Note 4 - Debt |
6 Months Ended | ||||||
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Jun. 30, 2026 | |||||||
| Notes to Financial Statements | |||||||
| Debt Disclosure [Text Block] |
Note 4. Debt
On May 13, 2021, the Partnership and its wholly-owned subsidiary, as borrowers, entered into a loan agreement (“BF Loan Agreement”) with BancFirst, as administrative agent for the lenders (the “Lender”), which provided for a revolving credit facility (“BF Credit Facility”) with an approved maximum credit amount of $60 million, subject to borrowing base restrictions. On February 27, 2024, the Partnership and its Lender entered into an amendment (“Fifth Amendment”) to the BF Loan Agreement, effective March 1, 2024, that renewed and extended the BF Credit Facility for additional years to March 1, 2026. Under the terms and conditions of the Fifth Amendment, the Partnership paid a loan fee to the Lender of $100,000, and the borrowing base of the BF Credit Facility was $20 million. Total loan costs associated with the Fifth Amendment, which totaled approximately $121,000, were capitalized and amortized through March 1, 2026.
In February 2026, the Partnership and its Lender entered into an amendment ("Seventh Amendment") to the BF Loan Agreement, effective March 1, 2026 ("Effective Date"), which renewed and extended the BF Credit Facility for additional year to March 1, 2027. In addition to the maturity date extension, other key terms of the Seventh Amendment included (i) the Partnership voluntarily electing to reduce its borrowing base to $10 million (as of the Effective Date); (ii) the incremental borrowing fee decreased from 50 basis points to 25 basis points; and (iii) the Partnership paying a renewal fee to the Lender of $25,000.
The interest rate is equal to the Wall Street Journal Prime Rate plus 0.50%, with a floor of 4.00%.
Any advances under the BF Credit Facility are to be used to fund capital expenditures for the development of the Partnership’s undrilled acreage. Under the terms of the BF Loan Agreement, the Partnership may make voluntary prepayments, in whole or in part, at any time with no penalty. The BF Credit Facility is secured by a mortgage and first lien position on certain of the Partnership’s producing wells.
The BF Loan Agreement requires the Partnership to maintain a risk management program to manage the commodity price risk of the Partnership’s future oil and gas production under certain conditions. As amended in August 2022, the Partnership is not required to enter into future hedging transactions as long as the Partnership maintains a BF Credit Facility utilization rate of less than or equal to 20% of the Partnership’s PV-9 (defined as the net present value, discounted at 9% per annum), as calculated by the Lender during the Lender’s scheduled redeterminations. However, the Partnership must hedge at least 50% of its rolling 12-month projected future production if the Partnership’s utilization of the BF Credit Facility is greater than 20% but less than or equal to 30% of PV-9, and at least 50% of its rolling 24-month projected future production if the Partnership’s utilization of the BF Credit Facility is greater than 30% of PV-9. Based on the Partnership’s utilization of the BF Credit Facility and Lender’s current calculation of PV-9, the Partnership was not subject to any hedging requirements under the amended BF Loan Agreement as of June 30, 2026. The hedge transactions discussed in Note 7. Risk Management were made at the discretion of the Partnership.
The BF Credit Facility contains prepayment requirements, customary affirmative and negative covenants and events of default. Certain of the financial covenants include:
The Partnership is permitted to make distributions to its limited partners so long as the Partnership is in compliance with its debt service coverage ratio and no other event of default has occurred. In addition, the Sixth Amendment to the BF Loan Agreement allows the Partnership to include any unused amount of BF Credit Facility in its calculation of current assets, which began with the quarter ended September 30, 2024.
The Partnership was in compliance with its applicable covenants and had no outstanding borrowings on the BF Credit Facility at June 30, 2026 and December 31, 2025.
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