What changed in this filing

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Item 1. Financial Statements

2020-10-30 compared with 2020-07-30 · 195 added, 171 removed, 584 unchanged (39% of the section changed)

4 unchanged sentences

(In Thousands, Except Per Share Amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

10 unchanged sentences

Impairments of fixed assets — 33,697 8,190 33,697

Other operating income, net ( 134 ) ( 399 ) ( 27 ) ( 485 )

Other operating expense (income), net ( 652 ) 519 ( 679 ) 34

165,599 298,607 1,006,674 831,138

16 unchanged sentences

(In Thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

(In Thousands, Except Share Amounts)

September 30,

2020 December 31, 2019

3 unchanged sentences

Inventories, net 180,497 221,342

Income taxes receivable 44,986 2,568

Prepaid expenses and other current assets 14,921 20,107

34 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2020 Common

Three Months Ended September 30, 2020 Common

Stock Additional

4 unchanged sentences

Stockholders'

Balance, March 31, 2020 $ 732 $ 1,115,677 $ 392,669 $ ( 82,537 ) $ ( 623,909 ) $ 802,632

Balance, June 30, 2020 $ 733 $ 1,117,771 $ 368,043 $ ( 83,767 ) $ ( 623,911 ) $ 778,869

Net loss — — ( 19,969 ) — — ( 19,969 )

4 unchanged sentences

Surrender of stock to settle taxes on restricted stock awards — — — — ( 8 ) ( 8 )

Balance, June 30, 2020 $ 733 $ 1,117,771 $ 368,043 $ ( 83,767 ) $ ( 623,911 ) $ 778,869

Six Months Ended June 30, 2020 Common

Balance, September 30, 2020 $ 733 $ 1,119,860 $ 348,074 $ ( 80,410 ) $ ( 623,919 ) $ 764,338

Nine Months Ended September 30, 2020 Common

Stock Additional

11 unchanged sentences

Surrender of stock to settle taxes on restricted stock awards — — — — ( 2,675 ) ( 2,675 )

Balance, June 30, 2020 $ 733 $ 1,117,771 $ 368,043 $ ( 83,767 ) $ ( 623,911 ) $ 778,869

Balance, September 30, 2020 $ 733 $ 1,119,860 $ 348,074 $ ( 80,410 ) $ ( 623,919 ) $ 764,338

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, March 31, 2019 $ 725 $ 1,102,176 $ 1,014,870 $ ( 68,931 ) $ ( 621,196 ) $ 1,427,644

Three Months Ended September 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, June 30, 2019 $ 726 $ 1,106,340 $ 1,005,130 $ ( 71,260 ) $ ( 621,208 ) $ 1,419,728

Net loss — — ( 31,868 ) — — ( 31,868 )

6 unchanged sentences

Surrender of stock to settle taxes on restricted stock awards — — — — ( 76 ) ( 76 )

Balance, June 30, 2019 $ 726 $ 1,106,340 $ 1,005,130 $ ( 71,260 ) $ ( 621,208 ) $ 1,419,728

Six Months Ended June 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, September 30, 2019 $ 726 $ 1,110,572 $ 973,262 $ ( 76,932 ) $ ( 621,284 ) $ 1,386,344

Nine Months Ended September 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, December 31, 2018 $ 718 $ 1,097,758 $ 1,029,518 $ ( 71,397 ) $ ( 616,829 ) $ 1,439,768

7 unchanged sentences

Surrender of stock to settle taxes on restricted stock awards — — — — ( 3,698 ) ( 3,698 )

Balance, June 30, 2019 $ 726 $ 1,106,340 $ 1,005,130 $ ( 71,260 ) $ ( 621,208 ) $ 1,419,728

Balance, September 30, 2019 $ 726 $ 1,110,572 $ 973,262 $ ( 76,932 ) $ ( 621,284 ) $ 1,386,344

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

(In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

8 unchanged sentences

Deferred income tax benefit ( 16,915 ) ( 11,935 )

Gain on extinguishment of 1.50 % convertible senior notes

Gain on disposals of assets ( 1,489 ) ( 1,245 )

Gains on extinguishment of 1.50 % convertible senior notes

Gains on disposals of assets ( 2,088 ) ( 2,310 )

Other, net 3,732 1,216

4 unchanged sentences

Income taxes payable 248 1,948

Deferred revenue 31,114 11,793

Other operating assets and liabilities, net 6,471 2,947

9 unchanged sentences

Purchases of 1.50 % convertible senior notes

( 20,078 ) ( 858 )

Other debt and finance lease repayments, net ( 337 ) ( 434 )

2 unchanged sentences

due to vesting of stock awards ( 2,675 ) ( 3,698 )

Purchase of treasury stock — ( 757 )

Net cash flows provided by (used in) financing activities 4,991 ( 41,644 )

Purchases of treasury stock — ( 757 )

Net cash flows used in financing activities ( 56,983 ) ( 76,909 )

Effect of exchange rate changes on cash and cash equivalents ( 214 ) 101

2 unchanged sentences

Cash and cash equivalents, end of period $ 79,701 $ 14,655

Cash paid for:

Cash paid (received) for:

Interest $ 5,716 $ 8,378

Income taxes, net of refunds 2,888 2,002

Income taxes, net ( 37,393 ) ( 2,522 )

The accompanying notes are an integral part of these financial statements.

12 unchanged sentences

As further discussed in Note 13, "Commitments and Contingencies," the impact of the Coronavirus Disease 2019 ("COVID-19") pandemic and the related economic, business and market disruptions continues to evolve and its future effects remain uncertain.

The actual impact of these recent developments on the Company will depend on many factors, many of which are beyond management's control and knowledge.

The actual impact of these developments on the Company will depend on many factors, many of which are beyond management's control and knowledge.

It is therefore difficult for management to assess or predict with precision the broad future effect of this health crisis on the global economy, the energy industry or the Company.

During the first and second quarters of 2020, the Company recorded asset impairments and recorded severance and facility closure charges in response to these recent developments, as further discussed in Note 3, "Asset Impairments and Other Charges." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

During the first nine months of 2020, the Company recorded asset impairments, severance and facility closure charges in response to these recent developments, as further discussed in Note 3, "Asset Impairments and Other Charges." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

5 unchanged sentences

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

In June 2016, the FASB issued guidance on credit impairment for short-term receivables which, as amended, introduces the recognition of management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset.

The Company adopted this guidance on January 1, 2020, using the optional transition method of recognizing any cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings.

The cumulative impact of the adoption of the new standard was not material to the Company's consolidated financial statements.

Prior periods were not retrospectively adjusted.

In August 2020, the FASB issued updated guidance to simplify the accounting for convertible instruments and contracts in an entity's own equity.

This new guidance will eliminate the current requirement that the carrying value of convertible debt instruments, including the Company's 1.50 % convertible senior notes due 2023 (the "Notes"), be allocated between the debt and equity components.

As permitted under the standard, the Company plans to adopt the new guidance on January 1, 2021 using the modified retrospective transition method.

Upon initial evaluation, the Company believes the key changes upon adoption will be to increase the carrying value of the debt component of the Notes and reduce the reported level of interest expense recognized over the remaining life of the Notes.

Based on the $ 157.4 million principal amount of the Notes outstanding as of September 30, 2020, the Company estimates that the adoption of the standard on January 1, 2021 will result in a $ 12.2 million increase in the net carrying value of the Notes, a $ 3.7 million decrease in deferred income taxes and an $ 8.5 million net decrease in stockholders' equity.

Beginning on January 1, 2021, the effective interest rate associated with the Notes is expected to decrease from approximately 6 % to approximately 2 %, which compares to the contractual cash interest rate of 1.50 %.

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

The cumulative impact of the adoption of the new standard was not material to the Company's consolidated financial statements.

Prior periods were not retrospectively adjusted.

Asset Impairments and Other Charges

In March of 2020, the spot price of West Texas Intermediate ("WTI") crude oil declined over 50 % in response to current and expected material reductions in global demand due to the global response to the COVID-19 pandemic, coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production.

In March of 2020, the spot price of West Texas Intermediate ("WTI") crude oil declined over 50 % in response to current and expected material reductions in global demand stemming from the global response to the COVID-19 pandemic, coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production.

Following this unprecedented collapse in crude oil prices, the spot price of Brent and WTI crude oil closed at $ 15 and $ 21 per barrel, respectively, on March 31, 2020.

Crude oil prices further declined in April of 2020 to record low levels, and while crude oil prices have increased to some extent since that time, they remain at depressed levels.

Crude oil prices further declined in April of 2020 to record low levels, and while the spot price of Brent and WTI crude oil increased to an average of $ 43 and $ 41 per barrel, respectively, in the third quarter of 2020, these average prices continue to be depressed versus historical price levels.

Demand for most of the Company's products and services depends substantially on the level of capital expenditures by the oil and natural gas industry.

This decline in oil prices has, and is expected to continue to, result in further near-term reductions to most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly in the U.S.

The decline in oil prices has, and is expected to continue to, result in further near-term reductions to most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly in the U.S.

shale play regions.

11 unchanged sentences

Severance and facility closure costs 331 217 — 112 660 139 521

The Company further reduced its workforce and closed additional facilities in the United States during the second quarter of 2020, and recorded the following charges (in thousands):

During the second and third quarters of 2020, the Company further reduced its workforce and closed additional facilities in the United States and continued to assess the carrying value of its assets based on the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):

Completion Services Downhole Technologies Offshore/ Manufactured Products Corporate Pre-tax Total Tax After-tax Total

Second quarter 2020

Impairments of fixed assets $ 2,992 $ — $ — $ — $ 2,992 $ 628 $ 2,364

Severance and facility closure costs 3,544 1,315 322 216 5,397 1,133 4,264

Third quarter 2020

Impairments of inventories (Note 4) $ — $ 5,921 $ — $ — $ 5,921 $ 1,243 $ 4,678

Severance and facility closure costs — — 288 — 288 60 228

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company has three reporting units – Completion Services, Downhole Technologies and Offshore/Manufactured Products – with goodwill balances totaling $ 482.3 million as of December 31, 2019.

4 unchanged sentences

This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Management utilizes, depending on circumstances, a combination of valuation methodologies including a market approach and an income approach, as well as guideline public company comparables.

9 unchanged sentences

Holding all other assumptions and inputs used in the discounted cash flow analysis constant, a 50 basis point increase in the discount rate assumption for the Offshore/Manufactured Products reporting unit would have increased the goodwill impairment charge by approximately $ 10 million.

A summary of changes in the carrying values of goodwill by reporting unit in the first six months of 2020 is presented in Note 4, "Details of Selected Balance Sheet Accounts."

A summary of changes in the carrying values of goodwill by reporting unit in the first nine months of 2020 is presented in Note 4, "Details of Selected Balance Sheet Accounts."

Long-lived Assets

2 unchanged sentences

During the second quarter of 2020, the Company concluded that certain facilities held for sale by the Completion Services reporting unit were impaired and recognized a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of the facilities to their estimated realizable value based on the current market environment.

The Company performed a qualitative assessment of goodwill and long-lived assets at June 30, 2020 and concluded that no further impairment evaluation was required.

As a result, no other impairments were recorded in the second quarter of 2020.

The Company performed a qualitative assessment of goodwill and long-lived assets as of September 30, 2020 and concluded that no further impairment evaluation was required.

As a result, no material impairments of goodwill or long-lived assets were recorded in the third quarter of 2020.

Should, among other events and circumstances, global economic and industry conditions further deteriorate, the COVID-19 pandemic business and market disruptions worsen, the outlook for future operating results and cash flow for any of the Company's reporting units decline, income tax rates increase or regulations change, costs of equity or debt capital increase, valuations for comparable public companies or comparable acquisition valuations decrease, or management implement strategic decisions based on industry conditions, the Company may need to recognize additional impairment losses in future periods.

4 unchanged sentences

Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of June 30, 2020 and December 31, 2019 is presented below (in thousands):

Additional information regarding selected balance sheet accounts as of September 30, 2020 and December 31, 2019 is presented below (in thousands):

September 30,

2020 December 31,

8 unchanged sentences

Allowance for doubtful accounts as a percentage of total accounts receivable 6 % 4 %

September 30,

2020 December 31,

Deferred revenue (contract liabilities) $ 48,851 $ 17,761

For the six months ended June 30, 2020, the $ 0.4 million net decrease in contract assets was primarily attributable to $ 22.1 million transferred to accounts receivable, which was partially offset by $ 21.8 million in revenue recognized during the period.

For the nine months ended September 30, 2020, the $ 0.8 million net decrease in contract assets was primarily attributable to $ 22.8 million transferred to accounts receivable, which was substantially offset by $ 22.0 million in revenue recognized during the period.

Deferred revenue (contract liabilities) increased by $ 31.1 million in 2020, primarily reflecting $ 46.4 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $ 15.2 million of revenue that was deferred at the beginning of the period.

As of June 30, 2020 and December 31, 2019, 61 % and 73 %, respectively, of total accounts receivables related to revenues generated in the United States.

As of June 30, 2020 and December 31, 2019, 18 % and 10 %, respectively, of total accounts receivables related to revenues generated in the United Kingdom.

As of June 30, 2020, 13 % of total accounts receivables related to revenues generated in Singapore.

No other country or single customer accounted for more than 10% of the Company's total accounts receivables at these dates.

As of September 30, 2020, accounts receivable, net in the United States, the United Kingdom and Singapore represented 62 %, 17 % and 12 %, respectively, of the respective total.

No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of September 30, 2020.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company's customers to make required payments.

5 unchanged sentences

If the financial condition of the Company's customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.

The following provides a summary of activity in the allowance for doubtful accounts for the six months ended June 30, 2020 and 2019 (in thousands):

The following provides a summary of activity in the allowance for doubtful accounts for the nine months ended September 30, 2020 and 2019 (in thousands):

Allowance for doubtful accounts – January 1 $ 8,745 $ 6,701

2 unchanged sentences

Other 1,158 ( 58 )

Allowance for doubtful accounts – June 30 10,262 6,303

Allowance for doubtful accounts – September 30 10,200 6,971

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

September 30,

2020 December 31,

6 unchanged sentences

$ 180,497 $ 221,342

The Company recorded impairment charges totaling $ 25.2 million in the first quarter of 2020 to reduce the carrying value of inventories to their estimated net realizable value following the March 2020 decline in crude oil prices, which is expected to reduce the near-term utility of certain goods within the Offshore/Manufactured Products and Completion Services operations.

The Company recorded an impairment charge of $ 5.9 million in the third quarter of 2020 to reduce the carrying value of inventories within the Downhole Technologies segment to their estimated net realizable value based on changes in expectations regarding the near-term utility, customer demand and market pricing of certain goods.

The Company recorded impairment charges totaling $ 25.2 million in the first quarter of 2020 to reduce the carrying value of inventories to their estimated net realizable value following the March 2020 decline in crude oil prices, which reduced the near-term utility of certain goods within the Offshore/Manufactured Products and Completion Services operations.

September 30,

2020 December 31,

10 unchanged sentences

$ 390,962 $ 459,724

For the three months ended June 30, 2020 and 2019, depreciation expense was $ 18.5 million and $ 25.1 million, respectively.

Depreciation expense was $ 38.6 million and $ 49.9 million for the six months ended June 30, 2020 and 2019, respectively.

As discussed in Note 3, "Asset Impairments and Other Charges," during the first quarter of 2020 the Drilling Services reporting unit recognized a non-cash impairment charge of $ 5.2 million to reduce the carrying value of the business's fixed assets to their estimated realizable value.

For the three months ended September 30, 2020 and 2019, depreciation expense was $ 18.0 million and $ 24.6 million, respectively.

Depreciation expense was $ 56.6 million and $ 74.5 million for the nine months ended September 30, 2020 and 2019, respectively.

During the third quarter of 2019, the Company made the strategic decision to reduce the scope of its Drilling Services reporting unit (adjusting from 34 rigs to 9 rigs) due to the ongoing weakness in customer demand for vertical drilling rigs in the U.S.

land market, particularly the Permian Basin, which resulted in the recognition of a $ 33.7 million non-cash fixed asset impairment charge.

As discussed in Note 3, "Asset Impairments and Other Charges," during the first quarter of 2020 the Drilling Services reporting unit recognized a non-cash impairment charge of $ 5.2 million to further reduce the carrying value of the business's fixed assets to their estimated realizable value.

Additionally, in the second quarter of 2020, the Completion Services reporting unit recognized a non-cash impairment charge of $ 3.0 million to reduce the carrying value of certain facilities to their estimated realizable value.

September 30,

2020 December 31,

3 unchanged sentences

$ 31,764 $ 28,701

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

September 30,

2020 December 31,

3 unchanged sentences

Accrued taxes, other than income taxes 12,427 3,424

Accrued interest 2,052 2,387

Accrued commissions 1,934 1,481

1 unchanged sentence

$ 49,755 $ 48,840

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Well Site Services Downhole Technologies Offshore/

8 unchanged sentences

Foreign currency translation — — — — ( 199 ) ( 199 )

Balance as of June 30, 2020 $ — $ — $ — $ — $ 75,746 $ 75,746

Balance as of September 30, 2020 $ — $ — $ — $ — $ 76,051 $ 76,051

________________

1 unchanged sentence

Other Intangible Assets:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Amount Accumulated

7 unchanged sentences

$ 313,730 $ 101,926 $ 211,804 $ 325,030 $ 94,939 $ 230,091

For the three months ended June 30, 2020 and 2019, amortization expense was $ 6.1 million and $ 6.8 million, respectively.

Amortization expense was $ 12.5 million and $ 13.5 million for the six months ended June 30, 2020 and 2019, respectively.

For the three months ended September 30, 2020 and 2019, amortization expense was $ 6.2 million and $ 6.8 million, respectively.

Amortization expense was $ 18.7 million and $ 20.3 million for the nine months ended September 30, 2020 and 2019, respectively.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Net Loss Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share amounts):

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share amounts):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

12 unchanged sentences

Diluted ( 0.33 ) ( 0.54 ) ( 7.52 ) ( 0.95 )

The calculation of diluted net loss per share for the three and six months ended June 30, 2020 excluded 596 thousand shares and 613 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

The calculation of diluted net loss per share for the three and six months ended June 30, 2019 excluded 664 thousand shares and 676 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

Additionally, shares issuable upon conversion of the 1.50 % convertible senior notes were excluded for the three and six month periods ended June 30, 2020 and 2019, due to their antidilutive effect.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The calculation of diluted net loss per share for the three and nine months ended September 30, 2020 excluded 560 thousand shares and 595 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

The calculation of diluted net loss per share for the three and nine months ended September 30, 2019 excluded 643 thousand shares and 665 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

Additionally, shares issuable upon conversion of the 1.50 % convertible senior notes were excluded for the three and nine month periods ended September 30, 2020 and 2019, due to their antidilutive effect.

Long-term Debt

As of June 30, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):

As of September 30, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):

September 30,

2020 December 31,

9 unchanged sentences

____________________

(1) Presented net of $ 1.2 million and $ 1.4 million of unamortized debt issuance costs as of June 30, 2020 and December 31, 2019, respectively.

(2) The outstanding principal amount of the 1.50 % convertible senior notes was $ 174.6 million and $ 192.3 million as of June 30, 2020 and December 31, 2019, respectively.

(1) Presented net of $ 1.3 million and $ 1.4 million of unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(2) The outstanding principal amount of the 1.50 % convertible senior notes was $ 157.4 million and $ 192.3 million as of September 30, 2020 and December 31, 2019, respectively.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Revolving Credit Facility due January 2022

3 unchanged sentences

Lender commitments under the Amended Credit Agreement were reduced to $ 200.0 million in exchange for the suspension of the financial covenants described below from July 1, 2020 through March 30, 2021.

During the financial covenant suspension period, borrowing availability under the Revolving Credit Facility (as amended, the "Amended Revolving Credit Facility") will be limited to 85 % of the lesser of (i) $ 200.0 million or (ii) a borrowing base, calculated monthly, equal to the sum of 70 % of the consolidated net book value of eligible receivables and 20 % of the consolidated net book value of eligible inventory (the "Borrowing Base").

As of June 30, 2020, the Company had $ 71.0 million of borrowings outstanding under the Amended Revolving Credit Facility and $ 28.4 million of outstanding letters of credit.

The total amount available to be drawn as of July 1, 2020 was $ 37.3 million, calculated based on 85 % of the current Borrowing Base less outstanding borrowings and letters of credit.

During the financial covenant suspension period, borrowing availability under the Revolving Credit Facility (as amended, the "Amended Revolving Credit Facility") is limited to 85 % of the lesser of (i) $ 200.0 million or (ii) a borrowing base, calculated monthly, equal to the sum of 70 % of the consolidated net book value of eligible receivables and 20 % of the consolidated net book value of eligible inventory (the "Borrowing Base").

As of September 30, 2020, the Company had $ 19.0 million of borrowings outstanding under the Amended Revolving Credit Facility and $ 31.2 million of outstanding letters of credit.

The total amount available to be drawn as of October 1, 2020 was $ 83.8 million, calculated based on 85 % of the current Borrowing Base less outstanding borrowings and letters of credit.

Prior to June 17, 2020, amounts outstanding under the Revolving Credit Facility accrued interest at LIBOR plus a margin of 1.75 % to 3.00 %, or at a base rate plus a margin of 0.75 % to 2.00 %, in each case based on a ratio of the Company's total net funded debt to consolidated EBITDA (as defined in the Credit Agreement).

5 unchanged sentences

Specifically, except for the period from July 1, 2020 through March 30, 2021, the Company must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0, a maximum senior secured leverage ratio, defined as the ratio of senior secured debt to consolidated EBITDA, of no greater than 2.25 to 1.0 and a total net leverage ratio, defined as the ratio of total net funded debt to consolidated EBITDA, of no greater than 3.75 to 1.0.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The various components used in the calculation of these ratios are defined in the Amended Credit Agreement.

Consolidated EBITDA and consolidated interest expense, as defined, exclude non-cash goodwill and fixed asset impairment charges, gains or losses on the extinguishment of debt, debt discount amortization, stock-based compensation expense and other non-cash charges.

Consolidated EBITDA and consolidated interest expense, as defined, exclude non-cash goodwill, fixed asset and inventory impairment charges, gains or losses on the extinguishment of debt, debt discount amortization, stock-based compensation expense and other non-cash charges.

Borrowings under the Amended Credit Agreement are secured by a pledge of substantially all of the Company's assets and the assets of its domestic subsidiaries.

2 unchanged sentences

Under the Amended Credit Agreement, the occurrence of specified change of control events involving the Company would constitute an event of default that would permit the banks to, among other things, accelerate the maturity of the facility and cause it to become immediately due and payable in full.

As of June 30, 2020, the Company was in compliance with its debt covenants under the Amended Credit Agreement.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1.50 % Convertible Senior Notes due February 2023

On January 30, 2018, the Company issued $ 200 million aggregate principal amount of its 1.50 % convertible senior notes due 2023 (the "Notes") pursuant to an indenture, dated as of January 30, 2018 (the "Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.

During the second quarter of 2020, the Company purchased $ 12.0 million principal amount of the outstanding Notes for $ 5.9 million in cash.

On January 30, 2018, the Company issued $ 200 million aggregate principal amount of the Notes pursuant to an indenture, dated as of January 30, 2018 (the "Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.

During the three months ended September 30, 2020, the Company purchased $ 17.2 million principal amount of the outstanding Notes for $ 9.5 million in cash.

The net carrying amount of the liability component of these Notes totaled $ 15.4 million.

In connection with extinguishment of these Notes, the Company recognized a non-cash gain of $ 4.8 million during the second quarter of 2020, which is included within other income, net.

During the first quarter of 2020, the Company purchased $ 5.7 million principal amount of the outstanding Notes for $ 4.7 million in cash, which approximated the net carrying amount of the related liability.

In connection with extinguishment of these Notes, the Company recognized non-cash gains totaling $ 5.9 million during the third quarter of 2020, which is included within other income, net.

During the nine months ended September 30, 2020, the Company purchased $ 34.9 million principal amount of the outstanding Notes for $ 20.1 million in cash.

The net carrying amount of the liability component of these Notes totaled $ 30.8 million.

In connection with extinguishment of these Notes, the Company recognized non-cash gains totaling $ 10.7 million during the first nine months of 2020, which is included within other income, net.

Since September 2019, the Company has purchased $ 42.6 million principal amount of the outstanding notes for $ 26.8 million in cash.

The initial carrying amount of the Notes recorded in the consolidated balance sheet was less than the $ 200 million principal amount of the Notes, in accordance with applicable accounting principles, reflective of the estimated fair value of a similar debt instrument that does not have a conversion feature.

The initial carrying amount of the Notes recorded in the consolidated balance sheet was less than the $ 200 million principal amount of the Notes, in accordance with the currently applicable accounting principles, reflective of the estimated fair value of a similar debt instrument that does not have a conversion feature.

The Company recorded the value of the conversion feature as a debt discount, which is amortized as interest expense over the term of the Notes, with a similar amount allocated to additional paid-in capital.

As a result of this amortization, interest expense recognized on the Notes for accounting purposes, reflecting an effective interest rate of approximately 6 %, is greater than cash interest the Company is obligated to pay.

Reported interest expense associated with the Notes for the three and six months ended June 30, 2020 was $ 2.4 million and $ 4.9 million, respectively, while the related contractual cash interest expense totaled $ 0.7 million and $ 1.4 million, respectively.

Reported interest expense associated with the Notes for the three and six months ended June 30, 2019 was $ 2.5 million and $ 5.1 million, respectively, while the related contractual cash interest expense totaled $ 0.8 million and $ 1.5 million, respectively.

The following table presents the carrying amount of the Notes in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 (in thousands):

As a result of this amortization, interest expense currently recognized on the Notes for accounting purposes, reflecting an effective interest rate of approximately 6 %, is greater than cash interest the Company is obligated to pay.

Reported interest expense associated with the Notes for the three and nine months ended September 30, 2020 was $ 2.3 million and $ 7.2 million, respectively, while the related contractual cash interest expense totaled $ 0.6 million and $ 2.0 million, respectively.

Reported interest expense associated with the Notes for the three and nine months ended September 30, 2019 was $ 2.6 million and $ 7.7 million, respectively, while the related contractual cash interest expense totaled $ 0.8 million and $ 2.3 million, respectively.

The following table presents the carrying amount of the Notes in the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (in thousands):

September 30,

2020 December 31,

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Net carrying amount of the equity component $ 25,683 $ 25,683

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

See Note 2, "Recent Accounting Pronouncement," for discussion of the FASB's recent revision to accounting guidance for convertible instruments, which will change the Company's method of accounting for the Notes upon its adoption of the standard effective January 1, 2021.

The Notes bear interest at a rate of 1.50 % per year until maturity.

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The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the Indenture.

The Company's intent is to repay the principal amount of the Notes in cash and the conversion feature in shares of the Company's common stock.

The Company's intent is to repay the principal amount of the Notes in cash and settle the conversion feature in shares of the Company's common stock.

Noteholders may convert their Notes, at their option, only in the following circumstances:

(1) if the last reported sale price per share of the Company's common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate on such trading day;

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company's common stock, as described in the Indenture;

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Additionally, the Indenture contains certain events of default, including certain defaults by the Company with respect to other indebtedness of at least $ 40.0 million.

As of June 30, 2020, none of the conditions allowing holders of the Notes to convert, or requiring the Company to repurchase the Notes, had been met.

As of September 30, 2020, none of the conditions allowing holders of the Notes to convert, or requiring the Company to repurchase the Notes, had been met.

Promissory Note

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Payments due under the promissory note are subject to set off, in part or in full, against certain indemnification claims related to matters occurring prior to the Company's acquisition of GEODynamics.

As more fully described in Note 13, "Commitments and Contingencies," the Company has provided notice to and asserted indemnification claims against the seller of GEODynamics.

The Company has provided notice to and asserted indemnification claims against the seller of GEODynamics.

As a result, the maturity date of the note is extended until these indemnity claims are resolved.

The Company expects that the amount ultimately paid in respect of such note to be reduced by these indemnification claims.

See Note 13, "Commitments and Contingencies," for additional discussion.

Fair Value Measurements

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The Company believes that the carrying values of these instruments, other than the Notes, on the accompanying consolidated balance sheets approximate their fair values.

The estimated fair value of the Notes as of June 30, 2020 was $ 91.5 million based on quoted market prices (a Level 1 fair value measurement), which compares to the $ 174.6 million principal amount of the Notes.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The estimated fair value of the Notes as of September 30, 2020 was $ 89.7 million based on quoted market prices (a Level 1 fair value measurement), which compares to the $ 157.4 million principal amount of the Notes.

See Note 2, "Recent Accounting Pronouncements."

Stockholders' Equity

The following table provides details with respect to the changes to the number of shares of common stock, $ 0.01 par value, outstanding during the first six months of 2020 (in thousands):

The following table provides details with respect to the changes to the number of shares of common stock, $ 0.01 par value, outstanding during the first nine months of 2020 (in thousands):

Shares of common stock outstanding – December 31, 2019 60,501

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Shares withheld for taxes on vesting of stock awards and transferred to treasury ( 225 )

Shares of common stock outstanding – June 30, 2020 61,032

As of June 30, 2020 and December 31, 2019, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding.

The Company maintained a share repurchase program, which was allowed to expire on July 29, 2020.

During the first six months of 2020, the Company did no t repurchase any common stock under the program.

The amount remaining under the Company's share repurchase authorization as of June 30, 2020 was $ 119.8 million.

Shares of common stock outstanding – September 30, 2020 61,031

As of September 30, 2020 and December 31, 2019, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding.

The Company historically maintained a share repurchase program, which was allowed to expire on July 29, 2020.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, reported as a component of stockholders' equity, increased from $ 67.7 million at December 31, 2019 to $ 83.8 million at June 30, 2020, due to changes in currency exchange rates.

Accumulated other comprehensive loss, reported as a component of stockholders' equity, increased from $ 67.7 million at December 31, 2019 to $ 80.4 million at September 30, 2020, due to changes in currency exchange rates.

Accumulated other comprehensive loss is primarily related to fluctuations in the currency exchange rates compared to the U.S.

dollar which are used to translate certain of the international operations of the Company's reportable segments.

For the six months ended June 30, 2020 and 2019, currency translation adjustments recognized as a component of other comprehensive income were primarily attributable to the United Kingdom and Brazil.

As of June 30, 2020, the exchange rate for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 6 % and 27 %, respectively, compared to the exchange rate at December 31, 2019, contributing to other comprehensive loss of $ 16.0 million reported for the six months ended June 30, 2020.

During the first six months of 2019, the exchange rates did not materially change.

For the nine months ended September 30, 2020 and 2019, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

As of September 30, 2020, the exchange rates for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 2 % and 29 %, respectively, compared to the exchange rates at December 31, 2019, contributing to other comprehensive loss of $ 12.7 million reported for the nine months ended September 30, 2020.

During the first nine months of 2019, the exchange rate for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 4 % and 7 %, respectively, compared to the exchange rate at December 31, 2018, contributing to other comprehensive loss of $ 5.5 million reported for the nine months ended September 30, 2019.

Long-Term Incentive Compensation

The following table presents a summary of activity for stock options, service-based restricted stock awards and performance-based stock unit awards for the six months ended June 30, 2020 (in thousands):

The following table presents a summary of activity for stock options, service-based restricted stock awards and performance-based stock unit awards for the nine months ended September 30, 2020 (in thousands):

Stock Options Service-based Restricted Stock Performance-based Stock Units

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Granted — 686 181

Vested/Exercised — ( 529 ) ( 125 )

Vested — ( 540 ) ( 125 )

Forfeited ( 86 ) ( 55 ) —

Outstanding – June 30, 2020 586 1,164 304

Outstanding – September 30, 2020 550 1,155 304

Weighted average grant date fair value (2020 awards) $ — $ 10.02 $ 11.15

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The performance measure for these Cash Awards is relative total stockholder return compared to a peer group of companies measured over a three-year period.

The ultimate dollar amount to be awarded for the 2020 and 2019 Cash Awards is

The ultimate dollar amount to be awarded for the 2020 and 2019 Cash Awards is limited to their targeted award value ($ 2.0 million and $ 1.4 million, respectively) if the Company's total stockholder return is negative over the performance period.

The obligation related to the Cash Awards is classified as a liability and recognized over the vesting period.

Stock-based compensation expense recognized during the three and nine months ended September 30, 2020 totaled $ 2.1 million and $ 5.3 million, respectively.

Stock-based compensation expense recognized during the three and nine months ended September 30, 2019 totaled $ 4.2 million and $ 12.8 million, respectively.

As of September 30, 2020, there was $ 11.3 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied.

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

limited to their targeted award value ($ 2.0 million and $ 1.4 million, respectively) if the Company's total stockholder return is negative over the performance period.

The obligation related to the Cash Awards is classified as a liability and recognized over the vesting period.

Stock-based compensation expense recognized during the three and six months ended June 30, 2020 totaled $ 2.1 million and $ 3.3 million, respectively.

Stock-based compensation expense recognized during the three and six months ended June 30, 2019 totaled $ 4.2 million and $ 8.6 million, respectively.

As of June 30, 2020, there was $ 13.6 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied.

The income tax benefit for the three and six month periods ended June 30, 2020 was calculated using a discrete approach.

The income tax benefit for the three and nine month periods ended September 30, 2020 was calculated using a discrete approach.

This methodology was used because changes in the Company's results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate.

For the three months ended June 30, 2020, the Company's income tax benefit was $ 6.9 million on a pre-tax loss of $ 31.5 million, which includes certain non-deductible expenses.

This compares to an income tax benefit of $ 0.3 million on a pre-tax loss of $ 10.0 million, which includes certain non-deductible expenses, for the three months ended June 30, 2019.

For the six months ended June 30, 2020, the Company's income tax benefit was $ 46.4 million on a pre-tax loss of $ 476.1 million, which included non-cash goodwill charges (approximately $ 313.1 million) and other expenses that are not deductible for income tax purposes.

For the three months ended September 30, 2020, the Company's income tax benefit was $ 7.7 million on a pre-tax loss of $ 27.6 million, which includes certain non-deductible expenses and discrete tax benefits.

This compares to an income tax benefit of $ 6.2 million on a pre-tax loss of $ 38.1 million, which includes certain non-deductible expenses, for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, the Company's income tax benefit was $ 54.1 million on a pre-tax loss of $ 503.7 million, which included non-cash goodwill charges (approximately $ 313.1 million) and other expenses that are not deductible for income tax purposes.

The impact of these non-deductible expenses was partially offset by a $ 16.4 million discrete tax benefit related to the carryback of U.S.

net operating losses under the CARES Act (discussed below).

This compares to an income tax benefit of $ 0.5 million on a pre-tax loss of $ 24.9 million, which includes certain non-deductible expenses, for the six months ended June 30, 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law.

In accordance with the recently established rules and procedures under the CARES Act, the Company has filed carryback claims regarding U.S.

net operating losses generated in 2018 and 2019.

Prior to the enactment of the CARES Act, such tax losses could only be carried forward.

The Company expects to receive refunds related to these carryback claims in 2020 of approximately $ 42.1 million, which are classified as income taxes receivable in the consolidated balance sheet as of June 30, 2020.

net operating losses under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

This compares to an income tax benefit of $ 6.7 million on a pre-tax loss of $ 63.0 million, which includes certain non-deductible expenses, for the nine months ended September 30, 2019.

Segments and Related Information

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They are managed separately because each business often requires different technologies and marketing strategies.

Financial information by business segment for the three and six months ended June 30, 2020 and 2019 is summarized in the following tables (in thousands).

Financial information by business segment for the three and nine months ended September 30, 2020 and 2019 is summarized in the following tables (in thousands).

Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Well Site Services –

Completion Services $ 34,893 $ 12,914 $ ( 14,330 ) $ 1,579 $ 248,715

$ 36,175 $ 13,352 $ ( 22,475 ) $ 1,923 $ 266,438

Drilling Services 2,479 16 458 — 5,166

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Downhole Technologies (1)

18,713 5,701 ( 12,594 ) 78 294,768

Offshore/Manufactured Products 78,674 5,401 3,875 686 541,661

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Total $ 134,759 $ 24,251 $ ( 30,840 ) $ 2,362 $ 1,180,786

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Well Site Services –

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Drilling Services (2)

12,034 3,164 ( 36,495 ) 538 21,464

Total Well Site Services 116,000 20,188 ( 34,776 ) 6,626 518,148

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Total $ 263,697 $ 31,366 $ ( 34,910 ) $ 14,255 $ 1,933,964

(1) Operating loss includes a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of certain of the Completion Services reporting unit’s facilities to their estimated realizable value.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Revenues Depreciation and

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expenditures Total assets

Six months ended June 30, 2020

Nine months ended September 30, 2020

Well Site Services –

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expenditures Total assets

Six months ended June 30, 2019

Nine months ended September 30, 2019

Well Site Services –

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Drilling Services (2)

32,430 9,729 ( 43,655 ) 2,452 21,464

Total Well Site Services 340,358 61,287 ( 45,937 ) 27,423 518,148

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________________

(1) Operating loss includes a non-cash goodwill impairment charge of $ 127.1 million to reduce the carrying value of the Completion Services reporting unit to its estimated fair value, an inventory impairment charge of $ 9.0 million to reduce the carrying value of the Completion Services reporting unit's inventory to its estimated realizable value and a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of certain of the Completion Services reporting unit's facilities to their estimated realizable value.

(2) Operating loss includes a non-cash fixed asset impairment charge of $ 5.2 million to reduce the carrying value of the Drilling Services business's fixed assets to their estimated realizable value.

(3) Operating loss includes non-cash goodwill impairment charge of $ 192.5 million to reduce the carrying value of the Downhole Technologies reporting unit to its estimated fair value.

(4) Operating loss includes a non-cash goodwill impairment charge of $ 86.5 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit to its estimated fair value and an inventory impairment charge of $ 16.2 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit's inventory to its estimated net realizable value.

See Note 3, "Asset Impairments and Other Charges" and Note 4, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges recorded during the first half of 2020.

(1) Operating loss includes a non-cash inventory impairment charge of $ 5.9 million to reduce the carrying of the Downhole Technologies reporting unit's inventory to its estimated realizable value.

(2) Operating loss includes a non-cash fixed asset impairment charge of $ 33.7 million to reduce the carrying value of the Drilling Services reporting unit's fixed assets to their estimated realizable value.

(3) Operating loss includes a non-cash goodwill impairment charge of $ 127.1 million to reduce the carrying value of the Completion Services reporting unit to its estimated fair value, a non-cash inventory impairment charge of $ 9.0 million to reduce the carrying value of the Completion Services reporting unit's inventory to its estimated realizable value and a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of certain of the Completion Services reporting unit's facilities to their estimated realizable value.

(4) Operating loss includes a non-cash fixed asset impairment charge of $ 5.2 million to further reduce the carrying value of the Drilling Services reporting unit's fixed assets to their estimated realizable value.

(5) Operating loss includes a non-cash goodwill impairment charge of $ 192.5 million to reduce the carrying value of the Downhole Technologies reporting unit to its estimated fair value and a non-cash inventory impairment charge of $ 5.9 million to reduce the carrying value of the Downhole Technologies reporting unit's inventory to its estimated realizable value.

(6) Operating loss includes a non-cash goodwill impairment charge of $ 86.5 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit to its estimated fair value and a non-cash inventory impairment charge of $ 16.2 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit's inventory to its estimated net realizable value.

See Note 3, "Asset Impairments and Other Charges" and Note 4, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges recorded during the first nine months of 2020 and 2019.

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

The following tables provide supplemental disaggregated revenue from contracts with customers by business segment for the three and six months ended June 30, 2020 and 2019 (in thousands):

The following tables provide supplemental disaggregated revenue from contracts with customers by business segment for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Well Site Services Downhole Technologies Offshore/Manufactured Products Total

2020 2019 2020 2019 2020 2019 2020 2019

Three months ended June 30

Three months ended September 30

Major revenue categories -

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2020 2019 2020 2019 2020 2019 2020 2019

Six months ended June 30

Nine months ended September 30

Major revenue categories -

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$ 161,173 $ 340,358 $ 74,743 $ 143,912 $ 264,782 $ 294,723 $ 500,698 $ 778,993

No customer individually accounted for 10% of the Company's consolidated revenue for the six months ended June 30, 2020 and 2019.

Revenues from products and services transferred to customers over time accounted for approximately 63 % and 67 % of consolidated revenues for the six months ended June 30, 2020 and 2019, respectively.

No customer individually accounted for 10% of the Company's consolidated revenue for the nine months ended September 30, 2020 and 2019.

Revenues from products and services transferred to customers over time accounted for approximately 62 % and 67 % of consolidated revenues for the nine months ended September 30, 2020 and 2019, respectively.

The balance of revenues for the respective periods relates to products and services transferred to customers at a point in time.

As of June 30, 2020, the Company had $ 151 million of remaining backlog related to contracts with an original expected duration of greater than one year.

Approximately 35 % of this remaining backlog is expected to be recognized as revenue over the remaining six months of 2020, with an additional 33 % in 2021 and the balance thereafter.

As of September 30, 2020, the Company had $ 157 million of remaining backlog related to contracts with an original expected duration of greater than one year.

Approximately 14 % of this remaining backlog is expected to be recognized as revenue over the remaining three months of 2020, with an additional 38 % in 2021 and the balance thereafter.

Commitments and Contingencies

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The overall impact of the pandemic and oil price collapse on the Company and its customers will depend on many factors, many of which are beyond management's control and knowledge.

In response to public health concerns related to COVID-19, many federal, state, local and other authorities around the world have imposed mandatory regulations directing individuals to stay at home and limiting their ability to travel domestically or internationally.

In response to public health concerns related to COVID-19, many federal, state, local and other authorities around the world have imposed mandatory regulations directing individuals to stay at home and have limited their ability to travel domestically or internationally.

In certain cases, when travel is permitted, a multi-week quarantine period is required before an individual can work in the area.

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Facility closures, quarantines, travel restrictions, and possible future workforce shortages may, among numerous other impacts, result in delays by the Company in fulfilling its existing contractual obligations to its customers, which could result in adverse financial consequences.

Additionally, the Company procures a variety of raw materials and component products, including steel, in the

Additionally, the Company procures a variety of raw materials and component products,

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

manufacture of its products from companies which may be impacted similar challenges.

including steel, in the manufacture of its products from companies which may be impacted by similar challenges.

The Company continues to monitor the effect of COVID-19 on its employees, customers, critical suppliers and other stakeholders.

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and global economy and capital markets remains uncertain.

Following the Company's acquisition of GEODynamics in January 2018, the Company determined that certain steel products historically imported by GEODynamics from China for use in its manufacturing process may potentially be subject to anti-dumping and countervailing duties based on recent clarifications/decisions rendered by the U.S.

Department of Commerce and the U.S.

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Customs and Border Protection in September 2018.

In connection with the acquisition of GEODynamics, the seller agreed to indemnify and hold the Company harmless against certain claims related to matters such as this, and the Company has provided notice to and asserted indemnification claims against the seller.

Additionally, the Company is able to set-off payments due under the $ 25.0 million promissory note (see Note 6, "Long-term Debt") issued to the seller of GEODynamics in respect of indemnification claims.

In connection with the acquisition of GEODynamics, the seller of GEODynamics (the "Seller") agreed to indemnify and hold the Company harmless against certain claims related to matters such as this, and the Company has provided notice to and asserted indemnification claims against the Seller.

Additionally, the Company's agreements with the Seller allow the Company to set off payments due under the $ 25.0 million promissory note (see Note 6, "Long-term Debt") issued to the Seller in respect of indemnification claims.

Such note was scheduled to mature on July 12, 2019, but, because the Company has provided notice to and asserted indemnification claims, the maturity date of the note is extended until the resolution of such claim.

The Company expects that the amount ultimately paid in respect of such note will be reduced as a result of these indemnification claims.

Although, as explained below, the Seller now claims the note has matured, the Company believes its position is correct and expects that the amount ultimately paid in respect of such note will be reduced as a result of any payments made to U.S.

Customs and Border Protection associated with these indemnification claims.

In August 2020, the Seller filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries alleging that payments due under the promissory note discussed above have not been repaid in accordance with the terms of the note.

Additionally, the Seller alleges in this suit that it is entitled to approximately $ 19 million in U.S.

federal income tax carryback claims received by the Company under the provisions of the CARES Act legislation enacted in March 2020.

The Company denies the validity of these breach of contract claims and plans to vigorously defend against this lawsuit.

Additionally, in the ordinary course of conducting its business, the Company becomes involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state and local levels.

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Although the Company can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on the Company, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by indemnity or insurance, will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

Related Party Transactions

GEODynamics historically leased certain land and facilities from an equity holder who was employed by the Company through March 31, 2020.

In connection with the acquisition of GEODynamics, the Company assumed these leases.

Rent expense related to leases with this former employee for the three months ended March 31, 2020 totaled $ 44 thousand.

Rent expense related to leases with this former employee for the three and six months ended June 30, 2019 totaled $ 44 thousand and $ 69 thousand, respectively.

Additionally, GEODynamics purchases products from and sells products to a company in which this former employee is an investor.

Sales to this company by GEODynamics were $ 1.8 million for the three months ended March 31, 2020.

Sales to this company by GEODynamics were $ 586 thousand and $ 593 thousand for the three and six months ended June 30, 2019, respectively.

Purchases from this company were $ 414 thousand and $ 825 thousand for the three and six months ended June 30, 2019, respectively.

C autionary Statement Regarding Forward-Looking Statements

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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-Q

Item 1. Financial Statements