The Company has a syndicated $730 million extendible revolving credit facility with a stated term date of April 28, 2013. The bank facility is made up of a $30 million working capital sub-tranche and a $700 million production line. The facilities are available on a revolving basis for a period of at least 364 days and upon the term out date may be extended for a further 364 day period at the request of the Company, subject to approval by the lenders. In the event that the revolving period is not extended, the facility is available on a non-revolving basis for a further one year term, at the end of which time the facility would be due and payable. Outstanding amounts on this facility will bear interest at rates ranging from prime plus 1.0% to prime plus 2.5% determined by the Company's debt to earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) ratios ranging from less than 1:1 to greater than 2.5:1. A General Security Agreement with a floating charge on land registered in Alberta is held as collateral by the bank.
On January 3, 2012, Peyto issued CDN $100 million of senior secured notes pursuant to a note purchase and private shelf agreement. The notes were issued by way of private placement and rank equally with Peyto's obligations under its bank facility. The notes are secured under the General Security Agreement with a floating charge on land registered in Alberta is held as collateral. The notes have a coupon rate of 4.39% and mature on January 3, 2019. Interest will be paid semi-annually in arrears.
On September 6, 2012, Peyto issued CDN $50 million of senior secured notes pursuant to a note purchase and private shelf agreement. The notes were issued by way of private placement and rank equally with Peyto's obligations under its bank facility. The notes are secured under the General Security Agreement with a floating charge on land registered in Alberta is held as collateral. The notes have a coupon rate of 4.88% and mature on September 6, 2022. Interest will be paid semi-annually in arrears.
Upon the issuance of the senior secured notes January 3, 2012, Peyto became subject to the following financial covenants as defined in the credit facility and note purchase and private shelf agreements:
-- Senior Debt to EBITDA Ratio will not exceed 3.0 to 1.0-- Total Debt to EBITDA Ratio will not exceed 4.0 to 1.0-- Interest Coverage Ratio will not be less than 3.0 to 1.0-- Total Debt to Capitalization Ratio will not exceed 0.55:1.0
Peyto is in compliance with all financial covenants at December 31, 2012.
Peyto's total borrowing capacity is $880 million and Peyto's net credit facility is $730 million.
The fair value of all senior notes as at December 31, 2012, is $149.9 million compared to a carrying value of $150.0 million.
Total interest expense for 2012 was $25.4 million (2011 - $21.9 million) and the average borrowing rate for 2012 was 4.7% (2011 - 4.8%).
6. Decommissioning provision
The Company makes provision for the future cost of decommissioning wells, pipelines and facilities on a discounted basis based on the commissioning of these assets.
The decommissioning provision represents the present value of the decommissioning costs related to the above infrastructure, which are expected to be incurred over the economic life of the assets. The provisions have been based on the Company's internal estimates on the cost of decommissioning, the discount rate, the inflation rate and the economic life of the infrastructure. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon the future market prices for the necessary decommissioning work required which will reflect market conditions at the relevant time. Furthermore, the timing of the decommissioning is likely to depend on when production activities ceases to be economically viable. This in turn will depend and be directly related to the current and future commodity prices, which are inherently uncertain.