Approach Resources, battered by lower oil and gas prices over the past two years, announced a debt restructuring that gives a major stake in the company to the family that founded Frac Tech.
Wilks Brothers LLC, based in Cisco, is exchanging $130 million in senior notes for 39.2 million new shares of common stock, which will give them 48.6 percent of the company’s shares. As part of the deal, they will also get three seats on an expanded Approach board of directors.
Approach is reducing its long-term debt by up to $230 million and hopes to generate up to $70 million in future investment savings through the transactions with Wilks Brothers and SDW Investments, according to a statement released by the company Wednesday.
Fort Worth-based Approach has been active in the Permian Basin but has faced “significant commodity price headwinds.” In its third quarter results announced Wednesday, the company reported a net loss of $9.1 million.
Approach Chairman and CEO Ross Craft said the decline in oil prices over the last two years has put “enormous pressure” on the company’s cash flow, calling the transaction “transformative” for the company. He said the deal was done after exploring various alternatives for many months.
The transactions, Craft said, are critical to “restoring access to outside capital and positioning the company to resume growth and take advantage of a potential recovery in commodity prices.”
He also said Approach is excited to align itself with “a strategic investor that has the depth of knowledge and experience in the oilfield services industry.”
In 2002, the Wilks family founded Frac Tech and grew it into the largest independent pressure pumping provider before selling their stake in the company in 2011. They now hold significant public and private market investments across multiple sectors of the energy industry.
Dan and Ferris Wilks founded Frac Tech, eventually renamed FTS International, just as the shale gas boom was beginning. When they sold their 68 percent stake to a group of investors, the deal was reportedly worth $3.5 billion, and Forbes said it gave each brother a net worth of $1.4 billion.
Approach hopes to close the initial exchange in the first quarter of 2017.
This report includes material from the Star-Telegram archives.