12.  Subsequent Events  

Commencement of Exchange Offer and Consent Solicitation.  On July 25, 2016, we announced the commencement of an exchange offer and consent solicitation to certain eligible holders of our outstanding 8.50% Senior Notes due 2019 for up to (i) 62,100,000 shares of common stock, par value $0.00001 per share, (ii) $202.5 million aggregate principal amount of new secured notes due 2020 and (iii) $180.0 million aggregate principal amount of new unsecured notes due 2021.  Interest for the new secured notes may be paid-in-kind at our option at a rate of 10.75% per annum for 18 months after issuance and is otherwise payable in cash at a rate of 9% per annum.  Interest for the new unsecured notes may be paid-in-kind at our option at a rate of 10.00% per annum for 24 months after issuance and is otherwise payable in cash at a rate of 8.5% per annum.  Concurrently with the exchange offer, the Company is soliciting consents from holders of the 8.50% Senior Notes to adopt certain proposed amendments to the current indenture.  

The exchange offer is conditioned on the satisfaction or waiver of certain additional conditions, including, among other things, (i) shareholder approvals related to the increase in the number of authorized shares of the Company’s common stock and the issuance of the shares in the exchange offer, which our majority stockholder, Tracy W. Krohn, has stated he intends to approve, (ii) receipt of requisite lender consents to an amendment to our bank credit facility to permit the exchange offer, which consents have been obtained subject to completion of definitive documentation, and (iii) a minimum of 95%, or $855.0 million, of the 8.50% Senior Notes being tendered as of the expiration date, together with requisite consents having been obtained, which tender condition may be waived, in our discretion, provided 85%, or $765.0 million, of the 8.50% Senior Notes are tendered as of the expiration date.  To the extent less than 90% in principal amount of the 8.50% Senior Notes are validly tendered and accepted for exchange, the new unsecured notes will instead be issued as secured by third-priority liens on substantially all of our and our subsidiary guarantors’ assets that secure our revolving bank credit facility.  Consummation of the exchange offer is also conditioned upon the satisfaction or waiver by the Company of certain other conditions.  The exchange offer for the 8.50% Senior Notes expires on September 1, 2016, subject to extension.  The exchange offer and consent solicitation for the 8.50% Senior Notes may be amended, extended or terminated.

An amendment to the Credit Agreement will become effective in the event of consummation of the current exchange offer and certain related transactions on or before October 31, 2016, including the issuance of a $75.0 million 1.5 Lien Term Loan, the net proceeds of which would be applied to reduce amounts outstanding on our revolving bank credit facility.  The amendment also provides that, in the event it becomes effective, the borrowing base will be reaffirmed at $150.0 million and will not be subject to a scheduled or elective interim redetermination until April 1, 2017.  The amendment will also revise various financial ratio covenants upon effectiveness as follows: (i) the Secured Debt Leverage Ratio will be eliminated, (ii) the First Lien Leverage Ratio will increased from 1.50 to 1.00 to 2.50 to 1.00 as of the end of each fiscal quarter with a stepdown to 2.00 to 1.00 beginning with the fiscal quarter ending September 30, 2017 and (iii) the Company will maintain an Asset Coverage Ratio of Total Proved PV-10 to borrowings and letters of credit outstanding under the revolving bank credit facility of 1.25 to 1.00 to be measured quarterly up to and including the quarter ending December 31, 2016.

New Capital Financing.  We have entered into commitment papers with certain holders of the 8.50% Senior Notes to provide $75.0 million of additional capital through borrowings on a 1.5 Lien Term Loan, which financing commitment is contingent upon the consummation of the exchange offer described above.  The 1.5 Lien Term Loan will be junior only to the revolving bank credit facility and certain other customary permitted liens and will be secured by a 1.5 priority lien on all assets granted to secure indebtedness under our revolving bank credit facility.