Basic Energy Services, Inc. (“Basic” or the “Company”) provides a wide range of wellsite services to oil and natural gas drilling and producing companies, including well servicing, water logistics and completion and remedial services. The Company’s operations are concentrated in major United States onshore oil and natural gas producing regions located in Texas, California, New Mexico, Oklahoma, Arkansas, Louisiana, Wyoming, North Dakota and Colorado.

Well Servicing: This segment encompasses a full range of services performed with a mobile well servicing rig, including the installation and removal of downhole equipment and elimination of obstructions in the well bore to facilitate the flow of oil and natural gas. These services are performed to establish, maintain and improve production throughout the productive life of an oil and natural gas well and to plug and abandon a well at the end of its productive life. The Company’s well servicing equipment and capabilities also facilitate most other services performed on a well. This segment also includes the manufacture and servicing of mobile well servicing rigs.

Water Logistics: This segment utilizes a fleet of trucks and related assets, including specialized tank trucks, storage tanks, water wells, disposal facilities, water treatment and related equipment. The Company employs these assets to provide, transport, store and dispose of a variety of fluids. These services are required in most workover, completion and remedial projects as well as part of daily producing well operations. Also included in this segment are the Company's construction services, which provide services for the construction and maintenance of oil and natural gas production infrastructures.

Industry conditions during 2020 were greatly influenced by factors that impacted supply and demand in the global oil and natural gas markets, including a global outbreak of the novel coronavirus ("COVID-19") and the announced price reductions and possible production increases by members of Organization of the Petroleum Exporting Countries (“OPEC”) and other oil exporting nations. As a result, the posted price for West Texas Intermediate oil ("WTI") declined sharply during early 2020 from 2019.

This decline in oil and natural gas prices, and the consequent impact on industry exploration and production activity, has adversely impacted the level of drilling and workover activity by our customers. As a result of these weak energy sector conditions and lower demand for our products and services, customer contract pricing, our operating results, our working capital and our operating cash flows have been negatively impacted during 2020. During the last half of 2020, we had difficulty paying for our contractual obligations as they came due, and we continue to have this difficulty in 2021. Management has taken several steps to generate additional liquidity, including reducing operating and administrative costs, employee headcount reductions, closing operating locations, implementing employee furloughs, other cost reduction measures, and the suspension of growth capital expenditures.

certain financial ratios or cash dominion covenants were to come into effect under our debt instruments, we will have difficulty complying with certain of such obligations. Certain covenants, such as consolidated fixed charge coverage ratio and cash dominion provisions in the ABL Facility spring into effect under certain triggers defined in the ABL Credit Agreement, as amended, for so long as such applicable trigger period is in effect. Additionally, certain triggers in the ABL Facility increase certain financial and borrowing base reporting requirements for so long as such applicable trigger period is in effect. Failure to comply, for example, with a “springing” consolidated fixed charge coverage ratio requirement under the ABL Facility would result in an event of default under the ABL Facility, which would result in a cross-default under the Senior Notes. If an event of default were to occur, our lenders could, in addition to other remedies such as charging default interest, accelerate the maturity of the outstanding indebtedness, making it immediately due and payable, and we may not have sufficient liquidity to repay those amounts.

To avoid triggering these consolidated fixed charge coverage ratios and cash dominion covenants as of June 30, 2020, in early July 2020 we repaid the $2.6 million amount of borrowings that was previously outstanding under our ABL Facility, and during the third and fourth quarter of 2020, we advanced $8.1 million, net, of our available cash balance to the Administrative Agent. Also beginning during the third quarter of 2020, we are currently subject to the increased financial and borrowing base information reporting. As of March 26, 2021, the amount of cumulative net advances of our available cash balance to the Administrative Agent has been increased to $15.5 million. As of December 31, 2020, we had no borrowings under the ABL Facility and approximately $325.3 million of total other indebtedness, net of discount and deferred financing costs, including $300 million of aggregate principal amount due under the Senior Notes, a $15.0 million Senior Secured Promissory Note, a $15.0 million Second Lien Delayed Draw Promissory Note, and finance lease obligations in the aggregate amount of $17.0 million. Additionally, on March 31, 2021, the Company negotiated a settlement of a significant contractual obligation with Ascribe III Investments LLC ("Ascribe") in exchange for issuing additional Senior Notes to Ascribe with an aggregate par value of $47.5 million. See Note 18. “Subsequent Event” for more information about the settlement of this obligation.

We continue to have difficulty paying for our contractual obligations as they come due. Management has taken several steps to generate additional liquidity, including reducing operating and administrative costs, employee headcount reductions, closing operating locations, implementing employee furloughs, other cost reduction measures, and the suspension of growth capital expenditures. The recent decline in the customers’ demand for our services has had a material adverse impact on the financial condition of the Company, resulting in recurring losses from operations, a net capital deficiency, and liquidity constraints that raise substantial doubt about its ability to continue as a going concern. Among the other steps that our management may or is implementing to attempt to alleviate this substantial doubt include additional sales of non-strategic assets, obtaining waivers of debt covenant requirements from our lenders, restructuring or refinancing our debt agreements, or obtaining equity financing. In addition, we had a significant contractual obligation to pay cash or issue additional 10.75% Senior Secured Notes due 2023 to our largest shareholder, Ascribe, resulting from our acquisition of CJWS. On March 31, 2021, the Company negotiated a settlement of this obligation with Ascribe in exchange for issuing additional Senior Notes to Ascribe with an aggregate par value of $47.5 million. See Note 18. “Subsequent Event” for more information about the settlement of this obligation.

Management has prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles applicable to a going concern, which contemplates that assets will be realized and liabilities will be discharged in the normal course of business as they become due. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported revenues and expenses and balance sheet classifications that would be necessary if the Company was unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material and adverse to the financial results of the Company.

We are engaged in ongoing discussions regarding our liquidity and financial situation with representatives of the lenders under the ABL Credit Facility, and have received from the lenders under the ABL Credit Facility a waiver of the default that otherwise would have arisen under the ABL Credit Facility as a result of the “going concern” disclosures described above. We also are evaluating certain strategic alternatives including financings, refinancings, amendments, waivers, forbearances, asset sales, debt issuances, exchanges and purchases, a combination of the foregoing, or other out-of-court or in-court bankruptcy restructurings of our debt to address these matters, which may include discussions with holders of the Company’s 10.75% Senior Secured Notes due 2023 for a comprehensive de-leveraging transaction.

prospects, results of operations and liquidity generally. There can be no assurance as to when or whether the Company will implement any action as a result of these strategic initiatives, whether the implementation of one or more such actions will be successful, whether the Company will be able to effect a refinancing of its Senior Notes or otherwise access the capital markets, or the effects the failure to take action may have on the Company’s business, its ability to achieve its operational and strategic goals or its ability to finance its business or refinance its indebtedness. A failure to address the Company’s level of corporate leverage in the near-term will have a material adverse effect on the Company’s business, prospects, results of operations, liquidity and financial condition, and its ability to service or refinance its corporate debt as it becomes due.

The Company’s customer base consists primarily of multi-national and independent oil and natural gas producers. The Company performs ongoing credit evaluations of its customers but generally does not require collateral on its trade receivables. The Company maintains an allowance for potential credit losses for its trade receivables. For the year ended December 31, 2020, one customer represented 22% of consolidated revenue. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of temporary cash investments and trade receivables. The Company restricts investment of temporary cash investments to financial institutions with high credit standing.

On March 9, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Ascribe, NexTier Holding Co., a Delaware corporation (“Seller”) and C&J Well Services, Inc., a Delaware corporation, and wholly owned subsidiary of Seller (“CJWS”), whereby the Company acquired all of the issued and outstanding shares of capital stock of CJWS, such that CJWS became a wholly-owned subsidiary of the Company. CJWS is the third largest rig servicing provider in the U.S., with a leading footprint in California and a strong customer base. Following the acquisition of CJWS, the Company has expanded its footprint in the Permian, California and other key oil basins.

Pursuant to the Purchase Agreement, among other things, (i) Seller transferred and delivered to the Company and the Company purchased and acquired from Seller, all of the issued and outstanding shares of capital stock of CJWS held by Seller (the "Stock Purchase"); (ii) as a portion of the consideration for the Stock Purchase, Ascribe, on behalf of the Company, conveyed to Seller certain 10.75% Senior Secured Notes due October 2023 (the "Senior Notes") issued by the Company to Ascribe in an aggregate par value amount equal to $34.4 million (the "Ascribe Senior Notes"); and (iii) Ascribe entered into an Exchange Agreement, dated March 9, 2020, with the Company (the "Exchange Agreement") pursuant to which, among other things, Ascribe exchanged the Ascribe Senior Notes for (a) 118,805 shares of newly issued preferred stock, designated as "Series A Participating Preferred Stock," par value $0.01 per share, of the Company (the "Series A Preferred Stock") and (b) an amount in cash for accrued interest on the Ascribe Senior Notes approximately equal to $1.5 million (the "Exchange Transaction" and, together with the Stock Purchase and the other transactions contemplated by the Purchase Agreement, the "CJWS Transaction"). For further discussion of the Series A Preferred Stock, see Note 6. "Series A Participating Preferred Stock."

Pursuant to the Purchase Agreement, Seller received consideration in the aggregate amount of $95.7 million comprised of (a) cash consideration paid at closing equal to $59.4 million (which was subject to post-closing working capital adjustments) and (b) the Ascribe Senior Notes transferred to Seller by Ascribe (on behalf of the Company) as described above. In connection with the CJWS Transaction, pursuant to the Purchase Agreement, Ascribe has certain contingent obligations to the Seller to make Seller whole on the par value of the Ascribe Senior Notes as of the earlier of the first anniversary of the closing of the Stock Purchase, a bankruptcy of the Company, or a change of control of the Company (the "Make-Whole Payment"). Considering this contingent Make-Whole Payment by Ascribe to the Seller, the fair value of the Ascribe Senior Notes issued to the Seller on March 9, 2020, was $36.3 million. If Ascribe is required to pay the Make-Whole Payment to Seller pursuant to the Purchase Agreement, the Company will be required to reimburse to Ascribe the amount of such Make-Whole Payment (such amount, the "Make-Whole Reimbursement Amount") either (i) in cash (a) to the extent the Company has available cash (as determined by an independent committee of the Company's board of directors) and (b) subject to satisfaction of certain "Payment Conditions" set forth in the ABL Credit Agreement (as defined below) or (ii) if the Company is unable to pay the full Make-Whole Reimbursement Amount in cash pursuant to clause "(i)" of this paragraph, in additional Senior Notes as permitted under the Indenture. In consideration of providing the Make-Whole Payment to Seller, the Company paid Ascribe $1.0 million in cash at the closing of the CJWS Transaction. The Company's obligation to Ascribe associated with the Make-Whole Reimbursement Amount is reflected as a derivative instrument in accordance with Accounting Standards Codification ("ASC") No. 815 "Derivatives and Hedging" ("ASC 815") with an initial fair value of approximately $9.7 million based on a risk-adjusted market

differential between the fair value of the Ascribe Senior Notes and their $34.4 million par value as of the March 9, 2020, closing date. Changes in fair value of the Make-Whole Reimbursement Amount each period are "marked to market" and charged or credited to Gain (Loss) on Derivative in the accompanying consolidated statements of operations. The fair value of the Make-Whole Reimbursement Amount liability as of December 31, 2020, is approximately $4.8 million and results in $4.9 million of derivative gain during the year ended December 31, 2020. The Make-Whole Reimbursement Amount liability is classified within Other Current Liabilities in the accompanying balance sheet. On March 31, 2021, the Company negotiated a settlement of the Make-Whole Reimbursement obligation with Ascribe in exchange for issuing additional Senior Notes to Ascribe with an aggregate par value of $47.5 million. See Note 18. “Subsequent Event” for more information about the settlement of this obligation.

The allocation of purchase price includes approximately $19.1 million allocated to nondeductible goodwill recorded to our Well Servicing and Water Logistics segments based on relative fair values of these acquired lines of business. The acquired property and equipment is stated at fair value, and depreciation on the acquired property and equipment is computed using the straight-line method over the estimated useful lives of each asset. The acquired intangible assets represent approximately $4.0 million for the CJWS trade name that is stated at its estimated fair value and is amortized on a straight-line basis over an estimated useful life of 15 years.

In 2020, our revenues and pretax earnings included $157.5 million and $16.5 million (excluding the impact of asset impairments of $36.1 million), respectively, associated with the CJWS acquired operations after the closing on March 9, 2020. In addition, CJWS Transaction-related costs of approximately $9.0 million were incurred in 2020, consisting of external legal and consulting fees and due diligence costs. These CJWS Transaction related costs, along with other costs associated with the CJWS acquisition, including severance costs paid to CJWS employees pursuant to the Purchase Agreement, have been recognized in Acquisition Related Costs in the consolidated statements of operations.

Unaudited Pro Forma Information - The unaudited pro forma information presented below has been prepared to give effect to the CJWS Transaction as if it had occurred at the beginning of the periods presented. The unaudited pro forma information includes the impact from the allocation of the acquisition purchase price on depreciation and amortization and the impact on interest expense associated with acquisition financing. It also excludes the impact of the CJWS Transaction acquisition costs charged to earnings during the 2020 period. The unaudited pro forma information is presented for illustration purposes only and is based on estimates and assumptions the Company deemed appropriate. The following unaudited pro forma information is not necessarily indicative of the results that would have been achieved if the CJWS Transaction had occurred in the past, and should not be relied upon as an indication of the operating results that the Company would have achieved if the transaction had occurred at the beginning of the periods presented, and our operating results, or the future results

During the third and fourth quarters of 2019, based on the Company's evaluation of the demand for pressure pumping and contract drilling services, the Company's management decided to divest all of its contract drilling rigs, and a majority of pressure pumping equipment and related ancillary equipment, having a combined net book value of $91.8 million. As a result of this strategic shift, the Company recorded a non-cash impairment charge of $32.6 million in 2019 to write down the value of the assets. The majority of the real estate and equipment was sold during late 2019 and the first half of 2020, with the remaining pumping and related assets, which are primarily real estate, classified as Other Current Assets or Other Assets on our Consolidated Balance Sheet. The Company is pursuing opportunities to sell the remainder of these non-strategic assets. The Company recorded an impairment on these remaining assets of $2.3 million at March 31, 2020 and an additional $2.0 million as of December 31, 2020. The Company recorded an impairment of $3.2 million in 2019 on contract drilling assets that were subsequently divested through auctions.


	Year Ended December 31,
(in thousands)	2020		2019

Assets held for sale
Inventories	$	—	$	2,069

Operating lease right-of-use assets	—		1,659
Property and equipment, net	1,523		50,496
Total assets held for sale	$	1,523	$	54,224
Other long term assets
Real estate held for sale	$	4,802	$	—
Liabilities related to assets held for sale
Operating lease liabilities	508		1,659
Finance lease liabilities	—		3,589
Total liabilities related to assets held for sale	$	508	$	5,248


	Year Ended December 31,

(in thousands)	2020		2019





Revenues	$	120	$	142,885






Cost of services	5,305		134,778
Selling, general and administrative	6,705		15,174
Depreciation and amortization	—		45,168
Asset impairments	4,378		35,801
Loss on disposal of assets	2,635		1,878
Total operating expenses	19,023		232,799

Operating loss	(18,903)		(89,914)


Interest expense	(64)		(583)




Loss from discontinued operations	$	(18,967)	$	(90,497)
Loss from discontinued operations per share, basic and diluted	$	(0.76)	$	(3.46)

operated in the discontinued Completions & Remedial Services and Other Services segments. Impairment expense was recorded during the three month periods ended March 31, 2020 and December 31, 2020, associated with certain assets with carrying values that were in excess of their current estimated selling price. Selling, general and administrative expense during 2020 consisted primarily of bad debt expense recorded on customer receivables from discontinued operations.

Capital expenditures and finance lease additions related to discontinued operations were $10.6 million and $1.5 million, respectively, for the year ended December 31, 2019. The Company did not have any capital expenditures or lease additions related to discontinued operations for the year ended December 31, 2020. Proceeds from sale of assets related to discontinued operations totaled $42.7 million and $10.7 million for the years ended December 31, 2020 and 2019, respectively.

In connection with the CJWS Transaction and pursuant to the Exchange Agreement, as partial consideration for the Exchange Transaction, on March 9, 2020, the Company issued to Ascribe 118,805 shares of the Series A Preferred Stock. The Series A Preferred Stock constituted 83% of the equity interest in the Company. Upon consummation of the Exchange Transaction, the Company's public stockholders owned approximately 14.94% of the equity interests in the Company, and Ascribe held approximately 85.06%. For further discussion of the Series A Preferred Stock, see Note 6. "Series A Participating Preferred Stock." For further discussion of other transactions with Ascribe, including amounts outstanding pursuant to the Senior Secured Promissory Note, the Second Lien Delayed Draw Promissory Note, and the Make-Whole Reimbursement Amount, see Note 4. "Indebtedness and Borrowing Facility."