What changed in this filing

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Item 1. Business

2023-03-09 compared with 2021-04-28 · 192 added, 106 removed, 228 unchanged (57% of the section changed)

Transition Period

On September 3, 2021, our Board of Directors ("Board" or "Board of Directors") approved a change in our fiscal year end from January 31 to December 31, effective beginning with the eleven-month period ended December 31, 2021.

In this Annual Report, references to “Transition Period” refer to the eleven-month period ended December 31, 2021.

Company Overview

Except as otherwise indicated or unless the context otherwise requires, “KLX Energy Services,” “KLXE,” “we,” “us” and “our” refer to KLX Energy Services Holdings, Inc.

Except as otherwise indicated or unless the context otherwise requires, “KLX Energy Services,” “KLXE,” “Company,” “we,” “us” and “our” refer to KLX Energy Services Holdings, Inc.

and its consolidated subsidiaries.

Our fiscal year ends on January 31, as a result, the years ended January 31, 2021 and 2020 are referred to as “Fiscal 2020" and "Fiscal 2019,” respectively.

KLX Energy Services is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout the United States.

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and became an independent, publicly traded company.

"Management Discussion and Analysis of Financial Condition and Results of Operations" for more details of our acquisitions since becoming a publicly traded company, including our 2020 acquisition of Quintana Energy Services Inc.

We deliver mission critical oilfield services to primarily independent major oil and gas companies focused on drilling, completion, production and intervention activities for the most technically demanding wells from over 50 service facilities located in the United States.

We deliver mission critical oilfield services to primarily independent major oil and gas companies focused on drilling, completion, production and intervention activities for technically demanding wells from over 50 service facilities located in the United States.

Our primary services include directional drilling, coiled tubing, thru tubing, hydraulic frac rentals, fishing, pressure control, wireline, rig-assisted snubbing, fluid pumping, flowback, testing, pressure pumping and well control services.

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We believe long-term revenue growth opportunities will continue to be driven by increases in the number of new customers served and the breadth of services we offer to existing and prospective customers.

"Management Discussion and analysis of Financial Condition and Results of Operations" for more details about our complementary suite of our targeted services and engineered solutions.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" for more details about our complementary suite of our targeted services and engineered solutions.

We endeavor to create a “next generation” oilfield services company in terms of management controls, processes and operating metrics and have driven these processes down through the operating management structure in every region.

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The oil and gas industry has historically been both cyclical and seasonal.

Activity levels are driven primarily by drilling rig counts, technological advances, well completions, workover activity, the geological characteristics

of the producing wells and their effect on the services required to commence and maintain production levels and our customers’ capital and operating budgets.

Activity levels are driven primarily by drilling rig counts, technological advances, well completions, workover activity, the geological characteristics of the producing wells and their effect on the services required to commence and maintain production levels and our customers’ capital and operating budgets.

All of these indicators are driven by commodity prices, which are affected by both domestic and global supply and demand factors.

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Global supply and demand factors will likely continue to result in commodity price volatility, similar to that experienced in 2022.

During the first quarter of 2020, the emergence of COVID-19, and the global pandemic caused thereby, placed significant downward pressure on the global economy and oil demand and prices, leading North American operators to announce significant cuts to planned 2020 capital expenditures and causing the continued acceleration of upstream oil and gas bankruptcies.

In response, OPEC, coupled with production curtailment and a drop in hydraulic fracturing activity amongst North America operators, removed significant oil supply from and eased pressure on the market.

During the second half of 2020, OPEC and the non-OPEC suppliers (collectively, “OPEC+”) worked to maintain oil production through an agreed upon quota, and North America operators largely remained disciplined in capital spending.

The reduced activity levels have led to a plunging North America onshore rig count.

In 2021, economic activity started recovering from COVID-19, albeit at an uneven pace.

This led to an increase in activity for the industry, as evidenced by a higher rig count and West Texas Intermediate ("WTI") prices through the end of our fiscal year.

The industry has seen a significant rebound since the emergence of the pandemic, including in early 2022, as a result of the ongoing conflict in Ukraine and increasing demand for oil and gas.

For more information, see “Risk Factors” in Item 1A of Part I and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Trends and Outlook” in Item 7 of Part II of this Annual Report.

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The principal high value-added services and related tools and equipment we offer to support our customers throughout the lifecycle of the well include drilling, completions, production and well intervention services and products in each of our geographic reporting segments.

We provide directional drilling and associated drilling services to E&P companies in many of the most active areas of onshore oil and natural gas developments in the United States, including all active U.S.

We provide directional drilling and associated drilling support services, including accommodations packages, to exploration and production ("E&P") companies in many of the most active areas of onshore oil and natural gas developments in the United States, including all active U.S.

oil and natural gas basins with level 1 facilities in Appalachian Mountain, Gulf Coast, Mid-Continent, West Texas and Rocky Mountain regions.

Our drilling activities are comprised of directional drilling services, downhole navigational and rental tools businesses and support services, including well planning, site supervision, accommodation rentals and other drilling rentals, which assists customers in the drilling and placement of complex directional and horizontal wellbores.

These directional drilling activities utilize in-house positive pulse and electromagnetic measurement-while-drilling ("MWD") communication options to ensure accurate and timely delivery of data transmission for all real-time drilling applications as well as logging-while-drilling capabilities.

Our drilling activities are comprised of directional drilling services, downhole navigational and rental tools businesses and support services, including well planning, site supervision, accommodation rentals and other drilling rentals, which assist customers in the drilling and placement of complex directional and horizontal wellbores.

These directional drilling activities utilize in-house positive pulse and electromagnetic measurement-while-drilling communication options to ensure accurate and timely delivery of data transmission for all real-time drilling applications as well as logging-while-drilling capabilities.

In addition to navigation, our systems offer various technologies, including gamma ray, azimuthal gamma ray, real-time continuous inclination and azimuth, rotary steerable, pressure-while-drilling, mode shifting, stick-slip and destructive dynamics, dynamic sequencing and real-time shock and vibration modules.

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The demand for these services tend to be influenced primarily by customer drilling-related activity levels.

As of January 31, 2021, our market share of the U.S.

onshore drilling market was 8.2%.

We intend to continue to re-deploy additional MWD kits into 2021, as market conditions warrant.

As of December 31, 2022, our market share of the U.S.

onshore drilling market was 7.4%, as compared to 8.4% as of December 31, 2021, as measured by the number of rigs we have worked on during the year as a proportion of the total number of rigs published by Baker Hughes.

We intend to continue to re-deploy additional directional drilling capacity into 2023, as market conditions warrant.

Our completions activities are focused on services that help our customers complete and stimulate extended reach horizontal laterals and more technical wellbores.

We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in all of the most active onshore basins in the United States and provide premium perforating services for both wireline and tubing-conveyed applications.

We believe we offer best-in-class service execution at the wellsite and innovative downhole technologies, positioning us to benefit from our ability to service technically complex wells where the potential for increased

operating leverage is high due to the large number of stages per well.

This is in addition to our customer focus on execution rather than price.

We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in all of the most active onshore basins in the

United States and provide premium perforating services for both wireline and tubing-conveyed applications.

This is in addition to our customer-centered focus on execution rather than price.

Our completions activities include a wide range of services:

• coiled tubing and nitrogen services;

• wireline services (including pump down perforating, logging and pipe recovery);

• pressure control products and services;

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• flowback and testing services;

• wireline services (including pump down perforating, logging, pipe recovery and slickline);

• thru-tubing technologies and services;

• rig assist snubbing services;

• cementing products and services;

• acidizing and pressure pumping services;

• downhole completion tools, including:

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◦ retrievable completion tools.

• cementing products and services;

• thru-tubing technologies and services;

• rig assist snubbing services;

• acidizing and pressure pumping services.

Our coiled tubing units are used in the provision of completion services or in support of well-servicing and workover applications.

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Our team is comprised of oilfield services veterans with extensive domestic and international experience in well control operations.

As of January 31, 2021, we had a fleet of 39 coiled tubing units, 24 of which are large diameter coiled tubing units across our geographical regions.

Over time, when the industry recovers, we believe that our investments in large diameter coil tubing spreads will allow us to increase our share of spend as the large diameter coil tubing pulls through asset light services such as flowback and testing services, thru-tubing and pressure control services, while leveraging our recently enhanced cost structure.

As of December 31, 2022, we had a fleet of 39 coiled tubing units, 23 of which are large diameter coiled tubing units, across our geographical regions.

Over time, when the industry recovers, we anticipate that our investments in large diameter coil tubing spreads will allow us to increase our share of spend as the large diameter coil tubing pulls through asset light services such as flowback and testing services, thru-tubing and pressure control services, while leveraging our enhanced cost structure.

Last year we continued to optimize the quality and performance of our magnesium alloy based line of dissolvable hydraulic fracturing plugs.

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Our R&D organization also enables our operations to support our customers with cutting edge pump down operations that include greaseless wireline, addressable gun systems and addressable release tools, to provide our customers with high quality pump down services.

We also maintain a full line of radial cement bond tools, compensated neutron porosity tools and casing evaluation tools to provide well evaluation services to our clients.

We also maintain a full line of radial cement bond tools, compensated neutron porosity tools and casing evaluation tools to provide well

evaluation services to our clients.

We also utilize greaseless line and quiet truck wireline technology to meet the environmental concerns of our customers.

We offer a full line of valves and corresponding services to assist clients with their pressure control needs during hydraulic fracturing operations.

These valves are assembled in predetermined configurations based on

customer preference and installed on the wellhead to control flow and pressure during hydraulic fracturing operations.

We own a large, young fleet of valves serving the North American onshore oil and gas market.

These valves are assembled in predetermined configurations based on customer preference and installed on the wellhead to control flow and pressure during hydraulic fracturing operations.

We own a large, young line of valves serving the North American onshore oil and gas market.

We have enhanced our hydraulic fracturing valve fleet line through the internal development of next generation technology, including our proprietary, patent pending hydraulic fracturing relief valve (“FRV”).

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When tied into a hydraulic fracturing core (pumps), the FRV gives customers a safer and more reliable method for relieving surface pressure in the event of an unforeseen overpressure event.

By doing this, we believe we minimize operational risk, as well as greatly reduce health, safety and environmental (“HSE”) concerns that are associated with hydraulic fracturing operations.

Additional technologies that we currently deploy on behalf of our customers include our (i) patented flotation collar, which assists customers in getting completion casing to the bottom of extended reach wells when friction prevents getting casing to depth, (ii) proprietary IPA toe sleeve, which allows customers a consistent and reliable hydraulic fracturing initiation sleeve at the toe of the completion, (iii) composite hydraulic fracturing plug, a flow control device that is set in the wellbore at given intervals to divert fluid into the formation, and (iv) dissolvable plugs.

By doing this, we believe we minimize operational risk, as well as greatly reduce health, safety and environmental concerns that are associated with hydraulic fracturing operations.

Additional technologies that we currently deploy on behalf of our customers include our (i) patented flotation collar, which assists customers in getting completion casing to the bottom of extended reach wells when friction prevents getting casing to depth, (ii) proprietary internal pressure actuated ("IPA") toe sleeve, which allows customers a consistent and reliable hydraulic fracturing initiation sleeve at the toe of the completion, (iii) composite hydraulic fracturing plug, a flow control device that is set in the wellbore at given intervals to divert fluid into the formation, and (iv) dissolvable plugs.

We also provide services to enhance and maintain oil and gas production throughout the productive lives of our customers’ wells.

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As with our completion and intervention service offerings, we have developed a portfolio of proprietary tools that we believe differentiates our production solutions service offering.

The principal services and equipment we provide across the production lifecycle of the well include (i) production blow out presenters, (ii) mechanical wireline services, (iii) slick line services, (iv) hydro-testing, (v) premium tubulars and (vi) other specialized production tools.

We believe our proprietary production tool portfolio creates a distinct competitive advantage for us in selling all of our production services.

The principal services and equipment we provide across the production lifecycle of the well include (i) production blow out preventers, (ii) mechanical wireline services, (iii) slick line services, (iv) hydro-testing, (v) premium tubulars and (vi) other specialized production tools.

We believe our proprietary production tool portfolio creates a distinct competitive advantage for us in selling our production services.

Key downhole production tools that we have developed and deployed with strong customer adoption include:

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Those outcomes rely principally on the skill and experience of the technicians dedicated to resolving the issues and the availability of exactly the right tools for every eventuality.

We believe we have one of the leading teams of intervention specialists in the industry, supported by a comprehensive portfolio of intervention tools and equipment.

We believe we have one of the leading teams of

intervention specialists in the industry, supported by a comprehensive portfolio of intervention tools and equipment.

Each of our geographic regions is fully staffed with top technicians and fully equipped with a comprehensive range and quantity of equipment given the wellbore profiles for the region.

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The chambers then carry the debris out of the hole when the system is brought back to surface.

HAVOK PDC Bearing Section— The patented Havok bearing pack is an extremely reliable and robust thru-tubing motor that deploys the industry’s only all PDC (Polycrystalline Diamond Compact) bearing design - meaning no ball bearings.

The elegant design greatly reduces the operating cost of our thru-tubing motors and provides us with a significant differentiator in the thru-tubing space.

Since being deployed, Havok has proven to be one of the most robust bearing packs available on the market.

Hydraulic By-Pass Tool— The patented hydraulic by-pass tool allows us to run our conventional motor assemblies and achieve substantially higher circulation rates without reducing the expected life of our conventional power section.

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The tool is a two-piece system that opens and closes based upon the amount of weight being set on the mill or bit.

During bottom milling with the tool, the tool is in the closed position, putting 100% of the flow through the motor BHA.

During bottom milling with the tool, the tool is in the closed position, putting 100% of the flow through the motor bottomhole assembly ("BHA").

As weight is removed from the mill or bit either by milling through the obstruction or picking up off bottom, the tool strokes open, thereby exposing by-pass ports that divert fluid through them.

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Most of our sales are to major, large independent and regional oil and natural gas companies, and these sales have resulted in a diversified and geographically balanced portfolio of more than 740 customers within North America.

Revenues from our five largest customers collectively represented approximately 27.8% of our revenues for the year ended January 31, 2021.

No single customer accounted for more than 10% of our revenues in Fiscal 2020.

Revenues from our five largest customers collectively represented approximately 21% of our revenues for the year ended December 31, 2022.

No single customer accounted for more than 5% of our revenues during the year.

Our sales activities are conducted through a network of sales representatives and business development personnel, which provide coverage on a product-line and geographical basis.

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Our strategy is to sell our services using data to demonstrate safety and service quality.

We accomplish this through communication across sales regions and operations departments to share best practices and leverage existing customer relationships.

We accomplish this

through communication across sales regions and operations departments to share best practices and leverage existing customer relationships.

The markets in which we operate are highly competitive.

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Additionally, projects are often awarded on a bid basis, which tends to create a highly competitive environment.

To be successful, a company must provide services that meet the specific needs of oil and natural gas E&P companies and drilling, completions, production and intervention service contractors at

competitive prices.

To be successful, a company must provide services that meet the specific needs of oil and natural gas E&P companies and drilling, completions, production and intervention service contractors at competitive prices.

We provide our services across the United States and we compete against different companies in each service and product line we offer.

Our competition includes many large and small oilfield service companies, including the largest integrated oilfield services companies.

Our major competitors include Schlumberger, Baker Hughes, Halliburton, RPC, Nine Energy Services, Phoenix Technology Services, Scientific Drilling International, NexTier, Liberty Oilfield Services, Basic Energy Services, Superior Energy Services, Key Energy Services, and STEP Energy Services.

Our major competitors include Schlumberger, Baker Hughes, Halliburton, RPC, Nine Energy Services, Phoenix Technology Services, Scientific Drilling International, NexTier, Liberty Oilfield Services, Ranger Energy Services, ProPetro Holding Corp., STEP Energy Services, and other private competitors.

We differentiate our company from our competitors by delivering a broad range of drilling, completion, production and intervention services safely with high quality equipment and highly competent personnel, which we believe enables us to deliver superior execution while operating an efficient and safe working environment.

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We purchase a wide variety of materials, components and partially completed and finished products from manufacturers and suppliers for our use.

We are not dependent on any single source of supply for those parts, supplies, materials or equipment and, as of January 31, 2021, no single supplier accounted for more than 10% of our total supply and procurement costs.

We are not dependent on any single source of supply for those parts, supplies, materials or equipment and, as of December 31, 2022, no single supplier accounted for more than 4% of our total supply and procurement costs.

To date, we have generally been able to obtain the equipment, parts and supplies necessary to support our operations on a timely basis.

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We are highly differentiated in each of the geographic markets that we serve with our services and associated product offerings.

This is achieved by providing targeted, complementary services and related products and being responsive to our customers with both quality, as measured by the industry-standard NPT, and timely responses to requests.

The key elements include:

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• recognized industry leading technicians in our principal service and product lines;

• responsiveness to our customers’ requirements for ready-to-deploy API certified equipment and a “can do” philosophy;

• responsiveness to our customers’ requirements for ready-to-deploy American Petroleum Institute certified equipment and a “can do” philosophy;

• technical interface with customers via product line management personnel;

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We have dedicated resources focused on the internal development of new technology and equipment, as well as resources focused on sourcing and commercializing new technologies through strategic relationships.

Our sales and

earnings are influenced by our ability to successfully introduce new or improved products and services to the market.

Our sales and earnings are influenced by our ability to successfully introduce new or improved products and services to the market.

Although in the aggregate our patents and licenses are important to us, we do not regard any single patent, license or strategic relationship as critical or essential to our business as a whole.

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If a serious accident were to occur at a location where our equipment and services are being used, it could result in us being named as a defendant in lawsuits asserting large claims.

Because our business involves the transportation of heavy equipment and materials, we may also experience traffic accidents, which may result in spills, property damage and personal injury.

Because our business involves the transportation of heavy equipment and materials, we from time to time experience traffic accidents, which may result in spills, property damage and personal injury.

Oilfield services companies, despite efforts to maintain high safety standards, from time to time, have suffered accidents.

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We maintain a risk management program that covers operating hazards, including products and completed operations, property damage and personal injury claims as well as certain limited environmental claims.

Our risk management program includes primary, umbrella and excess umbrella liability policies in excess of $75 million per occurrence, including sudden and accidental pollution claims.

Our risk management program includes primary, umbrella and excess umbrella liability policies in excess of $75.0

million per occurrence, including sudden and accidental pollution claims.

We believe that our insurance is sufficient to cover property and casualty liability claims.

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We retain the risk for any liability not indemnified by our customers and in excess of our insurance coverage.

These MSAs delineate our and our customers’ respective warranty and indemnification obligations with respect to the

services we provide.

These MSAs delineate our and our customers’ respective warranty and indemnification obligations with respect to the services we provide.

We endeavor to negotiate MSAs with our customers that provide, among other things, that we and our customers assume (without regard to fault) liability for damages to our respective personnel and property.

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Government Regulation and Environmental, Health and Safety Matters

Our operations are subject to extensive and changing federal, state and local laws and regulations establishing health, safety and environmental quality standards, including those governing discharges of pollutants into the air and water and the management and disposal of hazardous substances and wastes.

We may be subject to liabilities or penalties for violations of those regulations.

Our operations and those of our customers are subject to extensive and changing federal, state and local laws and regulations establishing health, safety and environmental quality standards, including those governing discharges of pollutants into the air and water, protection of natural resources and certain wildlife and the management and disposal of hazardous substances and wastes.

Failure to comply with these laws and regulations or comply with permits may result in the assessment of administrative, civil and criminal penalties;

the imposition of remedial or corrective action requirements;

and the imposition of injunctions or other orders to prohibit certain activities, restrict certain operations or force future compliance with environmental regulations.

We are also subject to laws and regulations, such as the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state statutes, governing remediation of contamination, which could occur or might have occurred at facilities that we own or operate, or which we formerly owned or operated, or to which we send or have sent hazardous substances or wastes for treatment, recycling or disposal.

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In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability relating to our facilities or operations.

The following is a summary of some of the existing laws, rules and regulations to which we are subject.

The following is a summary of some of the existing laws, rules and regulations, as amended from time to time, to which we or our customers are subject.

Hazardous Substances and Waste Handling

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However, efforts have been made from time to time to remove this exclusion and thus it is possible that certain E&P waste now classified as non-hazardous waste and excluded from treatment as hazardous wastes may in the future be designated as “hazardous wastes” under RCRA or other applicable statutes.

Stricter regulation of wastes generated during our or our customers’ operations could result in increased costs for our operations or the operations of our customers, which could in turn reduce demand for our services and adversely affect our business.

Naturally Occurring Radioactive Materials (“NORM”) may contaminate extraction and processing equipment used in the oil and natural gas industry.

The waste resulting from such contamination is regulated by federal and state laws.

Standards have been developed for worker protection; treatment, storage, and disposal of NORM and NORM waste; management of NORM-contaminated waste piles, containers and tanks; and limitations on the relinquishment of NORM contaminated land for unrestricted use under RCRA and state laws.

Comprehensive Environmental Response, Compensation, and Liability Act

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Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations to prevent future contamination.

The EPA has the power to make additional substances subject to CERCLA and is considering doing so at this time, which could result in additional remediation costs at certain properties in the future.

In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

Endangered Species Act and Migratory Bird Treaty Act

The federal Endangered Species Act (“ESA”) and comparable state laws were established to protect endangered and threatened species.

Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat.

Fish and Wildlife Service (“FWS”) has the ability to designate additional species as protected by the ESA and alter the areas designated as habitat for such species.

For example, FWS recently published a rule listing two distinct population segments of the Lesser Prairie Chicken under the ESA, a species found in some states where we operate.

FWS has also considered taking additional measures related to species such as the Dunes Sagebrush Lizard and Greater Sage Grouse, which can be found in some areas where we operate.

The designation of previously unidentified endangered or threatened species, or other agency actions aimed at species conservation could indirectly cause us to incur additional costs, cause our or our oil and natural gas exploration and production customers' operations to become subject to operating restrictions or bans, result in

new difficulties obtaining permits or other authorizations, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.

Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (“MBTA”).

FWS has taken differing positions on the extent to which there is criminal liability under the MBTA for certain actions reacted to migratory birds, their nests, or their eggs.

Some of our customers may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit our ability to operate in protected areas.

Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures.

National Environmental Policy Act

E&P activities on federal lands may be subject to review under the National Environmental Policy Act (“NEPA”).

NEPA requires federal agencies, including the Department of the Interior, to evaluate major agency actions that have the potential to significantly impact the environment.

Approvals necessary for our customers to operate on federal or Tribal land are subject to NEPA.

The NEPA review process has the potential to delay the permitting and subsequent development of oil and natural gas projects.

NEPA requirements are subject to or influenced by regulations and guidance from the Council on Environmental Quality (“CEQ”), and the CEQ’s requirements and guidance for such reviews have altered several times during the past few years under different administrations, and are likely to continue to change.

Most recently, in January 2023 the CEQ issued new guidance on consideration of greenhouse gas ("GHG") emissions and climate change in NEPA environmental reviews.

At this time, we cannot predict the outcome of such changes on our operations or the operations of our customers.

To the extent that new and more stringent NEPA requirements are finalized in the future, they could create permitting delays for our customers requiring federal approvals and thereby negatively impact the demand for our services.

Worker Health and Safety

We are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act, which establishes requirements to protect the health and safety of workers.

Occupational Safety and Health Administration ("OSHA") hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes requires maintenance of information about hazardous materials used or produced in operations and provision of this information to employees, state and local government authorities and citizens.

Occupational Safety and Health Administration ("OSHA") hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require maintenance of information about hazardous materials used or produced in operations and provision of this information to employees, state and local government authorities and citizens.

The Federal Motor Carrier Safety Administration regulates and provides safety oversight of commercial motor vehicles, the EPA establishes requirements to protect human health and the environment, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") establishes requirements for the safe use and storage of explosives, and the federal Nuclear Regulatory Commission establishes requirements for the protection against ionizing radiation.

Substantial fines and penalties can be imposed and orders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with these laws and regulations.

Additionally, OSHA has implemented rules establishing a more stringent permissible exposure limit for exposure to respirable crystalline silica and provided other provisions to protect employees.

These rules require compliance with engineering control obligations to limit exposures to respirable crystalline silica in connection with hydraulic fracturing activities by June 2021.

Additionally, OSHA has implemented rules establishing a more stringent permissible exposure limit for exposure to respirable crystalline silica and other provisions to protect employees.

These rules require compliance with engineering control obligations to limit exposures to respirable crystalline silica in connection with hydraulic fracturing activities.

OSHA and analogous state agencies may continue to propose changes in their regulations regarding workplace exposure to crystalline silica, such as permissible exposure limits and required controls and personal protective equipment.

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Operating a fleet of over 1,700 vehicles, we are subject to regulation as a motor carrier by the U.S.

Department of Transportation (“DOT”) and analogous state agencies, which requires us to comply with a number of federal and state laws and regulations, including the Federal Motor Carrier Safety Regulations and Hazardous Material Regulations for interstate travel, and comparable state regulations for intrastate travel.

Department of Transportation (the “DOT”) and analogous state agencies, which requires us to comply with a number of federal and state laws and regulations, including the Federal Motor Carrier Safety Regulations and Hazardous Material Regulations for interstate travel, and comparable state regulations for intrastate travel.

These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations, regulatory safety, equipment testing, driver requirements and specifications, and insurance requirements.

The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices (including for example,

changes in fuel emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period and limits on vehicle weight and size) or by reducing the demand for common or contract carrier services or the cost of providing truckload services.

Additional regulatory initiatives may be pursued relating to fuel quality, engine efficiency and greenhouse gas (“GHG”) emissions, which could further increase our costs due to truck purchases and maintenance, impairment of equipment productivity, decreases in the residual value of vehicles, unpredictable fluctuations in fuel prices and increases in operating expenses.

The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices (including for example, changes in fuel emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period and limits on vehicle weight and size) or by reducing the demand for common or contract carrier services or the cost of providing truckload services.

Additional regulatory initiatives may be pursued relating to fuel quality, engine efficiency and GHG emissions, which could further increase our costs due to truck purchases and maintenance, impairment of equipment productivity, decreases in the residual value of vehicles, unpredictable fluctuations in fuel prices and increases in operating expenses.

Our operations, including routing and weight restrictions, could be affected by road construction, road repairs, detours and state and local regulations and ordinances restricting access to certain roads and our increased truck traffic could contribute to deteriorating road conditions in some areas.

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Water Discharges

The Federal Water Pollution Control Act (the “Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States.

The Federal Water Pollution Control Act (the “Clean Water Act” or "CWA") and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States.

The discharge of pollutants into regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency.

In 2015, the EPA and U.S.

Army Corps of Engineers ("Corps") under the Obama Administration released a final rule outlining federal jurisdictional reach under the Clean Water Act over waters of the United States, including wetlands;

however, the 2015 rule was repealed by the EPA and the Corps under the Trump Administration in a final rule that became effective in December 2019 and they also published a final rule in April 2020 re-defining the term “waters of the United States” as applied under the Clean Water Act and narrowing the scope of waters subject to federal regulation.

The April 2020 final rule is subject to various pending legal challenges and with President Biden taking office in January 2021, there is the possibility that the Biden Administration will review and reconsider the December 2019 and April 2020 final rules.

The process for obtaining permits has the potential to delay our operations and those of our customers.

In other Clean Water Act matters, spill prevention, control and countermeasure requirements of federal laws require appropriate containment berms and similar structures to help prevent the contamination of navigable waters by a petroleum hydrocarbon tank spill, rupture or leak.

In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities.

Federal and state regulatory agencies can impose administrative, civil and criminal penalties as well as other enforcement mechanisms for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

The Clean Water Act and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the Oil Pollution Act of 1990, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

There continues to be uncertainty on the federal government's applicable jurisdictional reach under the CWA over waters of the United States, including wetlands, as the EPA and the U.S.

Army Corps of Engineers ("Corps") under the Obama, Trump and Biden Administrations have pursued multiple rulemakings since 2015 in an attempt to define the scope of such reach.

While the EPA and Corps under the Trump Administration issued a final rule in January 2021 narrowing federal jurisdictional reach over waters of the United States, the EPA and Corps under President Biden issued a new rule at the end of 2022 that again broadens federal jurisdiction over these waters.

The Supreme Court is also expected to rule on certain aspects of the definition in 2023, and the Biden Administration rule is likely to be subject to legal challenge.

Therefore, the final substance of this definition and its impacts on the scope of the Clean Water Act remain uncertain at this time.

To the extent the Biden Administration rule goes into effect and expands the scope of the Clean Water Act's jurisdiction in areas where we or our customers conduct operations, such developments could delay, restrict or halt the development of projects, result in longer permitting timelines, or increased compliance expenditures or mitigation costs for our customers’ operations, which may reduce our customers’ rate of production of oil and gas and reduce the demand for our products and services.

In other CWA matters, spill prevention, control and countermeasure requirements of federal laws require appropriate containment berms and similar structures to help prevent the contamination of navigable waters by a petroleum hydrocarbon tank spill, rupture or leak.

In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of

The CWA and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the Oil Pollution Act of 1990, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

Air Emissions

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These regulations change frequently.

These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with stringent air permit requirements or utilize specific equipment or technologies to control emissions of certain pollutants.

For example in 2015, the EPA under the Obama Administration lowered the National Ambient Air Quality Standard (“NAAQS”) for ground

level ozone from 75 to 70 parts per billion.

Since that time, the EPA under the Trump Administration has completed attainment/non-attainment designations and, more recently on December 31, 2020, published notice of a final action that, upon conducting a periodic review of the ozone standard in accord with CAA requirements, elected to retain the 2015 ozone NAAQS without revision on a going-forward basis.

However, this December 2020 final action is subject to legal challenge, and the NAAQS may be subject to further revision under the Biden Administration.

These laws and regulations may require us or our customers to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with stringent air permit requirements or utilize specific equipment or technologies to control emissions of certain pollutants.

For example in 2015, the EPA lowered the National Ambient Air Quality Standard (“NAAQS”) for ground level ozone from 75 to 70 parts per billion.

Since that time, the EPA has issued area designations with respect to ground-level ozone and, on December 31, 2020, published notice of a final action that, upon conducting a periodic review of the ozone standard in accord with CAA requirements, elected to retain the 2015 ozone NAAQS without revision on a going-forward basis.

However, this December 2020 final action is subject to legal challenge, which is currently on hold while the Biden Administration is reconsidering the December 2020 final action in favor of a potentially more stringent ground-level ozone NAAQS.

State implementation of the revised NAAQS could result in stricter permitting requirements, which in turn could delay or impair our or our customers’ ability to obtain air emission permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant.

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Climate Change

Congress has not adopted comprehensive climate change legislation but President Biden has already signed several executive orders regarding the combat of climate change in January 2021 and is expected to pursue legislative as well as other executive and regulatory initiatives in the future to limit GHG emissions.

The threat of climate change continues to attract considerable attention in the United States and around the world.

Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.

Congress has not adopted comprehensive climate change legislation but did impose the first-ever fee on the emission of GHGs through a methane emissions charge.

The Inflation Reduction Act of 2022 (“IRA”) amends the CAA to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production and gathering and boosting source categories.

The methane emissions charge would start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year after.

Calculation of the fee is based on certain thresholds established in the IRA.

The IRA also requires the EPA to revise GHG reporting requirements for segments of the oil and gas sector, including portions of our customer base, by August 2024.

The methane emissions charge and reporting revisions could increase our customers' operating or compliance costs and adversely affect their businesses, thereby reducing demand for our products and services.

The IRA also instructs the EPA to revise GHG reporting requirements that apply to some of our customers’ operations.

While we cannot predict the impact of any such revisions, if these revisions result in additional compliance costs for our customers, they could negatively impact the demand for our services.

Additionally, the IRA contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, and supporting infrastructure and carbon capture and sequestration, among other provisions.

These incentives could accelerate the transition of the U.S.

away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, reduce demand for our customers’ products, and thereby reduce demand for our services.

In addition, President Biden has made combating climate change arising from GHG emissions a priority under this Administration and has issued, and may continue to issue, executive orders or other regulatory initiatives in pursuit of this regulatory agenda.

At the federal level, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources, and impose new standards reducing methane emissions from oil and gas operations through limitations on venting and flaring and the implementation of enhanced emission leak detection and repair requirements.

In recent years, there has been considerable uncertainty surrounding regulation of methane emissions, as the EPA under the Obama Administration published a CAA final rule in 2016 establishing new source performance standards (“NSPS”) for methane, but since that time the EPA under the Trump Administration has undertaken several measures to delay or eliminate more stringent requirements under the 2016 final rule.

Various states and industry and environmental groups are separately challenging both the original 2016 standards and more recent EPA rules issued under the Trump Administration, and on January 20, 2021, President Biden issued an executive order, that among other things, directed EPA to reconsider certain of those Trump Administration rules.

The January 20, 2021 executive order also directed the establishment of new methane and volatile organic compound standards applicable to existing oil and gas operations, including the production segment.

In recent years, there has been considerable uncertainty surrounding regulation of methane emissions.

In 2020, the Trump Administration revised performance standards for methane established in 2016 to lessen the impact of those standards and removed the transmission and storage segments from the source category for certain regulations.

However, the U.S.

Congress subsequently passed, and President Biden signed into law, a revocation of the 2020 rulemaking, effectively reinstating the 2016 standards.

In November 2021, the EPA issued a proposed rule and further supplemented the proposal in December 2022 to adopt new methane regulations for the oil and gas sector.

If finalized, the proposed rule would establish Quad Ob new source and Quad Oc first-time existing source standards of performance for methane and volatile organic compound emissions in the oil and gas source category.

This proposed rule would apply to upstream and midstream facilities at oil and natural gas well sites, natural gas gathering and boosting compressor stations, natural gas processing plants, and transmission and storage facilities.

Owners or operators of affected emission units or processes would have to comply with specific standards of performance that may include leak detection using optical gas imaging and subsequent repair requirements, reduction of regulated emissions through capture and control systems, zero-emission requirements for certain equipment or processes, operations and maintenance requirements, and requirements for "green well" completions.

Additionally, this proposed rule would impose expanded inspection, monitoring and emissions control requirements on oil and gas sites, as well as strengthen requirements related to emissions from equipment and routine flaring.

The proposal would also establish a “Super Emitter Response Program” that would require operator response to emissions events exceeding 200 pounds per hour, as detected by regulatory authorities or qualified third parties.

The proposal is expected to be finalized in 2023, but will likely be subject to legal challenges.

As a result, we cannot predict the scope of any final methane regulatory requirements, or the expected cost to comply with such requirements.

Any increase in regulatory requirements may increase operating or compliance costs for our customers and thereby reduce the demand for our services.

Some states where we operate, such as New Mexico and Colorado, have also imposed new or more stringent methane emission regulations, which could also increase operating or compliance costs for our customers in these states and impact demand for our services.

Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, President Biden issued executive orders in January 2021 re-committing the United States to the "Paris Agreement," a non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, and directed the federal government to formulate the United States’ emissions reduction goal under the agreement.

Separately, on January 27, 2021, President Biden issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and an increased emphasis on climate-related risks across government agencies and economic sectors.

At the international level, the United Nations-sponsored Paris Agreement is a non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020.

President Biden announced in April 2021 a new, more rigorous nationally determined emissions reduction level of 50 percent to 52 percent from 2005 levels in economy-wide net GHG emissions by 2030.

Moreover, the international community gathered again in Glasgow in November 2021 at the 26th Conference of the Parties ("COP26"), during which multiple announcements (not having the effect of law) were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO2 GHGs.

Relatedly, the United States and European Union jointly announced at COP26 the launch of a Global Methane Pledge, an initiative which over 100 counties joined, committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including "all feasible reductions" in the energy sector.

These goals were reaffirmed at the 27th Conference of the Parties (“COP27”) in November 2022.

The impacts of

these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States' commitments under the Paris Agreement, COP26, COP27 or other international conventions cannot be predicted at this time.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in federal political risks in the United States.

President Biden has issued several executive orders calling for more expansive action to address climate change and suspend new oil and gas operations on federal lands and waters.

The suspension of the federal leasing activities prompted legal action by several states against the Biden Administration, resulting in issuance of a nationwide preliminary injunction by a federal district judge in Louisiana in June 2021, effectively halting implementation of the leasing suspension.

In November 2022 the federal Bureau of Land Management (“BLM”) proposed a rule that would limit flaring from well sites on federal and Tribal lands, as well as allow the delay or denial of permits if BLM finds that an operator’s methane waste minimization plan is insufficient.

Other actions adversely affecting the oil and gas industry that may be pursued by the Biden Administration include limiting hydraulic fracturing by banning new oil and gas permitting on federal lands and waters, limiting hydraulic fracturing by banning new oil and gas permitting on federal lands and waters, potentially eliminating certain tax rules (referred to as subsidies) that benefit the oil and gas industry, and imposing restrictions on pipeline infrastructure.

Litigation risks are also increasing as a number of states, municipalities and other plaintiffs have sought to bring suit against the largest oil and natural gas exploration and production companies in state or federal court alleging, among other things, that such energy companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore, are responsible for roadway and infrastructure damages as a result, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.

There are also increasing financial risks for fossil fuel producers and other companies supportive of the oil and natural gas industry as shareholders and bondholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors.

Institutional lenders who provide

financing to fossil-fuel energy companies also have become more attentive to sustainable lending and investment practices and some of them may elect not to provide funding for fossil fuel energy companies.

Additionally, there is the possibility that financial institutions will be required to adopt policies that limit funding for fossil fuel energy companies, as President Biden recently signed an executive order in January 2021 calling for the development of a climate finance plan and, separately, the Federal Reserve announced in late 2020 that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector.

Finally, some scientists have concluded that increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events;

if such effects were to occur, they could have an adverse impact on our operations.

Additionally, climate change policies may impact the Company or our customers’ access to capital.

Certain shareholders and bondholders currently invested in fossil-fuel energy companies are concerned about the potential effects of climate change and may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors.

Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending and investment practices that favor "clean" power sources, such as wind and solar, making those sources more attractive, and some of them may elect not to provide funding for fossil fuel energy companies.

Many of the largest U.S.

banks have made "net zero" carbon emission commitments and have announced that they will be assessing financed emissions across their portfolios and taking steps to quantify and reduce those emissions.

At COP26, the Glasgow Financial Alliance for Net Zero ("GFANZ") announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.

The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero emissions by 2050.

These and other developments in the financial sector could lead to some lenders restricting access to capital for or divesting from certain industries or companies, including the oil and gas sector, or requiring that borrowers take additional steps to reduce their GHG emissions.

Additionally, there is the possibility that financial institutions will be pressured or required to adopt policies that limit funding for fossil fuel energy companies.

In late 2020, the Federal Reserve announced that it had joined the Network for Greening the Financial System ("NGFS"), a consortium of financial regulators focused on addressing climate-related risks in the financial sector.

In November 2021, the Federal Reserve issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities.

While we cannot predict what policies may result from these announcements, a material reduction in the capital available to us or our fossil fuel-related customers could make it more difficult to secure funding for exploration, development, production, transportation, and processing activities, which could reduce the demand for our products and services.

The SEC has also proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks;

material climate-related impacts on strategy, outlook and business model;

climate risk management;

Scope 1 and 2

GHG emissions and Scope 3 GHG emissions under certain circumstances;

and if the registrant has set them, climate-related targets and goals.

The final rule is expected in 2023 and may be subject to legal challenge.

Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that an issuer's existing climate disclosures were misleading or deficient.

We cannot predict the impact that any rule, if finalized, would have on our operations.

To the extent that requirements or enforcement initiatives impose significant additional costs on us or our customers, we could be negatively impacted by the SEC’s regulatory or enforcement actions.

Finally, increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events, as well as chronic shifts in temperature and precipitation patterns.

These climatic developments have the potential to cause physical damage to our and our customers’ assets or disrupt operations and thus could have an adverse effect on each of our operations.

Additionally, changing meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or its production.

While our consideration of changing climatic conditions and inclusion of safety factors in design is intended to reduce the uncertainties that climate change and other events may potentially introduce, our ability to mitigate the adverse impacts of these events depends in part on the effectiveness of our facilities and our disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality.

Hydraulic Fracturing

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The process, which involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production, is typically regulated by state oil and natural gas commissions.

At the federal level, the EPA has asserted federal regulatory authority over certain hydraulic fracturing activities involving the use of diesel fuels and regarding certain wastewater discharges from onshore unconventional oil and gas extraction facilities.

Also, over the past several years, the federal Bureau of Land Management under both the Obama and Trump Administrations has pursued final rules governing hydraulic fracturing activities on federal lands but the outcome of those rulemakings remain uncertain.

In late 2016 the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that "water cycle" activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances.

While the U.S.

Congress has from time to time considered but refused to adopt federal regulation of hydraulic fracturing, the Biden Administration has issued executive orders, could issue additional executive orders, and could pursue other legislative and regulatory initiatives that restrict hydraulic fracturing activities on federal lands.

For example, the Biden Administration issued an order on January 20, 2021 temporarily suspending the issuance of new leases and authorizations, including drilling permits on federal lands and waters for a period of 60 days, and subsequently issued a second order on January 27, 2021 suspending the issuance of new leases on federal lands and waters pending completion of a study of current oil and gas practices.

Although these suspensions, which do not limit existing operations under valid leases and are not applicable to tribal lands that the federal government holds in trust, do not directly affect our operations, they could impose additional hydraulic fracturing limitations on our customers that could ultimately result in decreased demand for our services.

In late 2016, the EPA also released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that "water cycle" activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances.

BLM under both the Obama and Trump Administrations has pursued rules governing hydraulic fracturing activities on federal lands.

These requirements have been subject to legal challenge and the outcome remains uncertain.

Congress has from time to time considered but refused to adopt federal legislation regarding hydraulic fracturing including considering amending the current exemption for hydraulic fracturing operations that do not include fracturing fluids that contain diesel fuel under the Safe Drinking Water Act’s Underground Injection Control program.

The Biden Administration has issued executive orders, could issue additional executive orders, and could pursue other legislative and regulatory initiatives that restrict hydraulic fracturing activities on federal lands.

For example, President Biden issued an order in January 2021 suspending the issuance of new leases and authorizations, including drilling permits on federal lands and waters for a period of 60 days, and subsequently issued a second order on January 27, 2021 suspending the issuance of new leases on federal lands and waters pending completion of a study of current oil and gas practices.

The suspension of these federal leasing activities prompted legal action by several states against the Biden Administration, resulting in issuance of a nationwide preliminary injunction by a federal district judge in Louisiana in June 2021, effectively halting implementation of the leasing suspension but the federal government is appealing the district court decision.

These or similar federal actions, if taken in the future, could impose additional hydraulic fracturing limitations on our customers that could ultimately result in decreased demand for our products and services.

At the state level, many states have adopted legal requirements that have imposed new or more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities, including states where our customers operate.

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In recent years, wells used for the disposal by injection of flowback water or certain other oilfield fluids below ground into non-producing formations have been associated with an increased number of seismic events, with research suggesting that the link between seismic events and wastewater disposal may vary by region and local geology.

geological survey has in the recent past identified six states with the most significant hazards from induced seismicity, which list includes Oklahoma, Kansas, Texas, Colorado, New

Mexico, and Arkansas.

geological survey has in the recent past identified six states with the most significant hazards from induced seismicity, which includes Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas.

In response to these concerns, regulators in some states have adopted additional requirements related to seismicity and its potential association with hydraulic fracturing.

For example, Texas and Oklahoma has issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.

Other states, such as Oklahoma has also issued orders, from time to time, for certain wells where seismic incidents have occurred to restrict or suspend disposal well operations.

For example, Texas and Oklahoma have issued rules for wastewater disposal wells that impose certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.

Texas and Oklahoma have also issued orders or other directives, from time to time, requesting or even compelling operators of certain wells where seismic incidents have occurred to restrict or suspend disposal well operations.

Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal.

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Our customers' access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.

As of January 31, 2021, we had approximately 1,270 employees.

Approximately 86% of our employees are engaged in operations, quality and purchasing, 4% in sales and marketing and 10% in finance, human resources, IT and general administration.

As of December 31, 2022, we had approximately 1,779 employees.

Approximately 89% of our employees are engaged in operations, quality and purchasing, 4% in sales and marketing and 7% in finance, human resources, IT, management and general administration.

Our employees are not unionized, and we consider our employee relations to be good.

Available Information

Our filings with the SEC, including this Form 10-K, our Quarterly Reports on Form 10-Q, our Proxy Statement, Current Reports on Form 8-K and amendments to any of those reports are available free of charge on our website, http://www.klxenergy.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

Our filings with the SEC, including this Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Proxy Statement, Current Reports on Form 8-K and amendments to any of those reports are available free of charge on our website, http://www.klxenergy.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

These reports may also be obtained on the SEC’s website, www.sec.gov, which contains reports, proxy statements, information statements, and other information regarding SEC registrants, including KLX Energy Services Holdings, Inc.

Information included in or connected to our website is not incorporated by reference in this annual report.

In addition to the reports filed or furnished with the SEC and provided on our website, we publicly disclose material information from time to time in our press releases, at annual meetings of Shareholders and in publicly accessible conferences and Investor presentations primarily through our Investor Relations pages (https://investor.klxenergy.com).

It should be noted that references to the Company's website in this Annual Report are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Annual Report.

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 1. Business