Grey Wolf Increases Credit Facility to $100 Million

Grey Wolf reports that on December 31, 2004 it has, through its subsidiaries, amended its credit facility with the existing lenders and a new lender in the facility increasing the amount that can be borrowed under the facility from $75 million to $100 million. In addition, the term of the facility has also been extended from January 2006 to December 2008. The Company currently has no borrowings outstanding under the new facility. The Company has outstanding undrawn standby letters of credit of $18.8 million related to insurance contracts and other purposes.

The terms of the credit facility include periodic interest payments at a floating rate based upon the Company's debt service coverage ratio within a range of either the London Interbank Offering Rate (LIBOR) plus 1.75% to 3.50% or prime plus .25% to 1.50%. In addition, the credit facility contains certain affirmative and negative covenants including a minimum appraisal value of the Company's drilling rigs and related equipment plus certain financial covenants which take effect if the Company's cash on hand and borrowing capacity under the credit facility falls below $35 million. Substantially all of the Company's assets, including its drilling rigs and related drilling equipment, are pledged as collateral under the credit facility. The Company, however, retains the option, subject to a minimum appraisal value and other conditions, under the credit facility to extract $75 million of the equipment out of the collateral pool for other purposes.