Item 1.01. Entry into a Material Definitive Agreement.
On October 17, 2016, PetroQuest Energy, Inc., a Delaware corporation (the
Company
), and PetroQuest Energy, L.L.C., a
Louisiana limited liability company (the
Borrower
), entered into the Multidraw Term Loan Agreement (the
Loan Agreement
) with Franklin Custodian Funds Franklin Income Fund, as a lender, and Wells Fargo
Bank, National Association, as administrative agent. The Loan Agreement replaced the Companys existing Credit Agreement dated as of October 2, 2008 (as previously amended), with JPMorgan Chase Bank, N.A.
The Loan Agreement provides a new multi-advance term loan facility, with borrowing availability for three years, in a principal amount of up
to $50 million. The loans drawn under the Loan Agreement (collectively, the
Term Loans
) may be used to repay existing debt, to pay transaction fees and expenses, to provide working capital for exploration and production
operations and for general corporate purposes.
The Term Loans mature on October 17, 2020. As of the date hereof, the Borrower has no
borrowings outstanding under the Term Loans.
The Companys obligations under the Loan Agreement and the Term Loans are secured by a
first priority lien on substantially all of the assets of the Company and certain of its subsidiaries, including a lien on all equipment and at least 90% of the aggregate total value of the oil and gas properties of the Company and its subsidiaries,
a pledge of the equity interests of the Borrower and certain of the Companys other subsidiaries, and corporate guarantees of the Company and certain of the Companys other subsidiaries of the indebtedness of the Borrower. Term Loans under
the Loan Agreement bear interest at the rate of 10% per annum.
The Company and its subsidiaries are subject to certain restrictive
financial covenants under the Loan Agreement, including maintaining a ratio of (i) the present value, discounted at 10% per annum, of the estimated future net revenues in respect of the Companys and its subsidiaries oil and gas
properties, before any state, federal, foreign or other income taxes, attributable to proved developed reserves, using three-year strip prices in effect at the end of each calendar quarter, including swap agreements in place at the end of each
quarter, to (ii) the sum of the outstanding Term Loans and the then outstanding commitments to provide Term Loans, that shall not be less than (a) 1.7 to 1.0 as measured on December 31, 2016, and March 31, 2017, and (b) 2.0
to 1.0 as measured on June 30, 2017, and the last day of each calendar quarter thereafter.
Sales of the Companys and its
subsidiaries oil and gas properties outside the ordinary course of business are limited under the terms of the Loan Agreement. In addition, the Loan Agreement prohibits the Company from declaring and paying dividends on its Series B Preferred
Stock.
The Loan Agreement also includes customary restrictions with respect to debt, liens, dividends, distributions and redemptions,
investments, loans and advances, nature of business, international operations and foreign subsidiaries, leases, sale or discount of receivables, mergers or consolidations, sales of properties, transactions with affiliates, negative pledge
agreements, gas imbalances and swap agreements. As of the date hereof, the Company was in compliance with all such covenants contained in the Loan Agreement.
The foregoing description of the Loan Agreement is not complete and is qualified by reference to
the complete document, which is attached hereto as Exhibit 10.1 to this Form 8-K, and is incorporated herein by reference.