What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-02 · 127 added, 58 removed, 143 unchanged (56% of the section changed)

10 unchanged sentences

These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

We are a global manufacturing company serving the oil, natural gas, industrial and renewable energy industries.

We are a global manufacturing company serving the oil, natural gas, defense and renewable energy industries.

With headquarters in Houston, Texas, FET provides value added solutions aimed at improving the safety, efficiency, and environmental impact of our customers’ operations.

Our highly engineered products include capital equipment and consumable products.

FET’s customers include oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, pipeline and refinery operators, and renewable energy and new energy companies.

FET’s customers include oil and natural gas operators, oilfield service companies, pipeline and refinery operators, defense contractors and renewable energy companies.

Consumable products are used by our customers in drilling, well construction and completion activities and at processing centers and refineries.

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.

For the three months ended March 31, 2025, 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.

For the six months ended June 30, 2025, 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.

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

Average oil prices were lower in the first quarter 2025 compared to the first quarter 2024, while average natural gas prices nearly doubled.

Average oil prices were lower in the second quarter 2025 compared to the second quarter 2024, while average natural gas prices were higher.

The decline in average oil prices is attributable to a faster than expected return of the Organization of Petroleum Exporting Countries and its allies ("OPEC+") production combined with global recessionary fears triggered by the expected imposition of broad based trade policy changes by the Trump Administration.

The increase in average natural gas prices is attributable to strong demand, tightening supply and geopolitical uncertainty.

Subsequent to March 31, 2025, the Trump Administration's newly imposed trade policies and the uncertainty around their imposition led to concerns regarding ongoing consumer spending and the overall health of the world economy.

This uncertainty coupled with increased supply from OPEC+ led to a further decrease in oil and natural gas prices.

We will continue to monitor market conditions and assess risks, including macroeconomic uncertainty, trade policy, oil price volatility, and changes in regulations.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 5.0% during the first quarter 2025 compared to average global rig count during first quarter 2024.

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

rig count of 5.6%.

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.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 6.2% during the second quarter 2025 compared to average global rig count during second quarter 2024.

The decrease in rig count is driven by the lower average oil prices, increased production efficiencies and continued capital spending discipline by publicly owned exploration and production companies.

We expect rig count in the second half of 2025 to remain below the 2024 rig count with some areas of resilience in certain international markets.

Given the current macroeconomic uncertainty, trade policy fluctuations, oil price volatility, and changing regulations we are monitoring market conditions and assessing potential impacts on our business.

The table below shows average crude oil and natural gas prices for Average West Texas Intermediate (“WTI”), Brent, and Henry Hub:

Three Months Ended

March 31, December 31, March 31,

June 30, March 31, June 30,

2025 2025 2024

6 unchanged sentences

Three Months Ended

March 31, December 31, March 31,

June 30, March 31, June 30,

2025 2025 2024

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The table below shows the amount of total inbound orders by segment:

Three Months Ended

March 31, December 31, March 31,

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

(in millions of dollars) 2025 2025 2024 2025 2024

3 unchanged sentences

Results of operations

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three Months Ended March 31, Change

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Three Months Ended June 30, Change

(in thousands of dollars, except per share information) 2025 2024 $ %

12 unchanged sentences

Transaction expenses 184 1,228 (1,044) *

Loss (gain) on disposal of assets and other 123 (28) 151 *

Gain on sale-leaseback transactions (6,903) — (6,903) *

Loss on disposal of assets and other 207 220 (13) *

Operating income 14,683 7,934 6,749 85.1 %

1 unchanged sentence

Foreign exchange losses (gains) and other, net (3,942) 3,006 (6,948) *

Loss on extinguishment of debt — 463 (463) *

Total other expense 764 12,128 (11,364) (93.7) %

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* not meaningful

Our revenue for the three months ended March 31, 2025 was $193.3 million, a decrease of $9.1 million, or 4.5%, compared to the three months ended March 31, 2024.

For the three months ended March 31, 2025, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 59.8% and 40.2% of our total revenue, respectively, compared to 58.8% and 41.2% of our total revenue, respectively, for the three months ended March 31, 2024.

The overall decrease in revenue is primarily related to the decline in global drilling and completions activity in 2025 compared to 2024.

Our revenue for the three months ended June 30, 2025 was $199.8 million, a decrease of $5.4 million, or 2.7%, compared to the three months ended June 30, 2024.

For the three months ended June 30, 2025, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 58.7% and 41.3% of our total revenue, respectively, compared to 57.0% and 43.0% of our total revenue, respectively, for the three months ended June 30, 2024.

The overall decrease was primarily related to the decline in global drilling and completions activity, as well as tariff impacts mainly in our Valve Solutions product line, in the second quarter 2025 compared to the second quarter 2024.

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

Drilling and Completions segment — Revenue was $115.6 million for the three months ended March 31, 2025, a decrease of $3.5 million, or 2.9%, compared to the three months ended March 31, 2024.

The decrease in segment revenue included a $4.4 million, or 12.0%, decrease from the Drilling product line and a $1.1 million, or 2.9%, decrease from the Stimulation and Intervention product line, primarily the result of declining global drilling and completions activity.

These decreases were partially offset by an increase of $1.7 million, or 7.6%, in our Coiled Tubing product line due to the completion of coiled line pipe projects in the U.S.

and Latin America.

Artificial Lift and Downhole segment — Revenue was $77.8 million for the three months ended March 31, 2025, a decrease of $5.5 million, or 6.7%, compared to the three months ended March 31, 2024.

Revenue for our Downhole product line decreased by $4.6 million, or 8.8%, primarily due to decreased U.S.

activity, partially offset by an increase in sales of international casing equipment hardware.

Also, there was a $1.5 million, or 12.3%, decrease in sales volumes of our valve products, particularly sales into the North America downstream oil and natural gas market.

Drilling and Completions segment — Revenue was $117.2 million for the three months ended June 30, 2025, an increase of $0.2 million, or 0.2%, compared to the three months ended June 30, 2024.

The increase was primarily due to higher project revenue recognized for ROVs and Launch and Recovery Systems ("LARS"), and increased coiled line pipe sales due to growing demand in the U.S.

and a large offshore project.

Offsetting these increases were lower sales of capital and consumable products due to the decline in global drilling and completion activity.

Artificial Lift and Downhole segment — Revenue was $82.5 million for the three months ended June 30, 2025, a decrease of $5.6 million, or 6.4%, compared to the three months ended June 30, 2024.

The decline in revenue was driven by tariff-related impacts on sales volumes for valve products.

Partially offsetting this decline were higher sales of downstream processing equipment and technologies.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the three months ended March 31, 2025 was $9.0 million, a $0.1 million decrease, compared to $9.1 million for the three months ended March 31, 2024.

For the three months ended March 31, 2025, segment operating margin percentage was 4.6%, compared to 4.5%, for the three months ended March 31, 2024.

Segment operating income for the three months ended June 30, 2025 was $8.2 million, a $1.2 million decrease compared to $9.4 million for the three months ended June 30, 2024.

For the three months ended June 30, 2025, segment operating margin percentage was 4.1% compared to 4.6% for the three months ended June 30, 2024.

Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period.

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

Drilling and Completions segment — Segment operating income was $7.3 million, or 6.2%, for the three months ended June 30, 2025 compared to $2.9 million, or 2.5%, for the three months ended June 30, 2024.

The $4.4 million increase in segment operating results was primarily due to reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024.

Artificial Lift and Downhole segment — Segment operating income was $10.4 million, or 12.6%, for the three months ended June 30, 2025 compared to $13.5 million, or 15.3%, for the three months ended June 30, 2024.

The $3.1 million decrease was primarily driven by lower market activity and unfavorable customer and product mix.

Corporate — Selling, general and administrative expenses for Corporate were $9.5 million for the three months ended June 30, 2025 compared to $7.0 million for the three months ended June 30, 2024.

This increase was primarily related to higher performance-based incentive compensation costs and one-time professional fees.

Other items not included in segment operating income (loss)

Transaction expenses, gain on sale-leaseback transactions, and gain (loss) on the disposal of assets and other are not included in segment operating income, but are included in total operating income.

Other income and expense

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

We incurred $4.7 million of interest expense during the three months ended June 30, 2025, a decrease of $4.0 million compared to the three months ended June 30, 2024, due to decreased borrowings.

See Note 6 Debt for further details related to debt.

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

These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S.

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

We recorded tax expense of $6.2 million and $2.5 million for the three months ended June 30, 2025 and 2024, respectively.

The estimated annual effective tax rates for the three months ended June 30, 2025 and 2024 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

Results of operations

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Six Months Ended June 30, Change

(in thousands of dollars, except per share information) 2025 2024 $ %

Drilling and Completions $ 232,806 $ 236,096 $ (3,290) (1.4) %

Artificial Lift and Downhole 160,343 171,511 (11,168) (6.5) %

Eliminations (106) (6) (100) *

Total revenue 393,043 407,601 (14,558) (3.6) %

Segment operating income

Drilling and Completions 16,650 7,434 9,216 124.0 %

Operating margin % 7.2 % 3.1 %

Artificial Lift and Downhole 17,688 25,247 (7,559) (29.9) %

Operating margin % 11.0 % 14.7 %

Corporate (17,189) (14,206) (2,983) (21.0) %

Total segment operating income 17,149 18,475 (1,326) (7.2) %

Operating margin % 4.4 % 4.5 %

Transaction expenses 235 7,149 (6,914) *

Gain on sale-leaseback transactions (6,903) — (6,903) *

Loss on disposal of assets and other 330 192 138 *

Operating income 23,487 11,134 12,353 110.9 %

Interest expense 9,689 17,419 (7,730) (44.4) %

Foreign exchange losses (gains) and other, net (5,010) 4,233 (9,243) *

Loss on extinguishment of debt — 463 (463) *

Total other expense 4,679 22,115 (17,436) (78.8) %

Income (loss) before income taxes 18,808 (10,981) 29,789 271.3 %

Income tax expense 9,986 6,030 3,956 65.6 %

Net income (loss) $ 8,822 $ (17,011) $ 25,833 151.9 %

Weighted average shares outstanding

Basic 12,327 12,266

Diluted 12,542 12,266

Earnings (loss) per share

Basic $ 0.72 $ (1.39)

Diluted $ 0.70 $ (1.39)

* not meaningful

Our revenue for the six months ended June 30, 2025 was $393.0 million, a decrease of $14.6 million, or 3.6%, compared to the six months ended June 30, 2024.

For the six months ended June 30, 2025, our Drilling and Completions and our Artificial Lift and Downhole segments comprised 59.2% and 40.8% of our total revenue, respectively, compared to 57.9% and 42.1% of our total revenue, respectively, for the six months ended June 30, 2024.

The overall decrease in revenue is primarily related to the decline in global drilling and completions activity, as well as tariff impacts mainly in our Valve Solutions product line, in 2025 compared to 2024.

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

Drilling and Completions segment — Revenue was $232.8 million for the six months ended June 30, 2025, a decrease of $3.3 million, or 1.4%, compared to the six months ended June 30, 2024.

The decrease was primarily due to lower sales of capital and consumable products due to the decline in global drilling and completion activity.

Partially offsetting the decrease was higher project revenue recognized for ROVs and LARS, and increased coiled line pipe sales due to growing demand in the U.S.

and a large offshore project.

Artificial Lift and Downhole segment — Revenue was $160.3 million for the six months ended June 30, 2025, a decrease of $11.2 million, or 6.5%, compared to the six months ended June 30, 2024.

The decline in revenue was driven by tariff-related impacts on sales volumes for valve products and overall lower market activity.

Partially offsetting this decline were higher sales of casing equipment and, downstream processing equipment and technologies.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the six months ended June 30, 2025 was $17.1 million, a $1.3 million decrease, compared to $18.5 million for the six months ended June 30, 2024.

For the six months ended June 30, 2025, segment operating margin percentage was 4.4%, compared to 4.5%, for the six months ended June 30, 2024.

Segment operating margin percentage is calculated by dividing segment operating income by revenue for the period.

The change in operating income for each segment is explained as follows:

Drilling and Completions segment — Segment operating income was $9.4 million, or 8.1%, for the three months ended March 31, 2025 compared to $4.6 million, or 3.8%, for the three months ended March 31, 2024.

The $4.8 million increase in segment operating results due to reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024.

Artificial Lift and Downhole segment — Segment operating income was $7.3 million, or 9.4%, for the three months ended March 31, 2025 compared to $11.8 million, or 14.1%, for the three months ended March 31, 2024.

The $4.5 million decrease in segment operating results was due to unfavorable product mix.

Corporate — Selling, general and administrative expenses for Corporate were $7.7 million for the three months ended March 31, 2025 compared to $7.3 million for the three months ended March 31, 2024.

This increase was primarily related to higher compensation costs and professional fees.

Drilling and Completions segment — Segment operating income was $16.7 million, or 7.2%, for the six months ended June 30, 2025 compared to $7.4 million, or 3.1%, for the six months ended June 30, 2024.

The $9.2 million increase in segment operating results was primarily due to reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024.

Artificial Lift and Downhole segment — Segment operating income was $17.7 million, or 11.0%, for the six months ended June 30, 2025 compared to $25.2 million, or 14.7%, for the six months ended June 30, 2024.

The $7.6 million decrease in segment operating results was primarily driven by lower market activity and unfavorable customer and product mix.

Corporate — Selling, general and administrative expenses for Corporate were $17.2 million for the six months ended June 30, 2025 compared to $14.2 million for the six months ended June 30, 2024.

This increase was primarily related to higher performance-based incentive compensation costs and one-time professional fees.

Other items not included in segment operating income (loss)

Transaction expenses, gain (loss) on the disposal of assets and other are not included in segment operating income (loss), but are included in total operating income.

Other income and expense

Other income and expense includes interest expense and foreign exchange gains (losses) and other.

We incurred $5.0 million of interest expense during the three months ended March 31, 2025, a decrease of $3.8 million compared to the three months ended March 31, 2024, due to decreased borrowings.

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

We incurred $9.7 million of interest expense during the six months ended June 30, 2025, a decrease of $7.7 million compared to the six months ended June 30, 2024, due to decreased borrowings.

See Note 6 Debt for further details related to debt.

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

We recorded tax expense of $3.8 million and $3.5 million for the three months ended March 31, 2025 and 2024, respectively.

The estimated annual effective tax rates for the three months ended March 31, 2025 and 2024 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

We recorded tax expense of $10.0 million and $6.0 million for the six months ended June 30, 2025 and 2024, respectively.

The estimated annual effective tax rates for the six months ended June 30, 2025 and 2024 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

2 unchanged sentences

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 2029 Bonds.

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

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

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.

As of March 31, 2025, we had $73.8 million of borrowings under our revolving Credit Facility and $100.0 million principal amount of the 2029 Bonds outstanding.

As of June 30, 2025, we had $62.4 million of borrowings under our revolving Credit Facility and $100.0 million principal amount of the 2029 Bonds outstanding.

See Note 6 Debt for further details related to the terms for our debt arrangements.

As of March 31, 2025, we had cash and cash equivalents of $31.1 million and $77.4 million of availability under the Credit Facility.

As of June 30, 2025, we had cash and cash equivalents of $39.0 million and $93.1 million of availability under the Credit Facility.

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

5 unchanged sentences

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 the three months ended March 31, 2025 , we repurchased 105 thousand shares of our common stock for approximately $2.0 million and the remaining authorization under this program is $73.0 million.

Our cash flows for the three months ended March 31, 2025 and 2024 are presented below (in millions):

Three Months Ended March 31,

During the six months ended June 30, 2025 , we repurchased 331 thousand shares of our common stock for approximately $6.3 million and the remaining authorization under this program is $68.7 million.

Subsequent to June 30, 2025, we repurchased approximately 249 thousand shares of our common stock for aggregate consideration of $5.0 million.

Our cash flows for the six months ended June 30, 2025 and 2024 are presented below (in millions):

Six Months Ended June 30,

Net cash provided by operating activities $ 25.1 $ 28.1

Net cash used in investing activities (2.1) (152.8)

Net cash provided by (used in) investing activities 5.0 (154.5)

Net cash provided by (used in) financing activities (37.3) 114.9

Effect of exchange rate changes on cash 1.5 (2.8)

Net increase (decrease) in cash, cash equivalents and restricted cash $ (13.5) $ 2.3

Net decrease in cash, cash equivalents and restricted cash $ (5.7) $ (14.3)

Net cash provided by operating activities

Net cash provided by operating activities was $9.3 million for the three months ended March 31, 2025 compared to net cash provided by operating activities of $5.0 million for the three months ended March 31, 2024.

This improvement in operating cash flows is primarily attributable to increase in net income adjusted for non-cash items which provided $11.1 million of cash for the three months ended March 31, 2025 compared to $5.9 million for the three months ended March 31, 2024.

Net cash used in investing activities

Net cash used in investing activities was $2.1 million for the three months ended March 31, 2025, mainly related to capital expenditures.

Net cash used in investing activities was $152.8 million for the three months ended March 31, 2024, mainly related to the acquisition of Variperm Holdings Ltd.

Net cash provided by operating activities was $25.1 million for the six months ended June 30, 2025 compared to net cash provided by operating activities of $28.1 million for the six months ended June 30, 2024.

During the six months ended June 30, 2025, net working capital provided cash of $3.4 million, compared to providing cash of $10.7 million during the six months ended June 30, 2024.

This decline in operating cash flow was offset by the increase in net income adjusted for non-cash items which provided $21.7 million of cash for the six months ended June 30, 2025 compared to $17.4 million for the six months ended June 30, 2024.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $5.0 million for the six months ended June 30, 2025, primarily from $8.0 million proceeds from a sale-leaseback, offset by capital expenditures of $3.1 million.

Net cash used in investing activities was $154.5 million for the six months ended June 30, 2024, mainly related to the acquisition of Variperm Holdings Ltd.

(“Variperm”) of $150.1 million and $4.4 million of capital expenditures.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $21.0 million for the three months ended March 31, 2025 compared to $151.8 million of cash provided by financing activities for the three months ended March 31, 2024.

The change in net cash used in financing activities primarily resulted from $16.5 million in net repayments from the revolving Credit Facility during the three months ended March 31, 2025 compared to a $96.5 million in net borrowings on the revolving Credit Facility and $59.7 million proceeds from the second lien seller term loan related to the Variperm acquisition, during the three months ended March 31, 2024.

Net cash used in financing activities was $37.3 million for the six months ended June 30, 2025 compared to $114.9 million of cash provided by financing activities for the six months ended June 30, 2024.

The change in net cash used in financing activities primarily resulted from $28.0 million in net repayments of the revolving Credit Facility and repurchases of stock of $6.3 million during the six months ended June 30, 2025.

This is compared to $72.8 million in net borrowings on the revolving Credit Facility and $59.7 million proceeds from the second lien seller term loan related to the Variperm acquisition, partially offset by repurchases of our 9.00% Senior Convertible Secured Notes due 2025 (“2025 Notes”) of $13.0 million, during the six months ended June 30, 2024.

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, 2025.

There have been no material changes in our critical accounting policies and estimates during the six months ended June 30, 2025.

For a detailed discussion of our critical accounting policies and estimates, refer to our 2024 Annual Report on Form 10-K.

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis