What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-03-03 · 73 added, 80 removed, 224 unchanged (41% of the section changed)

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We assume no obligation to update any of these forward-looking statements.

We are a global manufacturing company serving the oil, natural gas, industrial 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.

FET optimizes customer operations by improving safety, increasing efficiency, and reducing environmental impact.

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.

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In 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.

We also expect hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources develop to scale.

As such, we remain focused on serving our customers in both oil and natural gas as well as renewable energy applications.

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:

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

Hydrocarbons are expected to play a vital role in meeting the world’s long-term energy needs even as renewable energy sources grow in importance.

As such, we are focused on developing products to help oil and gas operators lower expenses, increase production, and reduce their emissions while also deploying our technologies in renewable energy applications.

FET operates in the following two reportable segments:

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

Refer to Note 15 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:

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Market Conditions

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.

In addition, demand for our capital products is driven by the utilization of service company equipment.

Generally, demand for our products and services is directly related to our customers’ drilling and completions activity, and their capital expenditure budgets.

Their activity and the associated budgets are heavily influenced by forecasted energy prices and production targets.

Demand for our capital products is driven by the utilization of service company equipment.

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

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.

During 2025, global oil and natural gas markets were heavily impacted by shifting supply dynamics and geopolitical developments.

Additionally, U.S.

trade policy and global tariff responses created significant macroeconomic uncertainty across the industry.

In the future, volatile macroeconomic conditions, including changing 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.

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.

The table below shows average crude oil and natural gas prices for WTI, Brent, and Henry Hub:

Although near-term events may present challenges, we expect that global population growth and oil and gas production declines will continue to support long-term energy demand, which may outpace global supply.

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

Average oil prices declined over the course of the year, with Brent crude averaging approximately $63 per barrel in December after declining throughout the second half of the year.

This downward trend was driven by global crude oil supply exceeding demand, a result of both sluggish global economic growth and the accelerated unwinding of OPEC+ production cuts.

In contrast, average natural gas prices strengthened during 2025, supported by strong demand, tightening supply and geopolitical uncertainty.

Average global oil, $/bbl

West Texas Intermediate $ 76.45 $ 77.58

WTI $ 65.39 $ 76.45

Brent $ 69.14 $ 80.52

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The table below shows the average number of active drilling rigs operating by geographic area and drilling for different purposes based on the weekly rig count information published by Baker Hughes Company.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which decreased 6.7% in 2025 compared to average global rig count in 2024.

The decrease was mainly driven by lower average oil prices, enhanced drilling efficiencies, and sustained capital discipline among exploration and production companies.

In the third quarter of 2025, Baker Hughes implemented a revised methodology for counting rigs, primarily affecting data pertaining to Saudi Arabia.

Consequently, international rig counts reported for the prior period have been adjusted accordingly and may now vary from figures presented in previous disclosures.

Active Rigs by Location

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The table below shows the amount of total inbound orders by segment for the years ended December 31, 2025 and 2024:

(in millions of dollars) 2024 2023

(in thousands of dollars) 2025 2024

Drilling and Completions $ 567,805 $ 459,214

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Gain on sale-leaseback transactions (11,182) (4,860) (6,322) *

Loss on disposal of assets and other 484 156 328 *

Loss (gain) on disposal of assets and other (378) 484 (862) *

Operating income (loss) 30,145 (86,767) 116,912 134.7 %

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

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

Foreign exchange losses (gains) and other, net (4,754) 7,315 (12,069) *

Total other expense 13,558 41,659 (28,101) *

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

Income (loss) before income taxes 16,587 (128,426) 145,013 112.9 %

Income tax expense 26,247 6,900 19,347 *

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* not meaningful

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.

Our revenue for the year ended December 31, 2025 was $791.5 million, a decrease of $25.0 million, or 3.1%, compared to the year ended December 31, 2024.

For the year ended December 31, 2025, our Drilling and Completions segment and Artificial Lift and Downhole segment comprised of 60.3% and 39.8% of our total revenues, respectively, compared to 57.7% and 42.3%, respectively, for the year ended December 31, 2024.

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 overall decrease in revenue was primarily related to challenging market conditions, including a notable reduction in global drilling and completions activity, as well as tariff impacts in our Valve Solutions product line.

These pressures were partially offset by higher revenue recognized from ROVs projects and increased coiled line pipe sales.

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

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.

Drilling and Completions segment — Revenue was $477.2 million for the year ended December 31, 2025, an increase of $6.4 million, or 1.4%, compared to the year ended December 31, 2024.

This increase was driven by higher revenue recognized from ROVs projects and increased coiled line pipe sales due to growing U.S.

demand and a large offshore project.

These favorable factors were partially offset by lower global drilling and completions activity.

Artificial Lift and Downhole segment — Revenue was $314.8 million for the year ended December 31, 2025, a decrease of $30.9 million, or 8.9%, compared to the year ended December 31, 2024.

The decline in revenue was driven by lower sand control sales and tariff-related impacts on valve products sales volumes.

These decreases were partially offset by higher casing equipment sales.

Segment operating income (loss) and segment operating margin percentage

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Drilling and Completions segment — Segment operating income was $12.8 million, or 2.7%, for the year ended December 31, 2025 compared to $17.8 million, or 3.8%, for the year ended December 31, 2024.

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

The $4.9 million decrease in segment operating results was primarily due to inventory write-downs, asset impairments and other costs, net of recoveries, of $20.2 million related to the Company’s strategic decision to consolidate facilities and discontinue certain products.

This decrease was partially offset by a reduction in amortization expense following intangible asset impairments recognized in the fourth quarter of 2024.

Artificial Lift and Downhole segment — Segment operating income was $41.2 million, or 13.1%, for the year ended December 31, 2025 compared to $48.9 million, or 14.1%, for the year ended December 31, 2024.

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

The $7.7 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 $34.9 million for the year ended December 31, 2025, a $3.9 million increase compared to the year ended December 31, 2024.

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;

professional fees for legal, accounting and related services;

and marketing costs.

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)

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.

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

For further information related to Impairment of intangible assets, see Note 6 Goodwill and Intangible Assets.

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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.

We incurred $18.3 million of interest expense during the year ended December 31, 2025, a decrease of $13.2 million compared to the year ended December 31, 2024 due to the decreased borrowings.

See Note 7 Debt for further details related to debt.

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.

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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.

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 $26.2 million for the year ended December 31, 2025 compared to a tax expense of $6.9 million for the year ended December 31, 2024.

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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.

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

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

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As of December 31, 2025, we had $37.3 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.

See Note 7 Debt for further details related to the terms for our debt agreements and Note 16 Subsequent Events for further details on amendments to our Credit Facility subsequent to December 31, 2025.

As of December 31, 2025, we had cash and cash equivalents of $34.7 million and $72.5 million of availability under our Credit Facility.

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In addition, we expect total 2026 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.

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 for at least the next 12 months and for the foreseeable future.

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 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 Board of Directors approved programs for the repurchase of outstanding shares of our common stock.

From the inception of the programs in November 2021 through December 31, 2025, we repurchased approximately 1.7 million shares of our common stock for aggregate consideration of $41.9 million.

We repurchased approximately 1.4 million shares of our common stock for aggregate consideration of $34.3 million during 2025.

Our cash flows for the years ended December 31, 2025 and 2024 are presented below (in thousands):

Year ended December 31,

(in thousands of dollars) 2025 2024

Net cash provided by operating activities $ 70,402 $ 92,191

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

Net cash provided by (used in) investing activities 9,566 (137,526)

Net cash provided by (used in) financing activities (91,566) 45,242

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Net cash provided by operating activities was $70.4 million for the year ended December 31, 2025 compared to net cash provided by operating activities of $92.2 million for the year ended December 31, 2024.

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.

During the year ended December 31, 2025, net working capital provided cash of $17.8 million, compared to net working capital cash provided of $57.6 million for the year ended December 31, 2024.

This decline in operating cash flow was offset by

the increase in net income adjusted for non-cash items which provided $52.6 million of cash for the year ended December 31, 2025 compared to $34.6 million for the year ended December 31, 2024.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $9.6 million for the year ended December 31, 2025, mainly related to $14.6 million proceeds from sale-leaseback transactions, partially offset by capital expenditures of $6.0 million.

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.

Net cash used in financing activities was $91.6 million for the year ended December 31, 2025 and included $53.1 million of net repayments of our Credit Facility and repurchases of common stock of $34.6 million.

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 the Variperm acquisition, partially offset by $8.5 million of paid financing costs.

Off-balance sheet arrangements

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For the year ended December 31, 2025, approximately 79% of our revenue was recognized from goods transferred to customers at a point in time while 21% of our revenue was recognized from goods transferred to customers over time.

Although terms of our contracts may vary considerably, the 6% of revenues recognized over time relate to certain contracts in our Subsea and Production Equipment product lines which are typically based on a fixed amount for the entire contract.

Although terms of our contracts may vary considerably, the 21% of revenues recognized over time relate to certain contracts in our Subsea, Production Equipment and Downhole product lines which are typically based on a fixed amount for the entire contract.

Recognition over time for these contracts is supported by our assessment of the products supplied as having no alternative use to us and by clauses in the contracts that provide us with an enforceable right to payment for performance completed to date.

We use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of assets to the customer which occurs as costs are incurred on the contract.

For performance obligations satisfied over time, we measure progress toward completion using either an input method or an output method, depending on which method best depicts the transfer of control of goods or services to the customer.

The selection of the method requires judgment and is based on the nature of the goods or services promised and the terms of the contract.

For certain contracts, we use an input method and measure progress using the cost‑to‑cost method because it best depicts the transfer of assets to the customer, which occurs as costs are incurred on the contract.

The amount of revenue recognized is calculated based on the ratio of costs incurred to date compared to total estimated costs which requires management to calculate reasonably dependable estimates of total contract costs.

Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated

revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of profit to be established.

In such cases, no profit is recognized during the period.

For other contracts, we use an output method to measure progress toward completion where such measures provide a more faithful depiction of performance.

Under the output method, revenue is recognized based on direct measurements of value transferred to the customer, such as milestones achieved, units delivered, or other deliverables transferred relative to the remaining goods or services to be provided under the contract.

Accounting estimates during the course of projects may change.

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Refer to Note 6 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.

In 2025, we recognized $1.2 million and $1.6 million of property and equipment impairment and operating lease right of use assets impairment, respectively, related to the Company’s strategic decision to consolidate facilities and discontinue certain products.

Refer to Note 5 Property and Equipment and Note 8 Leases for further discussion.

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

We follow the liability method of accounting for income taxes.

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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.

deferred tax assets by $1.5 million along with a $2.8 million net increase to certain non-U.S.

deferred tax assets in the United Kingdom, Singapore and Canada.

See Note 9 Income Taxes for further information related to these charges.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis