What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-03-05 · 137 added, 152 removed, 167 unchanged (63% of the section changed)

10 unchanged sentences

Our capital products are directed at drilling rig equipment for constructing new or upgrading existing rigs, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects.

In 2023, over 60% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.

In 2024, approximately 80% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.

We expect that the world’s long-term energy demand will continue to rise for many decades.

2 unchanged sentences

We are continuing to develop products to help oil and gas operators lower expenses, increase production, and reduce their emissions while also deploying our technologies in renewable energy applications.

In the first quarter 2024, following the Variperm Acquisition, we aligned our reportable segments with business activity drivers, our customer base, and the manner in which management reviews and evaluates operating performance.

FET now operates in the following two reportable segments:

(1) Drilling and Completions and (2) Artificial Lift and Downhole.

Refer to Note 17 Business Segments for the product lines making up each segment.

Our historical results of operations were recast retrospectively to reflect these changes in accordance with U.S.

A summary of the products and services offered by each segment is as follows:

• Drilling & Downhole .

This segment designs, manufactures and supplies products and solutions to the drilling, artificial lift and subsea markets, including applications in oil and natural gas, renewable energy, defense and communications.

The products and solutions consist primarily of:

(i) capital equipment and consumable products used in the drilling process;

(ii) products designed to safeguard artificial lift equipment and cables, and well construction casing and cementing equipment;

and (iii) ROVs and trenchers, submarine rescue vehicles, specialty components and tooling, and technical services.

• Completions.

This segment designs, manufactures and supplies products and solutions to the coiled tubing, well stimulation and intervention markets.

The products and solutions consist primarily of:

(i) capital and consumable products sold to the pressure pumping market, including hydraulic fracturing pumps, cooling systems, high-pressure flexible hoses and flow iron, as well as wireline cable and pressure control equipment used in the well completion and intervention service markets;

and (ii) coiled tubing strings and coiled line pipe and related services.

• Production .

This segment designs, manufactures and supplies products and solutions for the production and infrastructure markets.

• Drilling and Completions .

This segment designs, manufactures and supplies products and solutions to the drilling, subsea, coiled tubing, well stimulation and intervention markets, including applications in the oil and natural gas, renewable energy, defense and communications industries.

The products and solutions consist primarily of (i) capital equipment and consumable products used in the drilling process;

(ii) capital equipment and aftermarket products including subsea ROVs and trenchers, submarine rescue vehicles, specialty components and tooling, and technical services;

(iii) capital equipment and consumable products sold to the pressure pumping market, including hydraulic fracturing pumps, cooling systems, and high-pressure flexible hoses and flow iron;

(iv) wireline cable and pressure control equipment used in the well completion and intervention service markets;

and (v) coiled tubing strings and pressure control equipment used in coiled tubing operations, as well as coiled line pipe and related services.

• Artificial Lift and Downhole .

This segment designs, manufactures and supplies products and solutions for the artificial lift, well construction, production and infrastructure markets.

The products and solutions consist primarily of:

(i) engineered process systems, production equipment, as well as specialty separation equipment;

and (ii) a wide range of industrial valves focused on oil and natural gas as well as power generation, renewable energy and other general industrial applications.

(i) products designed to safeguard artificial lift equipment and downhole cables;

(ii) well construction casing and cementing equipment;

(iii) customized downhole technology solutions, providing sand and flow control products for heavy oil applications;

(iv) engineered process systems, production equipment, as well as specialty separation equipment;

and (v) a wide range of industrial valves focused on oil and natural gas as well as power generation, renewable energy and other general industrial applications.

Market Conditions

Demand for our products and services is directly related to our customers’ capital and operating budgets.

Generally, demand for our products and services is directly related to our customers’ capital and operating budgets.

These budgets are heavily influenced by current and expected energy prices.

1 unchanged sentence

Utilization is a function of equipment capacity and durability in demanding environments.

Oil and natural gas prices softened in the first half 2023 as a result of global recessionary fears, but rebounded somewhat during the second half of 2023 as supply tightened from further OPEC+ production cuts and growing geopolitical tensions in the Middle East.

These tensions could lead to a disruption to world energy markets and international supply chains.

Despite these near-term macroeconomic challenges, we expect that the world’s long-term energy demand will continue to rise and may outpace global supply as OPEC+ remains committed to maintaining stable oil prices.

Oil and natural gas average prices were lower in 2024 compared to 2023 full year average prices.

This decline can be attributed to anticipated increases in production by OPEC+, geopolitical uncertainty in Ukraine and the Middle East and slowing global oil demand growth.

In the future, volatile macroeconomic conditions, including potential tariffs imposed by U.S.

or foreign governments, could disrupt world energy markets and international supply chains.

Although near-term events may present challenges, we expect that the world’s long-term energy demand will continue to rise and may outpace global supply.

We expect that hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources become increasingly prominent.

The price of oil has varied dramatically over the last several years.

The spot prices for West Texas Intermediate (“WTI”) and United Kingdom Brent (“Brent”) crude oil fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020.

Since that time, oil prices rebounded to highs above $120.00 per barrel in March 2022 but have softened in 2023 to an average of $71.89 and $77.69 for WTI and Brent, respectively.

In addition, average natural gas prices were 60.8% lower in 2023 compared to 2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which increased 3.6% in 2023 compared to average global rig count in 2022.

The increase was driven by growth in international rig count in 2023 of 9.6% compared to 2022, while the average U.S.

rig count for 2023 was 5.0% lower than 2022.

International markets grew throughout 2023 and outpaced the U.S.

and are expected to continue to grow in 2024.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 4.3% in 2024 compared to average global rig count in 2023.

The decrease was mainly driven by a decline in U.S.

rig count of 12.8%.

In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending while privately owned exploration and production companies fluctuate their activity in response to changes in oil and natural gas prices.

2 unchanged sentences

West Texas Intermediate $ 76.45 $ 77.58

United Kingdom Brent $ 82.49 $ 100.93

Brent $ 80.52 $ 82.49

Average North American Natural Gas, $/Mcf

18 unchanged sentences

(in millions of dollars) 2024 2023

Drilling & Downhole $ 337.0 $ 305.8

Completions 251.9 278.5

Production 135.4 196.4

Drilling and Completions $ 459.2 $ 497.0

Artificial Lift and Downhole 321.1 227.3

Total Orders $ 780.3 $ 724.3

2 unchanged sentences

(in thousands of dollars, except per share information) 2024 2023 $ %

Drilling & Downhole $ 329,576 $ 304,565 $ 25,011 8.2 %

Completions 265,628 264,951 677 0.3 %

Production 145,864 131,519 14,345 10.9 %

Drilling and Completions $ 470,767 $ 502,622 $ (31,855) (6.3) %

Artificial Lift and Downhole 345,680 236,312 109,368 46.3 %

Eliminations (22) (70) 48 *

1 unchanged sentence

Cost of sales

Drilling & Downhole $ 222,933 $ 206,976 $ 15,957 7.7 %

Completions 203,057 201,371 1,686 0.8 %

Production 110,925 104,162 6,763 6.5 %

Drilling and Completions $ 348,878 $ 376,882 $ (28,004) (7.4) %

Artificial Lift and Downhole 212,536 157,899 54,637 34.6 %

Eliminations (22) (70) 48 *

Total cost of sales $ 561,392 $ 534,711 $ 26,681 5.0 %

Drilling & Downhole $ 106,643 $ 97,589 $ 9,054 9.3 %

Completions 62,571 63,580 (1,009) (1.6) %

Production 34,939 27,357 7,582 27.7 %

Drilling and Completions $ 121,889 $ 125,740 $ (3,851) (3.1) %

Artificial Lift and Downhole 133,144 78,413 54,731 69.8 %

Total gross profit $ 255,033 $ 204,153 $ 50,880 24.9 %

Selling, general and administrative expenses

Drilling & Downhole $ 72,876 $ 65,388 $ 7,488 11.5 %

Completions 51,783 52,015 (232) (0.4) %

Production 28,477 27,800 677 2.4 %

Drilling and Completions $ 104,123 $ 106,306 $ (2,183) (2.1) %

Artificial Lift and Downhole 84,250 46,830 37,420 79.9 %

Corporate 30,952 27,253 3,699 13.6 %

1 unchanged sentence

Segment operating income (loss)

Drilling & Downhole $ 33,767 $ 32,201 $ 1,566 4.9 %

Operating margin % 10.2 % 10.6 %

Completions 10,788 11,565 (777) (6.7) %

Drilling and Completions $ 17,766 $ 19,434 $ (1,668) (8.6) %

Operating margin % 3.8 % 3.9 %

Production 6,462 (443) 6,905 1,558.7 %

Artificial Lift and Downhole 48,894 31,583 17,311 54.8 %

Operating margin % 14.1 % 13.4 %

3 unchanged sentences

Transaction expenses 7,728 2,892 4,836 *

Impairment of intangible assets 119,123 — 119,123 *

Gain on sale-leaseback transactions (4,860) — (4,860) *

Loss (gain) on disposal of assets and other 156 (1,271) 1,427 *

Operating income 20,716 17,326 3,390 19.6 %

Loss on disposal of assets and other 484 156 328 *

Operating income (loss) (86,767) 20,716 (107,483) (518.8) %

Interest expense 31,490 18,297 13,193 72.1 %

Foreign exchange losses (gains) and other, net 10,233 (24,548) 34,781 *

Loss on extinguishment of debt 2,854 — 2,854 *

Foreign exchange losses and other, net 7,315 10,233 (2,918) *

Total other expense 41,659 28,530 13,129 *

Income (loss) before income taxes (7,814) 10,349 (18,163) (175.5) %

Loss before income taxes (128,426) (7,814) (120,612) (1,543.5) %

Income tax expense 6,900 11,062 (4,162) *

Net income (loss) $ (18,876) $ 3,712 $ (22,588) (608.5) %

Net loss $ (135,326) $ (18,876) $ (116,450) (616.9) %

Weighted average shares outstanding

1 unchanged sentence

Diluted 12,299 10,212

Earnings (loss) per share

Loss per share

Basic $ (11.00) $ (1.85)

2 unchanged sentences

Our revenue for the year ended December 31, 2024 was $816.4 million, an increase of $77.6 million, or 10.5%, compared to the year ended December 31, 2023.

For the year ended December 31, 2023, our Drilling & Downhole segment, Completions segment, and Production segment comprised 44.6%, 35.7% and 19.7% of our total revenues, respectively, compared to 43.5%, 37.7% and 18.8%, respectively, for the year ended December 31, 2022.

The overall increase in revenues is primarily related to increases in the global rig count, with the increase in international rig count more than offsetting a decline in U.S.

rig count in 2023 compared to 2022.

For the year ended December 31, 2024, our Drilling and Completions segment and Artificial Lift and Downhole segment comprised of 57.7% and 42.3% of our total revenues, respectively, compared to 68.0% and 32.0%, respectively, for the year ended December 31, 2023.

The overall increase in revenue is primarily related to the revenue contributed from the acquired Variperm business, increased revenues in the Subsea product line and increased downhole equipment sales, partially offset by the decline in drilling and completions capital products sales in 2024 compared to 2023.

The changes in revenues by operating segment consisted of the following:

Drilling & Downhole segment — Revenues were $329.6 million for the year ended December 31, 2023, an increase of $25.0 million, or 8.2%, compared to the year ended December 31, 2022.

This increase includes a $27.3 million, or 19.0%, increase in revenues for our Drilling Technologies product line primarily due to higher sales volumes of both consumable products and capital equipment driven by increased international market activity.

Revenues for our Downhole Technologies product line increased by $5.5 million, or 6.4%, primarily due to higher sales volumes of artificial lift products in 2023 compared to 2022.

Revenues for our Subsea Technologies product line decreased by $7.7 million, or 10.1%, from lower project revenue recognized from ROVs and cable management systems, partially offset by an increase in part sales.

Completions segment — Revenues were $265.6 million for the year ended December 31, 2023, an increase of $0.7 million, or 0.3%, compared to the year ended December 31, 2022.

This change includes a revenue increase of $2.0 million, or 1.3%, for our Stimulation and Intervention product line primarily due to higher demand of radiators, wireline cable and high-pressure hoses, partially offset by lower sales volumes in power ends.

Production segment — Revenues were $145.9 million for the year ended December 31, 2023, an increase of $14.3 million, or 10.9%, compared to the year ended December 31, 2022.

The increase of $12.1 million or 17.3%, was primarily due to the project revenue recognized from our process oil treatment equipment within our Production Equipment product line, and a $2.3 million or 3.7%, increase in sales of our valve products.

Drilling and Completions segment — Revenue was $470.8 million for the year ended December 31, 2024, a decrease of $31.9 million, or 6.3%, compared to the year ended December 31, 2023.

This decrease includes a $25.3 million, or 15.0%, decrease from the Drilling product line, a $13.4 million, or 8.5%, decrease from Stimulation and Intervention product line and a $2.8 million, or 2.6%, decrease from Coiled Tubing product line, primarily the result of declining U.S.

drilling and completions activity.

These decreases were partially offset by a $9.6 million, or 14.1%, increase in our Subsea product line due to higher project revenue recognized from ROVs.

Artificial Lift and Downhole segment — Revenue was $345.7 million for the year ended December 31, 2024, an increase of $109.4 million, or 46.3%, compared to the year ended December 31, 2023.

Revenue for our Downhole product line increased by $117.0 million, or 129.3%, primarily due to revenue contributed from the acquired Variperm business and an increase in downhole equipment sales.

This increase was partially offset by a $5.7 million, or 7.0%, decrease in surface production equipment and a $1.9 million, or 2.9%, decrease in sales of our valve products.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the year ended December 31, 2023 was $23.8 million compared to an income of $9.1 million for the year ended December 31, 2022.

Segment operating income for the year ended December 31, 2024 was $35.7 million compared to $23.8 million for the year ended December 31, 2023.

For the year ended December 31, 2024, segment operating margin percentage was 4.4% compared to 3.2% for the year ended December 31, 2023.

1 unchanged sentence

The change in operating income (loss) and operating margin percentage for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $33.8 million, or 10.2%, for the year ended December 31, 2023 compared to segment operating income of $32.2 million, or 10.6%, for the year ended December 31, 2022.

The $1.6 million increase in segment operating results was primarily attributable to increased operating leverage on higher revenues for our Drilling Technologies and Downhole Technologies product lines.

Completions segment — Segment operating income of $10.8 million, or 4.1%, for the year ended December 31, 2023 was comparable to segment operating income of $11.6 million, or 4.4% for the year ended December 31, 2022.

The slight decline in operating income is attributed to unfavorable sales mix.

Production segment — Segment operating income was $6.5 million, or 4.4%, for the year ended December 31, 2023 compared to segment operating loss of $0.4 million, or 0.3% for the year ended December 31, 2022.

The $6.9 million increase in segment operating results was driven by the increase in revenues, lower freight costs, as well as increased operating leverage.

Corporate — Selling, general and administrative expenses for Corporate were $27.3 million for the year ended December 31, 2023, a $7.0 million decrease compared to the year ended December 31, 2022.

This decrease was primarily related to lower variable compensation costs.

Drilling and Completions segment — Segment operating income was $17.8 million, or 3.8%, for the year ended December 31, 2024 compared to $19.4 million, or 3.9%, for the year ended December 31, 2023.

The $1.7 million decrease in segment operating results was primarily due to the overall decline in segment revenues.

Artificial Lift and Downhole segment — Segment operating income was $48.9 million, or 14.1%, for the year ended December 31, 2024 compared to $31.6 million, or 13.4%, for the year ended December 31, 2023.

The $17.3 million increase in segment operating results was primarily driven by the acquisition of Variperm.

Corporate — Selling, general and administrative expenses for Corporate were $31.0 million for the year ended December 31, 2024, a $3.7 million increase compared to the year ended December 31, 2023.

This increase was primarily related to higher variable compensation costs.

Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel;

2 unchanged sentences

Other items not included in segment operating income (loss)

Several items are not included in segment operating income (loss), but are included in the total operating income.

These items include Transaction expenses, Gain on sale-leaseback transactions and Loss (gain) on disposal of assets and other.

Several items are not included in segment operating income (loss), but are included in the total operating income (loss).

These items include Transaction expenses, Impairment of intangible assets , Gain on sale-leaseback transactions and Loss on disposal of assets and other.

For further information related to Impairment of intangible assets, see Note 7 Goodwill and Intangible Assets.

For further information related to Gain on sale-leaseback transactions, see Notes 6 Property and Equipment and 9 Leases.

Other income and expense

Other income and expense includes interest expense and foreign exchange gains and losses.

We incurred $18.3 million of interest expense during the year ended December 31, 2023, a decrease of $13.2 million compared to the year ended December 31, 2022 due to the decline in the balance of our 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

See Note 8 Debt for further details related to the 2025 Notes and Credit Facility.

Other income and expense includes interest expense, foreign exchange gains (losses) and other, and loss on extinguishment of debt.

We incurred $31.5 million of interest expense during the year ended December 31, 2024, an increase of $13.2 million compared to the year ended December 31, 2023 due to the increased borrowings under our revolving Credit Facility and borrowings under the Seller Term Loan entered into in connection with the Variperm Acquisition.

See Note 8 Debt for further details related to the Credit Facility, our second lien seller term loan credit agreement that we entered into to fund a portion of the purchase price of the Variperm Acquisition (the “Seller Term Loan”), the 2025 Notes and the 2029 Bonds.

The foreign exchange gains and losses are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S.

1 unchanged sentence

dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S.

During 2024, we redeemed in full the $134.2 million aggregate principal amount outstanding of our 9.00% Senior Convertible Secured Notes due 2025 (“2025 Notes”) at par value, and we discharged our obligations under the indenture governing the 2025 Notes.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $130.6 million, resulting in a $3.6 million loss on extinguishment of debt.

During 2024, we repaid in full our Seller Term Loan at par value.

The net carrying value of the extinguished debt, including debt issuance costs, was $59.2 million, resulting in a $0.8 million gain on extinguishment of debt.

We recorded tax expense of $6.9 million for the year ended December 31, 2024 compared to a tax expense of $11.1 million for the year ended December 31, 2023.

3 unchanged sentences

Sources and uses of liquidity

Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility, the 2025 Notes and the Seller Term Loan.

Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, and debt repayments.

Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility and the 2029 Bonds.

Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, debt repayments and the acquisition of Variperm.

We continually monitor other potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements.

Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital.

We had outstanding $134.2 million principal amount of 2025 Notes and no borrowings under our Credit Facility as of December 31, 2023.

The 2025 Notes mature in August 2025 and, subject to certain exceptions, the Credit Facility matures in September 2028.

In January 2024, we entered into the Seller Term Loan in connection with the closing of the Variperm Acquisition, which has an initial principal amount of $60.0 million and matures in December 2026.

We also borrowed $90.0 million under the Credit Facility to fund a portion of the purchase price of the Variperm Acquisition.

See Notes 8 Debt and 18 Subsequent Events for further details related to the terms for our debt agreements.

As of December 31, 2024, we had $90.4 million of borrowings under our Credit Facility and $100.0 million outstanding principal amount of 2029 Bonds.

In January 2024, we entered into the Seller Term Loan in connection with the closing of the Variperm Acquisition, which had an initial principal amount of $60.0 million and a maturity date in December 2026.

In June and August 2024, we repurchased and redeemed $13.0 million and $60.0 million in aggregate principal amount of 2025 Notes, respectively.

In November 2024, we closed $100.0 million aggregate principal amount of 2029 Bonds, the net proceeds of which, together with cash on hand of $10.2 million and borrowings from our Credit Facility of $15.0 million, were used to repay in full the 2025 Notes and the Seller Term Loan.

In 2024, we borrowed $90.0 million under the Credit Facility to fund a portion of the purchase price of the Variperm Acquisition.

The Credit Facility matures on the earliest of (a) September 8, 2028 and (b) the date that is 91 days prior to the maturity of 2029 Bonds (which will not apply if the 2029 Bonds are repaid prior to such 91st day).

See Note 8 Debt for further details related to the terms for our debt agreements.

As of December 31, 2024, we had cash and cash equivalents of $44.7 million and $61.2 million of availability under our Credit Facility.

Upon closing of the Variperm Acquisition on January 4, 2024, our net availability under our Credit Facility was approximately $73.1 million.

We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues.

Furthermore, availability under our Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits.

In addition, we expect total 2024 capital expenditures to be approximately $10 million, consisting of, among other items, replacing end of life machinery and equipment.

We expect our available cash on-hand, cash generated by operations, and estimated availability under our Credit Facility to be adequate to fund current operations during the next 12 months.

Furthermore, availability under the Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits.

In addition, we expect total 2025 capital expenditures to be approximately $10.0 million, primarily for replacement of end of life machinery and equipment.

We expect our available cash on-hand, cash generated by operations, and estimated availability under the Credit Facility to be adequate to fund current operations during the next 12 months.

In addition, based on existing market conditions and our expected liquidity needs, among other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce outstanding debt or repurchase shares of our common stock under our repurchase program.

In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to $10.0 million.

Shares may be repurchased under the program from time to time, in amounts and at prices that the company deems appropriate, subject to market and

business conditions, applicable legal requirements and other considerations.

During 2023, we repurchased approximately 139 thousand shares of our common stock for aggregate consideration of approximately $3.5 million.

Remaining authorization under this program is $2.4 million.

In December 2024, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to $75.0 million.

Shares may be repurchased under the program from time to time, in amounts and at prices that the company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations.

Subsequent to December 31, 2024, we repurchased approximately 105 thousand shares of our common stock for aggregate consideration of $2.0 million.

In January 2024, we completed the Variperm Acquisition for consideration of $150.0 million of cash (subject to customary purchase price adjustments) and 2.0 million shares of our common stock.

We may pursue additional acquisitions in the future, which may be funded with cash and/or equity.

Our ability to make significant acquisitions for cash may require us to pursue additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all.

Our cash flows for the years ended December 31, 2024 and 2023 are presented below (in thousands):

Year ended December 31,

Net cash provided by (used in) operating activities $ 8,183 $ (17,054)

Net cash provided by (used in) investing activities (6,573) 27,139

Net cash used in financing activities (7,582) (5,076)

Net cash provided by operating activities $ 92,191 $ 8,183

Net cash used in investing activities (137,526) (6,573)

Net cash provided by (used in) financing activities 45,242 (7,582)

Effect of exchange rate changes on cash (1,411) 1,108

Net increase (decrease) in cash, cash equivalents and restricted cash $ (4,864) $ 4,171

Net cash provided by (used in) operating activities

Net cash provided by operating activities was $8.2 million for the year ended December 31, 2023 compared to net cash used in $17.1 million for the year ended December 31, 2022.

During the year ended December 31, 2023, net working capital cash usage was $21.5 million, primarily attributed to an increase in inventory to meet customer demand, compared to net working capital cash usage of $65.1 million for the year ended December 31, 2022.

This improvement was partially offset by a decline in net income adjusted for non-cash items which provided $29.6 million of cash for the year ended December 31, 2023 compared to provided $48.1 million of cash for the year ended December 31, 2022.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $6.6 million for the year ended December 31, 2023 including $7.9 million of capital expenditures, partially offset by $1.4 million of proceeds from the sale of property and equipment.

Net cash provided by investing activities for the year ended December 31, 2022 including $32.1 million of cash proceeds from sale of land and buildings that were subsequently leased back, partially offset by $7.5 million of capital expenditures.

Net cash used in financing activities

Net cash used in financing activities was $7.6 million for the year ended December 31, 2023 including $6.0 million of cash used to repurchase of our common stock and $1.3 million of repayments of debt.

Net cash used in financing activities was $5.1 million for the year ended December 31, 2022 including $3.8 million of cash used to repurchase of our common stock and $1.3 million of repayments of debt.

Net decrease in cash, cash equivalents and restricted cash $ (1,504) $ (4,864)

Net cash provided by operating activities

Net cash provided by operating activities was $92.2 million for the year ended December 31, 2024 compared to net cash provided by operating activities of $8.2 million for the year ended December 31, 2023.

During the year ended December 31, 2024, net working capital provided cash of $57.6 million, compared to net working capital cash usage of $21.5 million for the year ended December 31, 2023.

This change is primarily due to improved inventory management.

Net cash used in investing activities

Net cash used in investing activities was $137.5 million for the year ended December 31, 2024, mainly related to the Variperm Acquisition of $150.4 million and capital expenditures of $8.1 million, partially offset by $20.3 million proceeds from sale-leaseback.

Net cash used in investing activities of $6.6 million for the year ended December 31, 2023 included $7.9 million of capital expenditures, partially offset by $1.4 million of proceeds from the sale of property and equipment.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $45.2 million for the year ended December 31, 2024 and included $54.9 million of net proceeds from debt mainly due to Variperm Acquisition, partially offset by $8.5 million of paid financing costs.

Net cash used in financing activities was $7.6 million for the year ended December 31, 2023 and included $6.0 million of cash used to repurchase our common stock and $1.3 million of net repayments of debt.

Off-balance sheet arrangements

1 unchanged sentence

For additional information, refer to Note 12 Commitments and Contingencies.

Supplemental Guarantor Financial Information

The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company.

The guarantees are full and unconditional, joint and several.

The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor, including all obligations under our Credit Facility and the Seller Term Loan;

(ii) secured by certain collateral of such guarantor, subject to permitted liens under the indenture governing the 2025 Notes;

(iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral);

and (iv) senior in right of payment to any future subordinated indebtedness of that guarantor.

In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries of the 2025 Notes, the non-guarantor subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company or to any guarantors.

The 2025 Notes guarantees shall each be released upon (i) any sale or other disposition of all or substantially all of the assets of such guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes;

(ii) any sale, exchange or transfer (by merger, consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes;

(iii) legal or covenant defeasance or satisfaction and discharge of the indenture governing such notes;

or (iv) dissolution of such guarantor, provided no default or event of default has occurred that is continuing.

The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such guarantor (including, without limitation, any guarantees under the Credit Facility) and any collections from or payments made by or on behalf of any other guarantor in respect of the obligations of such other guarantor under its guarantee or pursuant to its contribution obligations under the applicable indenture, result in the obligations of such guarantor under its guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under applicable law.

Nonetheless, in the event of the bankruptcy, insolvency or financial difficulty of a guarantor, such guarantor’s obligations under its guarantee may be subject to review and avoidance under applicable fraudulent conveyance, fraudulent preference, fraudulent transfer and insolvency laws.

We are presenting the following summarized financial information for the Company and the subsidiary guarantors (collectively referred to as the “Obligated Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.

For purposes of the following summarized financial information, transactions between the Company and the subsidiary guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded.

Amounts due to the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information below.

Summarized financial information was as follows (in thousands):

Year ended December 31,

(in thousands) 2023 2022

Revenues $ 552,216 $ 547,256

Cost of sales 422,369 417,131

Operating income (loss) 5,304 35,321

Net income (loss) (18,876) 3,712

Year ended December 31,

(in thousands) 2023 2022

Current assets $ 388,817 $ 378,812

Noncurrent assets 251,901 279,389

Current liabilities 144,493 175,155

Payables to non-guarantor subsidiaries 190,816 132,839

Noncurrent liabilities 178,811 293,150

Critical accounting policies and estimates

28 unchanged sentences

For the years ended December 31, 2024 and 2023, we recognized inventory write downs totaling $2.7 million and $2.8 million, respectively.

These charges are all included in “ Cost of sales ” in the consolidated statements of comprehensive income (loss).

These charges are all included in “ Cost of sales ” in the consolidated statements of comprehensive loss.

See Note 5 Inventories for further information related to these charges.

Business combinations

We account for business combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition.

Goodwill acquired in connection with business combinations represents the excess of consideration over the fair value of net assets acquired.

Certain assumptions and estimates are employed in evaluating the fair value of assets acquired and liabilities assumed.

These estimates may be affected by factors such as changing market conditions, technological advances in the oil and natural gas industry or changes in regulations governing that industry.

The most significant assumptions requiring judgment involve identifying and estimating the fair value of intangible assets and the associated useful lives for establishing amortization periods.

To finalize purchase accounting for significant acquisitions, we utilize the services of independent valuation specialists to assist in the determination of the fair value of acquired intangible assets.

An assessment for impairment is performed annually or when there is an indication an impairment may have occurred.

Goodwill is reviewed for impairment by comparing the carrying value of the reporting unit’s net assets, including allocated goodwill, to the estimated fair value of the reporting unit.

We determine the fair value of the reporting unit using a combination of a discounted cash flows approach and a guideline public company method.

We selected these valuation approaches because we believe they, combined with our best judgment regarding underlying assumptions and estimates, provides the best estimate of fair value for the reporting unit.

Determining the fair value of a reporting unit requires the use of estimates and assumptions.

Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average cost of capital, a terminal growth value, and future market conditions, among others.

We believe that the estimates and assumptions used in our impairment assessments are reasonable.

If the reporting unit’s carrying value is greater than its calculated fair value, we recognize a goodwill impairment charge for the amount by which the carrying value of goodwill exceeds its fair value.

We determined our Downhole product line consists of a single reporting unit and, accordingly, goodwill acquired from the Variperm acquisition was allocated to that reporting unit.

At October 1, 2024, we performed our annual impairment test and concluded that there had been no impairment because the estimated fair value exceeded its carrying value by approximately 20%.

There are significant inherent uncertainties and management judgment in estimating the fair value of the reporting unit.

While we believe we have made reasonable estimates and assumptions to estimate the fair value of the reporting unit, it is possible that a material change could occur.

Long-lived assets

1 unchanged sentence

Key estimates related to long-lived assets include useful lives and recoverability of carrying values and changes in such estimates could have a significant impact on financial results.

We review long-lived 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 the review for impairment, future cash flows expected to result from the use of the asset and its eventual 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.

The impairment loss recognized represents the excess of an assets’ carrying value as compared to its estimated fair value.

We review long-lived assets with definite lives for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.

In 2024, an impairment loss of $119.1 million was recorded on intangible assets within the Coiled Tubing product line.

Refer to Note 7 Goodwill and Intangible Assets for further discussion.

No impairments to property equipment or operating lease right of use assets were recorded in 2024.

No impairments to property and equipment, definite lived intangibles, and operating lease right of use assets were recorded in 2023.

We follow the liability method of accounting for income taxes.

3 unchanged sentences

Any changes in our judgment as to the realizability of our deferred tax assets are recorded as an adjustment to the deferred tax asset valuation allowance in the period the change occurs.

For the year ended December 31, 2022, we recognized tax expense for valuation allowances totaling $8.1 million.

For the year ended December 31, 2024, we recognized tax expense for valuation allowances totaling $25.1 million related to the net increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable.

We increased our valuation allowance related to our U.S.

deferred tax assets by $29.5 million along with a $6.9 million increase to certain non-U.S.

deferred tax assets in the U.K.

Singapore and China.

In addition, we released $11.3 million of valuation allowance on our deferred tax assets generated from operations in Germany and Saudi Arabia as the Company determined they were no longer required.

See Note 10 Income Taxes for further information related to these charges.

16 unchanged sentences

We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements.

Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on Form 10-K are reasonable, forward-

looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from our plans, intentions or expectations.

Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on Form 10-K are reasonable, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from our plans, intentions or expectations.

This may be the result of various factors, including, but not limited to, those factors discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K.

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 7. Management’s Discussion and Analysis