Ultra Petroleum Corp. raised the borrowing base on its senior secured revolver to $155 million after the company demonstrated to its lenders that the value of its assets had improved. The natural gas reserve exploration and production company has a semi-annual borrowing base review as part of its bank agreement, said Fox Benton, cfo, explaining that since there was an increase in Ultra Petroleum's reserves, the credit could be increased. "We drilled more wells, so we could increase the borrowing base," he said. The revolver was for $120 million before the most recent increase, but the company began with a facility for $18 million in 2000. Benton explained that the deal has since been incrementally augmented as assets have grown.
In March of 2002, Ultra Petroleum refinanced the initial credit and syndicated it as the deal became larger. Lead lender Bank One brought Union Bank of California, Guaranty Bank, Hibernia National Bank and Compass Bank on board to the then $80 million credit. The deal was later increased to $120 million last November. The Royal Bank of Scotland joined the syndicate with the most recent increase. Benton added that the company is pleased with the relationship and appealing deal terms it has developed with Bank One.
The revolver was also extended an additional year into 2006 with the borrowing base increase. Pricing remained in place, based on a grid ranging from LIBOR plus 11/2-21/4%. Benton said the current rate is around LIBOR plus 13/4%. The company will revisit pricing as it gets bigger and cash flow and earnings improve, Benton noted, stating that the company looks forward to lowering its rates in the future. "As the yield curve starts to flatten, then we'll look at term pieces," he added, speaking to the prospects of institutional debt as the Houston-based company grows.