Fresh Start Accounting (Tables)

3 Months Ended

Mar. 31, 2019

The following table reconciles the enterprise value per the Plan to the estimated fair value (for fresh start accounting purposes) of the Successor's common stock as of the Effective Date (in thousands):



	February 8, 2019
Enterprise value	$	155,246
Plus: Cash	23,073
Plus: Restricted cash	5,675
Less: Fair value of 10% PIK Notes due 2024	(65,025		)
Less: Fair value of Term Loan Exit Facility	(45,269		)
Fair value of Successor common stock	$	73,700
Shares issued upon emergence	9,371
Per share value	$	7.86

The following table reconciles the enterprise value to the reorganization value as of the Effective Date (in thousands):



	February 8, 2019
Enterprise value	$	155,246
Plus: Cash	23,073
Plus: Restricted cash	5,675
Plus: Current liabilities	39,758
Plus: Asset retirement obligations (long-term)	2,303
Plus: Other long-term liabilities	2,845
Reorganization value of Successor assets	$	228,900

Schedule of Fresh-Start Adjustments

Reflects the cumulative impact of the fresh start adjustments discussed above:



Proved oil and gas properties fair value adjustment	$	(11,438	)
Unproved oil and gas properties fair value adjustment	94,660
Other asset fair value adjustment	(98		)
Exit Facility fair value adjustment	4,731
2024 PIK Notes fair value adjustment	14,975
Net gain on fresh start adjustments	102,830
Tax impact on fresh start accounting adjustments	(241		)
Net impact to Accumulated deficit	$	102,589

The following table reflects the reorganization and application of ASC 852 on our consolidated balance sheet as of February 8, 2019 (in thousands):



	Predecessor			Reorganization Adjustments				Fresh Start Adjustments				Successor
Assets
Current assets:
Cash and cash equivalents	$	31,881		$	(8,808	)	(1)	$	—			$	23,073
Restricted cash	389			5,286			(2)	—				5,675
Revenue receivable	13,704			—				—				13,704
Joint interest billing receivable	6,908			—				—				6,908
Deposit for surety bonds	3,550			—				—				3,550
Other current assets	924			—				—				924
Total current assets	57,356			(3,522		)		—				53,834
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method	1,366,884			—				(1,314,814		)	(12)	52,070
Unevaluated oil and gas properties	24,033			—				94,660			(12)	118,693
Accumulated depreciation, depletion, and amortization	(1,303,376		)	—				1,303,376			(12)	—
Oil and gas properties, net	87,541			—				83,222				170,763
Other property and equipment	9,318			—				(9,068		)	(13)	250
Accumulated depreciation of other property and equipment	(9,068		)	—				9,068			(13)	—
Total property and equipment	87,791			—				83,222				171,013
Other assets	4,151			—				(98		)	(14)	4,053
Total Assets	$	149,298		$	(3,522	)		$	83,124			$	228,900




LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors	$	14,813		$	2,575		(4)	$	—			$	17,388
Advances from co-owners	3,363			—				—				3,363
Oil and gas revenue payable	16,059			—				—				16,059
Accrued interest	1,181			(1,181		)	(5)	—				—
Asset retirement obligation	183			—				—				183
Right of use liability-short-term	1,080			—				—				1,080
Other accrued liabilities	1,224			461			(6)	—				1,685
Total current liabilities	37,903			1,855				—				39,758
Multi-draw Term Loan	49,754			246			(3)	(4,731		)	(15)	45,269
10% Senior Secured PIK Notes due 2024	—			80,000			(7)	(14,975		)	(16)	65,025
Asset retirement obligation	2,303			—				—				2,303
Right of use liability-long-term	2,604			—				—				2,604
Deferred tax liability	—			—				241			(17)	241
Total liabilities not subject to compromise	92,564			82,101				(19,465		)		155,200

Liabilities subject to compromise	321,495			(321,495		)	(8)	—				—

Stockholder's equity:
Preferred stock (Predecessor)	1			(1		)	(9)	—				—
Common stock (Predecessor)	26			(26		)	(9)	—				—
Paid-in capital (Predecessor)	314,312			(314,312		)	(9)	—				—
Common stock (Successor)	—			94			(10)	—				94
Paid-in capital (Successor)	—			73,606			(10)	—				73,606
Accumulated deficit	(579,100		)	476,511			(11)	102,589			(18)	—
Total stockholder's equity	(264,761		)	235,872				102,589				73,700
	$	149,298		$	(3,522	)		$	83,124			$	228,900

Reorganization Adjustments (in thousands, except per share values)


1.	Reflects the cash payments made as of the Effective Date from implementation of the Plan:



Uses:
Payment of accrued interest on the Multidraw Term Loan	$	(1,181	)
Payment of financing costs related to the Term Loan Exit Facility	(124		)
Funding of the general unsecured claims administrative escrow account	(1,200		)
Cash transferred to restricted cash for professional fee escrow	(5,157		)
Cash transferred to restricted cash for consenting creditors fees	(129		)
Payment of professional fees at emergence	(1,017		)
Total:	$	(8,808	)


2.	Reflects the cash reclassified to Restricted Cash as of the Effective Date from implementation of the Plan:



Reclassifications to Restricted Cash:
Funding of the professional fee escrow account	$	5,157
Funding of the consenting creditors escrow account	129
Total:	$	5,286


3.	Reflects the payment of financing costs related to the Term Loan Exit Facility and the write off of deferred financing costs related to the MultiDraw Term Loan Agreement and the Term Loan Exit Facility.


4.	Represents the $3.6 million of accrued expenses related to the success fee recognized at emergence and the payment of $1.0 million of professional fees at emergence.


5.	Represents the $1.2 million of accrued interest paid at emergence related to the Multidraw Term Loan Agreement.


6.	Represents the accrual of the tax liability associated with the forfeiture of RSUs issued at emergence.


7.	Represents the issuance of the $80 million PIK Notes due 2024 at face value.


8.	Liabilities subject to compromise were settled as follows in accordance with the Plan:



10% Senior Secured Notes due 2021	$	9,427
10% Senior Secured PIK Notes due 2021	275,046
Accrued interest on Senior Secured Notes due 2021 and PIK Notes due 2021	20,624
General Unsecured Claims & Convenience Claims	1,749
Preferred stock accrued dividends	14,649
Total liabilities subject to compromise	$	321,495

Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021	(71,343		)
Issuance of Successor 10% PIK Notes	(80,000		)
GUC Administration Funding	(1,200		)
Gain on settlement of liabilities subject to compromise	$	168,952


9.	Reflects the cancellation of the Predecessor's preferred stock, common stock and additional paid-in capital to retained earnings.

10.

Reflects the issuance of equity of the Successor. In accordance with the Plan, the Successor issued 8.9 million shares of new Class A Common Stock to the holder of Second Lien 10% Senior Secured Notes due 2021 and Second Lien 10% Senior Secured PIK Notes due 2021 as part of the settlement of certain liabilities subject to compromise. In addition, 300,000 shares of new Class A Common Stock were issued to consenting creditors, as well as 263,599 shares of new Class A Common Stock issued to holders of stock awards which vested at emergence. For those shares issued to the holders of stock awards, 92,479 were surrendered for tax purposes; therefore, a net 171,120 shares were considered outstanding at emergence. Each share of Class A Common Stock has a par value of $0.01. Additionally, the Successor issued one share of Class B Common Stock and one share of Class C Common Stock on the Effective Date in accordance with the Plan.



Common stock, par value $0.01	$	94
Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021	71,249
Issuance of the equity related to the emergence vesting of RSUs	1,318
Issuance of the equity to the consenting creditors	1,500
Total equity issued at emergence	74,161
Value of shares relinquished to satisfy taxes on the RSUs vested at emergence	(461		)
Net equity issued at emergence	$	73,700


11.	Reflects the cumulative net impact of the effects on Accumulated deficit as follows:



Gain on settlement of liabilities subject to compromise	$	168,952
Issuance of the equity to the consenting creditors	(1,500		)
Issuance of the equity related to the emergence vesting of RSUs	(1,318		)
Success fees recognized at emergence	(3,592		)
Accelerated vesting of Predecessor stock compensation	(396		)
Write-off deferred financing costs	(370		)
Net impact to Reorganization items, net	161,776
Cancellation of Predecessor equity, including vesting	314,735
Net Impact to Accumulated deficit	$	476,511

Fresh Start Adjustments


12.	Fair value adjustments to proved oil and a gas properties, associated inventory, unproved acreage, as well as the respective reset of depletion, depreciation, and amortization balances. See above for a detailed discussion of the fair value methodology.


13.	Adjustments to record the fair value of the well equipment, leasehold improvements, computer software, computers, as well as the reset of accumulated depreciation. The Company concluded that the net book value of the assets represented the fair value at emergence.


14.	Represents the write-down of the Indianola investment to fair value based on a five year cash flow analysis.

15.

Upon emergence, the Multidraw Term Loan Agreement was extinguished in the amount of $50 million and the Company entered into the Exit Facility in the amount of $50 million. This adjustment represents the fair value adjustment associated with the Exit Facility. Fair value was estimated via a discounted cash flow analysis by discounting scheduled debt service payments at a credit spread of 10.1%. The credit spread was determined by performing a synthetic credit rating analysis, considering yields on similarly-rated, energy corporate issues, and adjusting based on recovery rates for first lien debt.

16.

Represents the fair value adjustments to the 2024 PIK Notes. Fair value was estimated via a discounted cash flow analysis by discounting scheduled debt service payments at a credit spread of 11.9%. The credit spread was determined by performing a synthetic credit rating analysis, considering yields on similarly-rated, energy corporate issues, and adjusting based on recovery rates for second lien debt.


17.	Represents the net decrease in tax assets and tax liabilities associated with adjustments for fresh start accounting.


18.	Reflects the cumulative impact of the fresh start adjustments discussed above:

Schedule Of Reorganizational Adjustments

Reorganization Adjustments (in thousands, except per share values)


1.	Reflects the cash payments made as of the Effective Date from implementation of the Plan:



Uses:
Payment of accrued interest on the Multidraw Term Loan	$	(1,181	)
Payment of financing costs related to the Term Loan Exit Facility	(124		)
Funding of the general unsecured claims administrative escrow account	(1,200		)
Cash transferred to restricted cash for professional fee escrow	(5,157		)
Cash transferred to restricted cash for consenting creditors fees	(129		)
Payment of professional fees at emergence	(1,017		)
Total:	$	(8,808	)


2.	Reflects the cash reclassified to Restricted Cash as of the Effective Date from implementation of the Plan:



Reclassifications to Restricted Cash:
Funding of the professional fee escrow account	$	5,157
Funding of the consenting creditors escrow account	129
Total:	$	5,286


3.	Reflects the payment of financing costs related to the Term Loan Exit Facility and the write off of deferred financing costs related to the MultiDraw Term Loan Agreement and the Term Loan Exit Facility.


4.	Represents the $3.6 million of accrued expenses related to the success fee recognized at emergence and the payment of $1.0 million of professional fees at emergence.


5.	Represents the $1.2 million of accrued interest paid at emergence related to the Multidraw Term Loan Agreement.


6.	Represents the accrual of the tax liability associated with the forfeiture of RSUs issued at emergence.


7.	Represents the issuance of the $80 million PIK Notes due 2024 at face value.


8.	Liabilities subject to compromise were settled as follows in accordance with the Plan:



10% Senior Secured Notes due 2021	$	9,427
10% Senior Secured PIK Notes due 2021	275,046
Accrued interest on Senior Secured Notes due 2021 and PIK Notes due 2021	20,624
General Unsecured Claims & Convenience Claims	1,749
Preferred stock accrued dividends	14,649
Total liabilities subject to compromise	$	321,495

Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021	(71,343		)
Issuance of Successor 10% PIK Notes	(80,000		)
GUC Administration Funding	(1,200		)
Gain on settlement of liabilities subject to compromise	$	168,952


9.	Reflects the cancellation of the Predecessor's preferred stock, common stock and additional paid-in capital to retained earnings.

10.



Common stock, par value $0.01	$	94
Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021	71,249
Issuance of the equity related to the emergence vesting of RSUs	1,318
Issuance of the equity to the consenting creditors	1,500
Total equity issued at emergence	74,161
Value of shares relinquished to satisfy taxes on the RSUs vested at emergence	(461		)
Net equity issued at emergence	$	73,700


11.	Reflects the cumulative net impact of the effects on Accumulated deficit as follows:



Gain on settlement of liabilities subject to compromise	$	168,952
Issuance of the equity to the consenting creditors	(1,500		)
Issuance of the equity related to the emergence vesting of RSUs	(1,318		)
Success fees recognized at emergence	(3,592		)
Accelerated vesting of Predecessor stock compensation	(396		)
Write-off deferred financing costs	(370		)
Net impact to Reorganization items, net	161,776
Cancellation of Predecessor equity, including vesting	314,735
Net Impact to Accumulated deficit	$	476,511