What changed in this filing

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Item 1A. Risk Factors

2023-02-28 compared with 2022-03-04 · 99 added, 101 removed, 453 unchanged (31% of the section changed)

7 unchanged sentences

• We may not realize revenue on our current backlog due to customer order reductions, cancellations or acceptance delays, which may negatively impact our financial results.

• The COVID-19 pandemic has and may continue to adversely affect our business and results of operations.

• The industry in which we operate is undergoing continuing consolidation and seeking opportunities to participate in the energy transition, which may impact our results of operations.

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Increased costs of raw materials and other components, and inflationary pressure, may result in increased operating expenses.

• A deterioration of global economic conditions could adversely affect our financial condition and results of operations.

• We may not be able to satisfy technical requirements, testing requirements, code requirements or other specifications under contracts and contract tenders.

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• If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

• The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations.

• Facility consolidations or expansions may subject us to risks of operating inefficiencies, construction delays and cost overruns.

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• Our common stock price has been volatile, and we expect it to continue to remain volatile in the future.

• We have a significant amount of indebtedness.

Our leverage and debt service obligations restrict our operations and make us more vulnerable to adverse economic conditions.

• The indenture governing our 2025 Notes and our Credit Facility contain operating and financial restrictions that restrict our business and financing activities.

• Our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level, industry conditions and credit rating.

• We have incurred impairment charges and we may incur additional impairment charges in the future.

• Provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

Simmons & Associates (“LESA”), through SCF Partners (“SCF”), may significantly influence the outcome of stockholder voting and may exercise this voting power in a manner adverse to our other stockholders.

• We have renounced any interest in specified business opportunities.

• We have incurred impairment charges and we may incur additional impairment charges in the future.

Risks Related to our Business and Operations:

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Such factors include:

• supply of and demand for oil and natural gas;

• domestic and foreign supply of and demand for oil and natural gas;

• prices, and expectations about future prices, of oil and natural gas;

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• discovery rates of new oil and natural gas reserves;

• the COVID-19 pandemic and related public health measures implemented by governments worldwide;

• COVID-19 and related public health measures implemented by governments worldwide and the occurrence or threat of other epidemic or pandemic diseases, including variants of COVID-19, and any government response to such occurrence or threat;

• ability of our customers to access new markets or areas of production or to continue to access current markets, including as a result of trade restrictions;

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• natural disasters, catastrophes or other events resulting in severe property damage;

• more stringent environmental regulations;

• governmental regulations, including those instituted in connection with a response to climate change;

• prohibitions, moratoriums or similar limitations on drilling or hydraulic fracturing activity resulting in a cessation or disruption of operations;

• domestic and worldwide economic conditions;

• domestic and worldwide economic and political conditions, including inflationary pressures, further increases in interest rates and the cost of capital, a general economic slowdown or recession, political tensions and war (including future developments in the ongoing Russia-Ukraine conflict);

• financial stability of our customers and other industry participants;

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• increased pressures to invest in sustainable energy sources, shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas;

• investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit climate change;

• conservation measures and technological advances affecting energy consumption;

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• uncertainty in capital and commodities markets, and the ability of oil and natural gas companies to raise equity capital and debt financing;

• interest rates, the cost of capital and inflationary pressures;

• merger and divestiture activity among oil and natural gas producers, drilling contractors and oilfield service companies.

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As a result, there are periodic reductions in the demand for our products and services, downward pressure on the prices that we charge and ultimately an adverse impact on our business.

During the year ended December 31, 2021, the COVID-19 pandemic negatively impacted demand for oil and natural gas, which has contributed to further price volatility.

Although, as of early 2022, oil and gas prices and demand have recovered from the historic lows seen in the first half of 2020, it is uncertain whether prices will maintain current levels, decline or increase.

During the year ended December 31, 2022, ongoing COVID-19 outbreaks and related work restrictions impacted demand for oil and natural gas and caused disruptions in global

supply chains, which have contributed to price volatility and inflationary pressures for certain goods and services.

Although, during the year oil and gas prices and demand increased significantly from the historic lows seen in the first half of 2020, it is uncertain whether prices will maintain current levels, decline or increase.

Furthermore, there can be no assurance that the demand or pricing for oil and natural gas will follow historic patterns, including as a result of increased availability of alternative energy sources.

Declines in oil and natural gas prices, decreased levels of exploration,

development, and production activity, use of alternative sources of energy, and the willingness of customers to invest in their equipment relative to historical norms may negatively affect:

Declines in oil and natural gas prices, decreased levels of exploration, development, and production activity, use of alternative sources of energy, and the willingness of customers to invest in their equipment relative to historical norms may negatively affect:

• revenues, cash flows, and profitability;

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Our forecasts of customer demand are based on multiple assumptions, which have introduced errors into the estimates.

These forecasts were particularly challenging during the height of the COVID-19 pandemic, including as a result of uncertain demand levels and inability by our customers to receive finished goods.

These forecasts have been particularly challenging to develop as a result of uncertainty created by COVID-19 outbreaks and related work restrictions, and U.S.

recessionary pressures and supply chain inefficiencies preventing our customers from receiving finished goods.

In addition, many of our suppliers, such as those for certain of our standardized valves, require a longer lead time to provide products than our customers demand for delivery of our finished products.

If we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships.

If we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our

customer relationships.

Conversely, if we overestimate customer demand, we would allocate resources to the purchase of material or manufactured products that we are not be able to sell when we expect to, if at all.

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Our results of operations and overall financial condition may be negatively impacted by a reduction in revenue as a result of these circumstances.

The COVID-19 pandemic has and may continue to adversely affect our business and results of operations.

The COVID-19 pandemic and related responses by governmental authorities and changes to consumer behavior have significantly impacted global economic activity.

In addition to impacts on oil and natural gas markets (as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Conditions”), the COVID-19 pandemic caused further declines in the global rig count and North America completions activities that impacted our business and operations.

These events have compounded the impact from many of the risks described in this Risk Factors section, including those relating to our customers’ capital spending and trends in oil and natural gas prices.

Although demand for our products and services has partially recovered from 2020 lows, demand may remain depressed as a result of our customers’ reduction in capital budgets in response to commodity price volatility, ongoing macroeconomic instability, supply chain disruption and other factors related to the COVID-19 pandemic.

In addition, we are facing, and expect to continue to face, logistical challenges resulting from the COVID-19 pandemic, including operational and supply chain disruptions, material and labor shortages, travel restrictions and an inability to commute to certain facilities and job sites, as we provide services and products to our customers.

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.

The ultimate extent of the impact of the pandemic will depend largely on future developments, including the duration and spread of the outbreak, the success of vaccination and booster programs and the related impact on overall economic activity, all of which are uncertain and cannot be predicted with certainty at this time.

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

The industry in which we operate is undergoing continuing consolidation and seeking opportunities to participate in the energy transition, which may impact our results of operations.

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Our ability to be productive and profitable depends upon our ability to employ and retain skilled workers.

During periods of low activity in our industry, we have reduced the size of our labor force to match declining revenue levels, and other employees have chosen to leave in order to find more stable employment.

This causes us to lose skilled personnel, the absence of which could cause us to incur quality, efficiency and deliverability issues in our operations, or delay our response to an upturn in the market.

During periods of increasing activity in our industry, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force.

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Furthermore, a significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both.

We are also exposed to the impact of labor cost increases resulting from other factors such as high employment levels, increased wages offered by employers in other industries, and government regulations.

We are also exposed to the impact of labor cost increases resulting from other factors such as high employment levels, increased wages offered

by employers in other industries, and government regulations.

If any of these events were to occur, our ability to respond quickly to customer demands may be inhibited and our growth potential could be impaired.

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In some cases, the suppliers own the intellectual property rights to the products we sell, or possess the technology or specialized tooling required to manufacture them.

As a result of this concentration in part of our supply chain, our business and operations may be negatively affected if our key suppliers were to experience significant disruptions affecting the price, quality, availability or timely delivery of their products, such as from the COVID-19 pandemic, or if they were to decide to terminate their relationships with us.

As a result of this concentration in part of our supply chain, our business and operations may be negatively affected if our key suppliers were to experience significant disruptions affecting the price, quality, availability or timely delivery of their products, such as from COVID-19, or if they were to decide to terminate their relationships with us.

For example, we have a limited number of suppliers for our bearings product lines and certain of our valve product lines.

The limited number of these suppliers can restrict the quantity and timeliness of customer deliveries.

Recently, some of our suppliers have imposed more stringent payment terms and conditions on us based on our perceived risk as a counterparty.

In addition, some of our suppliers have imposed more stringent payment terms and conditions on us based on our perceived risk as a counterparty.

The partial or complete loss of any one of our key suppliers, a significant adverse change in the relationship with any of these suppliers, through consolidation or otherwise, would limit our ability to manufacture and sell certain of our products.

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For example, our Coiled Tubing product line was unable to source a sufficient amount of steel during the third and fourth quarters of 2021 to satisfy customer orders on a timely basis.

In addition to the impact of the COVID-19 pandemic and related supply chain and operational disruptions, the availability and cost of necessary raw materials and finished products may be impacted by macroeconomic demand, various national, regional, local, economic and political factors, and inflationary pressures.

Some of our customer contracts require us to compensate customers if we do not meet specified delivery obligations.

In addition to the impact of COVID-19 and related supply chain and operational disruptions, the availability and cost of necessary raw materials and finished products may be impacted by macroeconomic demand, various national, regional, local, economic and political factors, and inflationary pressures.

Some of our contracts require us to compensate customers if we do not meet specified delivery obligations.

We rely on suppliers to provide required materials and in many instances these materials must meet certain specifications.

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Furthermore, the ability of third-party suppliers to deliver materials to our specifications may be affected by events beyond our control.

As a result, there is a risk that we could experience diminished supplier performance

resulting in longer than expected lead times and/or product quality issues.

As a result, there is a risk that we could experience diminished supplier performance resulting in longer than expected lead times and/or product quality issues.

For example, in the past, we have experienced issues with the quality of certain forgings used to produce materials utilized in our products.

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The occurrence of any of the foregoing factors would have a negative impact on our ability to deliver products to customers within committed time frames.

A deterioration of global economic conditions could adversely affect our financial condition and results of operations.

A deterioration in global economic conditions, including an economic slowdown or recession in the United States or in any other country that significantly affects the supply of or demand for oil or natural gas, inflation, geopolitical issues such as the continuing conflict between Russia and Ukraine, the availability and cost of credit and supply chain disruptions, could adversely affect our financial condition and results of operations.

Global economic conditions have a significant impact on oil and natural gas prices, and any stagnation or deterioration in these conditions could result in less demand for our products and services and could cause our customers to reduce their planned capital spending.

Adverse global economic conditions also may cause our customers, vendors and/or suppliers to lose access to the financing necessary to sustain or increase their current level of operations, fulfill their commitments and/or fund future operations and obligations.

Additionally, if inflation increases, we may be unable to raise pricing for our products and services at or above the rate of inflation, which could reduce our profit margins.

In the past, global economic conditions, and expectations for future global economic conditions, have sometimes experienced significant deterioration in a relatively short period of time and there can be no assurance that global economic conditions or expectations for future global economic conditions will recover in the near term or not quickly deteriorate again due to one or more factors.

We may not be able to satisfy technical requirements, testing requirements, code requirements or other specifications under contracts and contract tenders.

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Despite our implementation of security measures, our IT systems are vulnerable to computer viruses, natural disasters, incursions by intruders or hackers, failures in hardware or software, power fluctuations, cyber terrorists and other similar disruptions.

Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cyber attacks.

In certain instances, our IT systems have failed to perform as anticipated, resulting in disruptions in operations and other adverse consequences.

Should our IT systems materially fail in the future, it may result in numerous other adverse consequences, including reduced effectiveness and efficiency of our operations, inappropriate disclosure or loss of confidential or sensitive information, increased overhead costs, and loss of intellectual property, which could lead to liability to third parties or otherwise and have a material adverse effect on our business and results of operations.

Our insurance may not protect us against such occurrences or our insurers may refuse to make payment.

While we carry cyber insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

In addition, we may be required to incur significant costs to prevent damage caused by these disruptions or security breaches in the future.

Further, cyber attacks on a communications network or power grid could cause operational disruption resulting in loss of revenues.

In addition, recent laws and regulations governing data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation and laws enacted in certain U.S.

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If we are unable to maintain effective internal controls and, as a result, fail to provide reliable financial reports and effectively prevent fraud, our reputation and operating results would be harmed.

The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations.

Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, and fear of such events have adversely impacted and may continue to adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our products and services.

Other effects of such public health crises, pandemics and epidemics, including the COVID-19 pandemic, have included and may continue to include significant volatility and disruption of the global financial markets;

continued volatility of oil and natural gas prices and related uncertainties around OPEC+ production;

disruption of our operations;

impact to costs;

loss of workers;

labor shortages;

operational and supply chain disruptions;

material or equipment shortages;

logistics constraints;

customer demand for our products and services and industry demand generally;

capital spending by oil and natural gas companies;

our liquidity;

the price of our securities and trading markets with respect thereto;

our ability to access capital markets;

asset impairments and other accounting changes;

certain of our customers experiencing bankruptcy or otherwise becoming unable to pay vendors, including us;

and employee impacts from illness, travel restrictions, including border closures and other community response measures.

Such public health crises, pandemics and epidemics are continuously evolving and the extent to which our business operations and financial results continue to be affected depends on various factors beyond our control, such as the duration, severity and sustained geographic resurgence of the COVID-19 virus;

the emergence, severity and spread of new variants of the COVID-19 virus;

the impact and effectiveness of governmental actions to contain and treat such outbreaks, including government policies and restrictions;

vaccine hesitancy, vaccine mandates, and voluntary or mandatory quarantines;

and the global response surrounding such uncertainties.

Given the dynamic nature of these events, we cannot reasonably estimate the period of time that COVID-19 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.

The ultimate extent of the impact of COVID-19 will depend largely on future developments, including the spread of the virus within communities, the success of programs designed to prevent the virus and its spread and the related impact on overall economic activity, all of which are uncertain and cannot be predicted with certainty at this time.

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

Facility consolidations or expansions may subject us to risks of operating inefficiencies, construction delays and cost overruns.

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Disruptions in operations or damage to a manufacturing plant could reduce our ability to produce products and satisfy customer demand.

In particular, we have offices and manufacturing facilities in Houston, Texas, and in

various places throughout the U.S.

In particular, we have offices and manufacturing facilities in Houston, Texas, and in various places throughout the U.S.

Gulf Coast region.

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In addition, the legislation broadened the authority for local governments to further regulate or restrict hydraulic fracturing.

In November 2019, the California governor’s office imposed new regulations on hydraulic fracturing, including a moratorium on all new hydraulic fracturing permits pending review by a panel of scientists.

In April 2021, the California governor’s office directed state regulators to end the issuance of new permits for hydraulic fracturing by January 2024.

In February 2018, the Oklahoma Corporation Commission released a protocol that requires operators to suspend hydraulic fracturing well completion operations in response to certain levels of seismic activity.

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In March 2021, prior to the expiration of the Secretary of the Interior’s order, President Biden announced that career staff at the Department of the Interior would resume processing oil and gas drilling permits.

In June 2021, a federal judge for the U.S.

District Court of the Western District of Louisiana issued a nationwide preliminary injunction against the pause of oil and natural gas leasing on public lands or in offshore waters while litigation challenging that aspect of the executive order is ongoing.

In August 2022, a federal judge for the U.S.

District Court of the Western District of Louisiana issued a permanent injunction against the pause of oil and natural gas leasing on public lands or in offshore waters of the thirteen plaintiff states that brought the lawsuit, which followed a June 2021 nationwide preliminary injunction by the district court that was subsequently vacated by the U.S.

Court of Appeals for the Fifth Circuit.

The full impact of these federal actions remains unclear, and if other restrictions or prohibitions become effective in the future, they could have an adverse impact on our business, financial condition, results of operations and cash flows.

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Failure to comply with these laws and regulations or to obtain or comply with permits may result in the inability to conduct certain operational activities, assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements and the imposition of injunctions to prohibit certain activities or force future compliance.

Certain environmental laws may impose joint and several liability, without regard to fault or legality of conduct, on classes of persons who are

considered to be responsible for the release of a hazardous substance into the environment.

Certain environmental laws may impose joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment.

In addition, these risks may be greater for us because the companies we acquire or have acquired may not have allocated sufficient resources and management focus to environmental compliance, potentially requiring rehabilitative efforts during the integration process or exposing us to liability before such rehabilitation occurs.

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products, including those containing steel and aluminum.

government recently entered into tariff agreements with the European Union, Japan, and the United Kingdom to ease Section 232 tariffs on the close allies and trade partners, but Section 232 tariffs still remain in effect with respect to the other nations.

In addition, the U.S.

government recently issued a preliminary determination pursuant to an anti-dumping duty order on certain hot-rolled steel products from Japan, in which it found imports of the subject merchandise were sold in the United States at prices below normal value during the August 2019 to July 2020 time period.

government issued a final determination pursuant to an anti-dumping duty order on

certain hot-rolled steel products from Japan, in which it found imports of the subject merchandise were sold in the United States at prices below normal value during the October 2019 to September 2020 time period.

As a result, the U.S.

government has preliminarily calculated a dumping margin of 26.81% for imports from Japan of the subject steel products.

At this time, we cannot predict whether this level of dumping margins will become final or the duty amount that may be imposed.

government assessed a dumping margin of 24.07% for imports from Japan of the subject steel products.

Further, the U.S.

government conducted a sunset review on its existing anti-dumping duty on certain hot-rolled steel products from Australia, Brazil, Japan, the Republic of Korea, the Netherlands, the Republic of Turkey, and the United Kingdom that was issued in 2016, and determined to continue the anti-dumping duty order on all subject steel products except for those from Brazil.

Our efforts to mitigate the impact of tariffs on raw materials through the diversification of our supply chain, exemption requests and other measures may not be sufficiently successful.

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Our excess insurers may also dispute the claims of exhaustion, or may rely on certain policy requirements to delay or deny claims.

Furthermore, the various per occurrence and aggregate limits in different insurance policies may result in extended negotiations or the denial of reimbursement

for particular claims.

Furthermore, the various per occurrence and aggregate limits in different insurance policies may result in extended negotiations or the denial of reimbursement for particular claims.

For more information on the cost sharing agreements related to this risk, refer to Note 12 Commitments and Contingencies .

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In addition, we provide certain services that could cause, contribute to or be implicated in these events.

If our products or services fail to meet specifications or are involved in accidents or failures, we could face warranty, contract or other litigation claims, which could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, and pollution or other environmental damages.

If our products or services fail to meet specifications or are involved in accidents or failures, we could face

warranty, contract or other litigation claims, which could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, and pollution or other environmental damages.

In addition, failure of our products to operate properly or to meet specifications may increase costs by requiring additional engineering resources and services, replacement of parts and equipment or monetary reimbursement to a customer.

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Congress has considered adopting comprehensive legislation to reduce emissions of GHGs, and almost half of the states have already taken legal measures to reduce emissions of GHGs, primarily through measures to promote the use of renewable energy and/or regional GHG cap-and-trade programs.

The Environmental Protection Agency (the “EPA”) has attempted to regulate greenhouse gas emissions under the federal Clean Air Act.

The EPA has attempted to regulate greenhouse gas emissions under the federal Clean Air Act.

In December 2009, the EPA determined that emissions of carbon dioxide, methane and certain other GHGs endanger public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the Earth’s atmosphere and other climatic changes.

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Court of Appeals for the District of Columbia struck down the ACE rule but did not reinstate the former CPP regulation.

The power of the EPA to reissue the CPP under Section 111(d) of the CAA will be decided by the Supreme Court in 2022.

In June 2022, the CPP was struck down by the United States Supreme Court, which held that Congress did not grant EPA the authority to devise emissions caps based on the generation-shifting approach the EPA took in the CPP.

In August 2020, the EPA rescinded methane and volatile organic compound emissions standards for new and modified oil and gas transmission and storage infrastructure previously promulgated in 2016, as well as methane limits for new and modified oil and gas production and processing equipment.

The EPA also relaxed requirements for oil and gas operators to monitor emissions leaks.

However, in November 2021, the EPA proposed new NSPS updates and emission guidelines to reduce methane and other pollutants from the oil and gas industry.

However, in November 2021, the EPA proposed new source performance standards (“NSPS”) updates and emission guidelines to reduce methane and other pollutants from the oil and gas industry.

In December 2022, the EPA issued a supplemental proposal to update, strengthen, and expand the November 2021 NSPS updates and further reduce methane and other pollutants from the oil and gas industry.

The public comment period on the proposed rule ended on January 5, 2023.

The EPA has also adopted rules requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission sources in the U.S., including oil and natural gas systems.

In August 2022, President Biden also signed into law the Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies, which could increase operating costs within the oil and gas industry and accelerate the transition away from fossil fuels.

Efforts have also been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues.

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Foreign Corrupt Practices Act and similar anti-corruption laws in other jurisdictions, including the UK Bribery Act 2010, (“anti-corruption laws”) prohibit corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity.

may be held responsible for violations by our employees, contractors and agents for violations of anti-corruption laws.

We may be held responsible for violations by our employees, contractors and agents for violations of anti-corruption laws.

We may also be held responsible for violations by an acquired company that occur prior to an acquisition, or subsequent to an acquisition but before we are able to institute our compliance procedures.

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The UK Bribery Act 2010 is broader in scope than the FCPA, applies to public and private sector corruption, and contains no facilitating payments exception.

A violation of any of these laws, even if prohibited by our policies, could have a material adverse effect on our business.

A violation of any of these laws, even if prohibited by our policies, could have a

material adverse effect on our business.

Actual or alleged violations could damage our reputation, be expensive to defend, impair our ability to do business, and cause us to incur civil and criminal fines, penalties and sanctions.

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Likewise, the market price of our common stock has varied significantly in the past.

For example, in 2021, the market price of our common stock reached a high of $28.50 per share on June 2, 2021 and a low of $12.09 per share on January 4, 2021.

Additionally, the Reverse Stock Split reduced the number of shares in our public float, which may limit trading and liquidity and increase volatility until more shares become available, if ever.

For example, in 2022, the market price of our common stock reached a high of $31.36 per share on December 20, 2022, and a low of $16.79 per share on January 5, 2022.

We expect our stock price to continue to remain volatile given the cyclical nature of our industry and our limited public float.

We have a significant amount of indebtedness.

Our leverage and debt service obligations restrict our operations and make us more vulnerable to adverse economic conditions.

We currently have a substantial amount of indebtedness, including approximately $257.0 million of 9.00% convertible secured notes due August 2025 (“2025 Notes”).

Our level of indebtedness and restrictions in our debt agreements have significant consequences for our future prospects, including limiting our liquidity and flexibility in obtaining additional financing.

In addition, we may have difficulty making debt service payments on our indebtedness as such payments become due.

Furthermore, our $179.0 million senior secured revolving credit facility (“Credit Facility”), which had no borrowings outstanding as of December 31, 2021, is scheduled to mature the earlier of September 8, 2026 or 91 days prior to the maturity of the 2025 Notes.

Our level of indebtedness and the terms of our debt agreements affect our operations in several ways, including the following:

• requiring us to dedicate a substantial portion of our cash flow from operations to servicing existing debt obligations;

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to borrow funds, dispose of assets, pay dividends and make certain investments;

• reducing our flexibility to plan for, and react to, changes in the economy and in our industry;

• impairing our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes.

Our ability to pay our expenses, and fund our working capital needs and debt obligations, will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors that are outside of our control.

As a result of these factors, our business may not generate sufficient cash flow from operations to enable us to meet our debt obligations.

In addition, under the terms of our Credit Facility, any failure to comply with the financial or other covenants of our indebtedness would result in an event of default, which would cause some or all of our indebtedness to become immediately due and payable and have a material adverse effect on our business, financial condition and results of operations.

The indenture governing our 2025 Notes and our Credit Facility contains operating and financial restrictions that restrict our business and financing activities.

The indenture governing our 2025 Notes and our Credit Facility contain operating and financial restrictions that restrict our business and financing activities.

Our indenture and Credit Facility contain, and any future indebtedness we incur may contain, a number of restrictive covenants that will impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

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Our Credit Facility also contains covenants, which, among other things, require us in certain circumstances, on a consolidated basis, to maintain specified financial ratios or conditions.

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities

or finance future operations or capital needs.

Our ability to borrow under the Credit Facility and comply with some of the covenants, ratios or tests contained in our indenture and Credit Facility may be affected by events beyond our control.

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A failure to comply with the covenants, ratios or tests would result in an event of default, which, if not cured or waived, would cause some or all of our indebtedness to become immediately due and payable and have a material adverse effect on our business, financial condition and results of operations.

The restrictions in our debt agreements may have significant consequences for our future prospects, including limiting our liquidity and flexibility in obtaining additional financing, increasing our vulnerability to general adverse economic and industry conditions, and reducing our flexibility to plan for, and react to, changes in the economy and in our industry.

As a result of these factors, our business may not generate sufficient cash flow from operations to enable us to meet our debt obligations.

Our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level, industry conditions and credit rating.

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If we are unable to access the capital or credit markets on terms acceptable to us, it could have a material adverse effect on our business, financial condition, results of operations, cash flows and liquidity, particularly in respect of our ability to repay or refinance our debt .

We have incurred impairment charges and we may incur additional impairment charges in the future.

We evaluate our long-lived assets, including property and equipment, intangible assets with definite lives and operating lease right of use assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.

In performing our review for impairment, future cash flows expected to result from the use of the asset and its eventual value upon disposal are estimated.

If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired.

The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset.

The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows based on expected utilization.

For the year ended December 31, 2021, we did not recognize any impairment charges.

For the year ended December 31, 2020, we recognized impairment charges for property and equipment, intangible assets and operating lease right of use assets totaling $15.1 million, $5.3 million and $15.4 million, respectively.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

If we determine that the carrying value of our long-lived assets is less than their fair value, we would be required to record additional charges in the future, which could adversely affect our financial condition and results of operations.

Provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

8 unchanged sentences

In addition, our amended and restated bylaws establish advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders.

LESA, through SCF, may significantly influence the outcome of stockholder voting and may exercise this voting power in a manner adverse to our other stockholders.

As of February 25, 2022, SCF held approximately 748 thousand shares of our common stock, equal to approximately 13% of the outstanding common stock at that date.

LESA is the ultimate general partner of SCF and will exert significant influence over us, including over the outcome of most matters requiring a stockholder vote, such as the election of directors, adoption of amendments to our charter and bylaws and approval of transactions involving a change of control.

LESA’s interests may differ from our other stockholders, and SCF may vote its common stock in a manner that may adversely affect those stockholders.

SCF is a party to a registration rights agreement with us, which requires us to effect the registration of its shares in certain circumstances.

SCF has exercised such rights in the past.

Sales of substantial amounts of our common stock by SCF, or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.

We have renounced any interest in specified business opportunities.

Our certificate of incorporation provides that, so long as we have a director or officer who is affiliated with SCF (an “SCF Nominee”) and for a continuous period of one year thereafter, we renounce any interest or expectancy in any business opportunity in which any member of the SCF group participates or desires or seeks to participate in and that involves any aspect of the energy equipment or services business or industry, other than (i) any business opportunity that is brought to the attention of an SCF Nominee solely in such person’s capacity as a director or officer of our Company and with respect to which no other member of the SCF group independently receives notice or otherwise identifies such opportunity and (ii) any business opportunity that is identified by the SCF group solely through the disclosure of information by or on behalf of our Company.

We refer to SCF and its other affiliates and its portfolio companies as the SCF group.

We are not prohibited from pursuing any business opportunity with respect to which we have renounced any interest.

No SCF nominee currently serves on our board of directors and, therefore, this provision in our certificate of incorporation is scheduled to expire in December 2022.

SCF has investments in other oilfield service companies that may compete with us, and SCF and its affiliates, other than our Company, may invest in other such companies in the future.

LESA, the ultimate general partner of SCF, has an internal policy that discourages it from investing in two or more portfolio companies with substantially overlapping industry segments and geographic areas.

However, LESA’s internal policy does not restrict the management or operation of its other individual portfolio companies from competing with us.

Pursuant to LESA’s policy, LESA may allocate any potential opportunities to the existing portfolio company where LESA determines, in its discretion, such opportunities are the most logical strategic and operational fit.

As a result, LESA or its affiliates may become aware, from time to time, of certain business opportunities, such as acquisition opportunities, and may direct such opportunities to its other portfolio companies, in which case we may not become aware of or otherwise have the ability to pursue such opportunities.

Furthermore, LESA does not have a specific policy with regard to allocation of financial professionals and they are under no obligation to provide us with financial professionals.

We have incurred impairment charges and we may incur additional impairment charges in the future.

In performing our review for impairment, future cash flows expected to result from the use of the asset and its eventual value upon disposal are estimated.

If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired.

The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset.

The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows based on expected utilization.

Unresolved Staff Comments

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