Emergence from Voluntary Reorganization under Chapter 11 / Fresh Start Accounting (Tables)

9 Months Ended

Sep. 30, 2020

Emergence from Voluntary Reorganization under Chapter 11 [Abstract]

Schedule of Reorganization Items [Table Text Block]

Reorganization items consisted of the following (amounts in thousands):

	Successor				Predecessor
	Three Months Ended September 30, 2020		Four Months Ended September 30, 2020		Five Months Ended May 31, 2020
Gain on settlement of liabilities subject to compromise	$	—	$	—	$	(291,378)
Fresh start valuation adjustments	—		—		284,392
Legal and professional fees	2,522		3,263		26,038
Unamortized debt costs on liabilities subject to compromise	—		—		2,003
Accelerated stock-based compensation	—		—		713
Loss (gain) on rejected leases	—		403		(378)
DIP facility costs	—		—		513
	$	2,522	$	3,666	$	21,903

Schedule of Enterprise Value to Estimated Fair Value of Successor Common Stock [Table Text Block]

The following table reconciles the enterprise value to the estimated fair value of our Successor Common Stock as of the Fresh Start Reporting Date (dollars in thousands, except per share data):

Enterprise value	$	276,000
Plus: cash and cash equivalents	10,592
Less: fair value of debt	(145,420)
Total implied equity (prior to debt issuance costs on equity component on Convertible Notes)	141,172
Less: equity portion of Convertible Notes	(123,088)
Fair value of Successor stockholders’ equity	$	18,084
Shares issued upon emergence	1,049,804
Per share value	$	17.23

Reconciliation of Enterprise Value to the Reorganization Value of Successor's Assets to be Allocated [Table Text Block]

The following table reconciles enterprise value to the reorganization value of our Successor’s assets to be allocated to our individual assets as of the Fresh Start Reporting Date (amounts in thousands):

Enterprise value	$	276,000
Plus: cash and cash equivalents	10,592
Plus: current liabilities	65,799
Plus: non-current liabilities excluding long-term debt	6,626
Less: debt issuance costs on Successor debt	(6,394)
Reorganization value of Successor assets	$	352,623

Schedule of Fresh-Start Adjustments [Table Text Block]

The adjustments set forth in the following consolidated balance sheet as of May 31, 2020 reflect the effects of the transactions contemplated by the Plan and executed on the fresh start reporting date (reflected in the column entitled “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of Fresh Start Accounting (reflected in the column entitled “Fresh Start Accounting Adjustments”).

	As of May 31, 2020
(in thousands)	Predecessor		Reorganization Adjustments			Fresh Start Accounting Adjustments			Successor
ASSETS
Cash and cash equivalents	$	21,253	$	(10,661)	(1)	$	—		$	10,592
Restricted cash	4,452		11,721		(2)	—			16,173
Receivables:
Trade, net of allowance for doubtful accounts	33,537		—			—			33,537
Unbilled receivables	9,163		—			—			9,163
Insurance recoveries	23,636		—			—			23,636
Other receivables	5,256		1,000		(3)	—			6,256
Inventory	21,012		—			(6,883)		(18)	14,129
Assets held for sale	1,825		—			29		(19)	1,854
Prepaid expenses and other current assets	4,817		—			952		(20)	5,769
Total current assets	124,951		2,060			(5,902)			121,109
Property and equipment, at cost	1,082,704		—			(886,733)		(21)	195,971
Less accumulated depreciation	655,512		—			(655,512)		(21)	—
Net property and equipment	427,192		—			(231,221)			195,971
Intangible assets, net of accumulated amortization	—		—			9,370		(22)	9,370
Deferred income taxes	10,897		—			(2,157)		(23)	8,740
Operating lease assets	5,234		—			—			5,234
Other noncurrent assets	13,247		(5,023)		(4)	3,975		(24)	12,199
Total assets	$	581,521	$	(2,963)		$	(225,935)		$	352,623
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	24,601	$	(9,478)	(5)	$	—		$	15,123
Deferred revenues	121		—			—			121
Commitment premium	9,584		(9,584)		(6)	—			—
Debtor in possession financing	4,000		(4,000)		(7)	—			—
Accrued expenses:
Employee compensation and related costs	4,970		—			—			4,970
Insurance claims and settlements	23,517		—			—			23,517
Insurance premiums and deductibles	5,269		—			—			5,269
Interest	3,775		(3,731)		(8)	—			44
Other	12,436		4,329		(9)	(10)			16,755
Total current liabilities	88,273		(22,464)			(10)			65,799
Long-term debt, less unamortized discount and debt issuance costs	175,000		(53,831)		(10)	20,070		(25)	141,239
Noncurrent operating lease liabilities	4,189		—			—			4,189
Deferred income taxes	4,296		—			(3,225)		(26)	1,071
Other noncurrent liabilities	1,366		—			—			1,366
Total liabilities not subject to compromise	273,124		(76,295)			16,835			213,664
Liabilities subject to compromise	308,422		(308,422)		(11)	—			—
Stockholders’ equity:
Predecessor common stock	8,893		(8,893)		(12)	—			—
Successor common stock	—		1		(13)	—			1
Predecessor additional paid-in capital	553,631		(553,631)		(14)	—			—
Successor additional paid-in capital	—		98,413		(15)	40,545		(27)	138,958
Predecessor treasury stock, at cost	(5,098)		5,098		(16)	—			—
Accumulated deficit	(557,451)		840,766		(17)	(283,315)		(28)	—
Total stockholders’ equity	(25)		381,754			(242,770)			138,959
Total liabilities and stockholders’ equity	$	581,521	$	(2,963)		$	(225,935)		$	352,623

(1)Represents the following net change in cash and cash equivalents:

Cash proceeds from Convertible Notes	$	120,187
Cash proceeds from Senior Secured Notes	75,000
Payment to fund claims reserve	(950)
Payment to escrow remaining professional fees	(10,771)
Payment of professional fees	(9,468)
Payment in full to extinguish DIP Facility	(4,000)
Payment of accrued interest on DIP Facility	(55)
Payment of DIP Facility fees	(177)
Payment in full to extinguish Prepetition Term Loan	(175,000)
Payment of accrued interest on Prepetition Term Loan	(3,677)
Payment of prepayment penalty on Prepetition Term Loan	(1,750)
	$	(10,661)

(2)Represents the following net change in restricted cash:

Payment to fund rejected leases claims reserve	$	950
Payment to escrow remaining professional fees	10,771
	$	11,721

(3)Represents recognition of a receivable for a portion of the proceeds from the issuance of the Senior Secured Notes which was received in June 2020.

(4)Represents the reclassification of previously paid debt issuance costs from deferred assets to offset the carrying amount of long-term debt.

(5)Represents the payment of professional fees which were incurred prior to emergence.

(6)Represents the settlement of the Backstop Commitment Premium upon issuance of the Convertible Notes.

(7)Represents the payment to extinguish the DIP Facility.

(8)Represents the payment of accrued interest on the Prepetition Term Loan and DIP Facility.

(9)Represents the increase in accrued expenses for fees which were incurred upon our emergence from Chapter 11.

(10)Represents the following changes in long-term debt, less unamortized discount and debt issuance costs:

Payment in full to extinguish Prepetition Term Loan	$	(175,000)
Issuance of Senior Secured Notes at Par	78,125
Recognition of debt issue costs on Senior Secured Notes	(2,913)
Recognition of liability component of Convertible Notes issuance	47,225
Recognition of debt issuance costs on liability component of Convertible Notes	(1,268)
	$	(53,831)

Due to the Convertible Notes’ embedded conversion option, the liability and equity components were reported separately, as described further in Note 7, Debt.

(11)Represents the settlement of liabilities subject to compromise in accordance with the Plan, for which the resulting gain is as follows:

Prepetition Senior Notes	$	300,000
Accrued interest on Prepetition Senior Notes	8,422
Liabilities subject to compromise	308,422
Cash paid by holders of Prepetition Senior Notes	118,013
Issuance of equity to Prepetition Senior Notes creditors	(17,044)
Notes Received by Prepetition Senior Note holders	(118,013)
	$	291,378

(12)Represents the cancellation of Predecessor common stock.

(13)Represents the issuance of Successor common stock to prior equity holders and to settle the Prepetition Senior Notes.

(14)Represents the cancellation of Predecessor additional paid-in capital.

(15)The changes in Successor additional paid-in capital were as follows:

Recognition of equity component of Convertible Notes	$	82,546
Issuance of Successor common stock to Prepetition Senior Notes creditors and prior equity holders	18,083
Recognition of debt issuance costs of Convertible Notes equity component	(2,216)
	$	98,413

Due to the Convertible Notes’ embedded conversion option, the liability and equity components were reported separately, as described further in Note 7, Debt.

(16)Represents the cancellation of Predecessor treasury stock.

(17)Represents the cumulative impact to Predecessor retained earnings of the reorganization adjustments described above.

(18)Represents the fair value adjustment to inventory, as described further in the previous section under the heading “Valuation Process”.

(19)Represents the fair value adjustment to assets held for sale, as described further in the previous section under the heading “Valuation Process”.

(20)Represents deferred compensation associated with the excess of fair value over the par value of Convertible Notes purchased by senior management, which is compensation to the Successor and therefore was expensed in June 2020.

(21)Represents the following fair value adjustments to property and equipment:

	Predecessor Historical Value		Fair Value Adjustment		Successor Fair Value
Drilling rigs and equipment	$	1,010,612	$	(832,294)	$	178,318
Vehicles	41,283		(28,561)		12,722
Building and improvements	16,619		(13,742)		2,877
Office equipment	12,231		(11,743)		488
Land	1,959		(393)		1,566
	$	1,082,704	$	(886,733)	$	195,971
Less: Accumulated Depreciation	(655,512)		655,512		—
	$	427,192	$	(231,221)	$	195,971

(22)Represents the fair value adjustment to recognize the trademark and tradename of Pioneer Energy Services Corp. as an intangible, as described further in the above section under the heading “Valuation Process”.

(23)Represents the recognition of the noncurrent deferred tax asset as a result of the cumulative tax impact of the fresh start adjustments herein.

(24)Represents a prepaid tax asset established as part of the fresh start accounting adjustments.

(25)Represents the following fair value adjustments to long-term debt less unamortized discount and debt issuance costs:

Fair value adjustment to the liability component of the Convertible Notes	$	23,195
Discount on Senior Secured Notes	(3,125)
	$	20,070

Due to the Convertible Notes’ embedded conversion option, the liability and equity components were reported separately, as described further in Note 7, Debt.

(26)Represents the derecognition of the deferred tax liability as a result of the cumulative tax impact of the fresh start adjustments herein.

(27)Represents the fair value adjustment to the equity component of the Convertible Notes.

(28)Represents the cumulative impact of the fresh start accounting adjustments discussed above and the elimination of Predecessor accumulated earnings.

^[1]

[1] Represents the cancellation of Predecessor common stock.