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Revolving Line of Credit
 6 Months Ended
Jun. 30, 2023
Revolving Line of Credit  
Revolving Line of Credit

6. Revolving Line of Credit

The Company closed a senior secured reserve based revolving credit facility on June 28, 2023 with Frost Bank as issuing bank and sole lender. The new facility replaced the Company’s previous facility. The initial commitment and borrowing base is $35 million, supported by the Company’s upstream assets in Pennsylvania and subject to semi-annual redeterminations with a maturity date of the earlier of June 28, 2027 or the date that the commitments are terminated. The next redetermination will be October 1, 2023. Interest will be charged at the Daily Simple SOFR rate plus a margin of 3.25%. The facility is secured by the assets of the Company’s Epsilon Energy USA subsidiary (Borrower). There are currently no borrowings under the facility.

Under the terms of the facility, the Company must adhere to the following financial covenants:

●Current ratio of 1.0 to 1.0 (current assets / current liabilities)
●Leverage ratio of less than 2.5 to 1.0 (total debt / income adjusted for interest, taxes and non-cash amounts)

Additionally, if the Leverage ratio is greater than 1.0 to 1.0, or the borrowing base utilization is greater than 50%, the Company is required to hedge 50% of the anticipated production from PDP reserves for a rolling 24 month period.

We were in compliance with the financial covenants of the agreement as of June 30, 2023.

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Balance at

    

Balance at

    

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June 30, 

    

December 31, 

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Current

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2023

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2022

    

Borrowing Base

    

Interest Rate

Revolving line of credit

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$

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$

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$

35,000,000

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SOFR + 3.25%

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