Cobalt International Energy, Inc.
Notes to Consolidated Financial Statements (Continued)
F-20
9. Other Assets
As of December 31, 2015 and 2014, the balance in other assets consisted of the following:
December 31,
2015
2014
($ in thousands)
Debt issue cost(1)....................................................................... $ 36,479 $
36,708
Rig mobilization costs(2)...........................................................
15,397
12,324
$ 51,876 $
49,032
(1) As of December 31, 2015, the $36.5 million in debt issue costs was related to the issuance of the Borrowing
Base Facility Agreement, the Company’s 2.625% convertible senior notes due 2019 and the Company’s
3.125% convertible senior notes due 2024, as described in
Note 10—Long-term Debt
. As of December 31,
2014, the $36.7 million in debt issue costs included $18.5 million and $18.2 million in costs related to the
issuance of the Company’s 2.625% convertible senior notes due 2019 and the Company’s 3.125%
convertible senior notes due 2024, respectively, as described in
Note 10—Long-term Debt
. These debt issue
costs are amortized over the life of the notes using the effective interest method.
(2) As of December 31, 2015 and 2014, the $15.4 million and $12.3 million, respectively, relate to costs
relating to the Rowan Reliance drilling rig which was delivered in January 2015 and is currently drilling our
North Platte #3 appraisal well. These costs are or will be amortized over the term of the drilling rig
contracts.
10. Long-term Debt
As of December 31, 2015, the Company’s long-term debt consists of the Borrowing Base Facility Agreement (the “Facility
Agreement”) entered into on May 29, 2015, the 2.625% convertible senior notes due 2019 issued on December 17, 2012 (the “2.625%
Notes”), and the 3.125% convertible senior notes due 2024 issued on May 13, 2014 (the “3.125% Notes”, and, collectively with the
2.625% Notes, the “Notes”), as follows:
Borrowing Base Facility Agreement
On May 29, 2015, Cobalt GOM #1 LLC (“GOM#1”), an indirect, wholly-owned subsidiary of the Company entered into a
Borrowing Base Facility Agreement (the “Facility Agreement”) with Société Générale, as administrative agent, and certain other
lenders. GOM#1 is the direct owner of the oil and gas leases, wells, production facilities and other assets and agreements associated
with the Company’s Heidelberg development. GOM#1 does not own any of the Company’s other oil and gas assets. The Facility
Agreement provides for a limited recourse $150 million senior secured reserve-based term loan facility. The proceeds of the loans
under the Facility Agreement will be available to fund the majority of GOM#1’s share of the remaining Heidelberg field development
costs, subject to the maintenance of a debt to equity ratio of the total investment in the Heidelberg development of no more than 70:30.
GOM#1 may request that the commitments under the Facility Agreement be increased by up to an additional $100 million upon the
satisfaction of certain conditions set forth in the Facility Agreement, and such increase is subject to lender participation. In addition,
GOM#1 may request a further commitment increase by up to $400 million if GOM#1’s interest in the Heidelberg field is increased,
with such commitment increase subject to lender participation.
The Company is a party to the Facility Agreement and has limited funding obligations thereunder. Until completion of the
Heidelberg development in accordance with the current field development plan and certain other requirements set forth in the Facility
Agreement (“Completion”), the Company has guaranteed to fund cost overruns that may be incurred up to an aggregate of
$38.7 million. The Company agreed to cash collateralize 50% of its funding obligation in respect of cost overruns by depositing
$19.4 million in a collateral account to be established pursuant to the terms of the Facility Agreement. As of December 31, 2015 this
amount has not been funded.
The amount available for borrowing at any one time under the Facility Agreement is limited to a borrowing base amount
determined twice a year using agreed projections by applying the lower of (i) a project life coverage ratio of 1.5:1.0 to the sum of
discounted projected net revenues from the Heidelberg field and certain capital expenditures and (ii) a loan life coverage ratio of
1.3:1.0 to the sum of discounted projected net revenues from the Heidelberg field and certain capital expenditures. Interim borrowing
