Note

– Fresh Start Accounting

The Company will adopt the fresh start accounting provisions ("Fresh Start") on the Plan Effective Date in connection with the Company's emergence from bankruptcy. Although the effective date of the Restructuring Plan was

January

2017,

the Company will account for the consummation of the Restructuring Plan as if it had occurred on

January

2017

and has implemented Fresh Start reporting as of that date. The adoption of Fresh Start accounting will result in a new reporting entity, the Successor, for financial reporting purposes. The presentation is analogous to that of a new business entity such that on the Plan Effective Date the Successor's consolidated financial statements reflect a new capital structure with no beginning retained earnings or deficit and a new basis in the identifiable assets and liabilities assumed. In order to adopt Fresh Start accounting, the Company has to meet the following

two

conditions: (i) holders of existing voting shares of the Predecessor immediately before the Plan Effective Date received less than

50.0%

of the voting shares of the Successor and (ii) the reorganization value of the Successor was less than its post-petition liabilities and estimated allowed claims.

As part of Fresh Start accounting, the Company is required to determine the reorganization value of the Successor upon emergence from the Chapter

Proceeding. Reorganization value approximates the fair value of the entity, before considering liabilities, and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. The fair value of the Successor's assets will be

determined with the assistance of a

third

party valuation expert who is expected to use

available comparable market data and quotations, discounted cash flow analysis, and other methods in determining the appropriate asset fair values. The reorganization value will be allocated to the Company's individual assets based on their estimated fair values.

Enterprise value, which was used to derive reorganization value, represents the estimated fair value of an entity’s capital structure which generally consists of long term debt and shareholders’ equity. The Successor’s enterprise value, as approved by the Bankruptcy Court in support of the Restructuring Plan, was estimated to be

$750

million which represented the mid-point of a determined range of

$600

million to

$900

million. The Successor's enterprise value of

$750

million was determined based upon

$725.9

million of New Equity and New Warrants as approved by the Bankruptcy Court and

$24.1

million of other liabilities that were not eliminated or discharged under the Restructuring Plan. The Successor's enterprise value was determined with the assistance of a separate

third

party valuation expert who used available comparable market data and quotations, discounted cash flow analysis and other internal financial information and projections. This enterprise value combined with the Company’s Rights Offering was the basis for deriving equity value. The Company’s estimates of fair value are inherently subject to significant uncertainties and contingencies beyond its control. Accordingly, there can be no assurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially. Moreover, the market value of the Company’s common stock subsequent to its emergence from bankruptcy

may

differ materially from the equity valuation derived for accounting purposes.

The unaudited pro forma balance sheet below summarizes the impact of the reorganization and the Fresh Start accounting as if the effective date of the emergence from bankruptcy had occurred on

December

31,

2016.

The reorganization value has been allocated to the assets acquired based upon their estimated fair values, as shown below. The estimated fair values of certain assets and liabilities, including property, plant and equipment, other intangible assets, taxes (including uncertain tax positions), and contingencies require significant judgments and estimates. C&J continues to assess the fair values of certain assets acquired and liabilities assumed, and these estimated fair values are preliminary and subject to material change (in thousands):

	Predecessor December 31, 2016			Reorganization Adjustments				Fresh Start Adjustments				Successor Pro forma December 31, 2016
				(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	64,583		$	111,281		(b)(c)(d)(e)(f)(g)	$	—			$	175,864
Accounts receivable		137,222			—				—				137,222
Inventories, net		54,471			—				—				54,471
Prepaid and other current assets		37,392			—				—				37,392
Deferred tax assets		6,020			—				—				6,020
Total current assets		299,688			111,281				—				410,969
Property, plant and equipment, net		950,811			—				(349,435	)	(h)		601,376
Other assets:
Intangible assets, net		76,057			—				(26,057	)	(h)		50,000
Deferred financing costs		—			2,248		(g)		—				2,248
Other noncurrent assets		35,045			—				—				35,045
Total assets	$	1,361,601		$	113,529			$	(375,492	)		$	1,099,638
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	75,193		$	—			$	—			$	75,193
Payroll and related costs		18,287			—				—				18,287
Accrued expenses		59,129			(16,051	)	(d)(e)		—				43,078
DIP Facility		25,000			(25,000	)	(e)		—				—
Other current liabilities		3,026			—				—				3,026
Total current liabilities		180,635			(41,051	)			—				139,584
Deferred tax liabilities		15,613			—				—				15,613
Other long-term liabilities		18,577			—				—				18,577
Total liabilities not subject to compromise		214,825			(41,051	)			—				173,744
Liabilities subject to compromise		1,445,346			(1,445,346	)	(a)(b)(c)						—
Commitments and contingencies
Shareholders' equity:
Common stock		1,195			555				(1,195	)	(i)		555
Additional paid-in capital		1,009,426			925,309				(1,009,426	)	(i)		925,309
Accumulated other comprehensive loss		(2,600	)		—				2,600		(i)		—
Retained earnings (deficit)		(1,306,591	)		674,062		(a)(c)		632,529		(h)(i)		—
Total shareholders' equity		(298,570	)		1,599,926				(375,492	)			925,864
Total liabilities and shareholders' equity	$	1,361,601		$	113,529			$	(375,492	)		$	1,099,638

(a) To record the discharge of indebtedness under the old Credit Agreement in exchange for the New Equity and to

reflect the issuance of the New Warrants.

(b) To record the settlement of liabilities subject to compromise related to contract cures,

503(b)(9)

claims and critical

vendors.

(d) To record the professional fees to be paid at or subsequent to emergence.

(e) To record repayment of DIP Facility and related accrued interest.

(f) To record the cash proceeds received from the

$200

million rights offering.

(g) To record deferred loan costs associated with the closing of the New Credit Facility.

(h) To record the Fresh Start accounting adjustments based upon the individual net asset fair values.

(i) To eliminate the historical equity of the Predecessor company in accordance with ASC

852,

Reorganizations.