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DEBT | 6 Months Ended
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Jun. 30, 2022
DEBT |
DEBT | 5. DEBT As of June 30, 2022 and December 31, 2021, the Company’s debt consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, 2022 | ​ | ​ | December 31, 2021
Term loan credit facility(1) | ​ | $ | 203,372 | ​ | ​ | $ | 181,565
Paycheck Protection Program loan | ​ | ​ | — | ​ | ​ | ​ | 85
Total debt, net | ​ | ​ | 203,372 | ​ | ​ | ​ | 181,650
Current portion of long-term debt(2) | ​ | ​ | 15,000 | ​ | ​ | ​ | 85
Total long-term debt, net | ​ | $ | 188,372 | ​ | ​ | $ | 181,565
(1) | Amount is net of $12.4 million and $14.2 million in unamortized debt issuance costs at June 30, 2022 and December 31, 2021, respectively. Amount also excludes the initial fair value allocated to the change of control call option embedded derivative of $4.2 million. Refer to “Term Loan Credit Facility” below for further details.
(2) | As of June 30, 2022, amount represents amortization payments of $15.0 million under the Term Loan Agreement due within one year. As of December 31, 2021, amount represents the balance owed under the Company’s Paycheck Protection Program Loan.
Term Loan Credit Facility ​ On November 24, 2021, the Company and its wholly owned subsidiary, Halcón Holdings, LLC (Borrower) entered into an Amended and Restated Senior Secured Credit Agreement (Term Loan Agreement) with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders. The Term Loan Agreement amends and restates in its entirety the senior secured revolving credit agreement, as amended, (the Senior Credit Agreement) entered into in 2019 as further discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Pursuant to the Term Loan Agreement, the lenders have agreed to loan the Company (i) $200.0 million, which was funded on November 24, 2021 and was partially used to refinance all amounts owed under the Senior Credit Agreement; (ii) up to $20.0 million under the first delayed draw of the Term Loan Agreement, which was drawn on April 29, 2022 and (iii) up to $15.0 million, which amount will be available to be drawn from the date certain wells included in the approved plan of development (APOD) are deemed producing APOD wells until up to 18 months after November 24, 2021, subject to the satisfaction of certain conditions. An additional $5.0 million is available for the issuance of letters of credit. The maturity date of the Term Loan Agreement is November 24, 2025. Until such maturity date, borrowings under the Term Loan Agreement bear interest at a rate per annum equal to LIBOR (or another applicable reference rate, as determined pursuant to the provisions of the Term Loan Agreement) plus an applicable margin of 7.00%. ​ At June 30, 2022, the Company had $220.0 million indebtedness outstanding and approximately $1.3 million letters of credit outstanding under the Term Loan Agreement. The Company also has available $15.0 million in delayed draw term loans, subject to the satisfaction of certain conditions defined in the agreement. ​ The Company may elect, at its option, to prepay any borrowing outstanding under the Term Loan Agreement subject to the following prepayment premiums: ​
​ | ​ | ​ | ​
Period | ​ | ​ | Premium
Months 0 - 12 | ​ | ​ | Make-whole amount equal to 12 months of interest plus 2.00%
Months 13 - 24 | ​ | ​ | 2.00%
Months 25 - 36 | ​ | ​ | 1.00%
Months 37 - 48 | ​ | ​ | 0.00%
​ ​ The Company may be required to make mandatory prepayments under the Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales, or with cash on hand in excess of certain maximum levels beginning in 2023. For each fiscal quarter after January 1, 2023, the Company is required to make mandatory prepayments when the Consolidated Cash Balance, as defined in the Term Loan Agreement, exceeds $20.0 million. Until December 31, 2024, the forecasted APOD capital expenditures for the succeeding fiscal quarter are excluded for purposes of determining the Consolidated Cash Balance. ​ The Company is required to make scheduled amortization payments in the aggregate amount of $120.0 million from the fiscal quarter ending March 31, 2023 through the fiscal quarter ending September 30, 2025. Amounts outstanding under the Term Loan Agreement are guaranteed by certain of the Borrower’s direct and indirect subsidiaries and secured by substantially all of the assets of the Borrower and such direct and indirect subsidiaries, and by the equity interests of the Borrower held by the Company. As part of the Term Loan Agreement there are certain restrictions on the transfer of assets, including cash, to Battalion from the guarantor subsidiaries. ​ The Term Loan Agreement also contains certain financial covenants (as defined in the Term Loan Agreement), including the maintenance of the following ratios:
| ● | Asset Coverage Ratio of not less than 1.60 to 1.00 as of June 30, 2022, 1.70 to 1.00 as of September 30, 2022, and 1.80 to 1.00 as of December 31, 2022 and each fiscal quarter thereafter
| ● | Total Net Leverage Ratio of not greater than 3.25 to 1.00 as of June 30, 2022, 3.00 to 1.00 as of September 30, 2022 and December 31, 2022, 2.75 to 1.00 as of March 31, 2023, and 2.50 to 1.00 as of each fiscal quarter thereafter, and
| ● | Current Ratio of not less than 1.00 to 1.00, each determined as of the last day of any fiscal quarter period.
​ As of June 30, 2022, the Company was in compliance with the financial covenants under the Term Loan Agreement. ​ The Term Loan Agreement also contains an APOD for the Company’s Monument Draw acreage through the drilling and completion of certain wells. The Term Loan Agreement contains a proved developed producing production test and an APOD economic test which the Company must maintain compliance with otherwise, subject to any available remedies or waivers, the Company is required to immediately cease making expenditures in respect of the APOD other than any expenditures deemed necessary by the Company in respect of no more than six additional APOD wells. ​ The Term Loan Agreement also contains certain events of default, including non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy. ​ In conjunction with the Term Loan Agreement, the Company agreed to pay a premium to the lenders upon a future change of control event in which a majority of the board of directors or the Chief Executive Officer or the Chief Financial Officer positions do not remain held by the same persons as before the change of control event (Change of Control Call Option). The premium is reduced over time through the payment of interest and certain fees. The Company determined that the Change of Control Call Option was an embedded derivative, concluded the embedded derivative was not clearly and closely related to the host debt instrument, and recorded the initial $4.2 million fair value separately on the unaudited condensed consolidated balance sheet within “Other noncurrent liabilities.” The Change of Control Call Option is subsequently remeasured at fair value each reporting period with fair value changes recorded in “Interest expense and other” on the unaudited consolidated statements of operations. Refer to Note 6 “Fair Value Measurements,” for a discussion of the valuation approach used, the significant inputs to the valuation, and for a reconciliation of the change in fair value of the Change of Control Call Option. Paycheck Protection Program Loan In 2020, the Company entered into a promissory note (the PPP Loan) for a principal amount of approximately $2.2 million under the Paycheck Protection Program of the CARES Act. Effective August 13, 2021, the principal amount of the Company’s PPP Loan was reduced to approximately $0.2 million upon forgiveness of $2 million based on the use of loan proceeds for eligible expenses under the CARES Act. The Company recorded a gain on the extinguishment of the forgiven portion of the PPP Loan and related accrued interest of $2.1 million presented in “Gain (loss) on extinguishment of debt” in the consolidated statements of operations during the quarter ended September 30, 2021. During the first quarter of 2022, the $0.2 million principal amount of the PPP loan was repaid in full.

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1E -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 + Details
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