Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2014
Debt Disclosure [Abstract]  
Long Term Debt



In January 2014, the Company executed a loan agreement with the International Finance Corporation (“IFC”) for a $65.0 million revolving credit facility, which is secured by the assets of the Company’s Gabon subsidiary. Borrowings under the credit facility totaled $15.0 million as of December 31, 2014 and are due in full upon maturity in December 2019. The borrowings approximate fair value as the interest approximates current market rates for similar instruments. In the year ended 2014, the interest rate on the Company’s bank debt averaged 4.32%. The debt facility is secured by the assets and ownership of the Company’s Gabon subsidiary ($58.7 million net asset value as of December 31, 2014) and include a parent company guarantee.  

Under the debt agreement the senior tranche decreases by $6.25 million and the subordinated tranche decreases by $1.88 million every six months beginning June 30, 2016 through December 2019. The proceeds from any borrowings under the facility are required to be used for (i) the construction of two new platforms and associated facilities in the Etame field and the South East Etame and North Tchibala fields; (ii) the drilling, completion and production of wells for the aforementioned fields; (iii) upon approval, the Ebouri Project; (iv) the costs associated with modifying the FPSO to support the new platforms, all of which are located in the Etame Block offshore of the southern coast of Gabon; and (v) general corporate purposes related to the foregoing.


Interest is paid quarterly at a rate of LIBOR plus a spread of 3.75% for the senior tranche and 5.75% for the subordinated tranche. We pay commitment fees on the undrawn portion of the total commitments.  Commitment fees for the lenders are equal to 1.5% of the unused balance of the senior tranche of $50.0 million and 2.3% of the unused balance of the subordinated tranche of $15.0 million when a commitment is available for utilization.

Our borrowing base under the IFC credit facility is based upon our proved reserves and risk adjusted probable reserves and is re-determined semi-annually by the IFC. In addition, the borrowing base may be adjusted pursuant to certain non-scheduled re-determinations. However, the credit facility contains a covenant that prevents us from borrowing any amounts that would cause our debt to equity ratio to exceed 60:40. As of December 31, 2014, we estimate that this covenant would restrict our total borrowing capacity to approximately $25.0 million (of which $15.0 million has been borrowed as of December 31, 2014).

Under the IFC credit facility, we are required to maintain a ratio of our net debt to EBITDAX (each as defined in the credit agreement) of not more than 3.0 to 1.0 and a ratio of debt to equity at or below 60:40.  Forecasting our compliance with the financial covenant in future periods is inherently uncertain. Factors that could impact our debt to EBITDAX in future periods include future realized prices for sales of oil and natural gas, estimated future production, returns generated by our capital program, and future interest costs, among others. The Company is in compliance with all financial covenants at the end of December 31, 2014.

The credit agreement governing the IFC credit facility contains additional customary non-financial covenants that, among other things, restrict our ability to pay dividends, restrict our ability to buy and sell assets, limit our ability to make acquisitions or investments, and restrict our ability to incur additional indebtedness. In addition, the credit agreement contains administrative requirements, including but not limited to providing financial statements, compliance certificates, and other documents to the IFC under prescribed timelines.

Subject to any cure periods, the consequences of non-compliance with our debt covenants generally include, but are not limited to, the ability of the IFC to accelerate our obligation to repay amounts outstanding.