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DEBT | 12 Months Ended
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Dec. 31, 2020
DEBT |
DEBT | 8. DEBT As of December 31, 2020 and 2019 (Successor), the Company’s debt consisted of the following (in thousands):
|  | Successor
|  | December 31, 2020 |  | December 31, 2019
Successor senior revolving credit facility |  | $ | 158,000 |  | $ | 144,000
Paycheck Protection Program loan |  |  | 2,209 |  |  | —
Total debt |  |  | 160,209 |  |  | 144,000
Current portion of Paycheck Protection Program loan |  |  | 1,720 |  |  | —
Total long-term debt |  | $ | 158,489 |  | $ | 144,000
Successor Senior Revolving Credit Facility On October 8, 2019, the Company entered into a senior secured revolving credit agreement, as amended, (the Senior Credit Agreement) with Bank of Montreal, as administrative agent, and certain other financial institutions party thereto, as lenders, which refinanced the DIP Facility and the Predecessor Credit Agreement, both discussed below. The Senior Credit Agreement provides for a $750.0 million senior secured reserve‑based revolving credit facility with a current borrowing base of $190.0 million. A portion of the Senior Credit Agreement, in the amount of $25.0 million, is available for the issuance of letters of credit. The maturity date of the Senior Credit Agreement is October 8, 2024. Redeterminations will occur semi-annually on May 1 and November 1, with the lenders and the Company each having the right to one interim unscheduled redetermination between any two consecutive semi-annual redeterminations. The borrowing base takes into account the estimated value of the Company’s oil and natural gas properties, proved reserves, total indebtedness, and other relevant factors consistent with customary oil and natural gas lending criteria. Amounts outstanding under the Senior Credit Agreement bear interest at specified margins over the base rate of 1.50% to 2.50% for ABR-based loans or at specified margins over LIBOR of 2.50% to 3.50% for Eurodollar-based loans, which margins may be increased one-time by not more than 50 basis points per annum if necessary in order to successfully syndicate the Senior Credit Agreement. These margins fluctuate based on the Company’s utilization of the facility. The Company may elect, at its option, to prepay any borrowings outstanding under the Senior Credit Agreement without premium or penalty, except with respect to any break funding payments which may be payable pursuant to the terms of the Senior Credit Agreement. The Company may be required to make mandatory prepayments of the outstanding borrowings under the Senior Credit Agreement in connection with certain borrowing base deficiencies, including deficiencies which may arise in connection with a borrowing base redetermination, an asset disposition or swap terminations attributable in the aggregate to more than ten percent (10%) of the then-effective borrowing base. Amounts outstanding under the Senior Credit Agreement are guaranteed by the Company’s direct and indirect subsidiaries and secured by a security interest in substantially all of the assets of the Company and its subsidiaries. The Senior Credit Agreement contains certain events of default, including non-payment; breaches of representation and warranties; non-compliance with covenants; cross-defaults to material indebtedness; voluntary or involuntary bankruptcy; judgments and change in control. The Senior Credit Agreement also contains certain financial covenants, including maintenance of (i) a Total Net Indebtedness Leverage Ratio (as defined in the Senior Credit Agreement) of not greater than 3.50 to 1.00 and (ii) a Current Ratio (as defined in the Senior Credit Agreement) of not less than 1.00 to 1.00. As of December 31, 2020 (Successor), after giving effect to the Third Amendment, discussed below, the Company was in compliance with the financial covenants under the Senior Credit Agreement. At December 31, 2020 (Successor), the Company had $158.0 million indebtedness outstanding, approximately $4.7 million letters of credit outstanding and approximately $27.3 million of borrowing capacity available under the Senior Credit Agreement. On October 29, 2020 (Successor), the Company entered into the Third Amendment to Senior Secured Revolving Credit Agreement and Limited Waiver (the Third Amendment). The Third Amendment, among other things, set the borrowing base to $190.0 million as of November 1, 2020, which eliminated the final monthly reduction of $5.0 million required under the Second Amendment (discussed below). The Third Amendment also reduced the amount available for issuance of letters of credit to $25.0 million and amended certain covenants including, but not limited to, covenants relating to increasing the minimum mortgaged total value of proved borrowing base properties from 85% to 90%. Additionally, the Third Amendment provided for new covenants that, among other things, require the Company to enter into swap agreements representing not less than 65% of the Company’s reasonably anticipated projected production from proved reserves classified as developed producing reserves for a period from the Third Amendment effective date through at least December 31, 2022 and prohibit no more than $3.0 million of the Company’s uncontested accounts payable or accrued expenses, liabilities or other obligations from remaining outstanding for longer than 90 days. Pursuant to the Third Amendment, the administrative agent and the lenders consented to a waiver of the Current Ratio (as defined in the Senior Credit Agreement) for the fiscal quarter ended September 30, 2020 and suspended testing of the Current Ratio until the fiscal quarter ending December 31, 2021. On July 31, 2020 (Successor), the Company entered into the Limited Waiver to Senior Secured Revolving Credit Agreement (the Waiver) in which the lenders consented to waive maintenance of a Current Ratio (as defined in the Senior Credit Agreement) of not less than 1.00 to 1.00 for the fiscal quarter ended June 30, 2020. On April 30, 2020 (Successor), the Company entered into the Second Amendment to the Senior Credit Agreement (Second Amendment) which, among other things, (i) reduced the borrowing base to $200.0 million effective from April 30, 2020, which was then reduced by $5.0 million monthly starting September 1, 2020 until November 1, 2020, so that the borrowing base was scheduled to be $185.0 million on November 1, 2020, provided the borrowing base redetermination scheduled for November 1, 2020 occurred pursuant to the terms of the Senior Credit Agreement, (ii) increased interest margins to 1.50% to 2.50% for ABR-based loans and 2.50% to 3.50% for Eurodollar-based loans, (iii) provided that should the Company’s Consolidated Cash Balance (as defined pursuant to the Second Amendment) exceed $10.0 million, such amounts shall be used to prepay any borrowings under the Senior Credit Agreement and thereafter, to the extent of any uncollateralized letters of credit exposure, shall be cash collateralized in accordance with the Senior Credit Agreement and (iv) allowed for a replacement benchmark rate to the London Interbank Offered Rate (which may include SOFR, Compounded SOFR or Term SOFR). The Second Amendment also added provisions related to a loan incurred by the Company under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The Company used, and the Second Amendment required the Company to use, the loan proceeds for CARES Forgivable Uses under the CARES Act. Additionally, the Second Amendment waived, for the fiscal quarter ended June 30, 2020, that the Company comply with the requirement under the Senior Credit Agreement that the Company unwind certain swap agreements for which settlement payments were calculated in such fiscal quarter to exceed 100% of actual production. On November 21, 2019 (Successor), the Company entered into the First Amendment to the Senior Credit Agreement which, among other things, (i) reduced the borrowing base to $240.0 million and (ii) limited the Total Net Indebtedness Leverage Ratio (as defined in the Senior Credit Agreement) as of the last day of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2020, to not greater than 3.50 to 1.00. Paycheck Protection Program Loan On April 16, 2020 (Successor), the Company entered into a promissory note (the PPP Loan) for a principal amount of approximately $2.2 million from Bank of Montreal under the Paycheck Protection Program of the CARES Act, which is administered by the U.S. Small Business Administration (SBA). Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The PPP Loan bears interest at a rate of 1.0% per annum and, if not forgiven, has a maturity date of April 16, 2022. As long as the Company makes a timely application of forgiveness to the SBA, the Company is not required to make any payments under the PPP Loan until the forgiveness amount is communicated to the Company by the SBA. The Company may elect, at its option, to prepay 20% or less of the borrowings outstanding under the PPP Loan without premium or penalty, and without notice. Prepayments of more than 20% of the outstanding borrowings require written advanced notice and payment of accrued interest. The PPP Loan contains certain events of default including non-payment, breach of representations and warranties, cross-defaults to other loans with the lender or to material indebtedness, voluntary or involuntary bankruptcy, judgments and change in control. Under the terms of the CARES Act, the Company can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act during the covered period after loan origination and the maintenance or achievement of certain employee levels. The Company believes it is eligible for, and intends to pursue, forgiveness of the PPP Loan in accordance with the requirements and limitations under the CARES Act; however, no assurance can be provided that forgiveness of any portion of the PPP Loan will be obtained. Debtor-in-Possession Financing In connection with the chapter 11 proceedings and pursuant to an order of the Bankruptcy Court dated August 9, 2019 (the Interim Order), the Predecessor Company entered into a Junior Secured Debtor-In-Possession Credit Agreement (the DIP Credit Agreement) with the Unsecured Senior Noteholders party thereto from time to time as lenders (the DIP Lenders) and Wilmington Trust, National Association, as administrative agent. Under the DIP Credit Agreement, the DIP Lenders made available a $35.0 million debtor-in-possession junior secured term credit facility (the DIP Facility), of which $25.0 million was extended as an initial loan and the remainder of which was drawn on September 5, 2019 (Predecessor). The DIP Facility was refinanced by the Senior Credit Agreement upon emergence from chapter 11 bankruptcy. The DIP Loans bore interest at a rate per annum equal to (i) adjusted LIBOR plus an applicable margin of 5.50% or (ii) an alternative base rate plus an applicable margin of 4.50%, in each case, as selected by the Company. Predecessor Senior Revolving Credit Facility On September 7, 2017, the Predecessor Company entered into an Amended and Restated Senior Secured Revolving Credit Agreement (the Predecessor Credit Agreement) by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and certain other financial institutions party thereto, as lenders. Pursuant to the Predecessor Credit Agreement, the lenders party thereto agreed to provide the Company with a $1.0 billion senior secured reserve-based revolving credit facility with a borrowing base of $225.0 million as of October 1, 2019 (Predecessor). The maturity date of the Predecessor Credit Agreement was September 7, 2022. The borrowing base was redetermined semi-annually, with the lenders and the Company each having the right to one interim unscheduled redetermination between any two consecutive semi-annual redeterminations. The borrowing base took into account the estimated value of the Company’s oil and natural gas properties, proved reserves, total indebtedness, and other relevant factors consistent with customary oil and natural gas lending criteria. Amounts outstanding under the Predecessor Credit Agreement bore interest at specified margins over the base rate of 1.75% to 2.75% for ABR-based loans or at specified margins over LIBOR of 2.75% to 3.75% for Eurodollar-based loans. These margins fluctuated based on the Company’s utilization of the facility. The Predecessor Credit Agreement was refinanced by the Senior Credit Agreement upon emergence from chapter 11 bankruptcy. 6.75% Senior Notes On February 16, 2017, the Predecessor Company issued $850.0 million aggregate principal amount of 6.75% senior notes due 2025 (the 2025 Notes) in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (Securities Act), Rule 144A and Regulation S, and applicable state securities laws. The 2025 Notes were issued at par and bore interest at a rate of 6.75% per annum, payable semi‑annually on February 15 and August 15 of each year. The maturity date of the 2025 Notes was February 15, 2025. On February 15, 2018, the Predecessor Company issued an additional $200.0 million aggregate principal amount of its 2025 Notes at a price to the initial purchasers of 103.0% of par (the Additional 2025 Notes). The net proceeds from the sale of the Additional 2025 Notes were approximately $202.4 million after deducting initial purchasers’ premiums, commissions and estimated offering expenses. The proceeds were used to fund the cash consideration for the acquisition of the West Quito Draw Properties, discussed further in Note 6, "Acquisitions and Divestitures,” and for general corporate purposes, including to fund the Company’s 2018 drilling program. On the Petition Date, the 2025 Notes represented "Liabilities subject to compromise" and the corresponding discount of $6.6 million and premium of $4.9 million were written-off to "Reorganization items, net" on the consolidated statements of operations. On October 8, 2019, upon emergence from chapter 11 bankruptcy, the 2025 Notes were cancelled. The Company discontinued recording interest on the 2025 Notes as of the Petition Date. The contractual interest expense not accrued or recorded in the consolidated statement of operations was approximately $7.1 million, representing interest expense from the Petition Date through the Effective Date. Refer to Note 2, “Reorganization” for further details. Debt Maturities Aggregate maturities required on debt at December 31, 2020 (Successor) due in future years are as follows (in thousands):
2021 |  | $ | 1,720
2022 |  |  | 489
2023 |  |  | —
2024 |  |  | 158,000
2025 |  |  | —
Thereafter |  |  | —
Total |  | $ | 160,209
Debt Issuance Costs The Company capitalizes certain direct costs associated with the issuance of debt and amortizes such costs over the lives of the respective debt. During the period of January 1, 2019 through October 1, 2019 (Predecessor), the Company expensed to “Reorganization items, net” $9.3 million of debt issuance costs associated with its 2025 Notes, which were cancelled upon emergence from chapter 11 bankruptcy. During the period, the Company also expensed to “Interest expense and other” $0.7 million of debt issuance costs associated with its Predecessor Credit Agreement. At December 31, 2020 and 2019 (Successor), the Company did not have any unamortized debt issuance costs.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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