Note

- Chapter

Proceeding and Emergence

Overview

July 8, 2016,

the Debtors, including C&J Corporate Services (Bermuda) Ltd. (together with the Predecessor, the “Bermudian Entities”), C&J Energy Production Services-Canada Ltd. and Mobile Data Technologies Ltd. (together, the

“Canadian Entities”), entered into a Restructuring Support and Lock-Up Agreement (the “Restructuring Support Agreement”), with certain lenders (the “Supporting Lenders”) holding approximately

90.0%

of the secured claims and interests arising under the Credit Agreement, dated as of

March

24,

2015

(as amended and otherwise modified, the “Original Credit Agreement”). The Restructuring Support Agreement contemplated the implementation of a financial restructuring of the Company, including the elimination of all amounts owed under the Original Credit Agreement through a complete debt-to-equity conversion and a re-investment in the Company through an equity rights offering. This financial restructuring was effectuated through the Restructuring Plan under Chapter

of the Bankruptcy Code.

To implement the Restructuring Support Agreement, on

July 20, 2016

(

the “Petition Date”), the Debtors filed voluntary petitions for reorganization (the “Bankruptcy Petitions”) seeking relief under the provisions of Chapter

of the Bankruptcy Code with the

United States Bankruptcy Court in the Southern District of Texas, Houston Division

(the “Bankruptcy Court”), and also commenced ancillary proceedings in Canada on behalf of the Canadian Entities and a provisional liquidation proceeding in Bermuda on behalf of the Bermudian Entities. The Chapter

Proceeding was being administered under the caption “

In re: CJ Holding Co., et al., Case

No.

33590

”. Throughout the Chapter

Proceeding, the Debtors continued operations and management of their assets in the ordinary course as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

In accordance with the Restructuring Support Agreement, the Debtors filed the Restructuring Plan and related disclosure statement (the “Disclosure Statement”) with the Bankruptcy Court on

August 19, 2016,

with a

first

amendment to the Restructuring Plan filed on

September 28, 2016

and a

second

amendment filed on

November 3, 2016.

November 4, 2016,

the Bankruptcy Court approved the Disclosure Statement, finding that the Disclosure Statement contained adequate information as required by the Bankruptcy Code. The Debtors then launched a solicitation of acceptances of the Restructuring Plan, as required by the Bankruptcy Code. On

December

16,

2016,

an order confirming the Restructuring Plan was entered by the Bankruptcy Court. On the Plan Effective Date, the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter

Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan, as of the Plan Effective Date, the Successor was formed, the Predecessor's equity was canceled, the Predecessor transferred all of its assets and operations to the Successor and the Predecessor was subsequently dissolved. As a result, the Successor became the successor issuer to the Predecessor.

The key terms of the restructuring included in the Restructuring Plan were as follows:

•

Debt-to-equity Conversion: As of the Plan Effective Date, the Supporting Lenders were issued new common equity (“New Equity”) in the Successor, as the ultimate parent company of the reorganized Debtors, and all of the existing shares of the Predecessor's common equity were canceled.

•

The Rights Offering, Backstop Commitment:

The Company offered its secured lenders the right to purchase New Equity in an amount of up to

$200.0

million as part of the approved Restructuring Plan (the “Rights Offering”). Certain of the Supporting Lenders (the “Backstop Parties”) agreed to backstop the full amount pursuant to a Backstop Commitment Agreement, in exchange for a commitment premium of

5.0%

of the

$200.0

million committed amount payable in New Equity to the Backstop Parties (the “Backstop Fee”). The Rights Offering was consummated on the Plan Effective Date and the shares were issued at a price that reflects a discount of

20.0%

to the Restructuring Plan value, which was

$750.0

million.

•

DIP Facility: Certain of the Supporting Lenders (the “DIP Lenders”) provided a superpriority secured delayed draw term loan facility to the Predecessor in an aggregate principal amount of up to

$100.0

million (the “DIP Facility”). As further discussed below, on

July 25, 2016,

the Bankruptcy Court entered an order approving the Debtors

’ entry into the DIP Facility on an interim basis, pending a final hearing. On

July 29, 2016,

the Debtors entered into a superpriority secured debtor-in-possession credit agreement, among the Debtors, the DIP Lenders and Cortland Capital Market Services LLC, as Administrative Agent (the “DIP Credit Agreement”), which set forth the terms and conditions of the DIP Facility. On

September 25, 2016,

the Bankruptcy Court entered a final order approving entry into the DIP Facility and DIP Credit Agreement. The Company repaid all amounts outstanding under the DIP Facility on the Plan Effective Date using proceeds from the Rights Offering.

•

The New Credit Facility:

The Successor and certain of its subsidiaries, as borrowers (the “Borrowers”), entered into a revolving credit and security agreement (the “New Credit Facility”) dated the Plan Effective Date with a maturity date of

January 6, 2021,

with PNC Bank, National Association, as administrative agent (the “Agent”). The Borrowers subsequently amended and restated the New Credit Facility in full pursuant to an amended and restated credit and security agreement (the “Amended Credit Facility”) dated

May 4, 2017,

with the Agent and the lenders party thereto. The Amended Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of

$200.0

million and a borrowing base, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory. The Amended Credit Facility also provides for the issuance of letters of credit, which would reduce borrowing capacity thereunder. The maturity date of the Amended Credit Facility is

May 4, 2022.

•

The New Warrants:

As of the Plan Effective Date, the Company agreed to issue new

seven

-year warrants exercisable on a net-share settled basis into up to

6.0%

of the New Equity at a strike price of

$27.95

per warrant (the “New Warrants”). New Warrants representing up to

2.0%

of the New Equity were issued to existing holders of Predecessor common equity as a result of such holders voting as a class to accept the Restructuring Plan, and the remaining New Warrants representing up to

4.0%

of the New Equity were issued to a

third

party who acquired them from the representative for the Debtors' general unsecured creditors.

•

Distributions:

The DIP Lenders received payment in full in cash on the Plan Effective Date from cash on hand and proceeds from the Rights Offering. The Supporting Lenders received all of the New Equity, subject to dilution on account of the Management Incentive Plan (as defined below), the Rights Offering, the Backstop Fee and the New Warrants, along with all of the subscription rights under the Rights Offering. Under the Restructuring Plan, mineral contractor claimants have or will be paid in full in the ordinary course of business. Additionally, subject to the terms of the Restructuring Plan, certain other unsecured claimants will share in a

$33.0

million cash recovery pool, plus a portion of the New Warrants, as described above.

•

Management Incentive Plan:

10.0%

of the New Equity was reserved for a management incentive program to be issued to management of the Company after the Plan Effective Date from time to time at the discretion of the board of the reorganized Company (the “Management Incentive Plan”). See Note

- Share-Based Compensation for additional information regarding the Management Incentive Plan.

•

Governance: The board of the Successor was appointed by the Supporting Lenders and includes the Successor's Chief Executive Officer.

Liabilities Subject to Compromise

As of

December 31, 2016,

the Company had segregated liabilities and obligations whose treatment and satisfaction were dependent on the outcome of its reorganization under the Chapter

Proceeding and had classified these items as liabilities subject to compromise. Generally, all actions to enforce or otherwise effect repayment of pre-petition liabilities of the Debtors, as well as all pending litigation against the Debtors, were subject to the Chapter

Proceeding. Liabilities subject to compromise includes only those liabilities that are obligations of the Debtors and excludes the obligations of the Predecessor's non-debtor subsidiaries.

Principal and accrued interest owed to the Supporting Lenders as of the Petition Date were settled via the issuance of New Equity under the Restructuring Plan. Interest expense incurred subsequent to the Petition Date was

not

accrued since it was

not

treated as an allowed claim under the Restructuring Plan. For the year ended

December 31, 2016,

the Company did

not

accrue interest totaling

$60.5

million under the Original Credit Agreement subsequent to the Petition Date.

As of

December 31, 2016,

the Company classified the entire principal balance of the Revolving Credit Facility, the Five-Year Term Loans and the Seven-Year Term Loans (see Note

- Debt for defined terms), as well as interest that was accrued but unpaid as of the Petition Date, as liabilities subject to compromise in accordance with ASC

852

- Reorganizations. The components of liabilities subject to compromise were as follows (in thousands):

	December 31, 2016
Revolving Credit Facility	$	284,400
Five-Year Term Loans		569,250
Seven-Year Term Loans		480,150
Total debt subject to compromise		1,333,800
Accrued interest on debt subject to compromise		37,516
Accounts payable and other estimated allowed claims		60,780
Related party payables		13,250
Total liabilities subject to compromise	$	1,445,346

Reorganization Items

The Company classifies all income, expenses, gains or losses that were incurred or realized as a result of the Chapter

Proceeding as reorganization items in its consolidated statements of operations. In addition, the Company reports professional fees and related costs associated with and incurred during the Chapter

Proceeding as reorganization items. The components of reorganization items are as follows (in thousands):

	Year Ended December 31, 2016			On January 1, 2017
Gain on settlement of liabilities subject to compromise	$	—		$	666,399
Net loss on fresh start fair value adjustments		—			(358,557	)
Professional fees		(41,240	)		(13,435	)
Contract termination settlements		(20,383	)		—
Revision of estimated claims		(782	)		—
Related party settlement		5,226			—
Vendor claims adjustment		1,849			(438	)
Total reorganization items	$	(55,330	)	$	293,969

While the Company's emergence from bankruptcy is complete, certain administrative activities will continue under the authority of the Bankruptcy Court for the next several months.