8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 9, 2019

Basic Energy Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware	1-32693		54-2091194
(State or other jurisdiction of incorporation)	(Commission File Number)		(I.R.S. Employer Identification No.)
801 Cherry Street, Suite 2100
Fort Worth, Texas		76102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (817) 334-4100

Not Applicable

(Former name or former address, if changed since last report.)

________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
*	*	*

* On December 3, 2019, Basic Energy Service, Inc.’s common stock began trading on the OTCQX® Best Market tier of the OTC Markets Group Inc. It is expected that the New York Stock Exchange will file a Form 25 with the Securities and Exchange Commission to remove the common stock of Basic Energy Services, Inc. from listing and registration on the New York Stock Exchange. Deregistration under Section 12(b) of the Act will become effective 90 days after the filing date of the Form 25.

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01. Entry into a Material Definitive Agreement.

On December 9, 2019, Basic Energy Services, Inc., a Delaware corporation (“Basic” or the “Company”), received consent pursuant to Section 7.05(e) under the ABL Credit Agreement, dated as of October 2, 2018 (the “Credit Agreement”) among the Company, as borrower, the financial institutions from time to time party thereto as lenders and Bank of America, N.A., in its capacity as administrative agent (in such capacity, the “Administrative Agent”), to sell assets in amounts exceeding $25 million and up to $70 million, effective for the fiscal year ending December 31, 2020 and solely in connection with upcoming sales of its pressure pumping assets, as described below. Under Section 7.05(e) of the Credit Agreement, the Administrative Agent may increase the Credit Agreement’s dollar limitation for asset sales. The Credit Agreement has not been modified otherwise.

Item 7.01 Regulation FD Disclosure.

On December 12, 2019, the Company issued a press release announcing the Company’s decision to divest of its pressure pumping assets. A copy of the press release is being furnished as Exhibit 99.1 hereto and is incorporated into this Item 7.01 by reference.

The information furnished pursuant to Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing of Basic’s under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 8.01 Other Events.

On December 10, 2019, the Board of Directors of the Company approved a plan by the Company to divest of its pressure pumping assets, not inclusive of coiled tubing, in one or more transactions. As a result of the divestitures, the Company expects to record a non-cash impairment charge of approximately $50 million in the fourth quarter of 2019 to write down the value of the pumping assets. The divestiture is designed to strengthen the Company’s remaining production businesses of well servicing and water logistics. The Company plans to complete all work currently in process, after which the Company will terminate its pumping and pumping-related services. Real estate and equipment is expected to be sold in multiple transactions in the fourth quarter of 2019 and the first quarter of 2020. The Company’s coiled tubing business is not expected to be impacted by the divestiture of the Company’s pressure pumping assets.

Cautionary Note Regarding Forward-Looking Statements

Many of the statements included or incorporated in this Current Report on Form 8-K and the furnished exhibit constitute “forward-looking statements.” In particular, they include statements relating to future actions, strategies, future operating and financial performance, and Basic’s future financial results. These forward-looking statements are based on current expectations and projections about future events. Readers are cautioned that forward-looking statements are not guarantees of future operating and financial performance or results and involve substantial risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of Basic may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, factors described from time to time in Basic’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein).

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits.
	99.1	Press Release, dated December 12, 2019.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Basic Energy Services, Inc.
Date: December 12, 2019	By:	/s/ David S. Schorlemer
	Name:	David S. Schorlemer
	Title:	Senior Vice President, Chief Financial Officer,
		Treasurer and Secretary (Principal Financial
		Officer and Principal Accounting Officer)

EX-99.1

Exhibit 99.1

NEWS RELEASE

Contact:	Trey Stolz
	Director, Investor Relations
	Basic Energy Services, Inc.
	817-334-4100

BASIC ENERGY SERVICES ANNOUNCES DIVESTMENT AND CAPITAL REDEPLOYMENT PLAN

FORT WORTH, Texas - December 12, 2019 - Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced a plan to divest of its pumping services assets (not inclusive of coiled tubing) in multiple transactions with expected proceeds of approximately $30 million to $45 million. Despite the recent repositioning and restructuring in the pumping business, activity and pricing remain difficult, inhibiting the potential for positive free cash flow in the near- to medium-term. This divestiture is designed to bolster the Company’s core remaining production-focused businesses of well servicing and water logistics. Furthermore, this non-core divestiture will fund the projected 2020 and 2021 capital budget of Agua Libre Midstream, the Company’s rapidly growing, high return-on-assets business.

Given current market conditions, the Company believes it is appropriate to pivot away from completion-centric pumping services and toward its core production businesses. Basic plans to complete all work currently in-process, after which the Company will cease its pumping and pumping-related services. Real estate and equipment are expected to be sold in multiple transactions during Q4 2019 and Q1 2020. Basic’s coiled tubing business remains highly complementary to its well servicing operations and is not expected to be impacted by these divestitures.

Roe Patterson, President and CEO, stated, “While the overall energy service market remains highly competitive, we continue to see high value potential in our Agua Libre Midstream subsidiary; this business continues to outperform in this very challenging market. With additional disposal barrels from 2019 growth capital expenditures, we expect the midstream business to contribute significantly to incremental margins in 2020. In order to focus our capital resources most effectively to benefit free cash flow, we made the decision to cease pumping operations and divest of all non-core equipment and real estate. Given current market conditions and appetite for pumping and ancillary equipment, we believe our plan limits execution risk and allows for greater proceeds than under a going-concern valuation and sale scenario.

“The decision to exit the pumping services market in no way reflects on the employees that make up our pumping services team. This team has aggressively cut costs and continued to win business in a highly competitive market. Unfortunately, these pumping business lines currently remain in a structurally-disadvantaged position, as they are our most capital-intensive businesses. These divestitures will also reduce our capital lease exposure and the Company’s total debt. The transaction will allow us to focus our efforts in the production-focused businesses in which we excel and generate higher returns on capital.

“Looking ahead to the first half of 2020, we do not expect the sale of our pumping assets to negatively impact EBITDA, reflecting just how difficult the market has become. Due to a lower-capital intensity asset base, we expect

Exhibit 99.1

our cash balance to be approximately $5 million higher, excluding proceeds from the pumping asset sales, at the end of the second quarter of 2020. Furthermore, in conjunction with this capital redeployment plan, we expect to immediately cut general and administrative expenses by approximately $14 million on an annualized basis, reaching an annual total company run-rate of approximately $100 million by the second quarter of 2020. Without a significant recovery in crude prices, we expect 2020 revenues in the Well Servicing segment and remaining Completions & Remedial Services segment (which includes coiled tubing, snubbing, and rental and fishing tools) to be flat compared to 2019, with our Water Logistics segment (which includes Agua Libre Midstream and fluid services) revenues to grow 5% to 10% year-over-year, with growth accelerating as our newer midstream projects come online with enhanced contribution margins for the segment.”

About Basic Energy Services

Basic Energy Services provides wellsite services essential to maintaining production from the oil and gas wells within its operating areas. The Company’s operations are managed regionally and are concentrated in major United States onshore oil-producing regions located in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana, Wyoming, North Dakota, California and Colorado. Our operations are focused in liquids-rich basins that have historically exhibited strong drilling and production economics in recent years with a significant presence in the Permian Basin, Powder River Basin, and the Bakken, Eagle Ford, and Denver-Julesburg shales. We provide our services to a diverse group of over 2,000 oil and gas companies. Additional information is available on the Company’s website at www.basices.com.

Safe Harbor Statement

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and reflect Basic’s current views about future events. The words "believe," "estimate," "expect," "anticipate," "project," "intend," "seek," "could," "should," "may," "potential" and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Although Basic believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions and estimates, certain risks and uncertainties could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release and the presentation. These risks and uncertainties include, without limitation, our ability to successfully execute, manage and integrate acquisitions, reductions in our customers’ capital budgets, our own capital budget, limitations on the availability of capital or higher costs of capital, volatility in commodity prices for crude oil and natural gas, the negative impacts of the delisting of the Company’s common stock from the NYSE and any impacts from the divestment of our pressure pumping assets. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of the Company’s most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that the transactions will be consummated or that anticipated future results will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made and Basic assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by Basic, whether as a result of new information, future events, or otherwise, except as required by applicable law.