|12 Months Ended|
Dec. 31, 2012
7. Long-Term Debt
As of December 31, 2012 and 2011 our long-term debt was as follows (in thousands):
On October 24, 2012, we issued $300.0 million of Senior Notes at a premium of 106% par value with an interest rate of 8.50% (7.73% effective interest rate) and maturity date of June 15, 2019, which have identical terms to the Senior Notes issued in June 2011 (collectively, the “8.50% Senior Notes”). The net proceeds after fees and expenses were approximately $312.0 million. The funds were used to repay all of our outstanding indebtedness under our revolving bank credit facility, a portion of which was incurred to partially fund our acquisition of the Newfield Properties described in Note 2, and for general corporate purposes. In February 2013, holders of the Senior Notes issued in October 2012 exchanged their Senior Notes for registered notes with the same terms.
On June 10, 2011, we issued $600.0 million of Senior Notes at par with an interest rate of 8.50% and maturity date of June 15, 2019. The net proceeds after fees and expenses were approximately $593.5 million. In January 2012, holders of the Senior Notes issued in June 2011 exchanged their Senior Notes for registered notes with the same terms.
In June and July of 2011, we used a portion of the net proceeds from the June 2011 issuance of the 8.50% Senior Notes to repurchase all of our 8.25% Senior Notes due 2014 (the “8.25% Senior Notes”), which had a principal amount of $450.0 million. Costs of $22.0 million related to repurchasing the 8.25% Senior Notes, which included repurchase premiums and the unamortized debt issuance costs, are included in the statement of income within the line item classification, Loss on extinguishment of debt.
Interest on the 8.50% Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year and all of the 8.50% Senior Notes are subject to the same indenture. The 8.50% Senior Notes are unsecured and are fully and unconditionally guaranteed by certain of our subsidiaries. At December 31, 2012 and 2011, the outstanding balance of our 8.50% Senior Notes was $900.0 million and $600.0, respectively, and was classified at their carrying value as long-term debt. The estimated annual effective interest rate on the 8.50% Senior Notes is 8.6% for 2012 which includes amortization of debt issuance costs and premiums. At December 31, 2012 and 2011, the estimated fair value of the 8.50% Senior Notes was approximately $963.0 million and $612.0 million, respectively.
We and our restricted subsidiaries are subject to certain covenants under the indenture governing the 8.50% Senior Notes, which limit our and our restricted subsidiaries’ ability to, among other things, make investments, incur additional indebtedness or issue preferred stock, sell assets, consolidate, merge or transfer all or substantially all of our assets, engage in transactions with affiliates, pay dividends or make other distributions on capital stock or subordinated indebtedness and create unrestricted subsidiaries. We were in compliance with all applicable covenants of the indenture governing the 8.50% Senior Notes as of December 31, 2012.
On May 5, 2011, we entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), which provides a revolving bank credit facility with an initial borrowing base of $525.0 million. In November 2012, the borrowing base was re-determined by our lenders and increased to $725.0 million. This is a secured facility that is collateralized by our oil and natural gas properties. The Credit Agreement terminates on May 5, 2015 and replaced the prior Third Amended and Restated Credit Agreement (the “Prior Credit Agreement”). Availability under the Credit Agreement is subject to a semi-annual borrowing base determination set at the discretion of our lenders. The amount of the borrowing base is calculated by our lenders based on their evaluation of our proved reserves and their own internal criteria. Any determination by our lenders to change our borrowing base will result in a similar change in the availability under our revolving bank credit facility.
The Credit Agreement contains covenants that limit, among other things, the payment of cash dividends of up to $60.0 million per year, common stock repurchases and Senior Note repurchases of up to $100.0 million, borrowings other than from the revolving bank credit facility, sales of assets, loans to others, investments, merger activity, hedging contracts, liens and certain other transactions without the prior consent of the lenders. In December 2012, we were granted a one-time waiver which allowed for cash dividends of up to $85.0 million during 2012. Letters of credit may be issued for up to $90.0 million, provided availability under the revolving bank credit facility exists. We are subject to various financial covenants calculated as of the last day of each fiscal quarter including a minimum current ratio and a maximum leverage ratio as such ratios are defined in the Credit Agreement. We were in compliance with all applicable covenants of the Credit Agreement as of December 31, 2012.
Borrowings under the revolving bank credit facility bear interest at the applicable LIBOR plus a margin that varies from 2.00% to 2.75% depending on the level of total borrowings under the Credit Agreement, or an alternative base rate equal to the applicable margin ranging from 1.00% to 1.75% plus the highest of the (a) Prime Rate, (b) Federal Funds Rate plus 0.50%, and (c) LIBOR plus 1.0%. The unused portion of the borrowing base is subject to a commitment fee of 0.50%. The estimated annual effective interest rate was 5.0% for 2012 for borrowings under the Credit Agreement. The estimated annual effective interest rate includes amortization of debt issuance costs and excludes commitment fees and other costs.
On May 7, 2012, we executed the First Amendment to the Fourth Amended and Restated Credit Agreement which, among other things, increased the number of participating lenders and added a provision permitting the Company to maintain security interests in favor of any derivative counterparties that cease to be lenders under the Company’s revolving bank credit facility. On October 12, 2012, we executed the Second Amendment to the Fourth Amended and Restated Credit Agreement, which, among other things, allowed for the issuance of additional Senior Notes above the $600.0 million level and provided for a reduction in the borrowing base of 25% of every $1.00 of Senior Notes above $600.0 million until such time as the borrowing base is re-determined. The borrowing base was re-determined subsequent to this amendment. All other terms of the Credit Agreement remain substantially the same prior to the Amendment.
Unamortized debt issuance costs of $0.7 million related to the Prior Credit Agreement were written off in 2011 and are included in the statement of income within the line item classification, Loss on extinguishment of debt.
At December 31, 2012, we had $170.0 million in borrowings and $0.6 million in letters of credit outstanding under the revolving bank credit facility. At December 31, 2011, we had $117.0 million in borrowings and $0.4 million in letters of credit outstanding under the revolving bank credit facility.
For information about fair value measurements, refer to Note 8.
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef