Jagged Peak amends credit facility, pays it off with funds from bonds

By Devika Patel

Knoxville, Tenn., May 11 – Jagged Peak Energy Inc. used the proceeds from a recent bond sale to pay down the balance of its revolving credit facility, leaving the company with approximately $635 million of liquidity.

The borrowing base of the credit facility had previously been increased to $540 million from $425 million and the pricing structure of the credit facility was reduced by 50 basis points.

“On May 8, we closed our ... bond issuance and we successfully raised $500 million at an attractive rate of 5 7/8%,” president and chief executive officer James J. Kleckner said on the company’s first quarter ended March 31 earnings conference call on Friday.

“Net proceeds from the offering were approximately $489 million and this money has been used to pay down all outstanding borrowings on the company’s revolving credit facility and the remainder will be used to fund the [company's development] program,” Kleckner said.

The company’s top financial executive elaborated on the bond sale.

“On Tuesday, we closed the private placement of $500 million eight-year senior unsecured notes, our ... bond offering,” executive vice president and chief financial officer Robert W. Howard said on the call.

“The proceeds from the offering were used to pay down the $320 million balance that was drawn on our credit facility.

“The borrowing base under the credit facility remains at $540 million.

“After closing the bond sale, our financial liquidity is approximately $635 million, including the undrawn credit facility, leaving us well positioned to execute our development program,” Howard said.

Adjusted for the offering, the company had no outstanding borrowings on its revolving credit facility, $227.2 million of cash and over $700 million of liquidity as of March 31.

First quarter adjusted EBITDAX was $85.5 million.

The company had a $265 million outstanding balance on its credit facility as of March 31 and, as of May 4, the company had $320 million of borrowings against its credit facility.

Cash and cash equivalents were $3,205,000 as of March 31, 2018, compared to $9,523,000 as of Dec. 31, 2017.

Long-term debt was $265 million as of March 31, 2018, compared to $155 million as of Dec. 31, 2017.

On March 21, the borrowing base and lender commitments under the company's credit facility were increased from $425 million to $540 million.

Concurrently with the borrowing base redetermination, the pricing structure of the company’s credit facility was reduced by 50 basis points to reflect favorable current market rates.

On April 25, Jagged Peak priced an upsized $500 million issue of eight-year senior notes (B3/B) at par to yield 5 7/8%.

The amount was increased from $400 million.

The yield printed at the tight end of the 5 7/8% to 6% yield talk and tight to early guidance in the 6% to 6¼% area.

J.P. Morgan Securities LLC was the lead.

The issuing entity was Jagged Peak Energy LLC, a wholly owned subsidiary of the Denver-based independent oil and gas energy exploration, development and production company, which earmarked the proceeds to pay down its revolving credit facility and for general corporate purposes. The additional proceeds resulting from the $100 million upsize of the deal were also be used for general corporate purposes.

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