Common use of Minimum Hedging Clause in Contracts

Minimum Hedging. The Borrower will, within thirty (30) days after the Closing Date enter into, and will thereafter maintain on a rolling twenty-four (24) month basis, Hedging Transactions in the form of swap agreements, puts, calls in connection with puts and/or collars (but not three way collars, other than three way collars in existence as of July 1, 2022 that are acquired by the Borrower pursuant to the Stronghold Transactions) at prices reasonably acceptable to the Administrative Agent (and, in the case of collars, on terms reasonably acceptable to the Administrative Agent) in respect of crude oil and natural gas, on not less than fifty percent (50%) (such percentage, as adjusted from time to time pursuant to the proviso at the end of this sentence, the “Required Hedging Percentage”) of the projected production from the Loan Parties’ proved, developed, producing Oil and Gas Properties (as reflected in the most recently delivered Reserve Report (and, for the avoidance of doubt, from the Closing Date until the date the first Reserve Report is delivered pursuant to this Agreement, the Initial Reserve Report shall be deemed to be the “most recently delivered Reserve Report”)); provided, that, (a) if on any Hedge Testing Date (i) the Borrowing Base Utilization Percentage as of such Hedge Testing Date is less than twenty-five percent (25%) and (ii) the Leverage Ratio (as reflected in the Compliance Certificate delivered on such Hedge Testing Date) is not greater than 1.25 to 1.00, the Required Hedging Percentage for months thirteen (13) through twenty-four (24) of the rolling twenty-four (24) month period provided for in this Section 5.19 shall be zero percent (0%) from such Hedge Testing Date to the next succeeding Hedge Testing Date, and (b) if on any Hedge Testing Date (i) the Borrowing Base Utilization Percentage as of such Hedge Testing Date is equal to or greater than twenty-five percent (25%), but less than fifty percent (50%) and (ii) the Leverage Ratio (as reflected in the Compliance Certificate delivered on such Hedge Testing Date) is not greater than 1.25 to 1.0, the Required Hedging Percentage for months thirteen (13) through twenty-four (24) of the rolling twenty-four (24) month period provided for in this Section 5.19 shall be twenty-five percent (25%) from such Hedge Testing Date to the next succeeding Hedge Testing Date (the “Required Hedging Partial Suspension Right”). If the Borrower fails to timely deliver financial statements pursuant to Section 5.1(b), an accompanying Compliance Certificate pursuant to Section 5.1(c) and a certificate pursuant to Section 5.1(e) at any time the Required Hedging Partial Suspension Right is utilized, the Required Hedging Percentage shall (unless the Administrative Agent otherwise consents, which consent shall be in the Administrative Agent’s sole discretion) be set at fifty percent (50%) for the entirety of the rolling twenty-four (24) month period provided for in this Section 5.19 from the date such financial statements, Compliance Certificate and certificate were due until the next succeeding Hedge Testing Date. If the Borrower seeks to utilize the Required Hedging Partial Suspension Right for any Hedge Testing Date associated with a Fiscal Quarter ending December 31, the Borrower will, notwithstanding the parenthetical in Section 5.1(c), deliver a Compliance Certificate with the financial statements delivered pursuant to Section 5.1(b).

Minimum Hedging. The Borrower will, within thirty (30) days after the Closing Date enter into, and will thereafter maintain on a rolling twenty-four (24) month basis, Hedging Transactions in the form of swap agreements, puts, calls in connection with puts and/or collars (but not three way collars, other than three way collars in existence as of July 1, 2022 that are acquired by the Borrower pursuant to the Stronghold Transactions) at prices reasonably acceptable to the Administrative Agent (and, in the case of collars, on terms reasonably acceptable to the Administrative Agent) in respect of crude oil and natural gas, on not less than fifty percent (50%) (such percentage, as adjusted from time to time pursuant to the proviso at the end of this sentence, the “Required Hedging Percentage”) of the projected production from the Loan Parties’ proved, developed, producing Oil and Gas Properties (as reflected in the most recently delivered Reserve Report (and, for the avoidance of doubt, from the Closing Date until the date the first Reserve Report is delivered pursuant to this Agreement, the Initial Reserve Report shall be deemed to be the “most recently delivered Reserve Report”)); provided, that, (a) if on any Hedge Testing Date (i) the Borrowing Base Utilization Percentage as of such Hedge Testing Date is less than twenty-five percent (25%) and (ii) the Leverage Ratio (as reflected in the Compliance Certificate delivered on such Hedge Testing Date) is not greater than 1.25 to 1.00, the Required Hedging Percentage for months thirteen (13) through twenty-four (24) of the rolling twenty-four (24) month period provided for in this Section 5.19 shall be zero percent (0%) from such Hedge Testing Date to the next succeeding Hedge Testing Date, and (b) if on any Hedge Testing Date (i) the Borrowing Base Utilization Percentage as of such Hedge Testing Date is equal to or greater than twenty-five percent (25%), but less than fifty percent (50%) and (ii) the Leverage Ratio (as reflected in the Compliance Certificate delivered on such Hedge Testing Date) is not greater than 1.25 to 1.0, the Required Hedging Percentage for months thirteen (13) through twenty-four (24) of the rolling twenty-four (24) month period provided for in this Section 5.19 shall be twenty-five percent (25%) from such Hedge Testing Date to the next succeeding Hedge Testing Date (the “Required Hedging Partial Suspension Right”). If the Borrower fails to timely deliver financial statements pursuant to Section 5.1(a) or Section 5.1(b), an accompanying Compliance Certificate pursuant to Section 5.1(c) and a certificate pursuant to Section 5.1(e5.1(d) at any time the Required Hedging Partial Suspension Right is utilized, the Required Hedging Percentage shall (unless the Administrative Agent otherwise consents, which consent shall be in the Administrative Agent’s sole discretion) be set at fifty percent (50%) for the entirety of the rolling twenty-four (24) month period provided for in this Section 5.19 from the date such financial statements, Compliance Certificate and certificate were due until the next succeeding Hedge Testing Date. If the Borrower seeks to utilize the Required Hedging Partial Suspension Right for any Hedge Testing Date associated with a Fiscal Quarter ending December 3131 prior to the date that the financial statements pursuant to Section 5.1(a) (and an accompanying Compliance Certificate) have been delivered, the Borrower will, notwithstanding shall deliver financial statements of the parenthetical type described in Section 5.1(c), deliver a 5.1(b) for such Fiscal Quarter (and an accompanying Compliance Certificate with the financial statements delivered pursuant to Section 5.1(bCertificate).