What changed in this filing

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Item 1A. Risk Factors

2020-08-07 compared with 2020-05-08 · 24 added, 13 removed, 22 unchanged (63% of the section changed)

1 unchanged sentence

Except for the updates below, there have been no material changes from the risk factors disclosed in our 2019 Annual Report on Form 10-K.

The convertibility of the 2025 Notes is subject to a conversion cap until stockholder approval is obtained and an event of default will occur if such approval is not obtained.

Subsequent to the end of the second quarter, we exchanged $315.5 million of our existing 6.25% senior unsecured notes due 2021 for new 9.00% convertible secured notes due July 2025 (the “2025 Notes”).

The 2025 Notes pay interest at the rate of 9.00%, of which 6.25% will be payable in cash and 2.75% will be payable in cash or additional notes, at the Company’s option.

The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility collateral, which secures the 2025 Notes on a second lien basis.

A portion of the 2025 Notes equal to $150.0 million total principal amount is mandatorily convertible into common stock on a pro rata basis at a conversion price of $1.35 per share, subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20-trading day period is at least $1.50 per share.

Holders of the 2025 Notes also have optional conversion rights in the event that the Company elects to redeem the 2025 Notes in cash and at the final maturity of the new notes.

Prior to obtaining stockholder approval, the amount of 2025 Notes that may be converted into common stock is subject to a conversion cap.

If the required stockholder approval of the issuance of additional shares of common stock and other related actions in connection with the exchange is not obtained in a timely manner, the convertibility of the 2025 Notes will be delayed until such approval is obtained.

If such stockholder approval is not received by

June 30, 2021, the failure to obtain such approval would result in an event of default under the 2025 Notes.

Upon such default, the 2025 Notes will become immediately due and payable without any action by the 2025 Notes trustee or the holders of 2025 Notes, which would have a material adverse effect on our business, financial condition and results of operations.

The recent COVID-19 pandemic and related economic repercussions have had, and are expected to continue to have, a significant impact on our business, and depending on the duration of the pandemic and its effect on the oil and natural gas industry, could have a material adverse effect on our business, liquidity, consolidated results of operations and consolidated financial condition.

The COVID-19 pandemic and associated volatility in the oil and natural gas markets has caused us to incur additional risk.

The COVID-19 pandemic has resulted in unprecedented governmental actions ordering citizens in the United States and countries around the world, including those in which we operate, to “shelter in place,” and issuing “stay at home orders.” As a result of these directives, worldwide demand for oil and natural gas has decreased significantly.

In addition, instability among the OPEC+ oil producing countries led to increases in oil production, which exacerbated the already existing surplus in oil.

Due to these events, the oil and natural gas industry experienced an unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply.

WTI oil spot prices decreased from a high of $63 per barrel in early January 2020 to a low of $14 per barrel in late March 2020, a level which had not been experienced since March 1999, with physical markets showing signs of distress as spot prices have been negatively impacted by the lack of available storage capacity.

While OPEC+ agreed in April to cut production, downward pressure on commodity prices has continued and could continue for the foreseeable future.

During the first half of 2020, the COVID-19 pandemic and associated actions taken around the world to mitigate the spread of COVID-19, including unprecedented governmental actions ordering citizens in the United States and countries around the world, including those in which we operate, to “shelter in place,” and issuing “stay at home orders,” caused a significant decline in economic activity and oil demand.

At the same time, the OPEC+ oil producing nations increased production in an effort to grow market share, which further exacerbated the imbalance between supply and demand.

The combination of these shocks in both supply and demand caused a significant decline in oil prices during the first quarter of 2020 and created an extremely challenging market for all sub-sectors of the oil and natural gas industry throughout the second quarter of 2020.

In response to the low level of oil prices in the second quarter of 2020, the OPEC+ oil producing nations agreed to a significant cut in oil production and North American exploration and production companies significantly reduced supply by shutting in producing wells and significantly decreasing drilling and completion activities.

Although oil demand and prices have increased from the lows reached at the beginning of the second quarter, they remain at levels that are uneconomic for many exploration and production companies.

This has driven further declines in the global rig count and North America completions activities.

These events have directly affected our business and have compounded the impact from many of the risks described in our Form 10-K for the year ended December 31, 2019, including those relating to our customers’ capital spending and trends in oil and natural gas prices.

Demand for our products and services has declined and is expected to further decline as our customers continue to revise their capital budgets downwards and swiftly adjust their operations in response to lower commodity prices.

In addition, we are facing logistical challenges including border closures, travel restrictions and an inability to commute to certain facilities and job sites, as we provide services and products to our customers.

We are also experiencing inefficiencies surrounding stay-at-home orders and remote work arrangements.

In addition, we are facing, and expect to continue to face, logistical challenges including border closures, travel restrictions and an inability to commute to certain facilities and job sites, as we provide services and products to our customers.

We are also experiencing inefficiencies surrounding stay-at-home orders and remote work arrangements, which we expect will continue for the foreseeable future.

Given the nature and significance of the events described above, we are not able to enumerate all potential risks to our business;

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• liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies;

• a credit rating downgrade of our corporate debt and potentially higher borrowing costs in the future;

• cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity;

• a credit rating downgrade of our corporate debt and higher borrowing costs in the future;

• cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of and increased sophistication in cyberattacks in the current environment of remote connectivity, which could disrupt our operations or result in the loss or exposure of confidential or sensitive customer, employee or company information and adversely affect our business, financial condition and results of operations;

• litigation risk and possible loss contingencies related to COVID-19 and its impact, including with respect to commercial contracts, employee matters and insurance arrangements;

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Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, the full extent of the impact they will have on our business, financial condition, results of operations or cash flows or the pace or extent of any subsequent recovery.

We anticipate that 2020 will be a challenging year for us, as our customers continue to reduce their capital budgets.

Therefore, we expect a substantial decline in activity from levels we experienced in the first quarter of 2020, coupled with downward pressure on the price of our products and services, and corresponding reductions in revenue and operating margins.

have, a material adverse effect on our business, liquidity, consolidated results of operations and consolidated financial condition.

This year has been, and we anticipate that it will continue to be, a challenging year for us, as our customers continue to reduce their capital budgets.

Therefore, we expect a continued substantial decline in activity from levels we experienced in the first half of 2020, coupled with downward pressure on the price of our products and services, and corresponding reductions in revenue and operating margins.

The confluence of events described above have had, and are expected to continue to have, a significant impact on our business, and depending on the duration of the pandemic and its effect on the oil and natural gas industry, could have, a material adverse effect on our business, liquidity, consolidated results of operations and consolidated financial condition.

For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Conditions.”

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-Q

Item 1A. Risk Factors