Jones Energy – Emerges from Bankruptcy in 33 Days Having Equitized $1.0bn of Debt, Announces $225mn Reserve-Based Credit Facility

May 17, 2019 – The Debtors notified [Docket No. 216] the Court hearing the Decor Holdings cases that their Joint Chapter 11 Plan of Reorganization had become effective as of May 17, 2019. The Court had previously confirmed the Debtors’ Plan on May 6, 2019 [Docket No. 180].

On April 15, 2019, Jones Energy, Inc. and 10 affilliates filed for Chapter 11 protection in the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 19-32112. In its Petition, the Company, an independent oil and natural gas company engaged in the exploration and development of oil and natural gas properties in the Anadarko basin of Oklahoma and Texas, noted estimated assets between $1.0bn and $10.0n and estimated liabilities between $1.0bn and $10.0bn.

In a press release announcing the (now former) Debtors' emergence from bankruptcy, Jones Energy stated: “On the Effective Date and pursuant to the Plan, the Company’s existing securities were cancelled and the Company issued 4,436,130 shares of Class A common stock in Jones Energy II, Inc. (the 'Class A Common Stock'), 9,843,870 shares of Class B common stock in Jones Energy II, Inc. (the 'Class B Common Stock'), together with a corresponding number of common units in Jones Energy Holdings II, LLC (the 'Common Units' and, together with the Class A Common Stock and Class B Common Stock, the 'New Common Equity'), and 2,520,000 5-year warrants convertible into New Common Equity (the 'New Warrants'). The Company expects that its newly issued Class A common stock and New Warrants will be quoted on the OTC Pink Market under the ticker symbols JEII and JEII.W, respectively.

The holders of the First Lien Notes received their pro rata share of 96% of the New Common Equity, or 30.464 shares of New Common Equity per $1,000 principal amount of First Lien Notes. The holders of the Unsecured Notes received their pro rata share of 4% of the New Common Equity, or 1.017 shares of New Common Equity per $1,000 principal amount of Unsecured Notes due 2022 or 1.034 shares of New Common Equity per $1,000 principal amount of Unsecured Notes due 2023. The distributed New Common Equity is subject to dilution by the Management Incentive Plan (as defined in the Plan) and the New Warrants.

Company Enters New $225 Million RBL Agreement

Jones Energy also announced that it had entered into a new reserve-based credit facility with a group of banks led by TD Securities and an initial borrowing base of $225 million (the "Facility"). The Company has initially elected an aggregate commitment of $150 million and will have no outstanding borrowings upon emergence. The Facility is attached as Exhibit F to the Debtors' Plan Supplement filed on May 17, 2019 [Docket No. 215].

Plan Overview

The Disclosure Statement [Docket No. 21] stated, “The Restructuring Support Agreement and Plan contemplate a swift restructuring by which the Debtors will (a) equitize all $1.009 billion of the Company’s prepetition funded debt and (b) obtain a new exit credit facility in an aggregate principal amount of up to $20.0 million (the 'Committed Exit Facility'), with the option to seek alternative financing with higher borrowing limits. The Plan also contemplates reinstating or paying in full all trade claims against the Debtors in the ordinary course of business. Finally, although the Debtors believe their total enterprise value does not support a recovery to Unsecured Noteholders, the Plan contemplates an opportunity for a meaningful recovery to the Unsecured Noteholders from the First Lien Notes’ collateral that they likely would not otherwise be entitled to receive. The proposed restructuring transactions are value-maximizing for the Company’s stakeholders. A right-sized capital structure will allow the Debtors to develop their assets and implement a growth-oriented drilling program. In addition, the compromises and settlements embodied in the Restructuring Support Agreement, and to be implemented pursuant to the Plan, preserve value by enabling the Debtors to avoid protracted, value-destructive litigation over potential recoveries and other causes of action that could delay the Debtors’ emergence from chapter 11. As of the date of this Disclosure Statement, holders of approximately 84% in principal of the First Lien Notes and approximately 84% in principal of the Unsecured Notes have signed onto the Restructuring Support Agreement, representing nearly $900 million of the Company’s just over $1.0 billion of funded debt.”

The Debtor’s Prepetition Capital Structure

As of the date of the Disclosure Statement, the Debtors had approximately $1.009 billion in total outstanding principal amount of funded debt obligations, as well as outstanding preferred equity with a stated aggregate liquidation preference of approximately $30.1 million. The Debtors also have approximately $11.8 million in marked-to-market secured liabilities to hedge counterparties as of March 22, 2019.

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

• Class 1 (“Other Secured Claims”) was unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
• Class 2 (“Other Priority Claims”) was unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
• Class 3 (“Hedge Claims / RBL Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
• Class 4 (“First Lien Notes Claims”) was impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $529,828,000 (includes interest and make whole payment) and the estimated recovery is 62.5%.
• Class 5 (“Unsecured Notes Claims”) was impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $582,125,000 (includes interest) and the estimated recovery is 4.3%.
• Class 6 (“General Unsecured Claims against Debtors other than JEI and JEI, LLC”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
• Class 7 (“General Unsecured Claims against JEI and/or JEI, LLC”) was impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $50,200,000 and the estimated recovery is 0%.
• Class 8 (“Intercompany Claims”) was unimpaired/impaired, deemed to accept or reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 0%.
• Class 9 (“Existing Preferred Equity Interests”) was impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 0%.
• Class 10 (“Existing Common Equity Interests”) was impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 0%.
• Class 11 (“Intercompany Interests”) was unimpaired/impaired, deemed to accept or reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 100%.

About Jones Energy, Inc.

Jones Energy, Inc. is an independent oil and natural gas company engaged in the exploration and development of oil and natural gas properties in the Anadarko basin of Oklahoma and Texas.

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