As previously disclosed, on August 27, 2020, SAExploration Holdings, Inc. (“SAExploration,” the “Company,”
“we,” “our,” and “us”) and certain of its wholly-owned direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Petition,” and the cases commenced thereby, the
“Chapter 11 Cases”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for Southern District of Texas, Houston Division (the “Court”) to
pursue a Chapter 11 plan of reorganization (the “Plan”). The Chapter 11 Cases are being administered under the caption In re SAExploration Holdings, Inc., et al. (Case
No. 20-34306). The Debtors will continue to operate as debtors-in-possession under the jurisdiction of the Court and in
accordance with the applicable provisions of the Bankruptcy Code and an order of the Court. The Company expects ordinary-course operations to continue substantially uninterrupted during and after the Chapter 11 Cases.
In connection with the Chapter 11 Cases, on September 15, 2020, the Debtors filed with the Court the Debtors’ First Amended Chapter 11
Plan of Reorganization (the “Amended Plan”) and the Second Amended Disclosure Statement for the Debtors’ First Amended Chapter 11 Plan of Reorganization (the “Amended Disclosure Statement”).
On September 15, 2020, the Court entered an order conditionally approving the Amended Disclosure Statement and approving the Debtors’
commencement of solicitation of votes on the Amended Plan. The Amended Plan is subject to confirmation by the Court and the Amended Disclosure Statement is subject to final approval by the Court.
The Amended Plan amends the initial Chapter 11 plan of reorganization filed with the Court on August 27, 2020.
The Amended Disclosure Statement amended the Disclosure Statement for the Debtors’ Chapter 11 Plan of Reorganization to, among other
things, include additional disclosures with respect to the Debtors’ tax credits receivable related to the tax credits earned by Alaskan Seismic Ventures, LLC (“ASV”). As of June 30, 2020, the tax credits receivable was
$2.7 million, net of an allowance of $27.7 million. The Debtors established the allowance due to the uncertainty of the future monetization of the tax credits and the potential for the Alaska Department of Revenue (the
“DOR”) to disallow the tax credits as the Debtors’ management has determined that the costs submitted to the DOR by ASV did not reflect the affiliate status of ASV. The Debtors have classified this receivable as
long–term because of the length of time the Debtors expect it will take to collect on it.
As further described in the Amended
Disclosure Statement, falling oil prices have substantially reduced Alaska’s revenue from production taxes and other petroleum sources, resulting in appropriations to the oil and gas tax credit fund for purchase of tax credit certificates in
the last several fiscal years at or below the amounts indicated by a statutory formula rather than amounts needed to pay for all the tax credit certificates in the queue for purchase. The Alaska budgets that passed in 2019 for fiscal year 2020,
which ended June 30, 2020, and in 2020 for fiscal year 2021, which started July 1, 2020, had no appropriations to the oil and gas tax credit fund, but did include appropriations of an estimated $700 million for purchases of tax credit
certificates through a bond program that would have authorized Alaska to issue bonds to finance the purchase of tax credit certificates. According to statements made by DOR officials, that amount would have been enough to pay for the outstanding tax
credit certificates awaiting purchase by the State of Alaska. However, the constitutionality of the legislation that set forth the bond program was challenged in Alaska state court, and on September 4, 2020 the Alaska Supreme Court ruled that
the legislation violated the limitation placed on contracting debt under article IX, section 8 of the Alaska Constitution. Accordingly, the bond program would need to be approved by the people of Alaska either through a bond referendum or a
constitutional amendment, and the Debtors do not believe that either is likely to happen, particularly in the current fiscal environment.
While the Debtors have continued to pursue other options to monetize the tax credit certificates, at this time the Debtors believe that the
most likely path to monetize the tax credit certificates may be through appropriations to the oil and gas tax credit fund made by the Alaska Legislature as part of the budget process. However, there is great uncertainty as to if and when the Alaska
Legislature will make such appropriations and how much those appropriations may be. Although the statute that governs purchase of tax credit certificates has a formula appropriation based on production tax revenues and oil prices, the funds remain
subject to appropriation, the Alaska Legislature has not followed the formula for the last three years, and at least in recent years there has not been full consensus within the Legislature as to how the formula should be calculated. In addition, by
statute, tax credit certificates submitted for purchase before 2017 will be purchased before tax
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