8-K: Nine Energy Service Files Prepackaged Chapter 11

Nine Energy Service, Inc. and its subsidiaries have filed for voluntary prepackaged Chapter 11 bankruptcy to implement a financial restructuring plan supported by key debtholders, aiming for emergence within 45 days.

Summary

• Nine Energy Service, Inc. and certain subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code on February 1, 2026, in the Southern District of Texas.
• The filing aims to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring of the company's existing indebtedness.
• A Restructuring Support Agreement (RSA) was entered into with an ad hoc group of certain holders of the company's 13.000% Senior Secured Notes due 2028 (Consenting Stakeholders) and the Prepetition ABL Lenders.
• The Consenting Stakeholders, representing over 70% of Senior Secured Notes claims and 100% of Prepetition ABL claims, have agreed to support the Plan.
• The restructuring plan includes the Prepetition ABL Lenders providing a Debtor-in-Possession (DIP) ABL Facility of up to $125 million, which will convert into a new senior secured asset-based revolving credit facility (Exit ABL Facility) of up to $135 million on the Plan Effective Date.
• The reorganized company will issue 100% of a single class of common equity interests to the holders of the Senior Secured Notes, subject to dilution by a customary management equity incentive plan.
• The company's existing common stock will be canceled for no consideration, resulting in a complete loss for current shareholders.
• The company anticipates emerging from the Chapter 11 Cases within 45 days of the Petition Date.
• The restructuring will eliminate approximately $320 million of senior secured notes, reducing annual interest expense by roughly $40 million.
• All vendors and general unsecured creditors are expected to be unimpaired and paid in full.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a necessary but highly negative event for existing equity holders, who face a complete loss. While the prepackaged nature and new financing provide a clear path to a healthier balance sheet for the reorganized entity, the underlying financial distress and industry headwinds remain significant concerns.

Positives

• The restructuring plan has strong support from over 70% of Senior Secured Noteholders and 100% of Prepetition ABL Lenders, indicating a high likelihood of successful implementation.
• A commitment for a $125 million Debtor-in-Possession (DIP) ABL Facility will support ongoing operations throughout the Chapter 11 process.
• A commitment for a $135 million Exit ABL Facility upon emergence will provide enhanced liquidity for the reorganized company.
• The company expects to emerge from Chapter 11 within 45 days of the Petition Date, suggesting a swift and efficient process.
• Approximately $320 million in senior secured notes will be eliminated, leading to an estimated reduction in annual interest expense of roughly $40 million.
• All vendors and general unsecured creditors are expected to be unimpaired and paid in full, preserving key business relationships.
• Employee wages, compensation, and benefits programs will continue in the ordinary course of business without disruption.
• All employment agreements and D&O liability insurance policies will be assumed by the reorganized debtors.

Negatives

• The company filed for voluntary Chapter 11 bankruptcy, indicating significant financial distress.
• Existing common stock will be canceled for no consideration, resulting in a complete loss for current shareholders.
• The company previously faced an overleveraged capital structure, high interest expense costs, and limited ability to reinvest in its businesses.
• Challenging macroeconomic conditions in the oil and gas industry, including persistent pricing declines and reduced drilling/completion programs, continue to put pressure on gross margins.
• The company was non-compliant with NYSE continued listing standards due to low market capitalization and share price.

Risks

• Risks inherent to the bankruptcy process, including the ability to obtain court approval for motions and the DIP ABL Facility.
• Uncertainty regarding the ability to consummate the plan of reorganization.
• Potential adverse effects of the Chapter 11 Cases on liquidity, results of operations, or business prospects, including increased legal and professional costs.
• Impact of the Chapter 11 Cases on the interests of various constituents.
• Uncertainty regarding the length of time the company will operate under Chapter 11 protection.
• Risks associated with third-party motions in the Chapter 11 Cases and Bankruptcy Court rulings.
• Conditions to which the DIP ABL Facility and Exit ABL Facility are subject, and the risk that these conditions may not be satisfied.
• Sensitivity to capital spending and well completions by the onshore oil and natural gas industry, affected by geopolitical and economic developments.
• Exposure to general economic conditions and inflation, particularly cost inflation for labor or materials.
• Effects of tariffs and other trade measures on the company's business and the onshore oil and natural gas industry.
• Equipment and supply chain constraints.
• Challenges in attracting and retaining key employees, technical personnel, and skilled workers.
• Ability to maintain existing prices or implement price increases on products and services.
• Pricing pressures, reduced sales, or reduced market share due to intense competition in the markets for dissolvable plug products.
• Conditions inherent in the oilfield services industry, such as equipment defects, liabilities from accidents, explosions, and loss of well control.
• Ability to implement and commercialize new technologies, services, and tools.
• Ability to grow the completion tool business domestically and internationally.
• Adequacy of capital resources and liquidity.
• Ability to manage capital expenditures.
• Ability to accurately predict customer demand, including international customers.
• Risk of loss of, or interruption or delay in operations by, one or more significant customers or key suppliers.
• Incurrence of significant costs and liabilities resulting from litigation, including the ongoing patent infringement lawsuit.
• Cybersecurity risks.
• Changes in laws or regulations regarding issues of health, safety, and environmental protection.
• Risk of termination of the Restructuring Support Agreement (RSA) if certain conditions or milestones are not met.
• The potential that the company may need to pursue an alternative transaction if the Plan is not confirmed, which could result in lower recoveries for stakeholders.
• Risk that parties in interest may object to the Plan's classification of claims and interests.
• Risk that the Bankruptcy Court might not approve the company's use of cash collateral or the DIP facilities.
• Risk that the conditions precedent to the Effective Date of the Plan may not occur.
• Risk that the company could fail to satisfy voting threshold requirements for Plan acceptance.
• Risk that the company might not be able to secure confirmation of the Plan, even with creditor support.
• Risk of nonconsensual confirmation (cramdown) over certain impaired non-accepting classes.
• Risk that the company could lose its exclusive right to propose a plan of reorganization.
• Risk of continued business challenges even if the restructuring is successful.
• Risk that the Bankruptcy Court could find the solicitation of acceptances inadequate.
• Risk that the Chapter 11 Cases could be converted to Chapter 7 liquidation, leading to significantly smaller distributions.
• Risk that one or more of the Chapter 11 Cases may be dismissed.
• Risk that the company may object to the amount or classification of a claim.
• Risk that foreign courts may not enforce the Confirmation Order.
• Risk that estimated valuations of the company and new equity interests, and estimated recoveries, may not represent actual market values.
• Risk that the terms of the new organizational documents and Exit ABL Facility Documents are subject to change based on negotiations.
• Risk that a decline in the reorganized debtors' credit ratings could negatively affect their ability to refinance debt.
• Risk of certain U.S. federal income tax consequences of the Plan to the company and holders of claims.
• Risk that the reorganized debtors may not be able to achieve their projected financial results or successfully implement their business plan.
• Risk of loss of key personnel.
• Risk that the company could fail to retain or attract customers.
• Risk that demand for the company's products is cyclical and vulnerable to economic volatility and customers' ability to meet payment obligations.
• Risk that deterioration in business relationships may impact the ability to source materials.
• Risk that the reorganized debtors may not generate sufficient cash to service all of their indebtedness and may be forced to take other, potentially unsuccessful, actions to satisfy obligations.

Future Outlook

The company anticipates emerging from Chapter 11 within 45 days of the Petition Date, with a significantly deleveraged balance sheet and enhanced liquidity from a $135 million Exit ABL Facility. Reorganized Nine Energy will remain a public company, with its new equity interests publicly traded on the NYSE or Nasdaq. The company expects to continue its history of innovation and success, focusing on providing cutting-edge solutions for unconventional oil and gas resource extraction and development.

Management Comments

• "We are taking an important strategic step to position the business for long-term success and ensure we have the appropriate capital structure to support us going forward." Ann Fox, President and Chief Executive Officer, Nine Energy Service.
• "We are confident that entering into this agreement will enable us to stay focused on what matters most – supplying the teams, the tools and the technology to ensure success for our customers, safely and efficiently." Ann Fox, President and Chief Executive Officer, Nine Energy Service.
• "I would like to thank our Nine team for their resilience, tenacity and commitment and our customers and vendors for their ongoing partnership and support. We look forward to emerging from this process with a healthier financial foundation, well-positioned to offer comprehensive well solutions for many years to come." Ann Fox, President and Chief Executive Officer, Nine Energy Service.

Industry Context

StockSavvy.ai notes that the restructuring addresses the persistent challenges in the oilfield services (OFS) industry, including macroeconomic volatility, declining oil and gas prices, and industry consolidation. The company's move to deleverage and secure new financing is a direct response to these pressures, aiming to regain competitiveness and invest in technology amidst a landscape where larger, more centralized well development companies are limiting customer opportunities.

Management Changes

Corporate Governance

Legal Proceedings

• A patent infringement lawsuit was filed on April 8, 2020, in the U.S. District Court for the Western District of Texas (Waco Division) by NCS Multistage Inc. and NCS Multistage, LLC, against the company regarding alleged infringement of U.S. Patent No. 10,465,445.
• An adverse judgment was received on January 18, 2022, in the patent infringement lawsuit.
• The company posted a $775,000 supersedeas bond, secured by a letter of credit, to appeal the adverse judgment.
• Wells Fargo issued a separate letter of credit covering supplemental damages, ongoing royalties, and interest related to the litigation, totaling approximately $2.44 million.
• The appeal for the patent infringement lawsuit remains pending.

Stakeholder Impact

• **Shareholders (Existing Equity)**: Will experience a complete loss of investment as existing common stock will be canceled for no consideration.
• **Senior Secured Noteholders**: Will receive 100% of the New Equity Interests (subject to dilution by the Management Incentive Plan), with an estimated recovery of 45% of their claims.
• **Prepetition ABL Lenders**: Will be paid in full in cash or have their claims converted into DIP Claims, then into Exit ABL Facility Loans, with an estimated 100% recovery.
• **General Unsecured Creditors/Vendors**: Expected to be unimpaired and paid in full, with an estimated 100% recovery, preserving critical business relationships.
• **Employees**: Wages, compensation, and benefits programs will continue in the ordinary course; employment agreements and indemnification agreements will be assumed.
• **Customers**: Operations will continue as usual without interruption, with a clear message of continued service and commitment to providing solutions.

Next Steps

• The Bankruptcy Court is requested to administer the Chapter 11 Cases jointly for administrative purposes.
• The Bankruptcy Court is expected to approve customary 'first day relief' motions, including interim approval of the DIP ABL Facility and consensual use of cash collateral.
• The company will seek Bankruptcy Court approval for the solicitation of votes for the Plan.
• A combined hearing will be scheduled to approve the adequacy of the Disclosure Statement and to confirm the Plan.
• The company anticipates emerging from the Chapter 11 Cases within 45 days of the Petition Date.
• The reorganized company will establish a customary management equity incentive plan.
• Reorganized Nine Energy will remain a public company, with its New Equity Interests publicly traded on the NYSE Main Board, NYSE American Exchange, or Nasdaq Stock Market LLC.
• Final fee applications for Professional Fee Claims must be filed no later than forty-five (45) days after the Effective Date.
• The Reorganized Debtors will establish and fund a Professional Fee Escrow Account on the Effective Date.
• The Reorganized Debtors will continue to honor workers' compensation obligations and D&O Liability Insurance Policies.
• The New Board will adopt the Management Incentive Plan.
• The Reorganized Debtors may maintain documents in accordance with their standard document retention policy.
• The Reorganized Debtors will close the Chapter 11 Cases promptly after full administration.

Key Dates

Recommendation

The company has filed for Chapter 11 bankruptcy, and the restructuring plan explicitly states that existing common stock will be canceled for no consideration. This represents a definitive and complete loss for current shareholders, necessitating a 'strong sell' recommendation for any remaining equity holdings.

Keywords

Oilfield Services, Chapter 11, Bankruptcy, Restructuring, DIP Financing, Exit Financing, Senior Secured Notes, ABL Facility, Debt Restructuring, Oil & Gas, Completion Tools, Cementing, Coiled Tubing, Wireline, SEC Filing, Corporate Reorganization, Financial Restructuring, Equity Cancellation, Prepackaged Bankruptcy