Long-Term Debt

Long-term debt consists of the following (in thousands):



	December 31,
	2012		2011
Senior credit facility	$	—	$	—
Senior Fixed Rate Notes
9.875% Senior Notes due 2016, net of $8,843 and $10,921 discount, respectively	356,657		354,579
8.0% Senior Notes due 2018	750,000		750,000
8.75% Senior Notes due 2020, net of $5,873 and $6,432 discount, respectively	444,127		443,568
7.5% Senior Notes due 2021, including a premium of $4,328 at December 31, 2012	1,179,328		900,000
8.125% Senior Notes due 2022	750,000		—
7.5% Senior Notes due 2023, net of $4,029 discount at December 31, 2012	820,971		—
Senior Floating Rate Notes due 2014	—		350,000
Mortgage note payable	—		16,029
Total debt	4,301,083		2,814,176
Less: current maturities of long-term debt	—		1,051
Long-term debt	$	4,301,083	$	2,813,125

Senior Credit Facility

The senior credit facility is available to be drawn on subject to limitations based on its terms and certain financial covenants. On March 29, 2012, the senior credit facility was amended and restated to, among other things, (a) increase the borrowing base to $1.0 billion from $790.0 million, (b) allow for the incurrence or issuance of additional debt (including up to $750.0 million of unsecured debt to finance the cash portion of the Dynamic purchase price and related costs and expenses), (c) permit the Company to designate certain of its subsidiaries as unrestricted subsidiaries, and (d) effective on and after June 30, 2012, establish the financial covenants as maintaining agreed upon levels for (i) ratio of total net debt to EBITDA, which may not exceed 4.5:1.0 at each quarter end, calculated using the last four completed fiscal quarters and (ii) ratio of current assets to current liabilities, which must be at least 1.0:1.0 at each quarter end. If no amounts are drawn under the senior credit facility when calculating the ratio of total net debt to EBITDA, the Company’s debt is reduced by its cash balance in excess of $10.0 million. In the current ratio calculation, any amounts available to be drawn under the senior credit facility are included in current assets, and unrealized assets and liabilities resulting from mark-to-market adjustments on the Company’s derivative contracts are disregarded. The senior credit facility matures in March 2017.

The senior credit facility contains various covenants that limit the ability of the Company and certain of its subsidiaries to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of the Company’s assets. Additionally, the senior credit facility limits the ability of the Company and certain of its subsidiaries to incur additional indebtedness with certain exceptions. As of and during the year ended December 31, 2012, the Company was in compliance with all applicable financial covenants under the senior credit facility.

The obligations under the senior credit facility are guaranteed by certain Company subsidiaries and are secured by first priority liens on all shares of capital stock of certain of the Company’s material present and future subsidiaries; certain intercompany debt of the Company; and substantially all of the Company’s assets, including proved oil and natural gas reserves representing at least 80.0% of the discounted present value (as defined in the senior credit facility) of proved oil and natural gas reserves considered by the lenders in determining the borrowing base for the senior credit facility.

At the Company’s election, interest under the senior credit facility is determined by reference to (a) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin between 1.75% and 2.75% per annum or (b) the “base rate,” which is the highest of (i) the federal funds rate plus 0.5%, (ii) the prime rate published by Bank of America or (iii) the Eurodollar rate (as defined in the senior credit facility) plus 1.00% per annum, plus, in each case under scenario (b), an applicable margin between 0.75% and 1.75% per annum. Interest is payable quarterly for base rate loans and at the applicable maturity date for LIBOR loans, except that if the interest period for a LIBOR loan is six months, interest is paid at the end of each three-month period. During the year ended December 31, 2012, the Company paid commitment fees of 0.5% on the available portion of the senior credit facility as there have been no amounts outstanding under the senior credit facility during 2012. The average annual interest rate paid on amounts outstanding under the senior credit facility was 2.69% and 2.70%, respectively, for the years ended December 31, 2011 and 2010.

Borrowings under the senior credit facility may not exceed the lower of the borrowing base or the committed amount. In August 2012, the borrowing base was reduced to $775.0 million from $1.0 billion as a result of the issuance of the 7.5% Senior Notes due 2023 and additional 7.5% Senior Notes due 2021, as discussed below. The Company’s borrowing base is redetermined in April and October of each year, and was reaffirmed at $775.0 million in October 2012. The next borrowing base redetermination will be in April 2013. With respect to each redetermination, the administrative agent and the lenders under the senior credit facility consider several factors, including the Company’s proved reserves and projected cash requirements, and make assumptions regarding, among other things, oil and natural gas prices and production. Because the value of the Company’s proved reserves is a key factor in determining the amount of the borrowing base, changing commodity prices and the Company’s success in developing reserves may affect the borrowing base. The Company at times incurs additional costs related to the senior credit facility as a result of amendments to the credit agreement and changes to the borrowing base. During 2012, additional costs of approximately $7.5 million were incurred. These costs have been deferred, and are included in other assets in the accompanying consolidated balance sheets and are being amortized to interest expense over the term of the senior credit facility.

At December 31, 2012, the Company had no amount outstanding under the senior credit facility and $30.2 million in outstanding letters of credit, which reduce the availability under the senior credit facility on a dollar-for-dollar basis.

Senior Fixed Rate Notes

The Company’s unsecured senior fixed rate notes (“Senior Fixed Rate Notes”) bear interest at a fixed rate per annum, payable semi-annually, with the principal due upon maturity. Certain of the Senior Fixed Rate Notes were issued at a discount or a premium. The discount or premium is amortized to interest expense over the term of the respective senior notes. The Senior Fixed Rate Notes are redeemable, in whole or in part, prior to their maturity at specified redemption prices and are jointly and severally guaranteed unconditionally, in full, on an unsecured basis by certain of the Company’s wholly owned subsidiaries. See Note 24 for condensed financial information of the subsidiary guarantors.

Debt issuance costs of $94.1 million incurred in connection with the offerings of the Senior Fixed Rate Notes and any subsequent registered exchanges are included in other assets in the accompanying consolidated balance sheets and are being amortized to interest expense over the term of the respective senior notes.

2011 Activity. In March 2011, the Company issued $900.0 million of unsecured 7.5% Senior Notes due 2021 to qualified institutional buyers eligible under Rule 144A of the Securities Act and to persons outside the United States under Regulation S under the Securities Act. Net proceeds from the offering were used to fund the tender offer for, and subsequent redemption of, the 8.625% Senior Notes due 2015, described below and to repay borrowings under the Company’s senior credit facility.

In March 2011, the Company purchased approximately 94.5%, or $614.2 million, of the aggregate principal amount of its 8.625% Senior Notes due 2015 pursuant to a tender offer. In April 2011, the Company redeemed the remaining outstanding $35.8 million aggregate principal amount of its 8.625% Senior Notes due 2015. All holders whose notes were purchased or redeemed received accrued and unpaid interest from October 1, 2010. The premium paid to purchase these notes and the unamortized debt issuance costs associated with the notes, totaling $38.2 million, were recorded as a loss on extinguishment of debt in the accompanying consolidated statements of operations for the year ended December 31, 2011.

In November 2011, pursuant to an exchange offer, the Company replaced substantially all of the 7.5% Senior Notes due 2021 with 7.5% Senior Notes due 2021 that are registered under the Securities Act. The exchange offer did not result in the incurrence of any additional indebtedness.

2012 Activity. In 2012, the Company completed offerings of the 2012 Senior Notes to qualified institutional buyers eligible under Rule 144A of the Securities Act and to persons outside the United States under Regulation S under the Securities Act. The Company incurred $41.0 million of debt issuance costs in connection with the 2012 Senior Notes offerings. These costs are included in other assets in the accompanying consolidated balance sheets and are being amortized to interest expense over the term of the respective senior notes.

In April 2012, the Company issued $750.0 million of unsecured 8.125% Senior Notes due 2022. Net proceeds from the offering were approximately $730.1 million after deducting offering expenses, and were used to finance the cash portion of the Dynamic Acquisition purchase price and to pay related fees and expenses, with any remaining amount used for general corporate purposes.

In August 2012, the Company issued $825.0 million of unsecured 7.5% Senior Notes due 2023 at 99.5% of par and $275.0 million of additional unsecured 7.5% Senior Notes due 2021 at 101.625% of par, plus accrued interest from March 15, 2012. The Company received net proceeds from this offering of approximately $1.1 billion, after deducting offering expenses and excluding accrued interest received. The net proceeds of the offering were used to fund the Company’s tender offer for, and subsequent redemption of, its Senior Floating Rate Notes, discussed under Senior Floating Rate Notes due 2014 below, to fund the Company’s capital expenditures and for general corporate purposes.

In November 2012, pursuant to exchange offers, the Company replaced the 2012 Senior Notes with equivalent senior notes that are registered under the Securities Act. The exchange offers did not result in the incurrence of any additional indebtedness.

Indentures. The indentures governing the Company’s senior notes contain covenants which restrict the Company’s ability to take a variety of actions, including limitations on the incurrence of indebtedness, payment of dividends, investments, asset sales, certain asset purchases, transactions with related parties and consolidations or mergers. As of and during the year ended December 31, 2012, the Company was in compliance with all of the covenants contained in the indentures governing the senior notes.

Senior Floating Rate Notes Due 2014

The Company’s Senior Floating Rate Notes were issued in May 2008 and bore interest at LIBOR plus 3.625%. On August 6, 2012, the Company announced a cash tender offer to purchase any and all of the outstanding $350.0 million aggregate principal amount of its Senior Floating Rate Notes. The Company purchased approximately 94.3%, or $329.9 million, of the aggregate principal amount of its Senior Floating Rate Notes pursuant to the tender offer, which expired on August 31, 2012. On September 4, 2012, the Company redeemed the remaining outstanding $20.1 million aggregate principal amount of its Senior Floating Rate Notes. All holders whose notes were purchased in the tender offer or redemption received accrued and unpaid interest from July 1, 2012 through the date of purchase. The premium paid to purchase these notes and the unamortized debt issuance costs associated with the notes, totaling $3.1 million, were recorded as a loss on extinguishment of debt and included in the accompanying consolidated statements of operations for the year ended December 31, 2012.

Mortgage Note Payable

The debt incurred to purchase the downtown Oklahoma City property that serves as the Company’s corporate headquarters was fully secured by a mortgage on one of the buildings located on the property. In May 2012, the Company paid the outstanding $15.8 million principal balance on the note underlying the mortgage.

Maturities of Long-Term Debt

Aggregate maturities of long-term debt, excluding discounts, are $365.5 million in 2016 and $4.0 billion thereafter.