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12. Subsequent Events
Calculus Lending Facility
On November 2, 2021, the Company entered into the Eighth Amendment to Sixth Amended and Restated Credit Agreement and Master Assignment, Resignation and Appointment Agreement (the “Eighth Amendment”) which effectively terminated the Company’s reserve based lending relationship with commercial bank lenders who have traditionally provided its secured revolving credit facility. The Company has not had any borrowings under the Company Credit Agreement since the closing of the Mobile Bay Transaction in May of this year. As of November 2, 2021, the Company has cash collateralized or otherwise provided credit support for each of the outstanding letters of credit in the aggregate amount of approximately $4.4 million issued by the commercial bank lenders under the amended Credit Agreement. Alter Domus (US) LLC was appointed to replace Toronto Dominion (Texas) LLC as administrative agent under the amended Company Credit Agreement.
On November 2, 2021, the Company also entered into the Ninth Amendment to the Sixth Amended and Restated Credit Agreement (the “Ninth Amendment”), which establishes a short-term $100 million first priority lien secured revolving facility with a borrowing base of $50 million (the “Calculus Lending facility”) provided by Calculus Lending, LLC, (“Calculus”) a company affiliated with, and controlled by W&T’s Chairman and Chief Executive Officer, Tracy W, Krohn, as sole lender under the Calculus Lending facility. A committee of the independent members of the Board of Directors reviewed and approved the amendments given the CEO’s affiliation with Calculus Lending, LLC.
As a result the Eighth Amendment and Ninth Amendment and related assignments and agreements, the key terms and covenants associated with the Calculus Lending facility under the amended Company Credit Agreement are as follows:
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The revised borrowing base is $50.0 million. |
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The Calculus Lending facility commitment will expire and final maturity of any and all outstanding loans is April 30, 2022. Outstanding borrowings will accrue interest at LIBOR plus 6.0% per annum. The commitment fee for the unused portion of available borrowing amounts will be 3.0% per annum. |
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The Company’s ratio of first lien debt outstanding under the Calculus Lending facility on the last day of the most recent quarter to EBITDAX (as such term is defined in the amended Company Credit Agreement) for the trailing four quarters must not be greater than 2.50 to 1.00 on the last day of the fiscal quarter ending March 31, 2022 and on the last day of each fiscal quarter thereafter. |
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The Company’s ratio of Total Proved PV-10 to First Lien Debt (as such terms are defined in the amended Company Credit Agreement) as of the last day of any fiscal quarter commencing with the fiscal quarter ending March 31, 2022 must be equal to or greater than 2.00 to 1.00. |
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The ratio of the Company and its restricted subsidiaries’ consolidated current assets to Company and its restricted subsidiaries’ consolidated current liabilities (subject in each case to certain exceptions and adjustments as set forth in the amended Company Credit Agreement) at the last day of any fiscal quarter must be greater than or equal to 1.00 to 1.00. |
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As of the last day of any fiscal quarter commencing with the fiscal quarter ending March 31, 2022, the Company and its restricted subsidiaries on a consolidated basis must pass a “Stress Test” consisting of an analysis conducted by the lender in good faith and in consultation with the Company based upon the latest engineering report furnished to lender, which analysis is designed to determine whether the future net revenues expected to accrue to the Company’s and its guarantor subsidiaries’ interest (and the interest of certain joint ventures) in the oil and gas properties included in the properties used to determine the latest borrowing base during half of the remaining expected economic lives of such properties are sufficient to satisfy the aggregate first lien indebtedness of the Company and its restricted subsidiaries in accordance with the terms of such indebtedness assuming the Calculus Lending facility is 100% funded or fully utilized.
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Certain related party transactions are required to meet certain arm’s length criteria; except in each case as specifically permitted or excluded from the covenant under the amended Company Credit Agreement. |
As consideration for its commitment as sole lender and consistent with customary non-commercial bank lending practice, Calculus will be paid certain market-based fees in connection with its commitment. Additionally, as a result of the recent amendments to the Company Credit Agreement and related agreements, certain existing commodity derivative contracts not associated with the Mobile Bay Transaction have been novated to a new counterparty at the same terms.
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