May 19, 2016
Dear Employee,
As you may have heard, Seventy Seven Energy Inc. announced an important step it is taking in securing
the future success of the Company. The Board and management team of Seventy Seven Energy,
including its operating affiliates Nomac Drilling, Performance Technologies and Great Plains Oilfield
Rental, have been working diligently to identify opportunities to improve its capital structure and secure
strategic opportunities.
As part of the Company’s reorganization efforts it has entered into a Restructuring Support Agreement
(the “Agreement”) with certain lenders. The terms of the Agreement provide for a substantial
deleveraging of the Company’s balance sheet by converting approximately $1.1 billion of the Company’s
bond debt into new common equity without interrupting the Company’s daily operations. The
Agreement outlines an expected restructuring through a prepackaged plan of reorganization (the
“Plan”).
Employees can expect that operations will continue, they will be paid as usual and benefits will
remain in effect. Additionally, a key component of the Plan is that all trade creditors, suppliers and
contractors will be paid in the ordinary course of business and customer relationships will be
unimpaired. The Company intends to commence a prepackaged Chapter 11 proceeding on or before
May 26, in order to implement the Plan.
We believe that this represents a positive step for Seventy Seven Energy and an opportunity to emerge
a stronger company and a leader in the industry.
If you have additional questions, do not hesitate to contact your manager or Company representative.
The Company has set up a toll-free information line to answer questions about this transaction. The
information line can be accessed by calling (844)224-1136 (internationally +1(917)962-8386).
Seventy Seven Energy
777 N.W. 63rd Street | Oklahoma City, OK 73116
405-608-7777
Frequently Asked Questions
1. What did the Company announce?
The Company announced that Seventy Seven Energy Inc. and its subsidiaries entered into a
Restructuring Support Agreement with certain lenders. Under the Restructuring Support
Agreement the Company intends to restructure its capital structure through a prepackaged
Chapter 11 filing and will continue to operate in the normal course.
2. What is a “prepackaged” Chapter 11?
A prepackaged Chapter 11 is when a company prepares a plan of reorganization that is
negotiated and voted on by certain stakeholders before the company actually files for
bankruptcy protection. This shortens and simplifies the process and also removes uncertainty
for its employees, customers and suppliers because of the known treatment to its constituents.
3. Why is the Company negotiating a prepack?
The Company will file for Chapter 11 bankruptcy protection to implement its plan of
reorganization which will create a deleveraged capital structure for its business by reducing $1.1
billion of bond debt, build a foundation for continued profitability, and better position the
Company for future success in the energy industry.
4. How long will the Company be in Chapter 11?
The Chapter 11 reorganization is expected to conclude in approximately 60 days or less
following the date the Company files for bankruptcy protection.
5. Is the Company going out of business?
No. The Company is not going out of business and operations will continue in the ordinary
course of business. The Company has worked diligently with certain lenders to develop a
prepackaged plan to support its ongoing operations and make the reorganization process as
efficient as possible.
6. Does the Company have adequate funding to conduct its operations?
Yes. The Company has enough working capital to operate throughout the restructuring.
7. Will this plan affect the Company’s operations?
No. Operations will continue without interruption during this process.
8. Which entities are included in the filing?
Seventy Seven Energy Inc. and all of its direct and indirect wholly-owned subsidiaries. Affiliates
Nomac Drilling, Performance Technologies and Great Plains Oilfield Rental are included in the
filing.
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9. How does this impact my job or my day-to-day responsibilities?
The Company plans to continue operations in the ordinary course without interruption. This
announcement will not affect your job responsibilities or day-to-day activities. You will still
report to work as scheduled, and you will be paid your same salary on the standard payroll cycle.
We expect all employees to continue to perform their jobs safely and in full compliance with all
Company policies and procedures.
10. Will I continue to be paid?
Yes. You will be paid your same salary on the standard payroll cycle. You will see no
interruption in your pay as a result of this Agreement.
11. Will there be a reduction in workforce due to this announcement?
Nothing in this Agreement or the Plan calls for a reduction in force. Any future changes in
workforce will be driven by overall business conditions or activity levels.
12. Will there be any management changes?
Nothing in this Agreement or the Plan calls for a change in management and there will be no
changes to the current reporting structure. Jerry Winchester will remain as CEO, along with the
current management team.
13. What will happen to the shares in the Seventy Seven Energy Inc. Retirement & Savings Plan
(“401(k) Plan”) Company Stock Fund?
If the plan of reorganization contemplated in the Restructuring Support Agreement is
implemented, each holder of shares of the Company, including those vested shares held in the
Company Stock Fund in the trust for the 401(k) Plan as of the effective date of the
reorganization, will be entitled to a pro rata share of (i) warrants exercisable for 10% of the
shares of the reorganized company with a strike price at a total equity value of $1.788 billion,
which warrants shall be exercisable at any time from the effective date of the reorganization
until the five year anniversary thereof and (ii) warrants exercisable for 10% of the shares of the
reorganized company with a strike price at a total equity value of $2.5 billion, which warrants
shall be exercisable at any time from the effective date of the reorganization until the seven year
anniversary thereof.
The bankruptcy process is technical and complex, the important thing to remember is if the
reorganization contemplated in Restructuring Support Agreement is implemented, it is currently
anticipated that the shares in the Company Stock Fund as of the effective date of the
reorganization will be replaced with the warrants described above. At this time, although
subject to change, it is anticipated that once the warrants are issued, the participants invested in
the Company Stock Fund will be able to exercise the warrants, in accordance with the terms of
the warrants. As this is a fluid process, the Company will let you know if there is a change in the
treatment of the Company Stock Fund due to the reorganization as described above.
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14. Can I sell all or a portion of the portion of my 401(k) Plan account that is invested in the
Company Stock Fund before the warrants are issued?
Currently, shares of the Company are trading over-the-counter and thus participants in the
401(k) Plan may elect to liquidate all or a portion of their 401(k) Plan accounts that are
invested in the Company Stock Fund prior to the issuance of the warrants. Note that this
could change and if so you will be notified of such change.
15. What are the procedures for exercising the warrants held through my 401(k) plan
account?
At this time, the details of the exercise procedures for the warrants have not been
determined. We will provide you with more information at a later date.
16. What is a warrant?
A warrant is a certificate that entitles the holder to acquire a specific amount of securities
(i.e., stock) at a specific price, usually above the current market price at the time of
issuance, during a certain period of time. If the stock rises above the warrant’s exercise
price, then the holder can exercise the warrant and either hold the stock or resell it for a
profit. Otherwise, the warrant will expire or remain unused.
17. Will trade creditors and suppliers continue to be paid?
Under the proposed Restructuring Support Agreement, trade creditors and suppliers are
expected to be paid in full in the ordinary course of business and all of the Company’s
contracts are expected to remain in effect in accordance with their terms preserving the
rights of all parties.
18. How will customers be affected by this announcement?
Customer relationships will be unimpaired and services will be provided as usual.
19. Where can I get additional information?
You can contact your manager or Company representative with any questions or call our
toll-free restructuring information line at (844)224-1136 (internationally +1(917)962-8386).
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