PES Pioneer Energy Services Corp

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 29, 2020

Introductory Note

As previously disclosed, on March 1, 2020, Pioneer Energy Services Corp. (“Pioneer” or the “Company”) and its affiliates, Pioneer Coiled Tubing Services, LLC, Pioneer Drilling Services, Ltd., Pioneer Fishing & Rental Services, LLC, Pioneer Global Holdings, Inc., Pioneer Production Services, Inc., Pioneer Services Holdings, LLC, Pioneer Well Services, LLC, Pioneer Wireline Services Holdings, Inc. and Pioneer Wireline Services, LLC filed voluntary petitions for relief under Title 11 (“Chapter 11”) of the United States Code (the “Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) and, on March 2, 2020, filed the prepackaged Chapter 11 plan of reorganization (the “Plan”) with the Bankruptcy Court.

On May 11, 2020, the Bankruptcy Court entered an order, Docket No. 331 (the “Confirmation Order”) confirming the Plan. On May 29, 2020 (the “Effective Date”) the conditions to effectiveness of the Plan were satisfied and the Company emerged from Chapter 11. The Company filed a notice of the Effective Date of the Plan with the Bankruptcy Court on May 29, 2020 (the “Notice of Effective Date”). A copy of the Notice of Effective Date is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

As part of the transactions undertaken pursuant to the Plan, the Company was converted from a Texas corporation to a Delaware corporation.

The Convertible Notes will mature on November 15, 2025, unless earlier redeemed, converted or repurchased. The Convertible Notes are general unsecured obligations of the Company. The Convertible Notes bear interest at a fixed rate of 5% per annum, which will be payable semi-annually in-kind in the form of an increase to the principal amount.

The Convertible Notes are convertible at the option of the holders at any time into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Convertible Notes will convert mandatorily into Common Stock at maturity; provided, however, that if the value of the Common Stock otherwise deliverable in connection with a mandatory conversion of a Convertible Note on the maturity date would be less than the principal amount of such Convertible Note plus accrued and unpaid interest, then the Convertible Note will instead convert into an amount of cash equal to the principal amount thereof plus accrued and unpaid interest. The initial conversion rate is 75 shares of the Common Stock per $1,000 principal amount of the Convertible Notes. The conversion rate is subject to customary anti-dilution adjustments.

If the Company undergoes a “fundamental change” as defined in the Convertible Notes Indenture, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes. The fundamental change repurchase price will be 100% of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid interest. In the case of certain fundamental change events that constitute merger events (as defined in the Convertible Notes Indenture), the Company has a superseding right to cause the mandatory conversion of the Convertible Notes.

The Company may, at its option, cause the conversion of all or part of the Convertible Notes into, per $1,000 principal amount of Convertible Notes, a number of shares of Common Stock equal to the then-current conversion rate or the cash value of such number of shares of Common Stock (but not less than the principal amount of the Convertible Notes), upon the consummation of a “merger event” (as defined in the Convertible Notes Indenture).

Holders of Convertible Notes are entitled to vote on all matters on which holders of Common Stock generally are entitled to vote (or, if any, to take action by written consent of the holders of Common Stock), voting together as a single class together with the shares of Common Stock and not as a separate class, on an as-converted basis, at any annual or special meeting of holders of Common Stock of the Company and each holder is entitled to such number of votes as such holder would receive on an as-converted basis on the record date for such vote.

The Convertible Notes Indenture contains covenants that limit the Company’s ability and the ability of certain of its subsidiaries to incur, assume or guarantee additional indebtedness and create liens and enter into mergers or consolidations.

The Convertible Notes Indenture contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or other similar law, with respect to the Company or any significant subsidiary of the Company, all outstanding Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the Convertible Notes then outstanding may declare the Convertible Notes due and payable immediately.

The Convertible Notes Indenture provides, subject to certain exceptions, that for so long as the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), a beneficial owner of the Convertible Notes is not entitled to receive shares of Common Stock upon an optional conversion of any Convertible Notes during any period of time in which the aggregate number of shares of Common Stock that may be acquired by such beneficial owner upon conversion of Convertible Notes shall, when added to the aggregate number of shares of Common Stock deemed beneficially owned, directly or indirectly, by such beneficial owner and each person subject to aggregation of Common Stock with such beneficial owner under Section 13 or Section 16 of the Exchange Act at such time, exceed 9.99% of the total issued and outstanding shares of Common Stock.

The foregoing description of the Convertible Notes Indenture and the Convertible Notes is qualified in its entirety by the full text of those documents, which are attached as Exhibits 4.1 and 4.2 to this Form 8-K and are incorporated herein by reference.

Senior Secured Notes Indenture and Senior Secured Notes due 2025

The Company entered into an indenture, dated as of the Effective Date (the “Senior Secured Notes Indenture”), among the Company, the subsidiary guarantor party thereto and Wilmington Trust, N.A., as trustee, and issued $78,125,000 aggregate principal amount of its floating rate senior secured notes due 2025 (the “Senior Secured Notes”) thereunder. The

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Senior Secured Notes are guaranteed on a senior secured basis by the Company’s existing subsidiaries that also guarantee its obligations under the ABL Credit Agreement (the “Guarantors”) on a full and unconditional basis and are secured by a second lien on the accounts receivable and inventory and a first lien on substantially all of the other assets and properties (including the cash proceeds thereof) of the Company and the Guarantors. The following is a brief description of the material provisions of the Senior Secured Notes Indenture and the Senior Secured Notes.

The Senior Secured Notes will mature on May 15, 2025. Interest on the Senior Secured Notes will accrue at the rate of LIBOR plus 9.50% per annum, with a LIBOR rate floor of 1.5%, and will be payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 2020. With respect to any interest payment due on or prior to May 29, 2021, 50% of the interest will be payable in cash and 50% of the interest will be paid in-kind in the form of an increase to the principal amount. A majority of the holders of the Senior Secured Notes may amend the Senior Secured Notes Indenture to provide that 100% of the interest will be payable in-kind with respect to any interest payment due on or prior to May 29, 2021. For all interest periods commencing on or after May 15, 2024, the interest rate for the Senior Secured Notes for a particular interest period will be a rate equal to LIBOR plus 10.50%, with a LIBOR rate floor of 1.5%.

The Company may not redeem the Senior Secured Notes prior to June 1, 2021. On and after June 1, 2021, the Company may redeem all or part of the Senior Secured Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 104.000% for the twelve-month period beginning on June 1, 2021; (ii) 102.000% for the twelve-month period beginning on June 1, 2022; (iii) 101.000% for the twelve-month period beginning on June 1, 2023 and (iii) 100.000% for the twelve-month period beginning June 1, 2024 and at any time thereafter, plus accrued and unpaid interest at the redemption date. Notwithstanding the foregoing, if a change of control (as defined in the Senior Secured Notes Indenture) occurs prior to June 1, 2022, the Company may elect to purchase all remaining outstanding Senior Secured Notes not tendered to the Company as described below at a redemption price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the applicable redemption date.

If a change of control (as defined in the Senior Secured Notes Indenture) occurs, holders of the Senior Secured Notes will have the right to require the Company to repurchase all or any part of their Senior Secured Notes at a purchase price equal to 101.000% of the aggregate principal amount of the Senior Secured Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

The Senior Secured Notes Indenture contains covenants that limit, among other things, the Company’s ability and the ability of certain of its subsidiaries, to: incur, assume or guarantee additional indebtedness; pay dividends or distributions on capital stock or redeem or repurchase capital stock; make investments; repay junior debt; sell stock of its subsidiaries; transfer or sell assets; enter into sale and lease back transactions, create liens; enter into transactions with affiliates; and enter into mergers or consolidations.

The Company is also subject to a minimum asset coverage ratio, pursuant to which the Company shall not permit its asset coverage ratio to be less than 1.5 to 1 as of any June 30 or December 31.

The Senior Secured Notes Indenture also provides for certain customary events of default, including, among others, nonpayment of principal or interest, breach of covenants, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, failure of a security document to create an effective security interest in collateral, bankruptcy and insolvency events, and cross acceleration, which would permit the principal, premium, if any, interest and other monetary obligations on all the then outstanding Senior Secured Notes to be declared due and payable immediately.

The foregoing description of the Senior Secured Notes Indenture and the Senior Secured Notes is qualified in its entirety by the full text of those documents, which are attached as Exhibits 4.3 and 4.4 to this Form 8-K and are incorporated herein by reference.

Intercreditor Agreement

On the Effective Date, PNC Bank, National Association, as administrative agent under the ABL Credit Agreement, Wilmington Trust, N.A. as collateral agent under the Senior Secured Notes Indenture, and the Company and certain of its subsidiaries entered into an intercreditor agreement (the “Intercreditor Agreement”) that, among other things, sets forth the relative lien priorities of the secured parties under the ABL Credit Agreement and the Senior Secured Notes Indenture on the collateral securing the Borrowers’ obligations under the ABL Credit Agreement and the Senior Secured Notes Indenture. Obligations under the ABL Credit Agreement are secured by a first-priority lien on ABL Priority Collateral, which generally includes accounts receivables and inventory assets of the Borrowers, whereas obligations under the Senior Secured Notes are secured by a first-priority lien on Notes Priority Collateral, which generally includes most fixed assets, equity interests and intellectual property of the Borrowers.

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The foregoing description of the Intercreditor Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Intercreditor Agreement, which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.

Registration Rights Agreement

On the Effective Date, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with certain parties who received the Company’s Common Stock and the Convertible Notes on the Effective Date (the “Securityholders”). The Registration Rights Agreement provides resale registration rights for the Securityholders’ Registrable Securities (as defined in the Registration Rights Agreement).

Pursuant to the Registration Rights Agreement, Securityholders have customary demand, shelf and piggyback registration rights, subject to the limitations set forth in the Registration Rights Agreement. Under their demand registration rights, Securityholders with an aggregate ownership percentage of at least 30% (15% after the Company completes its initial underwritten public offering (as such term is defined in the Registration Rights Agreement)) have the right to demand the Company register any or all of their Registrable Securities under the Securities Act of 1933. The Company is not obligated to effect a demand registration under certain circumstances.

These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in an offering and the Company’s right to delay or withdraw a registration statement under certain circumstances. The Company will generally pay all registration expenses in connection with its obligations under the Registration Rights Agreement, regardless of whether a registration statement is filed or becomes effective. The registration rights granted in the Registration Rights Agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as blackout periods.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is attached hereto as Exhibit 10.3 and is incorporated by reference herein.

David Coppé currently serves on the board of Legacy Reserves Inc., an oil and gas producer focused on horizontal development in the Permian basin. He also serves on the board of RDV Resources (f/k/a Sheridan I). Mr. Coppé served as director and head of energy, private equity of Caisse de Dépôt et Placement du Québec from March 2017 until March 2019. Mr. Coppé was also a co-founder and partner at Cadent Energy Partners, LLC, an energy-focused private equity firm, and chief executive officer of Probe Holdings, Inc., an independent manufacturer of wireline and downhole equipment for oil and gas wells. He started his career as a field engineer for Schlumberger and also worked for Goldman Sachs. Mr. Coppé received an M.B.A. from Massachusetts Institute of Technology and a Mechanical Engineering degree from the University of Louvain, Belgium.

John Jacobi began his full-time employment in the energy business in 1981 working for Woolf & Magee Inc., a drilling, exploration and production company. In 1991, Mr. Jacobi co-founded Jacobi-Johnson Energy, Inc., an independent oil and gas producer, and served as its president focusing on acquisitions in the Ark-La-Tex and Gulf Coast Basins. In 1998, Jacobi-Johnson Energy, Inc. was sold to EXCO Resources, where Mr. Jacobi served as vice president of business development and marketing and led the acquisition efforts on transactions valued at approximately $8 billion. In June 2013, Mr. Jacobi co-founded Covey Park Energy, Inc., again focusing on acquisitions and served as its co-chief executive officer. Covey Park Energy, Inc. was sold to Comstock Resources in July 2019, and Mr. Jacobi currently serves on its board.

Matt Porter is currently a founding partner at Activos, LLC, a consulting company in domestic and international oilfield service industry and Allied Industrial Partners, an investment firm that focuses on investments in manufacturing, distribution, energy and industrial service companies. Previously, he was a chief executive officer, president and director at Xtreme Drilling Corp. and chief financial officer at Bronco Drilling Company. He started his career at BOK Financial Corp. as portfolio manager. Mr. Porter received his M.B.A. and B.B.A. from University of Oklahoma.

Other than as set forth in the Plan, there are no arrangements or understandings between any of the listed directors and any other persons pursuant to which such director was selected as a director and there are no transactions in which any of the listed directors has an interest in which requires disclosure under Item 404(a) of Regulation S-K.

Equity Incentive Plan

Pursuant to the terms of the Plan, the Company adopted the Pioneer Energy Services Corp. 2020 Equity Incentive Plan (the “Equity Incentive Plan”) providing for the issuance from time to time, as approved by the Company’s new board of directors, of equity and equity-based awards with respect to the Common Stock in the aggregate and on a fully-diluted basis, of up to 1,198,074 shares of Common Stock, representing approximately 114 percent (114%) of the shares of Common Stock issued on the Effective Date, but representing 10 percent (10%) of the shares of Common Stock issued on the Effective Date on a fully-diluted basis. The shares of Common Stock issued under the Equity Incentive Plan in the future will dilute all of the shares of Common Stock issued on the Effective Date and all shares of Common Stock issued upon conversion of the Convertible Notes equally.

The foregoing description of the Equity Incentive Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Equity Incentive Plan, which is attached hereto as Exhibit 10.4 and is incorporated by reference herein.

Severance Plan

Pursuant to the terms of the Plan, the Company adopted the Pioneer Energy Services Corp. Key Executive Severance Plan (the “Severance Plan”) providing for protection for loss of salary and benefits in the event of certain involuntary terminations of employment from the Company for sixteen key employees (each a “participant”) to assist the Company in retaining an intact management team.

The Severance Plan provides that if an eligible participant’s employment with the Company is terminated by the Company other than for “cause” or due to voluntary resignation by the participant with “good reason” (each as defined in the Severance Plan), the participant will be eligible to receive accrued benefits (including base salary, vacation pay and other earned benefits) and a lump-sum cash payment in an amount set forth in Schedule A to the Severance Plan, as well as continuation of life insurance and medical benefits for twelve months from the date of the such termination.

Receipt of severance benefits are subject to the participant’s execution of a release of any claims against the Company and compliance with restrictive covenants, including non-competition and non-solicitation covenants.

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The foregoing description of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Severance Plan, which is attached hereto as Exhibit 10.5 and is incorporated by reference herein.

With respect to the Bylaws, the material differences between the Bylaws and the Prior Bylaws are as follows:

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The foregoing description of the Certificate of Incorporation and the Bylaws does not purport to be complete and is

qualified in its entirety by reference to the full text of the Certificate of Incorporation and the Bylaws, which are attached hereto as Exhibits 3.1 and 3.2 and are incorporated by reference herein.

The information contained in this Item 7.01 and Exhibit 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing. The filing of this Current Report on Form 8-K (including the exhibit hereto or any information included herein or therein) shall not be deemed an admission as to the materiality of any information herein that is required to be disclosed solely by reason of Regulation FD.