Business Context and Reporting Period
This Form 8-K was filed by Midstates Petroleum Company, Inc. on September 7, 2012. The report details the entry into a material definitive agreement regarding the company's credit facility. Note: The metadata provided lists "Amplify Energy Corp.", but the filing text explicitly identifies the registrant as Midstates Petroleum Company, Inc.
Key Financial Metrics and Debt Structure
- Borrowing Base Increase: The Credit Facility borrowing base was increased from $200 million to $235 million via the addition of $35 million in non-conforming borrowing base loans.
- Interest Rate Margins: If borrowing base usage exceeds $200 million, the applicable margin increases to up to 3.00% for base rate loans and up to 4.00% for LIBOR loans.
- Commitment Fees: Fees may increase up to 0.625% if borrowing base usage exceeds $200 million.
- Unsecured Indebtedness: The current allowance is $275 million, with a provision to increase this to $550 million upon the consummation of the Eagle Energy Acquisition.
Material Changes Versus Prior Period
The primary change is the execution of the "First Amendment" to the Second Amended and Restated Credit Agreement dated June 8, 2012. Key modifications include:
- Authorization of $35 million in non-conforming loans, effective September 7, 2012.
- Waiver of the minimum current ratio financial covenant for the quarters ending September 30, 2012, and potentially December 31, 2012, if conditions for a further borrowing base increase are not met.
- Introduction of tiered interest margins and commitment fees for utilization above the original $200 million threshold.
Guidance, Outlook, and Contingencies
The filing outlines a contingent future amendment tied to the "Eagle Energy Acquisition" (Asset Purchase Agreement with Eagle Energy Production, LLC). Upon consummation of this acquisition and satisfaction of customary conditions:
- The Credit Facility will automatically amend to accommodate new equity and debt instruments.
- The borrowing base is expected to increase to $250 million, subject to reduction if acquired assets are less than expected.
- The maturity date of the Credit Facility will be extended to the fifth anniversary of the date the conditions are satisfied.
- The $35 million non-conforming loan availability will terminate upon the earlier of the acquisition closing, issuance of permitted unsecured debt, or the March 2013 borrowing base redetermination.
Investor Verification Checklist
- Verify the exact status and timeline of the Eagle Energy Acquisition, as future debt terms and maturity depend on its closing.
- Confirm current borrowing base utilization to determine if the higher interest margins (3.00% base/4.00% LIBOR) and commitment fees (0.625%) are currently applicable.
- Review the full text of Exhibit 10.1 for specific definitions of "non-conforming borrowing base loans" and the precise conditions for the $250 million borrowing base increase.
- Monitor the company's compliance with the minimum current ratio covenant, noting the waiver applies only through specific quarter-ends.