Long-Term Debt

The Company’s long-term debt consists of the following:



	September 30, 2016			December 31, 2015
	(In thousands)
Senior secured revolving line of credit	$	195,000		$	138,000
Senior unsecured notes
7.25% senior unsecured notes due February 1, 2019	54,275			400,000
6.5% senior unsecured notes due November 1, 2021	395,501			400,000
6.875% senior unsecured notes due March 15, 2022	937,080			1,000,000
6.875% senior unsecured notes due January 15, 2023	366,094			400,000
2.625% senior unsecured convertible notes due September 15, 2023	300,000			—
Total principal of senior unsecured notes	2,052,950			2,200,000
Less: unamortized deferred financing costs on senior unsecured notes	(29,500		)	(35,416		)
Less: unamortized debt discount on senior unsecured convertible notes	(92,877		)	—
Total long-term debt	$	2,125,573		$	2,302,584

Senior secured revolving line of credit. The Company has a senior secured revolving line of credit (the “Credit Facility”) of $2,500.0 million as of September 30, 2016, which has a maturity date of April 13, 2020. The Credit Facility is restricted to a borrowing base, which is reserve-based and subject to semi-annual redeterminations on April 1 and October 1 of each year. On February 23, 2016, the lenders under the Credit Facility completed their regular semi-annual redetermination of the borrowing base scheduled for April 1, 2016, resulting in a decrease in the borrowing base and aggregate elected commitment from $1,525.0 million to $1,150.0 million.

As of September 30, 2016, the Company had $195.0 million of LIBOR loans and $12.3 million of outstanding letters of credit issued under the Credit Facility, resulting in an unused borrowing base committed capacity of $942.7 million. The weighted average interest rate on borrowings outstanding under the Credit Facility was 2.0% and 1.9% as of September 30, 2016 and December 31, 2015, respectively. On a quarterly basis, the Company also pays a 0.375% (as of September 30, 2016) annualized commitment fee on the average amount of borrowing base capacity not utilized during the quarter and fees calculated on the average amount of letter of credit balances outstanding during the quarter.

The Company was in compliance with the financial covenants of the Credit Facility as of September 30, 2016.

Senior unsecured notes. At September 30, 2016, the Company had $1,753.0 million principal amount of senior unsecured notes outstanding with maturities ranging from February 2019 to January 2023 and coupons ranging from 6.50% to 7.25% (the “Senior Notes”). Prior to certain dates, the Company has the option to redeem some or all of the Senior Notes for cash at certain redemption prices equal to a certain percentage of their principal amount plus an applicable make-whole premium and accrued and unpaid interest to the redemption date. The 7.25% senior unsecured notes due February 2019 (the “2019 Notes”) are currently redeemable for cash at a redemption price equal to 101.813% of their principal amount plus accrued and unpaid interest to the redemption date, which redemption price declines to par on February 1, 2017. The Company estimates that the fair value of these redemption options is immaterial at September 30, 2016 and December 31, 2015.

Repurchases of senior unsecured notes. On September 28, 2016, the Company completed its tender offers to repurchase certain outstanding Senior Notes (the “Tender Offers”). As a result of the Tender Offers, the Company repurchased an aggregate principal amount of $362.4 million of its outstanding Senior Notes, consisting of $344.7 million principal amount of its 2019 Notes, $2.2 million principal amount of its 6.5% senior unsecured notes due November 2021 (the “2021 Notes”), $3.4 million principal amount of its 6.875% senior unsecured notes due March 2022 (the “2022 Notes”) and $12.1 million principal amount of its 6.875% senior unsecured notes due January 2023 (the “2023 Notes”), for an aggregate cost of $371.4 million, including accrued interest and fees.

In addition to the Tender Offers, the Company repurchased an aggregate principal amount of $84.6 million of its outstanding Senior Notes, consisting of $1.0 million principal amount of its 2019 Notes, $2.3 million principal amount of its 2021 Notes, $59.5 million principal amount of its 2022 Notes and $21.8 million principal amount of its 2023 Notes, for an aggregate cost of $64.5 million, including accrued interest and fees, during the nine months ended September 30, 2016.

For the three and nine months ended September 30, 2016, the Company recognized a pre-tax loss of $13.8 million and a pre-tax gain of $4.9 million, respectively, related to these repurchases, including the Tender Offers, which were net of unamortized deferred financing costs write-offs of $5.3 million and $6.3 million, respectively, and are reflected in gain (loss) on extinguishment of debt in the Company’s Condensed Consolidated Statement of Operations.

Senior unsecured convertible notes. In September 2016, the Company issued $300.0 million of 2.625% senior unsecured convertible notes due September 2023 (the “Senior Convertible Notes”), which resulted in aggregate net proceeds to the Company of $291.9 million, after deducting underwriting discounts and commissions and estimated offering expenses. The Company used the proceeds from the Senior Convertible Notes to fund the repurchase of certain outstanding Senior Notes through the Tender Offers. The Senior Convertible Notes will mature on September 15, 2023 unless earlier converted in accordance with their terms.

The Company has the option to settle conversions of these notes with cash, shares of common stock or a combination of cash and common stock at its election. The Company’s intent is to settle the principal amount of the Senior Convertible Notes in cash upon conversion. Prior to March 15, 2023, the Senior Convertible Notes will be convertible only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Senior Convertible Notes for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events, including certain distributions or a fundamental change. On or after March 15, 2023, the Senior Convertible Notes will be convertible at any time until the second scheduled trading day immediately preceding their September 15, 2023 maturity date. The Senior Convertible Notes will be convertible at an initial conversion rate of 76.3650 shares of the Company’s common stock per $1,000 principal amount of the Senior Convertible Notes, which is equivalent to an initial conversion price of approximately $13.10. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its Senior Convertible Notes in connection with such corporate event or redemption in certain circumstances. As of September 30, 2016, none of the contingent conditions allowing holders of the Senior Convertible Notes to convert these notes had been met.

Upon issuance, the Company separately accounted for the liability and equity components of the Senior Convertible Notes in accordance with Accounting Standards Codification 470-20. The liability component was recorded at the estimated fair value of a similar debt instrument without the conversion feature. The difference between the principal amount of the Senior Convertible Notes and the estimated fair value of the liability component was recorded as a debt discount and will be amortized to interest expense over the term of the notes using the effective interest method, with an effective interest rate of 8.97% per annum. The fair value of the Senior Convertible Notes as of the issuance date was estimated at $206.8 million, resulting in a debt discount at inception of $93.2 million. The equity component, representing the value of the conversion option, was computed by deducting the fair value of the liability component from the initial proceeds of the Senior Convertible Notes issuance. This equity component was recorded, net of deferred taxes and issuance costs, in additional paid-in capital and will not be remeasured as long as it continues to meet the conditions for equity classification.

Transaction costs related to the Senior Convertible Notes issuance were allocated to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component of $5.4 million were recorded in deferred financing costs within long-term debt on the Company’s Condensed Consolidated Balance Sheet and are being amortized to interest expense over the term of the Senior Convertible Notes using the effective interest method. Issuance costs attributable to the equity component of $2.4 million were recorded as a charge to additional paid-in capital.

Interest on the Senior Notes and the Senior Convertible Notes (collectively, the “Notes”) is payable semi-annually in arrears. The Notes are guaranteed on a senior unsecured basis by the Company, along with its material subsidiaries (the “Guarantors”), which are 100% owned by the Company. These guarantees are full and unconditional and joint and several among the Guarantors, subject to certain customary release provisions. The indentures governing the Notes contain customary events of default as well as covenants that place restrictions on the Company and certain of its subsidiaries.

Deferred financing costs. At September 30, 2016, the Company had $35.0 million of deferred financing costs related to the Notes and the Credit Facility. Deferred financing costs of $29.5 million related to the Notes are included in long-term debt on the Company’s Condensed Consolidated Balance Sheet at September 30, 2016, and are being amortized over the respective terms of the Notes. Deferred financing costs of $5.5 million related to the Credit Facility are included in other assets on the Company’s Condensed Consolidated Balance Sheet at September 30, 2016, and are being amortized over the term of the Credit Facility. Amortization of deferred financing costs recorded was $2.1 million and $6.2 million for the three and nine months ended September 30, 2016, respectively, and $1.6 million and $5.0 million for the three and nine months ended September 30, 2015, respectively. These costs are included in interest expense on the Company’s Condensed Consolidated Statement of Operations. For the nine months ended September 30, 2016 and 2015, the Company’s interest expense also included $1.8 million and $0.5 million, respectively, for unamortized deferred financing costs related to the Credit Facility, which were written off in proportion to the decreases in the borrowing base. No deferred financing costs related to the Credit Facility were written off during the three months ended September 30, 2016 and 2015. Aforementioned, the gain (loss) on extinguishment of debt in the Company’s Condensed Consolidated Statement of Operations included unamortized deferred financing costs write-offs of $5.3 million and $6.3 million related to the repurchased Notes for the three and nine months ended September 30, 2016, respectively. No deferred financing costs related to the Notes were written off during the three and nine months ended September 30, 2015.