What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-04-29 · 227 added, 132 removed, 243 unchanged (60% of the section changed)

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Recent Developments

In March of 2020, the spot price of West Texas Intermediate ("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 later 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 collapsing demand and rapidly rising inventories.

While crude oil prices have recovered significantly since reaching record low levels in April 2020, with crude oil inventories moderating, there remains some uncertainty around the timing of demand recovery to pre-COVID-19 levels.

Demand for most of our products and services depends substantially on the level of capital expenditures by 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 to 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.

Demand for most of our products and services depends substantially on the level of capital expenditures by the oil and natural gas industry, and these conditions caused rapid reductions to 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.

These conditions have and may continue to result in adverse impacts 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 producing nations as to production levels and prices could result in declines in crude oil prices, which would prove detrimental.

Following the unprecedented events 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 and stabilize our cash flows and protect liquidity.

As discussed in more detail below and under "– ABL Facility," "– 2023 Notes," and "– 2026 Notes," we completed two significant financing transactions during the first quarter of 2021 to strengthen our liquidity position.

On February 10, 2021, we entered into a new revolving credit facility which provides for a $125.0 million asset-based revolving credit facility (the "ABL Facility") under which credit availability is subject to a borrowing base calculation that includes eligible U.S.

While the prices of and demand for crude oil have increased significantly since reaching record low levels in April 2020, with crude oil inventory levels moderating, uncertainty remains regarding the timing of demand recovery to pre-COVID-19 levels.

In addition, as discussed in more detail below and under "– ABL Facility," "– 2023 Notes," and "– 2026 Notes," we completed two significant financing transactions during the first quarter of 2021, which served to extend the maturity profile of our debt and provide greater access to liquidity.

On February 10, 2021, we entered into a new $125.0 million asset-based revolving credit facility (the "ABL Facility") under which credit availability is subject to a borrowing base calculation that includes eligible U.S.

customer accounts receivable and inventory.

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Concurrent with entering into the ABL Facility, our former senior secured revolving credit facility was terminated.

On March 16, 2021, we entered into an amendment to our ABL Facility that permitted us to incur the indebtedness represented by the 2026 Notes discussed below.

On March 16, 2021, we secured an amendment that permitted us to incur the indebtedness represented by the 2026 Notes discussed below.

On March 19, 2021, we issued $135.0 million aggregate principal amount of our 4.75% convertible senior notes due 2026 (the "2026 Notes").

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The 2026 Notes will mature on April 1, 2026 and bear interest at an annual rate of 4.75%, which is payable semi-annually on April 1 and October 1.

We used $120.0 million of the cash proceeds to purchase $125.0 million principal amount of our outstanding 1.50% convertible senior notes due 2023 (the "2023 Notes"), with the balance added to cash on-hand.

Activity levels in each of our segments were adversely impacted by the severe winter weather event that occurred in February 2021 – particularly in Texas, Oklahoma and surrounding states.

While our facilities did not sustain meaningful damage and our operations and services were restored following the event, our February results of operations were adversely impacted due to the temporary cessation of work at well sites, facility closures by us and our customers, and delays in the shipment of goods to our customers and from our vendors.

We used $120.0 million of the cash proceeds to purchase $125.0 million principal amount of our outstanding 1.50% convertible senior notes due 2023 (the "2023 Notes") at a discount, with the balance added to cash on-hand.

Additionally, as discussed in more detail under "– 2023 Notes," during the second quarter of 2021, we purchased $6.4 million principal amount of our 2023 Notes for $6.0 million in cash.

Brent and WTI crude oil and natural gas pricing trends were as follows:

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2021 $ 61.04 $ 68.98

2020 $ 50.27 $ 29.70 $ 42.91 $ 44.32 $ 41.96

WTI Crude (per bbl)

2021 $ 58.09 $ 66.19

2020 $ 45.34 $ 27.96 $ 40.89 $ 42.52 $ 39.16

Henry Hub Natural Gas (per MMBtu)

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2020 $ 1.91 $ 1.70 $ 2.00 $ 2.52 $ 2.03

________________

Energy Information Administration (spot prices).

On April 23, 2021, Brent crude oil, WTI crude oil and natural gas spot prices closed at $65.75 per barrel, $62.18 per barrel and $2.79 per MMBtu, respectively.

On July 23, 2021, Brent crude oil, WTI crude oil and natural gas spot prices closed at $72.24 per barrel, $74.86 per barrel and $4.11 per MMBtu, respectively.

Additionally, as presented in more detail below, the U.S.

drilling rig count reported on April 23, 2021 was 438 rigs, 11% above the first quarter 2021 average.

drilling rig count reported on July 23, 2021 was 491 rigs, 9% above the second quarter 2021 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 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 35% of Offshore/Manufactured Products sales in the first three months of 2021 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").

Approximately 39% of Offshore/Manufactured Products segment sales in the first six months of 2021 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.

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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.

Further, we expect that the segment's 2021 bookings will trend higher than the orders booked into backlog in 2020.

Backlog reported by our Offshore/Manufactured Products segment totaled $226 million at March 31, 2021, an increase of 3% from December 31, 2020.

First quarter 2021 booking improved sequentially, totaling $70 million, yielding a quarterly book-to-bill ratio of 1.2x.

Backlog reported by our Offshore/Manufactured Products segment totaled $214 million as of June 30, 2021, with quarterly bookings totaling $65 million, yielding a quarterly book-to-bill ratio of 0.9x and a year-to-date ratio of 1.0x.

The following table sets forth backlog as of the dates indicated (in millions).

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2020 $ 267 $ 235 $ 227 $ 219

2019 $ 234 $ 283 $ 293 $ 280

Our Downhole Technologies segment, comprised of the GEODynamics, Inc.

("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.

("GEODynamics") business we acquired in 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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Average for the

As of April 23, 2021

Three Months Ended March 31,

As of July 23, 2021

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

2021 2020 2021 2020

United States:

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Offshore 17 14 15 15 18

491 450 392 423 588

International:

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Offshore 178 207 173 227

808 858 822 1,064

1,258 1,250 1,245 1,652

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.

As of March 31, 2021, oil-directed drilling accounted for 78% of the total U.S.

As of June 30, 2021, oil-directed drilling accounted for 79% of the total U.S.

rig count – with the balance largely natural gas related.

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Since August 14, 2020, the U.S.

rig count has increased 71% to 417 rigs as of March 31, 2021.

rig count has increased 93% to 470 rigs as of June 30, 2021.

As can be derived from the table above, the average U.S.

rig count for the three months ended March 31, 2021 decreased by 392 rigs, or 50%, compared to the average for the three months ended March 31, 2020.

rig count for the three months ended June 30, 2021 increased by 58 rigs, or 15%, compared to the average for the three months ended June 30, 2020.

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

If the current pricing environment for crude oil does not stabilize at these higher levels, our customers may be required to reduce their capital expenditures, causing 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.

If the current pricing environment for crude oil declines from current levels, our customers may be required to further reduce their capital expenditures, causing 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 the manufacture of our products.

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

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

In response to the U.S.

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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.

If we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase 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.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and related notes included in "Part II, Item 8.

Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2020 in order to understand factors, such as business combinations, charges and credits, financing transactions and changes in tax regulations, which may impact the comparability of the selected financial data.

Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2020 in order to understand factors, such as charges and credits, financing transactions and changes in tax regulations, which may impact the comparability of the selected financial data.

Unaudited Consolidated Results of Operations Data

The following summarizes our unaudited consolidated results of operations for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):

Three Months Ended March 31,

2021 2020 Variance

The following summarizes our unaudited consolidated results of operations for the three and six months ended June 30, 2021 and 2020 (in thousands, except per share amounts):

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

2021 2020 Variance 2021 2020 Variance

Products $ 78,038 $ 82,643 $ (4,605) $ 139,483 $ 185,623 $ (46,140)

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— — — — 406,056 (406,056)

Impairments of fixed assets (3)

Impairments of fixed and lease assets (3)

2,794 2,992 (198) 3,444 8,190 (4,746)

Other operating (income) expense, net (354) 107 (461)

Other operating income, net (85) (134) 49 (439) (27) (412)

163,342 179,579 (16,237) 308,693 841,075 (532,382)

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(2) During the first quarter of 2020, we recognized non-cash goodwill impairment charges totaling $406.1 million to reduce the carrying value of our reporting units to their estimated fair value.

(3) During the first quarters of 2021 and 2020, our Well Site Services segment recognized non-cash impairment charges of $0.7 million and $5.2 million, respectively, to reduce the carrying value of the segment's fixed assets to their estimated realizable value.

(4) During the first quarter 2021, we recognized non-cash gains of $3.6 million in connection with our purchases of $125.0 million principal amount of our 2023 Notes.

(3) During the first quarter of 2021 and 2020, our Well Site Services segment recognized non-cash impairment charges of $0.7 million and $5.2 million, respectively, to reduce the carrying value of the segment's fixed assets to their estimated realizable value.

During the second quarter of 2021, our Well Site Services segment recognized non-cash impairment charges of $2.8 million to reduce the carrying value of certain of the segment's operating lease assets to their estimated realizable value.

During the second quarter of 2020, our Well Site Services segment recognized a non-cash impairment charge of $3.0 million to reduce the carrying value of the segment's fixed assets to their estimated realizable value.

(4) During the first quarter of 2021, we recognized non-cash gains of $3.6 million in connection with our purchases of $125.0 million principal amount of our 2023 Notes.

During the second quarter of 2021, we recognized non-cash gains of $0.4 million in connection with our purchases of $6.4 million principal amount of our 2023 Notes.

During the second quarter of 2020, we recognized non-cash gains of $4.8 million in connection with our purchases of $12.0 million principal amount of our 2023 Notes.

(5) During the first quarter of 2020, we recognized a discrete tax benefit of $14.8 million related to U.S.

net operating loss carrybacks under provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

See Note 3, "Asset Impairments and Other Restructuring Items," Note 4, "Details of Selected Balance Sheet Accounts," Note 6, "Long-term Debt," and Note 11, "Income Taxes," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion of these and other charges and benefits recognized in the first three months of 2021 and 2020.

Unaudited Operating Segment Financial Data

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

Supplemental unaudited financial information by operating segment for the three months ended March 31, 2021 and 2020 is summarized below (dollars in thousands):

Three Months Ended March 31,

2021 2020 Variance

Supplemental unaudited financial information by operating segment for the three and six months ended June 30, 2021 and 2020 is summarized below (dollars in thousands):

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

2021 2020 Variance 2021 2020 Variance

Offshore/Manufactured Products $ 76,908 $ 94,936 $ (18,028) $ 137,517 $ 186,108 $ (48,591)

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(3) Operating loss in the first quarter of 2021 included non-cash fixed asset impairment charges of $0.7 million.

Operating loss in the second quarter of 2021 included non-cash operating lease asset impairment charges of $2.8 million.

Operating loss in the first quarter of 2020 included non-cash goodwill, inventory and fixed asset impairment charges of $127.1 million, $9.0 million and $5.2 million, respectively.

See Note 3, "Asset Impairments and Other Restructuring Items," and Note 4, "Details of Selected Balance Sheet Accounts," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion of these and other charges and benefits recognized in the first three months of 2021 and 2020.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Operating loss in the second quarter of 2020 included a non-cash fixed asset impairment charge of $3.0 million.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Consolidated Operating Results

We reported a net loss for the three months ended March 31, 2021 of $15.8 million, or $0.26 per share.

The reported first quarter loss included non-cash gains of $3.6 million ($2.9 million after-tax, or $0.05 per share) associated with debt extinguishment offset by $3.4 million ($2.7 million after-tax) of severance and restructuring costs.

These results compare to a net loss for the three months ended March 31, 2020 of $405.0 million, or $6.79 per share, which included non-cash impairment charges totaling $436.5 million ($411.1 million after-tax, or $6.89 per share) related to write-downs of goodwill, inventories and fixed assets and $0.7 million ($0.5 million after-tax, or $0.01 per share) of severance and restructuring costs.

Our reported results of operations 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.

While the spot price of WTI crude oil averaged $58 per barrel in the first quarter of 2021, up 28% from the comparable prior-year quarterly average, and crude oil inventory levels have moderated, there remains some uncertainty around demand recovery to pre-COVID-19 levels.

Additionally, activity levels in each of our segments were adversely impacted during the first quarter of 2021 by the severe winter weather event that occurred in February 2021 – particularly in Texas, Oklahoma and surrounding states.

During the first quarter of 2021, we recognized an aggregate $4.8 million reduction of payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the CARES Act employee retention credit program.

During the first quarter of 2020, we recognized a discrete income tax benefit of $14.8 million related to U.S.

We reported a net loss for the three months ended June 30, 2021 of $15.3 million, or $0.25 per share.

The second quarter 2021 loss included non-cash operating lease asset impairment charges of $2.8 million ($2.2 million after-tax, or $0.04 per share), restructuring charges of $2.6 million ($2.0 million after-tax, or $0.03 per share) and non-cash gains on extinguishment of 2023 Notes of $0.4 million ($0.3 million after-tax, or $0.01 per share).

These results compare to a net loss for the three months ended June 30, 2020 of $24.6 million, or $0.41 per share.

The reported second quarter 2020 loss included:

$5.4 million ($4.3 million after-tax, or $0.07 per share) of severance and restructuring costs;

non-cash fixed asset impairment charges of $3.0 million ($2.4 million after-tax, or $0.04 per share);

$2.2 million ($1.7 million after-tax, or $0.03 per share) in bad debt provisions related to customer bankruptcies;

and non-cash gains of $4.8 million ($3.8 million after-tax, or $0.06 per share) associated with debt extinguishment.

Our reported results of operations reflect the negative impact of the global response to the COVID-19 pandemic and ongoing uncertainties related to future crude oil demand and supply.

Customer-driven activity has improved off of 2020's low levels but could remain tempered over the balance of 2021 given uncertainty around the timing of demand recovery to pre-COVID-19 levels due to the ongoing nature of the COVID-19 pandemic.

If the pricing environment for crude oil declines from current levels, our customers may be required to moderate or reduce their planned capital expenditures, leading to declines in the demand for and prices of our products and services.

During the second quarter of 2021, we recognized an aggregate $2.8 million reduction of payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the CARES Act employee retention credit program.

We continue to evaluate additional benefits potentially available to us under the CARES Act.

Consolidated total revenues in the second quarter of 2021 were relatively consistent with the level reported in the second quarter of 2020, but were up 16% sequentially.

Consolidated product revenues in the second quarter of 2021 decreased $4.6 million, or 6%, from the second quarter of 2020, driven by reduced project-driven customer demand for connector products, partially offset by an increase in U.S.

land-based customer activity.

Consolidated service revenues in the second quarter of 2021 increased $4.1 million, or 6%, from the second quarter of 2020 due primarily to higher customer spending in the U.S.

shale play regions as activity recovers from the 2020 COVID-19 induced lows.

As can be derived from the following table, 58% of our consolidated revenues in the second quarter of 2021 were derived from sales of our short-cycle product and service offerings, which compares to 43% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended June 30, 2021 and 2020 (in thousands):

Offshore/ Manufactured Products Downhole Technologies Well Site Services Total

Three months ended June 30 2021 2020 2021 2020 2021 2020 2021 2020

Major revenue categories -

Project-driven products $ 31,826 $ 51,365 $ — $ — $ — $ — $ 31,826 $ 51,365

Completion products and services 10,447 4,739 26,760 14,965 39,083 36,175 76,290 55,879

Drilling services — — — — 2,973 169 2,973 169

Other products 5,583 6,634 — — — — 5,583 6,634

Total short-cycle 16,030 11,373 26,760 14,965 42,056 36,344 84,846 62,682

Other products and services 29,052 32,198 — — — — 29,052 32,198

$ 76,908 $ 94,936 $ 26,760 $ 14,965 $ 42,056 $ 36,344 $ 145,724 $ 146,245

Percentage of total revenue by type -

Products 72 % 73 % 85 % 90 % — % — % 54 % 57 %

Services 28 % 27 % 15 % 10 % 100 % 100 % 46 % 43 %

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $10.5 million, or 8%, in the second quarter of 2021 compared to the second quarter of 2020.

Consolidated product costs in the second quarter of 2021, decreased $4.2 million, or 6%, from the second quarter of 2020.

Consolidated service costs in the second quarter of 2021, decreased $6.3 million, or 10%, from the second quarter of 2020 due to implemented cost saving measures.

Selling, General and Administrative Expense.

Selling, general and administrative expense decreased $1.9 million, or 8%, in the second quarter of 2021 from the second quarter of 2020 due primarily to reductions in personnel, compensation levels and bad debt expense along with other implemented cost reduction measures, partially offset by $2.1 million in restructuring charges recognized during the current quarter.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $3.7 million, or 15%, in the second quarter of 2021 compared to the prior-year quarter, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 12, "Segments and Related Information," presents depreciation and amortization expense by segment.

Impairments of Fixed and Lease Assets.

During the second quarters of 2021 and 2020, our Well Site Services segment recorded non-cash impairment charges of $2.8 million and $3.0 million, respectively, to reduce the carrying value of certain of the segment's fixed and lease assets to their estimated realizable value.

Operating Income (Loss).

Our consolidated operating loss was $17.6 million in the second quarter of 2021, which included $2.8 million of non-cash operating lease asset impairment charges and $2.6 million of restructuring charges.

This compares to a consolidated operating loss of $33.3 million recognized in the second quarter of 2020, which included $5.4 million of severance and restructuring charges and $3.0 million of non-cash fixed asset impairment charges.

Interest Expense, Net.

Net interest expense was $2.7 million in the second quarter of 2021, which compares to $4.2 million in the same period of 2020.

Interest expense, which included amortization of deferred financing costs in 2021 and amortization of debt discount and deferred financing costs in 2020, as a percentage of total debt outstanding was approximately 6% in the second quarter of 2021 and 2020.

Other Income, Net.

Net other income for second quarter of 2021 included non-cash gains of $0.4 million recognized in connection with our purchases of $6.4 million principal amount of our 2023 Notes for $6.0 million in cash.

Net other income for second quarter of 2020 included non-cash gains of $4.8 million recognized in connection with our purchases of $12.0 million principal amount of our 2023 Notes for $5.9 million in cash.

For the three months ended June 30, 2021, our income tax benefit was $3.2 million, or 17% of the pre-tax loss of $18.5 million, which included certain non-deductible expenses.

This compares to an income tax benefit of $6.9 million, or 22% of the pre-tax loss of $31.5 million for the three months ended June 30, 2020, which also included certain expenses that are not deductible for income tax purposes.

Other Comprehensive Income (Loss).

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

Other comprehensive income was $3.2 million in the second quarter of 2021 compared to loss of $1.2 million in the second quarter of 2020 due to fluctuations in foreign currency exchange rates compared to the U.S.

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

For the three months ended June 30, 2021 and 2020, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to Brazil.

During the second quarter of 2021, the exchange rate for the Brazilian real strengthened compared to the U.S.

This compares to the second quarter of 2020, when the exchange rate for the Brazilian real weakened compared to the U.S.

Segment Operating Results

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues decreased $18.0 million, or 19%, in the second quarter of 2021 compared to the second quarter of 2020 due primarily to a reduction in sales of its connector products.

Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $4.8 million in the second quarter of 2021, compared to operating income of $9.4 million in the second quarter of 2020, with the impact of the year-over-year decrease in revenues partially offset by implemented cost reduction measures.

Backlog in our Offshore/Manufactured Products segment totaled $214 million as of June 30, 2021, with second quarter 2021 bookings of $65 million and a quarterly book-to-bill ratio of 0.9x.

Downhole Technologies

Our Downhole Technologies segment revenues increased $11.8 million, or 79%, in the second quarter of 2021 from the prior-year period due primarily to an increase in U.S.

land-based customer completion activity.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $2.3 million in the second quarter of 2021 compared to an operating loss of $11.1 million in the prior-year period, driven by the significant increase in revenues and implemented cost reduction measures.

The second quarter 2020 results included a $1.5 million bad debt provision on a receivable from a customer claiming bankruptcy protection and $1.3 million in severance and restructuring costs.

Well Site Services

Our Well Site Services segment revenues increased $5.7 million, or 16%, in the second quarter of 2021 compared to the prior-year quarter, driven by higher customer drilling, completion and production activity.

Operating Loss.

Our Well Site Services segment reported an operating loss of $11.6 million in the second quarter of 2021, which included $2.4 million in restructuring charges and $2.8 million of non-cash operating lease asset impairment charges.

The segment reported an operating loss of $22.9 million in the second quarter of 2020, which included $3.5 million in severance and restructuring costs and $3.0 million of non-cash fixed asset impairment charges.

Excluding these charges, our Well Site Services operating loss decreased $10.0 million from the prior-year period due to the increase in revenues and implemented cost reduction measures.

Corporate expenses decreased $0.2 million, or 2%, in the second quarter of 2021 from the prior-year period.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Consolidated Operating Results

We reported a net loss for the six months ended June 30, 2021 of $31.1 million, or $0.52 per share.

The reported first half of 2021 loss included non-cash impairment charges of $3.4 million ($2.7 million after-tax, or $0.05 per share) associated with write-downs of fixed and lease assets, $6.0 million ($4.7 million after-tax, or $0.08 per share) of severance and restructuring costs and non-cash gains of $4.0 million ($3.2 million after-tax, or $0.05 per share) associated with debt extinguishment.

These results compare to a net loss for the six months ended June 30, 2020 of $429.7 million, or $7.19 per share, which included:

non-cash impairment charges totaling $439.5 million ($413.4 million after-tax, or $6.92 per share) related to write-downs of goodwill, inventories and fixed assets;

$6.1 million ($4.8 million after-tax, or $0.08 per share) of severance and restructuring costs;

$2.2 million ($1.7 million after-tax, or $0.03 per share) in bad debt provisions related to customer bankruptcies;

non-cash gains of $4.8 million ($3.8 million after-tax, or $0.06 per share) associated with debt extinguishment;

and a discrete tax benefit of $14.8 million, or $0.25 per share, associated with the carryback of tax losses allowed under the CARES Act.

Customer-driven activity has improved off of 2020's low levels but could remain tempered over the balance of 2021 given uncertainty around the timing of demand recovery to pre-COVID-19 levels.

During the first half of 2021, we recognized an aggregate $7.6 million reduction of payroll tax expense (recognized within cost of revenues and selling, general and administrative expense) as part of the CARES Act employee retention credit program.

During the first half of 2020, we also recognized a discrete income tax benefit of $14.8 million related to U.S.

net operating loss carrybacks under provisions of the CARES Act.

We continue to evaluate additional benefits potentially available to us under the CARES Act.

Customer-driven activity has improved off of 2020's low levels but could remain tempered in 2021 given uncertainty around the timing of demand recovery to pre-COVID-19 levels due to the ongoing nature of the COVID-19 pandemic.

If the current pricing environment for crude oil does not stabilize at these higher levels, our customers may be required to reduce their planned capital expenditures, causing declines in the demand for, and prices of, our products and services.

Consolidated total revenues in the first quarter of 2021 decreased $94.1 million, or 43%, from the first quarter of 2020.

Consolidated product revenues in the first quarter of 2021 decreased $41.5 million, or 40%, from the first quarter of 2020, driven by the significant decline in U.S.

land-based customer activity and reduced project-driven customer demand for connector products.

Consolidated service revenues in the first quarter of 2021 decreased $52.6 million, or 45%, from the first quarter of 2020 due primarily to reduced customer spending in the U.S.

shale play regions.

As can be derived from the following table, 61% of our consolidated revenues in the first quarter of 2021 were derived from sales of our short-cycle product and service offerings, which compares to 69% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended March 31, 2021 and 2020 (in thousands):

Consolidated total revenues in the first six months of 2021 decreased $94.6 million, or 26%, from the first six months of 2020.

Consolidated product revenues in the first six months of 2021 decreased $46.1 million, or 25%, from the first six months of 2020, driven by the significant decline in U.S.

land-based customer activity beginning in March 2020 and reduced project-driven customer demand for connector products.

Consolidated service revenues in the first six months of 2021 decreased $48.5 million, or 27%, from the first six months of 2020 due primarily to higher customer spending in the U.S.

shale play regions in the first quarter of 2020, prior to the significant impact of the COVID-19 pandemic on our operating results.

As can be derived from the following table, 60% of our consolidated revenues in the first six months of 2021 were derived from sales of our short-cycle product and service offerings, which compares to 58% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the six months ended June 30, 2021 and 2020 (in thousands):

Offshore/ Manufactured Products Downhole Technologies Well Site Services Total

Three months ended March 31 2021 2020 2021 2020 2021 2020 2021 2020

Six months ended June 30 2021 2020 2021 2020 2021 2020 2021 2020

Major revenue categories -

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $95.3 million, or 48%, in the first quarter of 2021 compared to the first quarter of 2020.

Cost of revenues in the first quarter of 2020 included provisions totaling $25.2 million for excess and obsolete inventory – driven by the unprecedented market downturn in March of 2020.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $105.7 million, or 32%, in the first six months of 2021 compared to the first six months of 2020.

Cost of revenues in the first six months of 2020 included provisions totaling $25.2 million for excess and obsolete inventory – driven by the unprecedented market downturn beginning in March of 2020.

Excluding these provisions, consolidated cost of revenues decreased $80.5 million, or 27%, from the prior-year period.

Consolidated product costs in the first quarter of 2021, decreased $40.3 million, or 45%, from the first quarter of 2020, which included a provision of $12.0 million for excess and obsolete inventory.

Consolidated product costs in the first six months of 2021, decreased $44.4 million, or 28%, from the first six months of 2020, which included a provision of $12.0 million for excess and obsolete inventory.

Excluding this charge, consolidated product costs decreased $32.5 million, or 22%, from the prior-year period.

Consolidated service costs in the first quarter of 2021, decreased $55.0 million, or 51%, from the first quarter of 2020, which included provisions for excess and obsolete inventory of $13.2 million.

Consolidated service costs in the first six months of 2021, decreased $61.3 million, or 37%, from the first six months of 2020, which included provisions for excess and obsolete inventory of $13.2 million.

Excluding these charges, consolidated service costs decreased $48.0 million, or 31%, from the prior-year period.

Selling, General and Administrative Expense.

Selling, general and administrative expense decreased $4.9 million, or 19%, in the first quarter of 2021 from the first quarter of 2020 due primarily to reductions in personnel, compensation levels and travel expenses along with other implemented cost reduction measures.

Selling, general and administrative expense decreased $6.8 million, or 14%, in the first six months of 2021 from the first six months of 2020 due primarily to reductions in personnel, compensation levels, travel and bad debt expenses along with other implemented cost reduction measures, partially offset by $3.7 million in severance and restructuring costs recognized in the first half of 2021.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $4.9 million, or 19%, in the first quarter of 2021 compared to the prior-year quarter, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Depreciation and amortization expense decreased $8.6 million, or 17%, in the first six months of 2021 compared to the prior-year period, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 12, "Segments and Related Information," presents depreciation and amortization expense by segment.

Impairment of Goodwill.

Impairments of Goodwill.

During the first quarter of 2020, our Offshore/Manufactured Products, Downhole Technologies and Well Site Services operations recognized non-cash goodwill impairment charges of $86.5 million, $192.5 million and $127.1 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.

Impairments of Fixed Assets.

During the first quarters of 2021 and 2020, our Well Site Services segment recorded non-cash impairment charges of $0.7 million and $5.2 million, respectively, to reduce the carrying value of certain of the segment's fixed assets to their estimated realizable value.

Impairments of Fixed and Lease Assets.

During the first six months of 2021 and 2020, our Well Site Services segment recorded non-cash impairment charges of $3.4 million and $8.2 million, respectively, to reduce the carrying value of certain of the segment's fixed and lease assets to their estimated realizable value.

Operating Income (Loss).

Our consolidated operating loss was $19.8 million in the first quarter of 2021, which included $3.4 million of severance and restructuring charges.

This compares to a consolidated operating loss of $441.8 million recognized in the first quarter of 2020, which included the impact of $436.5 million of non-cash asset impairment charges and $0.7 million of severance and restructuring charges.

Our consolidated operating loss was $37.4 million in the first six months of 2021, which included $3.4 million of non-cash asset impairment charges and $6.0 million of severance and restructuring costs.

This compares to a consolidated operating loss of $475.1 million recognized in the first six months of 2020, which included the impact of $439.5 million non-cash asset impairment charges and $6.1 million in severance and restructuring costs.

Interest Expense, Net.

Net interest expense was $2.3 million in the first quarter of 2021, which compares to $3.5 million in the same period of 2020.

Interest expense, which includes amortization of deferred financing costs in 2021 and amortization of debt discount and deferred financing costs in 2020, as a percentage of total debt outstanding was approximately 4% in the

first quarter of 2021 and 6% in the first quarter of 2020.

Our contractual cash interest expense as a percentage of total debt outstanding was approximately 3% in the three months ended March 31, 2021 and 2020.

Net interest expense was $5.0 million in the first six months of 2021, which compares to $7.7 million in the same period of 2020.

Other Income, Net.

Net other income for first quarter of 2021 includes a non-cash gain of $3.6 million recognized in connection with our purchases of $125.0 million principal amount of our 2023 Notes for $120.0 million in cash.

For the three months ended March 31, 2021, our income tax benefit was $2.3 million, or 13% of the pre-tax loss of $18.1 million, which included certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $39.5 million, or 9% of the pre-tax loss of $444.5 million for the three months ended March 31, 2020, which included non-cash goodwill charges (approximately $313.1 million) and other expenses that are not deductible for income tax purposes.

In the first quarter of 2020, the impact of these non-deductible expenses was partially offset by a $14.8 million discrete tax benefit related to the carryback of U.S.

Net other income for the first six months of 2021 included non-cash gains of $4.0 million recognized in connection with our purchases of $131.4 million principal amount of our 2023 Notes for $126.0 million in cash.

In the first six months of 2020, we recognized non-cash gains of $4.8 million recognized in connection with our purchases of $17.7 million principal amount of our 2023 Notes for $10.6 million in cash.

For the six months ended June 30, 2021, our income tax benefit was $5.5 million, or 15% of the pre-tax loss of $36.6 million, which included certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $46.4 million, or 10% of the pre-tax loss of $476.1 million for the six months ended June 30, 2020, which included non-cash goodwill charges (approximately $313.1 million) and other expenses that are not deductible for income tax purposes.

In the first six months of 2020, the impact of these non-deductible expenses was partially offset by a $14.8 million discrete tax benefit related to the carryback of U.S.

net operating losses under the CARES Act.

Other Comprehensive Loss.

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

Other comprehensive loss was $1.5 million in the first quarter of 2021 compared to loss of $14.8 million in the first quarter of 2020 due to fluctuations in foreign currency exchange rates compared to the U.S.

Other Comprehensive Income (Loss).

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

Other comprehensive income was $1.6 million in the first six months of 2021 compared to loss of $16.0 million in the first six months of 2020 due to fluctuations in foreign currency exchange rates compared to the U.S.

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

For the three months ended March 31, 2021 and 2020, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

During the first quarter of 2021, the exchange rate for the British pound strengthened compared to the U.S.

dollar and the Brazilian real weakened compared to the U.S.

This compares to the first quarter of 2020, when the exchange rate for both the British pound and Brazilian real weakened compared to the U.S.

For the six months ended June 30, 2021 and 2020, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During the first six months of 2021, the exchange rate for the British pound and the Brazilian real strengthened compared to the U.S.

This compares to the first six months of 2020, when the exchange rate for both the British pound and Brazilian real weakened compared to the U.S.

Segment Operating Results

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues decreased $30.6 million, or 34%, in the first quarter of 2021 compared to the first quarter of 2020 due primarily to a reduction in sales of its connector and short-cycle products and service activities.

Our Offshore/Manufactured Products segment revenues declined $48.6 million, or 26%, in the first six months of 2021 compared to the first six months of 2020 due primarily to a reduction in sales of its connector and short-cycle products and service activities.

Operating Income (Loss).

Our Offshore/Manufactured Products segment reported operating income of $1.1 million in the first quarter of 2021, compared to an operating loss of $95.5 million in the first quarter of 2020, which included 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 $6.1 million in the first quarter of 2021 compared to the first quarter of 2020, with the impact of the year-over-year decrease in revenues partially offset by cost reduction measures implemented in 2020.

Backlog in our Offshore/Manufactured Products segment totaled $226 million as of March 31, 2021, an increase of 3% from December 31, 2020.

First quarter 2021 bookings totaled $70 million, yielding a quarterly book-to-bill ratio of 1.2x.

Our Offshore/Manufactured Products segment reported operating income of $5.9 million in the first six months of 2021, which included $0.3 million of severance and restructuring charges.

The segment reported an operating loss of $86.1 million in the first six months of 2020, which included severance and restructuring costs of $0.4 million and 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 $10.8 million in the first six months of 2021 compared to the first six months of 2020, with the impact of the year-over-year decrease in revenues partially offset by implemented cost reduction measures.

Backlog in our Offshore/Manufactured Products segment totaled $214 million as of June 30, 2021, a decrease of 2% from December 31, 2020.

Bookings during first six months 2021 totaled $135 million, yielding a year-to-date book-to-bill ratio of 1.0x.

Downhole Technologies

Our Downhole Technologies segment revenues decreased $15.6 million, or 38%, in the first quarter of 2021 from the prior-year period due primarily to the year-over-year decline in U.S.

land-based customer completion activity.

Our Downhole Technologies segment revenues decreased $3.8 million, or 7%, in the first six months of 2021 from the prior-year period due primarily to higher U.S.

land-based customer completion activity during the first quarter of 2020, prior to the significant impact of the COVID-19 pandemic on our operating results.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $1.6 million in the first quarter of 2021 compared to an operating loss of $192.7 million in the prior-year period, which included a non-cash goodwill impairment charge of $192.5 million.

Excluding this charge, operating loss increased $1.4 million in the first quarter of 2021 from the prior-year period due to the decline in revenues, partially offset by cost reduction measures implemented in 2020.

Our Downhole Technologies segment reported an operating loss of $3.9 million in the first six months of 2021, which included $0.5 million of severance and restructuring charges.

The segment reported an operating loss of $203.8 million in the prior-year period, which included severance and restructuring costs of $1.3 million and a non-cash goodwill impairment charge of $192.5 million.

Excluding these charges, operating loss declined $6.6 million in the first six months of 2021 from the prior-year period due to implemented cost reduction measures.

Well Site Services

Our Well Site Services segment revenues decreased $47.9 million, or 55%, in the first quarter of 2021 compared to the prior-year quarter, driven by reduced customer completion and production activity.

Our Well Site Services segment revenues decreased $42.2 million, or 34%, in the first six months of 2021 compared to the prior-year period, driven by higher customer completion and production activity during the first quarter of 2020, prior to the significant impact of the COVID-19 pandemic on our operating results.

Operating Loss.

Our Well Site Services segment operating loss decreased $135.1 million in the first quarter of 2021 from the first quarter of 2020, which included non-cash impairment charges of $127.1 million related to goodwill, $9.0 million related to inventory and $5.2 million related to fixed assets.

Excluding these 2020 asset impairment charges, our Well Site Services operating loss increased $6.1 million from the prior-year period due to the significant decrease in revenues, substantially offset by cost reduction measures implemented in 2020.

Corporate expenses increased $0.7 million, or 8%, in the first quarter of 2021 from the prior-year period, due to $1.6 million of severance costs incurred in the first quarter of 2021 partially offset by cost reduction measures implemented in 2020.

Our Well Site Services segment reported an operating loss of $21.4 million in the first six months of 2021, which included $3.7 million in severance and restructuring costs and non-cash fixed and lease asset impairment charges of $3.4 million.

The segment reported an operating loss of $167.9 million in the first six months of 2020, which included severance and restructuring costs of $4.1 million and non-cash impairment charges of $127.1 million related to goodwill, $9.0 million related to inventory and $8.2 million related to fixed assets.

Excluding these charges, our Well Site Services operating loss decreased $5.2 million from the prior-year period due to implemented cost reduction measures.

Corporate expenses increased $0.5 million, or 3%, in the first six months of 2021 from the prior-year period, with $1.6 million of severance costs incurred in the first six months of 2021 substantially offset by implemented cost reduction measures.

Liquidity, Capital Resources and Other Matters

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Operating Activities

Cash flows totaling $8.4 million were used in operations during the first quarter of 2021, compared to $5.4 million generated by operations during the same period of 2020.

During the first quarter of 2021, $12.1 million was used to fund net working capital increases, primarily due to increases in accounts receivable and inventories.

During the first quarter of 2020, $14.7 million was used to fund net working capital increases, primarily due to an increase in inventories and a reduction in accrued liabilities.

Cash flows from operations totaling $13.9 million were generated during the first half of 2021, compared to $44.1 million generated by operations during the same period of 2020.

During the first half of 2021, $5.2 million was provided by net working capital decreases, primarily due to an increase in accounts payable, partially offset by increases in accounts receivable and inventories.

During the first half of 2020, $27.8 million was provided by net working capital decreases, primarily due to a reduction in accounts receivable, partially offset by decreases in accounts payable and accrued liabilities.

Investing Activities

Cash used in investing activities during the first quarter of 2021 totaled $2.4 million, compared to $2.0 million used in investing activities during the first quarter of 2020.

Capital expenditures totaled $4.1 million and $5.9 million during the first quarter of 2021 and 2020, respectively.

We expect to spend approximately $15 million to $20 million in capital expenditures during 2021.

Cash used in investing activities during the first half of 2021 totaled $4.2 million, compared to $3.8 million used in investing activities during the first half of 2020.

Capital expenditures totaled $7.3 million and $8.9 million during the first half of 2021 and 2020, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $3.4 million and $5.4 million during the six months ended June 30, 2021 and 2020, respectively.

We expect to spend approximately $15 million in 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.

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Financing Activities

During the three months ended March 31, 2021, net cash of $6.6 million was used in financing activities including our purchases of $125.0 million principal amount of our 2023 Notes for cash totaling $120.0 million and $12.0 million of net repayments under our ABL Facility.

During the six months ended June 30, 2021, net cash of $19.1 million was used in financing activities including our purchases of $131.4 million principal amount of our 2023 Notes for cash totaling $126.0 million and $19.0 million of net repayments under our ABL Facility.

Partially offsetting these uses was our issuance of $135.0 million principal amount of our 2026 Notes yielding net cash proceeds of $130.6 million.

This compares to $12.4 million of cash provided by financing activities during the three months ended March 31, 2020, primarily as a result of $19.8 million in net borrowings under our Revolving Credit Facility, partially offset by our purchase of $5.7 million principal amount of our 2023 Notes for $4.7 million.

As of March 31, 2021, we had cash and cash equivalents totaling $54.5 million, which compared to $72.0 million as of December 31, 2020.

As of March 31, 2021, we had $7.0 million outstanding under our ABL Facility (discussed below), $135.0 million principal amount of our 2026 Notes outstanding and $32.4 million principal amount of our 2023 Notes outstanding.

Our reported interest expense, which appropriately included amortization of deferred financing costs of $0.9 million during the first three months of 2021, was above our contractual cash interest expense.

For the first three months of 2021, our contractual cash interest expense was $1.4 million, or approximately 3% of the average principal balance of debt outstanding.

This compares to $5.0 million of cash provided by financing activities during the six months ended June 30, 2020, primarily as a result of $19.1 million in net borrowings under our former revolving credit facility, partially offset by our purchases of $17.7 million principal amount of our 2023 Notes for $10.6 million.

As of June 30, 2021, we had cash and cash equivalents totaling $62.7 million, which compared to $72.0 million as of December 31, 2020.

As of June 30, 2021, we had no borrowings outstanding under our ABL Facility (discussed below), $135.0 million principal amount of our 2026 Notes outstanding, $26.0 million principal amount of our 2023 Notes outstanding and other debt of $22.0 million.

Our reported interest expense, which appropriately included amortization of deferred financing costs of $1.4 million during the first six months of 2021, was above our contractual cash interest expense.

For the first six months of 2021, our contractual cash interest expense was $3.7 million, or approximately 4% of the average principal balance of debt outstanding.

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

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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;

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 during 2020, 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;

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

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.

ABL 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 (as amended, the "ABL Facility") under which credit availability is subject to a borrowing base calculation.

Concurrent with entering into the ABL Facility, our former revolving credit facility was terminated.

On February 10, 2021, we entered into the ABL Facility under which credit availability is subject to a borrowing base calculation.

Concurrent with entering into the ABL Facility, we terminated our former revolving credit facility.

On March 16, 2021, we entered into an amendment to the ABL Facility that permitted us to incur the indebtedness represented by the 2026 Notes.

The ABL Facility is governed by a credit agreement, as amended on March 16, 2021 to allow for the issuance of the 2026 Notes, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (the "ABL Agreement").

The ABL 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 "ABL Agreement").

The ABL 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).

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The ABL 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 ABL 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.

As of March 31, 2021, we had $7.0 million of borrowings outstanding under the ABL Facility and $19.0 million of outstanding letters of credit.

The total amount available to be drawn as of March 31, 2021 was $40.6 million, calculated based on the current borrowing base less outstanding borrowings and letters of credit.

As of June 30, 2021, we had no borrowings outstanding under the ABL Facility and $17.3 million of outstanding letters of credit.

The total amount available to be drawn as of June 30, 2021 was $50.3 million, calculated based on the current borrowing base less outstanding letters of credit.

Former Revolving Credit Facility.

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See Note 6, "Long-term Debt," for further information regarding the 2026 Notes.

As of March 31, 2021, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

As of June 30, 2021, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

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

The 2023 Indenture contains certain events of default, including certain defaults by the Company with respect to other indebtedness of at least $40.0 million.

During the first three months of 2021, we purchased $125.0 million principal amount of the outstanding 2023 Notes for $120.0 million in cash, which was $3.6 million below the net carrying amount of the related liability, resulting in the recognition of a non-cash gain.

During the first six months of 2021, we purchased $131.4 million principal amount of the outstanding 2023 Notes for $126.0 million in cash.

Since September 2019, we have purchased a cumulative $174.0 million principal amount of the 2023 Notes for $152.8 million in cash.

See Note 6, "Long-term Debt," for further information regarding the 2023 Notes.

As of March 31, 2021, none of the conditions allowing holders of the 2023 Notes to convert, or requiring us to repurchase the 2023 Notes, had been met.

As of June 30, 2021, none of the conditions allowing holders of the 2023 Notes to convert, or requiring us to repurchase the 2023 Notes, had been met.

Promissory Note.

In connection with the 2018 acquisition of GEODynamics (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.

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

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

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

Accordingly, we have reduced the carrying amount of such note in our consolidated balance sheet to $17.1 million as of March 31, 2021 and December 31, 2020, which is our current best estimate of what is owed after set-off for indemnification matters.

We have incurred settlement costs and expenses of $7.5 million related to such indemnification claims and believe that the maturity date of such note is extended until the resolution of such indemnity claims and that we are permitted to set-off the principal amount owed by the amount of such costs and expenses.

Accordingly, we have reduced the carrying amount of such note in our consolidated balance sheet to $17.5 million as of June 30, 2021, which is our current best estimate of what is owed after set-off for indemnification matters.

See Note 13, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.

Our total debt represented 20% of our combined total debt and stockholders' equity as of March 31, 2021 and December 31, 2020.

Our total debt represented 20% of our combined total debt and stockholders' equity as of June 30, 2021 and December 31, 2020.

Contingencies and Other Obligations.

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Off-Balance Sheet Arrangements

As of March 31, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of June 30, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Availability and Cost of Products

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

In 2018, the United States 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 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.

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

See Note 13, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis