In connection with the Notes Offering, the Issuers provided the
additional recent developments, risk factors and updated cash and cash equivalents balance set forth below in the disclosures provided to investors. Capitalized terms used but not defined below have the meaning given such terms in the offering
circular related to the Notes Offering.
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Fifth Amendment to Revolving Credit Facility
We are currently in the process of negotiating the fifth amendment to our revolving credit facility (the Fifth
Amendment). While the terms of the Fifth Amendment have not yet been finalized and thus remain subject to change and lender approval in all respects, we expect that the Fifth Amendment will: (i) increase the borrowing base under our
revolving credit facility from $1.4 billion to $1.8 billion (although the aggregate elected commitments under our revolving credit facility will remain at $1.0 billion); (ii) decrease the applicable margins for borrowings under our
revolving credit facility to a range of (A) 1.5% to 2.5% for LIBOR based borrowings and (B) 0.5% to 1.5% for alternative base rate based borrowings, with the specific applicable margins determined by reference to borrowing base utilization;
(iii) provide flexibility, subject to certain conditions, to enter into reverse 1031 exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the Code); (iv) provide enhanced flexibility,
subject to certain dollar limitations, to make investments in unrestricted subsidiaries and joint ventures and to make other investments; and (v) provide enhanced flexibility, subject to certain conditions, to dispose of oil and gas properties
not evaluated in the reserve reports delivered to the lenders pursuant to our revolving credit facility. There can be no assurance that we will be able to enter into the Fifth Amendment on the terms described above or at all. Specifically, while we
expect the Fifth Amendment to increase the borrowing base under our revolving credit facility from $1.4 billion to $1.8 billion as described above, the terms of our revolving credit facility provide that the borrowing base will
automatically be reduced from $1.4 billion to $1.25 billion in connection with the Notes Offering. Although we intend to seek a waiver of the automatic reduction from our lenders to maintain the borrowing base at $1.4 billion, and
ultimately to increase the borrowing base to $1.8 billion pursuant to the Fifth Amendment, we note that the lenders are not obligated to grant such waiver. References to our borrowing base in the offering circular do not take into account any
increase in borrowing base pursuant to the Fifth Amendment. Although our borrowing base under the current revolving credit facility may be automatically reduced to $1.25 billion in connection with the Notes Offering, the available borrowing
capacity will remain at $997.3 million.
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Legislation or regulatory initiatives intended to address seismic activity could restrict our drilling and production activities, as
well as our ability to dispose of saltwater gathered from such activities, which could consequently limit our ability to produce oil, natural gas, and NGLs economically and have a material adverse effect on our business.
State and federal regulatory agencies recently have focused on a possible connection between hydraulic fracturing-related
activities and an increased occurrence of seismic activity, and regulatory agencies at all levels are continuing to study the possible link between oil and gas activity and seismic activity. When caused by human activity, such seismic activity is
called induced seismicity. In response to these concerns, regulators in some states are seeking to impose additional requirements, including requirements in the permitting of saltwater disposal wells or otherwise, to assess any relationship between
seismicity and the use of such wells. We dispose of large volumes of saltwater gathered from our drilling and production operations pursuant to permits issued to us by governmental authorities overseeing such disposal activities. While these permits
are issued pursuant to existing laws and regulations, these legal requirements are subject to change, which could result in the imposition of more stringent operating constraints or new monitoring and reporting requirements, owing to, among other
things, the concerns of public or of governmental authorities regarding such gathering or disposal activities. The adoption and implementation of any new laws or regulations that restrict our ability to use hydraulic fracturing or dispose of
saltwater gathered from our drilling and production activities by limiting volumes, disposal rates, disposal well locations or otherwise, or requiring disposal wells to shut down, could have a material adverse effect on our business, financial
condition and results of operations.
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Our actual operating results could differ materially from the guidance included in the offering circular.
We have included in the offering circular certain forecasted production results. This forward-looking guidance represents our
managements estimates as of the date of the offering circular and is based upon our current planned capital expenditures, drilling activity and well results. Achieving these production estimates and maintaining the required drilling activity
to achieve these estimates will depend on the availability of capital, regulatory approvals, commodity prices, drilling and completion costs, actual drilling results and other factors. These estimates are also subject to numerous business, economic,
competitive, financial and regulatory risks, including the risks described under Risk Factors and Cautionary Statement Regarding Forward-Looking Statements in the offering circular and in our Annual Report, which is
incorporated in the offering circular by
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reference. To the extent any of these factors changes adversely, we may not be able to achieve these production results. Many of these risks and uncertainties are beyond our control, such as
declines in commodity prices and the speculative nature of estimating natural gas, NGLs and oil reserves and in projecting future rates of production. If any of these risks and uncertainties actually occur or the assumptions underlying our guidance
are incorrect, our actual operating results may be materially and adversely different from our guidance. In addition, investors should also recognize that the reliability of any guidance diminishes the farther in the future that the data is
forecast. In light of the foregoing, investors are urged to put our guidance in context and not to place undue reliance upon it.
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As of October 2, 2017, we had approximately $247.0 million in cash and cash equivalents.