Having thrown its first stalking horse bidder, bankrupt Permian operator Approach Resources Inc. appears to be headed toward a sale again—albeit for less than two-thirds of the original sales price.

Affiliates of Zarvona Energy LLC entered an agreement to purchase essentially all of the assets of Fort Worth, Texas-based Approach Resources for $115.5 million, according to court documents. Approach Resources holds about 113,000 net acres in the southern Midland Basin as well as gas and water infrastructure. 

Previously, Approach had agreed to sell its assets in what had been the largest first-quarter deal to an affiliate of Alpine Energy Capital for $192.5 million.

The Alpine deal, however, was terminated on March 26 based on “inaccurate factual allegations and was legally ineffective,” according to Approach Resources’ regulatory filings with the Securities and Exchange Commission. Alpine demanded more than $20 million in settlement fees, which Approach Resources said were paid in July.

Zarvona has deposited an earnest payment of $11.55 million into escrow that will be paid to Approach Resources at closing. The deal is subject to court approval.

At one time, Approach’s leasehold spanned 149,000 gross acres. The company said in 2018 it had 1,350 potential horizontal drilling locations across three Wolfcamp benches.

Alpine Resources Asset Map
Alpine Resources Asset Map (Source: 2018 Company Presentation)

Approach Resources’ assets are largely located in the Wolfcamp Shale in Crockett and Schleicher counties, Texas. The company’s production for the nine months ended September 2019 totaled 9,700 boe/d, a 15% decrease over the same period in 2018. Production at the time consisted of 23% oil, 36% NGL and 41% gas.

In late 2018, Approach began to struggle with maintaining operations when pipeline constraints forced natural gas prices at the Waha hub in the Permian Basin to tumble to their lowest on record. As a result, the company began deferring most of its drilling and completions activity beginning in third-quarter 2018.

In May 2018, the company estimated its enterprise value at $637 million. Six months later, Approach Resources and its affiliates entered bankruptcy with nearly $3.7 billion in debt. As part of the voluntary Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division), Approach began exploring strategic alternatives.

Approach has continued to operate through bankruptcy with debtor-in-possession financing.


Houston-based Zarvona last purchased a company out of bankruptcy in 2017, with the acquisition of Trinity River Resource LP’s assets in the Woodbine Sandstone and Austin Chalk. The company also owns operations in Oklahoma, East Texas and Louisiana.

Approach Resources engaged Perella Weinberg Partners LP to act as its investment banker in connection with the Chapter 11 case, including to advise the company in its exploration of these strategic alternatives. The company was also assisted by Alvarez & Marsal North America LLC as financial adviser and Thompson & Knight LLP as legal advisers.