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2020 EMERGENCE FROM VOLUNTARY REORGANIZATION UNDER CHAPTER 11
 12 Months Ended
Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
2020 EMERGENCE FROM VOLUNTARY REORGANIZATION UNDER CHAPTER 11 2020 EMERGENCE FROM VOLUNTARY REORGANIZATION UNDER CHAPTER 11
Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

On May 22, 2020, the Debtors filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The Chapter 11 proceedings were jointly administered under Case No. 20-32740 (DRJ). During the pendency of the Chapter 11 Cases, the Debtors operated their business as "debtors-in-possession" under the authority of the bankruptcy court and under the Bankruptcy Code.

On August 6, 2020, the bankruptcy court entered the “Findings of Fact, Conclusions of Law, and Order (I) approving the Disclosure Statement on a Final Basis and (II) confirming the Plan on a final basis. On September 3, 2020, the conditions to effectiveness for the Plan were satisfied, and the Debtors emerged from Chapter 11.

Following emergence, we implemented the Plan as follows:

•Each lender under the (i) the Unit credit agreement, and (ii) the DIP Credit Agreement received (or was entitled to receive) its pro rata share of revolving loans, term loans, and letter of credit participation under the Exit Credit Agreement, in exchange for the lender’s allowed claims under the Unit credit agreement or DIP Credit Agreement;
•Each lender under the Unit credit agreement and the DIP Credit Agreement received its pro rata share of an equity fee under the exit facility equal to 5% of the New Common Stock (subject to dilution by shares reserved for issuance under a management incentive plan and upon exercise of the warrants described below);
•The company issued a total of 12.0 million shares of New Common Stock at a par value of $0.01 per share to be subsequently distributed in accordance with the Plan;
•Each holder of the Notes received its pro rata share of New Common Stock based on equity allocations at each of Unit, UDC, and UPC in exchange for the holder’s allowed Notes claim;
•Each holder of an allowed general unsecured claim against Unit or UPC was entitled to receive its pro rata share of New Common Stock based on equity allocations at each of Unit and UPC, respectively;
•A disputed claims reserve was established for distribution of New Common Stock on allowance of certain disputed general unsecured claims;
•Each holder of an allowed general unsecured claim against UDC, 8200 Unit, Unit Drilling Colombia and Unit Drilling USA received payment or will receive payment in full for that claim in the ordinary course of business; and
•Each retained or former employee with a claim for vested severance benefits, who opted into a settlement, received or will receive cash payment(s) for the claim in lieu of an allocation of New Common Stock otherwise provided to holders of general unsecured claims.

All shares of New Common Stock are subject to the transfer restrictions in the company’s Amended and Restated Certificate of Incorporation (Charter). Article XIV of the Charter provides that, subject to the exceptions provided in Article XIV, any attempted transfer of the New Common Stock will be prohibited and void ab initio if (i) because of the transfer, any person becomes a Substantial Stockholder (as defined below) other than by reason of Treasury Regulations section 1.382-2T(j)(3) or (ii) the Percentage Stock Ownership (as defined in the Charter) interest of any Substantial Stockholder will be increased. A “Substantial Stockholder” means a person with a Percentage Stock Ownership of 4.75% or more.

Warrants

Each holder of the Old Common Stock outstanding before the Effective Date that did not opt out of the release under the Plan, is entitled to receive 0.03460447 warrants for every share of Old Common Stock owned. Each warrant will initially be exercisable for one share of New Common Stock, subject to adjustment as provided in the Warrant Agreement. The exercise price of the Warrants will be determined, and the Warrants will become exercisable, once the Debtors have completed the claims reconciliation process and resolved any objections to disputed claims under the Bankruptcy Petitions. The initial exercise price per share for the Warrants will be set at an amount that implies a recovery by holders of the Subordinated Notes of the $650 million principal amount of the Subordinated Notes plus interest thereon to the May 15, 2021 maturity date of the Notes. The Warrants expire on the earliest of (i) September 3, 2027, (ii) consummation of a Cash Sale (as defined in the Warrant Agreement) or (iii) the consummation of a liquidation, dissolutions or winding up of the company (such earliest date, the Expiration Date). Each Warrant that is not exercised on or before the Expiration Date will expire, and all rights under that Warrant and the Warrant Agreement will cease on the Expiration Date.

The warrants issued to holders of the company’s Old Common Stock that did not opt-out of the releases under the Plan and that owned their shares of old common stock through Direct Registration are outlined below:

Issuance DateWarrants Issued
December 21, 20201,764,164 
February 11, 202142,511 
July 29, 202110,521 
October 13, 20215,005 
Total1,822,201 

The company expects to issue approximately 21,117 more Warrants to the holders of the Old Common Stock that did not opt-out of the releases under the Plan and owned their shares through Direct Registration.

Events of Default

The filing of the Chapter 11 Cases, in addition to other events of default including cross-defaults, constituted an event of default that accelerated the company's obligations under the Unit credit agreement and the indenture governing the Notes. Under the Bankruptcy Code, the creditors under these debt agreements were stayed from taking any action against the company. Superior and its subsidiaries were not debtors in the Chapter 11 Cases, and the Chapter 11 Cases did not result in an event of default under the Superior credit agreement. In addition, the Debtors' filing of the bankruptcy petitions constituted a termination event under the Debtors' hedge agreements, which allowed the counterparties to those hedge agreements to terminate the outstanding hedges, as those termination events were not stayed by the Chapter 11 Cases.
On filing the Chapter 11 Cases, Unit entered into a Continuation Agreement (Continuation Agreement) with Superior, SPC Midstream Operating, L.L.C., and SP Investor to continue the parties' contractual relationships during the Chapter 11 Cases under the governance, operational, and related agreements entered into by those parties at the formation of the company’s midstream joint venture with SP Investor, which agreements contained certain provisions that otherwise would have been triggered by filing the Chapter 11 Cases.

Liquidity and Borrowings

The Debtors entered into the DIP Credit Agreement. Before repayment and termination on the Effective Date, borrowings under the DIP Credit Agreement would have matured on the earliest of (i) September 22, 2020 (subject to a two-month extension to be approved by the DIP lenders), (ii) the sale of all or substantially all the assets of the Debtors under Section 363 of the Bankruptcy Code or otherwise, (iii) the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases, (iv) the entry of an order by the bankruptcy court dismissing any of the Chapter 11 Cases or converting such Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code, and (v) the date of termination of the DIP lenders’ commitments and the acceleration of any outstanding extensions of credit, in each case, under the DIP Credit Agreement and subject to the bankruptcy court’s orders.

On the Effective Date, the DIP Credit Agreement was repaid in full and terminated. Following the Debtors’ emergence from the Chapter 11 Cases, each holder of an allowed claim under the DIP Credit Agreement received its pro rata share of revolving loans, term loans, and letter-of-credit participations under the Exit credit agreement. In addition, each holder received or was entitled to receive its pro rata share of an equity fee under the exit facility equal to 5% of the New Common Stock (subject to dilution by shares reserved for issuance under a management incentive plan and on exercise of the Warrants).

Also on the Effective Date, under the Plan, we entered into an amended and restated credit agreement (Exit credit agreement). Refer to Note 10 – Long-Term Debt And Other Long-Term Liabilities for the terms of the Exit credit agreement.

The Debtors discontinued recording interest on liabilities subject to compromise as of the filing of the Chapter 11 Cases. Contractual interest on liabilities subject to compromise not reflected in the consolidated statements of operations for the eight months ended August 31, 2020 was approximately $12.4 million, respectively, representing interest expense from the filing date through August 31, 2020. In addition, the Debtors did not make the May 15, 2020 $21.5 million required interest payment on the Notes.