Approach Resources Inc. Announces Close of Strategic Alliance and Deleveraging Transaction
January 27 2017 - 12:25PM
Approach Resources Inc. (NASDAQ:AREX) (“Approach” or the “Company”)
today announced the successful closing of the previously announced
exchange transaction (the “Exchange Transaction”) with Wilks
Brothers, LLC and SDW Investments, LLC (collectively, “Wilks”),
entities beneficially owned by the Wilks Family Office, to exchange
$130,552,000 principal amount of the Company’s 7.00% senior notes
due 2021 (“Senior Notes”), for 39,165,600 new shares of common
stock, par value $0.01 per share (the “Common Stock”), at
an implied issue price of $3.33 per share.
The Exchange Transaction will:
- Reduce the Company’s long-term debt by $130.6 million;
- Generate approximately $40 million in future interest savings
and enhance the Company’s liquidity;
- Provide the Company flexibility to increase its capital budget
out of operating cash flow and return the Company to production
growth in anticipation of a continued commodity price
recovery;
- Increase the Company’s financing and strategic flexibility by
removing certain restrictive covenants from the existing Senior
Notes indenture; and
- Align the Company with a significant investor in an integrated
oilfield service business.
J. Ross Craft, the Company’s Chairman and Chief Executive
Officer, stated: “The closing of the Exchange Transaction is a
critical step for us to strengthen our balance sheet and reposition
the Company for future growth. We look forward to working
with the Wilks Family Office as we begin the next phase of the
Company.”
Following the closing of the Exchange Transaction, Wilks became
the Company’s largest shareholder, holding approximately 48.5% of
the outstanding Common Stock of Approach. Pursuant to the Exchange
Agreement between the Company and Wilks dated November 2, 2016 (the
“Exchange Agreement”), Wilks, as holders of the majority in
principal amount of Senior Notes, has consented to amendments to
the indenture governing the Senior Notes to eliminate most of the
restrictive covenants and certain events of default in the
indenture, which amendments became effective on the closing of the
Exchange Transaction.
In connection with the Exchange Agreement, the Company also
entered into a Stockholders Agreement with Wilks (the “Stockholders
Agreement”). Under the Stockholders Agreement, the Company has
appointed three Wilks’ designees to the Board of Directors of the
Company, Matthew R. Kahn, Morgan D. Neff and Matthew D.
Wilks.
The Company also has agreed to offer to exchange its remaining
$99,768,000 principal amount of outstanding Senior Notes for Common
Stock, which offer it expects to commence as promptly as practical
subject to market, economic and other factors it considers
appropriate in the circumstances.
About Approach Resources
Approach Resources Inc. is an independent
energy company focused on the exploration, development, production
and acquisition of unconventional oil and gas reserves in the
Midland Basin of the greater Permian Basin in West Texas. For
more information about the Company, please visit
www.approachresources.com. Please note that the Company
routinely posts important information about the Company under the
Investor Relations section of its website.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the
future are forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically relate to consummation of the
Follow-On Exchange Offer. These statements are based on
certain assumptions made by the Company based on management’s
experience, perception of historical trends and technical analyses,
current conditions, anticipated future developments and other
factors believed to be appropriate and reasonable by management.
When used in this press release, the words “will,” “potential,”
“believe,” “estimate,” “intend,” “expect,” “may,” “should,”
“anticipate,” “could,” “plan,” “predict,” “project,” “profile,”
“model” or their negatives, other similar expressions or the
statements that include those words, are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. Such statements are
subject to a number of assumptions, risks and uncertainties, many
of which are beyond the control of the Company, which may cause
actual results to differ materially from those implied or expressed
by the forward-looking statements. These risks, uncertainties,
assumptions and other important factors include, but are not
limited to (1) the inability to complete the Follow-On Exchange
Offer, (2) the failure to achieve 100% participation in the
Follow-On Exchange Offer, (3) a continued decline in commodities
prices, (4) the Company’s ability to recognize the anticipated
benefits of the Exchange Transaction and the Follow-On Exchange
Offer, (5) costs related to the Exchange Transaction and the
Follow-On Exchange Offer, (6) changes in applicable laws or
regulations, and (7) other risks and uncertainties indicated from
time to time in the definitive proxy statement filed with the SEC
in connection with the Exchange Transaction on December 13, 2016,
including those under “Risk Factors” therein, and other documents
filed or to be filed with the SEC by Approach. The
Company’s SEC filings are available on the Company’s
website at www.approachresources.com. Any forward-looking
statement speaks only as of the date on which such statement is
made and the Company undertakes no obligation to correct or update
any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
NO OFFER OR SOLICITATION
THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A
SOLICITATION TO BUY ANY OF THE EXISTING SENIOR NOTES NOR IS IT A
SOLICITATION FOR ACCEPTANCE OF THE FOLLOW-ON EXCHANGE OFFER. THE
COMPANY IS MAKING THE FOLLOW-ON EXCHANGE OFFER ONLY BY, AND
PURSUANT TO THE TERMS OF, THE OFFERS TO EXCHANGE AND LETTERS OF
TRANSMITTAL. THE FOLLOW-ON EXCHANGE OFFER IS NOT BEING MADE IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES, BLUE SKY OR OTHER LAWS OF SUCH
JURISDICTION. NONE OF THE COMPANY, ANY INFORMATION AGENT OR ANY
EXCHANGE AGENT FOR THE FOLLOW-ON EXCHANGE OFFER MAKES ANY
RECOMMENDATION IN CONNECTION WITH SUCH EXCHANGE OFFER. THIS
ANNOUNCEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN
OFFER TO BUY ANY OF THESE SECURITIES AND SHALL NOT CONSTITUTE AN
OFFER, SOLICITATION OR SALE IN ANY JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE IS UNLAWFUL.
INVESTOR CONTACT
Suzanne Ogle
Vice President - Investor Relations & Corporate Communications
ir@approachresources.com
817.989.9000
APPROACH RESOURCES INC.
One Ridgmar Centre
6500 West Freeway, Suite 800
Fort Worth, Texas 76116
www.approachresources.com
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