December 14, 2020 – The Debtors filed their Second Amended Plan of Liquidation and a separate redline [Exhibit B] showing immaterial changes to the versions filed on November 9, 2020 [Docket Nos. 700 and 701, respectively].

The Second Amended Plan adds a condition to effectiveness. Specifically, among other conditions, before the Plan can take effect, "The Debtors shall have paid the Indenture Trustee Distribution," which the plan defines as "an amount equal to the Indenture Trustee Fees not to exceed One Hundred Twenty Thousand dollars ($120,000.00), which shall be payable from the Gift Reserve as a settlement pursuant to the terms of the Plan." 

Plan Overview

The Disclosure Statement provides [Docket No. 662]: “On September 30, 2020, the Debtors closed the sale of substantially all of their assets to the Purchaser pursuant to the Sale Order. The Plan, among other things, appoints a Plan Administrator to, among other things, wind down the Debtors’ limited remaining operations and distribute the remaining proceeds of the Debtors’ assets in the manner specified in the Plan. Under the Plan, a Plan Administrator will be appointed to oversee the Wind Down and to resolve and compromise Claims. The Plan provides that the Plan Administrator shall, subject to the Agent’s consent, complete the winding up of the Debtors as expeditiously as practicable under applicable law, and empowers and directs the Plan Administrator to take such actions as may be necessary to effect the dissolution of the Debtors.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

• Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $0 and estimated recovery is 100%.
• Class 2 (“Prepetition Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $307,418,000 (allowed amount $297,026,070) and estimated recovery is 27.5%. Treatment: The Prepetition Agent shall receive, on behalf of the Holders of the Prepetition Secured Claims: (a) on the Effective Date, from the Debtors, following payment of the DIP Facility Claims in full, all Available Cash, up to an amount necessary to satisfy the Prepetition Secured Claims in full, except for any portion of such Available Cash transferred by the Debtors to fund the Post-Effective Date Agent Professional Retainers and the Wind-Down Budget to fund (i) the Budgeted Claims Reserve, (ii) the Professional Fee Claims Reserve and (iii) the Gift Reserve; and (b) beginning on the first calendar quarter following the Effective Date, and continuing on at least a quarterly basis thereafter, the Plan Administrator shall pay all Available Cash in excess of the amounts in the Distribution Reserve Accounts then remaining to be paid in accordance with the Wind-Down Budget, up to an amount necessary to satisfy the Prepetition Secured Claims in full. All Assets vesting in the Post-Effective Date Debtors, other than Available Cash transferred to the Gift Reserve and the Professional Fee Claims Reserve, shall be subject to the Liens of the Prepetition Agent; provided, however, that such Liens shall be retained for defensive purposes only to entitle the Prepetition Agent to enforce the Distribution and other terms of the Plan; provided, further, however, that the Prepetition Agent shall not foreclose upon such retained Liens unless a Final Order is entered finding that (i) a Plan Default occurred (including if any collateral is sought to be used in a manner inconsistent with the Plan) and (ii) such default was not cured in accordance with the Plan.
• Class 3 (“Miscellaneous Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $0 and estimated recover is 100%.
• Class 4 (“Class 4 GUC Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $92,471,000 (allowed amount $87,775,890) and estimated recovery is 1.84% – 1.95%. Treatment: Each Holder shall receive its Pro Rata share of (i) the Gift Reserve, following payment of all other Claims and other amounts entitled to receive payment from the Gift Reserve under the Plan, and, (ii) following the indefeasible payment in full of all Prepetition Secured Claims, all remaining Available Cash. “Gift Reserve” means the Distribution Reserve Account established for the Gifted Amount and “Gifted Amount” means $1,800,000 of Available Cash.
• Class 5 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and estimated recovery is 0%.
• Class 6 (“Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of interests is N/A and estimated recovery is 0%.

Asset Sale

On September 15, 2020, the Court issued an order authorizing the Debtors to enter into a $115.5mn asset purchase agreement (“APA”) with Houston-based Zarvona III-A, L.P.’s (“Zarvona” or the “Buyer”) for the sale of substantially all of the their assets [Docket No. 605]. The Zarvona APA was attached to the order as Exhibit 1. The Zarvona transaction closed on September 30th.

Prepetition Capital Structure

• Senior Secured Credit Facility – The Debtors are party to a $325.0mn, May 2014 credit agreement (the “Prepetition Credit Agreement”), with JPMorgan Chase Bank, N.A., as an Issuing Bank and as Administrative Agent (the “Prepetition Agent”) and other lenders thereto. As of the Petition date, approximately $322.0mn is outstanding under this facility.
• 7.00% Senior Notes – Debtor Approach is party to a senior indenture dated June 11, 2013 (Wilmington Trust, National Association, as trustee), further to which Approach issued $250.0mn aggregate principal amount of the Senior Notes in a public offering. The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of Approach’s subsidiaries. Subsequent exchange transactions have reduced the amount of outstanding principal on the Senior Notes such that, as of the Petition date, approximately $85.2mn in principal amount remains outstanding. The Debtors estimate Wilks Brothers, LLC and its affiliates (collectively “Wilks”) holds approximately $62.3mn of those outstanding Senior Notes. 
• Common Equity – As of the Petition Date, there were 93,630,390 shares of Common Stock issued and outstanding. The Common Stock currently trades on the OTC Pink marketplace. Previously, the Common Stock traded on the Nasdaq Global Select Market. Based on the most recent Schedule 13D/A filing of Wilks, as of the Petition Date, Wilks owns approximately 48% of the outstanding Common Stock, and senior management of the Company owns approximately 1% of the outstanding Common Stock.

Voting Results

The claims agent notified the Court of the Plan voting results [Docket No. 699], which were as follows:

• Class 2 (“Prepetition Secured Claims”): 8 claim holders, representing $259,782,048.34 in amount and 100% in number, accepted the Plan.
• Class 4 (“Class 4 GUC Claims”): 33 claim holders, representing $77,581,105.85 (or 99.51%) in amount and 84.62% in number, accepted the Plan. 6 claim holders, representing $383,001 (or 0.49%) in amount and 15.38% in number, rejected the Plan.

The following documents were attached to the Disclosure Statement [Docket No. 662]:

• Exhibit A: The Plan
• Exhibit B: Liquidation Analysis
• Exhibit C: Proposed Disclosure Statement Order
• Exhibit D: Wind-Down Budget

Summary of Recoveries and Liquidation Analysis (see Exhibit B of Disclosure Statement [Docket No. 662] for notes)

About the Debtors

The Debtors, a Delaware corporation headquartered in Fort Worth, Texas, are an independent exploration and production company focused on the acquisition and development of U.S. onshore oil and natural gas resources. Approach Oil & Gas Inc., a Delaware corporation (“AOG”), and Approach Operating, LLC (“Approach Operating”), Approach Delaware, LLC (“Approach Delaware”), Approach Services, LLC (“Approach Services”) and Approach Midstream Holdings LLC (“Approach Midstream”), each a Delaware limited liability company, are wholly-owned subsidiaries of Approach. Approach Resources I, LP (“Approach LP”) is a Texas limited partnership with Approach Operating holding a 1% general partnership interest and Approach Delaware holding a 99% limited partnership interest.

The Debtors engage in the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas, where the Debtors leased approximately 113,000 net acres as of the Petition Date. Approach is a holding company with no independent assets or operations. All of the Debtors’ oil and gas leases are held by AOG and Approach LP. All of the Debtors’ employees are employed by Approach Operating, and the Debtors’ assets are operated by Approach Operating. Approach Operating manages substantially all of the Debtors’ receipts and disbursements. Approach Midstream, Approach Delaware and Approach Services currently perform no material services, and hold no material assets.

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