What changed in this filing

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Item 1A. Risk Factors

2024-03-08 compared with 2023-03-09 · 132 added, 138 removed, 482 unchanged (36% of the section changed)

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Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility, and we depend on our customers’ willingness to make capital and operating expenditures to explore for, develop and produce oil and natural gas in the United States.

In recent years, the oil and gas industry has experienced significant downturns and volatility.

For example, in 2020, low oil and natural gas prices due, in part, to the COVID-19 pandemic, caused a reduction in cash flows for our customers, which had a significant adverse effect on the financial condition of some of our customers.

This has resulted in, and may continue to result in, lower capital expenditures, project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us.

These effects have had, and may continue to have, a material adverse effect on our financial condition, results of operations and cash flows.

As oil and gas prices increased significantly during the first half of 2022 and marked a slow decline in the second half of 2022, we anticipate oil and natural gas prices will continue to be volatile.

Factors over which we have no control that could affect our customers’ willingness to undertake drilling, completion, production, and intervention spending activities include:

The oil and gas industry experienced significant increases in activity in late 2021 and 2022 due to the recovery from the COVID-19 pandemic and increasing demand for oil and gas.

Average oil prices and natural gas prices and activity subsequently decreased in 2023 compared to 2022, before stabilizing in late 2023.

Oil and natural gas prices have been, and may remain, volatile, which impacts demand for our business.

However, an unexpected slowdown in economic activity may result in lower capital expenditures, project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Over the past several years, an increasing number of E&P companies increased their focus on generating free cash flow;

as a result, if oil prices drop or spending for activities exceeds amounts budgeted earlier in their fiscal years, many E&P companies will sharply curtail spending, which negatively impacts demand for our services.

This practice has been commonly referred to as “budget exhaustion” in the industry.

The lack of notice of budget exhaustion negatively impacts our hiring practices and operating efficiencies.

Additional factors over which we have no control that could affect our customers’ willingness to undertake drilling, completion, production, and intervention spending activities include:

• the level of prices, and expectations about prices, for oil and natural gas;

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• the availability, capacity and cost of disposal and recycling services for used hydraulic fracturing fluids;

• the political environment in oil and natural gas producing regions, including uncertainty or instability resulting from civil disorder, terrorism or war, such as the continuing conflict between Russia and Ukraine;

• worldwide political, military and economic conditions;

• global or national health pandemics, epidemics or concerns, such as the COVID-19 pandemic, which reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity;

• actions of OPEC, its members and other state-controlled oil companies relating to oil and natural gas price and production levels, including announcements of potential changes to such levels;

• actions of the Organization of the Petroleum Exporting Countries ("OPEC"), its members and other state-controlled oil companies relating to oil and natural gas price and production levels, including announcements of potential changes to such levels;

• advances in exploration, development and production technologies or in technologies affecting energy consumption;

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During the past five years, WTI has ranged from a low of $(36.98) per barrel ("Bbl") in April 2020 to a high of $123.64 per Bbl in March 2022.

As of December 31, 2022, WTI closed at $80.16 per Bbl, a 6.4% increase compared to WTI on December 31, 2021.

As of December 31, 2023, WTI closed at $71.89 per Bbl, a 10.3% decrease compared to the closing price of WTI on December 31, 2022.

On February 29, 2024, WTI closed at $79.22 per Bbl.

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and global economic conditions, U.S.

and global political and economic developments, including initiatives introduced by the Biden Administration and resulting energy and environmental policies, war or other military conflict, including the continuing conflict between Russia and Ukraine, the impact of the ongoing COVID-19 pandemic, and conditions in the U.S.

oil and gas industry and the resulting demand for domestic land oilfield services.

If the prices of oil and natural gas continue to be volatile or decline, our business, financial condition and results of operations may be materially and adversely affected.

The COVID-19 pandemic has had, and may continue to have, a material adverse effect on our financial condition, results of operations and cash flows.

The COVID-19 pandemic in the United States and globally, together with significant volatility in commodity prices adversely affected, and may continue to adversely affect, both the price of and demand for crude oil and the continuity of our business operations.

The COVID-19 pandemic and its related effects continue to evolve.

The ultimate extent of the impact of the COVID-19 pandemic and any other future pandemic on our business will depend on future developments, including, but not limited to, the nature, duration and spread of the disease and its variants, the vaccination

rollout and responsive actions to stop its spread or address its effects and the duration, timing and the severity of the related consequences on commodity prices and the economy more generally, including any recession resulting from the pandemic.

Any extended period of depressed commodity prices or general economic disruption as a result of a pandemic would adversely affect our business, financial condition and results of operations.

Our business may be adversely affected by a deterioration in general economic conditions or a weakening of the broader energy industry.

Although in the first half of 2022, oil prices experienced a significant increase, the industry still has not fully recovered, and is currently still at a lower rig count than before the COVID-19 pandemic.

Although oil prices were higher in 2022 and 2023, compared to 2021, the industry still has not fully recovered, and is currently still at a lower rig count than before the COVID-19 pandemic.

We cannot assure you these conditions will not continue to exist throughout 2024.

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Activity levels historically have been driven primarily by E&P company capital spending, well completions and 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 generally driven by commodity prices, which are affected by both domestic and global supply and demand factors.

All of these indicators are generally

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

In particular, while U.S.

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The borrowing base of our ABL Facility is dependent upon our receivables, which may be significantly lower in the future due to reduced activity levels or decreases in pricing for our services.

Over the past several years, an increasing number of E&P companies increased their focus on generating free cash flow;

This practice has been commonly referred to as “budget exhaustion” in the industry.

The lack of notice of budget exhaustion negatively impacts our hiring practices and operating efficiencies.

The industry in which we operate has undergone and may continue to undergo consolidation.

Some of our largest customers have consolidated in recent years and are using their size and purchasing power to achieve economies of scale and pricing concessions.

This consolidation may result in reduced capital spending by E&P customers or the acquisition of one or more of our other primary customers, which may lead to decreased demand for our products and services.

If we cannot maintain sales levels for customers that have consolidated or replace such revenue with increased business activities from other customers, this consolidation activity could have a significant negative impact on our business, financial condition and results of operations.

We are unable to predict what effect consolidations in our industry may have on prices, capital spending by customers, selling strategies, competitive position, ability to retain customers or ability to negotiate favorable agreements with customers.

The loss of one or more of our larger customers could have a material adverse effect on our business, financial condition and results of operations.

In addition, if a significant customer experiences liquidity constraints or other financial difficulties, it may be unable to make required payments to us or may seek to renegotiate contracts, which could adversely affect our liquidity and profitability.

We may be adversely affected by the effects of inflation.

inflation rate began increasing significantly in 2021 and has remained at an elevated level.

inflation rate began increasing significantly in 2021 and has remained at an elevated level as of year-end 2023.

Inflation in wages, materials, parts, equipment and other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers for our products and services.

In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

In addition, the existence of inflation in the economy has resulted in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

Sustained levels of high inflation caused the U.S.

Federal Reserve and other central banks to increase interest rates several times in 2022, and the U.S.

Federal Reserve has indicated its intention to continue to raise benchmark interest rates in 2023 in an effort to curb inflationary pressure on the costs of goods and services across the United States, which could have the effects of raising

the cost of capital and depressing economic growth, either of which or the combination thereof could hurt the financial and operating results of our business.

To the extent elevated inflation remains, we may experience further cost increases for our operations, including labor costs and equipment.

Federal Reserve and other central banks to increase interest rates several times in 2022 and 2023 in an effort to curb inflationary pressure on the costs of goods and services across the United States, which could have the effects of raising the cost of capital and depressing economic growth, either of which or the combination thereof could hurt the financial and operating results of our business.

In early 2024, the U.S.

Federal Reserve indicated its intention to eventually lower benchmark interest rates.

However, to the extent elevated inflation remains, we may experience further cost increases for our operations, including labor costs and equipment.

We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to timely pass through the cost increases to our customers, would negatively impact our business, financial condition and results of operations.

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As a result, and given the volatility in the market, we may not be successful in maintaining our existing prices or, in the future, implementing price increases.

An increase in commodity prices and the ongoing recovery from the COVID-19 pandemic resulted in a significant increase in demand and prices for our services in the twelve months ended December 31, 2022 and in the transition period ended December 31, 2021.

However, we cannot predict the ultimate magnitude or duration of the volatility in oil and gas prices and the COVID-19 pandemic on the prices we charge.

We cannot predict the magnitude or duration of volatility in oil and gas prices and therefore on the prices we charge our customers.

Any inability to maintain our pricing or to increase our pricing from reduced levels could have a material adverse effect on our business, financial condition and results of operations.

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Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions.

Global pandemics have previously, may continue to, and may in the future adversely impact our business.

Global pandemics and the actions taken by third parties, including, but not limited to, governmental authorities, businesses, and consumers, in response to such pandemics, including the COVID-19 pandemic, have previously adversely impacted and may in the future adversely impact the global economy, resulting in

significant volatility in the oil and gas industry.

A continued, prolonged period or a renewed period of reduced demand for oil and other commodities and other adverse impacts from a pandemic may adversely affect our business, financial condition, cash flows, and results of operations.

Further, to the extent COVID-19 or any other pandemic adversely affects our business or the global economic conditions more generally, it may also have the effect of heightening many of the other risks described in this report.

Risks Relating to Our Industry

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We cannot predict the impact of the changing demand for oil and natural gas services, and any major changes may have a material adverse effect on our business, financial condition and results of operations.

Our business involves many hazards and operational risks that could adversely affect our business,

financial condition and results of operations.

Our business involves many hazards and operational risks that could adversely affect our business, financial condition and results of operations.

Conditions inherent in the oil and natural gas industry can cause personal injury or loss of life, disruption or suspension in operations, damage to geological formations, damage to facilities, substantial revenue loss, business interruption and damage to, or destruction of, property, equipment and the environment.

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The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators.

Our customers may elect not to purchase our services if they view our safety record as unacceptable or otherwise experience material defects in our products or performance problems, which could cause us to lose customers and substantial revenue, and any litigation or claims, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public and make it more difficult for us to compete effectively or obtain adequate insurance

in the future.

In addition, these risks may be greater for us upon the acquisition of another company that has not allocated significant resources and management focus to safety and has a poor safety record.

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In recent years, oilfield services companies have been the subject of a significant volume of wage and hour-related litigation, including claims brought under the Fair Labor Standards Act, in which employee pay practices have been challenged.

We have previously been named as defendants in these lawsuits, and we do not maintain insurance for alleged wage and hour-related litigation.

We have previously been named as defendants in these lawsuits, and we do

not maintain insurance for alleged wage and hour-related litigation.

The frequency and significance of wage or other employment-related claims may affect expenses, costs and relationships with employees and regulators.

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Weather has a significant impact on demand as consumption of energy is seasonal, and any variation from normal weather patterns, such as cooler or warmer summers and winters, can have a significant impact on demand.

cause supply disruptions and result in a loss of revenue and damage to our equipment and facilities, which may or may not be insured.

Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual capital spending budgets towards year end.

Adverse weather conditions, including rain, tropical storms, hurricanes, tornadoes and severe cold weather, have in the past and may in the future interrupt or curtail operations, our customers’ operations, cause supply disruptions and result in a loss of revenue and damage to our equipment and facilities, which may or may not be insured.

Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual

capital spending budgets towards year end.

Additionally, our operations are directly affected by weather conditions, which can severely disrupt the normal operation of our business and adversely impact our financial condition and results of operations.

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In addition, throughout the year heavy rains adversely affect activity levels, as dirt access roads can become impassible in wet conditions and well locations become inaccessible.

These locations and activities are susceptible to the physical effects of climate change, such as increased frequency or severity storm systems, hurricanes, droughts, floods, extreme winter weather, or geologic/geophysical conditions.

Risks Relating to Financial Considerations

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We have experienced periods of low demand for our services and have incurred operating losses.

As discussed above, lower commodity prices and the effects of the COVID-19 pandemic resulted in a global recession with numerous E&P and oilfield services companies filing bankruptcy and a significant decline in demand and prices for our services in the fiscal year ended December 31, 2021.

Although there have been improvements in profitability, we still had a net loss during the most recent period.

Although there have been improvements in profitability, which have led to net income in the fiscal year ended December 31, 2023, we are still in an accumulated deficit position.

We serve customers who are involved in drilling for and production of oil and natural gas.

Demand for services in the oil and natural gas industry is cyclical, experienced a significant downturn in 2020 due to COVID-19 and has experienced additional significant downturns in recent years, which are currently significantly affecting, and have in recent years significantly affected, the performance of our business.

Demand for services in the oil and natural gas industry is cyclical and has experienced significant downturns in recent years, which have significantly affected the performance of our business.

Additional adverse developments affecting this industry could have a material adverse effect on our business, financial condition and results of operations.

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Our equipment requires periodic capital investment in maintenance, upgrades and refurbishment to maintain its competitiveness.

The costs of components and labor have increased in the past and may increase in the future with increases in demand, which will require us to incur additional costs to upgrade any equipment we may acquire in the future.

The costs of components and labor have increased in the past and may increase in the

future with increases in demand, which will require us to incur additional costs to upgrade any equipment we may acquire in the future.

Our equipment typically does not generate revenue while it is undergoing maintenance, refurbishment or upgrades.

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Moreover, if challenging business conditions in the energy sector occur for a prolonged period, we may be unable to make capital investments.

Additionally, competition or advances in technology within our

industry may require us to update our products and services.

Additionally, competition or advances in technology within our industry may require us to update our products and services.

Such demands on our capital or reductions in demand and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, financial condition and results of operations.

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Our ability to pay the principal and interest on our long-term debt and to satisfy our other liabilities will depend on our future operating performance and ability to refinance our debt as it becomes due.

Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the continuation of the COVID-19 pandemic, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.

Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.

Our ability to refinance our debt will depend on the condition of the public and private debt markets and our financial condition at such time, among other things.

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In addition, incurring additional debt in excess of our existing outstanding indebtedness would result in increased interest expense and financial leverage, and issuing Common Stock may result in dilution to our current stockholders.

Our ABL Facility matures in September 2024 and we intend to work with our existing lenders or other sources of capital to seek to refinance the ABL Facility.

If we are unable to refinance the ABL Facility over the next twelve months and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2023.

Our ABL Facility matures in 2025 and we intend to work with our existing lenders or other sources of capital to seek to refinance the ABL Facility.

If we are unable to refinance the ABL Facility as planned over the next twelve months and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2024.

The delivery of an audit opinion with such a qualification would result in an event of default under our ABL Facility.

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Some of these alternatives may require the consent of current lenders, stockholders or noteholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all.

For example, during the year ended December 31, 2022, we entered into debt for equity exchange agreements (the “Exchange Agreements” and each, an “Exchange Agreement”) with certain holders (the “Noteholders”) of our Senior Notes.

Pursuant to the Exchange Agreements, the Noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our common stock (the "Exchanges" and each, an “Exchange”).

If we cannot service our debt or repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (1) reducing financing in the future for working capital, capital expenditures and other general corporate purposes or (2) dedicating an unsustainable level of

our cash flow from operations to the payment of principal and interest on our indebtedness.

For example, during the year ended December 31, 2022, we entered into debt for equity exchange agreements (the

“Exchange Agreements”) with certain holders (the “Noteholders”) of our Senior Notes.

The lenders or other investors who hold debt that we fail to service or on which we otherwise default could also accelerate amounts due, which could in such an instance potentially trigger a default or acceleration of other debt we may incur.

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The indenture governing the Senior Notes contains customary affirmative and negative covenants restricting, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or sell substantially all of the Company’s assets.

The indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.

acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.

Agreements governing our future indebtedness could also contain significant financial and operating restrictions.

A failure to comply with the obligations contained in any such agreement governing our indebtedness could result in an event of default under such agreement, which could permit acceleration of the related debt, enforcement against any liens securing the related debt and acceleration of debt under other

instruments that may contain cross acceleration or cross default provisions.

We may not have, or may not be able to obtain, sufficient funds to make any required accelerated payments.

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Although we monitor individual customer financial viability in granting such credit arrangements and maintain reserves we believe are adequate to cover exposure for doubtful accounts, in weak economic environments, customers’ delays and failures to pay often increase due to, among other reasons, a reduction in our customers’ cash flow from operations and their access to credit markets.

If our customers delay or fail to pay a significant amount of outstanding receivables, it could reduce our availability under our revolving credit facility or otherwise have a material adverse effect on our liquidity, financial condition, results of operations and cash flows.

If our customers delay or fail to pay a significant amount of outstanding receivables, it could reduce our availability under our ABL Facility or otherwise have a material adverse effect on our liquidity, financial condition, results of operations and cash flows.

Some of our customers have entered bankruptcy proceedings in the past, and certain of our customers’ businesses face financial challenges that put them at risk of future bankruptcies.

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We are also at risk that we may be required to refund amounts collected from a customer during the period immediately prior to that customer’s bankruptcy filing, and the amount we ultimately collect from the customer’s bankruptcy estate may be significantly less.

Customer bankruptcies may also reduce our availability under our revolving credit facility.

Customer bankruptcies may also reduce our availability under our ABL Facility.

Although we maintain reserves for potential customer credit losses, customer bankruptcies could result in unanticipated credit losses.

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We are dependent on a small number of suppliers for key goods and services that we use in our operations.

We do not have long-term contracts with third-party suppliers of many of the goods and services used in large volumes in our operations, including manufacturers of technical services equipment and fishing tools, chargers and other tools and equipment used in our operations.

We do not have long-term contracts with third-party suppliers of many of the goods and services used in large volumes in our operations, including manufacturers of technical services equipment and fishing tools, wireline perforating guns and charges and other tools and equipment used in our operations.

If demand for goods and services exceeds supply, such as from disruptions to the supply chain or supplier bankruptcies, the availability of certain goods and services used in our industry decreases and the price of such goods and services increases.

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Should any of our current suppliers be unable to provide the necessary materials or otherwise fail to deliver the materials in a timely manner and in the quantities required, any resulting delays in our ability to provide our services could have a material adverse effect on our ability to compete, business, financial condition and results of operations.

While we believe that we will be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers, we may not always be able to make alternative arrangements.

While we believe that we will be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials

and/or products by one of our suppliers, we may not always be able to make alternative arrangements.

In addition, certain materials for which we do not currently have long-term supply agreements could experience shortages and significant price increases in the future.

Increasing costs of such materials may negatively impact demand for our services or the profitability of our business operations.

In the past, our industry faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which

adversely impacted the operating results of several competitors.

In the past, our industry faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several competitors.

We may not be able to mitigate any future shortages of materials, including proppant, and our results of operations, prospects and financial condition could be adversely affected.

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New technology could also make it easier for our oil and natural gas E&P customers to vertically integrate their operations, thereby reducing or eliminating their need for our services.

Thus, limits on our ability to effectively use and implement new and emerging technologies may have a material adverse effect on our business, financial condition and results of operations.

Thus, limits on our ability to effectively use and implement new and emerging technologies may have a material adverse effect on our business, financial condition or results of operations.

We currently rely on a limited number of manufacturers for the production of the proprietary products used in the provision of our products and services.

Termination of the manufacturing relationship with any of these manufacturers could affect our ability to provide such products and services to our customers.

Although we believe other alternate sources of supply for our proprietary products exist, we would need to establish

relationships with new manufacturers, which could potentially involve significant expense, delay, and potential changes to certain product components.

Any protracted curtailment or interruptions of the supply of any of our

key products, whether or not as a result of termination of our manufacturing relationships or patent infringement claims, could have a material adverse effect on our financial condition, business, and results of operations.

Although we believe other alternate sources of supply for our proprietary products exist, we would need to establish relationships with new manufacturers, which could potentially involve significant expense, delay or potential changes to certain product components.

Any interruptions to the supply of any of our key products could have a material adverse effect on our financial condition, business, or results of operations.

Our success may be affected by our ability to use and protect our proprietary technology as well as our ability to enter into license agreements.

Our success may be affected by our development and implementation of new product designs and improvements and by our ability to protect, obtain and maintain intellectual property assets related to these developments.

We rely on a combination of patents and trade secret laws to establish and protect our proprietary technology.

We rely on a combination of patents and trade secrets to protect our proprietary technology.

We have received patents and have filed patent applications with respect to certain aspects of our technology in the U.S.

and international jurisdictions, as well as a combination of trade secrets, employee and third-party non-disclosure agreements and other protective measures to protect intellectual property rights pertaining to our products and technologies.

and international jurisdictions.

In addition to seeking patent protection, we also protect our proprietary technology with other protective measures, including through a combination of trade secrets and employee and third-party non-disclosure agreements.

We cannot assure you that our competitors or other third parties will not infringe upon, misappropriate, violate or challenge our intellectual property rights in the future.

Further, we cannot assure you that our intellectual property rights will deter or prevent competitors from creating similar purpose products for our customers.

Any failure to adequately protect or enforce our intellectual property rights could have a material adverse effect to our business, financial condition and results of operations.

Moreover, our rights in our confidential information, trade secrets and confidential know-how cannot prevent third parties from independently developing similar technologies or duplicating such technologies.

Further, we cannot assure you that our intellectual property rights will deter or prevent competitors from creating similar products or services.

Any failure to adequately protect or enforce our intellectual property rights could have a material adverse effect to our business, financial condition or results of operations.

Moreover, our rights in our confidential information, trade secrets and confidential know-how cannot prevent third parties from independently developing similar technologies.

Publicly available information (e.g., information in issued patents, published patent applications and scientific literature) may be used by third parties to independently develop similar technology, and we cannot provide assurance that this independently developed technology will not be equivalent or superior to our proprietary technology.

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The process of maintaining, monitoring and enforcing patent protection can be long and expensive.

There also can be no assurance that patents will be issued from our currently pending or future applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us.

Further, with respect to exclusive third-party intellectual property arrangements, existing arrangements could be terminated and future arrangements may not be available on commercially acceptable terms, if at all, which could result in a material adverse effect on our financial condition, business, and results of operations.

There is also no assurance that patents will be issued from our currently pending or future applications or that, if patents are issued, they will be of sufficient scope to provide meaningful protection or any commercial advantage to us.

We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights is uncertain.

We may become involved in claims, litigation or dispute resolution proceedings from time to time to maintain, protect and enforce our intellectual property rights against potential third-party infringers, which could be costly and time-consuming.

Moreover, in these dispute resolution proceedings, a defendant or opposing third party may assert claims, defenses, counterclaims and countersuits that attack the validity and enforceability of our intellectual property rights, and/or allege that that our business, services, or products infringe, impair, misappropriate, dilute or otherwise violate their intellectual property rights.

We may become involved in claims, litigation or dispute resolution proceedings from time to time to maintain, protect or enforce our intellectual property rights against potential third-party infringers, which could be costly and time-consuming.

Moreover, in these dispute resolution proceedings, a defendant or opposing third party may assert claims, defenses, counterclaims and countersuits that attack the validity or enforceability of our intellectual property rights, and/or allege that that our business, services, or products infringe, impair, misappropriate, dilute or otherwise violate their intellectual property rights.

We may not prevail in any such dispute resolution proceedings, and our intellectual property rights may be found invalid or unenforceable, or our products and services may be found to infringe, impair, misappropriate, dilute or otherwise violate the intellectual property rights of others.

The results or costs of any such dispute resolution proceedings may have an adverse effect on our business, financial condition and results of operations.

Any dispute resolution proceeding concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, financial condition and results of operations, regardless of its outcome.

The results or costs of any such dispute resolution proceedings may have an adverse effect on our business, financial condition or results of operations.

Any dispute resolution proceeding concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, financial condition or results of operations, regardless of its outcome.

Additionally, if we discover or a legal authority finds that our technologies infringe intellectual property rights of third parties, we may need to obtain licenses from these parties or substantially re-engineer our technologies in order to avoid infringement.

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If our inability to obtain required licenses for certain technologies or products prevents us from using the infringed technologies or products, our business, financial condition and results of operations could be materially adversely impacted.

Our operations rely on an extensive network of information technology resources and a failure to maintain, upgrade and protect such systems could adversely impact our business, financial condition and results of operations.

Our operations are subject to cyber security risks that could have a material adverse effect on our business, financial condition and results of operations.

Information technology plays a crucial role in all of our operations.

Our operations rely on an extensive network of IT resources and a failure to maintain, upgrade and protect such systems could adversely impact our business, financial condition and results of operations.

Our operations are subject to cybersecurity risks that could have a material adverse effect on our business, financial condition and results of operations.

IT plays a crucial role in all of our operations.

To remain competitive, our hardware, software and related services must properly and efficiently interact with our suppliers’ and customers' products, services and technology, record and process our financial transactions accurately, and obtain accurate and timely data and information to enable our analysis of trends and plans and the execution of our strategies.

At the same time, cyber incidents have increased in frequency and severity.

A cyber incident could be caused by malicious insiders or third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other cyber security defenses, including hacking, fraud, trickery, or other forms of deception.

government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats.

Our information technology systems, and networks, and those of our vendors, suppliers and other business partners, are subject to possible breaches and other threats that could cause us harm.

The implementation of social distancing measures and other limitations on our employees, service providers and other third parties in response to the COVID-19 pandemic have necessitated in certain cases to switching to remote work arrangements on less secure systems and environments.

The increase in companies and individuals working remotely has increased the risk of cyberattacks and potential cyber security incidents, both deliberate attacks and unintentional events.

Despite our security measures, our information technology systems may become the target of cyberattacks or security breaches (including employee error, malfeasance or other breaches), which could result in the theft or loss of sensitive data, misappropriation of assets, disruption of transactions and reporting functions, our ability to protect confidential information and our financial reporting.

Moreover, we may not be able to anticipate, detect or prevent cyberattacks or security breaches, particularly because the methodologies used by attackers change frequently or may not be recognized until such attack is underway, and because attackers are increasingly using technologies specifically designed to circumvent cyber security measures and avoid detection.

A cyber incident could be caused by malicious insiders or third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other cybersecurity defenses, including hacking, fraud, trickery, or other forms of deception.

Emerging artificial intelligence technologies may improve or expand the capabilities of malicious third parties in a way we cannot predict at this time, including being used to develop new hacking tools, exploit vulnerabilities, obscure malicious activities and increase the difficulty detecting threats.

government has issued public warnings that indicate that energy assets might be specific targets of cybersecurity threats.

Our IT systems, and networks, and those of our vendors, suppliers and other business partners, are subject to possible breaches and other threats that could cause us harm.

The increase in companies and individuals working remotely has increased the risk of cyberattacks and potential cybersecurity incidents, both deliberate attacks and unintentional events.

Despite our security measures, our IT systems may become the target of cyberattacks or security breaches (including employee error, malfeasance or other breaches), which could result in the theft or loss of sensitive data, misappropriation of assets, disruption of transactions and reporting functions, our ability to protect confidential information and our financial reporting.

In addition, as technologies evolve, and cyberattacks become increasingly sophisticated, we may incur significant costs to modify, upgrade or enhance our security measures to protect against such cyberattacks and we may face difficulties in fully anticipating or implementing adequate security measures or mitigating potential harm.

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however, there can be no assurance that we will not suffer such losses in the future.

If our information technology systems for protecting against cyber security risks are inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, or customer data;

If our IT systems for protecting against cybersecurity risks are inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, or customer data;

interruption of business operations;

reputational harm;

or additional costs to prevent, respond to, or mitigate cyber security attacks.

We are subject to various laws related to cyber security requirements, which are continuing to develop and evolve at a rapid pace.

or additional costs to prevent, respond to, or mitigate cybersecurity attacks.

We are subject to various laws related to cybersecurity requirements, which are continuing to develop and evolve at a rapid pace.

We may not be able to monitor and react to all legal developments in a timely manner.

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Likewise, our business involves the collection, use, and processing of personal data of our employees, contractors, suppliers, and service providers, and such collection, use and processing is subject to a changing landscape of data privacy laws, rules and regulations.

These data privacy laws are not uniform and as the privacy legal landscape

continues to develop, we will likely be required to expend significant resources to continue to modify or enhance our compliance measures to comply with such laws, rules and regulations.

Any failure or perceived failure by us or our third-party service providers to comply with such data privacy laws, rules and regulations, or any security compromise that results in the unauthorized access, improper disclosure, or misappropriation of personal data or other customer data, could result in significant liabilities, negative publicity and reputational harm.

These data privacy laws are not uniform and as the privacy legal landscape continues to develop, we will likely be required to expend significant resources to continue to modify or

enhance our compliance measures to comply with such laws, rules and regulations.

Our systems and insurance coverage for cyber incidents, including deliberate attacks, may not be sufficient to cover all of the losses we may experience as a result of such cyberattacks.

These risks could have a material adverse effect on our business, financial condition, reputation, and results of operations.

These risks could have a material adverse effect on our business, financial condition, reputation or results of operations.

See “Item 1C.

Cybersecurity” for additional information on our cybersecurity risk management, strategy and governance.

Risks Relating to Government Regulation and Legal Matters

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The practice is controversial in certain parts of the country and there remains increased scrutiny and government regulation of the hydraulic fracturing process.

Additionally, with concerns about seismic activity resulting from injection of produced wastewaters into underground disposal wells, certain regulators could impose additional requirements related to seismic safety.

Additionally, with concerns about seismic activity resulting from injection of produced wastewaters into underground disposal wells, certain regulators have and could continue to impose additional requirements related to seismic safety.

Our customers’ inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could also adversely impact their operations.

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“Business – Government Regulation and Environmental, Health and Safety Matters” for more discussion on these hydraulic fracturing, seismicity and water availability matters.

One or more of these developments could decrease completion of our customers’ oil and gas wells,

increase our and our customers’ compliance costs and reduce demand for our products and services, which could have a material adverse effect on our business, results of operations, and financial condition.

One or more of these developments could decrease completion of our customers’ oil and gas wells, increase our and our customers’ compliance costs and reduce demand for our products and

services, which could have a material adverse effect on our business, results of operations, and financial condition.

We and our customers are subject to environmental and occupational health and safety laws and regulations that could increase our or our customers’ costs of doing business and adversely impact our business, financial condition and results of operations.

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The occurrence of one or more of these developments could have a material adverse effect on our business, financial condition and results of operations.

Increasing attention to environmental, social and governance ("ESG") matters may impact our business.

Increasing attention to ESG matters may impact our business.

Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to fossil-fuel energy commodities may result in increased costs, reduced demand for our customers’ hydrocarbon products and our products and services, reduced profits, increased governmental investigations and private litigation against us, and negative impacts on our stock price and access to capital markets.

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To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors.

See Part I, Item 1.

“Business – Government Regulation and Environmental, Health and Safety Matters” for more discussion on climate change and ESG matters that may pose a risk to our business, such as regulatory actions taken by the Biden Administration and the proposed SEC rule relating to climate disclosures.

We may be required to assume responsibility for environmental and other liabilities of companies we have acquired or will acquire.

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Such permits are typically required by state agencies but can also be required by federal and local governmental agencies.

Moreover, some of our customers’ drilling and completion activities may take place on federal land or Tribal lands, requiring leases and other approvals from the federal government or Tribes to conduct such drilling and completion activities.

The requirements for such permits

vary depending on the type of operations, including the location where our customers’ drilling and completion activities will be conducted.

Moreover, some of our customers’ drilling and completion activities

may take place on federal land or Tribal lands, requiring leases and other approvals from the federal government or Tribes to conduct such drilling and completion activities.

The requirements for such permits vary depending on the type of operations, including the location where our customers’ drilling and completion activities will be conducted.

As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued and the conditions that may be imposed in connection with the granting of the permit.

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Moreover, failure to comply with applicable requirements or the occurrence of an explosive incident may also result in the loss of our ATF or analogous state license to store and handle explosives, which would have a material adverse effect on our business, results of operations and financial conditions.

The ESA and comparable laws intended to protect certain species of wildlife govern our and our oil and natural gas exploration and production customers’ operations, which constraints could have an

adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new oil and natural gas wells.

The ESA and comparable laws intended to protect certain species of wildlife govern our and our oil and natural gas E&P customers’ operations, which constraints could have an adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new oil and natural gas wells.

The federal ESA and comparable state laws were established to protect endangered and threatened species.

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Customer oil and natural gas operations may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit their 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.

Moreover, the FWS may make determinations on the listing of numerous species as endangered or threatened under the ESA, which listings could cause our customers to incur additional costs, become subject to operating restrictions or bans, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.

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

Moreover, the FWS may make determinations on the listing of numerous species as endangered or threatened under the ESA and designate areas as critical habitat, which listings and designations could cause our customers to incur additional costs, become subject to operating restrictions or bans, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.

We may be subject to claims for personal injury and property damage or other litigation, which could materially adversely affect our business, financial condition and results of operations.

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We may sell shares of Common Stock in the future.

We may also issue additional shares of common stock, including as employee compensation or as consideration in one or more acquisitions or other business

combination transactions.

We may also issue additional shares of Common Stock, including as employee compensation or as consideration in one or more acquisitions or other business combination transactions.

As of December 31, 2023, we had outstanding approximately 16.0 million shares of our Common Stock.

We also have registered 1,277,051 shares of common stock reserved for issuance under our Long-Term Incentive Plan ("LTIP"), and 340,000 registered shares of common stock are reserved for issuance under our Employee Stock Purchase Plan.

We also have registered 2,477,051 shares of Common Stock reserved for issuance under our Long-Term Incentive Plan ("LTIP").

Of those shares initially registered and reserved for issuance, as of December 31, 2023, approximately 1,296,553 restricted shares of Common Stock were granted in connection with equity awards to management, directors and employees and approximately 1,180,498 shares remain available for future issuance.

An amendment to the LTIP was approved by stockholders on February 12, 2021 to increase the total number of shares reserved for issuance by 632,051 shares.

During the year ended December 31, 2022, we entered into debt for equity exchange agreements with certain holders of our Senior Notes.

Pursuant to the Exchange Agreements, the noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our common stock.

An amendment to the LTIP was approved by stockholders on May 10, 2023 to, among other things, increase the total number of shares of Common Stock for issuance by 1,200,000 shares, resulting in an increase of the total number of shares of our Common Stock reserved for issuance to 1,256,289, and extend the expiration date to March 8, 2033.

During the year ended December 31, 2022, we entered into the Exchange Agreements with the Noteholders of our Senior Notes.

Pursuant to the Exchange Agreements, the noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our Common Stock through the Exchanges.

Subject to the satisfaction of vesting conditions and the requirements of Rule 144, the registered restricted shares of our Common Stock will be available for resale immediately in the public market without restriction.

With respect to shares of restricted stock granted to certain members of our management, we have filed a resale prospectus in order to allow such members of our management to freely resell their restricted stock once it has vested.

In addition, (i) certain former members of our management are entitled to registration rights with respect to their shares of restricted stock, and (ii) certain former QES stockholders are entitled to registration rights with respect to the shares of common stock they received in the Merger.

We recently entered into a Registration Rights and Lock-Up Agreement with Greene’s Holding Corporation in connection with the Greene’s Acquisition.

On March 8, 2023, we entered into a Registration Rights and Lock-Up Agreement with Greene’s Holding Corporation in connection with the Greene’s Acquisition.

Following their receipt of Common Stock as consideration in the Greene’s Acquisition, subject to release from the associated lock-up provisions and the filing of a resale registration statement or satisfaction of the requirements of Rule 144, the seller may seek to sell the Common Stock delivered to them.

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as sales agent (the “Agent”).

Pursuant to the terms of the Equity Distribution Agreement, we may sell from time to time through the Agent (the “Offering”) the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $50.0.

During the three and twelve months ended December 31, 2022, the Company sold 976,808 and 2,803,007 shares of Common Stock, respectively, in exchange for gross proceeds of approximately $15.0 and $25.1, respectively, and paid legal and administrative fees of $0.1 and $0.3, respectively.

Any common stock offered and sold in the Offering will be issued pursuant to our shelf registration statement on Form S-3 (Registration No.

333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the Offering that form a part of the Registration Statement.

Sales of common stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the terms of the Equity Distribution Agreement, we may sell from time to time through the Agent (the “ATM Offering”) the Company’s Common Stock, par value $0.01 per share, having an aggregate offering price of up to $50.0.

On November 16, 2022, the Company entered into Amendment No.

1 to the Equity Distribution Agreement (the “EDA Amendment”).

Among other things, the EDA Amendment allows for debt for equity exchanges in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

During the three and twelve months ended December 31, 2023, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.1 and $0.5, respectively.

Any Common Stock offered and sold in the ATM Offering will be issued pursuant to our shelf registration statement on Form S-3 (Registration No.

333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement.

Sales of Common Stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act.

We cannot predict the size of future issuances of our Common Stock or securities convertible into Common Stock or the effect, if any, that future issuances and sales of shares of our Common Stock will have on the market price of our Common Stock.

Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition or shares held by stockholders with registration rights), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.

Sales of or other transactions relating to shares of our common stock by our significant stockholders, directors, officers or employees could cause a perception in the marketplace that adverse events or trends

have occurred or may be occurring at our company or that it is otherwise an advantageous time to sell shares of our common stock.

Sales of substantial amounts of our Common Stock (including shares

issued in connection with an acquisition or shares held by stockholders with registration rights), or the perception that such sales could occur, may adversely affect prevailing market prices of our Common Stock.

Sales of or other transactions relating to shares of our Common Stock by our significant stockholders, directors, officers or employees could cause a perception in the marketplace that adverse events or trends have occurred or may be occurring at our company or that it is otherwise an advantageous time to sell shares of our Common Stock.

We cannot assure you that we will pay dividends on our Common Stock, and our indebtedness could limit our ability to pay dividends on our Common Stock.

We do not currently intend to pay dividends.

Our dividend policy will be established by our Board based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant.

Our dividend policy will be established by our board of directors (the “Board” or “Board of Directors”) based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant.

In addition, the terms of the agreements governing our debt limit, and the terms of the agreements governing any future debt may limit or prohibit, the payments of dividends.

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These provisions are not intended to make us immune from takeovers.

However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or effectively prevent an acquisition that our Board determines is not in the best interests of our company and our stockholders.

company and our stockholders.

These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

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Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.

Utilizing the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.

We qualify as an “emerging growth company” and are therefore eligible to utilize certain reduced reporting and other requirements that are otherwise applicable generally to public companies.

For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things:

(i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of Sarbanes-Oxley;

(ii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

(iii) provide certain disclosures regarding executive compensation required of larger public companies;

or (iv) hold nonbinding advisory votes on executive compensation.

We will remain in an emerging growth company for up to five years, although we would cease to be an emerging growth company if we have more than $1,235 in annual revenue, have more than $700 in market value of our common stock held by non-affiliates or issue more than $1,000 of non-convertible debt over a three-year period.

We intend to utilize certain of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, until we are no longer an emerging growth company.

If we were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable.

We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our common stock price may be more volatile.

We will lose emerging growth company status no later than December 31, 2023, and the loss of such status may require us to incur significant additional costs as we transition to complying with the various reporting requirements applicable to other public companies that are not emerging growth companies.

If securities or industry analysts do not publish research reports or publish unfavorable research about our business, the price and trading volume of our Common Stock could decline.

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If one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline.

If one or more of these analysts ceases to cover us

or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and its trading volume to decline.

If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our Common Stock and its trading volume to decline.

General Risks

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As a result, we are not insured against any losses resulting from the death of our key employees.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors