Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Subsequent Events

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Note 12 - Subsequent Events
 3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Subsequent Events [Text Block]
12.
Subsequent Events
 
COVID-
19
Impacts on Economic Environment.
 
On 
January 30, 2020,
the World Health Organization (“WHO”) announced a global health emergency because of COVID-
19
 and the risks to the international community as the virus spread globally beyond its point of origin.  In
March 2020,
the WHO classified the COVID-
19
as a pandemic based on the rapid increase in exposure globally.
 
The COVID-
19
pandemic has significantly impacted the global crude oil supply-demand balance causing a substantial decrease in crude oil prices and increasing the volatility of the market.  Domestic natural gas prices have remained relatively stable and have experienced less volatility.  This economic environment has caused oil and gas operators to reduce their capital expenditure budgets, reduce activity and shut-in significant production.  The full impact of the COVID-
19
pandemic and the volatility in crude oil prices continue to evolve as of the date of this Quarterly Report.  However, the scope and length of this economic downturn and the ultimate effect on the prices of crude oil and natural gas cannot be determined and we could be adversely affected in future periods.
 
We are actively monitoring the impact on our results of operations, financial position, and liquidity for the remainder of
2020.
  In response to the market changes, we have reduced our capital expenditure budget for the remainder of
2020,
experienced production shut-ins from non-operated oil and gas properties and shut-in a limited number of our operated oil and gas properties
 
Purchase of Senior Second Lien Notes. 
During the
second
quarter of
2020,
approximately
$45.1
 million of  Senior Second Lien Notes were purchased in the open market for approximately
$15.4
 million.
 
Paycheck Protection Program (
“
PPP
”
)
. 
 On
April 15, 2020,
the Company received
$8.4
million under the U.S. Small Business Administration (“SBA”) PPP.  The Company expects that it will
not
be required to repay any of the funds received; however, we can give
no
assurances on the outcome of the SBA’s decision on the matter.  Should the Company be required to repay all or a portion of the funds received under the PPP (the PPP “Loan”), the Loan would mature on
April 10, 2025
and accrue interest at
1%.
 
Spring
2020
Borrowing Base Redetermination.  
On
June 17, 2020,
the lenders under the Credit Agreement completed their semi-annual borrowing base redetermination and entered into the Third Amendment and Waiver (the “Third Amendment”) to the Credit Agreement. Although the Company had
not
violated any covenants, the Third Amendment provides less stringent covenant requirements given the recent changes in the oil and gas markets.  The Third Amendment includes the following changes, among other things, to the Credit Agreement:
 
 
 •
The borrowing base under the Credit Agreement was reduced from
$250.0
million to
$215.0
million.
 
 
 •
Increase the interest rate margin by
25
basis points.
 
 
 •
Amend the financial covenants as follows:  
 
 
   •
From the period ended
June 30, 2020
through the period ended
December 31, 2021 (
the "Waiver Period"), the Company will
not
be required to comply with the Leverage Ratio covenant.
 
 
   •
During the Waiver Period, the Company will be required to maintain a
2.00
to
1.00
ratio limit of
first
lien debt outstanding under the Credit Agreement on the last day of the most recent quarter to EBITDAX for the trailing
four
quarters.
 
 
   •
Increase the requirement to provide
first
priority liens on properties constituting at least
85%
of total proved reserves of the Company as set forth on reserve reports required to be delivered under the Credit Agreement to
90%.