Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on November 18, 2019, Approach Resources Inc. (“Approach,” the “Company,” the “Seller” or “we”) and all of its subsidiaries (the “Filing Subsidiaries and, together with Approach, the “Debtors”) filed voluntary petitions (collectively, the “Bankruptcy Petitions”) under chapter 11 (“Chapter 11”), of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Court”), thereby commencing the Chapter 11 cases captioned In re Approach Resources Inc., et al., Case No. 19-36444 (Bankr. S.D. Tex.) (the “Chapter 11 Cases”).
As previously disclosed, the Debtors have considered, among other things, sales of all or substantially all of their assets pursuant to Section 363 of the Bankruptcy Code. On February 4, 2020, the Company and certain of the Filing Subsidiaries entered into an asset purchase agreement (the “APA”) with Alpine Energy Acquisitions, LLC (“Alpine”), an affiliate of Alpine Energy Capital, LLC. Pursuant to the terms of the APA, the Company has agreed to sell substantially all of the Debtors’ assets, (the “Assets,” and such sale, the “Asset Sale”) for approximately $192,500,000, subject to certain customary purchase price adjustments as set forth in the APA (the “Purchase Price”). In addition, under the APA Alpine is obligated to make a $19.25 million deposit for escrow, and upon the closing of the transactions contemplated by the APA, such deposit will be released to the Seller and credited against the Purchase Price. The escrow amount was funded on February 6, 2020.
The APA, which is subject to Court approval, is intended to constitute a “stalking horse bid” for the Assets in accordance with the bid procedures (the “Bid Procedures”) previously approved by the Court on January 9, 2020 (the “Bid Procedures Order”), and includes certain bid protections for Alpine, including a maximum expense reimbursement of $250,000 and a break-up fee of $5.25 million (the “Bid Protections”). The Bid Procedures Order established certain Bid Procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase all or substantially all of the Assets (any such offer, a “Competing Transaction”). The Bid Protections are payable upon certain termination events, including the consummation of a Competing Transaction.
The Bid Procedures Order has set the deadline (the “Bid Deadline”) to submit bids for the Debtors’ assets as February 14, 2020. Upon the receipt of at least one qualified offer from other bidders proposing a Competing Transaction by the Bid Deadline, the Debtors propose to hold an auction with respect to the Assets on or about February 26, 2020. Additional information regarding the proposed auction and the requirements for qualified bids with respect to a Competing Transaction can be found in the Bid Procedures Order.
The foregoing description of the APA does not purport to be complete and is qualified in its entirety by reference to the APA, which has been filed with the Court and is attached hereto as Exhibit 2.1 and incorporated herein by reference.
Information regarding the Chapter 11 Cases is available through the Company’s website under the Restructuring Information tab, which contains a link to the claims agent’s website, https://dm.epiq11.com/approachresources.