Case Summary: Axip Energy Services Chapter 11

Business Description

Headquartered in Houston, TX, Axip Energy Services, LP ("Axip"), along with its Debtor⁽¹⁾ and non-Debtor affiliates (collectively, the "Company"), is a leading provider of natural gas compression services to upstream and midstream customers across major U.S. producing basins and offshore in the Gulf of Mexico, with a primary strategic focus on the Permian Basin.

• The Company operates a network of seven facilities across Texas, New Mexico, and North Dakota, deploying approximately 940 compression units generating roughly 326,070 horsepower ("HP") to deliver gas lift and gathering compression services.
• In addition to its compressor fleet, Axip contracts out more than 120 skid-mounted auxiliary natural gas coolers used to cool higher-pressure gas produced from deeper wells.

Axip provides its compression services on a fixed-fee basis under an initial contract term that converts to a month-to-month arrangement upon expiry. Gas lift compression, which injects mechanically compressed gas into a wellhead to assist crude oil production, accounts for more than 70% of the Company's deployed fleet, with the remaining approximately 30% serving gathering compression applications that increase pressure for efficient natural gas transportation.

• The Company serves a diverse customer base of more than 55 companies, including large, integrated multinational oil and gas operators and other investment-grade producers.
• More than 25% of Axip's compressor fleet is electric motor-driven, reflecting a broader industry shift toward lower-emission, higher-reliability solutions aligned with evolving methane-reduction regulations.

The Company is privately held and, as of the Petition Date, employed approximately 149 full-time and part-time employees, including approximately 101 field technicians responsible for callout response, crash repairs, monthly preventative maintenance, and periodic overhauls.

As of the Petition Date, Axip's funded debt obligations totaled approximately $240.5 million against annual revenue of approximately $92 million.

Axip Energy Services, LP and certain affiliates filed for Chapter 11 protection on February 22, 2026 (the "Petition Date") in the U.S. Bankruptcy Court for the Southern District of Texas, reporting $100 million to $500 million in both assets and liabilities.

⁽¹⁾ For a complete list of Debtor entities, see organizational structure chart below.

Corporate History

The Company traces its origins to 2002, when it was founded as Valerus Compression Services, LP ("Valerus").

• Following various spin-offs, Valerus changed its name to Axip Energy Services, LP in 2014.
• In September 2022, a fund affiliated with Energy Spectrum Capital LP acquired the Company via an equity purchase transaction.

Organizational Structure

A total of seven Company entities are Debtors, including the borrower and each guarantor under the prepetition credit agreements. The non-Debtor affiliates are non-operating entities that hold no assets and from which the Debtors derive no revenue.

• E3 Compression Holdings LLC ("E3 Holdings"): Immediate parent company of Axip Management (defined below) and holding company whose primary assets consist of its direct and indirect ownership of the equity interests of each of the other Debtors and the non-Debtor affiliates. Guarantor under the prepetition superpriority facility and prepetition ABL facility, and grantor of security interest under the prepetition 2L Facility.
• Axip Energy Services, LP ("Axip"): The Company's primary operating entity and borrower under each of the prepetition credit agreements.
• Axip Leasing Company, LLC ("Axip Leasing"): Owns substantially all of the Debtors' compression units. Guarantor under the prepetition credit agreements.
• Axip Energy Services Management, LLC ("Axip Management"): Owns 100% of the general partnership interests of Axip. Guarantor under the prepetition credit agreements.
• Axip Producer Services, LLC ("Axip Services"): Guarantor under the prepetition credit agreements.
• Axip Producer Services - Marcellus I, LLC ("Axip Marcellus"): Wholly owned subsidiary of Axip Services. Guarantor under the prepetition credit agreements.
• Axip Holdings, LLC ("Axip Holdings"): Guarantor under the prepetition credit agreements.
• Non-Debtor Affiliates: Axip Gas Solutions GP, LLC, Axip Gas Solutions Partners, LP, Axip MLP Holdings, LLC, Axip Leasing Company II, LLC, and Axip International, LLC.

Operations Overview

Axip's operations are centered on contracting natural gas and electric compressor units to upstream and midstream customers for gas lift and gathering compression applications. The Company's fleet comprises units ranging from less than 250 HP to more than 2,500 HP, with a typical deployment lifecycle of two to five years on location, though equipment can remain deployed for ten years or more. Compression units have an approximate useful life of 20–25 years; upon contract completion, returned units sit idle until refurbished and redeployed.

Gas Lift Compression

• More than 70% of Axip's fleet supports gas lift services, whereby a compressor injects mechanically compressed, high-pressure natural gas into a well's production stream at the wellhead to force fluids to the surface, thereby optimizing crude oil production. Once a well goes on an artificial lift application, it will typically remain on a lift application for the rest of its productive life.

Gathering Compression

• Nearly 30% of the Company's fleet is deployed in gathering applications, which collect lower-pressure natural gas from wells and mechanically reduce volume to increase pressure, enabling pipelines to service increased flow rates into trunk lines.

Workforce and Field Service Model

The Company's workforce includes approximately 101 field technicians providing on-site callout help, crash repairs, monthly preventative maintenance, and periodic overhauls. Because Axip's compression units are often deployed in rural areas without sufficient local skilled labor, the Company recruits primarily from elsewhere in Texas and New Mexico and provides lodging for employees working on set rotation schedules.

• In addition to in-house field services, the Company relies on strategic partner service facilities and repair and maintenance providers located near deployment sites — many of which are sole-source or limited-source providers essential to maintaining uninterrupted operations.

Electric Compression and ESG Positioning

• More than 25% of the Company's fleet consists of electric motor-driven compressors, which offer improved runtime and performance metrics relative to gas-driven counterparts, including automatic and remote-start capabilities and the elimination of combustion emissions.
• Electric compressors, however, require certain infrastructure — such as powerlines — to be in place at the well, a dependency that has at times constrained redeployment of returned electric units when electrical infrastructure lagged drilling and compression demand.

Prepetition Obligations

Top Unsecured Claims

Events Leading to Bankruptcy

Post-Acquisition Growth Strategy

• Following Energy Spectrum Capital's September 2022 acquisition, the Company pursued an aggressive growth strategy focused on:
  • Using idle compression units to contract to customers;
  • Filling market gaps with larger, high-HP compression units and electric compression equipment; and
  • Optimizing operations across the fleet.
• In December 2023, the Company purchased 10 new 2,500 HP units to fulfill specific customer contracts. The Debtors characterized these as non-speculative purchases tied to intended customer demand. During this period, the Debtors operated under thin margins and were susceptible to large revenue or cost shifts.

Customer Disruption and Stranded Offshore Assets

• The Company faced customer-specific shocks in 2024 causing significant financial distress. Most significantly, a major offshore drilling customer operating in the Gulf of Mexico unexpectedly filed Chapter 11 in the Southern District of Texas in the first quarter of 2024 and subsequently liquidated and converted to Chapter 7.
  • This left more than 15% of the Company's total available HP, across 24 compression units, stranded offshore and unable to generate anticipated revenue.
  • Because the customer's compression units were not returned (a multi-million-dollar expense that would normally be borne by the customer), the equipment could not be economically redeployed. A subset was subsequently sold, while the remainder of the compression units stayed idle in the Gulf of Mexico.
  • The loss not only cost the Debtors millions in EBITDA but also required significant legal spend to pursue recovery.
• Another customer shifted its business model from wellhead compression to centralized gathering compression and prematurely returned certain compression units to the Debtors. Redeployment of these units was delayed due to industry electrical infrastructure struggling to keep pace with drilling and compression demand.

Liquidity Preservation Measures

• In response to the deteriorating operating environment, the Company implemented a series of cost-cutting measures to maintain sufficient liquidity:
  • Minimized capital expenditures, including deferring certain non-essential preventative maintenance;
  • Halted zero-hour "make ready" projects (the capital expenditures required to prepare idle equipment for new contracts);
  • Closed its offshore office;
  • Limited overtime hours; and
  • Reduced other operating expenses.

Covenant Defaults and Failed Refinancing

• The Debtors experienced covenant and default pressures under the Prepetition ABL Facility. The Debtors operated under cash dominion, with the ABL Agent sweeping receivables and applying them to the facility balance. While the Debtors utilized equity cure provisions permitted under the credit agreement, they projected that covenants would not be met for the fiscal quarter ending June 30, 2025, and that Energy Spectrum would be unable to provide capital to address the anticipated shortfall.
• In March 2025, the Debtors engaged Evercore Group, L.L.C. as investment banker to pursue a refinancing process. Despite an extensive marketing effort — approximately 85 parties contacted, approximately 51 confidentiality agreements executed, more than a dozen indications of interest received, and nine parties advancing to a second diligence round — no executable transaction materialized by early September 2025.

Forbearance and Pivot to Sale

• As refinancing proved unsuccessful, the Debtors engaged Vinson & Elkins LLP as counsel and Ankura Consulting Group, LLC as restructuring advisor. The ABL Lender Group, led by JPMorgan Chase Bank, N.A., retained Simpson Thacher & Bartlett LLP and Huron Consulting Group, Inc. as advisors.
• The Debtors and their advisors engaged in negotiations with the ABL Lender Group to enter into a series of forbearance agreements with respect to outstanding defaults. While the parties worked to reach agreement, Energy Spectrum provided additional equity financing in August 2025 to fund certain interim obligations.
• The First Forbearance Agreement was initially intended to provide relief while the Debtors completed the refinancing process. However, by early September 2025, the parties pivoted to negotiate the Prepetition Superpriority Facility — a first-lien secured term loan with an aggregate principal amount of up to $15.65 million — to provide the Debtors both time and liquidity to pivot to a sale process and prepare for a potential Chapter 11 filing.
• In September 2025, Ben Chesters of Ankura was appointed Chief Restructuring Officer, and Peter Laurinaitis joined E3 Holdings as an independent member of the executive committee with governing and oversight authority over the Debtors.

Prepetition Sale Process

• Evercore conducted a robust prepetition sale process, executing confidentiality agreements and providing initial diligence materials to approximately 21 parties, answering more than 125 questions from prospective bidders through a virtual data room and on calls, and receiving five indications of interest at the bid deadline.
• Despite the robust process, no bid exceeded the amount of outstanding funded indebtedness under the Prepetition ABL Facility. After evaluating all bids, the Debtors determined that Service Compression, LLC ("SC") had submitted the highest actionable bid, though it was clear that SC's bid could not be implemented outside of a Chapter 11 process.

Stalking-Horse APA and Chapter 11 Filing

• On February 16, 2026, the Debtors entered into a stalking-horse asset purchase agreement with SC, contemplating a sale of substantially all of the Debtors' assets for cash consideration of approximately $161 million (the "Base Purchase Price"), subject to adjustments, plus the assumption of certain liabilities.
  • The Bidding Procedures provide for bid protections in the form of an expense reimbursement not to exceed 1% of the Base Purchase Price and a break-up fee of 3% of the Base Purchase Price.
• The Chapter 11 filing on February 22, 2026 followed six days later, supported by DIP financing to preserve operations through a court-supervised Section 363 auction process.

DIP Financing

• To fund ongoing operations and the restructuring process, the Debtors secured a DIP facility totaling approximately $104.83 million, composed of:
  • Approximately $25.51 million in new-money DIP loans; and
  • Approximately $79.32 million in roll-up loans, including the full principal amount of the prepetition superpriority obligations (including accrued and unpaid interest) and approximately $66.16 million of prepetition ABL obligations.
• JPMorgan Chase Bank, N.A. serves as DIP Agent. The DIP Facility bears interest at the Alternate Base Rate plus 6.50% per annum, with a maturity date of the earlier of (a) 90 days from the Petition Date (extendable by 30 days at the election of all lenders) or (b) the consummation of a sale of substantially all assets.
• The Debtors' professional team includes Vinson & Elkins LLP (legal counsel), Ankura Consulting Group (restructuring advisor), and Evercore Group L.L.C. (investment banker). Epiq serves as claims and noticing agent.
• DIP Agent advisors include Simpson Thacher & Bartlett (counsel) and Huron Consulting Group (financial advisor).
• Stalking Horse Bidder advisors include Willkie Farr & Gallagher LLP (counsel).

DIP Budget

Key Parties

• Vinson & Elkins L.L.P. (general bankruptcy counsel); Evercore Group, L.L.C. (investment banker); Ankura Consulting Group, LLC (financial advisor / CRO, Ben Chesters); Epiq Corporate Restructuring, LLC (claims and noticing agent); JPMorgan Chase Bank, N.A. (DIP agent); Simpson Thacher & Bartlett LLP (counsel to DIP agent); Huron Consulting Group, Inc. (financial advisor to DIP agent); Willkie Farr & Gallagher LLP (counsel to stalking-horse bidder); Peter Laurinaitis (independent executive committee member); Service Compression, LLC (stalking-horse bidder); Energy Spectrum (equity sponsor); Permico Inc. (Prepetition 2L agent); Ropes & Gray (counsel to prepetition 2L agent).

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