Denver, CO-based independent oil and gas exploration and production company Emerald Oil Inc. has closed on a senior credit facility with Wells Fargo Bank NA. The credit facility is a senior secured reserve based revolving credit facility with a maximum commitment of up to $400 million and an initial borrowing base of $27.5 million. On November 20, 2012, approximately $15.2 million was drawn to pay in full the approximately $15 million balance on the Macquarie Bank Limited credit facility and fees and expenses associated with the credit facility.
Proceeds from the credit facility can be used to acquire oil and gas properties, finance ongoing working capital requirements, for general corporate purposes, or refinance existing debt. The annual interest cost, which is dependent upon the percentage of the borrowing base utilized, is the London Interbank Offer Rate (LIBOR) plus 1.75% to 2.75%. The current annual interest rate on the credit facility is LIBOR plus 2.25%. Redetermination of the borrowing base will be on a semi-annual basis, with an option to elect additional redeterminations every six months. The credit facility is secured by first priority, perfected liens and security interests on substantially all assets of Emerald and its subsidiaries and terminates on the fifth anniversary of the closing date on November 20, 2017. The company did not issue equity or provide royalty consideration in connection with the credit facility.
Emerald (NYSE MKT: EOX) is focused primarily on the development of its approximate 48,800 net acres in the Williston Basin in North Dakota and Montana, prospective for oil in the Bakken and Three Forks formations. Emerald also has accumulated 45,100 net acres in the Sandwash Basin in northwest Colorado and southwest Wyoming, prospective for oil in the Niobrara formation, and 33,500 net acres in central Montana, prospective for oil in the Heath formation.