5.  Long-Term Debt

Our long-term debt was as follows (in thousands):

8.5% Senior Notes

At March 31, 2016 and December 31, 2015, our outstanding senior notes, which bear an annual interest rate of 8.50% and mature on June 15, 2019 (the “8.50% Senior Notes”), were classified as long-term at their carrying value.  Interest on the 8.50% Senior Notes is payable semi-annually in arrears on June 15 and December 15.  The estimated annual effective interest rate on the 8.50% Senior Notes is 8.4%, which includes amortization of debt issuance costs and premiums.  We are subject to various financial and other covenants under the indenture governing the 8.50% Senior Notes, and we were in compliance with those covenants as of March 31, 2016.  

9.00% Term Loan

At March 31, 2016 and December 31, 2015, our outstanding term loan, which bears an annual interest rate of 9.00% and matures on May 15, 2020 (the “9.00% Term Loan”), was classified as long-term at its carrying value.  Interest on the 9.00% Term Loan is payable in arrears semi-annually on May 15 and November 15.  The estimated annual effective interest rate on the 9.00% Term Loan is 9.7%, which includes amortization of debt issuance costs and discounts.  The 9.00% Term Loan is secured by a second priority lien covering our oil and gas properties to the extent such properties secure first priority liens granted to secure indebtedness under our Credit Agreement.  We are subject to various covenants under the terms governing the 9.00% Term Loan including, without limitation, covenants that limit our ability to incur other debt, pay dividends or distributions on our equity, merge or consolidate with other entities and make certain investments in other entities.  We were in compliance with those covenants as of March 31, 2016.  

Credit Agreement

The Credit Agreement provides a revolving bank credit facility.  Availability under the Credit Agreement is subject to a semi-annual borrowing base determination set at the discretion of our lenders, and the Company and the lenders may each request one additional determination per year.  The amount of the borrowing base is calculated by our lenders based on their evaluation of our proved reserves and their own internal criteria.  Any determination by our lenders to change our borrowing base will result in a similar change in the availability under our revolving bank credit facility.  To the extent borrowings and letters of credit outstanding exceed the redetermined borrowing base, such excess or deficiency is required to be repaid within 90 days in three equal monthly payments.  Letters of credit may be issued in amounts up to $150.0 million, provided availability under the revolving bank credit facility exists.  The revolving bank credit facility is secured and is collateralized by our oil and natural gas properties.  The Credit Agreement terminates on November 8, 2018.

The Credit Agreement contains various customary covenants for certain financial tests, as defined in the Credit Agreement and measured as of the end of each quarter, and for customary events of default.  These financial test ratios and limits as of March 31, 2016 and thereafter are: (i) the First Lien leverage Ratio must be less than 1.50 to 1.00; (ii) the Current Ratio must be greater than 1.00 to 1.00; and (iii) the Secured Debt Leverage Ratio must be less than 3.50 to 1.00.   As of March 31, 2016, our the First Lien Ratio was  1.48 to 1.00, the Current Ratio was 2.84 to 1.00 and the Secured Debt Leverage Ratio was 3.02 to 1.00.  The customary events of default include: (i) nonpayment of principal when due or nonpayment of interest or other amounts within three business days of when due; (ii) bankruptcy or insolvency with respect to the Company or any of its subsidiaries guaranteeing borrowings under the revolving bank credit facility; or (iii) a change of control.  The Credit Agreement contains cross-default clauses with the 8.50% Senior Notes and the 9.00% Term Loan, and these agreements contain similar cross-default clauses with the Credit Agreement.  We were in compliance with all applicable covenants of the Credit Agreement as of March 31, 2016.

In February 2016, we borrowed $340.0 million under the Credit Agreement.  On March 23, 2016, the banks reduced our borrowing base to $150.0 million from $350.0 million in connection with the spring borrowing base redetermination.  We are required to repay borrowings outstanding in excess of the redetermined borrowing base pursuant to the terms of the Credit Agreement.  On March 31, 2016, we repaid $52.0 million leaving an outstanding balance under the Credit Agreement of $288.0 million as of March 31, 2016.  On May 2, 2016, we repaid an additional $12.0 million.  Additional payments are required of $64.0 million on May 31, 2016 and $64.0 million on June 30, 2016, in addition to interest payments on our long-term debt, which will bring total borrowings outstanding under the Credit Agreement in conformity with the borrowing base limitation.  The Company has sufficient available cash to make these payments.  The reduction in the borrowing base resulted in a proportional reduction in the unamortized costs related to the Credit Agreement of $1.4 million, which is included in the line Other (income) expense, net on the Condensed Statement of Operations.  

As of March 31, 2016 and December 31, 2015, we had $1.0 million and $0.9 million, respectively, of letters of credit outstanding under the revolving bank credit facility.  The estimated annual effective interest rate was 4.7% for the three months ended March 31, 2016 for average daily borrowings outstanding under the revolving bank credit facility.  The estimated annual effective interest rate includes amortization of debt issuance costs and excludes commitment fees and other costs.  

The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the agreement.

For information about fair value measurements for our 8.50% Senior Notes, 9.00% Term Loan and revolving bank credit facility, refer to Note 6.