What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-02-22 · 120 added, 110 removed, 259 unchanged (47% of the section changed)

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Business and Operating Risks

Declines in crude oil prices to record low levels as a result of the COVID-19 outbreak and a significantly oversupplied crude oil market have negatively impacted, and are expected to continue to negatively impact, demand for our products and services resulting in a material negative impact on our results of operations, financial position and liquidity.

Public health crises, pandemics and epidemics, such as the ongoing outbreak of COVID-19, have adversely impacted and are expected to continue to adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our services.

Fear of such events has also altered the level of capital spending by oil and gas companies for exploration and production activities and adversely affected the economies and financial markets of many countries resulting in an economic downturn that has affected demand for our services.

A significant majority of states as well as local jurisdictions have imposed, and others in the future may impose, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions, and the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects.

In an effort to minimize the spread of illness, we and our customers have implemented various worksite restrictions as well as quarantining in order to minimize the chances of a potential COVID-19 outbreak, which could result in decreased operational effectiveness and disruptions in our equipment delivery and supply chain for our customers.

As of the date of filing of this Annual Report on Form 10-K for the period ended December 31, 2020, our manufacturing and services facilities are open, but our operations still face certain interruptions related to the COVID-19 pandemic.

Even once the worst impacts have subsided, the COVID-19 pandemic could continue to adversely impact our business through, for example, reductions in the demand for gasoline by consumers who may be more inclined to work from home than commute to work.

We are continuing to monitor the impact of COVID-19 on our business, including as a result of changes in consumer behavior, which has resulted in a decrease in the demand for crude oil and natural gas and, consequently, our products and services.

Contemporaneously with the widespread outbreak of COVID-19 in the United States, the increase in crude oil supply resulting from production escalations from OPEC, combined with a decrease in crude oil demand stemming from the uncertainties surrounding COVID-19 resulted in a sharp decline in crude oil prices.

In response, a number of our exploration and production company customers announced significant reductions in capital spending for drilling, completion, production and other projects on which our products and services would be used.

These reductions in spending and activity levels have negatively impacted, and we expect they will continue to negatively impact, demand for our products and services, the prices we can charge for those products and services and, as a result, our results of operations, liquidity and financial condition.

Although OPEC, its members and other state-controlled oil companies ultimately agreed to reduce production and many operators have shut-in production in the United States, supply continues to exceed demand and crude oil prices remain volatile and at lower levels.

Further actions among OPEC members and other 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 COVID-19 pandemic.

The extent to which COVID-19 and lower crude oil prices impacts our results, financial position and liquidity will depend on future developments, such as the availability of effective treatments and vaccines, which are highly uncertain and cannot be predicted.

Demand for the majority of our products and services is substantially dependent on the levels of expenditures by companies in the oil and natural gas industry.

Lower oil and natural gas prices have significantly reduced the demand for our products and services and the prices we are able to charge.

The COVID-19 outbreak has negatively impacted, and may continue to negatively impact crude oil prices and demand for our products and services.

The outbreak of COVID-19 has adversely impacted and may continue to adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our products and services.

The COVID-19 pandemic also altered the level of capital spending by oil and gas companies for exploration and production activities and adversely affected the economies and financial markets of many countries resulting in an economic downturn that affected demand for our products and services.

In response to the initial outbreak of COVID-19, many state and local jurisdictions imposed quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects.

In an effort to minimize the spread of illness, we and our customers implemented various worksite restrictions as well as quarantining in order to minimize the chances of a potential COVID-19 outbreak.

During 2021, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded.

However, the effects of the COVID-19 pandemic and related economic, business and market disruptions continue and the macro outlook remains uncertain.

While the prices of and demand for crude oil have recovered from the lows seen in the initial stages of the pandemic, further outbreaks or the emergence of new strains of the COVID-19 virus, such as the Omicron variant, could result in the reimposition of domestic and international regulations directing individuals to stay at home, limiting travel, requiring facility closures and imposing quarantines.

Widespread implementation of these or similar restrictions could result in commodity price volatility, reduced demand for our products and services, as well as delays in or inability to fulfill our contractual obligations to customers, logistic constraints, increases in our costs, and workforce and raw material shortages.

The ultimate duration of the COVID-19 pandemic, along with resulting governmental restrictions and related impacts on the prices of and demand for crude oil, the global economy and capital markets remains uncertain.

Demand for the majority of our products and services is substantially dependent on the levels of expenditures by companies in the crude oil and natural gas industry.

The global response to COVID-19, ongoing uncertainties related to future crude oil demand and the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory pressures reduced the demand, and the prices we are able to charge, for our products and services during 2020 and 2021.

This has had and may continue to have a material adverse effect on our financial condition and results of operations.

Demand for most of our products and services depends substantially on the level of capital expenditures invested in the oil and natural gas industry.

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 which resulted in an oversupply of many of our services and products and substantially reduced the prices we could charge our customers for these services and products.

The global response to COVID-19, ongoing uncertainties related to future crude oil demand and the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory pressures have resulted in an oversupply of many of our services and products and substantially reduced the prices we could charge our customers for these services and products.

A continuation or worsening of these conditions may result in a material adverse impact on our financial condition, results of operations and cash flows, and it is difficult to predict how long the current commodity price environment will continue.

Prices could remain highly volatile and have adverse effects on our business and operations due to numerous factors, including:

• public health crises, such as the COVID-19 outbreak at the beginning of 2020, which has negatively impacted the global economy, and correspondingly, the price of crude oil;

• worldwide demand for oil and natural gas;

The level of capital expenditures by companies in the crude oil and natural gas industry could remain highly volatile and have adverse effects on our business and operations due to numerous factors, including:

• the ongoing impact of COVID-19 pandemic;

• worldwide demand for and supply of oil and natural gas;

• crude oil and natural gas prices;

• inflation in wages, materials, parts, equipment and other costs;

• the level of drilling and completion activity;

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• delays in major offshore and onshore oil and natural gas field permitting or development timetables;

• the availability of attractive offshore and onshore oil and natural gas field prospects that may be affected by governmental actions or environmental activists that may restrict development;

• the availability of attractive offshore and onshore oil and natural gas field prospects that may be affected by governmental actions or environmental activists that may restrict, suspend or cancel development;

• the availability of transportation infrastructure for oil and natural gas, refining capacity and shifts in end-customer preferences toward fuel efficiency and the use of natural gas;

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• national government political requirements, including the ability and willingness of OPEC to set and maintain production levels and prices for oil and government policies which could nationalize or expropriate oil and natural gas exploration, production, refining or transportation assets;

• shareholder activism or activities by non-governmental organizations to limit or cease certain sources of funding for the energy sector or restrict the exploration, development, production and transportation of oil and natural gas;

• stockholder activism or activities by non-governmental organizations to limit or cease certain sources of funding for the energy sector or restrict the exploration, development, production and transportation of oil and natural gas;

• the impact of armed hostilities involving one or more oil producing nations;

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• environmental and other governmental laws and regulations;

• domestic and foreign tax policies, including those regarding tariffs and duties.

and foreign tax policies, including those regarding tariffs and duties.

In response to lower oil prices, many of our customers have reduced or delayed their capital spending, which reduced the demand for our products and services and exerted downward pressure on the prices paid for our products and services.

We expect that we will continue to encounter weakness in the demand for, and prices of, our products and services until commodity prices stabilize at higher levels and our customers' capital spending increases.

Any prolonged reduction in the overall level of exploration and production activities, whether resulting from changes in oil and natural gas prices or otherwise, could have an adverse effect on our equipment utilization, revenues, cash flows and profitability;

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While we utilize various procedures and controls to monitor these security threats and mitigate our exposure to such threats and other disruptions, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing.

If any of these events were to materialize, they could lead to losses of sensitive information (including our intellectual property and customer data), critical infrastructure, personnel or capabilities, essential to our operations, and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows.

If any of these events were to materialize, they could lead to losses of sensitive information (including our intellectual property, and employee and customer data), critical infrastructure, personnel or capabilities, essential to our operations, and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows.

Our inability to control the inherent risks of identifying and integrating businesses that we have or may acquire, including any related increases in debt or issuances of equity securities, could adversely affect our operations.

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However, we may not be able to identify and acquire acceptable acquisition candidates on favorable terms in the future or at all.

In addition, we may incur substantial indebtedness to finance future acquisitions and also may issue equity securities in connection with such acquisitions, which could impose a significant burden on our results of operations and financial condition and could result in significant dilution to stockholders.

In addition, we have in the past and may in the future incur indebtedness to finance acquisitions and also may issue equity securities in connection with such acquisitions, which could impose a significant burden on our results of operations and financial condition and could result in significant dilution to stockholders.

We expect to gain certain business, financial, and strategic advantages as a result of business combinations we undertake, including synergies and operating efficiencies.

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Conversely, during periods of reduced activity, we are forced to reduce headcount, freeze or reduce wages, and implement other cost-saving measures which could lead skilled personnel to migrate to other industries.

Market interest in ESG and alternative energy sources may also make it more difficult for us to attract and retain employees who may feel it necessary to exit our business in favor of other opportunities.

We depend on several significant customers in each of our business segments, and the loss of one or more such customers or the inability of one or more such customers to meet their obligations to us, could adversely affect our results of operations.

While no customer accounted for more than 10% of our consolidated revenues in 2020 or 2019, Halliburton Company individually accounted for 10% of our total consolidated revenues in 2018.

The loss of a significant portion of customers in any of our business segments, or a sustained decrease in demand by any of such customers, could result in a loss of revenues and could have a material adverse effect on our results of operations.

While no customer accounted for more than 10% of our consolidated revenues in 2021, 2020 or 2019, the loss of a significant portion of customers in any of our business segments, or a sustained decrease in demand by any of such customers, could result in a loss of revenues and could have a material adverse effect on our results of operations.

In addition, the concentration of customers in one industry impacts our overall exposure to credit risk, in that customers may be similarly affected by changes in economic and industry conditions.

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Many of our customers finance their activities through cash flow from operations, the incurrence of debt, or the issuance of equity.

In 2020, many of our customers experienced substantial reductions in their cash flows from operations, and some are experiencing liquidity shortages, lack of access to capital and credit markets, a reduction in borrowing bases under reserve-based credit facilities and other adverse impacts to their financial condition.

These conditions caused a number of our customers to claim bankruptcy protection in 2020 which could continue.

In 2020 and 2021, many of our customers experienced substantial reductions in their cash flows from operations, and some are experiencing liquidity shortages, lack of access to capital and credit markets, a reduction in borrowing bases under reserve-based credit facilities and other adverse impacts to their financial condition.

These conditions caused a number of our customers to claim bankruptcy protection, which could continue.

The inability, or failure of, our significant customers to meet their obligations to us, or their insolvency or liquidation, may adversely affect our financial results.

Weather conditions in our regions of operations may limit our ability to operate our business and could adversely affect our operating results, which are susceptible to seasonal earnings volatility.

Our operations are directly affected by seasonal differences in weather in the areas in which we operate, most notably in the Rocky Mountain and Northeast regions of the United States, where severe winter weather conditions can restrict access to work areas.

In addition, summer and fall completion and drilling activity can be restricted due to hurricanes and other storms

prevalent in the Gulf of Mexico and along the Gulf Coast.

Climate events could adversely impact our operations or those of our customers or suppliers.

Severe weather events in the areas in which we or our customers operate, such as hurricanes, floods and prolonged periods of cold weather, whether from climate change or otherwise, can cause disruptions and, in some cases, delays in, or suspension of, our operations and those of our customers.

Seasonal differences in weather in the areas in which we operate, most notably in the Rocky Mountain and Northeast regions of the United States, where severe winter weather conditions can also restrict our operations and those of our customers.

In addition, summer and fall completion and drilling activity can be restricted due to hurricanes and other storms prevalent in the Gulf of Mexico and along the Gulf Coast.

As a result of these seasonal differences, full year results are not likely to be a direct multiple of any particular quarter or combination of quarters.

Many forecasters also expect that potential climate changes may have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events and could have an adverse effect on our or our customers' operations.

Any unusual or prolonged severe weather or increased frequency thereof, such as freezing rain, earthquakes, hurricanes, droughts, or floods in our or our oil and gas exploration and production customers' areas of operations or markets, whether due to climate change or otherwise, could have a material adverse effect on our business, results of operations and financial condition.

Many forecasters also believe that potential climate changes may have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events, as well as chronic shifts in temperature and precipitation patterns, which could have an adverse effect on our or our customers' operations.

These climatic developments have the potential to also cause physical damage to our assets, which may have an adverse effect on our operations.

Any unusual or prolonged severe weather or increased frequency thereof in our or customers' areas of operations or markets, whether due to climate change or otherwise, could have a material adverse effect on our business, results of operations and financial condition.

Adverse climate events could also affect our third-party suppliers, which could limit their ability to

provide us with the necessary products or raw materials to maintain operations of our facilities or services.

Our planning for normal climatic variation, insurance programs and emergency recovery plans may inadequately mitigate the effects of such weather conditions, and not all such effects can be predicted, eliminated or insured against.

Additionally, changing meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or the products our customer produce, which may impact demand for our products and services.

Disruption of our supply chain could adversely impact our ability to manufacture, transport and sell our products.

We and our suppliers use multiple forms of transportation to bring our products to market, including truck, ocean and air-cargo shipments.

Disruption to the timely supply of raw materials, parts and finished goods or increases in the cost of transportation services, including due to general inflationary pressures, cost of fuel and labor, labor disputes, governmental regulation or governmental restrictions limiting specific forms of transportation, could have an adverse effect on our ability to manufacture, transport and sell our products, which would adversely affect our results of operations, cash flows and financial position.

Financial Risks

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Historically, we have sought to finance the operation of our business primarily with cash on-hand and cash provided by operating activities, but we have also relied on capital from the bank and capital markets.

The effect of the COVID-19 pandemic has resulted in significant disruption to and volatility in the global financial markets.

For companies like ours in the energy industry, this market disruption has significantly 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 capital being available on less favorable terms, all of which could negatively affect our liquidity and our ability to fund our operations.

In addition, a recession or long-term market correction could further materially impact the value of our common stock, our access to capital or our liquidity or ability to generate cash from operations in the near and long-term.

The COVID-19 pandemic initially resulted in significant disruption to and volatility in the global financial markets.

For companies like ours in the energy industry, this market disruption significantly impacted the value of our common stock and reduced our ability to access capital in the bank and capital markets.

Further outbreaks or the emergence of new strains of the COVID-19 virus, such as the Omicron variant, could result in the return of these conditions, which could negatively affect our liquidity and our ability to fund our operations.

In addition, a recession or long-term market correction could further negatively impact the value of our common stock, our access to capital or our liquidity or ability to generate cash from operations in the near and long-term.

If we are unable to access the bank and capital markets on favorable terms, or if we are not successful in raising capital at an attractive cost within the time period required or at all, we may not be able to grow or maintain our business, which could have a material adverse effect on our business, results of operations and financial condition.

We may be adversely affected by the effects of inflation.

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

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

Backlog in our Offshore/Manufactured Products segment is subject to unexpected adjustments and cancellations and, therefore, has limitations as an indicator of our future revenues and earnings.

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We typically have no contractual right to the total revenues reflected in our backlog once a project is canceled.

While backlog cancellations have not been significant in the past, we incurred cancellations totaling $2.2 million, $5.0 million and $6.5 million during 2020, 2019 and 2018, respectively.

If commodity prices do not further improve, or decline, we may incur additional cancellations or experience further declines in our backlog.

We may assume contractual risks in developing, manufacturing and delivering products in our Offshore/Manufactured Products business segment.

While backlog cancellations have not been significant in the past, we incurred cancellations totaling $1.8 million and $2.2 million during 2021 and 2020, respectively.

If commodity prices decline, we may incur additional cancellations or experience declines in our backlog.

We may assume contractual risks in developing, manufacturing and delivering products in our Offshore/Manufactured Products segment.

Many of our products from our Offshore/Manufactured Products segment are ordered by customers under frame agreements or project-specific contracts.

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• errors or omissions in estimates or bidding;

• changes in availability and cost of materials and labor;

• failures of our suppliers to deliver raw materials and other goods that comply with our specifications;

• changes in availability and cost of materials and labor, including from price inflation and supply chain disruptions;

• failures of our suppliers to deliver materials and other goods that comply with our specifications;

• variations in productivity from our original estimates;

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We record goodwill when the consideration we pay in acquiring a business exceeds the fair market value of the tangible and separately measurable intangible net assets of that business.

We are required to at least annually review the goodwill and other intangible assets of our applicable reporting units (Completion Services, Downhole Technologies and Offshore/Manufactured Products) for impairment in value and to recognize a non-cash charge against earnings causing a corresponding decrease in stockholders' equity if circumstances, some of which are beyond our control, indicate that the carrying amounts will not be recoverable.

In the first quarter of 2020, we recognized goodwill impairment charges totaling $406.1 million in our Completion Services, Downhole Technologies and Offshore/Manufactured Products reporting units due to, among other factors, the significant decline in 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 our assessment as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

While no additional provisions for impairment were identified during our December 1, 2020 assessment, it is possible that we could recognize goodwill or other intangible assets impairment losses in the future if, among other factors:

We are required to at least annually review the goodwill and other intangible assets of our applicable reporting units (Offshore/Manufactured Products, Downhole Technologies and Completion Services) for impairment in value and to recognize a non-cash charge against earnings causing a corresponding decrease in stockholders' equity if circumstances, some of which are beyond our control, indicate that the carrying amounts will not be recoverable.

In the first quarter of 2020, we recognized goodwill impairment charges totaling $406.1 million in our Offshore/Manufactured Products, Downhole Technologies and Completion Services reporting units due to, among other factors, the significant decline in 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 our assessment as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

While no additional provisions for impairment were identified during either of our December 1, 2020 or 2021 assessments, it is possible that we could recognize goodwill or other intangible assets impairment losses in the future if, among other factors:

• global economic and industry conditions deteriorate;

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• laws, executive actions or regulatory initiatives are imposed, which significantly restrict, delay or otherwise reduce the drilling, completion and production of oil and natural gas wells;

• domestic and/or foreign income tax rates increase, or regulations change;

and/or foreign income tax rates increase, or regulations change;

• costs of equity or debt capital increase;

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Any failure to comply with the FCPA or other anti-bribery legislation could subject us to civil and criminal penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of operations.

We could also face fines, sanctions, and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in, or curtailment of, business operations in those jurisdictions and the seizure of assets.

We could also face fines, sanctions, and other penalties from authorities in the

relevant foreign jurisdictions, including prohibition of our participating in, or curtailment of, business operations in those jurisdictions and the seizure of assets.

Additionally, we may have competitors who are not subject to the same ethics-related laws and regulations which provides them with a competitive advantage over us by securing business awards, licenses, or other preferential treatment, in those jurisdictions using methods that certain ethics-related laws and regulations prohibit us from using.

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

The results of the United Kingdom's decision to withdraw from the European Union including subsequent exchange rate fluctuations and political and economic uncertainties may have a negative effect on global economic conditions, financial markets and our business.

We are a multinational company and are subject to the risks inherent in doing business in other countries, including the United Kingdom (the "U.K.").

In June 2016, a majority of voters in the U.K.

elected to withdraw from the European Union in a national referendum ("Brexit").

On January 31, 2020, the U.K.

Parliament ratified a withdrawal agreement between the U.K.

government and the European Union (the "EU"), which contemplated a transition period to end on December 31, 2020, to allow time for a future trade deal to be agreed upon.

On December 24, 2020, the U.K.

and the EU agreed on a trade and cooperation agreement (the "Trade and Cooperation Agreement"), which covers the general objectives and framework of the relationship between the U.K.

and the EU as it relates to trade, transport, visas, judicial, law enforcement and security matters, and continued participation in community programs and mechanisms for dispute resolution.

Notably, under the Trade and Cooperation Agreement, U.K.

service suppliers no longer benefit from automatic access to the entire EU single market, U.K.

goods no longer benefit from the free movement of goods and there is no longer the free movement of people between the U.K.

The terms of the Trade and Cooperation Agreement could potentially disrupt the markets we serve and the jurisdictions in which we operate and may cause us to lose customers, suppliers and employees.

Brexit and the Trade and Cooperation Agreement can subject us to increased risks, including but not limited to, changes in regulatory oversight, disruptions to supply, increases in prices, fees, taxes or tariffs on goods that are sold between the EU and the U.K., inspections or barriers on goods sold between the U.K.

and the EU, extra charges, and/or difficulty staffing.

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

We are currently in the process of evaluating our own risks and uncertainty related to what financial, trade, regulatory and legal implications this new Brexit trade deal could have on our U.K.

business operations.

This uncertainty also includes the impact on our customers' business operations and capital planning as well as the overall impact on the staffing industry.

While we have not experienced any direct material financial impact since Brexit in 2016, we cannot predict its future implications which could result in a negative impact on our financial position and results of operations.

Explosive incidents arising out of dangerous materials used in our business could disrupt operations and result in bodily injuries and property damages, which occurrences could have a material adverse effect our business, results of operations and financial conditions.

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Any explosion could expose us to adverse publicity and liability for damages or cause production restrictions, delays or cancellations, any of which occurrences could have a material adverse effect on our operating results, financial condition and cash flows.

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

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

We may not have adequate insurance for potential liabilities and our insurance may not cover certain liabilities, including litigation risks.

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In addition, many of these products are used in inherently hazardous applications where an accident or product failure can cause personal injury or loss of life, damages to property, equipment, or the environment, regulatory investigations and penalties, and the suspension or cancellation of the end-user's operations.

If our products or services fail to meet specifications, or are involved in accidents or failures, we could

face warranty, contract, or other litigation claims for which we may be held responsible and our reputation for providing quality products may suffer.

If our products or services fail to meet specifications, or are involved in accidents or failures, we could face warranty, contract, or other litigation claims for which we may be held responsible and our reputation for providing quality products may suffer.

In the ordinary course of business, we become the subject of various 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.

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• we may not be able to continue to obtain insurance on commercially reasonable terms;

• we may be faced with types of liabilities that will not be covered by our insurance, such as damages from environmental contamination, terrorist attacks or acts of war;

• we may be faced with types of liabilities that will not be covered by our insurance, such as damages from environmental contamination, fines and penalties imposed for failure to comply with applicable law, terrorist attacks or acts of war;

• the counterparties to our insurance contracts may pose credit risks;

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We might be unable to protect our intellectual property rights and we may be subject to litigation if another party claims that we have infringed upon its intellectual property rights.

We rely on a variety of intellectual property rights that we use in our businesses, including our patents relating to our FlexJoint ® , Merlin™ and SmartStart Plus ® technologies, and intervention and downhole extended-reach tools (including our HydroPull ® tool) utilized in the completion or workover of oil and natural gas wells.

We rely on a variety of intellectual property rights that we use in our businesses, including our patents and proprietary rights relating to our FlexJoint ® , Merlin ® , STRATX ® , Evolv ® and SmartStart Plus ® technologies, and intervention and downhole extended-reach tools (including our HydroPull ® tool) utilized in the completion or workover of oil and natural gas wells.

The market success of our technologies will depend, in part, on our ability to obtain and enforce our proprietary rights in these technologies, to preserve rights in our trade secret and non-public information.

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In addition, we may be required to expend significant amounts of money pursuing and defending our intellectual property rights, and these proceedings may not ultimately be successful.

For example, during 2018 we incurred expenses in excess of $8 million in connection with patent defense.

In addition, the laws of some foreign countries in which our products and services may be sold do not protect intellectual property rights to the same extent as the laws of the United States.

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Laws, regulations and other executive actions or regulatory initiatives regarding hydraulic fracturing could increase our costs of doing business and result in additional operating restrictions, delays or cancellations in the completion of oil and natural gas wells, or possible bans on the performance of hydraulic fracturing that may reduce demand for our products and services and could have a material adverse effect on our business, results of operations and financial condition.

Although we do not directly engage in hydraulic fracturing, a material portion of our Completion Services, Downhole Technologies and Offshore/Manufactured Products operations support many of our oil and natural gas exploration and production customers in such activities.

Although we do not directly engage in hydraulic fracturing, a material portion of our operations support many of our oil and natural gas exploration and production customers in such activities.

There exists federal regulatory initiatives and various state laws and regulations that have increased, and have the potential to further increase, the regulatory burden imposed on hydraulic fracturing.

Moreover, there also exists, under the Biden Administration, the potential for new or amended laws, regulations, executive actions and other regulatory initiatives that could impose more stringent restrictions on hydraulic fracturing, including potential restrictions on hydraulic fracturing by banning new oil and gas permitting on federal lands.

The Biden Administration issued an order temporarily suspending the issuance of new leases and authorizations on federal lands and waters for a period of 60 days beginning January 20, 2021, and subsequently issued a second order in January 2021 suspending the issuance of new leases on federal lands and waters pending completion of a study of current oil and gas practices.

Although theses suspensions do not limit existing operations under valid leases and are not applicable to tribal lands that the federal government holds in trust,

further constraints may be adopted by the Biden Administration in the future.

In January 2021, President Biden issued an executive order suspending the issuance of new federal non-Indian leases for exploration and production activities on federal lands and waters, but not existing operations under valid leases, pending completion of a study of current oil and gas practices.

The suspension of these federal leasing activities prompted legal action by several states against the Biden Administration, resulting in issuance of a nationwide preliminary injunction by a federal district judge in Louisiana in June 2021, effectively halting implementation of the leasing suspension.

The federal government and a coalition of environmental groups are appealing the district court decision.

Separately, the DOI released a report on the federal oil and gas leasing program in November 2021, following a review of the onshore and offshore federal oil and gas program.

The report states an intent to modernize the federal oil and gas leasing program, and recommends reforms that have the potential to reduce our customers' operations of federal lands and waters.

Moreover, further or different constraints may be adopted by the Biden Administration in the future, including but not limited to a delay in permitting procedures, which may reduce the desirability or viability of

projects on federals lands or waters.

See "Part I, Item 1.

Business – Environmental and Occupational Health and Safety Matters" for more discussion on these hydraulic fracturing matters.

Business – Environmental and Occupational Health and Safety Matters – Hydraulic Fracturing" for more discussion on these matters.

The occurrence of any one or more of these developments with respect to hydraulic fracturing in areas where our oil and natural gas exploration and production customers operate could result in potentially significant added costs to comply with requirements relating to permitting, construction, financial assurance, monitoring, recordkeeping, and/or plugging and abandonment.

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Any of the foregoing could reduce demand for the products and services of one or more of our business segments and have a material adverse effect on our business, financial condition and results of operations.

In countries outside of the United States, including provincial, regional, tribal or local jurisdictions therein where we conduct operations, there may exist similar governmental restrictions or controls on our customers' hydraulic fracturing activities, which, if such restrictions or controls exist or are adopted in the future, our customers may incur significant costs to comply with such requirements or may experience restrictions, delays or cancellations in the permitting or pursuit of their operations, which could have a material adverse effect on our business, results of operations and financial condition.

Legislative and regulatory initiatives related to induced seismicity could result in operating restrictions or delays in the drilling and completion of oil and natural gas wells that may reduce demand for our products and services and could have a material adverse effect on our business, results of operations and financial condition.

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A significant portion of our Offshore/Manufactured Products segment provides products and services for oil and natural gas exploration and production customers operating offshore in the deepwaters of the United States and in other countries.

In the United States, the Biden Administration has issued orders suspending the issuance of new oil and gas leases and authorizations on federal lands and waters, including the OCS.

In the United States, the Biden Administration has issued orders suspending the issuance of new oil and natural gas leases on federal lands and waters, including the OCS.

While this suspension has been enjoined pending litigation, the Biden Administration may pursue other restrictions on such operations.

Separately, President Biden has issued an executive order that commits to substantial action on climate change, calling for, among other things, the elimination of subsidies provided to the fossil fuel industry and an increased emphasis on climate-related risks across government agencies and economic sectors.

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See "Part I, Item 1.

Business – Environmental and Occupational Health and Safety Matters" for more discussion on these deepwater regulatory matters.

Any new legislation, executive actions or regulatory initiatives, whether in the United States under the Biden Administration or in other countries, that impose increased costs, more stringent operational standards or result in significant delays, cancellations or disruptions in our customers' operations, increase the risk of losing leasing or permitting opportunities, expired leases due to the time required to develop new technology, increased supplemental bonding costs, or cause our customers to incur penalties, fines, or shut-in production at one or more of their facilities, any or all of which could reduce demand for our products and services.

Also, if material spill events were to occur in the future, the United States or other countries where such an event were to occur could elect to issue directives to temporarily cease drilling activities and, in any event, may from time to time issue further safety and environmental laws and regulations regarding offshore oil and natural gas

exploration and development, any of which developments could have a material adverse effect on our business.

Business – Environmental and Occupational Health and Safety Matters" for more discussion on deepwater regulatory matters.

Any new legislation, executive actions or regulatory initiatives, whether in the United States or in other countries, that impose increased costs, more stringent operational standards or result in significant delays, cancellations or disruptions in our customers' operations, increase the risk of losing leasing or permitting opportunities, expired leases due to the time required to develop new technology, increased supplemental bonding costs, or cause our customers to incur penalties, fines, or shut-in production at one or more of their facilities, any or all of which could reduce demand for our products and services.

environmental laws and regulations regarding offshore oil and natural gas exploration and development, any of which developments could have a material adverse effect on our business.

We cannot predict with any certainty the full impact of any new laws, regulations, executive actions or regulatory initiatives on our customers' drilling operations or the opportunity to pursue such operations, or on the cost or availability of insurance to cover the risks associated with such operations.

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Compliance with these regulations and other regulatory initiatives, or any other new environmental laws and regulations could, among other things, require us or our customers to install new or modified emission controls on equipment or processes, incur longer permitting timelines, and incur increased capital or operating expenditures, which costs may be significant.

Additionally, one or more of these developments that impact our oil and natural gas exploration and production customers could reduce demand for our products and services, which could have a material adverse effect on our business, results of operations and financial condition.

An accidental release of pollutants into the environment may cause us to incur significant costs and liabilities.

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We could incur significant costs in complying with stringent occupational health and safety requirements.

We are subject to stringent federal and state laws and regulations, including OSHA and comparable state statutes, whose purpose is to protect the health and safety of workers, both generally and within the Well Site Services, Downhole Technologies, and Offshore Manufactured Products business segments.

In addition, OSHA's hazard communication standard, the EPA community right-to-know regulations under Title III of the Federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens.

We are subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals.

We are subject to stringent federal and state laws and regulations, including the federal Occupational Safety and Health Act and comparable state statutes, whose purpose is to protect the health and safety of workers, both generally and within the Offshore Manufactured Products, Downhole Technologies and Well Site Services business segments.

In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the Federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens.

We are also subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals.

We have incurred and will continue to incur operating and capital expenditures to comply with occupational health and safety laws and regulations.

Historically these costs have not had a material adverse effect on our results of operations.

However, there can be no assurance that such costs will not be material in the future or that such future compliance will not have a material adverse effect on our business and operational results.

However, there can be no assurance that such costs will not be material in the future or that such future compliance will not have a material adverse effect on our business, financial condition and results of operation.

Our and our customers' operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide.

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Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.

As a result, our operations as well as the operations of our oil and natural gas exploration and production customers are subject to a series of regulatory, political, financial and litigation risks associated with the production and processing of fossil fuels and emission of GHGs.

For example, President Biden has signed a series of executive orders that, among other things, recommitted

the United States to the Paris Agreement, called for increased emphasis on climate change across government agencies and economic sectors, suspended the issuance of new leases and authorizations for oil and gas development on federal leans and waters, and called for the issuance of new or more stringent emissions standards for new, modified and existing oil and gas facilities.

emission of GHGs.

See "Part I, Item 1.

Business – Environmental and Occupational Health and Safety Matters" for more discussion on the threat of regulation of GHG emissions.

Business – Environmental and Occupational Health and Safety Matters" for more discussion on these risks.

The adoption and implementation of new or more stringent international, federal or state executive actions, legislation, regulations or regulatory initiatives that impose more stringent standards for GHG emissions from the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate GHG emissions could result in increased costs of compliance or costs of consuming fossil fuels.

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Similar protections are offered to migratory birds under the Migratory Bird Treaty Act ("MBTA").

Fish and Wildlife Service ("FWS") under former President Trump issued a final rule on January 7, 2021, which notably clarifies that criminal liability under the MBTA will apply only to actions "directed at" migratory birds, its nests, or its eggs;

however, in 2020, the U.S.

District Court for the Southern District of New York vacated a DOI memorandum articulating a similar interpretation.

We expect that the January 7 rulemaking will be subject to litigation or to reconsideration by the Biden Administration.

however, in October 2021, the FWS under the Biden Administration revoked the Trump Administration's rule on incidental take and published an advanced notice of proposed rulemaking to codify a general prohibition on incidental take while establishing a process to regulate or permit exceptions to such a prohibition.

Oil and natural gas operations in our operating areas may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit our ability to operate in protected areas.

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The designation of previously unidentified endangered or threatened species could indirectly cause us to incur additional costs, cause our or our oil and natural gas exploration and production customers' operations to become subject to operating restrictions or bans, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.

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

Increasing attention to ESG matters may impact our business.

Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG practices.

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Increasing attention to climate change, for example, may result in demand shifts for our customers' hydrocarbon products and additional governmental investigations and private litigation against those customers.

Our Board of Directors' Nominating & Corporate Governance Committee is responsible for overseeing and managing our ESG initiatives.

Committee members review the implementation and effectiveness of our ESG programs and policies.

Through end-of-year 2021, we have sought to strengthen our ESG performance through certain voluntary operational strategies, including, for example (i) pursuing a goal to reduce GHG emissions generated by us by 10% between 2022 and 2024;

(ii) seeking to co-locate certain of our facilities and common processes, where feasible, to minimize our GHG emission impacts;

(iii) pursuing the implementation of alternative energy systems (for example, solar and wind power) at certain of our facilities, where applicable;

(iv) seeking to identify and select low-impact energy providers, where geographically available;

(v) evaluating the addition of an onboard system for our trucks that would link to integral vehicle systems to reduce vehicle

idling time on work locations;

and (vi) purchasing alternative fueled vehicles to reduce carbon-based emissions and improved technology offerings, as fleet replacements occur from time to time.

Despite our governance, however, we cannot guarantee that we will be able to implement any of the opportunities we may review or explore, or, for any opportunities we do choose to implement, to implement them within a specific timeframe or across all operational assets.

Moreover, we note that even with our governance oversight in place, we may not be able to adequately identify or manage ESG-related risks and opportunities, which may include failing to achieve ESG-related strategies and goals.

Also, despite these aspirational goals, we may receive pressure from investors, lenders or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of changes in activity levels, potential costs or technical or operational obstacles.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

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Additionally, certain investors use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with companies to require improved ESG disclosure or performance.

Moreover, certain

members of the broader investment community may consider a company's sustainability score as a reputational or other factor in making an investment decision.

Moreover, certain members of the broader investment community may consider a company's sustainability score as a reputational or other factor in making an investment decision.

Consequently, a low sustainability score could result in exclusion of our stock from consideration by certain investment funds, engagement by investors seeking to improve such scores and a negative perception of our operations by certain investors.

Changes to applicable tax laws and regulations may result in our incurring additional income tax liabilities, which could have a material adverse effect on our business, results of operations and financial condition.

We are subject to various complex and evolving U.S.

federal, state and local and foreign taxes.

federal, state and local and foreign tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us, in each case, possibly with retroactive effect, and may have a material adverse effect on our business, results of operations and financial condition.

For example, several tax proposals have been set forth that would, if enacted, make significant changes to U.S.

Such proposals include an increase in the U.S.

corporate income tax rate, the imposition of a minimum tax on book income for certain corporations, interest expense deduction limitations, greater inclusion of foreign sourced earnings as taxable income and increased limitations on the creditability of foreign taxes paid against US income taxes.

Congress may consider, and could include, some or all of these proposals in connection with tax reform that may be undertaken.

It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect.

The passage of any legislation as a result of these proposals and other similar changes in U.S.

federal income tax laws could materially adversely affect our business, financial condition and results of operations.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors