limits our ability to, among other things, incur and repay other indebtedness; grant liens; engage in certain mergers, consolidations, liquidations and dissolutions; engage in sales of assets; make acquisitions and investments; make other restricted payments (including redeeming, repurchasing or retiring our common stock); and enter into commodity derivative agreements, in each case subject to customary exceptions.

The Successor Bank Credit Agreement is secured by (1) our proved oil and natural gas properties, which are held through our restricted subsidiaries; (2) the pledge of equity interests of such subsidiaries; (3) a pledge of our commodity derivative agreements; (4) a pledge of deposit accounts, securities accounts and commodity accounts of Denbury Inc. and such subsidiaries (as applicable); and (5) a security interest in substantially all other collateral that may be perfected by a Uniform Commercial Code filing, subject to certain exceptions.

The Successor Bank Credit Agreement contains certain financial performance covenants including the following:

•A Consolidated Total Debt to Consolidated EBITDAX covenant, with such ratio not to exceed 3.5 times; and

•A requirement to maintain a current ratio (i.e., Consolidated Current Assets to Consolidated Current Liabilities) of 1.0.

For purposes of computing the current ratio per the Successor Bank Credit Agreement, Consolidated Current Assets exclude the current portion of derivative assets but include available borrowing capacity under the Successor Bank Credit Agreement, and Consolidated Current Liabilities exclude the current portion of derivative liabilities as well as the current portions of long-term indebtedness outstanding.

Loans under the Successor Bank Credit Agreement are subject to varying rates of interest based on either (1) for alternate base rate loans, a base rate determined under the Successor Bank Credit Agreement plus an applicable margin ranging from 2% to 3% per annum, or (b) for LIBOR Loans, the LIBOR rate (subject to a 1% floor) plus an applicable margin ranging from 3% to 4% per annum (capitalized terms as defined in the Successor Bank Credit Agreement). The weighted average interest rate on borrowings outstanding as of December 31, 2021 under the Successor Bank Credit Agreement was 4.0%. The undrawn portion of the aggregate lender commitments under the Successor Bank Credit Agreement is subject to a commitment fee of 0.5%. As of December 31, 2021, we were in compliance with all debt covenants under the Successor Bank Credit Agreement.

The above description of our Successor Bank Credit Agreement and defined terms are contained in the Successor Bank Credit Agreement.

Restructuring of Pipeline Financing Transactions

In May 2008, we closed two transactions with Genesis Energy, L.P. (“Genesis”) involving two of our pipelines. The NEJD pipeline system included a 20-year secured financing lease, and the Free State Pipeline included a long-term transportation service agreement. In late October 2020, we restructured our CO2 pipeline financing arrangements with Genesis, whereby (1) Denbury reacquired the NEJD pipeline system from Genesis in exchange for $70 million which was paid in four equal payments during 2021, representing full settlement of all remaining obligations under the NEJD secured financing lease; and (2) Denbury reacquired the Free State Pipeline from Genesis in exchange for a one-time payment of $22.5 million on October 30, 2020.

Predecessor Senior Secured Bank Credit Facility

From December 2014 through September 18, 2020, the Company maintained a senior secured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto (the “Predecessor Bank Credit Agreement”). All but a minor portion of the Predecessor Bank Credit Agreement was refinanced through the DIP Facility from August 4, 2020 through September 18, 2020, which was in turn refinanced by the Successor Bank Credit Agreement upon emergence from the Chapter 11 Restructuring.

Extinguishment of Predecessor Senior Secured Second Lien Notes, Convertible Senior Notes, and Senior Subordinated Notes

Upon emergence from the Chapter 11 Restructuring on September 18, 2020, the Predecessor’s 9% Senior Secured Second Lien Notes due 2021 (the “2021 Notes”), 9¼% Senior Secured Second Lien Notes due 2022, 7¾% Senior Secured Second Lien Notes due 2024, 7½% Senior Secured Second Lien Notes due 2024, 6⅜% Convertible Senior Notes due 2024 (the “2024 Convertible Notes”), 6⅜% Senior Subordinated Notes due 2021, 5½% Senior Subordinated Notes due 2022, and 4⅝% Senior Subordinated Notes due 2023 were fully extinguished by issuing equity and/or warrants in the Successor to the holders of that debt. The Predecessor debt discussions that follow are included to provide context on the impact of these transactions on the Predecessor’s financial statements.

Second Quarter 2020 Conversion of 2024 Convertible Notes

During the second quarter of 2020, holders of $19.9 million aggregate principal amount outstanding of the Predecessor’s 2024 Convertible Notes converted their notes into shares of the Predecessor’s common stock, at the rates specified in the indenture for the notes, resulting in the issuance of 7.4 million shares of Predecessor common stock upon conversion. The debt principal balance, net of debt discounts, totaling $13.9 million, was reclassified to “Paid-in capital in excess of par” and “Common stock” in the Consolidated Balance Sheet of the Predecessor upon the conversion of the notes into shares of Predecessor common stock.

First Quarter 2020 Repurchases of Senior Secured Notes

During March 2020, the Predecessor repurchased a total of $30.2 million aggregate principal amount of its 2021 Notes in open-market transactions for a total purchase price of $14.2 million, excluding accrued interest. In connection with these transactions, the Predecessor recognized a $19.0 million gain on debt extinguishment, net of unamortized debt issuance costs and future interest payable written off.

2019 Predecessor Debt Reduction Transactions

With a focus on reducing the amount of outstanding debt principal, the Predecessor engaged in a series of debt exchanges and repurchase transactions, resulting in total gains on extinguishments of $156.0 million for the year ended December 31, 2019, in its Consolidated Statements of Operations.

Debt Issuance Costs

In connection with the issuance of our outstanding long-term debt, we have incurred debt issuance costs, which are being amortized to interest expense using the straight line or effective interest method over the term of each related facility or

borrowing.  Remaining unamortized debt issuance costs were $5.7 million and $8.4 million at December 31, 2021 and 2020, respectively.  Issuance costs associated with our Successor Bank Credit Agreement are included in “Other assets” in the Consolidated Balance Sheets.

Indebtedness Repayment Schedule

At December 31, 2021, our indebtedness is payable over the next five years and thereafter as follows:

In thousands
2022	$	—
2023	—
2024	35,000
2025	—
2026	—
Thereafter	—
Total indebtedness	$	35,000