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Item 7. Management’s Discussion and Analysis

2021-02-22 compared with 2020-02-21 · 339 added, 398 removed, 203 unchanged (78% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on management's current expectations, estimates and projections about our business operations.

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in "Part II Item 8 Financial Statements and Supplementary Data." This section of this Annual Report on Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019.

Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Annual Report on Form 10-K can be found in "Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 .

This discussion contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations.

Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in "Part I, Item 1A.

We provide a broad range of products and services to the oil and gas industry through our Well Site Services, Downhole Technologies and Offshore/Manufactured Products business segments.

Risk Factors." You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes to those statements included elsewhere in this Annual Report on Form 10‑K in order to understand factors, such as business combinations, charges and credit and financing transactions, which may impact comparability from period to period.

We provide a broad range of products and services to our customers through our three business segments.

Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers' willingness to invest capital in the exploration for and development of crude oil and natural gas reserves.

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As a result, demand for our products and services is largely sensitive to future expectations with respect to crude oil and natural gas prices.

Our consolidated results of operations include contributions from the GEODynamics and Falcon acquisitions completed in the first quarter of 2018.

Our reported results of operations reflect the impact of current industry trends and customer spending activities with investments weighted toward U.S.

shale play regions.

However, in 2019, we began to see a general improvement in the level of planned investments in deepwater markets globally.

Recent Developments

In addition to capital spending, we have invested in acquisitions of businesses complementary to our growth strategy.

Our acquisition strategy has allowed us to leverage our existing and acquired products and services into new geographic locations and has expanded the breadth of our technology and product offerings while allowing us to leverage our cost structure.

We have made strategic and complementary acquisitions in each of our business segments in recent years.

On December 12, 2017 we entered into an agreement to acquire GEODynamics, Inc.

("GEODynamics"), which provides oil and gas perforation systems and downhole tools in support of completion, intervention, wireline and well abandonment operations.

On January 12, 2018, we closed the acquisition of GEODynamics for total consideration of approximately $615 million (the "GEODynamics Acquisition"), consisting of (i) $295 million in cash (net of cash acquired), (ii) approximately 8.66 million shares of our common stock (valued at $34.05 per share on the date of closing) and (iii) an unsecured $25 million promissory note.

In connection with the GEODynamics Acquisition, we completed several financing transactions in 2018 to extend the maturity of our debt and to provide flexibility in repaying outstanding borrowings under the Revolving Credit Facility with anticipated future cash flows from operations.

On January 30, 2018, we sold $200 million aggregate principal amount of our 1.50% convertible senior notes due February 2023 (the "Notes") through a private placement to qualified institutional buyers.

We received net proceeds from the offering of the Notes of approximately $194 million, after deducting issuance costs.

We used the net proceeds to repay a portion of the borrowings outstanding under our Revolving Credit Facility, substantially all of which were drawn to fund the cash portion of the purchase price paid for GEODynamics.

Concurrently with the Notes offering, we amended our Revolving Credit Facility to extend the maturity date to January 2022, permit the issuance of the Notes and provide for up to $350 million in borrowing capacity, subject to certain limitations.

On February 28, 2018, we acquired Falcon Flowback Services, LLC ("Falcon"), a full-service provider of flowback and well testing services for the separation and recovery of fluids, solid debris and proppant used during hydraulic fracturing operations.

Falcon provides additional scale and diversity to our Completion Services operations in key shale plays in the United States.

The acquisition price was $84.2 million in cash, funded with borrowings under our Revolving Credit Facility.

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

As a result of this decision, our Drilling Services business recorded a non-cash impairment charge of $33.7 million to decrease the carrying value of the business' fixed assets to their estimated fair value.

Substantially all of the decommissioned rigs were sold in the fourth quarter of 2019.

During the fourth quarter of 2019, our Downhole Technologies segment recorded a non-cash goodwill impairment charge of $165.0 million due to, among other factors, a reduction in our near-term outlook for demand related to our short-cycle products and services in the U.S.

shale play regions.

See Note 4 , "Details of Selected Balance Sheet Accounts," Note 5 , "Business Acquisitions" and Note 7 , "Long-term Debt" to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion.

Macroeconomic Environment

Our long-term outlook for the energy industry remains constructive – guided by expected population growth, projected future growth in global demand for crude oil, an underinvestment in major offshore projects over the past five years, a decline in the productivity of wells drilled on U.S.

land over recent years and increased capital discipline during 2019 by operators in the U.S.

shale play regions.

Additionally, OPEC, along with Russia, have demonstrated a willingness since late 2016 to adjust crude oil production in an effort to balance crude oil supply and demand in the market.

In December 2019, OPEC and other countries announced further curtailments of crude oil production.

We believe that the currently demonstrated restraint by operators to invest in projects without a reasonable return on investment at lower commodity prices creates the potential for crude oil prices to increase over time as production growth slows, providing for improved market fundamentals over the longer term.

The macroeconomic environment for the energy sector has been and continues to be extremely volatile due to uncertainties regarding short- and medium-term commodity price expectations.

Most recently, this volatility was driven by significant production growth from the U.S.

shale play regions and concerns over the possible slowing of global demand growth.

Following material declines in the fourth quarter of 2018, Brent and WTI crude oil prices averaged $64 and $57 per barrel in 2019 – down 10% and 13% , respectively, compared to 2018 average prices.

While the commodity price environment improved in 2019 relative to the December 2018 lows, the crude oil price outlook and associated volatility continues to have a moderating impact on our customers' operating results and capital spending plans, particularly those operating in the U.S.

Disruptions caused by the COVID-19 pandemic and measures taken to prevent its spread or mitigate its effects both domestically and international have impacted our results of operations.

In March of 2020, the spot price of WTI crude oil declined over 50% in response to actual and forecasted reductions in global demand for crude oil due to the COVID-19 pandemic coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production in an effort to protect market share.

OPEC, its members, and other state-controlled oil companies ultimately agreed to reduce production following the crude oil price collapse and many operators shut-in production in the United States in an effort to address rapidly collapsing demand.

While crude oil prices have recovered some of their losses since reaching record low levels in April of 2020, the spot price of Brent and WTI crude oil averaged $42 and $39 per barrel during 2020 – down 35% and 31%, respectively, from their comparable 2019 averages.

The ultimate magnitude and duration of the COVID-19 pandemic, the timing and extent of governmental restrictions placing limitations on the mobility and ability to work of the worldwide population, and the related impact on crude oil prices, the global economy and capital markets remains uncertain.

While it is difficult to assess or predict with precision the broad future effect of this pandemic on the global economy, the energy industry or us, we expect that the COVID-19 pandemic will continue to adversely affect demand for our products and services in 2021.

Demand for most of our products and services depends substantially on the level of capital expenditures invested in the oil and natural gas industry, which reached 15-year lows in 2020.

The decline in crude oil prices, coupled with higher crude oil inventory levels in 2020, caused rapid reductions in most of our customers' drilling, completion and production activities and their related spending on products and services, particularly those supporting activities in the U.S.

shale play regions.

Consequently, the U.S.

rig count at December 31, 2019 of 805 rigs fell 26% from the most recent peak of 1,083 rigs working in December of 2018 .

Current and expected future pricing for WTI crude will continue to influence our customers' willingness to invest in U.S.

shale play developments as our customers strive for financial discipline and spending levels that are within their capital budgets and cash flows.

These conditions have and may continue to result in a material adverse impact on certain customers' liquidity and financial position, leading to further spending reductions, delays in the collection of amounts owed and, in certain instances, non-payments of amounts owed.

Additionally, future actions among OPEC members and other oil producing nations as to production levels and prices could result in further declines in crude oil prices, which would prove detrimental, particularly given the weak demand environment for crude oil and associated products caused by the ongoing COVID-19 pandemic.

Following the unprecedented events commencing in March 2020, we immediately began aggressive implementation of cost reduction initiatives in an effort to reduce our expenditures to protect the financial health of our company, including the following:

• reduced headcount by 32% between December 31, 2019 and December 31, 2020;

• reduced capital expenditures in 2020 by 77% compared to 2019;

• reduced annual short-term and long-term incentive awards;

• consolidated and closed certain facilities.

Given the COVID-19 induced economic destruction, we assessed the carrying value of goodwill and other assets based on the industry outlook regarding overall demand for and pricing of our products and services.

As a result of these events, actions and assessments, we recorded the following charges during 2020:

• non-cash goodwill impairment charges of $406.1 million to reduce the carrying value of our reporting units to their estimated fair value;

• non-cash impairment charges of $31.2 million to reduce the carrying value of inventory to its estimated realizable value;

• non-cash impairment charges of $12.4 million to decrease the carrying value of our fixed assets and leases to their estimated realizable value;

• employee severance and restructuring charges of $9.1 million.

As discussed in more detail under "– Liquidity, Capital Resources and Other Matters – Financing Activities – Revolving Credit Facility," we amended our existing Revolving Credit Facility during the second quarter of 2020.

In connection with this amendment, the Revolving Credit Facility size was reduced from $350 million to $200 million, with advances subject to a monthly borrowing base calculation, in exchange for suspension of the existing financial covenants from July 1, 2020 through March 30, 2021.

On February 10, 2021, as discussed in more detail under "– Liquidity, Capital Resources and Other Matters – Financing Activities – Asset-based Revolving Credit Facility," we entered into the Asset-based Revolving Credit Facility in order to extend maturity, which provides for a $125.0 million asset-based revolving credit facility under which credit availability is subject to a monthly borrowing base calculation.

The Asset-based Revolving Credit Facility matures in February 2025.

Concurrent with entering into the Asset-based Revolving Credit Facility, the existing Amended Credit Agreement was terminated.

In addition, as discussed in more detail under "– Liquidity, Capital Resources and Other Matters – Financing Activities – 1.50% Convertible Senior Notes due February 2023," we opportunistically purchased a total of $34.9 million principal amount of the Notes for $20.1 million in cash and recognized non-cash gains totaling $10.7 million during 2020.

See Note 3, "Asset Impairments and Other Charges," Note 4, "Details of Selected Balance Sheet Accounts," Note 6, "Goodwill and Other Intangible Assets," Note 7, "Long-term Debt," and Note 8, "Operating Leases," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion.

The crude oil and natural gas industry is highly cyclical which may result in declines in the demand for, and prices of, our products and services, the inability or failure of our customers to meet their obligations to us or a sustained decline in our market capitalization.

These and other potentially adverse market conditions could require us to incur additional asset impairment charges, record additional deferred tax valuation allowances and/or further write down the value of our goodwill and other intangible assets, and may otherwise adversely impact our results of operations, our cash flows and our financial position.

Current and expected future pricing for WTI crude oil, along with a belief that regulatory access will be allowed, are factors that will continue to influence our customers' willingness to invest in U.S.

shale play developments as they allocate capital and strive for financial discipline and spending levels that are within their capital budgets and cash flows.

Expectations for the longer-term price for Brent crude oil will continue to influence our customers' spending related to global offshore drilling and development and, thus, a significant portion of the activity of our Offshore/Manufactured Products segment.

There remains a likelihood that crude oil prices could remain highly volatile due to increases in global inventory levels, increasing domestic or international crude oil production, trade tensions with China, sanctions on Iranian production and tensions with Iran, civil unrest in Libya and Venezuela, increasing price differentials between markets, slowing growth rates in China and other global regions, use of alternative fuels, improved vehicle fuel efficiency, a more sustained movement to electric vehicles and/or the potential for ongoing supply/demand imbalances.

However, if the global supply of crude oil were to decrease due to a prolonged reduction in capital investment by our customers or if government instability in a major oil-producing nation develops, and energy demand were to continue to increase, a sustained recovery in WTI and Brent crude oil prices could occur.

Crude oil prices are likely to remain highly volatile due to numerous factors, including global uncertainties related to the COVID-19 pandemic, higher global inventory levels, increasing domestic or international crude oil production, changes in governmental regulations, trade tensions with China, sanctions on Iranian production and tensions with Iran, civil unrest in Libya and Venezuela, use of alternative fuels, improved vehicle fuel efficiency, a more sustained movement to electric vehicles and/or the potential for ongoing supply/demand imbalances.

Capital investment by our customers is at a 15-year low.

This underinvestment coupled with potential instability in foreign producing nations could lead to a sustained recovery in WTI and Brent crude oil prices as demand recovers following the pandemic.

In any event, crude oil price improvements will depend upon the balance of global supply and demand, with a corresponding continued reduction in global inventories.

Customer spending in the natural gas shale plays has been limited due to natural gas production from prolific basins in the Northeastern United States and from associated gas produced from the drilling and completion of unconventional oil wells in North America.

Customer spending in the natural gas shale plays has been limited due to significant technological advancements that have led to significant amounts of natural gas being produced from prolific basins in the Northeastern United States and from associated gas produced from the drilling and completion of unconventional oil wells in North America.

Recent WTI crude oil, Brent crude oil and natural gas pricing trends are as follows:

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Average price (1) for year ended December 31

Year March 31 June 30 September 30 December 31

WTI Crude (per bbl)

2020 $ 45.34 $ 27.96 $ 40.89 $ 42.52 $ 39.16

2019 54.82 59.88 56.34 56.82 56.98

2018 62.91 68.07 69.70 59.97 65.25

Brent Crude (per bbl)

2020 $ 50.27 $ 29.70 $ 42.91 $ 44.32 $ 41.96

2019 63.10 69.01 61.95 63.17 64.26

2018 66.86 74.53 75.08 68.76 71.32

Henry Hub Natural Gas (per MMBtu)

2020 $ 1.91 $ 1.70 $ 2.00 $ 2.52 $ 2.03

2019 2.92 2.57 2.38 2.40 2.56

2018 3.08 2.85 2.93 3.77 3.15

____________________

Energy Information Administration.

As of February 18, 2020, WTI crude oil, Brent crude oil and natural gas traded at approximately $52.10 per barrel, $57.35 per barrel and $2.04 per mmBtu, respectively.

Our Well Site Services segment provides completion services and, to a much lesser extent land drilling services, in the United States (including the Gulf of Mexico) and the rest of the world.

drilling and completion activity and, in turn, our Well Site Services results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of its operations.

Within this segment, our Completion Services business supplies equipment and service personnel utilized in the completion and initial production of new and recompleted wells.

Activity for the Completion Services business is dependent primarily upon the level and complexity of drilling, completion, and workover activity in the areas of operations mentioned above.

As of February 12, 2021, WTI crude oil, Brent crude oil and natural gas traded at $59.50 per barrel, $62.47 per barrel and $6.12 per MMBtu, respectively.

drilling and completion activity and, in turn, our financial results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of our U.S.

We primarily supply equipment and service personnel utilized in the completion and initial production of new and recompleted wells.

activity is dependent primarily upon the level and complexity of drilling, completion, and workover activity in our areas of operations.

Well intensity and complexity has increased with the continuing transition to multi-well pads, the drilling of longer lateral wells and increased downhole pressures, along with the increased number of frac stages completed in horizontal wells.

Similarly, demand for our Drilling Services operations has historically been driven by activity in our primary land drilling markets of the Permian Basin in West Texas and the U.S.

Rocky Mountain area.

Prospectively, the operations will primarily focus on serving operators in the U.S.

Rocky Mountain region.

See Note 4 , "Details of Selected Balance Sheet Accounts," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Our Downhole Technologies segment is comprised of the GEODynamics business we acquired in January 2018.

GEODynamics was founded in 2004 as a researcher, developer and manufacturer of consumable engineered products used in completion applications.

This segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations.

Our Downhole Technologies segment, comprised of the GEODynamics business we acquired in January 2018, provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations.

This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies.

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Additional offerings include proprietary toe valve and frac plug products, which are focused on zonal isolation for hydraulic fracturing of horizontal wells, and a broad range of consumable products, such as setting tools and bridge plugs, that are used in completion, intervention and decommissioning applications.

Demand drivers for the Downhole Technologies segment include continued trends toward longer lateral lengths, increased frac stages and more perforation clusters to target increased unconventional well productivity.

Demand for our Well Site Services and Downhole Technologies segments' businesses is highly correlated to changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the drilling rig count.

Demand for our completion products and services within each of our segments is highly correlated to changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the drilling rig count.

The following table sets forth a summary of the average U.S.

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Average Rig Count for Year Ended December 31,

2020 2019 2018

Land – Oil 288 329 753 826

Land – Natural gas and other 91 87 165 185

Over recent years, our industry experienced an increase in customer spending on crude oil and liquids-rich exploration and development activities in U.S.

Offshore 18 17 25 21

Total 397 433 943 1,032

energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S.

shale plays utilizing horizontal drilling and completion techniques.

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rig count – with the balance largely natural gas related.

Following the significant decline in crude oil prices in the fourth quarter of 2018, coupled with customer spending within their cash flows, the U.S.

rig count declined steadily during the 2019 and exited the year at 805 rigs – 278 rigs, or 26% , below the level reported at the end of 2018.

Due to the unprecedented decline in crude oil prices in March and April of 2020, drilling and completion activity in the United States collapsed – with the active drilling rig count declining 52% from March 31, 2020 to 351 rigs working as of December 31, 2020.

As a result, the average U.S.

rig count in 2019 decreased 89 rigs, or 9% , from the level reported in 2018 .

rig count in 2020 decreased by 510 rigs, or 54%, from the 2019 average.

Our Offshore/Manufactured Products segment provides technology-driven, highly-engineered products and services for offshore oil and natural gas production systems and facilities, as well as certain products and services to the offshore and land-based drilling and completion markets.

This segment is particularly influenced by global deepwater drilling and production spending, which are primarily driven by our customers' longer-term commodity demand forecasts and outlook for crude oil and natural gas prices.

Approximately 60% of Offshore/Manufactured Products sales in 2016 were driven by our customers' capital spending for offshore production systems and subsea pipelines, repairs and, to a lesser extent, upgrades of existing offshore drilling rigs and construction of new offshore drilling rigs and vessels (referred to herein as "project-driven products").

While increasing substantially from levels reported in 2017 and 2018, these activities only represented approximately 40% of the segment's revenue in 2019 .

Deepwater oil

and gas development projects typically involve significant capital investments and multi-year development plans.

This segment is particularly influenced by global spending on deepwater drilling and production, which is primarily driven by our customers' longer-term commodity demand forecasts and outlook for crude oil and natural gas prices.

Approximately 49% of Offshore/Manufactured Products sales in 2020 were driven by our customers' capital spending for products used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as "project-driven products").

Deepwater oil and gas development projects typically involve significant capital investments and multi-year development plans.

Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies ("IOCs") and state-run national oil companies ("NOCs")) using relatively conservative crude oil and natural gas pricing assumptions.

Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are less susceptible to short-term fluctuations in the price of crude oil and natural gas.

However, lower crude oil prices that have persisted since 2014, coupled with the relatively uncertain outlook around shorter-term and possibly longer-term pricing improvements, led exploration and production companies to reduce their capital expenditures in regards to these deepwater projects since they are expensive to drill and complete, have long lead times to first production and may be considered uneconomical relative to the risk involved.

Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to short-term fluctuations in the price of crude oil and natural gas.

Customers have focused on improving the economics of major deepwater projects at lower commodity breakeven prices by re-bidding projects, identifying advancements in technology, and reducing overall project costs through equipment standardization.

This resulted in reduced bidding and quoting activity, as well as reduced orders from customers and backlog levels, for our Offshore/Manufactured Products segment in 2017 and 2018 relative to 2014.

Bidding and quoting activity, along with orders from customers, for deepwater projects improved in 2019 from 2018 levels and the potential for future awards appears to be improving.

Reflecting increased project award activity, backlog in our Offshore/Manufactured Products segment increased from $179 million at December 31, 2018 to $280 million at December 31, 2019 .

The segment received four notable orders during 2019 for production facility content destined for South America and Southeast Asia, as well as connector products destined for the Middle East and military products for the United States.

Bidding and quoting activity, along with orders from customers, for deepwater projects improved in 2019 from 2018 levels.

However, with reduced market visibility given the significant decline in crude oil prices, which began in March of 2020, and associated reductions in customer spending, the segment's 2020 bookings were lower than the levels achieved in 2019.

Backlog reported by our Offshore/Manufactured Products segment decreased from $280 million as of December 31, 2019 to $219 million as of December 31, 2020.

The following table sets forth backlog reported by our Offshore/Manufactured Products segment as of the dates indicated (in millions).

Backlog as of

Reduced demand for our products and services, coupled with a reduction in the prices we charge our customers for our services, has adversely affected our results of operations, cash flows and financial position since the second half of 2014.

If the current pricing environment for crude oil does not improve, or declines, our customers may be required to further reduce their capital expenditures, causing additional declines in the demand for, and prices of, our products and services, which would adversely affect our results of operations, cash flows and financial position.

Year March 31 June 30 September 30 December 31

2020 $ 267 $ 235 $ 227 $ 219

2019 234 283 293 280

2018 157 165 175 179

Reduced demand for our products and services, coupled with a reduction in the prices we are able to charge our customers for our products and services, has adversely affected our results of operations, cash flows and financial position.

While the current pricing environment for crude oil has improved from the levels experienced in 2020, if prices were to decline, our customers may be required to further reduce their capital expenditures, causing additional declines in the demand for, and prices of, our products and services, which would adversely affect our results of operations, cash flows and financial position.

We use a variety of domestically produced and imported raw materials and component products, including steel, in manufacturing our products.

The United States recently imposed tariffs on a variety of imported products, including steel and aluminum.

The United States has imposed tariffs on a variety of imported products, including steel and aluminum.

In response to the U.S.

tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs.

The effect of these new tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continue to evolve, and we continue to monitor these matters.

The effect of these tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continue to evolve, and we continue to monitor these matters.

If we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase as a result of customs, anti-dumping and countervailing duty regulations or otherwise, and we are unable to pass corresponding cost increases on to our customers, our financial position and results of operations could be adversely affected.

Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.

Other factors that can affect our business and financial results include but are not limited to the general global economic environment, competitive pricing pressures, regulatory changes and changes in tax laws in the United States and international markets.

We continue to monitor the global economy, the prices of and demand for crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.

See Note 14, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Other factors that can affect our business and financial results include but are not limited to the general global economic environment, competitive pricing pressures, public health crises, climate-related and other regulatory changes, and changes in tax laws in the United States and international markets.

We continue to monitor the global economy, the demand for and prices of crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.

Consolidated Results of Operations

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Well Site Services, Downhole Technologies and Offshore/Manufactured Products.

Selected financial information by business segment for the years ended December 31, 2019 , 2018 and 2017 is summarized as follows (dollars in thousands):

Selected financial information by business segment for the years ended December 31, 2020 and 2019 follows (in thousands):

Year Ended December 31,

2020 2019 Variance 2020 vs.

Variance 2018 vs.

Well Site Services -

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Drilling Services (1)

8,310 41,346 (33,036)

Total Well Site Services 199,839 432,094 (232,255)

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Total Offshore/Manufactured Products 340,300 402,946 (62,646)

Total $ 638,075 $ 1,017,354 $ (379,279)

Operating income (loss)

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Completion Services (2)

Drilling Services (1)

Total Well Site Services

Downhole Technologies (2)

Offshore/Manufactured Products

Operating income (loss) as a percentage of revenues

Well Site Services -

Completion Services

$ (187,869) $ (11,621) $ (176,248)

Drilling Services (1)

(5,519) (43,419) 37,900

Total Well Site Services (193,388) (55,040) (138,348)

Downhole Technologies (3)

(224,414) (164,008) (60,406)

Offshore/Manufactured Products (4)

(80,794) 36,022 (116,816)

Operating loss includes a non-cash fixed asset impairment charge of $33.7 million in 2019 to decrease the carrying value of the Drilling Services business' fixed assets to their estimated fair value.

See Note 4 , "Details of Selected Balance Sheet Accounts," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Operating loss includes a non-cash goodwill impairment charge of $165.0 million in 2019 to reduce the carrying value of the Downhole Technologies segment to its estimated fair value.

See Note 6 , "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

"n.m." indicates percentage is considered not meaningful.

Corporate (35,744) (45,154) 9,410

$ (534,340) $ (228,180) $ (306,160)

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(1) In late 2019, we reduced the scope of our Drilling Services business due to weakness in customer demand for vertical drilling rigs in the U.S., resulting in a non-cash fixed asset impairment charge of $33.7 million in 2019.

Operating loss included a non-cash fixed asset impairment charge of $5.2 million in 2020.

(2) Operating loss in 2020 included a non-cash inventory impairment charge of $9.0 million, a non-cash goodwill impairment charge of $127.1 million and a non-cash fixed asset impairment charge of $3.6 million.

(3) Operating loss in 2020 and 2019 included non-cash goodwill impairment charges of $192.5 million and $165.0 million, respectively.

Operating loss in 2020 also included a non-cash inventory impairment charge of $5.9 million and other non-cash asset impairment charges of $3.6 million.

(4) Operating loss in 2020 included a non-cash inventory impairment charge of $16.2 million and a non-cash goodwill impairment charge of $86.5 million.

(5) Operating loss included non-cash asset impairment charges totaling $449.7 million and $198.7 million in 2020 and 2019, respectively.

See Note 3, "Asset Impairments and Other Charges," Note 4, "Details of Selected Balance Sheet Accounts," Note 6, "Goodwill and Other Intangible Assets," and Note 8, "Operating Leases," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of these and other charges recognized in 2020 and 2019.

YEAR ENDED DECEMBER 31, 2020 COMPARED TO YEAR ENDED DECEMBER 31, 2019

Net loss for the year ended December 31, 2019 was $231.8 million , or $3.90 per diluted share, which included non-cash impairment charges of $165.0 million ( $2.78 per diluted share) related to a write down of goodwill and $33.7 million ( $26.6 million after-tax, or $0.45 per diluted share) related to a write down of fixed assets, as well as $3.5 million ( $2.8 million after-tax, or $0.05 per diluted share) of severance and downsizing charges.

These results compare to a net loss for the year ended December 31, 2018 of $19.1 million, or $0.33 per diluted share, which included $8.4 million ($6.6 million after-tax, or $0.11 per diluted share) of charges related to legal fees incurred for patent defense, $3.3 million ($2.6 million after-tax, or $0.04 per diluted share) of transaction-related expenses, a $3.0 million ($2.4 million after-tax, or $0.04 per diluted share) provision for Fair Labor Standards Act ("FLSA") claim settlements and $1.6 million ($1.3 million after-tax, or $0.02 per diluted share) of severance and downsizing charges.

Additionally, during the year ended December 31, 2018 the Company recognized a $5.8 million ($0.10 per diluted share) income tax benefit related to a change in its December 2017 provisional estimates with respect to U.S.

tax reform legislation.

Our consolidated results of operations include contributions from the GEODynamics and Falcon acquisitions completed in the first quarter of 2018.

Our reported results of operations reflect the impact of industry trends and customer spending activities with investments weighted toward U.S.

shale play regions.

However, in 2019 we began to see a general improvement in the level of planned investments in deepwater markets globally.

During 2019 , the average price of WTI crude oil declined approximately 13% from the 2018 average price.

This decline in crude oil prices had a negative impact on U.S.

land-based customer drilling and completion activity, particularly in the U.S.

shale play regions.

We expect customer-driven activity to remain tempered in early 2020 as operators strive for financial discipline and spending levels that are within their capital budgets and cash flows.

Consolidated total revenues decreased $70.8 million , or 7% , in 2019 compared to 2018 .

We reported a net loss for the year ended December 31, 2020 of $468.4 million, or $7.83 per share.

The reported loss included non-cash impairment charges totaling $449.7 million ($421.5 million after tax, or $7.04 per share) related to write downs of goodwill, inventories, fixed assets and leases;

$9.1 million ($7.2 million after-tax, or $0.12 per share) of severance and restructuring charges;

non-cash gains of $10.7 million ($8.5 million after-tax, or $0.14 per share) associated with convertible debt extinguishment;

and discrete tax benefits of $16.4 million, or $0.27 per share, associated with the carryback of tax losses allowed under the CARES Act.

These results compare to a net loss for the year ended December 31, 2019 of $231.8 million, or $3.90 per share, which included non-cash goodwill and fixed asset impairment charges totaling $198.7 million ($191.6 million after-tax, or $3.23 per share), and $3.5 million ($2.8 million after-tax, or $0.05 per share) of severance and restructuring charges.

Our reported results of operations for 2020 reflect the negative impact of the unprecedented decline in crude oil prices starting in March and April of 2020 stemming from the global response to the COVID-19 pandemic and ongoing uncertainties related to future crude oil demand.

The spot price of WTI crude oil averaged $39 per barrel in 2020, down 31% from the prior-year average.

The decline in crude oil prices, coupled with high crude oil inventory levels, had a negative impact on customer drilling, completion and production activity beginning in March of 2020.

Additionally, our operations were negatively impacted by government-imposed business closures and mandates outside of the United States enacted in an effort to control the COVID-19 pandemic, which limited wellsite operations and required us and a number of our suppliers to temporarily cease certain operations.

We expect customer-driven activity to improve off of 2020's low levels but remain tempered in 2021 given continued high crude oil inventory levels and uncertainty around demand recovery due to the continued severity of the COVID-19 pandemic.

If the current pricing environment for crude oil does not continue to improve, or declines, our customers may be required to further reduce their planned capital expenditures, causing additional declines in the demand for, and prices of, our products and services.

Consolidated total revenues in 2020 decreased $379.3 million, or 37%, from 2019.

Consolidated product revenues in 2020 decreased $152.1 million, or 31%, from 2019 driven primarily by lower U.S.

land-based customer activity and the impact of competitive pricing pressures for conventional perforating products in our Downhole Technologies segment, partially offset by higher project-driven sales within our Offshore/Manufactured Products segment.

Consolidated service revenues for 2019 decreased $52.3 million , or 9% , from 2018 with the impact, particularly on the Well Site Services segment, of lower customer spending in the U.S.

shale play regions partially offset by two additional months of revenue generated by the Falcon operations (acquired February 28, 2018).

As can be derived from the following table, 73% of our consolidated revenues in 2019 were related to our short-cycle product and service offerings, which compared to 77% in 2018 .

The following table provides disaggregated revenue information by operating segment for the years ended December 31, 2019 and 2018 (in thousands):

Well Site Services

Downhole Technologies

Offshore/ Manufactured Products

land-based customer activity as well as the associated impact of competitive pricing pressures for products in our Downhole Technologies segment, partially offset by higher project-driven sales in our Offshore/Manufactured Products segment.

Consolidated service revenues for 2020 decreased $227.2 million, or 43%, from 2019 due primarily to reduced customer spending in the U.S.

shale play regions.

As can be derived from the following table, 54% of our consolidated revenues in 2020 were related to our short-cycle product and service offerings, which compared to 73% in 2019, reflecting the negative impact of the COVID-19 pandemic on our U.S.

The following table provides supplemental disaggregated revenue information by operating segment for the years ended December 31, 2020 and 2019 (in thousands):

Well Site Services Downhole Technologies Offshore/ Manufactured Products Total

2020 2019 2020 2019 2020 2019 2020 2019

Major revenue categories -

5 unchanged sentences

Other products and services — — — — 126,661 120,519 126,661 120,519

$ 199,839 $ 432,094 $ 97,936 $ 182,314 $ 340,300 $ 402,946 $ 638,075 $ 1,017,354

Percentage of total revenue by type -

Products — % — % 93 % 97 % 71 % 76 % 52 % 48 %

Services 100 % 100 % 7 % 3 % 29 % 24 % 48 % 52 %

Cost of Revenues (exclusive of Depreciation and Amortization Expense).

Our consolidated cost of revenues (exclusive of depreciation and amortization expense) decreased $31.9 million , or 4% , in 2019 compared to 2018 .

Consolidated product costs in 2019 increased $2.7 million , or 1% , from 2018 (compared to a 4% decrease in product revenue) as a result of a shift in revenue mix between short-cycle and project-driven products, which generally have higher relative costs, and increased costs within the Downhole Technologies segment.

Consolidated service costs for 2019 decreased $34.7 million , or 7% , from 2018 , which included the impact of $3.0 million in costs associated with the settlement of FLSA claims.

The balance of the decrease in service costs from 2018 is due primarily to activity-driven revenue declines within the Well Site Services segment, partially offset by incremental costs in the Downhole Technologies segment associated with an expansion of field support operations.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $240.8 million, or 30%, in 2020 compared to 2019.

Cost of revenues in 2020 included non-cash inventory impairment provisions totaling $31.2 million – driven by the unprecedented market downturn which began in March of 2020.

Excluding these 2020 provisions, consolidated cost of revenues decreased $271.9 million, or 34%, from 2019.

Consolidated product costs in 2020, which included non-cash inventory impairment provisions of $17.9 million, decreased $81.6 million, or 22%, from 2019.

Excluding these charges, consolidated product costs decreased $99.5 million, or 27%, from the prior-year period.

Consolidated service costs for 2020, which included non-cash inventory impairment provisions of $13.3 million, decreased $159.2 million, or 37%, from 2019.

Excluding these inventory impairment provisions, consolidated service costs declined $172.5 million, or 40%, due primarily to significantly lower activity levels in the U.S.

shale play regions.

Selling, General and Administrative Expense.

Selling, general and administrative expense decreased $15.1 million , or 11% , in 2019 from 2018 .

The expense in 2018 included $8.4 million of patent defense costs and $1.0 million of transaction-related costs.

Excluding these items from 2018 , selling, general and administrative expense declined $5.7 million, or 4%, due primarily to a year-over-year reduction in stock-based compensation expense.

Selling, general and administrative expense decreased $28.8 million, or 23%, in 2020 from 2019 due primarily to reductions in short- and long-term compensation costs, personnel levels, travel expense and other implemented cost-saving initiatives.

Depreciation and Amortization Expense.

Depreciation and amortization expense was relatively consistent between the 2019 and 2018 periods, with the impact of the GEODynamics and Falcon operations acquired in the first quarter of 2018 partially offset by reduced capital investments and certain assets becoming fully depreciated.

Note 15 , "Segments and Related Information," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K presents depreciation and amortization expense by segment.

Impairment of Goodwill.

During the fourth quarter of 2019, our Downhole Technologies segment recognized a non-cash impairment charge of $165.0 million to reduce the carrying value of the segment's goodwill.

Depreciation and amortization expense decreased $24.8 million, or 20%, in 2020 compared to the prior-year period, driven primarily by our decision to exit drilling operations in West Texas in the third quarter of 2019 along with reduced capital investments made in our Completion Services business in recent years.

See Note 15, "Segments and Related Information," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for expense by segment.

Impairments of Goodwill.

During the first quarter of 2020, our Completion Services, Downhole Technologies and Offshore/Manufactured Products operations recognized non-cash goodwill impairment charges of $127.1 million, $192.5 million and $86.5 million, respectively, arising from, among other factors, the significant decline in our stock price (and that of most of our peers) and reduced growth rate expectations given weak energy market conditions resulting from the demand destruction caused by the global response to the COVID-19 pandemic.

In addition, the estimated returns required by market participants increased materially in our March 31, 2020 assessment from our assessment as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

During the fourth quarter of 2019, our Downhole Technologies segment recognized a non-cash goodwill impairment charge of $165.0 million.

See Note 6, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Impairment of Fixed Assets.

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

As a result of this decision, our Drilling Services business recorded a non-cash impairment charge of $33.7 million to decrease the carrying value of the unit’s fixed assets to their estimated fair value.

See Note 4 , "Details of Selected Balance Sheet Accounts," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Other Operating Income , Net.

Other operating income decreased slightly from 2018 , totaling $2.0 million in 2019 .

During 2018, our Offshore/Manufactured Products segment recognized a gain of $3.9 million in settlement of a Hurricane Harvey flood insurance claim, which was partially offset by $2.3 million in transaction-related expenses.

Other operating income in 2019 is primarily related to an insurance recovery.

Impairments of Fixed and Lease Assets.

During 2020, our Drilling Services, Completion Services and Downhole Technologies businesses recognized non-cash fixed asset and lease impairment charges of $5.2 million, $3.6 million and $3.6 million, respectively, following the significant decline in crude oil prices beginning in March of 2020 and our decisions to consolidate and exit certain facilities.

During the third quarter of 2019, we made the strategic decision to reduce the scope of our Drilling Services business due to ongoing weakness in customer demand for vertical drilling rigs in the U.S.

As a result of this decision, our Drilling Services business recorded a non-cash impairment charge of $33.7 million.

See Note 4, "Details of Selected Balance Sheet Accounts," and Note 8, "Operating Leases," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Operating Loss.

Our consolidated operating loss was $228.2 million in 2019 , which included t he impact of $198.7 million in non-cash goodwill and fixed asset impairment charges discussed previously and $3.5 million of severance and downsizing charges.

This compares to a consolidated operating loss of $5.9 million in 2018, which included $11.4 million of costs associated with patent defense and settlement of FLSA claims, $3.3 million of transaction-related expense and $1.6 million of severance and downsizing charges partially offset by the $3.9 million gain related to the insurance settlement discussed above.

Our consolidated operating loss was $534.3 million in 2020, which included $418.5 million in non-cash goodwill, inventory, fixed asset and lease impairment charges and $9.1 million of severance and restructuring charges.

This compares to a consolidated operating loss of $228.2 million in 2019, which included $198.7 million in non-cash goodwill and fixed asset impairment charges and $3.5 million of severance and restructuring charges.

Interest Expense, Net.

Net interest expense was $17.6 million in 2019 , a decrease of $1.4 million from 2018 .

Interest expense, which includes amortization of debt discount and deferred financing costs, as a percentage of total average debt outstanding was approximately 6% in both 2019 and 2018 .

Our contractual cash interest expense as a percentage of total debt outstanding was substantially lower – averaging approximately 3% in both 2019 and 2018 .

Net interest expense totaled $13.9 million in 2020, a decrease of $3.8 million from 2019 due to reductions in the level of debt outstanding.

Interest expense, which included amortization of debt discount and deferred financing costs, as a percentage of total average debt outstanding was approximately 6% in both 2020 and 2019.

Our contractual cash interest expense as a percentage of total debt outstanding was substantially lower – averaging approximately 2% in 2020 and 3% in 2019.

In connection with our adoption of the recent revision to accounting guidance for convertible instruments on January 1, 2021, interest expense associated with the Notes in 2021 will decrease to approximately 2% of the outstanding principal balance, which compares to the contractual interest rate of 1.50%.

Additionally, we expect to recognize a non-cash expense of approximately $0.6 million for previously deferred financing costs associated with our Amended Revolving Credit Facility that will be written off in the first quarter of 2021.

Other Income, Net.

Other income, net, consisting primarily of gains recognized on the sale of property and equipment, was $5.1 million in 2019 , an increase of $2.0 million from 2018 .

Our income tax benefit for 2019 was $8.9 million on a pre-tax loss of $240.7 million , which included a non-cash goodwill impairment charge of $165.0 million and other expenses that are not deductible for tax purposes.

This compares to an income tax benefit for 2018 of $2.6 million on a pre-tax loss of $21.7 million, which included a $5.8 million discrete tax benefit related to U.S.

tax reform guidance as well as other discrete tax attributes.

Other income, net in 2020 included non-cash gains of $10.7 million recognized in connection with purchases of $34.9 million principal amount of the Notes for $20.1 million in cash, with the balance consisting primarily of gains recognized on the sale of property and equipment.

Our income tax benefit for 2020 totaled $65.9 million on a pre-tax loss of $534.3 million, which included non-cash goodwill impairment charges (approximately $313.1 million) and other expenses that are not deductible for tax purposes.

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

federal net operating losses under the CARES Act.

This compares to an income tax benefit for 2019 of $8.9 million on a pre-tax loss of $240.7 million, which included a non-cash goodwill impairment charge of $165.0 million and other expenses that are not deductible for tax purposes.

Other Comprehensive Income (Loss).

Reported comprehensive loss is the sum of the reported net income (loss) and other comprehensive income (loss).

Other comprehensive income was $3.7 million in 2019 compared to other comprehensive loss of $12.9 million in 2018 due to fluctuations in foreign currency exchange rates compared to the U.S.

Other comprehensive loss was $3.6 million in 2020 compared to other comprehensive income of $3.7 million in 2019 due to fluctuations in foreign currency exchange rates compared to the U.S.

dollar for certain of the international operations of our reportable segments.

For 2020 and 2019, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

In 2019 , the exchange rate for the British

pound strengthened compared to the U.S.

During both 2020 and 2019, the exchange rate for the British pound strengthened compared to the U.S.

dollar, while the Brazilian real weakened compared to the U.S.

During 2018 , the exchange rates for the British pound and the Brazilian real weakened compared to the U.S.

Segment Operating Results

1 unchanged sentence

Our Well Site Services segment revenues decreased $232.3 million, or 54%, in 2020 compared to 2019.

Completion Services revenue decreased $20.3 million , or 5% , due to a significant decrease in U.S.

land-based customer drilling and completion activity following the decline in commodity prices in the fourth quarter of 2018, partially offset by the impact of two additional months of revenue generated by the Falcon operations (acquired February 28, 2018).

Our Drilling Services revenues decreased $27.9 million , or 40% , to $41.3 million in 2019 from 2018 due to a reduction in customer vertical drilling operations in 2019 and our exit of drilling operations in the West Texas region in the fourth quarter of 2019.

Completion Services revenue decreased $199.2 million, or 51%, driven by the decline in U.S.

land-based customer completion and production activity in response to lower commodity prices.

Our Drilling Services revenues decreased $33.0 million, or 80%, year-over-year due primarily to our exit of drilling operations in the West Texas region in the fourth quarter of 2019.

Operating Loss.

Our Well Site Services segment operating loss increased $38.0 million in 2019 from 2018 due primarily to the $33.7 million non-cash fixed asset impairment charge recorded in Drilling Services.

Our Completion Services operating loss increased by $4.0 million in 2019 compared to 2018 , which included $3.0 million in charges (presented within cost of services) associated with additional reserves established for the final settlement of legacy FLSA claims.

Our Drilling Services operating loss increased $34.1 million in 2019 from 2018 due principally to the $33.7 million non-cash fixed asset impairment charge discussed previously.

During 2020 and 2019, our Well Site Services segment recorded non-cash impairment charges totaling $144.9 million and $33.7 million, respectively.

Excluding these impairment charges, our Well Site Services segment operating loss increased $27.2 million in 2020 from 2019.

Our Completion Services operating loss in 2020, after excluding non-cash impairment charges, was $48.2 million, compared to an operating loss of $11.6 million in the prior-year period, given a 51% decrease in revenues and $4.1 million of severance and restructuring charges partially offset by a $15.5 million reduction in depreciation expense.

After excluding non-cash fixed asset impairment charges, our Drilling Services operating loss in 2020 was $0.3 million, compared to an operating loss of $9.7 million in the prior-year period.

Downhole Technologies

Our Downhole Technologies segment revenues decreased $84.4 million, or 46%, in 2020 compared to 2019 due primarily to a decline in U.S.

land-based customer completion activity, competitive pricing pressures for certain of its conventional perforating products and a market shift toward sales of integrated perforating gun systems, which the segment did not commercialize until late 2019.

land-based customer completion activity and competitive pricing pressures.

Operating Income (Loss).

During 2019, our Downhole Technologies segment recognized a non-cash impairment charge of $165.0 million to reduce the carrying value of goodwill.

Excluding this charge, operating income declined $25.7 million in 2019 from 2018 due primarily to the decline in revenues coupled with an expansion of field support operations, higher product and engineering costs and $1.4 million of inventory write-offs due to product design changes.

Prior-year results included $8.4 million in patent defense costs incurred after our acquisition of GEODynamics.

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues increased $8.9 million , or 2% , in 2019 compared to 2018 with higher sales of project-driven products partially offset by a decrease in sales of short-cycle products and other products and services.

Operating Income.

Our Offshore/Manufactured Products segment operating income decreased $2.9 million , or 7% , in 2019 compared to 2018 .

Operating results in 2019 included a $1.7 million provision for bad debt on a prior-year receivable from a customer claiming bankruptcy protection, while results for 2018 included a gain of $3.9 million associated with an insurance settlement.

To a lesser extent, reported segment results for 2019 and 2018 were reduced by severance and downsizing-related expenses of $1.7 million and $1.5 million , respectively.

Bidding and quoting activity, along with orders from customers, for our Offshore/Manufactured Products segment improved during 2019 , with deepwater project awards increasing for a second consecutive year .

Backlog in ou r Offshore/Manufactured Products increased 57% during 2019 to total $280 million as of December 31, 2019 .

Orders totaled $523 million in 2019 , resulting in a book-to-bill ratio of 1.3 x.

Expenses decreased $9.3 million , or 17% , in 2019 from 2018 due primarily to a $5.9 million year-over-year decrease in stock-based compensation, a $1.6 million insurance benefit recognized in the fourth quarter of 2019 and $3.0 million in nonrecurring transaction-related expenses incurred during 2018 in connection with the acquisitions of GEODynamics and Falcon.

YEAR ENDED DECEMBER 31, 2018 COMPARED TO YEAR ENDED DECEMBER 31, 2017

Net loss for the year ended December 31, 2018 was $19.1 million, or $0.33 per diluted share, which included $8.4 million ($6.6 million after-tax, or $0.11 per diluted share) of charges related to legal fees incurred for patent defense and $3.0 million in reserves ($2.4 million after-tax, or $0.04 per diluted share) for prior years' FLSA claim settlements, $3.3 million ($2.6 million after-tax, or $0.04 per diluted share) of transaction-related expenses and $1.6 million ($1.3 million after-tax, or $0.02 per diluted share) of severance and downsizing charges.

tax reform legislation.

These results compare to a net loss for the year ended December 31, 2017 of $84.9 million, or $1.69 per diluted share, which included $3.4 million ($2.4 million after-tax, or $0.05 per diluted share) of severance and downsizing charges and $29.2 million ($0.58 per diluted share) of additional non-cash income tax expense primarily related to U.S.

tax law changes.

Our consolidated results of operations for 2018 included contributions from the GEODynamics and Falcon acquisitions completed in the first quarter of 2018 and reflected the impact of industry trends and customer spending activities which were directed toward growth in the U.S.

shale play regions with a general slowing of global investments in deepwater markets since the start of a prolonged industry downturn in 2014.

During the fourth quarter of 2018, the price of crude oil fell approximately 40% – with WTI closing at $45 per barrel on December 28, 2018.

This precipitous decline in crude oil prices had a moderate negative impact on our fourth quarter 2018 consolidated results of operations, particularly in the U.S.

shale play regions.

Consolidated total revenues increased $417.5 million, or 62% in 2018 compared to 2017.

Consolidated product revenues in 2018 increased $198.0 million, or 65%, from 2017, reflecting contributions from the acquired GEODynamics operations.

Consolidated service revenues for 2018 increased $219.5 million, or 60%, from 2017 due principally to contributions from the acquired Falcon operations and higher customer-driven activity within the Well Site Services and Offshore/Manufactured Products segments.

As can be derived from the following table, 77% of our consolidated revenues in 2018 were related to our short-cycle product and service offerings, which compared to 65% in 2017, due principally to contributions from our first quarter 2018 acquisitions and higher customer spending in the U.S.

shale play regions.

The following table provides disaggregated revenue information by operating segment for the years ended December 31, 2018 and 2017 (in thousands):

Well Site Services

Downhole Technologies

Offshore/ Manufactured Products

Major revenue categories -

Project-driven products

Completion products and services

Drilling services

Other products

Total short-cycle

Other products and services

Percentage of total revenue by type -

Cost of Revenues (exclusive of Depreciation and Amortization Expense).

Our consolidated cost of revenues (exclusive of depreciation and amortization expense) increased $313.8 million, or 60%, in 2018 compared to 2017, due to costs associated with the acquisitions completed in the first quarter of 2018 as well as activity-driven costs associated with revenue growth within the Well Site Services and Offshore/Manufactured Products segments.

Consolidated product costs in 2018 increased $147.0 million, or 67%, from 2017 due primarily to the GEODynamics Acquisition completed in first quarter 2018.

Consolidated service costs for 2018 increased $166.8 million, or 55%, from 2017 driven by the significant increase in service activity coupled with the acquired Falcon operations.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased $23.3 million, or 20%, in 2018 from the prior-year period primarily due to incremental expenses associated with the acquired GEODynamics operations (including $8.4 million of patent defense costs), higher activity levels and $1.0 million of transaction-related costs.

Depreciation and Amortization Expense.

Depreciation and amortization expense increased $15.9 million, or 15%, in 2018 compared to 2017 reflecting the impact of the acquired GEODynamics and Falcon operations, which was partially offset by certain assets becoming fully depreciated.

Note 14, "Segments and Related Information," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K presents depreciation and amortization expense by segment.

Other Operating (Income) Expense, Net.

Other operating (income) expense moved from an expense of $1.3 million in 2017 to income of $2.1 million in 2018.

Other operating expense in the prior year was primarily related to foreign currency exchange losses.

Operating Loss.

Our consolidated operating loss was $5.9 million in 2018, which included $11.4 million of costs associated with patent defense and settlement of FLSA claims, $3.3 million of transaction-related expense and $1.6 million of severance and downsizing charges partially offset by a $3.9 million gain related to the insurance settlement discussed previously.

This compares to a consolidated operating loss of $73.9 million in 2017, which included $3.4 million of transaction-related, severance and facility closure charges.

The majority of the year-over-year improvement in operating results reflects contributions from the GEODynamics and Falcon acquisitions completed in the first quarter of 2018 as well as the impact of growth in customer spending activities which was primarily focused in the U.S.

shale play regions.

Interest Expense, Net.

Net interest expense was $19.0 million in 2018, an increase of $14.7 million from 2017.

This increase reflects our funding during the first quarter of 2018 of $379.7 million in net acquisition consideration through borrowings under our revolving credit facility and issuance of the Notes.

Interest expense as a percentage of total average debt outstanding decreased from 17.3% in 2017 to 5.6% in 2018.

Interest expense as a percentage of total average debt outstanding in 2017 reflects lower average borrowings outstanding under our revolving credit facility and an increased proportion of interest expense associated with unused commitment fees and non-cash amortization of debt issuance costs.

Other Income, Net.

Other income, net, consisting primarily of gains recognized on the sale of property and equipment, was $3.1 million in 2018, an increase of $2.4 million from 2017.

Our income tax benefit for 2018 was $2.6 million on a pre-tax loss of $21.7 million, which includes a $5.8 million discrete tax benefit related to recent U.S.

tax reform guidance allowing the carry back of U.S.

net operating losses incurred in 2017 as well as other discrete tax attributes.

This compares to an income tax benefit for 2017 of $7.4 million on a pre-tax loss of $77.4 million (an income tax benefit of $21.8 million after excluding the discrete charges discussed below).

On December 22, 2017, the United States enacted Tax Reform Legislation which resulted in significant changes to U.S.

tax and related law, including certain key federal income tax provisions applicable to multinational companies such as ours.

As a result of the tax law changes, we recorded $28.2 million of incremental non-cash income tax expense related to the U.S.

transition tax on our unremitted foreign subsidiary earnings and to provide valuation allowances against our foreign tax credit carryforwards (which were recorded as assets prior to U.S.

Additionally, we re-measured our other U.S.

deferred tax assets and liabilities to reflect the lower U.S.

corporate income tax rate which was reduced from 35% to 21%.

We also recorded a discrete tax charge of $1.0 million during 2017 related to the decision to carryback 2016 U.S.

net operating losses against 2014 taxable income.

Other Comprehensive Income (Loss).

Reported comprehensive loss is the sum of the reported net income (loss) and other comprehensive income (loss).

Other comprehensive loss was $12.9 million in 2018 compared to other comprehensive income of $11.8 million in 2017 due to fluctuations in foreign currency exchange rates compared to the U.S.

dollar for certain of the international operations of our reportable segments.

For 2018 and 2017, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During 2018, the exchange rates for the British pound and the Brazilian real weakened compared to the U.S.

This compares to 2017, when the exchange rates for the British pound strengthened and the Brazilian real weakened compared to the U.S.

Segment Operating Results

Well Site Services

Our Well Site Services segment revenues increased $191.5 million, or 66%, in 2018 compared to 2017.

This growth was concentrated in Completion Services, where revenues increased $176.8 million, or 75%, reflecting revenue generated by the acquired Falcon operations and increased completion-related activity in the United States.

Our Drilling Services revenues increased $14.8 million, or 27%, to $69.2 million in 2018 from 2017 primarily as a result of improved dayrates for our land drilling rigs and a higher level of third-party costs reimbursed by our customers.

Operating Loss.

With higher revenues, our Well Site Services segment operating loss declined $42.1 million, or 71%, in 2018 from 2017.

Well Site Services segment revenues and cost of services for 2018 increased 66% and 59%, respectively, from the prior year, with other costs and expenses remaining relatively consistent.

Our Completion Services operating loss improved $37.5 million, or 83%, in 2018 compared to 2017, due to increased completion-related activity levels in the United States coupled with ten months of contributions from the acquired Falcon operations.

2018 results include $3.0 million in charges (presented within cost of services) associated with additional reserves established for the final settlement of historical FLSA claims.

During 2017, reported results included $1.1 million of severance and downsizing costs.

Our Drilling Services operating loss declined $4.5 million, or 33%, in 2018 from 2017 primarily as a result of the reported revenue growth.

Downhole Technologies

Our Downhole Technologies segment revenues were $213.8 million in 2018 reflecting the activity of the GEODynamics operations acquired in January 2018.

Operating Income.

Our Downhole Technologies segment operating income was $26.7 million in 2018.

Reported results were negatively impacted by $8.4 million of patent defense costs.

The legal actions were settled in the fourth quarter of 2018.

During 2020, our Downhole Technologies segment recorded a non-cash goodwill impairment charge of $192.5 million, a non-cash inventory impairment charge of $5.9 million, non-cash fixed asset and lease impairment charges of $3.6 million and severance and restructuring charges of $2.0 million.

During 2019, the segment recognized a non-cash goodwill impairment charge of $165.0 million.

Excluding the impairment charges, operating income declined $23.4 million in 2020 from 2019 due primarily to a 46% decline in revenues, partially offset by the benefit of cost reduction measures in 2020.

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues increased $12.2 million, or 3%, in 2018 compared to 2017 as a result of higher sales of other products and service offerings.

Service revenue increased 28% from the prior year's level driven by higher customer demand while project-driven products revenues decreased 5% year-over-year due to lower sales of production and subsea equipment, which was partially offset by higher sales of our standard connector products.

Operating Income.

Our Offshore/Manufactured Products segment operating income increased $0.8 million, or 2%, in 2018 compared to 2017 as a result of a gain of $3.9 million recognized upon the settlement of a Hurricane Harvey flood insurance claim during 2018.

The impact of the shift in sales mix from 2017 to 2018 offset the impact of the reported revenue growth and the insurance gains discussed above.

To a lesser extent, reported segment results for 2018 and 2017 were reduced by severance and downsizing-related expenses of $1.5 million and $0.9 million, respectively.

Bidding and quoting activity, along with orders from customers, for our Offshore/Manufactured Products segment continued in 2018, albeit at a substantially slower pace than in recent year s.

Backlog in ou r Offshore/Manufactured Products increased 6% during 2018 to total $179 million as of December 31, 2018, with a book to bill ratio of 1.1x for the year.

Expenses increased $1.5 million, or 3%, in 2018 from 2017 due to $3.0 million in transaction-related expenses incurred in connection with the first quarter 2018 acquisitions of GEODynamics and Falcon.

Given backlog entering the year, our Offshore/Manufactured Products segment revenues were more resilient and only declined $62.6 million, or 16%, in 2020 compared to 2019 with a significant reduction in sales of our short-cycle products (elastomer and valve products), partially offset by an increase in project-driven product sales.

Operating Income (Loss).

During 2020, our Offshore/Manufactured Products segment recorded non-cash impairment charges of $86.5 million related to goodwill and $16.2 million related to inventory.

Excluding these charges, our Offshore/Manufactured Products segment operating income decreased $14.1 million, or 39%, in 2020 compared to 2019.

Backlog in our Offshore/Manufactured Products totaled $219 million as of December 31, 2020, a decrease of 22% from December 31, 2019.

Orders totaled $286 million in 2020, yielding in a book-to-bill ratio of 0.8x.

Corporate expenses decreased $9.4 million, or 21%, in 2020 from 2019 due primarily to personnel reductions as well as reductions in short- and long-term compensation and other implemented cost reduction measures.

Liquidity, Capital Resources and Other Matters

Our primary liquidity needs are to fund operating and capital expenditures, which in the past have included expanding and upgrading our Offshore/Manufactured Products and Downhole Technologies manufacturing facilities and equipment, replacing and increasing Completion Services assets, funding new product development and general working capital needs.

In addition, capital has been used to repay debt, fund strategic business acquisitions and fund our stock repurchase program.

Our primary sources of funds have been cash flow from operations, proceeds from borrowings under our credit facilities and capital market transactions.

See Note 4 , "Details of Selected Balance Sheet Accounts," and Note 6 , "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information.

Our primary liquidity needs are to fund operating and capital expenditures, new product development and general working capital needs.

In addition, capital has been used to fund strategic business acquisitions, repay debt and fund share repurchases.

Our primary sources of funds are cash flow from operations, proceeds from borrowings under our credit facilities and, less frequently, capital market transactions.

Operating Activities

Cash flows totaling $137.4 million were provided by operations during the year ended December 31, 2019 compared to $103.2 million provided by operations during the year ended December 31, 2018 .

During 2019 , $39.3 million was provided by net working capital decreases, with a reduction in accounts receivable partially offset by an increase in inventories.

During 2018 , $22.9 million used to fund working capital increases primarily associated with activity-driven growth in accounts receivable and inventories.

Cash flows from operations totaling $132.8 million were generated during the year ended December 31, 2020 compared to $137.4 million provided by operations during 2019.

During 2020, $69.7 million was provided from net working capital decreases, primarily due to collections of accounts receivable and an increase in deferred revenue, partially offset by decreases in accounts payable and accrued liabilities.

Additionally, we filed carryback claims regarding U.S.

net operating losses generated in 2018 and 2019 in accordance with the rules and provisions of the CARES Act and received cash of $41.3 million, which benefited our cash flow from operations.

During 2019, $39.3 million was provided from net working capital decreases, with a reduction in accounts receivable partially offset by an increase in inventories.

Investing Activities

A total of $52.0 million in cash was used in investing activities during the year ended December 31, 2019 , compared to $461.4 million used during 2018 .

Capital expenditures totaled $56.1 million and $88.0 million during the years ended December 31, 2019 and 2018 , respectively.

Capital expenditures in both years consisted principally of purchases of Completion Services equipment, expansion and upgrading of our Downhole Technologies and Offshore/Manufactured Products segment facilities and equipment as well as various other capital spending initiatives.

On January 12, 2018, we acquired GEODynamics for a purchase price consisting of (i) $295.4 million in cash (net of cash acquired), which we funded through borrowings under our Revolving Credit Facility, (ii) approximately 8.66 million shares of our common stock (having a market value of $294.9 million as of the closing date) and (iii) an unsecured $25.0 million promissory note.

On February 28, 2018, we acquired Falcon for cash consideration of $84.2 million (net of cash acquired), which we funded from borrowings under our Revolving Credit Facility.

We expect to spend between $40 million and $45 million in total capital expenditures during 2020 to replace and upgrade our Completion Services equipment, to expand and maintain our Downhole Technologies and Offshore/Manufactured Products facilities and equipment, and to fund various other capital spending projects.

Whether planned expenditures will actually be spent in 2020 depends on industry conditions, project approvals and schedules, vendor delivery timing, free cash flow generation and careful monitoring of our levels of liquidity.

We plan to fund these capital expenditures with available cash, internally generated funds and, if necessary, borrowings under our Revolving Credit Facility.

The foregoing capital expenditure expectations do not include any funds that might be spent on future strategic acquisitions, which the Company could pursue depending on the economic environment in our industry and the availability of transactions at prices deemed attractive to the Company.

At December 31, 2019 , we had cash totaling $8.5 million .

With the enactment of the Tax Cuts and Jobs Act in December 2017, we repatriated $14.5 million and $45.0 million of cash held by our international subsidiaries to reduce borrowings outstanding under our Revolving Credit Facility during 2019 and 2018, respectively, without triggering incremental tax expense.

Net cash of $3.7 million was used in investing activities during the year ended December 31, 2020, compared to $52.0 million used during 2019.

Capital expenditures totaled $12.7 million and $56.1 million during the years ended December 31, 2020 and 2019, respectively, while proceeds from the sale of property and equipment totaled $9.6 million and $6.0 million, respectively.

We expect to spend approximately $15 million in total capital expenditures during 2021.

Whether planned expenditures will actually be made in 2021 depends on industry conditions, project approvals and schedules, vendor delivery timing, free cash flow generation and careful monitoring of our levels of liquidity.

We plan to fund these capital expenditures with available cash, internally generated funds and, if necessary, borrowings under our Asset-based Revolving Credit Facility (as discussed below).

Financing Activities

Net cash of $95.9 million was used in financing activities during the year ended December 31, 2019 , primarily associated with the net repayment of $84.2 million in borrowings under the Revolving Credit Facility and the repurchase at a discount of $7.8 million in principal amount of the Notes for $6.7 million .

Net cash of $324.1 million was provided by financing activities during the year ended December 31, 2018 , primarily as a result of our issuance of $200.0 million of 1.50% convertible senior notes and net borrowings of $136.1 million under the Revolving Credit Facility to fund acquisitions.

As discussed above, during 2019 we used $90.9 million of our $137.4 million in cash flows from operating activities to reduce our outstanding debt level.

As of December 31, 2019 , we had principal outstanding of $51.9 million under our Revolving Credit Facility (due in January 2022, if not repaid in part or in full in advance) and $192.3 million under our Notes (due in February 2023, if not repurchased in part or in full in advance).

Our reported interest expense, which appropriately includes amortization of debt discount and deferred financing costs of $7.9 million , is substantially above our contractual cash interest expense – reflective primarily of the Notes which provide for a cash interest payment of 1.5% per annum.

Net cash of $65.0 million was used in financing activities during the year ended December 31, 2020, primarily associated with a $32.9 million reduction in bank debt and our purchases of $34.9 million principal amount of the Notes for cash totaling $20.1 million.

Net cash of $95.9 million was used in financing activities during the year ended December 31, 2019, primarily associated with the repayment of $84.2 million, net in borrowings under our Revolving Credit Facility and the repurchase at a discount of $7.8 million principal amount of the Notes for cash totaling $6.7 million.

As of December 31, 2020, we had cash on-hand of $72.0 million, compared to $8.5 million as of December 31, 2019.

As of December 31, 2020, we had $19.0 million outstanding under our Amended Revolving Credit Facility and $157.4 million principal amount of the Notes outstanding.

Our reported interest expense, which included non-cash amortization of debt discount and deferred financing costs of $7.7 million, is substantially above our contractual cash interest expense.

For 2020, our contractual interest expense was $6.2 million, or approximately 2% of the average principal balance of debt outstanding.

On January 12, 2018, we partially funded the GEODynamics Acquisition through borrowings available under our Revolving Credit Facility.

On January 30, 2018, we issued $200.0 million in principal amount of our Notes due February 2023 and entered into our Revolving Credit Facility, to extend the maturity of the facility to January 30, 2022 and provide for total lender commitments of $350 million.

Net proceeds from the Notes offering of approximately $194.0 million, after deducting discounts and estimated expenses, were used to repay a portion of amounts outstanding under the Revolving Credit Facility.

We believe that cash on hand, cash flow from operations and available borrowings under our Revolving Credit Facility will be sufficient to meet our liquidity needs in the coming twelve months.

If our plans or assumptions change, or are inaccurate, or if we make acquisitions, we may need to raise additional capital.

The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain.

We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances.

We believe that cash on-hand, cash flow from operations and borrowing capacity available under our Asset-based Revolving Credit Facility will be sufficient to meet our liquidity needs in the coming twelve months.

If our plans or assumptions change, or are inaccurate, we may need to raise additional capital.

Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing.

Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control.

Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets, stakeholder scrutiny of environmental, social and governance matters and other factors, many of which are beyond our control.

In this regard, the effect of the COVID-19 pandemic has resulted in significant disruption of global financial markets.

For companies like ours that support the energy industry, this disruption has been exacerbated by the global crude oil supply and demand imbalance and resulting decline in crude oil prices, which has negatively impacted the value of our common stock;

has and may continue to reduce our ability to

access capital in the bank and capital markets;

and has and may continue to result in such capital being available on less favorable terms, which could in the future negatively affect our liquidity.

Asset-based Revolving Credit Facility.

On February 10, 2021, we entered into a senior secured credit facility with certain lenders, which provides for a $125.0 million asset-based revolving credit facility (the "Asset-based Revolving Credit Facility") under which credit availability is subject to a borrowing base calculation.

Concurrent with entering into the Asset-based Revolving Credit Facility, the Amended Credit Agreement was terminated.

The Asset-based Revolving Credit Facility is governed by a credit agreement with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (the "Asset-based Credit Agreement").

The Asset-based Credit Agreement matures on February 10, 2025 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million (excluding the unsecured promissory note to the seller of GEODynamics ).

The Asset-based Credit Agreement provides funding based on a borrowing base calculation that includes eligible U.S.

customer accounts receivable and inventory and provides for a $50.0 million sub-limit for the issuance of letters of credit.

Borrowings under the Asset-based Credit Agreement are secured by a pledge of substantially all of our domestic assets and the stock of certain foreign subsidiaries.

Borrowings under the Asset-based Credit Agreement bear interest at a rate equal to the London Interbank Offered Rate ("LIBOR") plus a margin of 2.75% to 3.25% and subject to a LIBOR floor rate of 0.50%, or at a base rate plus a margin of 1.75% to 2.25%, in each case based on average borrowing availability.

We must also quarterly pay a commitment fee of 0.375% to 0.50% per annum, based on unused commitments under the Asset-based Credit Agreement.

The Asset-based Credit Agreement places restrictions on our ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the Notes), engage in mergers, and other matters, in each case, subject to certain exceptions.

The Asset-based Credit Agreement contains customary default provisions, which, if triggered, could result in acceleration of all amounts then outstanding.

The Asset-based Credit Agreement also requires us to satisfy and maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 for specified periods of time in the event that availability under the Asset-based Credit Agreement is less than the greater of 15% of the borrowing base and $14.1 million or if an event of default has occurred and is continuing.

See Note 7, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the terms of the Asset-based Credit Agreement.

As of February 10, 2021, we had $12.1 million of borrowings outstanding under the Asset-based Revolving Credit Facility and $29.0 million of outstanding letters of credit.

The total amount available to be drawn as of February 10, 2021 was approximately $29 million, calculated based on an initial borrowing base less outstanding borrowings and letters of credit.

Revolving Credit Facility.

Our Revolving Credit Facility is governed by a credit agreement dated as of January 30, 2018, as amended, (the "Credit Agreement") by and among the Company, the Lenders party thereto, Wells Fargo Bank, N.A., as administrative agent for the lenders party thereto and collateral agent for the secured parties thereunder, and the lenders and other financial institutions from time to time party thereto.

Our Revolving Credit Facility provides for up to $350 million in lender commitments with an option to increase the maximum borrowings to $500 million subject to additional lender commitments and matures on January 30, 2022.

Under our Revolving Credit Facility, $50 million is available for the issuance of letters of credit.

See Note 7 , "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the terms of the Credit Agreement.

As of December 31, 2019 , we had $51.9 million of borrowings outstanding under the Credit Agreement and $19.3 million of outstanding letters of credit, leaving $131.1 million available to be drawn.

The total amount available to be drawn was less than the lender commitments as of December 31, 2019 , due to limits imposed by maintenance covenants in the Credit Agreement.

As of December 31, 2019 , we were in compliance with our debt covenants and expect to continue to be in compliance over the next twelve months.

1.50% Convertible Senior Notes.

Until its termination on February 10, 2021, our former senior secured revolving credit facility (the "Revolving Credit Facility") was governed by an amended and restated credit agreement by and among the Company, Wells Fargo Bank, N.A., as administrative agent for the lenders party thereto and the lenders and other financial institutions from time to time party thereto, dated as of January 30, 2018 (the "Credit Agreement"), which was scheduled to mature on January 30, 2022.

Prior to June 17, 2020, our Revolving Credit Facility provided for up to $350 million in lender commitments, including $50 million for the issuance of letters of credit.

On June 17, 2020, we entered into an omnibus amendment to the Credit Agreement (as amended, the "Amended Credit Agreement").

Lender commitments under the Amended Credit Agreement were reduced to $200 million in exchange for the suspension of the financial covenants 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") was limited to 85% of the lesser of (i) $200 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").

We expensed approximately $0.5 million of previously deferred financing costs in 2020, which is included in interest expense, net as a result of the amendment of the Credit Agreement.

See Note 7, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the terms of the Credit Agreement and the amendment thereto.

As of December 31, 2020, we had $19.0 million of borrowings outstanding under the Amended Revolving Credit Facility and $29.2 million of outstanding letters of credit.

The total amount available to be drawn as of January 1, 2021 was $69.3 million, calculated based on 85% of the Borrowing Base less outstanding borrowings and letters of credit.

1.50% Convertible Senior Notes due February 2023.

On January 30, 2018, we issued $200.0 million aggregate principal amount of the Notes pursuant to an indenture, dated as of January 30, 2018 (the "Indenture"), between us and Wells Fargo Bank, N.A., as trustee.

Net proceeds, after deducting discounts and expenses, were approximately $194.0 million .

During 2019, we repurchased $7.8 million in principal amount of the outstanding notes for $6.7 million , which approximated the carrying amount of the related liability.

The initial carrying amount of the Notes recorded in the consolidated balance sheet as of January 30, 2018 was less than the $200.0 million in 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.

We recorded the value of the conversion feature of $34.4 million 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 of debt discount, the interest expense we recognize related to the Notes for accounting purposes is based on an effective interest rate of approximately 6% , which is greater than the cash interest payments we are obligated to pay on the Notes.

Interest expense associated with the Notes for 2019 and 2018 was $10.2 million and $9.0 million ,

respectively, while the related cash interest expense was $3.0 million and $2.8 million , respectively.

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

During 2020, we opportunistically purchased $34.9 million principal amount of the outstanding Notes for $20.1 million in cash, which was $10.7 million below the net carrying amount of the related liability, resulting in the recognition of non-cash gains.

During 2019, we repurchased $7.8 million principal amount of the outstanding Notes for $6.7 million, which approximated the carrying amount of the related liability.

The initial carrying amount of the Notes recorded in the consolidated balance sheet as of January 30, 2018 was less than the $200.0 million in principal amount of the Notes, reflective of the estimated fair value of a similar debt instrument that does not have a conversion feature.

We recorded the value of the conversion feature as a debt discount at the date of issuance, to be 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 of debt discount, interest expense recognized on the Notes for accounting purposes, reflecting an effective interest rate of approximately 6%, is greater than the cash interest payments we are obligated to pay on the Notes.

Interest expense associated with the Notes for 2020 and 2019 was $9.3 million and $10.2 million, respectively, while the related cash interest expense was $2.6 million and $3.0 million, respectively.

As of December 31, 2020, none of the conditions allowing holders of the Notes to convert, or requiring us to repurchase the Notes, had been met.

See Note 7, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the Notes.

See Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for discussion of the recent revision to accounting guidance for convertible instruments, which changed our method of accounting for the Notes upon our adoption of the standard effective January 1, 2021.

Promissory Note.

In connection with the GEODynamics Acquisition, we issued a $25.0 million promissory note that bears interest at 2.5% per annum and was scheduled to mature on July 12, 2019.

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

As more fully described in Note 14 , "Commitments and Contingencies" to the Consolidated Financial Statements included in this Annual Report on Form 10‑K, we have provided notice to and asserted indemnification claims against the seller of GEODynamics.

As a result, the maturity date of the note is extended until the resolution of the indemnity claim.

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

Our total debt represented 16.9% of our combined total debt and stockholders' equity at December 31, 2019 compared to 18.7% at December 31, 2018 .

We believe that payments due under the promissory note are subject to set-off, in full or in part, against certain claims related to matters occurring prior to the GEODynamics Acquisition.

We have provided notice to and asserted indemnification claims against the seller of GEODynamics (the "Seller"), and the Seller has filed a breach of contract suit against us and one of our wholly-owned subsidiaries alleging that payments due under the promissory note are required to be, but have not been, repaid in accordance with the terms of the note.

We have incurred settlement costs and expenses of $7.9 million related to such indemnification claims and we believe that the maturity date of the note is extended until these claims are resolved.

Accordingly, we have reduced the carrying amount of such note in our consolidated balance sheet to $17.1 million as of December 31, 2020, which is our current best estimate of what is owed after set-off for indemnification matters.

See Note 14, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K.

Our total debt represented 20% of our combined total debt and stockholders' equity as of December 31, 2020 compared to 17% as of December 31, 2019.

Stock Repurchase Program.

We maintain a share repurchase program which was extended to July 29, 2020 by our Board of Directors.

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

During 2020, we did not repurchase any shares of our common stock under the program.

During 2019, we repurchased approximately 51 thousand shares of our common stock under the program at a total cost of $0.8 million.

During 2018 , there were no repurchases of our common stock under the program.

In 2017 , 562 thousand shares of our common stock were repurchased under the program at a total cost of $16.2 million .

The amount remaining under our current share repurchase authorization as of December 31, 2019 was $119.8 million .

Subject to applicable securities laws, any purchases will be at such times and in such amounts as the Company deems appropriate.

Contractual Obligations.

The following summarizes our contractual obligations at December 31, 2019 , and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands):

The following summarizes our contractual obligations as of December 31, 2020, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands):

Payments due by period

Less than 1 year

More than 5 years

Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years

Contractual obligations

Revolving Credit Facility (1)

1.50% convertible senior notes (2)

$ 19,000 $ — $ 19,000 $ — $ —

1.50% convertible senior notes due February 2023 (2)

163,270 2,361 160,910 — —

Promissory note (3)

18,422 18,422 — — —

Other debt and finance lease obligations 4,792 683 1,220 997 1,892

Operating lease liabilities (4)

43,841 9,293 11,738 9,023 13,787

Purchase obligations (5)

50,694 49,975 719 — —

Total contractual cash obligations $ 300,019 $ 80,734 $ 193,587 $ 10,020 $ 15,679

____________________

Excludes interest on the variable-rate debt, which matures in January 2022.

(1) Excludes interest on the variable-rate debt, which was scheduled to mature in January 2022.

Since we cannot predict with any certainty the amount of interest due on our revolving debt due to the expected variability of interest rates and principal amounts outstanding, we do not include this in our obligations.

If we assume interest payment amounts are calculated using the outstanding principal balances and interest rates as of December 31, 2019 and include applicable commitment fees, estimated interest payments on our variable-rate debt would be $2.4 million "due in less than one year" and $2.6 million "due in one to three years." See Note 7 , "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for additional information regarding our Revolving Credit Facility.

If we assume interest payment amounts are calculated using the outstanding principal balances and interest rates as of December 31, 2020 and include applicable commitment fees, estimated interest payments on our variable-rate debt would be $0.7 million "due in less than one year" and $0.1 million "due in one to three years." As discussed above, we entered into a new Asset-based Revolving Credit Facility on February 10, 2021, which matures in February 2025.

Concurrent with entering into the Asset-based Revolving Credit Facility, borrowings under the Amended Revolving Credit Facility were repaid and the related agreement was terminated.

See Note 7, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for additional information.

(2) Amount represents the full principal amount of the Notes together with cash interest payments due semi-annually.

Amount represents the full principal amount of the $25 million promissory note together with accrued and unpaid interest as of February 21, 2020 .

(3) Amount represents the net principal amount of the $25 million promissory note together with accrued and unpaid interest as of February 22, 2021.

The $25 million promissory note (together with accrued and unpaid interest) issued in connection with the GEODynamics Acquisition was scheduled to mature on July 12, 2019.

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

As more fully described in Note 14 , "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K, we have provided notice to and asserted indemnification claims against the seller of GEODynamics.

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

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

We believe that payments due under the promissory note are subject to set-off, in full or in part, against certain claims related to matters occurring prior to the GEODynamics Acquisition.

As more fully described in Note 14, "Commitments and Contingencies," to the Consolidated Financial Statements, we have provided notice to and asserted indemnification claims against the Seller, and the Seller has filed a breach of contract suit against us alleging that payments due under the promissory note are required to be, but have not been, repaid in accordance with the terms of the note.

As a result, we believe that the maturity date of the note is extended until the resolution of the claims and we expect that the amount ultimately paid in respect of such note will be reduced as a result of these indemnification claims.

(4) Amount represents the payment obligations (including implied interest) for operating leases with an initial term of greater than 12 months.

The purchase obligations of the Company primarily relate to open purchase orders in our Offshore/Manufactured Products and Completion Services operations.

Operating lease obligations are recorded in the consolidated balance sheet as operating lease liabilities while the right-of-use assets are included within operating lease assets.

(5) Our purchase obligations primarily relate to open purchase orders in our Offshore/Manufactured Products and Completion Services operations.

Contingencies and Other Obligations.

We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including occasional claims by individuals alleging exposure to hazardous materials as a result of our products or operations.

Some of these claims relate to matters occurring prior to the acquisition of businesses, and some relate to businesses we have sold.

In certain cases, we are entitled to indemnification from the sellers of businesses and, in other cases, we have indemnified the buyers of businesses.

In addition, the Seller in the GEODynamics Acquisition filed a breach of contract suit against us in federal court in August 2020, in which the Seller alleged, among other contractual breaches, that it was entitled to approximately $19 million in U.S.

federal income tax carryback claims we received under the provisions of the CARES Act legislation.

On February 15, 2021, the Seller dismissed the federal lawsuit without prejudice and refiled in state court.

Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, we believe 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 our consolidated financial position, results of operations or liquidity.

See Note 14, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further discussion.

Effects of Inflation

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tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs.

The effect of these new tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continues to evolve, and we continue to monitor these matters.

The effect of these tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continues to evolve, and we continue to monitor these matters.

If we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase further as a result of customs, anti-dumping and countervailing duty regulations or otherwise and we are unable to pass corresponding cost increases on to our customers, our financial position and results of operations could be adversely affected.

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Critical Accounting Policies

Our Consolidated Financial Statements included in this Annual Report on Form 10‑K have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require that management make numerous estimates and assumptions.

Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position.

The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires management's most subjective judgments in making estimates about the effect of matters that are inherently uncertain.

The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain.

We describe our significant accounting policies more fully in Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K.

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Our goodwill totaled $76.5 million, representing 7% of our total assets as of December 31, 2020.

Our long-lived tangible assets totaled $459.7 million as of December 31, 2019 , and our long-lived intangible assets totaled $230.1 million , representing 13% of our total assets.

Our long-lived tangible assets totaled $416.7 million, representing 36% of our total assets as of December 31, 2020, and our long-lived intangible assets totaled $205.7 million, representing 18% of our total assets.

The remainder of our assets largely consisted of cash, accounts receivable and inventories.

In accordance with current accounting guidance, we do not amortize goodwill, but rather assess goodwill for impairment annually on December 1 and when an event occurs or circumstances change to suggest that the carrying amount may not be recoverable.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered to be impaired and an impairment loss is recorded.

We have three reporting units – Completion Services, Downhole Technologies and Offshore/Manufactured Products – with goodwill balances totaling $646.7 million as of September 30, 2019.

Goodwill represents the excess after impairments, if applicable, of the purchase price for acquired businesses over the allocated fair value of related net assets.

In accordance with current accounting guidance, we do not amortize goodwill, but rather assess goodwill for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

In the evaluation of goodwill, each reporting unit with goodwill on its balance sheet is assessed separately using relevant events and circumstances.

We estimate the fair value of each reporting unit and compare that fair value to its recorded carrying value.

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

Projected cash flows are discounted using a long-term weighted average cost of capital for each reporting unit based on estimates of investment returns that would be required by a market participant.

As part of the process of assessing goodwill for potential impairment, our total market capitalization is compared to the sum of the fair values of all reporting units to assess the reasonableness of aggregated fair values.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded.

December 2019 Impairment

During the fourth quarter of 2019, U.S.

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Additionally, a number of other market indicators declined to levels not experienced in recent years.

For example, in October 2019, the Philadelphia Oil Services Index average price declined to a level not reported since 1999 and the average U.S.

rig count was 20% below the level observed a year prior.

Consistent with other oilfield service industry peers, our common stock price declined and our market capitalization was below the carrying value of stockholders' equity.

Given current market conditions, we reduced our near-term outlook for demand related to our short-cycle products and services in the U.S.

Consistent with most other oilfield service industry peers, our stock price declined and our market capitalization was below the carrying value of stockholders' equity.

Given these market conditions, we reduced our near-term demand outlook for our short-cycle products and services in the U.S.

shale play regions.

This refined outlook was incorporated in the December 1, 2019 annual impairment assessment, which indicated that the fair value of the Downhole Technologies segment was less than its carrying amount.

For our annual quantitative impairment test of goodwill on December 1, 2019, we estimated the fair value of each reporting unit and compared that fair value to its recorded carrying value.

As none of our reporting units have publicly quoted market prices, we determined the value that willing buyers and sellers would place on each reporting unit in a routine sale process (a Level 3 fair value measurement).

In our analysis, we targeted a valuation that would be placed on the reporting unit by market participants based on historical and projected operating results throughout a full market cycle, not the value of the reporting unit based on trough or peak operating results.

We utilized, based on circumstances, a combination of trading multiples analyses, projected discounted cash flow calculations with estimated terminal values and acquisition comparables.

We discounted our projected cash flows using a long-term weighted average cost of capital for each reporting unit based on our estimate of investment returns that would be required by a market participant.

The fair value of our reporting units is primarily affected by expectations regarding future crude oil and natural gas prices, anticipated spending by our customers, income tax rates and the cost of capital.

We also compared the total market capitalization of the Company to the sum of the fair values of all of our reporting units to assess the reasonableness of the aggregated fair value.

Our assessment led us to conclude that the goodwill amount recorded in our Downhole Technologies reporting unit was partially impaired and we therefore recognized a non-cash goodwill impairment charge of $165.0 million in the fourth quarter of 2019.

Following the impairment charge, our Downhole Technologies reporting unit did not have a fair value substantially in excess of its carrying amount.

The fair value of our Completion Services and Offshore/Manufactured Products reporting units exceeded their carrying amounts by 24% and 38% , respectively, as of December 1, 2019.

The discount rates used to value our reporting units ranged between 12.5% and 13.0% .

This refined outlook was incorporated in the December 1, 2019 annual impairment assessment.

Based on this quantitative assessment, we concluded that the goodwill amount recorded in our Downhole Technologies reporting unit was partially impaired and recognized a non-cash goodwill impairment charge of $165.0 million in the fourth quarter of 2019.

The discount rates used to value the our reporting units as of December 1, 2019 ranged between 12.5% and 13.0%.

Holding all other assumptions and inputs used in each of the respective discounted cash flow analysis constant, a 50 basis point increase in the discount rate assumption would have increased the goodwill impairment charge by approximately $28 million.

March 2020 Impairments

In March 2020, the spot price of 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.

Consistent with oilfield service industry peers, our stock price also declined dramatically during the first quarter of 2020, with our market capitalization falling substantially below the carrying value of stockholders' equity.

Given the significance of these March 2020 events, we performed a quantitative assessment of goodwill for further impairment as of March 31, 2020.

This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts due to, among other factors, the significant decline in the our stock price and that of our peers and reduced growth rate expectations given weak energy market conditions resulting from the demand destruction caused by the global response to the COVID-19 pandemic.

In addition, the estimated returns required by market participants increased materially in our March 31, 2020 assessment from the assessment performed as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

Significant assumptions and estimates used in the income approach include, among others, estimated future net annual cash flows and discount rates for each reporting unit, current and anticipated market conditions, estimated growth rates and historical data.

These estimates relied upon significant management judgment, particularly given the uncertainties regarding the COVID-19 pandemic and its impact on activity levels and commodity prices as well as future global economic growth.

Based on this quantitative assessment as of March 31, 2020, we concluded that goodwill recorded in the Completion Services and Downhole Technologies businesses was fully impaired while goodwill recorded in the Offshore/Manufactured Products business was partially impaired.

We therefore recognized non-cash goodwill impairment charges totaling $406.1 million in the first quarter of 2020.

The discount rates used to value our reporting units as of March 31, 2020 ranged between 16.8% and 18.5%.

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.

December 2020 Assessment

As of December 1, 2020, we had only one reporting unit – Offshore/Manufactured Products – with a goodwill balance of $76 million.

We performed our annual quantitative assessment of goodwill for impairment, which indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount and no additional provision for impairment was required.

The valuation techniques used in the December 1, 2020 assessment were consistent with those used during the March 31, 2020 assessment.

The discount rate used to value the Offshore/Manufactured Products reporting unit as of December 1, 2020 was approximately 15%.

The estimated returns required by market participants decreased in our December 1, 2020 assessment from our assessment as of March 31, 2020, resulting in lower discount rate used in the discounted cash flow analysis.

all other assumptions and inputs used in the discounted cash flow analysis constant, a 100 basis point increase in the discount rate assumption for the Offshore/Manufactured Products reporting unit would not result in a goodwill impairment.

As of December 31, 2020, our market capitalization was $306 million, or $452 million below our equity carrying value.

As discussed above, our annual assessment has appropriately considered the impact of the current market environment and industry outlook by using projected discounted cash flows reflecting expected market conditions at December 1, 2019 in estimating the fair value of our reporting units.

The underlying fundamentals supporting the crude oil and natural gas markets continue to support long-term crude oil demand growth and the need for additional crude oil production.

The March 2020 and December 2019 goodwill impairment charges did not impact our liquidity position, debt covenants or cash flows.

We continue to monitor commodity prices and other significant assumptions used in our forecasts.

If we experience a prolonged decline in long-term demand for crude oil and natural gas or significant and sustained increases in commodity supplies, which serve to depress commodity prices over the long term, we will be required to update our discounted cash flow analysis and potentially be required to record a goodwill impairment in the future.

Furthermore, if our market capitalization remains below our book value for a sustained period of time and the implied fair value of our equity is not reasonably supported by equity control premiums, we will need to consider updating our assessment.

If we experience a prolonged decline in long-term demand for crude oil and natural gas or significant and sustained increases in commodity supplies, which serve to lower commodity prices over the long term, we will be required to update our discounted cash flow analysis and potentially be required to record a goodwill impairment in the future.

Long-Lived Tangible and Intangible Assets

An assessment for impairment of long-lived tangible and intangible assets is conducted whenever changes in facts and circumstances indicate a loss in value may have occurred.

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When necessary, the determination of the amount of impairment is based on quoted market prices, if available, or on our judgment as to the future operating cash flows to be generated from these assets throughout their estimated useful lives.

Based on our December 2019 impairment assessment, the carrying values of our long-lived tangible and intangible asset groups are recoverable and no impairment losses were recorded.

During 2020 and 2019, we recognized non-cash asset impairment charges totaling $12.4 million and $33.7 million, respectively, to reduce the carrying value of certain equipment and facilities (owned and leased) to their estimated realizable value.

Based on our impairment assessment in 2020, the carrying values of our other long-lived tangible and intangible assets are recoverable and no impairment losses were recorded.

However, industry cyclicality and downturns may result in future changes to our estimates of projected operating cash flows, or their timing, and could potentially cause future impairment to the values of our long-lived assets, including finite-lived intangible assets.

Revenue and Cost Recognition

As further discussed in Note 3 , "Recent Accounting Pronouncements," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K, we account for revenue in accordance with Financial and Accounting Standards Board guidance on revenue from contracts with customers ("ASC 606"), which we adopted on January 1, 2018.

The new guidance did not have a material impact on our recognition of revenues.

Our revenue contracts may include one or more promises to transfer a distinct good or service to the customer, which is referred to under ASC 606 as a "performance obligation," and to which revenue is allocated.

Our revenue contracts may include one or more promises to transfer a distinct good or service to the customer, which is referred to as a "performance obligation," and to which revenue is allocated.

We recognize revenue and the related cost when, or as, the performance obligations are satisfied.

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Contract costs include labor, material and overhead.

Management believes this method is the most appropriate measure of progress on large contracts.

Billings on such contracts in excess of costs incurred and estimated profits are classified as a contract liability (deferred revenue).

We believe this method is the most appropriate measure of progress on large contracts.

Billings on such contracts in excess of costs incurred and estimated profits are classified as a

contract liability (deferred revenue).

Costs incurred and estimated profits in excess of billings on these contracts are recognized as a contract asset (a component of accounts receivable).

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Proceeds from customers for the cost of oilfield rental equipment that is damaged or lost downhole are reflected as gains or losses on the disposition of assets after considering the write-off of the remaining net book value of the equipment.

Purchase Price Allocation of Acquisitions

We allocate the fair value of the purchase price consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values.

The excess of the purchase price over the fair value of the acquired assets and liabilities, if any, is recorded as goodwill.

We use available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows.

Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such items as customer relationships, technology and know-how, trade names and non-compete agreements involves significant professional judgment and is ultimately based on acquisition models and management's assessment of the value of the assets acquired, and to the extent available, third-party assessments.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact our results of operations.

Accounting for Contingencies

We have contingent liabilities and future claims for which we have made estimates of the amount of the eventual cost to liquidate such liabilities or claims.

These liabilities and claims sometimes involve threatened or actual litigation where damages have been quantified and we have made an assessment of our exposure and recorded in an amount estimated to cover an expected loss.

Other claims or liabilities have been estimated based on their fair value or our experience in these matters and, when appropriate, the advice of outside counsel or other outside experts.

Other claims or liabilities have been estimated based on their fair value or our experience in such matters and, when appropriate, the advice of outside counsel or other outside experts.

Upon the ultimate resolution of these uncertainties, our future reported financial results will be impacted by the difference between our estimates and the actual amounts paid to settle a liability.

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We believe our estimates of useful lives are appropriate.

We follow the liability method of accounting for income taxes in accordance with current accounting standards regarding the accounting for income taxes.

We follow the liability method of accounting for income taxes.

Under this method, deferred income taxes are recorded based upon the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect at the time the underlying assets or liabilities are recovered or settled.

On December 22, 2017, Tax Reform Legislation was signed into law which enacts significant changes to U.S.

On March 27, 2020, the CARES Act was signed into law, which allowed the carryback of U.S.

federal net operating losses.

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

On December 22, 2017, Tax Reform Legislation was signed into law which enacted significant changes to U.S.

tax and related laws, including certain key U.S.

federal income tax provisions applicable to oilfield service and manufacturing companies such as the Company.

state or other regulatory bodies have not finalized potential changes to existing laws and regulations which may result from the new U.S.

tax and related laws.

federal income tax provisions applicable to oilfield service and manufacturing companies such as ours.

In accordance with the SEC's Staff Accounting Bulletin No.

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During 2018, we adjusted these provisional estimates based on additional guidance issued by the Internal Revenue Service.

Prior to December 22, 2017, the majority of our earnings from international subsidiaries were considered to be indefinitely reinvested outside of the United States and no provision for U.S.

income taxes was made for these earnings.

However, certain historical foreign earnings were not considered to be indefinitely reinvested outside of the United States and were subject to U.S income tax as earned.

If any of our subsidiaries distributed earnings in the form of dividends or otherwise, we generally were subject to both U.S.

income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

As of December 31, 2020, our total investment, including earnings and profits, in foreign subsidiaries is considered to be permanently reinvested.

We record a valuation allowance in the reporting period when management believes that it is more likely than not that any deferred tax asset will not be realized.

We record a valuation allowance in the reporting period when we believe that it is more likely than not that any deferred tax asset will not be realized.

This assessment requires analysis of changes in tax laws, available positive and negative evidence, including consideration of losses in recent years, reversals of temporary differences, forecasts of future income, assessment of future business and tax planning strategies.

During 2019, 2018 and 2017, we recorded valuation allowances primarily with respect to net operating loss carryforwards of certain of our operations outside the United States.

As a result of changes in U.S.

tax laws in 2017, we recorded a valuation allowance on our foreign tax credit carryforwards during the fourth quarter of 2017.

During 2020, 2019 and 2018, we recorded valuation allowances primarily with respect to foreign and U.S.

state net operating loss carryforwards.

The calculation of our tax liabilities involves assessing uncertainties regarding the application of complex tax regulations.

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From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB"), which are adopted by us as of the specified effective date.

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

Unless otherwise discussed, we believe that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption.

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 eliminates the requirement that the carrying value of convertible debt instruments, such as the Notes, be allocated between the debt and equity components.

As permitted under the standard, we adopted the new guidance on January 1, 2021 using the modified retrospective transition method.

Adoption of the standard resulted 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.

The effective interest rate associated with the Notes after adoption of this guidance decreased from approximately 6% to approximately 2%, which compares to the contractual interest rate of 1.50%.

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

We 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 our consolidated financial statements.

Prior periods were not retrospectively adjusted.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis