Kodiak has entered into a $200 million senior secured revolving line of credit facility with Wells Fargo Bank, N.A. The initial borrowing base, reflecting the maximum amount that may be outstanding under the credit facility at any time, is $20 million and is subject to two scheduled and two optional redeterminations each year. The maturity date of the credit agreement is May 24, 2014.
Loans made under this credit facility are secured by Kodiak's proved reserves and a pledge of the capital stock of the Company's direct or indirect subsidiaries, the capital stock of the parent of the borrower and the accounts receivable, inventory, contract rights, and general intangibles of Kodiak and its subsidiaries.
The senior credit facility's purpose is to provide funds to finance the development of oil and gas assets, to finance acquisitions of oil and gas properties, to provide working capital and for other general corporate purposes.
Interest on borrowings under the credit facility accrues at variable interest rates at either, at Kodiak's election, a LIBOR rate or an alternate base rate, as defined in the credit agreement. The LIBOR rate is calculated as LIBOR plus an applicable margin that varies from 2.25% to 3.25% depending on the utilization of the facility. The applicable margin for loans at the alternate base rate varies from 1.25% to 2.25%. As part of the credit facility, Kodiak must pay a commitment fee of 0.50% paid per annum based on the unused portion of the credit facility.
For further details regarding the credit facility, please refer to Kodiak's complete disclosure on Form 8-K to be filed with the Securities and Exchange Commission.
"The new credit agreement is a significant milestone in improving Kodiak's financial strength," said James Henderson, Kodiak's chief financial officer. "The facility is with Wells Fargo, a bank with excellent liquidity and a reputation as strong oil and gas lender. Having the facility in place, with its initial $20 million borrowing base, will provide us with balance sheet flexibility. With a $200 million total facility size, it also has the advantage of being able to grow with Kodiak as we continue to add proven reserves through the drill bit. Our cash balances, prepaid expenses, operating cash flow from our Bakken oil producers and the cushion provided by the credit facility are all sources which we can draw upon to successfully execute our $60 million 2010 capital expenditure program, the majority of which is development drilling."
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