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Debt | 9 Months Ended
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Sep. 30, 2016
Debt Disclosure [Abstract] |
Debt | Debt Chapter 11 Proceedings The Chapter 11 filings constituted an event of default with respect to the Company’s pre-petition senior credit facility, Senior Secured Notes, Senior Unsecured Notes and Convertible Senior Unsecured Notes, which became immediately due and payable. The enforcement of any obligations under the Company’s pre-petition debt was automatically stayed as a result of the Chapter 11 filings. On the Emergence Date, the Senior Secured Notes, Unsecured Notes and senior credit facility were canceled and the Company entered into the $425.0 million New First Lien Exit Facility, issued approximately $281.8 million principal value of New Convertible Notes and entered into the $35.0 million New Building Note as discussed further below. See Note 1 for additional information regarding the bankruptcy proceedings. Reclassification of Debt. The balance outstanding under the senior credit facility of $449.2 million, par value of the Senior Secured Notes of $1.3 billion, par value of the Senior Unsecured Notes of $2.2 billion and par value of the Convertible Senior Unsecured Notes of $87.6 million are included in liabilities subject to compromise on the accompanying unaudited condensed consolidated balance sheet at September 30, 2016. Additionally, a non-cash charge to write off all of the related unamortized debt issuance costs and associated discounts and premiums of approximately $158.6 million and the fair value of associated debt derivatives of $9.8 million as of May 16, 2016 related to the Company's debt is included in reorganization items in the accompanying unaudited condensed consolidated statements of operations for the nine-month period ended September 30, 2016, as discussed in Note 1. See Note 4 for the fair values and carrying values of the senior notes outstanding at September 30, 2016 and December 31, 2015, respectively. As of December 31, 2015, there were no amounts outstanding under the senior credit facility, and the carrying values of the senior notes were net of unamortized discounts, premiums, and deferred costs of $342.6 million, and included the fair value of debt derivatives of $32.3 million. Pre-Emergence Indebtedness Senior Credit Facility The terms of the senior credit facility contained certain financial covenants, including maintenance of agreed upon levels for the (a) ratio of total secured debt under the senior credit facility to earnings before interest, taxes, depreciation and amortization (“EBITDA”), which could not exceed 2.00:1.00 at each quarter end and (b) ratio of current assets to current liabilities, which was required to 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 were included in current assets, and unrealized assets and liabilities that resulted from mark-to-market adjustments on the Company’s commodity derivative contracts were disregarded. The senior credit facility matured by its terms 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 then outstanding notes. The senior credit facility also contained various covenants that limited 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. The terms of the senior credit facility allowed the Company to redeem or purchase outstanding Senior Unsecured Notes for up to $275.0 million in cash subject to certain limitations. Additionally, the senior credit facility limited the ability of the Company and certain of its subsidiaries to incur additional indebtedness with certain exceptions. See Note 1 for information regarding the Company’s Bankruptcy Petitions and the Chapter 11 proceedings. The obligations under the senior credit facility were guaranteed by certain Company subsidiaries and were required to be 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, was 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 was 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 was six months or longer, interest was paid at the end of each three-month period. Quarterly, the Company paid commitment fees assessed at an annual rate of 0.5% on any available portion of the senior credit facility. On March 11, 2016, the administrative agent notified the Company that the lenders had elected to reduce the borrowing base to $340.0 million from $500.0 million pursuant to a special redetermination. On April 20, 2016, the Company submitted for consideration by its lenders additional properties to serve as collateral under the senior credit facility to support a borrowing base of $500.0 million. On May 11, 2016, in exchange for waivers from the requisite percentage of lenders with respect to certain specified defaults and events of defaults under the senior credit facility, the Company permanently repaid $40.0 million of borrowings to the lenders, which payment correspondingly reduced the lenders’ commitments. See Note 1 for further discussion of the senior credit facility and the plan of reorganization. The senior credit facility had $449.2 million drawn at September 30, 2016 and had $9.9 million in outstanding letters of credit. Additionally, at September 30, 2016, 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. Senior Secured Notes The Company issued $1.25 billion of 8.75% Senior Secured Notes due 2020 in June 2015. 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. Additionally, the Company issued $78.0 million par value of 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, which included mandatory prepayment feature liabilities and a discount. Fair value at issuance was determined based upon the then-current market value of the Senior Secured Notes. The unamortized portions of the discount and the carrying value of the mandatory prepayment feature as of the date of the Chapter 11 filings, May 16, 2016, were written off to reorganization items on the accompanying unaudited condensed consolidated statement of operations for the nine-month period ended September 30, 2016 as noted above. The Company accrued interest on its Senior Secured Notes at a fixed rate of 8.75% prior to the Chapter 11 filings, with no interest accrued subsequent to the filings. The Senior Secured Notes were by their terms redeemable, in whole or in part, prior to their maturity at specified redemption prices and were 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 were secured by second-priority liens on all of the Company’s assets that secured the senior credit facility on a first-priority basis; provided, however, the security interest in those assets that secured the Senior Secured Notes and the guarantees were contractually subordinated to liens thereon that secure the credit facility and certain other permitted indebtedness. Consequently, the Senior Secured Notes and the guarantees were effectively subordinated to the credit facility and such other indebtedness to the extent of the value of such assets. Maturity Date and Mandatory Prepayment Feature. Pursuant to the indenture, the Senior Secured Notes by their terms matured 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 exceeded $100.0 million, the Senior Secured Notes matured on October 16, 2019. See further discussion of the mandatory prepayment feature Note 4 and Note 7, which with respect to the PGC Senior Secured Notes was an embedded derivative that was accounted for separately from these notes, prior to being written-off to reorganization items on the accompanying unaudited condensed consolidated statements of operations for the nine-month period ended September 30, 2016, as discussed in Note 1. Indenture. The indenture governing the Senior Secured Notes contained covenants that restricted the Company’s ability to pay dividends, incur indebtedness, create liens, enter into consolidations or mergers, purchase or redeem stock or subordinated or unsecured indebtedness, dispose of or transfer certain assets, transact with related parties, make investments and refinance certain indebtedness, among other actions. These indentures were canceled upon the Company’s emergence from Chapter 11. See Note 1 for additional details about the Company’s Bankruptcy Petitions and the Chapter 11 proceedings. Senior Unsecured Notes The Company accrued interest on its Senior Unsecured Notes at a fixed rate through the date of the Chapter 11 filings, with no interest accrued subsequent to the filings. The Senior Unsecured Notes were by their terms redeemable, in whole or in part, prior to their maturity at specified redemption prices and were jointly and severally guaranteed unconditionally, in full, on an unsecured basis by certain of the Company’s wholly owned subsidiaries. See Note 14 for condensed financial information of the SandRidge subsidiaries that own substantially all of the Company’s oil and gas assets (collectively, the “Guarantors”). Certain of the Senior Unsecured Notes were issued at a discount or a premium. Prior to the Chapter 11 filings, the discount or premium was amortized to interest expense over the term of the respective series of Senior Unsecured Notes. The unamortized portions of the discount or premium as of the date of the Chapter 11 filings, May 16, 2016, were written off to reorganization items on the accompanying unaudited condensed consolidated statement of operations for the nine-month period ended September 30, 2016 as noted above. The unamortized portions of the debt issuance costs associated with the Senior Unsecured Notes as of the date of the Chapter 11 filings, May 16, 2016, were written off to reorganization items on the accompanying unaudited condensed consolidated statement of operations for the nine-month period ended September 30, 2016 as noted above. Indentures. Each of the indentures governing the Company’s Senior Unsecured Notes contained covenants that restricted the Company’s ability to pay dividends, incur indebtedness, make investments, sell certain assets, purchase certain assets, transact with related parties and enter into consolidations or mergers. These indentures were canceled upon the Company’s emergence from Chapter 11. See Note 1 for additional details about the Company’s Bankruptcy Petitions and the Chapter 11 proceedings. Convertible Senior Unsecured Notes The Convertible Senior Unsecured Notes were issued in conjunction with exchanges and repurchases of Senior Unsecured Notes that took place in August and October 2015. 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. The Convertible Senior Unsecured Notes were guaranteed by the same Guarantors that guaranteed the Senior Unsecured Notes and were subject to covenants and bore 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 Company accrued interest on its Convertible Senior Unsecured Notes at a fixed rate through the date of the Chapter 11 filings, with no interest accrued subsequent to the filings. Conversions to Common Stock. During the nine-month period ended September 30, 2016, holders of $200.5 million aggregate principal amount ($67.4 million net of discount and including holders’ conversion feature) of 8.125% Convertible Senior Notes due 2022 and $31.6 million aggregate principal amount ($10.4 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 84.4 million shares of Company common stock and aggregate cash payments of $33.5 million for accrued interest and early conversion payments. The conversions resulted in a gain on extinguishment of debt totaling $41.3 million, including the write off of $4.3 million of net unamortized debt issuance costs, which is included in other income on the unaudited condensed consolidated statement of operations for the nine-month period ended September 30, 2016. There were no conversions during the three-month period ended September 30, 2016. Post-Emergence Indebtedness New First Lien Exit Facility As discussed in Note 1, on the Emergence Date, the Company entered into the New First Lien Exit Facility with the lenders party thereto and Royal Bank of Canada, as administrative agent and issuing lender. The initial borrowing base under the New First Lien Exit Facility is $425.0 million. There are no scheduled borrowing base redeterminations until October 2018, followed by scheduled semiannual borrowing base redeterminations thereafter. The New First Lien Exit Facility matures on February 4, 2020. The outstanding borrowings under the New First Lien Exit Facility bear interest at a rate equal to, at the option of the Company, either (a) a base rate plus an applicable rate of 3.75% per annum or (b) LIBOR plus 4.75% per annum, subject to a 1.00% LIBOR floor. Interest on base rate borrowings is payable quarterly in arrears and interest on LIBOR borrowings is payable every one, two, three or six months, at the election of the Company. The Company has the right to prepay loans under the New First Lien Exit Facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to LIBOR loans. The New First Lien Exit Facility is guaranteed by the Guarantors. Furthermore, the New First Lien Exit Facility is secured by (i) first-priority mortgages on at least 95% of the PV-9 valuation of the proved developed producing reserves and 95% of the PV-9 valuation of all proved reserves included in the most recently delivered reserve report of the Company, (ii) a first-priority perfected pledge of capital stock of each credit party and their respective wholly owned subsidiaries and (iii) a first-priority security interest in the cash, cash equivalents, deposit, securities and other similar accounts, and a first-priority perfected security interest in substantially all other tangible and intangible assets of the credit parties (including but not limited to as-extracted collateral, accounts receivable, inventory, equipment, general intangibles, investment property, intellectual property, real property and the proceeds of the foregoing). The New First Lien Exit Facility requires the Company to, (a) commencing with the first full fiscal quarter ending after the Emergence Date through the last full fiscal quarter before the occurrence of the end of the borrowing base protection period, maintain a minimum proved developing producing reserves asset coverage ratio, measured as of the last day of each fiscal quarter, of 1.75 to 1.00 and (b) commencing with the first full fiscal quarter ending after the occurrence of the end of the borrowing base protection period, maintain (i) a maximum consolidated total net leverage ratio, measured as of the last day of each fiscal quarter, (A) on or prior to December 31, 2018, of no greater than 3.50 to 1.00, and (B) any fiscal quarter ending on or after March 31, 2019, of no greater than 3.00 to 1.00 and (ii) a minimum consolidated interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 2.00 to 1.00. Such financial covenants are subject to customary cure rights. The New First Lien Exit Facility contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants. New Convertible Debt As discussed in Note 1, on the Emergence Date, pursuant to the terms of the Plan, the Company issued approximately $281.8 million principal amount of New Convertible Notes, which do not bear regular interest and will mature and mandatorily convert into New Common Stock on October 4, 2020, unless repurchased, redeemed or converted prior to that date. The New Convertible Notes will be recorded at fair value upon implementation of fresh start accounting. Upon the occurrence of certain events, including any acceleration, repayment or prepayment of the New Convertible Notes (including any optional redemption), the Company will be required to pay a make-whole amount of $0.783478 for each $1.00 in principal amount of New Convertible Notes repaid or prepaid in accordance with the provisions of the associated indenture. The New Convertible Notes are initially convertible at a conversion rate of 0.05330841 shares of New Common Stock per $1.00 principal amount of New Convertible Notes, which represents, in the aggregate, approximately 15.0 million shares of the New Common Stock. The conversion rate for the New Convertible Notes is subject to customary anti-dilution adjustments. In addition, upon the occurrence of certain events, including any acceleration, repayment or prepayment of the New Convertible Notes (including any optional redemption), the conversion rate will be automatically adjusted such that the New Convertible Notes convert into the same percentage of New Common Stock before and after such event. The New Convertible Notes are convertible at the option of the holders at any time to, and including, the business day immediately preceding the maturity date. In addition, the Company is required to convert all outstanding New Convertible Notes upon the earliest to occur of the following: (i) any bona fide arm’s length issuance by the Company of New Common Stock to third parties for cash with (a) a total issuance size that is greater than or equal to $100,000,000 and (b) a per-share price greater than or equal to $34.16; (ii) 30 days’ written notice to the Company to convert the New Convertible Notes from holders of at least a majority in aggregate principal amount of the New Convertible Notes then outstanding; (iii) the average of the last reported sale prices of the New Common Stock over a 30 consecutive trading day period is 50% greater than $34.16; (iv) any bona fide refinancing of the New First Lien Exit Facility after a determination by the post-emergence board of directors in good faith that: (a) such refinancing provides for terms that are materially more favorable to the Company and (b) the causing of a conversion is not the primary purpose of such refinancing; (v) any change of control transaction; or (vi) the maturity date. Upon conversion, the Company will deliver shares of New Common Stock equal to the conversion rate, together with a cash payment in lieu of delivering any fractional share of New Common Stock issuable upon conversion, based on the last reported sale price of the New Common Stock on the relevant conversion date. During the period from October 4, 2016 through October 31, 2016, holders of approximately $3.7 million in aggregate principal amount of the New Convertible Notes exercised conversion options applicable to those notes, resulting in the issuance of approximately 0.2 million shares of New Company Stock. The Company may redeem for cash all or part of the New Convertible Notes at any time prior to the maturity date, at a redemption price equal to 100% of the principal amount of such New Convertible Notes to be redeemed, as increased by the make-whole amount. With respect to any New Convertible Notes selected for redemption that are converted following a redemption notice, the conversion rate will be automatically adjusted such that the New Convertible Notes convert into the same percentage of New Common Stock before and after such redemption notice. The Company’s obligations pursuant to the New Convertible Notes are fully and unconditionally guaranteed, jointly and severally, by each of the Guarantors of the New First Lien Exit Facility. Following the occurrence of certain events, the Company would be required to secure $100,000,000 of the New Convertible Notes, which amount may be increased to the full outstanding principal amount of the New Convertible Notes, including any applicable make-whole amount, in accordance with the provisions of the New Convertible Notes Indenture (the “Springing Lien”). The Springing Lien will be a second priority lien on the same collateral securing the New First Lien Exit Facility. New Building Note As discussed in Note 1, on the Emergence Date, the Company entered into the New Building Note, which has a principal amount of $35.0 million and is secured by first priority mortgage on the Company’s headquarters facility and certain other non-oil and gas real property. The New Building Note will be recorded at fair value upon implementation of fresh start accounting. Interest is payable on the New Building Note at 6% per annum for the first year following the Emergence Date, 8% per annum for the second year following the Emergence Date, and 10% thereafter through maturity. Interest is payable in kind from the Emergence Date through the earlier of September 30, 2020, 46 months from the Emergence Date or 90 days after the refinancing or repayment of the New First Lien Exit Facility and thereafter in cash. The New Building Note matures on October 4, 2021. On the Emergence Date, pursuant to the Plan, certain holders of the Unsecured Senior Notes purchased the New Building Note for $26.8 million in cash, net of certain fees and expenses.

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