Superior Energy Services To Divest Certain US Land Service Lines

(RTTNews) - Superior Energy Services Inc. (SPN) agreed to divest its U.S. service rig, coiled tubing, wireline, pressure control, flowback, fluid management and accommodations service lines and merge them with Forbes Energy Services Ltd.'s complementary service lines to create a new, publicly traded consolidation platform. The transaction is expected to close in the first quarter of 2020.

Upon the completion of the deal, Superior Energy will focus on U.S. offshore and international markets.

As per the terms of the merger agreement, the Superior Energy U.S. Business and Forbes will be merged into a newly formed company. Newco will operate under a new corporate name and ticker symbol.

At the closing of the deal, Superior Energy will receive 49.9% of Newco's issued and outstanding voting Class A common stock and 100% of Newco's issued and outstanding non-voting Class B common stock, which will collectively represent an approximate 65% economic interest in Newco.

Forbes shareholders will receive 50.1% of the Class A Stock, representing an about 35% economic interest in Newco.

In addition, certain lenders under Forbes' existing term loan will exchange their portion of the Forbes Term Loan for about $30 million in newly issued mandatory convertible preferred shares of Newco, which will be entitled to cash dividends at a rate of 5% per annum, payable semi-annually.

After giving effect to the conversion of the Preferred Shares, Superior Energy would own a 52% economic interest and Forbes shareholders would own a 48% economic interest in Newco.

Superior Energy also plans to reduce the amount of 2021 notes outstanding by up to $500 million by reducing Superior Energy's total debt by $250 million through the issuance of Newco notes and extending the maturity of up to another $250 million of Superior Energy 2021 notes.

Dave Dunlap, CEO of Superior Energy, will be leaving Superior Energy to become the CEO of Newco. Superior Energy's current Chief Financial Officer, Westy Ballard, will become President and CEO of Superior Energy.

Brian Moore will serve as COO of the Newco. Newco's headquarters will be in Houston and will have support services provided to it by Superior Energy for up to two years under a transition services agreement. Dunlap is expected to also serve as Chairman of a four-person board of directors, with other board members to be identified before the transaction is closed.

Superior Energy's current Chief Accounting Officer, Jamie Spexarth, will assume the title of Chief Financial Officer and Treasurer of Superior Energy.

Superior Energy said it plans to wind down its hydraulic fracturing business and will discontinue hydraulic fracturing operations. The company will exit this business and expects cash generated from potential future sales of assets used in this business to be used to reduce debt.

The company sold non-core assets for about $42 million, about $24 million of which is expected to be received early in the first quarter of 2020.