SUMMARY
You should read carefully this entire prospectus supplement, the accompanying prospectus and the other documents incorporated by
reference herein to understand fully the terms of the common stock, as well as the other considerations that are important in making your investment decision. Unless the context otherwise indicates, the information included in this prospectus
supplement assumes that the underwriter does not exercise its option to purchase additional shares.
For purposes of
this prospectus supplement and the accompanying prospectus, unless otherwise indicated, the terms “Basic,” “us,” “we,” “our” and similar terms refer to Basic Energy Services, Inc., together with its
subsidiaries, and the term “selling stockholders” refers to DLJ Merchant Banking Partners III, L.P.; DLJ Offshore Partners III, L.P.; DLJ Offshore Partners III-1, C.V.; DLJ Offshore Partners III-2, C.V.; DLJ MB PartnersIII GmbH &
Co. KG; Millennium Partners II, L.P.; MBP III Plan Investors, L.P.; DLJMB Funding III, Inc. and DLJ ESC II, L.P., collectively.
Basic Energy Services, Inc.
Overview
We provide a wide range of well site services in the United States to oil and natural gas drilling and producing companies, including
completion and remedial services, fluid services, well servicing and contract drilling. These services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well. Our broad range of
services enables us to meet multiple needs of our customers at the well site. Our operations are managed regionally and are concentrated in major United States onshore oil and natural gas producing regions located in Texas, New Mexico, Oklahoma,
Arkansas, Kansas, Louisiana, Wyoming, North Dakota, Colorado, Utah, Montana, West Virginia, Kentucky, Ohio and Pennsylvania. Our operations are focused on liquids-rich basins that currently exhibit strong drilling and production economics as well as
natural gas-focused shale plays characterized by prolific reserves and attractive economics. Specifically, we have a significant presence in the Permian Basin and the Bakken, Eagle Ford, Haynesville and Marcellus shales. We provide our services to a
diverse group of over 2,000 oil and gas companies.
Our current operating segments are Completion and Remedial Services, Fluid
Services, Well Servicing, and Contract Drilling. The following is a description of these segments:
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Completion and Remedial Services
. Our completion and remedial services segment (40% of our revenues in the first quarter of 2014 and in 2013)
operates our fleet of pumping units, an array of specialized rental equipment and fishing tools, coiled tubing units, snubbing units, thru-tubing, air compressor packages specially configured for underbalanced drilling operations, cased-hole
wireline units and nitrogen units. The largest portion of this business segment consists of pumping services focused on cementing, acidizing and fracturing services in niche markets.
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Well Servicing
. Our well servicing segment (28% of our revenues in the first quarter of 2014 and 29% of our revenues in 2013) operates our fleet
of 425 well servicing rigs and related equipment. This business 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. Our well servicing equipment and capabilities also facilitate most other services performed on a well.
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Fluid Services
. Our fluid services segment (28% of our revenues in the first quarter of 2014 and 27% of our revenues in 2013) utilizes our fleet
of 1,006 fluid service trucks and related assets, including specialized tank trucks, storage tanks, water wells, disposal facilities, water treatment and construction
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and other related equipment. These assets provide, transport, store and dispose of a variety of fluids, as well as provide well site construction and maintenance services. These services are
required in most workover, completion and remedial projects and are routinely used in daily producing well operations.
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Contract Drilling
. Our contract drilling segment (4% of our revenues in the first quarter of 2014 and in 2013) operates our fleet of 12 drilling
rigs and related equipment. We use these assets to penetrate the earth to a desired depth and initiate production from a well.
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General Industry Overview
Demand for services offered by our industry is a
function of our customers’ willingness to make operating and capital expenditures to explore for, develop and produce hydrocarbons in the United States, which in turn is affected by current and expected levels of oil and natural gas prices. Oil
prices remained relatively stable through the latter half of 2010, which resulted in increases in drilling, maintenance and workover activities in the
oil-driven
markets during this period. However, natural
gas prices continued to decline significantly in 2009 and remained depressed through 2013, which resulted in decreased activity in the natural gas-driven markets. Oil prices increased during the first half of 2011 primarily due to political and
economic instability in several oil producing countries and remained relatively stable through 2013. Despite natural gas prices remaining below the levels seen in past years, several markets that produce significant natural gas liquids, such as the
Eagle Ford shale, and/or that have other advantages like proximity to key consuming markets, such as the Marcellus shale, have continued to see stable activity.
Our business is influenced substantially by both operating and capital expenditures by oil and gas companies. Because existing oil and natural gas wells require ongoing spending to maintain production,
expenditures by oil and gas companies for the maintenance of existing wells are relatively stable and predictable. In contrast, capital expenditures by oil and gas companies for exploration and drilling are more directly influenced by current and
expected oil and natural gas prices and generally reflect the volatility of commodity prices. We believe our focus on production and workover activity partially insulates our financial results from the volatility of the active drilling rig count.
Competitive Strengths
We believe that the following competitive strengths currently position us well within our industry:
Extensive Domestic Footprint in the Most Prolific Basins.
Our operations are focused on liquids-rich basins located in the United States that currently exhibit strong drilling and production
economics as well as natural
gas-focused
shale plays characterized by prolific reserves and attractive economics. Specifically, we have a significant presence in the Permian Basin and the Bakken, Eagle Ford,
Haynesville and Marcellus shales. Based on the most recent publicly available information, we operate in states that accounted for approximately 78% of the approximately 800,000 existing onshore oil and natural gas wells in the 48 contiguous states
and approximately 84% of U.S. onshore oil production and 95% of U.S. onshore natural gas production. We believe that our operations are located in the most active U.S. well services markets, as we currently focus our operations on onshore domestic
oil and natural gas production areas that include both the highest concentration of existing oil and natural gas production activities and the largest prospective acreage for new drilling activity. We believe our extensive footprint allows us to
offer our suite of services to more than 2,000 customers who are active in those areas and allows us to redeploy equipment between markets as activity shifts, reducing the risk that a
basin-specific
slowdown
will have a disproportionate impact on our cash flows and operational results.
Diversified Service Offering for Further
Revenue Growth and Reduced Volatility.
We believe our range of well site services provides us a competitive advantage over smaller companies that typically offer fewer services. Our experience, equipment and network of 157 area offices
position us to market our full range of well site services to our existing customers. By utilizing a wider range of our services, our customers can use fewer
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service providers, which enables them to reduce their administrative costs and simplify their logistics. Furthermore, offering a broader range of services allows us to capitalize on our existing
customer base and management structure to grow within existing markets, generate more business from existing customers, and increase our operating profits as we spread our overhead costs over a larger revenue base.
Significant Market Position
. We maintain a significant market share for each of our lines of business within our core operating
areas: the Permian Basin of West Texas and Southeast New Mexico; the Gulf Coast region of South Texas and Louisiana; the Mid-Continent region of North Texas, Oklahoma and Kansas; the Ark-La-Tex region of East Texas, North Louisiana and Arkansas; and
the Rocky Mountain region of North New Mexico, Colorado, Utah, Wyoming, Montana and North Dakota. Our goal is to be one of the top two providers of the services we provide in each of our core operating areas. Our position in each of these markets
allows us to expand the range of services performed on a well throughout its life, such as drilling, maintenance, workover, stimulation, completion and plugging and abandonment services.
Modern and Competitive Fleet.
We operate a modern fleet matched to the needs of the local markets in each of our business
segments. We are driven by a desire to maintain one of the most efficient, reliable and safest fleets of equipment in the country, and we have an established program to routinely monitor and evaluate the condition of our equipment. We selectively
refurbish equipment to maintain the quality of our service and to provide a safe working environment for our personnel. Since 2003, we have obtained annual independent reviews and evaluations of substantially all of our assets, which confirmed the
location and condition of these assets. We believe that by maintaining a modern and active asset base, we are better able to earn our customers’ business while reducing the risk of potential downtime.
Decentralized Experienced Management with Strong Corporate Infrastructure.
Our corporate group is responsible for maintaining
a unified infrastructure to support our diversified operations through standardized financial and accounting, safety, environmental and maintenance processes and controls. Below our corporate level, we operate a decentralized operational
organization in which our nine regional or division managers are responsible for their operations, including asset management, cost control, policy compliance and training and other aspects of quality control. With the majority having over 30 years
of industry experience, each regional manager has extensive knowledge of the customer base, job requirements and working conditions in each local market. Below our nine regional or division managers, our area managers are directly responsible for
customer relationships, personnel management, accident prevention and equipment maintenance, the key drivers of our operating profitability. This management structure allows us to monitor operating performance on a daily basis, maintain financial,
accounting and asset management controls, integrate acquisitions, prepare timely financial reports and manage contractual risk.
Business
Strategy
The key components of our business strategy include:
Establishing and Maintaining Leadership Positions in Core Operating Areas
. We strive to establish and maintain market leadership
positions within our core operating areas. To achieve this goal, we maintain close customer relationships, seek to expand the breadth of our services and offer high quality services and equipment that meet customer specifications and requirements.
In addition, our significant presence in our core operating areas facilitates employee retention and attraction, a key factor for success in our business. Our significant presence in our core operating areas also provides us with brand recognition
that we intend to utilize in creating leading positions in new operating areas.
Selectively Expanding Within Our Regional
Markets
. We intend to continue strengthening our presence within our existing geographic footprint through internal growth and acquisitions of businesses with strong customer relationships, well-maintained equipment and experienced and skilled
personnel. We typically enter
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into new markets through the acquisition of businesses with strong management teams that will allow us to expand within these markets. Management of acquired companies often remain with us and
retain key positions within our organization, which enhances our attractiveness as an acquisition partner. We have a record of successfully implementing this strategy. By concentrating on targeted expansion in areas in which we already have a
meaningful presence, we believe we maximize the returns on expansion capital while reducing downside risk.
Developing
Additional Service Offerings Within the Well Servicing Market
. We intend to continue broadening the portfolio of services we provide to our clients by utilizing our well servicing infrastructure. A customer typically begins a new maintenance or
workover project by securing access to a well servicing rig, which generally stays on site for the duration of the project. As a result, our rigs are often the first equipment to arrive at the well site and typically the last to leave, providing us
the opportunity to offer our customers other complementary services. We believe the fragmented nature of the well servicing market creates an opportunity to sell more services to our core customers and to expand our total service offering within
each of our markets. We have expanded our suite of services available to our customers and increased our opportunities to cross-sell new services to our core well servicing customers through acquisitions and internal growth. We expect to continue to
develop or selectively acquire capabilities to provide additional services to expand and further strengthen our customer relationships.
Pursuing Growth Through Selective Capital Deployment
. We intend to continue growing our business through selective acquisitions, continuing a newbuild program and/or upgrading our existing assets.
Our capital investment decisions are determined by an analysis of the projected return on capital employed of each of those alternatives. Acquisitions are evaluated for “fit” with our area and regional operations management and are
reviewed by corporate level financial, equipment, safety and environmental specialists to ensure consideration is given to identified risks. We also evaluate the cost to acquire existing assets from a third party, the capital required to build new
equipment and the point in the oil and natural gas commodity price cycle. Based on these factors, we make capital investment decisions that we believe will support our long-term growth strategy, and these decisions may involve a combination of asset
acquisitions and the purchase of new equipment. We recently increased our 2014 capital expenditure plan by $50 million to account for the purchase of approximately 60,000 hydraulic horsepower of frac equipment. The total 2014 capital expenditure
plan including this increase now stands at $285 million, which includes $155 million for expansion projects.
Executive Offices
Our principal executive offices are located at 801 Cherry Street, Suite 2100, Fort Worth, Texas 76102, and our phone
number is (817) 334-4100.
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THE OFFERING
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Shares of common stock offered by the selling stockholders
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6,000,000 shares (6,900,000 shares if the underwriter exercises in full its option to purchase additional shares).
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Shares outstanding as of June 6,
2014
(1)
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43,205,979 shares.
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Use of proceeds
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We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders in this offering.
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New York Stock Exchange symbol
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BAS
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Description of common stock
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A description of our common stock is included in the accompanying prospectus under the heading “Description of Common Stock.”
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Risk Factors
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Investing in our common stock involves risk. You should carefully consider the risk factors described in this prospectus supplement and the accompanying prospectus under the heading “Risk
Factors” and in our annual report on Form 10-K for our fiscal year ended December 31, 2013, which is incorporated by reference in this prospectus supplement, prior to making an investment in our common stock.
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(1)
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Does not include an aggregate of 280,000 shares issuable upon the exercise of options to purchase shares of common stock or upon vesting of
performance-based awards outstanding as of June 6, 2014.
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RISK FACTORS
Investing in our common stock involves risk. See the risk factors described in the accompanying prospectus under the heading “Risk
Factors” and in our annual report on Form 10-K for our fiscal year ended December 31, 2013, which is incorporated by reference in this prospectus supplement. Before making an investment decision, you should carefully consider these risks
and the other information we include or incorporate by reference in this prospectus supplement. If one or more of the events discussed in these risk factors were to occur, our business, financial condition and results of operations, cash flow and
prospects could be materially affected.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders in this offering.
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SELLING STOCKHOLDERS
The following table sets forth information regarding the selling stockholders and the shares to be offered and sold by them pursuant to
this prospectus supplement. The information set forth below is based on written representations provided to us by the selling stockholders. As of June 6, 2014, there were 43,205,979 shares of our common stock outstanding.
The shares of common stock to be offered and sold by the selling stockholders pursuant to this prospectus supplement were issued to the
selling stockholders in private placements of such shares, or upon the exercise of warrants issued in private placements, prior to our initial public offering in 2005. On March 31, 2014, management and advisory responsibility for the aPriori
Funds (as defined below) was transferred to aCP (as defined below) and certain of its affiliates from certain subsidiaries of Credit Suisse AG within the Private Banking and Wealth Management Division.
aPriori Funds
The
“aPriori Funds” consist of each of the following entities: DLJ Merchant Banking Partners III, L.P.; DLJ Offshore Partners III, L.P.; DLJ Offshore Partners III-1, C.V.; DLJ Offshore Partners III-2, C.V.; DLJ MB PartnersIII GmbH &
Co. KG (“Partners III GmbH”); Millennium Partners II, L.P.; and MBP III Plan Investors, L.P.
aPriori Capital
Partners III LLC (“aCP III”) is the general partner of the aPriori Funds except for Partners III GmbH whose general partner is aPriori Capital Partners GmbH (“aPriori GmbH”). aPriori Capital Partners L.P. (“aCP”) was
retained by the aPriori Funds to act as investment manager pursuant to an amended and restated agreement of limited partnership of each of the aPriori Funds and/or an investment management agreement. aCP is the managing member of aCP III and the
sole shareholder of aPriori GmbH. aPriori Capital Partners LLC (“aPriori”) is the general partner of aCP. The managing members (the “Members”) of aPriori are Susan C. Schnabel and Colin A. Taylor. Voting and disposition decisions
with respect to the shares held by the aPriori Funds are made by the general partners of the aPriori Funds.
Each of the
Members, aPriori, aCP, aCP III and aPriori GmbH disclaims beneficial ownership of the securities held by the aPriori Funds except to the extent of such person’s pecuniary interest therein. Based on representations made to us by the aPriori
Funds, to our knowledge, none of the aPriori Funds has, or within the past three years has had, any position, office or other material relationship with us or any of our affiliates. Based on written representations received from the aPriori Funds,
to our knowledge, each of the aPriori Funds acquired its shares of common stock in the ordinary course of its business, and at the time of acquisition, none of the aPriori Funds had any direct or indirect agreements or understandings with any person
to distribute its shares. We have determined beneficial ownership in accordance with the rules of the SEC. All of the aPriori Funds listed below can be contacted at 767 Fifth Avenue, New York, NY 10153.
Credit Suisse Funds
Credit Suisse AG, a Swiss bank, owns the majority of the voting stock of Credit Suisse Holdings (USA), a Delaware corporation, which in
turn owns all of the voting stock of Credit Suisse (USA) Inc., a Delaware corporation (“CS-USA”). DLJMB Funding III, Inc. and DLJ ESC II, L.P. (together, the “Credit Suisse Funds”) are entities managed by indirect subsidiaries of
CS-USA. The ultimate parent company of Credit Suisse AG is Credit Suisse Group AG.
Credit Suisse Group AG disclaims
beneficial ownership of the securities held by its direct and indirect subsidiaries and the selling stockholders. Credit Suisse AG, its executive officers and directors and its direct and indirect subsidiaries may beneficially own securities that
are not included in this prospectus supplement. Based on representations made to us by the Credit Suisse Funds, to our knowledge, none of the Credit Suisse Funds has,
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or within the past three years has had, any position, office or other material relationship with us or any of our affiliates. Based on written representations received from the Credit Suisse
Funds, to our knowledge, each of the Credit Suisse Funds acquired its shares of common stock in the ordinary course of its business, and at the time of acquisition, none of the Credit Suisse Funds had any direct or indirect agreements or
understandings with any person to distribute its shares. We have determined beneficial ownership in accordance with the rules of the SEC. All of the Credit Suisse Funds listed below can be contacted at Eleven Madison Avenue, New York, New York
10010-3629.
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Selling Stockholder
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Number of
Shares of
Common Stock
Beneficially
Owned
Prior
to the Offering(1)
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Number of
Shares of
Common Stock
to be
Offered(2)
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Number of
Shares of
Common Stock
Beneficially
Owned After
the
Offering
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Percentage of
Outstanding
Shares of
Common Stock
After
the
Offering(2)
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DLJ Merchant Banking Partners III, L.P.
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8,818,062
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4,298,201
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4,519,861
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10.5
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%
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DLJ Offshore Partners III, L.P.
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607,875
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296,297
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311,578
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DLJ Offshore Partners III-1, C.V.
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155,803
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75,943
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79,860
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DLJ Offshore Partners III-2, C.V.
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110,984
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54,097
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56,887
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DLJ MB PartnersIII GmbH & Co. KG
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73,633
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35,891
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37,742
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*
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Millennium Partners II, L.P.
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49,906
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24,326
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25,580
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*
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MBP III Plan Investors, L.P.
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1,561,538
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761,143
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800,395
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1.9
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%
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DLJ ESC II, L.P.
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931,623
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454,102
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477,521
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1.1
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%
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Includes shares held of record as follows: 8,622,404 shares held by DLJ Merchant Banking Partners III, L.P.; 602,902 shares held by DLJ Offshore Partners III, L.P.;
155,600 shares held by DLJ Offshore Partners III-1, C.V.; 110,844 shares held by DLJ Offshore Partners III-2, C.V.; 73,544 shares held by DLJ MB PartnersIII GmbH & Co. KG; 14,666 shares held by Millennium Partners II, L.P.; 1,621,577 shares held
by MBP III Plan Investors, L.P.; 90,122 shares held by DLJMB Funding III, Inc.; and 1,017,765 shares held by DLJ ESC II, L.P.
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(2)
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Each selling stockholder will sell an additional 15% of the number of shares set forth opposite its name in the column above entitled “Number of Shares of Common
Stock to be Offered” if the underwriter exercises in full its option to purchase additional shares of common stock, and the number and percentage of shares each selling stockholder will own after the offering will be reduced correspondingly.
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The shares of common stock owned by the selling stockholders are being registered for resale pursuant to the
Third Amended and Restated Stockholders’ Agreement, dated December 20, 2010 (the “Stockholders’ Agreement”), by and among Basic and the selling stockholders. The Stockholders’ Agreement provides for certain
informational and consultation rights, along with confidentiality obligations, and registration rights for the selling stockholders. As long as (i) any selling stockholder remains an Affiliate (as defined in the Stockholders’ Agreement) of
Basic or (ii) the selling stockholders, collectively, beneficially hold at least ten percent of the outstanding shares of Basic’s common stock, the selling stockholders can require Basic to register shares of common stock on up to three
occasions, provided that the proposed offering proceeds for the offering equal or exceed $10 million (or $5 million if Basic is able to register such securities on Form S-3). In addition to such demand registration rights, the Stockholders’
Agreement provides the selling stockholders with piggyback registration rights with respect to any proposed offering of equity securities pursuant to a registration statement filed by Basic (other than a registration statement on Form S-4 or Form
S-8). Basic is also obligated under the Stockholders’ Agreement to perform certain other actions in connection with a demand registration or piggyback registration request by any of the selling stockholders.
The Stockholders’ Agreement terminates upon the earliest of (i) the dissolution, liquidation or winding-up of Basic,
(ii) the date all of the selling stockholders cease to be affiliates of Basic and the selling stockholders, collectively, beneficially hold less than ten percent of the outstanding shares of common stock of Basic, or
(iii) December 21, 2015.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as
defined below) of the ownership and disposition of shares of our common stock. Except where noted, this summary deals only with a share of common stock held as a capital asset (generally, property held for investment) and does not represent a
detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:
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a financial institution;
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a tax-exempt organization;
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a person holding the common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle;
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a trader in securities that has elected the mark-to-market method of accounting for your securities;
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a person who is an investor in a pass-through entity or subject to the alternative minimum tax;
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a controlled foreign corporation;
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a passive foreign investment company;
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a partnership or other entity classified as a partnership for U.S. federal income tax purposes; or
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a United States expatriate, a former U.S. citizen or a long-term resident of the United States.
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The summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable U.S. Treasury
regulations, rulings and other administrative pronouncements and judicial decisions, all as of the date hereof. Those authorities are subject to different interpretations and may be changed, perhaps retroactively, so as to result in U.S. federal
income tax consequences different than those summarized below. This summary does not address all aspects of U.S. federal income taxes and does not deal with all tax considerations that may be relevant to holders in light of their personal
circumstances (including U.S. estate or gift, state, local or foreign tax considerations) and does not address any aspects of the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.
For purposes of this discussion, a “U.S. holder” is a beneficial owner of common stock that is for U.S. federal
income tax purposes:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source;
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons (as defined in
the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
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The term “non-U.S. holder” means a beneficial owner of a share of common stock who is an individual, corporation, estate or
trust and who is not a U.S. holder.
If an entity classified as a partnership for U.S. federal income tax purposes holds
common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership considering an investment in shares of our common stock,
we urge you to consult your own tax advisors.
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If you are considering the purchase of shares of our common stock, you should consult
your own tax advisors concerning the particular U.S. federal income tax consequences to you of the ownership and disposition of shares of our common stock, as well as the consequences to you arising under other U.S. federal tax laws and the laws of
any other applicable taxing jurisdiction in light of your particular circumstances.
Dividends
We do not intend to pay any cash distributions on our common stock in the foreseeable future. However, in the event we do make such cash
distributions, these distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If any such
distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a non-taxable return of capital to the extent of the non-U.S. holder’s tax basis in our common stock and thereafter as gain from the sale or
exchange of such common stock as described below in “—Sale, Exchange or Other Dispositions of Shares of Common Stock”. Any dividends paid to you with respect to the shares of common stock will be subject to withholding tax at a 30%
rate (or lower applicable income tax treaty rate). In order to obtain a reduced rate of withholding, you will be required to provide a properly executed Internal Revenue Service (“IRS”) Form W-8BEN certifying your entitlement to benefits
under a treaty. However, dividends that are effectively connected with your conduct of a trade or business within the United States and, where a tax treaty applies, are attributable to a U.S. permanent establishment, are not subject to the
withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates. You will be required to provide a properly executed IRS Form W-8ECI in order for effectively connected
income to be exempt from withholding. Any such effectively connected income received by a foreign corporation may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate (or lower applicable income tax treaty
rate).
A non-U.S. holder of shares of common stock who wishes to claim the benefit of an applicable treaty rate is required
to satisfy applicable certification and other requirements. If you are eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by timely filing an appropriate claim
for refund with the IRS.
Sale, Exchange or Other Disposition of Shares of Common Stock
Subject to the discussions below concerning backup withholding and foreign accounts, you generally will not be subject to U.S. federal
income tax with respect to gain recognized on a sale, exchange, redemption or other taxable disposition of shares of common stock unless:
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that gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty,
is attributable to a U.S. permanent establishment);
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•
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you are a non-U.S. individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other
conditions are met; or
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•
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we are or have been a “U.S. real property holding corporation,” or a USRPHC, for U.S. federal income tax purposes at any time during the
shorter of the five-year period ending on the date of disposition or the period you held our common stock.
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If you are described in the first bullet point above, you will be subject to tax on the net gain derived from the sale, exchange,
redemption or other taxable disposition under regular graduated U.S. federal income tax rates, and if you are a foreign corporation, you may also be subject to a branch profits tax equal to 30% of your effectively connected earnings and profits or
at such lower rate as may be specified by an applicable income tax treaty. If you are an individual described in the second bullet point above, you will be subject to a 30% tax (or lower applicable treaty rate) on the gain derived from the sale,
exchange, redemption or other taxable disposition, which may be offset by certain U.S.-source capital losses, even though you are not considered a resident of the United States.
S-11
With respect to the third bullet point above, we believe that we are not currently, and we
do not anticipate becoming in the future, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be
no assurance that we will not become a USRPHC in the future. Even if we are or become a USRPHC, so long as our common stock is regularly traded on an established securities market, a non-U.S. holder would not recognize taxable gain on a sale of our
common stock under the third bullet point above unless the non-U.S. holder actually or constructively owned more than 5% of our common stock at any time during the applicable period.
Information Reporting and Backup Withholding
Generally, we must report to
the IRS and to you the amount of dividends paid to you and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such payments and any withholding may also be made available to the tax
authorities in the country in which you reside under the provisions of an applicable income tax treaty.
In general, you will
not be subject to backup withholding with respect to payments of dividends that we make to you provided that we do not have actual knowledge or reason to know that you are a United States person, as defined under the Code, you provide your name and
address on an IRS Form W-8BEN (or other applicable form), and you certify, under penalties of perjury, that you are not a United States person, or you otherwise establish an exemption.
In addition, no information reporting or backup withholding will be required with respect to the proceeds of the sale of shares of common
stock made within the United States or conducted through certain U.S.-related financial intermediaries, if the payor receives the statement described above and does not have actual knowledge or reason to know that you are a United States person, as
defined under the Code, or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS.
Foreign Accounts
A U.S.
federal withholding tax of 30% may apply on dividend income from our common stock and on the gross proceeds of a sale or other disposition of our common stock paid to a “foreign financial institution” (as specifically defined for this
purpose), unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which would include certain equity and
debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise qualifies for an exemption. Absent any applicable exception, a U.S. federal withholding tax of 30% may also apply on
dividend income from our common stock and the gross proceeds of a sale or other disposition of our common stock paid to a foreign entity that is not a foreign financial institution unless such entity provides the applicable withholding agent or, in
the case of substantial U.S. owners, also the U.S. tax authorities either with (i) a certification identifying any substantial U.S. owners of the entity, which generally includes any U.S. person who directly or indirectly owns more than 10% of
the entity (or more than zero percent in the case of some entities) or (ii) a certification that the entity does not have any substantial U.S. owners. The United States and other governments may enter into intergovernmental agreements that
modify or supplement these rules. Under final Treasury regulations and related guidance, this withholding tax only applies to payments of dividends made after June 30, 2014 and payments of gross proceeds made after December 31, 2016. Under
certain circumstances, a non-U.S. holder of our common stock might be eligible for refunds or credits of such withholding taxes, and a non-U.S. holder might be required to file a U.S. federal income tax return to claim such refunds or credits.
Non-U.S. holders should consult their own tax advisors regarding the implications of these rules on their investment in our common stock.
The foregoing discussion is for general information only and should not be viewed as tax advice. Investors considering the purchase of our common stock should consult their own tax advisors regarding
the application of the U.S. federal income tax laws to their particular situations and the applicability and effect of estate, state, local or foreign tax laws and tax treaties.
S-12
UNDERWRITING
The company, the selling stockholders and Goldman, Sachs & Co. have entered into an underwriting agreement with respect to the
shares being offered. Subject to certain conditions, Goldman, Sachs & Co. has agreed to purchase all of the 6,000,000 shares offered hereby by the selling stockholders.
Goldman, Sachs & Co. has an option to purchase up to an additional 900,000 shares from the selling stockholders. Goldman,
Sachs & Co. may exercise that option for 30 days.
Goldman, Sachs & Co. proposes to offer the shares offered
hereby from time to time for sale in one or more transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, subject to receipt and
acceptance by it and subject to its right to reject any order in whole or in part. Goldman, Sachs & Co. may effect such transactions by selling the shares to or through dealers and such dealers may receive compensation in the form of discounts,
concessions or commissions from Goldman, Sachs & Co. and/or purchasers of shares for whom they may act as agents or to whom they may sell as principal. The difference between the price at which Goldman, Sachs & Co. purchases the shares and
the price at which Goldman, Sachs & Co. resells such shares may be deemed underwriting compensation.
The following table
shows the public offering price, underwriting discount and proceeds before expenses to the selling stockholders.
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Per Share
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Total
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Public offering price
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$
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26.25
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$
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157,500,000
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Underwriting discounts and commissions
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$
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0.75
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$
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4,500,000
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Proceeds, before expenses, to the selling stockholders
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$
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25.50
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$
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153,000,000
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The company, selling stockholders and the company’s officers and directors have agreed with Goldman,
Sachs & Co., subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus supplement
continuing through the date 45 days after the date of this prospectus supplement with respect to the company and the company’s officers and directors and through the date 60 days after the date of this prospectus supplement with respect to
the selling stockholders, except with the prior written consent of the representatives. These restrictions do not apply to (i) any existing employee benefit plans, (ii) our private offers or the issuance of shares to sellers of assets or entities in
connection with acquisitions by us, provided that Goldman, Sachs & Co. receives similar lock-up agreements from such sellers in connection with any binding agreements, (iii) bona fide gifts, (iv) dispositions pursuant to Rule 10b5-1 trading
plans or (v) transfers among the various selling stockholders, provided in the case of clause (v), any such transfer does not result in the filing of a report pursuant to the Exchange Act.
In connection with the offering, Goldman, Sachs & Co. may purchase and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by Goldman, Sachs & Co. of a greater number of shares than they are required to purchase in
the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchase. A “covered short position” is a short position that is not greater than the amount of additional shares for which
Goldman, Sachs & Co.’s option described above may be exercised. Goldman, Sachs & Co. may cover any covered short position by either exercising its option to purchase additional shares or purchasing shares in the open market.
In determining the source of shares to cover the covered short position, Goldman, Sachs & Co. will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase
additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. Goldman,
Sachs & Co. must
S-13
cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if Goldman, Sachs & Co. is concerned that there may be
downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by
Goldman, Sachs & Co. in the open market prior to the completion of the offering.
Purchases to cover a short position
and stabilizing transactions, as well as other purchases by Goldman, Sachs & Co. for its own account, may have the effect of preventing or retarding a decline in the market price of the company’s stock, and may stabilize, maintain or
otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. Goldman, Sachs & Co. is not required to engage in these activities
and may end any of these activities at any time. These transactions may be effected on New York Stock Exchange, in the over-the-counter market or otherwise.
European Economic Area
In relation to each Member State of the European
Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), Goldman, Sachs & Co. has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in
that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved
by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except
that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:
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(a)
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to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to
invest in securities;
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(b)
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to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than
€43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
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(c)
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to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the
representatives for any such offer; or
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(d)
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in any other circumstances which do not require the publication by the company of a prospectus pursuant to Article 3 of the Prospectus Directive.
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For the purposes of this provision, the expression an “offer of shares to the public” in relation to
any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares,
as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Goldman, Sachs & Co. has represented and agreed that:
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(a)
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it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the company; and
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(b)
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it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving
the United Kingdom.
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S-14
The shares may not be offered or sold by means of any document other than (i) in
circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance
(Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no
advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely
to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to
“professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in
Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and
in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not
an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be
transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial
Instruments and Exchange Law) and Goldman, Sachs & Co. has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any
person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
The company estimates that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately
$175,000.
The company has agreed to indemnify Goldman, Sachs & Co. against certain liabilities, including
liabilities under the Securities Act of 1933.
Goldman, Sachs & Co. and its affiliates are full service financial
institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and
non-financial activities and services. Goldman, Sachs & Co. has provided, and may in the future provide, a variety of these services to the company and to persons and entities with relationships with the company, for which they received or
will receive customary fees and expenses.
S-15
In the ordinary course of their various business activities, Goldman, Sachs & Co.
and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their
own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the company (directly, as collateral securing other obligations or otherwise) and/or
persons and entities with relationships with the company. Goldman, Sachs & Co. and its respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent
research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
LEGAL MATTERS
The validity of the shares of common stock is being passed upon for us by Andrews Kurth LLP, Houston, Texas. Certain legal matters in connection with the shares of common stock will be passed upon for the
selling stockholders by Weil, Gotshal & Manges LLP, New York, New York. Certain legal matters are being passed upon for the underwriter by Vinson & Elkins L.L.P, Houston, Texas.
EXPERTS
The consolidated financial statements and related financial statement schedule of Basic Energy Services, Inc. as of December 31, 2013 and 2012, and for each of the years in the three-year period
ended December 31, 2013, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2013 have been incorporated by reference herein and in the registration statement in reliance
upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The audit report on the effectiveness of internal control over financial reporting as of December 31, 2013, contains an explanatory
paragraph that states that the Company acquired the Atlas Environmental Consulting, Inc., Atlas Oilfield Construction Company, LLC, Petroleum Water Solutions, LLC, and Karnes Water Management, LLC (collectively the “Acquisitions”) during
2013, and that management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, the Acquisitions’ internal control over financial reporting associated
with total assets of $21.5 million and total revenues of $10.6 million included in the consolidated financial statements of Basic Energy Services, Inc. and subsidiaries as of and for the year ended December 31, 2013. KPMG LLP’s audit of
internal control over financial reporting of Basic Energy Services, Inc. also excluded an evaluation of the internal control over financial reporting of the Acquisitions.
S-16
WHERE YOU CAN FIND MORE INFORMATION
This prospectus supplement is part of a registration statement on Form S-3 (File No. 333-180673) that we filed with the SEC using a
“shelf” registration process. This prospectus supplement does not contain all of the information set forth in the registration statement, or the exhibits that are a part of the registration statement, parts of which are omitted as
permitted by the rules and regulations of the SEC. For further information about us and about our common stock, please refer to the information below and to the registration statement and the exhibits thereto.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials
that we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding us. The SEC’s website address is www.sec.gov. You may also inspect our SEC reports and other information at the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, or at our website at www.basicenergyservices.com. Information contained on our website is not incorporated by reference in this prospectus.
The SEC allows us to “incorporate by reference” information that we file with it, which means that we can disclose important
information to you by referring you to documents previously filed with the SEC. The information incorporated by reference is an important part of this prospectus supplement, and the information that we later file with the SEC will automatically
update and supersede this information. The following documents we filed with the SEC pursuant to the Exchange Act are incorporated herein by reference:
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our Annual Report on Form 10-K for the year ended December 31, 2013;
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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014;
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our Current Reports on Form 8-K filed with the SEC on February 12, 2014, March 21, 2014 and May 23, 2014; and
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•
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the description of our common stock set forth in our registration statements filed pursuant to Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
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All documents that we file pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus supplement and until our offering hereunder is completed will be deemed to be incorporated by reference in this prospectus supplement and will be a part of
this prospectus supplement from the date of the filing of the document. Any statement contained in a document, all or a portion of which is incorporated by reference in this prospectus supplement, will be deemed to be modified or superseded for
purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement or in any future filings that we incorporate by reference herein modifies or supersedes the statement. Any such statement or document so
modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement.
You may request a copy of these filings, free of charge, by writing or telephoning us at the following address and telephone number:
Basic Energy Services, Inc.
801 Cherry Street, Suite 2100
Fort Worth, Texas 76102
(817) 334-4100
Attn: Investor Relations
S-17
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain statements that are, or may be deemed to be, “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things,
the risk factors discussed in Item 1A of our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other factors, most of which are beyond our control.
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,”
“plan,” “expect,” “indicate” and similar expressions are intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this prospectus are forward
looking-statements. Although we believe that the forward-looking statements contained in this prospectus are based upon reasonable assumptions, the
forward-looking
events and circumstances discussed in this
prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
Important factors that may affect our expectations, estimates or projections include:
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a decline in, or substantial volatility of, oil and natural gas prices, and any related changes in expenditures by our customers;
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the effects of future acquisitions on our business;
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changes in customer requirements in markets or industries we serve;
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competition within our industry;
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general economic and market conditions;
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our access to capital on favorable terms;
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our ability to replace or add workers at economic rates; and
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environmental and other governmental regulations.
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Our forward-looking statements speak only as of the date of this prospectus. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
S-18
PROSPECTUS
12,309,424 SHARES OF COMMON STOCK
This prospectus relates to an aggregate of up to 12,309,424 shares of common stock, par value $0.01 per share, of Basic Energy
Services, Inc. (“Basic”) that may be resold from time to time by the selling stockholders named on page 5 of this prospectus for their own account. We will not receive any proceeds from the sale of shares offered by the selling
stockholders. See “Selling Stockholders” and “Plan of Distribution.”
The selling stockholders may sell
the shares directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of commissions, discounts or concessions. The selling stockholders may sell the shares at any time at market prices
prevailing at the time of sale, at prices related to such market prices, at fixed prices or prices subject to change or at privately negotiated prices. This prospectus describes the general matter in which the shares may be offered and sold by the
selling stockholders. If necessary, the specific manner in which the shares may be offered and sold will be described in a supplement to this prospectus. You should carefully read this prospectus, any applicable prospectus supplement and any
information under the headings “Where You Can Find More Information” and “Incorporation by Reference” before you purchase any of our shares of common stock.
Our common stock is listed on the New York Stock Exchange under the symbol “BAS.” On April 10, 2012, the last reported sale
price of our common stock was $15.46 per share.
Investing in our securities involves risks. You should carefully consider
the
risk factors
beginning on page 2 of this prospectus, as well as the documents we file with the Securities and Exchange Commission that are incorporated by reference herein.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is April 17, 2012
Table of Contents
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About This Prospectus
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ii
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Where You Can Find More Information
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ii
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Incorporation by Reference
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iii
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Cautionary Note Regarding Forward-Looking Statements
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iv
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Industry and Market Data
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iv
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Basic Energy Services, Inc.
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1
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Risk Factors
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2
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Use of Proceeds
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3
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Selling Stockholders
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4
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Description of Common Stock
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6
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Plan of Distribution
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9
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Legal Matters
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11
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Experts
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11
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i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form
S-3
that we filed with the Securities
and Exchange Commission, or SEC, utilizing a “shelf” registration process. Under this shelf registration process, the selling stockholders may offer from time to time up to 12,309,424 shares of our common stock. If necessary, the specific
manner in which the shares may be offered and sold will be described in a supplement to this prospectus or a free writing prospectus. Any prospectus supplement or free writing prospectus may also add, update or change information contained or
incorporated by reference in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement or free writing prospectus, you should rely on the information provided in the prospectus supplement
or free writing prospectus. This prospectus does not contain all of the information included in the registration statement. The registration statement filed with the SEC includes exhibits that provide more details about the matters discussed in this
prospectus. You should read carefully this prospectus, the related exhibits filed with the SEC and any prospectus supplement or free writing prospectus, together with the additional information described below under the headings “Where You Can
Find More Information” and “Incorporation by Reference.”
You should rely only on the information contained
or incorporated by reference in this prospectus or any accompanying prospectus supplement or free writing prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. Neither we nor the selling stockholders are making an offer of or soliciting an offer to buy shares of common stock in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus, any prospectus supplement, any free writing prospectus and any other document incorporated by reference is accurate only as of the date on the front cover of those documents. Our business, financial
condition, results of operations and prospects may have changed since those dates.
Under no circumstances should the
delivery to you of this prospectus, any prospectus supplement or any free writing prospectus create any implication that the information contained therein is correct as of any time after the date thereof.
Unless otherwise indicated or unless the context otherwise requires, all references in this prospectus to “Basic,” “Basic
Energy Services,” “we,” “us,” and “our” mean Basic Energy Services, Inc. and its wholly owned subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement on Form
S-3
under the Securities Act of 1933, as amended, which we refer to as the Securities Act, that registers the resale of the shares of common stock covered by
this prospectus. The registration statement, including the attached exhibits, contains additional relevant information about us. The rules and regulations of the SEC allow us to omit some information included in the registration statement from this
prospectus.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the SEC’s web site at
http://www.sec.gov
. You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information regarding the operation of the Public
Reference Room.
These reports and other information may be inspected and copied at the public reference facilities maintained
by the SEC or obtained from the SEC’s website as provided above. In addition, we make available on our web site at
http://www.basicenergyservices.com
, free of charge, our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
(and any amendments to those reports)
filed pursuant to
ii
Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended, and other information filed with or furnished to the SEC, as soon as reasonably practicable after those
reports and other information are electronically filed with or furnished to the SEC.
Unless otherwise specified, information contained on, or available by hyperlink from, our web site or contained on the SEC’s web site is not incorporated
into this prospectus.
You may also request a copy of these filings at no cost, by writing or telephoning us at the following address: Basic Energy Services, Inc., Attention: Chief Financial Officer, 500 W. Illinois, Suite 100,
Midland, Texas 79701, (432) 620-5500.
INCORPORATION BY REFERENCE
We are incorporating by reference the information that we file with the SEC, which means that we are disclosing important information to
you in those documents. The information incorporated by reference is an important part of this prospectus, and the information that we subsequently file with the SEC will automatically update and supersede information in this prospectus and in our
other filings with the SEC. We incorporate by reference the documents listed below, which we have already filed with the SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act (other than
information furnished pursuant to Items 2.02 or 7.01 of any Current Report on
Form 8-K)
until the offering of the shares of common stock pursuant to this prospectus is completed or otherwise
terminated:
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our annual report on Form
10-K
for the year ended December 31, 2011, as filed with the SEC on
February 24, 2012, which we refer to as our 2011 Form
10-K;
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our current reports on Form
8-K,
as filed with the SEC on January 30, 2012, March 14, 2012 and
April 10, 2012;
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the description of our common stock set forth in our registration statements filed pursuant to Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
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All documents that we file pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and until the offering of the shares of common stock pursuant to this prospectus is completed or terminated, or after the date of the registration statement
of which this prospectus forms a part and prior to effectiveness of the registration statement, will be deemed to be incorporated by reference in this prospectus and will be a part of this prospectus from the date of the filing of the document. Any
statement contained in a document, all or a portion of which is incorporated by reference in this prospectus, will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or
in any future filings that we incorporate by reference herein modifies or supersedes the statement. Any such statement or document so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
You may request a copy of these filings, free of charge, by writing or telephoning us at the following address
and telephone number:
Basic Energy Services, Inc.
500 W. Illinois, Suite 100
Midland, Texas 79701
(432)
620-5500
Attn: Investor Relations
iii
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of the U.S. federal securities laws. We
have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of
risks, uncertainties and assumptions, including, among other things, the risk factors discussed in this prospectus under the caption “Risk Factors” beginning on page 2 and in our most recent annual report on Form
10-K
and quarterly reports on Form
10-Q
and other factors, most of which are beyond our control.
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect” and similar expressions are
intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this prospectus are forward looking-statements. Although we believe that the forward-looking statements contained in
this prospectus are based upon reasonable assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking
statements.
Important factors that may affect our expectations, estimates or projections include:
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a decline in, or substantial volatility of, oil or natural gas prices, and any related changes in expenditures by our customers;
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the effects of future acquisitions on our business;
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changes in customer requirements in markets or industries we serve;
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competition within our industry;
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general economic and market conditions;
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our access to current or future financing arrangements;
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our ability to replace or add workers at economic rates; and
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environmental and other governmental regulations.
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Our forward-looking statements speak only as of the date of this prospectus. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
INDUSTRY AND MARKET DATA
This prospectus and the information incorporated herein by reference include market share data, industry data and
forecasts that we obtained from internal company surveys (including estimates based on our knowledge and experience in the industry in which we operate), market research, consultant surveys, publicly available information, industry publications and
surveys. These sources include Baker Hughes Incorporated, the Association of Energy Service Companies, and the Energy Information Administration of the U.S. Department of Energy. Industry surveys and publications, consultant surveys and forecasts
generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe such information is accurate and reliable, we have not independently verified any of the data from third-party sources
cited or used for our management’s industry estimates, nor have we ascertained the underlying economic assumptions relied upon therein. For example, the number of onshore well servicing rigs in the U.S. could be lower than our estimate to the
extent our larger well servicing competitors have continued to report as stacked rigs equipment that is not actually complete or subject to refurbishment. Statements as to our position relative to our competitors or as to market share refer to the
most recent available data.
iv
BASIC ENERGY SERVICES, INC.
We provide a wide range of well site services to oil and natural gas drilling and producing companies, including completion and remedial
services, fluid services, well servicing and contract drilling. These services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well. Our broad range of services enables us to meet
multiple needs of our customers at the well site. Our operations are managed regionally and are concentrated in major United States onshore oil and natural gas producing regions located in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana,
Wyoming, North Dakota, Colorado, Utah, Montana, West Virginia and Pennsylvania. Our operations are focused on liquid rich basins that currently exhibit strong drilling and production economics as well as natural
gas-focused
shale plays characterized by prolific reserves and attractive economics. Specifically, we have a significant presence in the Permian Basin and the Bakken, Eagle Ford, Haynesville and Marcellus
shales. We provide our services to a diverse group of over 2,000 oil and gas companies.
Our four operating segments are
Completion and Remedial Services, Fluid Services, Well Servicing and Contract Drilling. The following is a description of these segments:
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Completion and Remedial Services.
Our completion and remedial services segment operates our fleet of pressure pumping units, an array of
specialized rental equipment and fishing tools, coiled tubing units, snubbing units, thru-tubing, air compressor packages specially configured for underbalanced drilling operations, cased-hole wireline units, nitrogen units, and water treatment. The
largest portion of this business segment consists of pumping services focused on cementing, acidizing and fracturing services in niche markets. In July 2011, we acquired Maverick Stimulation Company, LLC, Maverick Coil Tubing Services, LLC, Maverick
Thru-Tubing Services, LLC, Maverick Solutions, LLC, The Maverick Companies, LLC, MCM Holdings, LLC, and MSM Leasing, LLC (collectively, the “Maverick Companies”).
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Fluid Services.
Our fluid services segment utilizes our fleet of fluid service trucks and related assets, including specialized tank trucks,
storage tanks, water wells, disposal facilities and construction and other related equipment. These assets provide, transport, store and dispose of a variety of fluids, as well as provide well site construction and maintenance services. These
services are required in most workover, completion and remedial projects and are routinely used in daily producing well operations.
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Well Servicing.
Our well servicing segment operates our fleet of well servicing rigs and related equipment. This business 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. Our well servicing equipment and capabilities also facilitate
most other services performed on a well.
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Contract Drilling.
Our contract drilling segment operates drilling rigs and related equipment. We use these assets to penetrate the earth to a
desired depth and initiate production from a well.
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Our primary
executive offices are located at 500 W. Illinois, Suite 100, Midland, Texas 79701 and our telephone number is (432) 620-5500. Our Internet website is
www.basicenergyservices.com
. The information contained on or that can be
accessed through our website does not constitute a part of this prospectus.
1
RISK FACTORS
Investing in our common stock involves risk. See the risk factors described in our annual report on
Form 10-K
for our fiscal year ended December 31, 2011, which is incorporated by reference in this prospectus. Before making an investment decision, you should carefully consider these risks, the
risks described below and the other information we include or incorporate by reference in this prospectus. If applicable, we will include in a prospectus supplement a description of the significant factors relating to the offering described in that
prospectus supplement, including any additional risk factors. If one or more of the events discussed in these risk factors were to occur, our business, financial condition and results of operations, cash flow and prospects could be materially
affected.
The market price for shares of our common stock may be highly volatile and could be subject to wide
fluctuations.
The market price for shares of our common stock may be highly volatile and could be subject to wide
fluctuations. Some of the factors that could negatively affect our share price include:
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actual or anticipated variations in our quarterly operating results;
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changes in oil and natural gas prices;
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changes in our cash flows from operations or earnings estimates;
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publication of research reports about us or the oilfield services or exploration and production industries generally;
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increases in market interest rates, which may increase our cost of capital;
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changes in applicable laws or regulations, court rulings and enforcement and legal actions;
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changes in the market valuations of similar companies;
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adverse market reaction to any increased indebtedness we incur in the future;
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additions or departures of key management personnel;
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actions, including sales of common stock, by our stockholders;
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speculation in the press or investment community regarding our business;
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general market and economic conditions; and
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domestic and international economic, legal and regulatory factors unrelated to our performance.
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The selling stockholders may continue to have a substantial influence on the outcome of stockholder voting and may exercise this
voting power in a manner that may not be in the best interest of our other stockholders.
As of April 9, 2012, the
selling stockholders, which are managed by affiliates of Credit Suisse AG, a Swiss Bank, and Credit Suisse Securities (USA) LLC, beneficially owned approximately 28.5% of our outstanding common stock. Notwithstanding any sales that the selling
stockholders may make pursuant to this prospectus, they may continue to be in a position to have a substantial influence on the outcome of matters requiring a stockholder vote, including the election of directors, adoption of amendments to our
certificate of incorporation or bylaws or approval of transactions involving a change of control. The interests of the selling stockholders may differ from those of our other stockholders, and the selling stockholders may vote their common stock in
a manner that may adversely affect our other stockholders.
Future sales of shares of our common stock could adversely
affect the market price of our common stock.
The registration statement of which this prospectus forms a part is
registering for resale all of the 12,309,424 shares of our common stock held by the selling stockholders. Future sales of substantial amounts of
2
our common stock in the public market following this offering, whether by us or our existing stockholders, or the perception that such sales could occur, may adversely affect the market price of
our common stock, which could decline significantly. Sales by our existing stockholders might also make it more difficult for us to raise equity capital by selling new common stock at a time and price that we deem appropriate.
Additional issuances of equity securities by us would dilute the ownership of our existing stockholders.
We may issue equity in the future in connection with acquisitions or strategic transactions, to adjust our ratio of debt to equity, to
fund expansion of our operations or for other purposes. We may issue shares of our common stock at prices or for consideration that is greater or less than the price at which the shares of common stock are being offered by this prospectus. To the
extent we issue additional equity securities, your percentage ownership of our common stock would be reduced.
We are
able to issue shares of preferred stock with greater rights than our common stock.
Our certificate of incorporation
authorizes our board of directors to issue one or more series of preferred stock and set the terms of the preferred stock without seeking any further approval from our stockholders. Any preferred stock that is issued may rank ahead of our common
stock in terms of dividends, liquidation rights or voting rights. If we issue preferred stock, it may adversely affect the market price of our common stock.
USE OF PROCEEDS
Any proceeds from the sale of
the shares offered by this prospectus will be received by the selling stockholders, and we will not receive any proceeds from the sale of such shares.
We will incur all of the costs associated with the registration of the shares offered by this prospectus other than underwriting discounts and commissions, if any. Please read “Plan of
Distribution.”
3
SELLING STOCKHOLDERS
The following table sets forth information regarding the selling stockholders and the shares that may be offered and sold from time to
time by them pursuant to this prospectus. The information set forth below is based on written representations provided to us by the selling stockholders. The selling stockholders named below are referred to in this prospectus as the “selling
stockholders.”
The shares of common stock that may be offered and sold pursuant to this prospectus were issued to the
selling stockholders in private placements of such shares, or upon the exercise of warrants issued in private placements, prior to our initial public offering in 2005.
The selling stockholders may offer from time to time some, all or none of their shares pursuant to this prospectus. Since the selling stockholders are not obligated to sell, transfer or otherwise dispose
of their shares, and because the selling stockholders may acquire our publicly-traded common stock, we cannot estimate how many shares each selling stockholder will actually own after this offering. The table below assumes that the selling
stockholders will sell all of the shares of common stock covered by this prospectus and will not acquire any additional shares on the open market or otherwise.
Credit Suisse AG, a Swiss bank, owns the majority of the voting stock of Credit Suisse Holdings (USA), a Delaware corporation, which in turn owns all of the voting stock of Credit Suisse (USA) Inc., a
Delaware corporation (“CS-USA”). The selling stockholders are merchant banking funds managed by indirect subsidiaries of
CS-USA
and form part of Credit Suisse’s Asset Management Division. The
ultimate parent company of Credit Suisse AG is Credit Suisse Group AG. Credit Suisse Group AG disclaims beneficial ownership of the common stock that is beneficially owned by its direct and indirect subsidiaries. Credit Suisse AG, its executive
officers and directors, and its direct and indirect subsidiaries may beneficially own shares that are not included in this prospectus. Based on representations made to us by the selling stockholders, to our knowledge, none of the selling
stockholders has, or within the past three years has had, any position, office or other material relationship with us or any of our affiliates, except that an affiliate of the selling stockholders was a lender under a revolving credit facility that
we terminated in 2009. Each of the selling stockholders is an affiliate of a registered U.S. broker-dealer. Based on written representations received from the selling stockholders, to our knowledge, each of the selling stockholders acquired its
shares of common stock in the ordinary course of its business, and at the time of acquisition, none of the selling stockholders had any direct or indirect agreements or understandings with any person to distribute its shares. We have determined
beneficial ownership in accordance with the rules of the SEC.
Voting and dispositive power over the shares owned by the
selling stockholders are exercised by an investment committee of the general partner of each of the selling stockholders. The members of such investment committee are Nicole Arnaboldi, Susan Schanabel, Colin Taylor, Thompson Dean and Neal Pomroy,
each of whom disclaims beneficial ownership of the shares held by the selling stockholders and their affiliated entities, except to the extent of his or her pecuniary interest therein.
4
All of the entities listed below can be contacted at Eleven Madison Avenue, New York, New
York 10010-3629 except for the three “Offshore Partners” entities, which can be contacted at John B. Gosiraweg, 14, Willemstad, Curacao, Netherlands Antilles.
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Selling Stockholder
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Number of Shares of
Common
Stock
Beneficially Owned
Prior to the Offering
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Number of Shares
of Common
Stock
to be Offered
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Number of Shares
of Common
Stock
Beneficially Owned
After the Offering
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DLJ Merchant Banking Partners III, L.P.
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8,622,404
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8,622,404
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DLJ ESC II, L.P.
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1,017,765
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1,017,765
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DLJ Offshore Partners III, C.V.
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602,902
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602,902
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DLJ Offshore Partners
III-1,
C.V.
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155,600
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155,600
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DLJ Offshore Partners
III-2,
C.V.
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110,844
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110,844
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DLJ MB Partners III GmbH & Co. KG
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73,544
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73,544
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DLJ MB Funding III, Inc.
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90,122
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90,122
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Millennium Partners II, L.P.
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14,666
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14,666
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MBP III Plan Investors, L.P.
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1,621,577
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1,621,577
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The shares of common stock owned by the selling stockholders are being registered for resale pursuant to
the Third Amended and Restated Stockholders’ Agreement, dated December 20, 2010 (the “Stockholders’ Agreement”), by and among Basic and the selling stockholders. The Stockholders’ Agreement provides for certain
informational and consultation rights, along with confidentiality obligations, and registration rights for the selling stockholders. As long as (i) any selling stockholder remains an Affiliate (as defined in the Stockholders’ Agreement) of
Basic or (ii) the selling stockholders, collectively, beneficially hold at least ten percent of the outstanding shares of Basic’s common stock, the selling stockholders can require Basic to register shares of common stock on up to three
occasions, provided that the proposed offering proceeds for the offering equal or exceed $10 million (or $5 million if Basic is able to register such securities on
Form S-3).
In addition to such
demand registration rights, the Stockholders’ Agreement provides the selling stockholders with piggyback registration rights with respect to any proposed offering of equity securities pursuant to a registration statement filed by Basic (other
than a registration statement on
Form S-4
or
Form S-8).
Basic is also obligated under the Stockholders’ Agreement to perform certain other actions in
connection with a demand registration or piggyback registration request by any of the selling stockholders.
The
Stockholders’ Agreement terminates upon the earliest of (i) the dissolution, liquidation or
winding-up
of Basic, (ii) the date all of the selling stockholders cease to be Affiliates of Basic and
the selling stockholders, collectively, beneficially hold less than ten percent of the outstanding shares of common stock of Basic, or (iii) December 21, 2015.
5
DESCRIPTION OF COMMON STOCK
The following summary of the rights, preferences and privileges of our common stock and of our certificate of incorporation and bylaws
does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and to our certificate of incorporation and bylaws.
Our authorized capital stock consists of:
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80,000,000 shares of common stock, $0.01 par value; and
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5,000,000 shares of preferred stock, $0.01 par value, none of which are currently designated or issued.
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Holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Because holders of common
stock do not have cumulative voting rights, the holders of a majority of the shares of common stock can elect all of the members of the board of directors standing for election. The holders of common stock are entitled to receive dividends as may be
declared by the board of directors. Upon our liquidation, dissolution or winding up, and subject to any prior rights of outstanding preferred stock, the holders of our common stock will be entitled to share pro rata in the distribution of all of our
assets available for distribution to our stockholders after satisfaction of all of our liabilities and the payment of the liquidation preference of any preferred stock that may be outstanding. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and the shares of common stock to be sold in this offering when issued and paid for will be, fully paid and
non-assessable.
The
holders of our common stock have no preemptive or other subscription rights to purchase our common stock.
Subject to the
provisions of the certificate of incorporation and limitations prescribed by law, the board of directors has the authority to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, dividend rates, conversion rates, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of
the series, which may be superior to those of the common stock, without further vote or action by the stockholders. We have no present plans to issue any shares of preferred stock.
One of the effects of undesignated preferred stock may be to enable the board of directors to render more difficult or to discourage an
attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise and, as a result, protect the continuity of our management. The issuance of shares of the preferred stock under the board of directors’ authority
described above may adversely affect the rights of the holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock or may otherwise adversely affect the market price of the common stock.
Delaware Anti-Takeover Law and Charter and Bylaw Provisions
We are subject to the provisions of Section 203 of the Delaware General Corporation Law, or the “DGCL.” In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved
in a prescribed manner.
Section 203 defines a “business combination” as a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholders. Section 203 defines an “interested stockholder” as a person who, together with affiliates and associates, owns, or, in some cases, within three years prior,
did own, 15% or more of the corporation’s voting stock. Under Section 203, a business combination between us and an interested stockholder is prohibited unless:
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our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder
prior to the date the person attained the status;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85%
of our voting stock outstanding at the time the transaction commenced, excluding, for purposes of determining the number of shares outstanding, shares owned by persons who are directors and also officers and employee stock plans, under which
employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or
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the business combination is approved by our board of directors on or subsequent to the date the person became an interested stockholder and authorized
at an annual or special meeting of the stockholders by the affirmative vote of the holders of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
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This provision has an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including
discouraging takeover attempts that might result in a premium over the market price for the shares of our common stock. With approval of our stockholders, we could amend our certificate of incorporation in the future to elect not to be governed by
the anti-takeover law. This election would be effective 12 months after the adoption of the amendment and would not apply to any business combination between us and any person who became an interested stockholder on or before the adoption of the
amendment.
Provisions of Our Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws provide that any action required or permitted to be taken by our stockholders must be taken at
a duly called meeting of stockholders and not by written consent. Under Delaware law, the power to adopt, amend or repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon the
board of directors the power to adopt, amend or repeal its bylaws. Our charter and bylaws grant our board the power to adopt, amend and repeal our bylaws on the affirmative vote of a majority of the directors then in office. Our stockholders may
adopt, amend or repeal our bylaws but only at any regular or special meeting of stockholders by the holders of not less than 66 2/3% of the voting power of all outstanding voting stock. Also, our bylaws preclude the ability of our stockholders to
call special meetings of stockholders. Advance notice is required for stockholders to nominate directors or to submit proposals for consideration at meetings of stockholders. In addition, the removal of directors by stockholders without cause is
precluded.
Our board of directors is divided into three classes, and directors serve staggered three-year terms. Any
vacancies on the board of directors may be filled by vote of the board of directors until the next meeting of stockholders when the election of directors is in the regular course of business, and until a successor has been duly elected and
qualified.
The foregoing provisions of our certificate of incorporation and bylaws and the provisions of Section 203 of
the DGCL could have the effect of delaying, deferring or preventing a change in control of our company.
Liability and Indemnification of
Officers and Directors
Our certificate of incorporation and bylaws provide that indemnification shall be to the fullest
extent permitted by the DGCL for all current or former directors or officers of Basic Energy Services. As permitted by the DGCL, the certificate of incorporation provides that directors of Basic Energy Services shall have no personal liability to
Basic Energy Services or its stockholders for monetary damages for breach of fiduciary duty as a director, except (1) for any breach of the director’s duty of loyalty to Basic Energy Services or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing violation of law, (3) under Section 174 of the DGCL or (4) for any transaction from which a director derived an improper personal benefit. If the DGCL is
amended to authorize the further elimination or limitation of directors’ liability, then the liability of our directors will automatically be limited to the fullest extent provided by law.
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We have also entered into indemnification agreements with all of our directors and some of
our executive officers (including each of our named executive officers). These indemnification agreements are intended to permit indemnification to the fullest extent now or hereafter permitted by the DGCL. It is possible that the applicable law
could change the degree to which indemnification is expressly permitted. The indemnification agreements cover expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred as a result of the fact that such
person, in his or her capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. The indemnification agreements generally cover claims relating to the fact that the indemnified party is or was an officer,
director, employee or agent of us or any of our affiliates, or is or was serving at our request in such a position for another entity. The indemnification agreements also obligate us to promptly advance all reasonable expenses incurred in connection
with any claim. The indemnitee is, in turn, obligated to reimburse us for all amounts so advanced if it is later determined that the indemnitee is not entitled to indemnification. The indemnification provided under the indemnification agreements is
not exclusive of any other indemnity rights. However, double payment to the indemnitee is prohibited.
We have also agreed to
obtain and maintain director and officer liability insurance for the benefit of each of the above indemnitees. These policies include coverage for losses for wrongful acts and omissions and to ensure our performance under the indemnification
agreements. Each of the indemnitees is named as an insured under such policies and provided with the same rights and benefits as are accorded to the most favorably insured of our directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock Transfer & Trust Company.
8
PLAN OF DISTRIBUTION
We are registering the common stock covered by this prospectus to permit the selling stockholders to conduct public secondary trading of
such shares from time to time after the date of this prospectus. We will not receive any of the proceeds of the sale of the shares of common stock offered by this prospectus. The aggregate proceeds to the selling stockholders from the sale of such
common stock will be the purchase price of the common stock less any discounts and commissions. The selling stockholders reserve the right to accept and, together with their agents, to reject, any proposed purchases of common stock to be made
directly or through agents.
The common stock offered by this prospectus may be sold from time to time to purchasers:
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directly by the selling stockholders and their successors, which includes their donees, pledgees or transferees or their
successors-in-interest; or
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through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, commissions or concessions from the selling
stockholders or the purchasers of the common stock. These discounts, commissions or concessions may be in excess of those customary in the types of transactions involved.
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Any underwriters, broker-dealers or agents who participate in the sale or distribution of the common stock may be deemed to be
“underwriters” within the meaning of the Securities Act. Any affiliate of a selling stockholder that is a registered broker-dealer may be deemed to be an underwriter. As a result, any profits on the sale of the common stock by such selling
stockholders and any discounts, commissions or concessions received by it may be deemed to be underwriting discounts and commissions under the Securities Act. Affiliates of selling stockholders who are deemed to be “underwriters” within
the meaning of Section 2(11) of the Securities Act will be subject to prospectus delivery requirements of the Securities Act. Underwriters are subject to certain statutory liabilities, including, but not limited to, Sections 11, 12 and 17
of the Securities Act.
The common stock may be sold in one or more transactions at:
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prevailing market prices at the time of sale;
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prices related to such prevailing market prices;
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varying prices determined at the time of sale; or
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These sales may be effected in one or more transactions:
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on any national securities exchange or quotation service on which the common stock may be listed or quoted at the time of the sale;
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in the
over-the-counter
market;
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in transactions other than on such exchanges or services or in the
over-the-counter
market;
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through the writing of options (including the issuance by the selling stockholders of derivative securities), whether the options or such other
derivative securities are listed on an options exchange or otherwise;
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through the settlement of short sales; or
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through any combination of the foregoing.
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These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade.
9
In connection with the sales of the common stock, the selling stockholders may enter into
hedging transactions with broker-dealers or other financial institutions which in turn may:
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engage in short sales of the common stock in the course of hedging their positions;
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sell the common stock short and deliver the common stock to close out short positions;
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loan or pledge the common stock to broker-dealers or other financial institutions that in turn may sell the common stock;
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enter into option or other transactions with broker-dealers or other financial institutions that require the delivery to the broker-dealer or other
financial institution of the common stock, which the broker-dealer or other financial institution may resell under the prospectus; or
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enter into transactions in which a broker-dealer makes purchases as a principal for resale for its own account or through other types of transactions.
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There can be no assurance that any selling stockholder will sell any or all of its common stock pursuant to
this prospectus. Further, we cannot assure you that any such selling stockholder will not transfer, devise or gift the common stock by other means not described in this prospectus. In addition, any common stock covered by this prospectus that
qualifies for sale under Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. The common stock covered by this prospectus may also be sold to
non-U.S. persons
outside the U.S. in accordance with Regulation S under the Securities Act rather than pursuant to this prospectus. The common stock may be sold in some states only through registered
or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification is available and complied with.
The selling stockholders and any other person participating in the sale of the common stock will be subject to the applicable provisions
of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales
of any of the common stock by the selling stockholders and any other such person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the common stock to engage in market-making activities with
respect to the particular common stock being distributed. This may affect the marketability of the common stock and the ability of any person or entity to engage in market-making activities with respect to the common stock.
We will pay all expenses of the registration of the shares pursuant to the Stockholders’ Agreement, including, without limitation,
SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that the selling stockholders will pay all underwriting discounts and commissions, if any. Pursuant to the Stockholders’
Agreement, we will indemnify the selling stockholders against certain liabilities, including some liabilities under the Securities Act. Pursuant to the Stockholders’ Agreement, we may be indemnified by the selling stockholders against certain
liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders specifically for use in this prospectus.
10
LEGAL MATTERS
The validity of the shares of common stock offered pursuant to this prospectus will be passed upon by Andrews Kurth LLP. Any underwriter
will be advised about other issues relating to any offering by its own legal counsel.
EXPERTS
The consolidated financial statements and related financial statement schedules of Basic Energy Services, Inc. (the
“Company”) as of December 31, 2011 and 2010, and for each of the years in the three-year period ended December 31, 2011, and the effectiveness of internal control over financial reporting as of December 31, 2011 have been
incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The audit report on the effectiveness of internal control over financial reporting as of December 31, 2011, contains an explanatory
paragraph that states that the Company acquired the Maverick Companies, Pat’s P&A, Inc., and Cryogas Services LLP (collectively “the Acquisitions”) during 2011, and that management excluded from its assessment of the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2011, the Acquisitions’ internal control over financial reporting associated with total assets of $219.9 million and total revenues of
$68.6 million included in the consolidated financial statements of Basic Energy Services, Inc. and subsidiaries as of and for the year ended December 31, 2011. KPMG LLP’s audit of internal control over financial reporting of Basic
Energy Services, Inc. also excluded an evaluation of the internal control over financial reporting of the Acquisitions.
11
6,000,000 Shares
Common Stock
Goldman, Sachs & Co.
Prospectus supplement dated June 9, 2014
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