What changed in this filing

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Item 1. Business

2022-02-22 compared with 2021-02-24 · 210 added, 54 removed, 104 unchanged (72% of the section changed)

We are an independent provider of hydraulic fracturing and wireline services and related goods to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

We provide our services primarily in the Permian Basin, the Eagle Ford Shale, the Denver-Julesburg Basin (the “DJ Basin”), the Williston Basin, the San Juan Basin and the Powder River Basin.

Following the completion of the OneStim Acquisition (as defined below) we now also provide services in the Haynesville Shale, the South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher (collectively the “SCOOP/STACK”), the Marcellus Shale, Utica Shale, and the Western Canadian Sedimentary Basin.

The process of hydraulic fracturing involves pumping a pressurized stream of fracturing fluid—typically a mixture of water, chemicals and proppant—into a well casing or tubing in order to cause the underground formation to fracture or crack.

We are a leading integrated oilfield services and technology company focused on providing innovative hydraulic services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, data analytics, related goods (including our sand mine operations), and technologies that will facilitate lower emission completions, thereby helping our customers reduce their emissions profile.

Our primary locations of operation include the Permian Basin, the Eagle Ford Shale, the Denver-Julesburg Basin (the “DJ Basin”), the Williston Basin, the San Juan Basin, the Powder River Basin, the Haynesville Shale, the South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher (collectively, the “SCOOP/STACK”), the Marcellus Shale, the Utica Shale, and the Western Canadian Sedimentary Basin, which are among the most active basins in North America.

The breadth of our operational footprint provides us an opportunity to leverage our fixed costs and to efficiently reposition our equipment in response to customer requirements.

The map below represents our current areas of operation.

The process of hydraulic fracturing involves pumping a pressurized stream of fracturing fluid (typically a mixture of water, chemicals and proppant) into a well casing or tubing to cause the underground formation to fracture or crack.

These fractures release trapped hydrocarbon particles and provide a conductive channel for the oil or natural gas to flow freely to the wellbore for collection.

The propping agent, or proppant, typically sand, becomes lodged in the cracks created by the hydraulic fracturing process, “propping” them open to facilitate the flow of hydrocarbons from the reservoir to the well.

The fracturing fluid is engineered to lose viscosity, or “break,” and is subsequently flowed back from the formation, leaving the proppant suspended in the formation fractures.

The fracturing

fluid is engineered to lose viscosity, or “break,” and is subsequently flowed back from the formation, leaving the proppant suspended in the formation fractures.

Once our customer has flushed the fracturing fluids from the well using a controlled flow-back process, the customer manages fluid and water recycling or disposal.

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We refer to the group of units and other equipment, such as blenders, data vans, sand storage, tractors, manifolds and high pressure fracturing iron, which are necessary to perform a typical hydraulic fracturing job, as a “fleet,” and the personnel assigned to each fleet as a “crew.” The size of each fleet and crew can vary depending on the requirements of each job design.

We have wireline operations after December 31, 2020 as a result of the OneStim Acquisition (as defined below).

Our wireline units consist of a truck equipped with a spool of wireline that is lowered into wells to convey specialized tools or equipment necessary to connect the wellbore with the target formation.

We also have wireline operations as a result of the acquisition of Schlumberger’s OneStim business in December 2020, whereby we obtained certain assets and liabilities of the OneStim business including OneStim’s hydraulic fracturing pressure pumping services business in onshore United States and Canada (the “OneStim Acquisition”).

Our wireline units consist of a truck equipped with a spool of wireline that is lowered into wells to convey specialized tools or equipment, such as perforating guns and charges, that are necessary to connect the wellbore with the target formation.

This operation is performed between each hydraulic fracturing stage.

We offer our wireline service on a stand alone basis or alongside our hydraulic fracturing services.

When offered along side our hydraulic fracturing services, we are able to maximize efficiency for our customers through optimized coordination of the wireline and hydraulic fracturing services.

Our operations are organized into a single business segment, which consists of hydraulic fracturing services, including wireline, and goods, including our Permian sand mines, and we have one reportable geographical segment, North America.

We have grown from one active hydraulic fracturing fleet in December 2011 to approximately 30 fleets in the first quarter of 2021, including the addition of active fleets as a result of the OneStim Acquisition (as defined below).

Our founders and existing management were pioneers in the development of data-driven hydraulic fracturing technologies for application in shale plays.

Our wireline service is primarily offered alongside our hydraulic fracturing services, which allows us to maximize efficiency for our customers through optimized coordination of the wireline and hydraulic fracturing services.

In addition, we also offer our wireline service on a stand-alone basis.

As a result of the PropX Acquisition, which was completed in October 2021 (described in this Annual Report under “—Recent Developments—PropX Acquisition”), we are now a leading provider of last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America.

PropX offers innovative environmentally friendly technology with optimized dry and wet sand containers and wellsite proppant handling equipment that drive logistics efficiency and reduce noise and emissions.

We believe that PropX wet sand handling technology is a key enabler of the next step of cost and emissions reductions in the proppant industry.

PropX also offers customers the latest real-time logistics software, PropConnect™, for sale or as hosted software as a service.

Our operations are organized into a single business segment, which consists of hydraulic fracturing services, including wireline, proppant delivery and goods, including our Permian Basin sand mines, and we have one reportable geographical segment, North America.

We have grown from one active hydraulic fracturing fleet as of December 2011 to over 30 active fleets as of December 31, 2021.

We are focused on providing “next-generation” frac fleets and technologies to assist our customers with completing their wells in an ESG-friendly manner.

Our founders and management are pioneers in the development of data-driven hydraulic fracturing technologies for application in shale plays.

Prior to founding the Company, the majority of our management team founded and built Pinnacle Technologies, Inc.

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Taken together, these technologies have enabled us to be a leader in hydraulic fracture design innovation and application.

We believe the following characteristics distinguish us from our competitors and are the foundations of our business:

forming ongoing partnerships of trust and innovation with our customers;

developing and utilizing technology to maximize well performance;

and promoting a people-centered culture focused on our employees, customers and suppliers.

We have developed strong relationships with our customers by investing significant time in fracture design collaboration, which substantially

enhances their production economics.

Our technological innovations have become even more critical as E&P companies have increased the completion complexity and fracture intensity of horizontal wells.

We are proactive in developing innovative solutions to industry challenges, including developing:

Our management team has an average of over 20 years of oilfield services experience, and the majority of our management team worked together before founding our company.

We believe technical innovation and strong relationships with our customer and supplier bases distinguish us from our competitors and are the foundations of our business.

We expect that E&P companies will continue to focus on technological innovation as completion complexity and fracture intensity of horizontal wells increases, particularly as customers are increasingly focused on reducing emissions from their completions operations.

We remain proactive in developing innovative solutions to industry challenges, including developing:

(i) our databases of U.S.

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(ii) our Liberty Quiet Fleet® design which significantly reduces noise levels compared to conventional hydraulic fracturing fleets;

(iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate;

and (iv) our dual fuel dynamic gas blending fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs.

We foster a people-centered culture built around honoring our commitments to customers, partnering with our suppliers and hiring, training and retaining people that we believe to be the best talent in our field, enabling us to be one of the safest and most efficient hydraulic fracturing companies in North America.

(iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate and (iv) our dual fuel dynamic gas blending fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs.

In addition, our integrated supply chain includes proppant, chemicals, equipment, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers.

In order to achieve our technological objectives, we carefully manage our liquidity and debt position to promote operational flexibility and invest in the business throughout the full commodity cycle.

Recent Developments

On December 31, 2020, the Company acquired certain assets and liabilities of Schlumberger Limited’s (“Schlumberger”) OneStim® business, which provides hydraulic fracturing pressure pumping services in onshore United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business (such entire business of Schlumberger, “OneStim,” and the portion of OneStim acquired pursuant by the Company, the “Transferred Business”) in exchange for consideration resulting in a total of 66,326,134 shares of Class A common stock, par value $0.01 per share, of the Company (the “Class A Common Stock”) being issued in connection with the transaction (such transaction, the “OneStim Acquisition”;

see Note 3—The OneStim Acquisition to the consolidated and combined financial statements included in “Item 8.

PropX Acquisition

On October 26, 2021, the Company acquired Proppant Express Investments, LLC in exchange for $11.9 million in cash and 3,405,526 shares of Class A Common Stock and 2,441,010 shares of Class B common stock, par value $0.01 per share (“Class B Common Stock” and, together with Class A Common Stock, the “Common Stock”), and 2,441,010 units of Liberty LLC (“Liberty LLC Units”), for total consideration of $103.0 million, based on the Class A Common Stock closing price of $15.58 on October 26, 2021, subject to customary post-closing adjustments (the “PropX Acquisition”).

The Liberty LLC Units are redeemable for an equivalent number of shares of Class A Common Stock at any time, at the election of the shareholder.

See Note 3 —Acquisitions to the consolidated financial statements included in “Item 8.

Financial Statements and Supplementary Data.”

Effective December 31, 2020, Schlumberger owned 37% of the issued and outstanding shares of our combined Class A Common Stock and our Class B common stock, par value $0.01 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”).

The OneStim Acquisition substantially increased the Company’s geographical reach and expanded operations, allowing the Company to serve a broader range of customers and utilize the increase in scale, vertical integration and technological know-how to better serve new and existing customers.

The Transferred Business includes over 500 fully operational hydraulic fracturing pumps, district facilities, pumpdown perforating wireline units, two state-of-the-art sand mines in the Permian Basin and a highly experienced team of employees.

Additionally, the Company added over 400 owned and licensed patents, significant internally developed software intellectual property and a strategic alliance agreement, which increases access to technology portfolios and advances the technological collaborations we are able to offer our customers.

The combined company offers best-in-class completion services for the sustainable development of unconventional resource plays in the United States and Canada onshore markets.

Joinder to Liberty LLC Agreement

In connection with the PropX Acquisition, each of the sellers and certain of their investors that received Liberty LLC units, entered into a joinder to the Second Amended and Restated Limited Liability Company Agreement of Liberty LLC (the “Liberty LLC Agreement”).

Under the Liberty LLC Agreement, holders, subject to certain limitations, have the right, pursuant to a redemption right, to cause Liberty LLC to acquire all or a portion of their Liberty LLC Units for, at Liberty LLC’s election, (i) shares of our Class A Common Stock at a redemption ratio of one share of Class A Common Stock for each Liberty LLC Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification or (ii) an equivalent amount of cash.

Alternatively, upon the exercise of the redemption right, we (instead of Liberty LLC) have a call right to acquire each tendered Liberty LLC Unit directly from the holder for, at its election, (x) one share of Class A Common Stock or (y) an equivalent amount of cash.

In addition, upon a change of control, we have the right to require each holder of Liberty LLC Units (other than us) to exercise its redemption right with respect to some or all of such unitholder’s Liberty LLC Units.

As the holders redeem their Liberty LLC Units, our membership interest in Liberty LLC will be correspondingly increased, the number of shares of Class A Common Stock outstanding will be increased, and the number of shares of Class B Common Stock outstanding will be reduced.

On October 22, 2021, we entered into an amendment with respect to our ABL Facility.

Under the terms of the amendment, the maximum borrowing amount was increased to $350.0 million, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory (with the ability to request an increase in the size of the ABL Facility by $75 million).

Additionally, limits under certain covenants related to allowable indebtedness and other activities were expanded.

The ABL Facility maturity was extended to the earlier of (i) October 22, 2026 and (ii) to the extent the debt under the Term Loan Facility remains outstanding 90 days prior to the final maturity of the Term Loan Facility.

All other financial provisions under the original agreement are still applicable to the ABL Facility aside from the aforementioned changes to the borrowing base.

Term Loan Facility

On October 22, 2021, we entered into a Fifth Amendment to Credit Agreement, Second Amendment to Guaranty and Security Agreement and Termination of Right of First Offer Letter (the “Term Loan Credit Agreement Amendment”).

The Term Loan Credit Agreement Amendment further amends the credit agreement and guaranty and security agreement and terminates the right of first offer letter originally entered into by the parties on September 19, 2017 (the “Right of First Offer Letter”), which governs our Term Loan Facility.

Along with other revisions, the Term Loan Credit Agreement Amendment (i) increased certain indebtedness baskets;

(ii) provided additional flexibility for a potential future internal structuring;

(iii) extended the maturity date through September 19, 2024;

and (iv) terminated a right of first offer in favor of the Term Loan Facility lenders.

While we recognize the various environmental and social impacts of hydrocarbon energy, we believe that access to life-enhancing modern energy presents the most pressing global energy challenge.

We passionately work to better the process of bringing hydrocarbons to the surface in a clean, safe and efficient fashion and view ESG principles as foundational to our business.

We focus on developing and adding technologies to our operations that assist our customers in implementing their ESG goals.

The list below sets forth specific examples of our efforts towards ESG principles:

• In 2013, we introduced Tier 2 dual-fuel technology to our fleets which allows our frac pumps to use natural gas in place of some diesel fuel to lower particulate emissions.

• In 2014, we began the use of containerized sand delivery at frac locations, which reduces dust, noise and truck traffic.

• In 2016, we introduced Quiet Fleet® technology, which significantly reduces noise levels associated with frac operations.

• In 2018, we began a partnership with an equipment supplier to introduce Tier 4 dynamic gas blending, or DGB, engines to our frac fleet that can substitute up to 80% of the diesel typically used by a frac pump with natural gas and significantly lower emission levels in frac operations.

Tier 4 DGB engines were added to our fleet in 2020.

• In 2021, we announced the successful test of digiFrac™, our innovative, purpose-built electric frac pump that has approximately a 25% lower CO2e emission profile than the Tier IV DGB.

We have entered into two multi-year arrangements with customers for digiFrac fleets and expect to deliver the first fleet into commercial service in 2022.

• In October 2021, we closed the acquisition of PropX.

PropX offers innovative, environmentally friendly technology with optimized dry and wet sand containers and wellsite proppant handling equipment that drive logistics efficiency and reduce noise and emissions.

We are continuously committed to engagement in our communities.

We provide K-12 scholarships to low-income children through ACE (Alliance for Choice in Education) and we have launched a Liberty Scholars program at Montana Technological University to enable lower income students to obtain a college engineering education.

In 2021, over 100 students received Liberty scholarships.

We have numerous other efforts targeting schools, veterans, poverty abatement, low-income housing, criminal justice reform and job opportunities for those who had a disadvantaged start in life.

In 2021, we launched Love, Liberty, our matching program that is aimed to encourage our employees to get involved in their communities.

Cyclical Nature of Industry

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Intellectual Property

Over the last several years and in connection with the OneStim Acquisition, we have significantly invested in our research and technology capabilities.

Over the last several years and in connection with the acquisitions of OneStim and PropX, we have significantly invested in our research and technology capabilities.

Our efforts to date have been focused on developing innovative, fit-for-purpose solutions designed to enhance our core service offerings, increase completion efficiencies, provide cost savings to our operations and add value for our customers.

A cornerstone of our technological advantage is a series of proprietary databases of U.S.

unconventional wells that include production data, completion designs and reservoir characteristics.

We utilize these databases to perform multi-variable statistical analysis that generates differential insight into fracture design optimization to enhance our customers’ production economics.

Our emphasis on data analytics is also deployed during job execution through the use of real-time feedback on variables that maximizes customer returns by improving cost-effective hydraulic fracturing operations.

Today, we hold over 500 patents and patent licenses relating to our engineering and technology solutions.

We seek patent and trademark protections for our technology when we deem it prudent, and we aggressively pursue protection of these rights when warranted.

We believe our patents, trademarks, and other protections for our proprietary technologies are adequate for the conduct of our business and that no single patent or trademark is critical to our business.

In addition, we rely, to a great extent, on the technical expertise and know-how of our personnel to maintain our competitive position, and we take commercially reasonable measures to protect trade secrets and other confidential and/or proprietary information relating to the technologies we develop.

In addition, we rely, to a great extent,

on the technical expertise and know-how of our personnel to maintain our competitive position, and we take commercially reasonable measures to protect trade secrets and other confidential and/or proprietary information relating to the technologies we develop.

Human Capital Management

As of December 31, 2021, we had 3,601 employees and no unionized labor.

We believe we have good relations with our employees.

We promote a people-centered culture focused heavily on our employees and believe that the strength of our workforce is critical to our success as a company.

We believe we have good relations with our employees and that one of our key competitive advantages is our people.

Our highly trained, experienced and motivated employees are critical to delivering our hydraulic fracturing services.

Taking care of our employees is one of our top priorities, and we continually invest in hiring, training and retaining the employees we believe to be the best in our field.

We consistently assess the current business environment and labor market to refine our compensation and benefits programs in order to attract and retain top talent in our industry.

We generally strive to hire people with integrity, a positive attitude and hunger to learn and contribute to a team.

In response to the COVID-19 pandemic, we reduced our headcount and implemented a company-wide employee furlough plan in order to align with the uncertain level of frac demand we experienced during the second and third quarters of 2020.

As of September 30, 2020, all furloughed employees had returned from furlough.

We have implemented and continue to implement safety measures in all of our facilities to address the COVID-19 pandemic.

Additionally, as a result of the OneStim Acquisition, we expect to hire approximately 800 employees following a brief transition period during which their continuing service is provided while on secondment from Schlumberger.

We temporarily implemented a company-wide employee furlough plan in connection with COVID-19 due to the uncertain level of frac demand we experienced during the second and third quarters of 2020, but as of September 30, 2020, all employees were returned from furlough.

During 2021, we experienced increased turnover in field employee positions;

however that trend improved in the later part of the year and into 2022.

We strive to promote from within our existing employee base to manage new hydraulic fracturing fleets and organically grow our operating expertise.

This organic growth is essential in achieving the expertise and level of customer service we strive to provide each of our customers.

As a result, we plan to continue to invest in our employees through both personal and professional training to attract and retain the best individuals in our areas of operation.

Overall, we focus on individual contributions and team success to foster a culture built around operational excellence and superior safety.

Health and Safety

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The Liberty Frac Academy not only ensures dissemination of high-quality training material, but also provides a forum for sharing best practices and lessons learned across the Company.

As a result, we are among the safest service providers in the industry with a constant focus on Health, Safety and Environmental performance and service quality, as evidenced by an average incident rate that was 10% less than the industry average from 2019 to 2021.

Our employee-centered focus and reputation for safety has enabled us to obtain projects from industry leaders with some of the most demanding safety and operational requirements.

We have implemented and continue to implement safety measures in all of our facilities to address the COVID-19 pandemic.

Programs and Benefits

One way we have demonstrated a history of investing in our workforce is by offering competitive salaries and wages.

To foster a strong sense of ownership, restricted stock units are provided to eligible non-executive employees under our stock incentive program.

To foster a strong sense of ownership, restricted stock units are provided to eligible employees under our long term incentive plan.

Furthermore, we offer innovative benefits to all eligible employees, including, among others, comprehensive health insurance coverage, parental leave to all new parents, for birth or adoption, financial support for child adoption, leave to care for partners with serious health conditions, 401(k) savings plan and educational tuition assistance for both bachelor’s degree and master’s degree programs.

We are also passionate about community investment and, in 2019, we joined the Ban the Box initiative which provides work opportunities for formerly incarcerated individuals.

Governmental Regulation and Climate Change

As a company with operations in both the United States and Canada, we are subject to the laws of both jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among those jurisdictions.

Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.

We are also subject to numerous environmental and regulatory requirements related to our operations.

For further information related to such regulation, see the risks described under the heading “Risk Factors” in this Annual Report.

Our operations are subject to numerous stringent and complex laws and regulations at the federal, state, and local levels governing the discharge of materials into the environment, environmental protection, and health and safety aspects of our operations.

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

There is inherent risk of incurring significant environmental costs and liabilities in the performance of our operations due to our handling of petroleum hydrocarbons, other hazardous substances, and wastes, as a result of air emissions and wastewater discharges related to our operations, and because of historical operations and waste disposal practices.

Spills or other releases of regulated substances, including such spills and releases that occur in the future, could expose us to material losses, expenditures, and liabilities under applicable environmental laws and regulations.

Under certain of such laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination, regardless of whether we were responsible for the release or contamination and even if our operations met previous standards in the industry at the time they were conducted.

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

Laws and Regulations

Hazardous Substances and Waste Handling

The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes.

Under guidance issued by the U.S.

Environmental Protection Agency (the “EPA”), the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements.

RCRA currently exempts many E&P wastes from classification as hazardous waste.

Specifically, RCRA excludes from the definition of hazardous waste produced waters and other wastes intrinsically associated with the exploration, development, or production of crude oil and natural gas.

However, these E&P wastes may still be regulated under state solid waste laws and regulations, and it is possible that certain oil and natural gas E&P wastes now classified as non-hazardous could be classified as hazardous waste in the future.

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.

We cannot guarantee that the EPA will not revisit the exemption of E&P waste or that waste will not become more heavily regulated at the federal or state level.

Comprehensive Environmental Response, Compensation, and Liability Act

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment.

These persons include the current and former owner or operator of the site where the release occurred and anyone who transported or disposed or arranged for the transport or disposal of a hazardous substance released at the site.

Persons who are or were responsible for releases of hazardous substances under CERCLA and any state analogs may be subject to joint and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources and for the costs of certain health studies.

We currently own, lease, or operate numerous properties that have been used for manufacturing and other operations for many years.

These properties and the substances disposed or released on them may be subject to CERCLA and analogous state laws.

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.

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.

Worker Health and Safety

We are subject to a number of federal and state laws and regulations, including the OSHA, establishing requirements to protect the health and safety of workers.

The 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.

Specifically, OSHA has enacted a regulation regarding crystalline silica exposures, which included requirements that hydraulic fracturing operations implement dust controls to limit exposures to the substance.

Additionally, the Federal Motor Carrier Safety Administration (the “FMCSA”) 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 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.

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 U.S.

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.

To the extent the agencies expanding the range of properties subject to the Clean Water Act’s jurisdiction, certain energy companies could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas, which in turn could reduce demand for our services.

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

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 wastewater and storm water runoff from certain types of facilities.

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.

Air Emissions

The federal Clean Air Act (the “CAA”) and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements.

In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources.

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.

In recent years, the CAA has been used to impose additional stringent requirements upon oil and gas production operations.

While these rules may not be directly applicable to our business, they are applicable to the business of our customers.

Promulgation of stricter permitting requirements could delay or impair our or our customers’ ability to obtain air emission permits, to develop new wells and to continue to operate existing wells, and result in fewer wells being drilled or redeveloped, causing a decrease in demand for our services.

Federal and state regulatory agencies can impose administrative, civil, and criminal penalties, as well as injunctive relief, for non-compliance with air permits or other requirements of the CAA and associated state laws and regulations.

Climate Change

The EPA has determined that emissions of greenhouse gases, including carbon dioxide and methane, present a danger to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the Earth’s atmosphere and other climatic changes.

The EPA has established greenhouse gas emissions reporting requirements for sources in the oil and gas sector and has also promulgated rules requiring certain large stationary sources of greenhouse gases to obtain preconstruction permits under the CAA and follow “best available control technology” requirements.

Although we are not likely to become subject to greenhouse gas emissions permitting and best available control technology requirements because none of our facilities are presently major sources of greenhouse gas emissions, such requirements could become applicable to our customers.

In addition, the EPA has used the CAA to impose additional greenhouse gas emissions control requirements upon our customers.

These additional requirements on greenhouse gas emissions from our customers could have an adverse effect on their costs of operations or financial performance, thereby adversely affecting our business, financial condition, and results of operations.

Also, the U.S.

Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases, and many states have already established regional greenhouse gas “cap-and-trade” programs.

The adoption of any legislation or regulation that restricts emissions of greenhouse gases from the equipment and operations of our customers or with respect to the oil and natural gas they produce could adversely affect demand for our products and services.

Hydraulic Fracturing

Our business is clearly dependent on hydraulic fracturing and horizontal drilling activities.

As further described herein, hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations, including shale.

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.

However, federal agencies have asserted regulatory authority over certain aspects of the process.

Specifically, there is considerable uncertainty surrounding regulation of the emissions of methane, which may be released during hydraulic fracturing, chemicals used in the hydraulic fracturing process, the discharge of wastewater from hydraulic

fracturing operations and concerns about the triggering of seismic activity by the injection of produced waters into underground wells.

Certain proposed regulation could make it significantly more difficult and/or costly to drill and operate oil and gas wells.

If adopted, such regulation could result in a decline in the completion of new oil and gas wells or the recompletion of existing wells, which could negatively impact the drilling programs of our customers and, consequently, delay, limit or reduce the demand for our services.

Given the long-term trend towards increasing regulation, future regulation in the industry remains a possibility.

Some states, counties, and municipalities have enacted or are considering moratoria on hydraulic fracturing.

For example, New York, Vermont, Maryland, and Washington have banned, or are in the process of banning, the use of high-volume hydraulic fracturing.

Alternatively, some municipalities are, or have considered, zoning and other ordinances, the conditions of which could impose a de facto ban on drilling and/or hydraulic fracturing operations.

Further, some states, counties, and municipalities are closely examining water use issues, such as permit and disposal options for processed water, which could have a material adverse impact on our financial condition, prospects, and results of operations if such additional permitting requirements are imposed upon our industry.

If new laws or regulations that significantly restrict hydraulic fracturing are adopted, such laws could reduce demand for our business by making it more difficult or costly for certain customers to perform fracturing to stimulate production from tight formations.

National Environmental Policy Act

Businesses and operations of our customers that are carried out on federal lands may be subject to the National Environmental Policy Act (“NEPA”), which requires federal agencies, including the U.S.

Department of the Interior, to evaluate major agency actions having the potential to significantly impact the human environment.

In the course of such evaluations, an agency will evaluate the potential direct, indirect, and cumulative impacts of a proposed project and, if necessary, will prepare a detailed Environmental Impact Statement that must be made available for public review and comment.

To the extent that our customers’ current activities, as well as proposed plans, on federal lands require governmental permits that are subject to the requirements of NEPA, this process has the potential to delay or impose additional conditions upon the development of oil and natural gas projects which in turn could reduce demand for our services.

Endangered Species Act and Migratory Bird Treaty Act

The federal Endangered Species Act (“ESA”) was established to protect endangered and threatened species.

Pursuant to that act, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species or its habitat.

Fish and Wildlife Service (the “FWS”) must also designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species.

A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development.

Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (the “MBTA”), which makes it illegal to, among other things, hunt, capture, kill, possess, sell, or purchase migratory birds, nests, or eggs without a permit.

This prohibition covers most bird species in the U.S.

Future implementation of the rules implementing the ESA and the MBTA are uncertain.

If our customers were to have areas within their business and operations designated as critical or suitable habitat for a protected species, it could decrease demand for our services and have a material adverse effect on our business.

Canadian Laws and Regulations

Companies such as us offering oilfield services that include hydraulic fracturing, engineering, and wireline services in the Province of Alberta in Canada are regulated by both the provincial government of Alberta (“Province”) and the federal government of Canada (“Canada”).

This includes, but is not limited to, regulation related to environmental protection legislation, climate change legislation, fracking legislation, and legislation related to wildlife.

In addition to being regulated by the Province and Canada, oilfield services companies may also be subject to other international, national, and subnational laws, regulations, and policies.

Provincial Legislation

Oilfield services companies are primarily regulated by provincial governments in Canada.

For example, in Alberta, provincial legislation potentially applicable to our Canadian operations includes the Environmental Protection and Enhancement Act, RSA 2000, e E-12.

This Act promotes the protection, enhancement and wise use of the environment, and deals with matters such as air emissions, water discharges, and the handling of hazardous substances and waste control (for example, under the Waste Control Regulation, Alta Reg 192/1996).

Other potentially applicable provincial legislation in Alberta includes legislation directed at the transportation of dangerous goods, including oil (the Dangerous Goods Transportation and Handling Act, RSA 2000, c D-4 and associated regulations), legislation intended to provide for the responsible management of oil wells and associated sites (the Oil and Gas

Conservation Act, RSA 2000, c O-6), legislation establishing regulatory bodies overseeing oil and gas and electricity in Alberta (the Responsible Energy Development Act, SA 2012, c R-17.3 and the Alberta Utilities Commission Act, SA 2007, c A-37.2), legislation governing the removal of gas or propane from Alberta (the Gas Resources Preservation Act, RSA 2000, c G-4), legislation to effect conservation and prevent waste of the oil sands resource in Alberta (the Oil Sands Conservation Act, RSA 2000, c O-7) and legislation governing worker safety (the Occupational Health and Safety Act, SA 2017, c O-2.1).

The Alberta Energy Regulator has a number directives that are applicable to oilfield services companies, such as Directive 050 which addresses salinity ranges for soils that can receive drilling wastes, and Directive 058, which sets out regulatory requirements for the handling, treatment, and disposal of upstream oilfield waste.

Other provinces in Canada have their own statutory regime applicable to oilfield service companies.

Federal Legislation

The Federal government in Canada shares certain jurisdiction with the provinces over certain environmental matters.

Federal legislation potentially applicable to our Canadian operations includes legislation focused on regulating greenhouse gases (the Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186), legislation aimed at protecting wildlife (the Species at Risk Act, SC 2002, c 29), legislation governing approvals for projects (the Impact Assessment Act, SC 2019, c 28, s 1), and legislation governing the transportation of potentially dangerous substances (the Transportation of Dangerous Goods Act, 1992, SC 1992, c 34).

Our corporate headquarters are located at 950 17 th Street, Suite 2400, Denver, Colorado 80202.

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Monahans, TX 3,200 acres Owned

Magnolia, TX 63,350 sq.

Leased (through May 31, 2031)

Shreveport, LA 225,000 sq ft.

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ft on 13 acres Leased (through December 31, 2034)

Henderson, CO 96,582 sq.

ft on 12 acres Owned

Williston, ND 30,000 sq.

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Marketing and Customers

We have developed long-term partnerships with our customers through a continuous dialogue focused on their production economics.

Further, we have a proven track record of executing our customers’ plans and delivering on time and in line with expected costs.

Our customer base includes a broad range of integrated and independent E&P companies, including some of the largest E&P companies in our areas of operation such as Occidental Petroleum Corp, ConocoPhillips Company and ExxonMobil.

We believe our customer relationships enabled us to maintain higher utilization than many of our competitors during the downturn resulting from the COVID-19 pandemic.

Our technological innovations, customer-tailored approach and track record of consistently providing high-quality, safe and reliable service has allowed us to develop long-term customer partnerships, which we believe makes us the service provider of choice for many of our customers.

Our sales and marketing activities typically are performed through our local sales representatives in each geographic region, and are supported by our corporate headquarters.

For the years ended December 31, 2021, 2020 and 2019, our top five customers collectively accounted for approximatel y 27% , 48%, and 35% of our revenues, respectively.

For the year ended December 31, 2020, PDC Energy Inc., ConocoPhillips Company, Parsley Energy Operations, LLC, and WPX Energy each accounted for more than 10% of our revenues.

No customer accounted for more than 10% of our revenues for the year ended December 31, 2019.

For the year ended December 31, 2018, Extraction Oil & Gas, Inc.

accounted for more than 10% of our revenues.

For the years ended December 31, 2021 and 2019, no customer accounted for more than 10% of our revenues.

For the year ended December 31, 2020, PDC Energy Inc., WPX Energy, Conoco-Phillips Company, and Parsley Energy Operations, LLC each accounted for more than 10% of our revenues.

Suppliers and Raw Materials

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We have built long-term relationships with multiple industry leading suppliers of proppant, chemicals and hydraulic fracturing equipment and have started to internally design and assemble key pump and maintenance parts.

In addition, we have built a strong relationship with the assembler of our custom-designed hydraulic fracturing fleets and believe we will continue to have timely access to new, high capability fleets as we continue to grow.

In 2018, we also vertically integrated a supplier of certain major components through the acquisition of ST9 Gas and Oil LLC.

In addition, we have built a strong relationship with the assemblers of our custom-designed hydraulic fracturing fleets and believe we will continue to have timely access to new, high capability fleets as we continue to grow.

In 2018, we vertically integrated a supplier of certain major components through the acquisition of ST9 Gas and Oil LLC.

In October 2021, we vertically integrated a supplier of our containerized sand and last mile proppant logistics solutions with the acquisition of PropX.

We purchase a wide variety of raw materials, parts and components that are manufactured and supplied for our operations.

We are not dependent on any single source of supply for those parts, supplies or materials.

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

To date, we have generally been able to obtain the equipment, parts and supplies necessary to support our operations, although we have experienced delivery delays and shortages on some items.

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 do so.

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As a result, we may be unable to mitigate any future supply shortages and our results of operations, prospects and financial condition could be adversely affected.

The OneStim Acquisition included two state-of-the-art sand mines in the Permian Basin, which further alleviates the risk of potential future material supply shortages.

The OneStim Acquisition included two state-of-the-art sand mines in the Permian Basin, which helps alleviate the risk of proppant supply shortages.

The markets in which we operate are highly competitive.

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We seek to differentiate ourselves from our competitors by delivering the highest-quality services and equipment possible, coupled with superior execution and operating efficiency in a safe working environment.

Governmental Regulation

We are also subject to numerous environmental and regulatory requirements related to our operations.

For further information related to such regulation, see “Item 1A.

Risk Factors.”

Available Information

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

What changed 10-K

Item 1. Business