Guarantor/Non Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2020

Guarantor Non-Guarantor Condensed Consolidated Financial Statements

Guarantor/Non Guarantor Condensed Consolidated Financial Statements

Guarantor/Non-Guarantor Condensed Consolidating Financial Statements

Our Prepetition Senior Notes were fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all existing 100% owned domestic subsidiaries, except for Pioneer Services Holdings, LLC. The Prepetition Senior Notes, the guarantees, and the Prepetition Senior Notes Indenture were terminated on the Effective Date pursuant to the Plan. See Note 2, Emergence from Voluntary Reorganization under Chapter 11, for more information.

Our Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by all existing 100% owned domestic subsidiaries, except for Pioneer Services Holdings, LLC.

The subsidiaries that generally operate our non-U.S. business concentrated in Colombia do not guarantee our Senior Secured Notes and did not guarantee our Prepetition Senior Notes. The non-guarantor subsidiaries do not have any payment obligations under the Senior Secured Notes, the guarantees or the Senior Secured Notes Indenture.

In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, such non-guarantor subsidiary would be obligated to pay the holders of its debt and other liabilities, including its trade creditors, before it would be able to distribute any of its assets to us. As of June 30, 2020, there were no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company.

As a result of the guarantee arrangements, we are presenting the following Predecessor and Successor condensed consolidating balance sheets, statements of operations and statements of cash flows of the issuer, the guarantor subsidiaries, and the non-guarantor subsidiaries.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(unaudited, in thousands)

	Successor
	June 30, 2020
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	12,534		$	—	$	2,627		$	—		$	15,161
Restricted cash	16,173			—		—			—			16,173
Receivables, net of allowance	413			50,286		13,707			302			64,708
Intercompany receivable (payable)	(2,786		)	30,855		(28,069		)	—			—
Inventory	—			5,321		7,735			—			13,056
Assets held for sale	—			7,292		—			—			7,292
Prepaid expenses and other current assets	2,469			2,510		265			405			5,649
Total current assets	28,803			96,264		(3,735		)	707			122,039
Net property and equipment	521			160,610		25,109			—			186,240
Investment in subsidiaries	250,356			37,491		—			(287,847		)	—
Intangible assets, net of accumulated amortization	9,292			—		—			—			9,292
Deferred income taxes	—			—		9,140			(1		)	9,139
Operating lease assets	2,800			2,177		63			—			5,040
Other noncurrent assets	1,784			82		10,184			—			12,050
Total assets	$	293,556		$	296,624	$	40,761		$	(287,141	)	$	343,800
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,643		$	7,720	$	2,785		$	—		$	16,148
Deferred revenues	—			74		163			405			642
Accrued expenses	13,886			35,994		278			(1,012		)	49,146
Total current liabilities	19,529			43,788		3,226			(607		)	65,936
Long-term debt, less unamortized discount and debt issuance costs	142,005			—		—			—			142,005
Noncurrent operating lease liabilities	2,467			1,587		44			—			4,098
Deferred income taxes	254			818		—			(1		)	1,071
Other noncurrent liabilities	159			75		—			1,314			1,548
Total liabilities	164,414			46,268		3,270			706			214,658
Total stockholders’ equity	129,142			250,356		37,491			(287,847		)	129,142
Total liabilities and stockholders’ equity	$	293,556		$	296,624	$	40,761		$	(287,141	)	$	343,800
	Predecessor
	December 31, 2019
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	14,461		$	—	$	10,158		$	—		$	24,619
Restricted cash	998			—		—			—			998
Receivables, net of allowance	107			92,394		30,908			117			123,526
Intercompany receivable (payable)	(28,664		)	64,485		(35,821		)	—			—
Inventory	—			10,325		12,128			—			22,453
Assets held for sale	—			3,447		—			—			3,447
Prepaid expenses and other current assets	2,849			4,122		898			—			7,869
Total current assets	(10,249		)	174,773		18,271			117			182,912
Net property and equipment	2,374			441,567		27,229			—			471,170
Investment in subsidiaries	547,123			47,953		—			(595,076		)	—
Deferred income taxes	44,224			—		11,540			(44,224		)	11,540
Operating lease assets	3,114			3,581		569			—			7,264
Other noncurrent assets	506			562		—			—			1,068
Total assets	$	587,092		$	668,436	$	57,609		$	(639,183	)	$	673,954
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,811		$	24,436	$	6,304		$	—		$	32,551
Deferred revenues	—			513		826			—			1,339
Accrued expenses	10,570			44,893		2,111			117			57,691
Total current liabilities	12,381			69,842		9,241			117			91,581
Long-term debt, less unamortized discount and debt issuance costs	467,699			—		—			—			467,699
Noncurrent operating lease liabilities	2,749			2,536		415			—			5,700
Deferred income taxes	—			48,641		—			(44,224		)	4,417
Other noncurrent liabilities	187			294		—			—			481
Total liabilities not subject to compromise	483,016			121,313		9,656			(44,107		)	569,878
Total stockholders’ equity	104,076			547,123		47,953			(595,076		)	104,076
Total liabilities and stockholders’ equity	$	587,092		$	668,436	$	57,609		$	(639,183	)	$	673,954

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Successor
	One Month Ended June 30, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	10,335		$	828		$	—		$	11,163
Costs and expenses:
Operating costs	—			7,680			1,063			—			8,743
Depreciation and amortization	124			4,036			1,076			—			5,236
General and administrative	2,429			1,703			146			(65		)	4,213
Intercompany leasing	—			(405		)	405			—			—
Impairment	—			388			—			—			388
Bad debt expense (recovery), net	—			(283		)	—			—			(283		)
Gain on dispositions of property and equipment, net	—			(460		)	—			—			(460		)
Total costs and expenses	2,553			12,659			2,690			(65		)	17,837
Income (loss) from operations	(2,553		)	(2,324		)	(1,862		)	65			(6,674		)
Other income (expense):
Equity in earnings of subsidiaries	(4,312		)	(1,656		)	—			5,968			—
Interest expense	(2,217		)	—			2			—			(2,215		)
Reorganization items, net	(741		)	(403		)	—			—			(1,144		)
Other income	6			89			(260		)	(65		)	(230		)
Total other income (expense), net	(7,264		)	(1,970		)	(258		)	5,903			(3,589		)
Income (loss) before income taxes	(9,817		)	(4,294		)	(2,120		)	5,968			(10,263		)
Income tax (expense) benefit 1	—			(18		)	464			—			446
Net income (loss)	$	(9,817	)	$	(4,312	)	$	(1,656	)	$	5,968		$	(9,817	)
	Predecessor
	Two Months Ended May 31, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	26,575		$	1,473		$	—		$	28,048
Costs and expenses:
Operating costs	—			20,487			1,538			—			22,025
Depreciation and amortization	147			12,673			843			—			13,663
General and administrative	2,922			4,277			283			(90		)	7,392
Pre-petition restructuring charges	(252		)	—			—			—			(252		)
Intercompany leasing	—			(810		)	810			—			—
Bad debt expense (recovery), net	—			482			—			—			482
Gain on dispositions of property and equipment, net	—			(272		)	—			—			(272		)
Total costs and expenses	2,817			36,837			3,474			(90		)	43,038
Income (loss) from operations	(2,817		)	(10,262		)	(2,001		)	90			(14,990		)
Other income (expense):
Equity in earnings of subsidiaries	(202,279		)	(2,086		)	—			204,365			—
Interest expense	(4,138		)	(1		)	4			—			(4,135		)
Loss on extinguishment of debt	(3,723		)	—			—			—			(3,723		)
Reorganization items, net	217,009			(231,420		)	(829		)	—			(15,240		)
Other income	33			160			2,109			(90		)	2,212
Total other income (expense), net	6,902			(233,347		)	1,284			204,275			(20,886		)
Income (loss) before income taxes	4,085			(243,609		)	(717		)	204,365			(35,876		)
Income tax (expense) benefit 1	(39,206		)	41,330			(1,369		)	—			755
Net income (loss)	$	(35,121	)	$	(202,279	)	$	(2,086	)	$	204,365		$	(35,121	)

	Predecessor
	Three months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	127,421		$	25,422		$	—		$	152,843
Costs and expenses:
Operating costs	—			97,417			18,553			—			115,970
Depreciation and amortization	210			21,268			1,373			—			22,851
General and administrative	6,907			10,579			677			(135		)	18,028
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense (recovery), net	—			(348		)	—			—			(348		)
Impairment	—			332			—			—			332
Gain on dispositions of property and equipment, net	—			(1,121		)	(5		)	—			(1,126		)
Total costs and expenses	7,117			126,912			21,813			(135		)	155,707
Income (loss) from operations	(7,117		)	509			3,609			135			(2,864		)
Other income (expense):
Equity in earnings of subsidiaries	3,305			3,431			—			(6,736		)	—
Interest expense	(10,059		)	(1		)	(45		)	—			(10,105		)
Other income (expense)	91			401			(8		)	(135		)	349
Total other income (expense), net	(6,663		)	3,831			(53		)	(6,871		)	(9,756		)
Income (loss) before income taxes	(13,780		)	4,340			3,556			(6,736		)	(12,620		)
Income tax (expense) benefit 1	836			(1,035		)	(125		)	—			(324		)
Net income (loss)	$	(12,944	)	$	3,305		$	3,431		$	(6,736	)	$	(12,944	)
1  The income tax (expense) benefit reflected in each column does not include any tax effect of the equity in earnings (losses) of subsidiaries.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Successor
	One Month Ended June 30, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	10,335		$	828		$	—		$	11,163
Costs and expenses:
Operating costs	—			7,680			1,063			—			8,743
Depreciation and amortization	124			4,036			1,076			—			5,236
General and administrative	2,429			1,703			146			(65		)	4,213
Intercompany leasing	—			(405		)	405			—			—
Impairment	—			388			—			—			388
Bad debt recovery, net of expense	—			(283		)	—			—			(283		)
Gain on dispositions of property and equipment, net	—			(460		)	—			—			(460		)
Total costs and expenses	2,553			12,659			2,690			(65		)	17,837
Loss from operations	(2,553		)	(2,324		)	(1,862		)	65			(6,674		)
Other income (expense):
Equity in earnings of subsidiaries	(4,312		)	(1,656		)	—			5,968			—
Interest expense	(2,217		)	—			2			—			(2,215		)
Reorganization items, net	(741		)	(403		)	—			—			(1,144		)
Other income (expense)	6			89			(260		)	(65		)	(230		)
Total other expense, net	(7,264		)	(1,970		)	(258		)	5,903			(3,589		)
Loss before income taxes	(9,817		)	(4,294		)	(2,120		)	5,968			(10,263		)
Income tax (expense) benefit 1	—			(18		)	464			—			446
Net income (loss)	$	(9,817	)	$	(4,312	)	$	(1,656	)	$	5,968		$	(9,817	)
	Predecessor
	Five Months Ended May 31, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	126,442		$	15,928		$	—		$	142,370
Costs and expenses:
Operating costs	—			100,372			13,675			—			114,047
Depreciation and amortization	374			33,129			2,144			—			35,647
General and administrative	8,865			12,489			918			(225		)	22,047
Pre-petition restructuring charges	16,822			—			—			—			16,822
Intercompany leasing	—			(2,025		)	2,025			—			—
Impairment	—			17,853			—			—			17,853
Bad debt recovery, net of expense	—			1,209			—			—			1,209
Loss (gain) on dispositions of property and equipment, net	3			(992		)	—			—			(989		)
Total costs and expenses	26,064			162,035			18,762			(225		)	206,636
Loss from operations	(26,064		)	(35,593		)	(2,834		)	225			(64,266		)
Other income (expense):
Equity in earnings of subsidiaries	(227,497		)	(8,594		)	—			236,091			—
Interest expense	(12,315		)	—			21			—			(12,294		)
Reorganization items, net	210,346			(231,420		)	(829		)	—			(21,903		)
Loss on extinguishment of debt	(4,215		)	—			—			—			(4,215		)
Other income (expense)	(4		)	394			(3,498		)	(225		)	(3,333		)
Total other expense, net	(33,685		)	(239,620		)	(4,306		)	235,866			(41,745		)
Loss before income taxes	(59,749		)	(275,213		)	(7,140		)	236,091			(106,011		)
Income tax (expense) benefit 1	(44,476		)	47,716			(1,454		)	—			1,786
Net income (loss)	$	(104,225	)	$	(227,497	)	$	(8,594	)	$	236,091		$	(104,225	)

	Predecessor
	Six months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	252,346		$	47,065		$	—		$	299,411
Costs and expenses:
Operating costs	—			189,519			35,036			—			224,555
Depreciation and amortization	490			42,298			2,716			—			45,504
General and administrative	14,903			22,025			1,128			(270		)	37,786
Intercompany leasing	—			(2,430		)	2,430			—			—
Impairment	—			1,378			—			—			1,378
Bad debt recovery, net of expense	—			(286		)	—			—			(286		)
Gain on dispositions of property and equipment, net	—			(2,105		)	(96		)	—			(2,201		)
Total costs and expenses	15,393			250,399			41,214			(270		)	306,736
Income (loss) from operations	(15,393		)	1,947			5,851			270			(7,325		)
Other income (expense):
Equity in earnings of subsidiaries	6,073			5,895			—			(11,968		)	—
Interest expense	(19,933		)	(15		)	(42		)	—			(19,990		)
Other income	297			667			339			(270		)	1,033
Total other income (expense), net	(13,563		)	6,547			297			(12,238		)	(18,957		)
Income (loss) before income taxes	(28,956		)	8,494			6,148			(11,968		)	(26,282		)
Income tax (expense) benefit 1	897			(2,421		)	(253		)	—			(1,777		)
Net income (loss)	$	(28,059	)	$	6,073		$	5,895		$	(11,968	)	$	(28,059	)
1  The income tax (expense) benefit reflected in each column does not include any tax effect of the equity in earnings (losses) of subsidiaries.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Successor
	One Month Ended June 30, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	(4,616	)	$	10,312		$	(979	)	$	—		$	4,717
Cash flows from investing activities:
Purchases of property and equipment	(14		)	(809		)	(77		)	—			(900		)
Proceeds from sale of property and equipment	—			752			—			—			752
	(14		)	(57		)	(77		)	—			(148		)
Cash flows from financing activities:
Intercompany contributions/distributions	16,730			(10,255		)	(6,475		)	—			—
	16,730			(10,255		)	(6,475		)	—			—
Net decrease in cash, cash equivalents and restricted cash	12,100			—			(7,531		)	—			4,569
Beginning cash, cash equivalents and restricted cash	16,607			—			10,158			—			26,765
Ending cash, cash equivalents and restricted cash	$	28,707		$	—		$	2,627		$	—		$	31,334
	Predecessor
	Five Months Ended May 31, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	(127,760	)	$	132,354		$	(6,839	)	$	—		$	(2,245	)
Cash flows from investing activities:
Purchases of property and equipment	(569		)	(8,755		)	(1,524		)	—			(10,848		)
Proceeds from sale of property and equipment	—			1,819			—			(154		)	1,665
Proceeds from insurance recoveries	—			22			—			—			22
	(569		)	(6,914		)	(1,524		)	(154		)	(9,161		)
Cash flows from financing activities:
Debt repayments	(175,000		)	—			—			—			(175,000		)
Proceeds from debt issuance	195,187			—			—			—			195,187
Proceeds from DIP Facility	4,000			—			—			—			4,000
Repayment of DIP Facility	(4,000		)	—			—			—			(4,000		)
Payments of debt issuance costs	(7,625		)	—			—			—			(7,625		)
Purchase of treasury stock	(8		)	—			—			—			(8		)
Intercompany contributions/distributions	116,923			(125,440		)	8,363			154			—
	129,477			(125,440		)	8,363			154			12,554
Net decrease in cash, cash equivalents and restricted cash	1,148			—			—			—			1,148
Beginning cash, cash equivalents and restricted cash	15,459			—			10,158			—			25,617
Ending cash, cash equivalents and restricted cash	$	16,607		$	—		$	10,158		$	—		$	26,765
	Predecessor
	Six months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	(35,104	)	$	35,209		$	3,941		$	—		$	4,046
Cash flows from investing activities:
Purchases of property and equipment	(314		)	(28,634		)	(2,434		)	—			(31,382		)
Proceeds from sale of property and equipment	—			3,376			63			—			3,439
Proceeds from insurance recoveries	—			588			—			—			588
	(314		)	(24,670		)	(2,371		)	—			(27,355		)
Cash flows from financing activities:
Purchase of treasury stock	(125		)	—			—			—			(125		)
Intercompany contributions/distributions	10,784			(10,539		)	(245		)	—			—
	10,659			(10,539		)	(245		)	—			(125		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(24,759		)	—			1,325			—			(23,434		)
Beginning cash, cash equivalents and restricted cash	51,348			—			3,216			—			54,564
Ending cash, cash equivalents and restricted cash	$	26,589		$	—		$	4,541		$	—		$	31,130