The fall 2016 semi-annual borrowing base redetermination under the Credit Agreement, dated March 29, 2011 (as amended, the “Credit Agreement”) of Bonanza Creek Energy, Inc. (the “Company”) was completed on October 31, 2016. (Capitalized terms used herein shall be deemed to have the meaning ascribed to them in the Credit Agreement.) The Borrowing Base under the Credit Agreement was reduced from $200 million to $150 million, which amount will remain in effect until it is redetermined or adjusted in accordance with the Credit Agreement and will continue to be secured by certain of the Company’s Oil and Gas Properties.
As of October 31, 2016, the Company had approximately $214.7 million in borrowings outstanding under the Credit Agreement and no outstanding letters of credit. As a result of this October 2016 redetermination and after giving effect to the last monthly installment of approximately $14.6 million owed as a result of the Borrowing Base Deficiency which existed following the Company’s semi-annual borrowing base redetermination on May 20, 2016, the Company will have a Borrowing Base Deficiency of approximately $50 million (the “Fall Deficiency”). The Company received notice of the Fall Deficiency on October 31, 2016 (the “Deficiency Notice Date”).
Under the terms of the Credit Agreement, the Company must pursue one of the following options to address the Borrowing Base Deficiency: (A) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to repay Advances such that the Borrowing Base Deficiency is cured within 30 days after the Deficiency Notice Date; (B) pledge, within 30 days after the Deficiency Notice Date, additional Oil and Gas Properties acceptable to the Lenders, which the Lenders deem sufficient in their sole discretion to eliminate the Borrowing Base Deficiency; (C) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to repay Advances in six monthly installments equal to one-sixth of the Borrowing Base Deficiency, with the first such installment due 30 days after the Deficiency Notice Date and each following installment due 30 days after the preceding installment; or (D) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to combine the options in clause (B) and (C) above, and indicating the amount to be repaid in installments and the amount to be provided as additional Collateral.