What changed in this filing

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Item 1A. Risk Factors

2022-03-18 compared with 2021-03-16 · 51 added, 26 removed, 249 unchanged (24% of the section changed)

15 unchanged sentences

and the severity and duration of the COVID-19 outbreaks, which together have created future uncertainty for the demand and pricing for services, equipment, and raw materials in the petroleum industry.

We are monitoring developments in Ukraine as well as the related export controls and financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., the U.K., the European Union and others.

Although we do not presently foresee direct material adverse effects upon our business, financial condition or results of operations as a result of developments in Ukraine and the consequent controls and sanctions, these factors may affect companies in many sectors and could lead to increased market volatility and uncertainty, which could affect us in turn.

We face various risks related to the ongoing COVID-19 pandemic and any future health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial condition, results of operations and cash flows.

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● domestic and foreign energy policy including increased emphasis on alternative sources of energy;

● increased attention to environmental, social and governance matters, including climate change;

● weather conditions in the U.S., Canada and elsewhere;

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● the overall supply and demand for oil and natural gas.

We are a "controlled company", controlled by Wilks, and as a result, are exempt from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not controlled companies.

As of January 14, 2022, Wilks controls approximately 74.46% of our combined voting power and is able to elect all of the Company’s board of directors.

As a result, we are considered a “controlled company” for the purposes of the Nasdaq listing requirements.

As a “controlled company,” we are permitted to, and we may, opt out of the Nasdaq listing requirements that would require (i) a majority of the members of our board of directors to be independent, (ii) that we establish a compensation committee and a nominating and governance committee, each comprised entirely of independent directors, or (iii) an annual performance evaluation of the nominating and governance and compensation committees.

The Nasdaq listing requirements are intended to ensure that directors who meet the independence standards are free of any conflicting interest that could influence their actions as directors.

Our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the applicable Nasdaq listing requirements.

It is also possible that the interests of Wilks may in some circumstances conflict with our interests and the interests of the holders of our common stock.

A limited number of clients operating in a single industry account for a significant portion of our revenues, and the loss of one of these clients could adversely affect our results of operations.

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We perform ongoing credit evaluations of our clients’ financial conditions and, generally, require no collateral from our clients.

It is possible that one or more of our clients will become financially distressed, especially in light of the recent downturn in the oil and natural gas industry and fluctuations in commodity prices, which could cause them to default on their obligations to us and could reduce the client’s future need for seismic services provided by us.

It is possible that one or more of our clients will become financially distressed, which could cause them

to default on their obligations to us and could reduce the client’s future need for seismic services provided by us.

Our concentration of clients may also increase our overall exposure to these credit risks.

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As a result, any extended periods of significant downtime or low productivity caused by reduced demand, weather interruptions, equipment failures, permit delays, or other causes could result in continuing or increasing operating losses.

We have indebtedness from time to time under credit facilities with a commercial bank, and certain of our accounts receivable and a restricted CDARS account are pledged as collateral for these obligations.

We have indebtedness from time to time under credit facilities with a commercial bank, and certain of our accounts receivable and a restricted IntraFi Network Deposit account are pledged as collateral for these obligations.

Our ability to borrow may be limited if our accounts receivable decreases.

From time to time, we may have indebtedness under credit facilities with a commercial bank.

We maintain a restricted CDARS account with our commercial bank which can be used as collateral against future borrowings.

If we are unable to repay all secured borrowings when due, whether at maturity or if declared due and payable following a default, our lenders have the right to proceed against the deposit pledged to secure the indebtedness and may liquidate the CDARS account in order to repay those borrowings, which could materially harm our business, financial condition and results of operations.

We maintain a restricted IntraFi Network Deposit account with our commercial bank which can be used as collateral against future borrowings.

If we are unable to repay all secured borrowings when due, whether at maturity or if declared due and payable following a default, our lenders have the right to proceed against the deposit pledged to secure the indebtedness and may liquidate the IntraFi Network Deposit account in order to repay those borrowings, which could materially harm our business, financial condition and results of operations.

Our ability to borrow funds under our revolving line of credit is tied to the value of our collateral account with our commercial bank as well as the amount of our eligible accounts receivable.

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In addition, even if we negotiate weather protection provisions in our contracts, we may not be fully compensated by our clients for delays caused by inclement weather.

As evidenced by the recent statewide winter storm in Texas in February 2021, the ability of our crews to operate could be impacted by weather conditions for extended periods, particularly if widespread power or water outages persist.

While this event did not materially impact our operations for an extended period, similar events could create circumstances that have a material adverse effect on our operating results for the period involved.

Our operations are subject to delays related to obtaining land access rights of way from third parties, which could affect our results of operations.

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It may be difficult for you to sell your shares in the public market at any given time at prevailing prices, and the price of our common stock may, therefore, be volatile.

In addition, after the consummation of the Offer on January 14, 2022, Wilks and its affiliates own approximately 74.46% of our common stock;

therefore, the public market for our common stock is more limited, which

could lead to increased volatility and low trading volumes.

Shareholders that tendered their shares in the Offer received consideration of $2.34 per share.

Our common stock traded below $5.00 per share for the past year, and when it trades below $5.00 per share it may be considered a low-priced stock and may be subject to regulations that limit or restrict the potential market for the stock.

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However, we do not carry insurance against certain risks that could cause losses, including business interruption resulting from equipment maintenance or weather delays.

Further, there can be no assurance, however, that any insurance obtained by us will be adequate to cover all losses or liabilities or that this insurance will continue to be available or available on terms which are

acceptable to us.

Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have a materially adverse effect on us.

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Canadian operations have been historically cyclical due to governmental restrictions on seismic acquisition during certain periods.

As a result, there is a risk that there will be a significant amount of unused equipment during those periods.

As a result, there is a risk that there

will be a significant amount of unused equipment during those periods.

We are required to expend financial and managerial resources to comply with such laws and related permit requirements in our operations, and we anticipate that we will continue to be required to do so in the future.

Although such expenditures historically have not been material to us, the fact that such laws or regulations change frequently makes it impossible for us to predict the cost or impact of such laws

and regulations on our future operations.

Although such expenditures historically have not been material to us, the fact that such laws or regulations change frequently makes it impossible for us to predict the cost or impact of such laws and regulations on our future operations.

The adoption of laws and regulations that have the effect of reducing or curtailing exploration and development activities by energy companies could also adversely affect our operations by reducing the demand for our services.

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Although various climate change legislative measures have periodically been introduced in the U.S.

Congress, and there has been a wide-ranging policy debate both in the United States and internationally regarding the impact of these gases and possible means for their regulation, it is not possible at this time to predict whether or when Congress may act on climate change legislation.

Congress, and there has been a wide-ranging policy debate both in the U.S.

and internationally regarding the impact of these gases and possible means for their regulation, it is not possible at this time to predict whether or when Congress may act on climate change legislation.

However, future actions that require substantial reductions in carbon emissions could be costly and difficult to implement.

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These and other lawsuits relating to GHG emissions may result in decisions by state and federal courts and agencies that could impact our operations.

In addition, the United States was actively involved in the United Nations Conference on Climate Change in Paris, which led to the creation of the Paris Agreement.

In April 2016, the United States signed the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years.

In November 2019, the State Department formally informed the United Nations of the United States’ withdrawal from the Paris Agreement.

In February 2021, the State Department formally informed the United Nations of the United States’ intent to rejoin the Paris Agreement which formally starts the 30-day process of bringing the United States back into the accord.

Additional legislation or regulation by states and regions, the EPA, and/or any international agreements to which the United States may become a party that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our operations.

In addition, the U.S.

was actively involved in the United Nations Conference on Climate Change in Paris, which led to the creation of the Paris Agreement.

In April 2016, the U.S.

signed the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years.

In November 2020, the U.S.

officially withdrew from the Paris Agreement.

However, on January 20, 2021, President Biden signed an “Acceptance on Behalf of the United States of America” that will allow the U.S.

to rejoin the Paris Agreement.

The newly signed acceptance, deposited with the United Nations on January 20, reverses the prior withdrawal.

officially rejoined the Paris Agreement on February 19, 2021.

The Paris Agreement requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years beginning in 2020.

As part of rejoining the Paris Agreement, President Biden announced that the U.S.

would commit to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG emissions by 2050.

In addition, shortly after taking office in January 2021, President Biden issued a series of executive orders designed to address climate change.

For example, the Executive Order on “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” sought to adopt new regulations and policies to address climate change and suspend, revise, or rescind, prior agency actions that were identified as conflicting with the Biden Administration’s climate policies.

Additional legislation or regulation by states and regions, the EPA, and/or any international agreements to which the U.S.

may become a party that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our operations.

The increasing governmental focus on GHG emissions may result in new environmental laws or regulations that may negatively affect us, our suppliers and our clients.

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Reductions in our revenues or increases in our expenses as a result of climate control initiatives could have adverse effects on our business, financial position, results of operations and cash flows.

In addition, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.

Ultimately, this could make it more difficult to secure funding for exploration and production activities, which may have an adverse impact on the demand for our services.

New regulation or legislation that limits or prohibits hydraulic fracturing could negatively affect the exploration and production of oil and gas and adversely affect demand for our services.

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Due to public concerns raised regarding potential impacts of hydraulic fracturing on groundwater quality, legislative and regulatory efforts at the federal level and in some states have been initiated to require or make more stringent the permitting and compliance requirements for hydraulic fracturing operations.

For example, EPA issued a final report in

December 2016, concluding that hydraulic fracturing activities have the potential to impact drinking water resources, particularly when involving water withdrawals, spills, fracturing into wells with inadequate mechanical integrity, fracturing directly into such resources, underground migration of liquids and gases, and inadequate treatment, disposal, storage and discharge of wastewater.

The final report also listed the data gaps and uncertainties that limited the EPA’s ability to fully assess the potential impacts of hydraulic fracturing on drinking water resources.

The EPA has asserted federal regulatory authority over hydraulic fracturing using fluids that contain “diesel fuel” under the Safe Drinking Water Act (“SDWA”) Underground Injection Control Program and has released a revised guidance regarding the process for obtaining a permit for hydraulic fracturing involving diesel fuel.

In May 2014, the EPA issued an Advanced Notice of Proposed Rulemaking, seeking comment on the development of regulations under the Toxic Substances Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing.

The EPA has not yet finalized this rule.

In June 2016, the EPA published final pretreatment standards for disposal of wastewater produced from shale gas operations to publicly owned treatment works.

Several states have adopted more stringent permitting, public disclosure or well construction legislation and/or regulations.

Three states (New York, Maryland and Vermont) have banned the use of high-volume hydraulic fracturing.

In addition to state laws, some local municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict or prohibit the performance of well drilling in general or hydraulic fracturing in particular.

There have also been certain governmental reviews that focus on deep shale and other formation completion and production practices, including hydraulic fracturing.

Governments may continue to study hydraulic fracturing.

We cannot predict the outcome of future studies, but based on the results of these studies to date, federal and state legislatures and agencies may seek to further regulate or even ban hydraulic fracturing activities.

These regulatory initiatives could each spur further action toward federal and/or state legislation and regulation of hydraulic fracturing activities.

Certain states have also adopted or are considering disclosure legislation and/or regulations.

Additional regulation could materially reduce our business opportunities and revenues if our customers decrease their levels of activity in response to such regulation.

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In addition, a number of lawsuits have been filed against other industry participants alleging damages and regulatory violations in connection with such activity.

These and other ongoing or proposed studies could spur initiatives to further regulate hydraulic fracturing under the SDWA and other aspects of the oil and gas industry.

These and other ongoing or proposed studies could spur initiatives to further regulate hydraulic fracturing and other aspects of the oil and gas industry.

In light of concerns about induced seismicity, some state regulatory agencies have already modified their regulations or issued orders to address induced seismicity.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors