NOTE 5 DEBT

Debt consisted of the following:

	December 31,
	2015		2014
	(in millions)
Secured First Lien Bank Debt
Revolving Credit Facility	$	739	$	360
Term Loan Facility	1,000		1,000
Senior Secured Second Lien Notes
8% Notes Due 2022	2,250		—
Senior Unsecured Notes
5% Notes Due 2020	433		1,000
5 1/2% Notes Due 2021	829		1,750
6% Notes Due 2024	892		2,250

Total Debt - Principal Amount	6,143		6,360
Less Current Maturities of Long-Term Debt	(100)		—

Long-Term Debt - Principal Amount	$	6,043	$	6,360

At December 31, 2015 deferred gain and issuance costs, net, of $491 million consisted of $560 million of deferred gains offset by $69 million of deferred issuance costs. The December 31, 2014 balance of $68 million consisted of deferred issuance costs.

Credit Facilities

We have a credit agreement effective through September 2019 that provides for (i) a senior term loan facility (the Term Loan Facility) and (ii) a senior revolving loan facility (the Revolving Credit Facility and, together with the Term Loan Facility, the Credit Facilities). All borrowings under these facilities are subject to certain customary conditions. We amended the Credit Facilities effective as of November 2015 and February 2016, to change certain of our financial and other covenants, incurring costs of $11 million and $8 million, respectively. During the third quarter of 2015, our corporate ratings from Moody’s Investors Service (Moody’s) and Standard & Poor’s Ratings Services (S&P) were downgraded, resulting in the imposition under our Credit Facilities of a borrowing base and the requirement to grant security on a first-lien basis. On February 23, 2016, we received 100% bank approval to amend our Credit Facilities. Effective with the amendment, the borrowing base under our Credit Facilities was reduced to $2.3 billion and the lenders’ revolving facility commitments were reduced to $1.6 billion.

The Revolving Credit Facility includes a sub-limit of $400 million for the issuance of letters of credit. We are required to repay the Term Loan Facility in $25 million quarterly installments beginning on March 31, 2016. As of December 31, 2015, we had $739 million outstanding borrowings under our Revolving Credit Facility and $1.0 billion under the Term Loan Facility.

Borrowings under the Credit Facilities bear interest, at our election, at either a LIBOR rate or an alternate base rate (ABR) (equal to the greatest of (i) the administrative agent’s prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds effective rate plus 0.50%), in each case plus an applicable margin. This applicable margin is based, while our total leverage ratio exceeds 3.00:1.00, on our borrowing base utilization and effective February 2016 will vary from (a) in the case of LIBOR loans, 2.50% to 3.50% and (b) in the case of ABR loans, 1.50% to 2.50%. The unused portion of the Revolving Credit Facility, as it may be limited by the borrowing base, is subject to a commitment fee equal to 0.50% per annum. We also pay customary fees and expenses under the Credit Facilities. Interest on ABR loans is payable quarterly in arrears. Interest on LIBOR loans is payable at the end of each LIBOR period, but not less than quarterly.

As amended, our financial performance covenants through December 31, 2016 comprise an obligation to achieve (i) a cumulative minimum EBITDAX during 2016 of $55 million through the first quarter, $130 million through the second quarter, $190 million through the third quarter and $250 million through the fourth quarter and (ii) a trailing twelve-month minimum interest coverage ratio of 2.00:1.00 as of the end of the first quarter, 1.50:1.00 as of the end of the second quarter, 1.25:1.00 as of the end of the third quarter and 0.70:1.00 as of the end of the fourth quarter. As of the end of the first quarter of 2017, the minimum interest coverage ratio will revert back to 2.00:1.00. We will not be subject to a maximum first lien senior secured leverage ratio for 2016. The amendment also suspends the requirement for us to comply with a trailing twelve-month maximum first lien senior secured leverage ratio of 2.25:1.00 until the end of the first quarter of 2017.

Except as otherwise agreed with our lenders for specific transactions, our Credit Facilities as amended require us to apply 100% of the proceeds from certain asset monetizations to repay loans outstanding under the Credit Facilities, except that we will be permitted to use up to 40% of proceeds from non-borrowing base asset sales to repurchase our notes to the extent available at a significant minimum discount to par, as specified in the amended facilities. Subject to compliance with our indentures, our amended facilities permit us to incur additional indebtedness to repurchase our notes to the extent available at a significant minimum discount to par, as specified in the amended facilities, as follows: (i) up to $1 billion, which may be secured by liens that are junior to the liens securing our Credit Facilities, provided that at least 60% of the proceeds from the new debt is used first to repay loans outstanding under the Credit Facilities, and (ii) up to $200 million, which may be secured by first-priority liens on our non-borrowing base properties. The amended Credit Facilities also permit us to incur up to an additional $50 million of non-Credit Facility indebtedness, which, subject to compliance with our indentures, may be secured; and the proceeds of which must be applied to repay loans outstanding under the Credit Facilities. All of the foregoing prepayments will be applied first to our Term Loan Facility and second to our Revolving Credit Facility after the Term Loan Facility has been fully repaid (with a corresponding reduction to the lenders’ Revolving Credit Facility commitments). Our amended facilities also require us to apply cash on hand in excess of $150 million to repay amounts outstanding under our Revolving Credit Facility. Further, we are restricted from (i) paying dividends or making other distributions to common stockholders and (ii) making capital investments exceeding $100 million during 2016.

The amendment also imposed a semi-annual borrowing base redetermination each May 1 and November 1, commencing May 1, 2016. The borrowing base will be based upon a number of factors, including commodity prices and reserves levels. Increases in our borrowing base requires approval of at least 80% of our revolving lenders, as measured by exposure, while decreases require a two-thirds approval. We and the lenders (requiring a request from the lenders holding 2/3 of the revolving commitments and outstanding loans), each may request a special redetermination once in any period between three consecutive scheduled redeterminations. We will be permitted to have collateral released when both (i) our credit ratings are at least Baa3 from Moody’s and BBB- from S&P, in each case with a stable or better outlook, and (ii) certain permitted liens securing other debt are released.

Effective February 2016, all obligations under the Credit Facilities are guaranteed jointly and severally by all of our material wholly-owned material subsidiaries. The assets and liabilities of subsidiaries not guaranteeing the debt are de minimis.

Substantially all of the restrictions imposed by the recent amendment to the Credit Facilities, other than the requirement for semiannual borrowing base redeterminations, may terminate in the future if we are able to comply with the financial covenants as they existed prior to giving effect to the amendment. If we were to breach any of our Credit Facility covenants, our lenders would be permitted to accelerate the principal amount due under the Credit Facilities and foreclose on the assets securing the facilities. If payment were accelerated under our Credit Facilities, it would result in a default under our outstanding notes and permit acceleration and foreclosure on the assets securing the secured notes.

At December 31, 2015, we were in compliance with the financial and other covenants under our Credit Facilities as they existed at that time.

Senior Notes

On October 1, 2014, we issued $5.00 billion in aggregate principal amount of our senior unsecured notes, including $1.00 billion of 5% senior unsecured notes due January 15, 2020 (the 2020 notes), $1.75 billion of 5 1/2% senior unsecured notes due September 15, 2021 (the 2021 notes) and $2.25 billion of 6% senior unsecured notes due November 15, 2024 (the 2024 notes and together with the 2020 notes and the 2021 notes, the unsecured notes). The unsecured notes were issued at par and are fully and unconditionally guaranteed on a senior unsecured basis by all of our material subsidiaries. We used the net proceeds from the issuance of the unsecured notes to make a $4.95 billion cash distribution to Occidental in October 2014.

In December 2015, we exchanged $534 million, $921 million and $1,358 million in aggregate principal amount of the 2020 notes, the 2021 notes, and the 2024 notes, respectively, for $2.25 billion in aggregate principal amount of newly issued 8% senior secured second lien notes due December 15, 2022 (the 2022 notes). We recorded a deferred gain of approximately $560 million on the debt exchange, which will be amortized using the effective interest rate method over the term of the 2022 notes. Additionally, we incurred approximately $28 million in third-party costs which were fully expensed in 2015. The newly-issued second lien notes are secured on a second-priority basis, subject to the terms of an intercreditor agreement and collateral trust agreement by a lien on the same collateral used to secure our obligations under our Credit Facilities.

In December 2015, we repurchased approximately $33 million in principal amount of the 2020 notes for $12 million in cash.

We will pay interest semiannually in cash in arrears on January 15 and July 15 for the 2020 notes, on March 15 and September 15 for the 2021 notes and on May 15 and November 15 for the 2024 notes. We will pay interest on the 2022 notes semiannually in cash in arrears on June 15 and December 15, beginning on June 15, 2016.

The indentures governing the senior unsecured notes and the second lien secured notes each include covenants that, among other things, limit our and our restricted subsidiaries’ ability to incur debt secured by liens. The indentures also restrict our ability to merge or consolidate with, or transfer all or substantially all of our assets to, another entity. These covenants are subject to a number of important qualifications and limitations that are set forth in the indenture. The covenants are not, however, directly linked to measures of our financial performance. In addition, if we experience a “change of control triggering event” (as defined in the indentures) with respect to a series of notes, we will be required, unless we have exercised our right to redeem the notes of such series, to offer to purchase the notes of such series at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest. The indenture governing our second-lien secured notes also restricts our ability to sell certain assets and to release collateral from liens securing the second-lien secured notes.

Principal maturities of long-term debt outstanding at December 31, 2015 are as follows (in millions):

2016	$	100
2017	100
2018	100
2019	1,439
2020	433
Thereafter	3,971

Total	$	6,143

We estimate the fair value of fixed-rate debt, which is classified as Level 1, based on prices from known market transactions for our instruments. The estimated fair value of our debt at December 31, 2015 and 2014, including the fair value of the variable rate portion, which we believe approximates the carrying value, was approximately $3.6 billion and $5.6 billion, respectively, compared to a carrying value of approximately $6.1 billion and $6.4 billion. A one-eighth percent change in the variable interest rates on the borrowings under our Term Loan Facility and Revolving Credit Facility on December 31, 2015, would result in a $2.2 million change in annual interest expense. In 2014, we incurred $70 million in debt issuance costs related to the notes and the Credit Facility which we are amortizing using the effective interest rate method over the respective term of each instrument.

As of December 31, 2015 and 2014, we had letters of credit in the aggregate amount of approximately $70 million (including $49 million under the Revolving Credit Facility) and $25 million, respectively, which were issued to support ordinary course marketing, regulatory and other matters.