Long-Term Debt

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



	December 31,
	2015		2014
Senior credit facility	$	—	$	—
8.75% Senior Secured Notes due 2020, including mandatory prepayment feature liabilities of $2,941, and net of $29,842 discount	1,301,098		—
Senior Unsecured Notes
8.75% Senior Notes due 2020, net of $3,269 and $4,598 discount, respectively	392,666		445,402
7.5% Senior Notes due 2021, including a premium of $1,944 and $3,486, respectively	759,711		1,178,486
8.125% Senior Notes due 2022	527,737		750,000
7.5% Senior Notes due 2023, net of $1,989 and $3,452 discount, respectively	541,572		821,548
Convertible Senior Unsecured Notes
8.125% Convertible Senior Notes due 2022, including holder conversion feature liabilities of $21,874, and net of $180,751 discount	82,294		—
7.5% Convertible Senior Notes due 2023, including holder conversion feature liabilities of $7,481, and net of $59,549 discount	26,428		—
Total debt	3,631,506		3,195,436
Less: current maturities of long-term debt	—		—
Long-term debt	$	3,631,506	$	3,195,436

See Note 22 for discussion of events occurring related to long-term debt subsequent to December 31, 2015.

Senior Credit Facility

The senior credit facility, as amended, is available to be drawn on subject to limitations based on its terms and certain financial covenants, as described below. Prior to its amendment and restatement on June 10, 2015, the senior credit facility contained certain financial covenants, including maintenance of agreed upon levels for (a) ratio of total debt secured by assets of the Company and certain of its subsidiaries to EBITDA, which was not permitted to exceed 2.25:1.00 at each quarter end, calculated using the last four completed fiscal quarters, (b) ratio of EBITDA to interest expense, which was required to be at least 2.00:1.00 at March 31, 2015 and June 30, 2015, 1.75:1.00 at September 30, 2015, 1.50:1.00 at each quarter end from December 31, 2015 to September 30, 2016, and 2.00:1.00 at December 31, 2016 and thereafter, calculated using the last four completed fiscal quarters, and (c) ratio of current assets to current liabilities, which was required to be at least 1.00:1.00 at each quarter end. A February 2015 amendment temporarily suspended until June 30, 2016 the financial covenant requiring maintenance of certain levels for the ratio of total net debt to EBITDA. For periods after such time, the ratio of total net debt to EBITDA could not exceed 6.25:1.00 at June 30, 2016, 6.00:1.00 at September 30, 2016 and December 31, 2016, 5.50:1.00 at March 31, 2017 and June 30, 2017, 5.00:1.00 at September 30, 2017 and December 31, 2017 and 4.50:1.00 at March 31, 2018 and thereafter, calculated using annualized EBITDA for the fiscal quarter ended June 30, 2016 and the two subsequent fiscal quarters and otherwise calculated using the last four completed fiscal quarters.

The senior credit facility was amended and restated on June 10, 2015 (the “June Amendment”). In connection with the June Amendment, the then-existing financial covenants were replaced. As of then and as of December 31, 2015, the senior credit facility contains financial covenants, including maintenance of agreed upon levels for the (a) ratio of total secured debt under the senior credit facility to EBITDA, which may not exceed 2.00:1.00 at each quarter end and (b) ratio of current assets to current liabilities, which must be at least 1.0:1.0 at each quarter end. For the purpose of 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 commodity derivative contracts are disregarded. The senior credit facility matures on the earlier of March 2, 2020 and 91 days prior to the earliest date of any maturity under or mandatory offer to repurchase the Company’s currently outstanding senior notes.

Prior and subsequent to the June Amendment, the senior credit facility also 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. On August 13, 2015, the senior credit facility was amended to allow the Company to redeem or purchase outstanding Senior Unsecured Notes for up to $200.0 million in cash subject to certain limitations and on October 16, 2015, concurrent with the October borrowing base redetermination, the senior credit facility was further amended to increase the amount of Senior Unsecured Notes the Company may redeem or purchase for cash to $275.0 million from $200.0 million. 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, 2015, 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, all of the Company’s intercompany debt, and certain of the Company’s other assets, including proved oil, natural gas and NGL reserves representing at least 80.0% of the discounted present value (as defined in the senior credit facility) of proved oil, natural gas and NGL reserves of the Company.

At the Company’s election, interest under the senior credit facility, as amended, is determined by reference to (a) the ICE Benchmark Administration Limited LIBOR (“LIBOR”) plus an applicable margin between 1.750% and 2.750% 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 Royal Bank of Canada under the senior credit facility or (iii) the one-month 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 0.750% and 1.750% 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 or longer, interest is paid at the end of each three-month period. Quarterly, the Company pays commitment fees assessed at annual rates of 0.5% on any available portion of the senior credit facility.

Borrowings and letter of credit obligations under the senior credit facility may not exceed the lower of the committed amount, which is currently $1.0 billion, or the borrowing base, which is $500.0 million and is subject to periodic redeterminations. Prior to the June Amendment, the borrowing base was $900.0 million. This reduction in borrowing base resulted in the write off of approximately $4.9 million of capitalized debt issuance costs. The borrowing base remained unchanged as a result of the October 2015 redetermination. The next scheduled borrowing base redetermination is expected to take place in April 2016; however, as discussed in Note 22, a special redetermination of the borrowing base was made in March 2016. 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.

The amended senior credit agreement permits the Company and certain of its subsidiaries to incur additional indebtedness in an aggregate principal amount not to exceed $1.75 billion, which may be secured solely by collateral securing the senior credit facility on a junior lien basis. Any junior lien debt shall be subject to the terms and conditions set forth in an intercreditor agreement and shall mature no earlier than January 21, 2020. The borrowing base under the senior credit facility will be reduced by $0.25 for every $1.00 of junior debt incurred above $1.50 billion.

The Company had no amounts outstanding under the senior credit facility at December 31, 2015 and $11.0 million in outstanding letters of credit, which reduce availability under the senior credit facility on a dollar-for-dollar basis. Additionally, at December 31, 2015, the Company had incurred $1.3 billion in junior lien debt subject to an intercreditor agreement as a result of the issuance of Senior Secured Notes in June 2015 and the PGC Senior Secured Notes in October 2015 as described further below.

Senior Secured Notes

Concurrent with the amendment and restatement of the Company’s senior credit facility discussed above, in June 2015 the Company issued $1.25 billion of 8.75% Senior Secured Notes due 2020. Net proceeds from the issuance were approximately $1.21 billion after deducting offering expenses, a portion of which was used to repay amounts outstanding at that time under the Company’s senior credit facility. The Senior Secured Notes were issued to qualified institutional buyers eligible under Rule 144A of the Securities Act and to persons outside the United States under Regulation S of the Securities Act.

Additionally, the Company issued the PGC Senior Secured Notes in conjunction with the acquisition of and termination of a gathering agreement with PGC in October 2015. Because the PGC Senior Secured Notes were issued as partial consideration for the acquisition and termination, these notes were recorded at fair value of approximately $50.3 million ($78.0 million par value, including mandatory prepayment feature liabilities of $2.8 million, net of $30.5 million discount) upon their issuance. Fair value at issuance was determined based upon the then-current market value of the Senior Secured Notes. The PGC Senior Secured Notes were issued at a discount that is being amortized to interest expense over the term of the Senior Secured Notes.

The Company’s Senior Secured Notes bear interest at a fixed rate of 8.75% per annum, payable semi-annually, with the principal due upon maturity. The Senior Secured 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 a second-priority secured basis by certain of the Company’s wholly owned subsidiaries.

The Senior Secured Notes are secured by second-priority liens on all of the Company’s and certain of the Company’s wholly owned subsidiaries’ assets that secure the senior credit facility on a first-priority basis; provided, however, the security interest in those assets that secure the Senior Secured Notes and the guarantees will be contractually subordinated to liens thereon that secure the credit facility and certain other permitted indebtedness. Consequently, the Senior Secured Notes and the guarantees will be effectively subordinated to the credit facility and such other indebtedness to the extent of the value of such assets.

Debt issuance costs of $39.2 million incurred in connection with the offering of the Senior Secured Notes outstanding at December 31, 2015 are included in other assets in the accompanying unaudited condensed consolidated balance sheet and are being amortized to interest expense over the term of Senior Secured Notes.

Maturity Date and Mandatory Prepayment Feature. Pursuant to the indenture, the Senior Secured Notes will mature on June 1, 2020; provided, however, that if on October 15, 2019, the aggregate outstanding principal amount of the unsecured 8.75% Senior Notes due 2020 exceeds $100.0 million, the Senior Secured Notes will mature on October 16, 2019. See further discussion of the mandatory prepayment feature, which with respect to the PGC Senior Secured Notes is an embedded derivative that has been accounted for separately from these notes, at Note 5 and Note 13.

Indenture. The indenture governing the Senior Secured Notes contains covenants that restrict the Company’s ability to take a variety of actions, including limitations on the payment of dividends, incurrence of indebtedness, create liens, enter into consolidations or mergers, purchase or redeem stock or subordinated or unsecured indebtedness, certain dispositions and transfers of assets, transactions with related parties, make investments and refinance certain indebtedness. As of and during the year ended December 31, 2015, the Company was in compliance with all of the covenants contained in the indenture governing its outstanding Senior Secured Notes. Because the Senior Secured Notes were not issued until June 2015, the covenants contained therein were not applicable during the three-month period ended March 31, 2015.

Senior Unsecured Notes

The Company’s Senior Unsecured Notes bear interest at a fixed rate per annum, payable semi-annually, with the principal due upon maturity. Certain of the Senior Unsecured Notes were issued at a discount or a premium. The discount or premium is amortized to interest expense over the term of the respective series of Senior Unsecured Notes. The Senior Unsecured 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 $48.9 million incurred in connection with the offerings and subsequent registered exchange offers of the Senior Unsecured Notes outstanding, including the impact of write offs in conjunction with the repurchases and exchanges discussed below, are included in other assets in the accompanying consolidated balance sheet at December 31, 2015 and are being amortized to interest expense over the term of the respective series of Senior Unsecured Notes.

Indentures. Each of the indentures governing the Company’s Senior Unsecured Notes contains covenants that 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, 2015, the Company was in compliance with all of the covenants contained in the indentures governing its outstanding Senior Notes.

2015 Activity

Redemption of Senior Unsecured Notes. During the second quarter of 2015, the Company issued to a holder of its 7.5% Senior Notes due 2021 and 8.125% Senior Notes due 2022, approximately 28.0 million shares of the Company’s common stock in exchange for an aggregate $50.0 million principal amount of the notes ($29.0 million of 7.5% Senior Notes due 2021 and $21.0 million of 8.125% Senior Notes due 2022) and as payment for the interest accrued thereon since the last interest payment date. The exchange resulted in a gain on extinguishment of $17.9 million, which is included in other income on the accompanying consolidated statement of operations for the year ended December 31, 2015.

Repurchase and Exchange of Senior Unsecured Notes. In August 2015, the Company repurchased $250.0 million of its Senior Unsecured Notes comprised of (i) $29.3 million aggregate principal amount of its 8.75% Senior Notes due 2020, (ii) $111.6 million aggregate principal amount of its 7.5% Senior Notes due 2021, (iii) $26.1 million aggregate principal amount of its 8.125% Senior Notes due 2022 and (iv) $83.0 million aggregate principal amount of its 7.5% Senior Notes due 2023, for approximately $94.5 million cash. The repurchase resulted in a gain on extinguishment of $152.0 million, including the write off of $3.2 million of net unamortized debt issuance costs, which is included in other income on the accompanying consolidated statement of operations for the year ended December 31, 2015. In conjunction with the repurchase, the Company also exchanged $275.0 million of its Senior Unsecured Notes for newly-issued Convertible Senior Unsecured Notes, as discussed further below.

In October 2015, the Company repurchased $100.0 million of its Senior Unsecured Notes comprised of (i) $2.2 million aggregate principal amount of its 8.75% Senior Notes due 2020, (ii) $46.6 million aggregate principal amount of its 7.5% Senior Notes due 2021, and (iii) $51.2 million aggregate principal amount of its 7.5% Senior Notes due 2023, for approximately $30.0 million in cash. The repurchase resulted in a gain on extinguishment of $68.7 million, including the write off of $1.2 million of net unamortized debt issuance costs, which is included in other income on the accompanying consolidated statement of operations for the year ended December 31, 2015. In conjunction with the repurchase, the Company also exchanged approximately $300.0 million of its Senior Unsecured Notes for newly-issued Convertible Senior Unsecured Notes, as discussed further below.

2013 Activity

In March 2013, the Company redeemed $365.5 million aggregate principal amount of its 9.875% Senior Notes due 2016 and $750.0 million aggregate principal amount of its 8.0% Senior Notes due 2018 for total consideration of $1,061.34 per $1,000 principal amount and $1,052.77 per $1,000 principal amount, respectively. The premium paid to redeem these notes and the expense incurred to write off the remaining associated unamortized debt issuance costs, totaling $82.0 million, were recorded as a loss on extinguishment of debt in the accompanying consolidated statement of operations for the year ended December 31, 2013.

Convertible Senior Unsecured Notes

In conjunction with the repurchase of Senior Unsecured Notes in August 2015, the Company also exchanged $275.0 million of its Senior Unsecured Notes, comprised of (i) $15.9 million aggregate principal amount of its 8.75% Senior Notes due 2020, (ii) $40.7 million aggregate principal amount of its 7.5% Senior Notes due 2021, (iii) $101.8 million aggregate principal amounts of its 8.125% Senior Notes due 2022 and (iv) $116.6 million aggregate principal amount of its 7.5% Senior Notes due 2023, for (i) $158.4 million aggregate principal amount of newly-issued 8.125% Convertible Senior Notes due 2022 and (ii) $116.6 million aggregate principal amount of newly-issued 7.5% Convertible Senior Notes due 2023. The exchange resulted in a gain on extinguishment of $189.0 million, including the write off of $4.0 million of net unamortized debt issuance costs, which is included in other income on the accompanying consolidated statement of operations year ended December 31, 2015.

In conjunction with the repurchase of Senior Unsecured Notes in October 2015, the Company exchanged $300.0 million of its Senior Unsecured Notes, comprised of (i) $6.6 million aggregate principal amount of its 8.75% Senior Notes due 2020, (ii) $189.3 million aggregate principal amount of its 7.5% Senior Notes due 2021, (iii) $73.5 million aggregate principal amounts of its 8.125% Senior Notes due 2022 and (iv) $30.6 million aggregate principal amount of its 7.5% Senior Notes due 2023, for (i) $269.4 million aggregate principal amount of newly-issued 8.125% Convertible Senior Notes due 2022 and (ii) $30.6 million aggregate principal amount of newly-issued 7.5% Convertible Senior Notes due 2023. The exchange resulted in a gain on extinguishment of $207.4 million, including the write off of $4.0 million of net unamortized debt issuance costs, which is included in other income on the accompanying consolidated statement of operations year ended December 31, 2015.

The Convertible Senior Unsecured Notes are guaranteed by the same guarantors that guarantee the Senior Unsecured Notes and are subject to covenants and bear payment terms substantially identical to those of the corresponding series of Senior Unsecured Notes of similar tenor, other than the conversion features, described further below, and the extension of the final maturity by one day. The transactions were determined to be an extinguishment of each of the Senior Unsecured Notes exchanged. As such, the newly-issued Convertible Senior Unsecured Notes were recorded at fair value on the date of issuance, which resulted in a discount that is being amortized to interest expense over the term of the respective series of Convertible Senior Unsecured Notes.

Debt issuance costs of $6.3 million incurred in connection with the issuance of the Convertible Senior Unsecured Notes, including the impact of write offs in conjunction with the conversions discussed below, are included in other assets in the accompanying consolidated balance sheet at December 31, 2015 and are being amortized to interest expense over the term of the respective series of Convertible Senior Unsecured Notes.

Conversion Features. The Convertible Senior Unsecured Notes are convertible, at the option of the holders, into shares of common stock at any time prior to (i) the fifth business day following the date of a mandatory conversion notice, discussed further below, (ii) with respect to Convertible Senior Unsecured Notes called for redemption, the business day immediately preceding the redemption date or (iii) the business day immediately preceding the maturity date. The conversion rate is approximately 363.6 shares of common stock per $1,000 principal amount of the Convertible Senior Unsecured Notes, subject to customary adjustments. With respect to any conversions prior to the first anniversary of the issuance of the Convertible Senior Unsecured notes, in addition to the shares deliverable upon conversion, holders are entitled to receive an early conversion payment equal to the amount of 18 months of interest payable on the applicable series of converted Convertible Senior Unsecured Notes. With respect to any conversion subsequent to the first anniversary of the issuance of the Convertible Senior Unsecured Notes, but on or prior to the second anniversary of the issuance of such Convertible Senior Unsecured Notes, holders are entitled to receive an early conversion payment equal to the amount of 12 months of interest payable on the applicable series of converted Convertible Senior Unsecured Notes. The dilutive effect, if any, of the Convertible Senior Unsecured Notes on the Company’s earnings per share is determined using the if-converted method. See further discussion at Note 20.

See further discussion of the holders’ conversion features, which are embedded derivatives that have been accounted for separately from the Convertible Senior Unsecured Notes, at Note 5 and Note 13.

In addition to the holders’ conversion feature, the Convertible Senior Unsecured Notes contain a provision whereby the Company, subject to compliance with certain conditions, has the right to mandatorily convert the Convertible Senior Unsecured Notes to shares of Company common stock, in whole or in part, at a rate of approximately 363.6 shares of common stock per $1,000 principal amount of Convertible Senior Unsecured Notes, if the volume weighted average price of the Company’s stock exceeds 40.0% of an applicable conversion price of the Convertible Senior Unsecured Notes for a specific period of time. The conversion price threshold, initially set at $1.10, is subject to certain customary adjustments. No early conversion payments will be made upon a mandatory conversion.

Conversions to Common Stock. During the year ended December 31, 2015, holders of $186.6 million aggregate principal amount ($54.4 million net of discount and including holders’ conversion feature) of 8.125% Convertible Senior Notes due 2022 and $68.7 million aggregate principal amount ($19.3 million net of discount and holders’ conversion feature) of 7.5% Convertible Senior Notes due 2023 exercised conversion options applicable to those notes, resulting in the issuance of approximately 92.8 million shares of Company common stock and aggregate cash payments of $30.5 million for accrued interest and early conversion payments. The conversions resulted in a gain on extinguishment of debt totaling $6.1 million, including the write off of $5.2 million of net unamortized debt issuance costs, which is included in other income on the accompanying consolidated statement of operations for year ended December 31, 2015.

Maturities of Long-Term Debt

As of December 31, 2015, $1.7 billion of long-term debt will mature in 2020, with the remainder of long-term debt maturing thereafter; provided, however, that if on October 15, 2019, the aggregate outstanding principal amount of the unsecured 8.75% Senior Notes due 2020 exceeds $100.0 million, the Senior Secured Notes will mature on October 16, 2019.