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proceeds of $33.5 million from the issuance of
common stock, partially offset by $40.5 million of debt repayments.
During 2005, net cash flow provided by financing activities was
$95.6 million and was primarily comprised of $183.6 million of net
proceeds from borrowings primarily from the Second Lien Credit Facility
and also advances under the Senior Credit Facility and the net proceeds
of $17.0 million from the 2005 private placement of common stock.
The proceeds were partially offset by $101.0 million of debt repayments.
Liquidity/Cash Flow Outlook. In
February 2008, we received approximately $135.4 million, before
expenses, from an underwritten public offering of 2,587,500 shares
of our common stock priced at $54.50 per share. With a portion of
the proceeds we repaid the $85.0 million of borrowings outstanding
under the Senior Credit Facility. We believe that the proceeds from
this offering and cash generated from operations along with cash
on hand and the cash available under the Senior Credit Facility
is sufficient to fund our immediate needs but we may need to seek
other financing alternatives, including additional debt or equity
financings, to fully fund our 2008 capital expenditures program,
especially if there are additional capital needsin connection with
our Floyd Shale or U.K. North Sea operations or new opportunities
in our Other Shale areas.
We may not be able to obtain financing
needed in the future on terms that would be acceptable to us. If
we cannot obtain adequate financing, we may be required to limit
or defer our planned oil and natural gas exploration and development
program, thereby adversely affecting the recoverability and ultimate
value of our oil and natural gas properties.
Contractual Obligations
The following table sets forth estimates
of our contractual obligations as of December 31, 2007:
Off Balance Sheet Arrangements
We currently do not have any off balance
sheet arrangements.
Financing Arrangements
Second Lien Credit Facility
On July 21, 2005, we entered into a Second
Lien Credit Agreement with Credit Suisse, as administrative agent
and collateral agent and the lenders party thereto (the “Second
Lien Credit Facility”) that matures on July 21, 2010. The Second
Lien Credit Facility, as amended, provides for a term loan facility
in an aggregate principal amount of $225.0 million. It is secured
by substantially all of our assets and is guaranteed by our subsidiaries.
The liens securing the Second Lien Credit Facility are second in
priority to the liens securing the Senior Secured Revolving Credit
Facility (discussed below).
The interest rate on each base rate loan
will be the greater of the agent’s prime rate and the federal
funds effective rate plus0.5%, plus a margin of 3.75%. The interest
on each Eurodollar loan will be the adjusted LIBO rate plus a margin
of 4.75%. Interest on Eurodollar loans is payable on either the
last day of each period or every three months, whichever is earlier.
Interest on our outstanding borrowings under the Second Lien Credit
Facility is payable quarterly. On December 31, 2007, the interest
rate was approximately 9.6%, excluding the impact of interest rate
swaps.
We are subject to certain covenants under
the Second Lien Credit Facility. These covenants include, but are
not limited to, the maintenance of the following financial covenants:
(1) a minimum current ratio of 1.0 to 1.0 including availability
under the borrowing base under the Senior Credit Facility; (2) a
minimum quarterly interest coverage ratio of 2.75 to 1.0 through
December 31, 2007 and 3.0 to 1.0 thereafter; (3) a minimum quarterly
proved reserve coverage ratio of 1.5 to 1.0 through
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