Chapter 11 Reorganization

12 Months Ended

Dec. 31, 2020

Chapter 11 Reorganization [Abstract]

(2) Chapter 11 Reorganization

On the Petition Date, the Former Parent and certain of its direct and indirect wholly-owned domestic subsidiaries (collectively with the Former Parent, the Affiliate Debtors) filed voluntary petitions for relief (the Chapter 11 Cases) under the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas Houston Division (the Bankruptcy Court) and, in connection therewith, the Affiliate Debtors filed the Plan with the Bankruptcy Court. On January 19, 2021, the Bankruptcy Court entered an order confirming and approving the Plan (the Confirmation Order).

As part of the transactions undertaken pursuant to the Plan, the Former Parent’s equity interests existing and outstanding prior to the Effective Date were cancelled. The record holders of certain of the 7.125% Notes and 7.750% Notes were deemed to have contributed all of the allowed prepetition notes claims described in the Plan against the Affiliate Debtors in exchange for shares of the Company’s Class A Common Stock, par value $0.01 per share (the Class A Common Stock). As a result, effective as of the Effective Date, the entity now known as Superior Energy Services, Inc., became the successor reporting company to the Former Parent pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended.

Executory Contracts and Leases

On January 19, 2021, the Bankruptcy Court approved the Former Parent’s motion to reject certain executory contracts, which were comprised entirely of corporate guarantees. Upon the rejection of these contracts, the counterparties were included in the general unsecured claims category, of which they are to receive a pro rata share based on their allowed claim of a $125,000 cash payment. On this same date, the Bankruptcy Court also approved the rejection of seven leases. Upon their rejection, the Company reclassified the associated lease liabilities to Liabilities subject to compromise at their allowed claim or settlement amount, with any difference recorded to Reorganization items.

Credit Facility

On the Effective Date, pursuant to the Plan, the Former Parent entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and letter of credit issuers named therein providing for a $120.0 million asset-based secured revolving credit facility (the Credit Facility), as further described in Note 6 herein.

Stockholders Agreement

On the Effective Date, in order to implement certain transactions contemplated by the Plan, the Company entered into a Stockholders Agreement (the Stockholders Agreement), to provide for certain governance matters. Other than obligations related to Confidential Information (as defined in the Stockholders Agreement), the rights and preferences of each stockholder under the Stockholders Agreement will terminate when such stockholder ceases to own shares of the Class A Common Stock.

Senior Notes

As part of the transactions undertaken pursuant to the Plan, the record holders of certain of the 7.125% Notes and the 7.750% Notes contributed all of their allowed claims described in the Plan in exchange for either (i) a cash payout to be entirely funded by an equity rights offering in connection with the Plan discussed elsewhere in this Annual Report on Form 10-K (the Equity Rights Offering), or (ii) shares of the Class A Common Stock. On the Effective Date, all outstanding obligations under the 7.125% Notes and the 7.750% Notes, were cancelled, and the applicable agreements governing such obligations were terminated. Furthermore, all existing shares of common stock of the Former Parent were cancelled pursuant to the Plan, and the Company is in the process of issuing shares of the Class A Common Stock to such noteholders, subject to dilution on account of the Class B Common Stock to be issued to the Company’s management under a management equity incentive plan. The Class A Common Stock issued to such holders is exempt from registration under the Securities Act of 1933, as amended (the Securities Act), pursuant to Section 1145 of the Bankruptcy Code (which generally exempts from such registration requirements the issuance of securities under a plan of reorganization).

By the Effective Date, the Company completed the Equity Rights Offering in accordance with the Plan, which resulted in the issuance of 735,189 shares of Class A Common Stock to accredited cash opt-out noteholders as described in the Plan. The Class A Common Stock issued to the accredited cash opt-out noteholders in the Equity Rights Offering was exempt from registration under the Securities Act pursuant to section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The proceeds of approximately $952 thousand from the Equity Rights Offering were used entirely to fund the proceeds provided to the cash opt-in noteholders.

DDTL Commitment Letter

On the Effective Date, that certain Commitment Letter, dated as of September 29, 2020 (the DDTL Commitment Letter), with certain consenting noteholders terminated in accordance with its terms upon the effectiveness of the Credit Facility without the establishment of a delayed-draw term loan facility.

Change in Control

On the Effective Date, all previously issued and outstanding equity interests in the Company were cancelled. The Company issued Class A Common Stock to Equity Rights Offering participants and holders of allowed claims arising under the Prepetition Notes (in each case subject to dilution on account of the Class B Common Stock to be issued to management pursuant to the Plan.
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Affiliate Debtor Financial Statements

The following are the condensed combined financial statements for the Affiliate Debtors included in the Chapter 11 Cases:


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES (DEBTOR IN POSSESSION)
Condensed Combined Balance Sheet
(in thousands)
(Unaudited)

	December 31,
ASSETS	2020
Current assets:
Cash and cash equivalents	$	132,932
Accounts receivable, net of allowance for doubtful accounts of $19,036 at December 31, 2020 ⁽¹⁾		239,962
Income taxes receivable		13,490
Prepaid expenses		20,064
Inventory and other current assets		72,278
Assets held for sale		47,635
Total current assets		526,361

Property, plant and equipment, net of accumulated depreciation and depletion		422,848
Operating lease right-of-use assets		36,893
Notes receivable ⁽²⁾		73,027
Restricted cash		80,133
Intangible and other long-term assets, net of accumulated amortization		49,841
Investment in subsidiaries		3,914,155
Total assets	$	5,103,258


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable ⁽³⁾	$	2,348,756
Accrued expenses		106,730
Current portion of decommissioning liabilities		3,765
Liabilities held for sale		4,079
Total current liabilities		2,463,330

Intra-group notes payable		10,500
Decommissioning liabilities		138,981
Operating lease liabilities		30,184
Deferred income taxes		16,748
Other long-term liabilities		125,176

Total liabilities not subject to compromise		2,784,919

Liabilities subject to compromise		1,335,794

Total stockholders' equity		982,545

Total liabilities and stockholders' equity	$	5,103,258


(1) Includes intra-group receivables in the amount of $111.4 million.
(2) Includes intra-group note receivables in the amount of $0.4 million.
(3) Includes intra-group payables in the amount of $2,315.8 million.

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES (DEBTOR IN POSSESSION)
Condensed Combined Statement of Operations
(in thousands)
(Unaudited)

	Year Ended December 31,
	2020
Revenues:
Revenues	$	627,070
Revenues - affiliates		25,790
Total revenues		652,860
Costs and expenses:
Cost of revenues		421,295
Cost of revenues - affiliates		14,046
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		435,341
Depreciation, depletion, amortization and accretion		112,395
General and administrative expenses		185,236
Restructuring expense		47,055
Reduction in value of assets		21,049
Income (loss) from operations		(148,216)

Other income (expense):
Interest expense, net (contractual interest $95.8 million)		(93,132)
Reorganization expenses		(21,616)
Other income (expense):		(555)
Loss from continuing operations before income taxes		(263,519)
Income taxes		(1,155)
Net loss from continuing operations		(262,364)
Loss from discontinued operations, net of income tax		(114,882)
Net loss	$	(377,246)

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES (DEBTOR IN POSSESSION)
Condensed Combined Statement of Cash Flows
(in thousands)
(Unaudited)

	Year Ended December 31,
	2020
Cash flows from operating activities:
Net loss	$	(377,246)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, amortization and accretion		112,395
Deferred income taxes		8,569
Reduction in value of assets		21,049
Reduction in value of assets held for sale		114,213
Right-of-use assets amortization		16,107
Stock-based compensation expense		2,344
Bad debt		12,377
Reorganization items		18,087
Other reconciling items, net		(4,569)
Changes in operating assets and liabilities:
Accounts receivable		96,851
Inventory and other current assets		27,856
Accounts payable		(19,282)
Accrued expenses		(18,089)
Income taxes		(12,208)
Other, net		(3,509)
Net cash used in operating activities		(5,055)

Cash flows from investing activities:
Payments for capital expenditures		(41,179)
Proceeds from sales of assets		49,792
Net cash provided by investing activities		8,613

Cash flows from financing activities:
Delayed draw term loan commitment fee		(12,000)
Debtor in possession credit facility costs		(1,554)
Other		(640)
Net cash used in financing activities		(14,194)

Net change in cash, cash equivalents, and restricted cash		(10,636)
Cash, cash equivalents, and restricted cash at beginning of period		223,702
Cash, cash equivalents, and restricted cash at end of period	$	213,066