What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-22 compared with 2021-02-22 · 337 added, 328 removed, 214 unchanged (76% of the section changed)

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

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

We provide a broad range of manufactured products and services to customers in the energy, industrial and military sectors through our Offshore/Manufactured Products, Downhole Technologies and Well Site Services segments.

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

Our customers' capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, economic growth, commodity demand and estimates of resource production.

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

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

Recent Developments

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

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

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

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

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

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

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

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

shale play regions.

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

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

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

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

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

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

• consolidated and closed certain facilities.

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

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

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

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

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

• employee severance and restructuring charges of $9.1 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As demand for most of our products and services depends substantially on the level of capital expenditures by the oil and natural gas industry, these conditions caused rapid reductions to most of our customers' drilling, completion and production activities and their related spending on our products and services, particularly those supporting activities in the U.S.

shale play regions, until the supply/demand imbalances eased.

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.

The most direct impacts that we continue to experience are decreased pricing for our products and services due to the timing and rate of activity increases, the demand for crude oil, market pressures driving increased capital discipline by our customers and supply chain disruptions.

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.

We continue to monitor the effect of the COVID-19 pandemic on our employees, customers, critical suppliers and other stakeholders.

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.

In addition, uncertainty remains regarding the timing of demand recovery to pre-COVID-19 levels and the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory pressures around ESG considerations.

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 ABL Facility under which credit availability is subject to a borrowing base calculation that includes eligible U.S.

customer accounts receivable and inventory.

The ABL Facility matures in February 2025.

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

On March 16, 2021, we secured an amendment with our bank group 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 2026 Notes.

Net proceeds from the 2026 Notes offering, after deducting issuance costs, totaled $130.6 million.

We used $120.0 million of the cash proceeds to purchase $125.0 million principal amount of our outstanding 2023 Notes at a discount, with the balance added to cash on-hand.

During 2021, we made strategic decisions within our Well Site Services segment to exit various underperforming service lines and regions both domestically and internationally.

During the year ended December 31, 2021, these equipment/service offerings and regions generated revenues of approximately $20 million, but with net losses incurred.

These service line and region exits will temper our revenues going forward but should improve our segment margins.

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

Average Price (1) for quarter ended

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Year March 31 June 30 September 30 December 31

WTI Crude (per bbl)

Brent Crude (per bbl)

2021 $ 61.04 $ 68.98 $ 73.51 $ 79.61 $ 70.86

2020 50.27 29.70 42.91 44.32 41.96

WTI Crude (per bbl)

2021 $ 58.09 $ 66.19 $ 70.58 $ 77.33 $ 68.14

Brent Crude (per bbl)

2020 45.34 27.96 40.89 42.52 39.16

Henry Hub Natural Gas (per MMBtu)

2021 $ 3.50 $ 2.95 $ 4.35 $ 4.75 $ 3.90

2020 1.91 1.70 2.00 2.52 2.03

Henry Hub Natural Gas (per MMBtu)

________________

Energy Information Administration (spot prices).

On February 11, 2022, Brent crude oil, WTI crude oil and natural gas spot prices closed at $97.50 per barrel, $93.10 per barrel and $4.04 per MMBtu, respectively.

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

drilling rig count reported on February 11, 2022 was 635 rigs, 14% above the fourth quarter 2021 average.

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

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

Capital investment by our customers recently reached a 15-year low due to many of these factors.

This underinvestment, coupled with potential instability in foreign producing nations, could lead to a sustained recovery in WTI and Brent crude oil prices.

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

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

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

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

This segment also produces a variety of products for use in industrial, military

and other applications outside the traditional energy industry.

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 41% of Offshore/Manufactured Products segment sales in 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.

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

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

Backlog reported by our Offshore/Manufactured Products segment increased to $260 million as of December 31, 2021 from $219 million as of December 31, 2020.

Bookings totaled $345 million in 2021, yielding a book-to-bill ratio of 1.2x.

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

Backlog as of

Year March 31 June 30 September 30 December 31

2021 $ 226 $ 214 $ 249 $ 260

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2019 234 283 293 280

Energy Information Administration.

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

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

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

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

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

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

Our Downhole Technologies segment 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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This expertise has led to the optimization of perforation hole size, depth, and quality of tunnels, which are key factors for maximizing the effectiveness of hydraulic fracturing.

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

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

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

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

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

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

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

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

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

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

drilling rig count, as measured by Baker Hughes, for the periods indicated.

and international drilling rig count, as measured by Baker Hughes Company, for the periods indicated.

Average for the

As of February 11, 2022

Average Rig Count for Year Ended December 31,

2020 2019 2018

Year Ended December 31,

United States:

Land – Oil 498 365 329

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Offshore 18 15 17

Total 397 433 943 1,032

International:

Offshore 179 199

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

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rig count – with the balance largely natural gas related.

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

As a result, the average U.S.

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

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

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

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

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

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

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

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

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

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

Backlog as of

Year March 31 June 30 September 30 December 31

2020 $ 267 $ 235 $ 227 $ 219

2019 234 283 293 280

2018 157 165 175 179

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

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

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

Due to the unprecedented decline in crude oil prices in March and April of 2020, drilling and completion activity in the United States collapsed – with the active drilling rig count declining from 790 rigs as of February 29, 2020 to a trough of 244 rigs as of August 14, 2020.

From this trough, the U.S.

rig count has increased to 586 rigs as of December 31, 2021.

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

rig count for 2021 increased by 45 rigs, or 10%, compared to the average for 2020.

However, quarterly averages between periods was more volatile.

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 pricing environment for crude oil declines from current levels, our customers may be required to again 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 aluminum.

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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, cash flows 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.

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

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

See Note 14, "Commitments and Contingencies."

Other factors that can affect our business and financial results include but are not limited to the general global economic environment, competitive pricing pressures, public health crises, natural disasters, labor market constraints, supply chain disruptions, inflation in wages, materials, parts, equipment and other costs, climate-related and other regulatory changes, and changes in tax laws in the United States and international markets.

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

Selected Financial Data

This selected financial data should be read in conjunction with our Consolidated Financial Statements and related Notes included in this Annual Report on Form 10-K 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.

Consolidated Results of Operations

We manage and measure our business performance in three operating segments:

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

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

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

Year Ended December 31,

2020 2019 Variance 2020 vs.

Well Site Services -

Completion Services $ 191,529 $ 390,748 $ (199,219)

Drilling Services (1)

2021 2020 Variance

Products $ 299,293 $ 331,272 $ (31,979)

Services 273,868 306,803 (32,935)

573,161 638,075 (64,914)

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

Downhole Technologies 97,936 182,314 (84,378)

Costs and expenses:

Product costs 246,589 287,615 (41,026)

Service costs 223,807 274,190 (50,383)

Cost of revenues (exclusive of depreciation and amortization expense presented below) (1)

470,396 561,805 (91,409)

Selling, general and administrative expenses 83,692 94,102 (10,410)

Depreciation and amortization expense 80,741 98,543 (17,802)

Impairments of goodwill (2)

— 406,056 (406,056)

Impairments of fixed and lease assets (3)

4,166 12,447 (8,281)

Other operating (income) expense, net (1,042) (538) (504)

637,953 1,172,415 (534,462)

Operating loss (64,792) (534,340) 469,548

Interest expense, net (10,170) (13,869) 3,699

Other income, net (4)

1,628 13,880 (12,252)

Loss before income taxes (73,334) (534,329) 460,995

Income tax benefit (5)

9,341 65,946 (56,605)

Net loss $ (63,993) $ (468,383) $ 404,390

Net loss per share:

$ (1.06) $ (7.83)

(1.06) (7.83)

Weighted average number of common shares outstanding:

60,293 59,812

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(1) Cost of revenues (exclusive of depreciation and amortization expense) included non-cash inventory impairment charges of $3.6 million ($2.1 million in product costs and $1.5 million in service costs) recognized in 2021.

Cost of revenues (exclusive of depreciation and amortization expense) included non-cash inventory impairment charges of $31.2 million ($17.9 million in product costs and $13.3 million in service costs) recognized in 2020.

(2) During 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 2021 and 2020, we recognized non-cash impairment charges of $4.2 million and $12.4 million, respectively, to reduce the carrying value of certain fixed and operating lease assets to their estimated realizable value.

(4) During 2021, we recognized a non-cash foreign currency loss of $9.3 million associated with the reclassification of unrealized foreign currency translation adjustments which were released upon the liquidation of an international operation and non-cash gains of $4.0 million in connection with our purchases of $131.4 million principal amount of our 2023 Notes.

During 2020, we recognized non-cash gains of $10.7 million in connection with our purchases of $34.9 million principal amount of our 2023 Notes.

(5) During 2020, we recognized a discrete tax benefit of $16.4 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 9, "Income Taxes," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of these and other charges and benefits recognized in the years ended December 31, 2021 and 2020.

Segment Results of Operations

We manage and measure our business performance in three distinct operating segments:

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

Supplemental financial information by operating segment for the years ended December 31, 2021 and 2020 is summarized below (in thousands):

Year Ended December 31,

2021 2020 Variance

Offshore/Manufactured Products

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Total Offshore/Manufactured Products 298,729 340,300 (41,571)

Downhole Technologies 103,492 97,936 5,556

Well Site Services 170,940 199,839 (28,899)

Total $ 573,161 $ 638,075 $ (64,914)

Operating income (loss)

Well Site Services -

Completion Services (2)

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

Drilling Services (1)

Offshore/Manufactured Products (1)

$ 15,447 $ (80,794) $ 96,241

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

Downhole Technologies (2)

(13,470) (224,414) 210,944

Offshore/Manufactured Products (4)

Well Site Services (3)

(34,511) (193,388) 158,877

Corporate (32,258) (35,744) 3,486

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

Total $ (64,792) $ (534,340) $ 469,548

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

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

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

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

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

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

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

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

(1) Operating loss in 2020 included non-cash goodwill and inventory impairment charges of $86.5 million and $16.2 million, respectively.

(2) Operating loss in 2021 and 2020 included non-cash inventory impairment charges of $2.1 million and $5.9 million, respectively.

Operating loss in 2020 also included a non-cash goodwill charge of $192.5 million and other non-cash impairment charges of $3.6 million.

(3) Operating loss in 2021 included non-cash operating lease, fixed asset and inventory impairment charges of $2.8 million, $1.4 million and $1.5 million, respectively.

Operating loss in 2020 included non-cash goodwill, inventory and fixed asset impairment charges of $127.1 million, $9.0 million and $8.8 million, respectively.

See Note 3, "Asset Impairments and Other Restructuring Items," and Note 4, "Details of Selected Balance Sheet Accounts," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of these and other charges and benefits recognized in the years ended December 31, 2021 and 2020.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

We reported a net loss for the year ended December 31, 2021 of $64.0 million, or $1.06 per share.

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

The reported 2021 loss included:

non-cash impairment charges of $7.7 million ($6.1 million after-tax, or $0.10 per share) associated with write-downs of inventories and fixed and lease assets;

$7.5 million ($5.9 million after-tax, or $0.10 per share) of severance and restructuring costs;

a non-cash loss of $9.3 million ($9.3 million after-tax, or $0.15 per share) reclassified from other comprehensive loss upon exit of an international operation;

and non-cash gains of $4.0 million ($3.2 million after-tax, or $0.05 per share) associated with convertible debt extinguishment.

These results compare to a net loss for the year ended December 31, 2020 of $468.4 million, or $7.83 per share.

The reported loss included:

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

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

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

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

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

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

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

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

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

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

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

Customer-driven activity has improved since the low levels of 2020, but uncertainty remains around the willingness of operators (our customers) to invest in U.S.

land-based drilling, completion and production activities given regulatory pressures around ESG considerations.

If the pricing environment for crude oil declines, our customers may be required to further reduce their planned capital expenditures, causing declines in the demand for, and prices of, our products and services.

During 2021, we recognized an aggregate $8.8 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 2020, we also recognized a discrete income tax benefit of $16.4 million related to U.S.

net operating loss carrybacks under provisions of the CARES Act.

Consolidated total revenues in 2021 decreased $64.9 million, or 10%, from 2020.

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

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

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

shale play regions.

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

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

Well Site Services Downhole Technologies Offshore/ Manufactured Products Total

2020 2019 2020 2019 2020 2019 2020 2019

Consolidated product revenues in 2021 decreased $32.0 million, or 10%, from 2020, driven primarily by reduced project-driven customer demand for connector products, partially offset by the impact of higher U.S.

land-based customer activity.

Consolidated service revenues in 2021 decreased $32.9 million, or 11%, from 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, 59% of our consolidated revenues in 2021 were derived from sales of our short-cycle product and service offerings, which compares to 54% in the prior year.

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

Offshore/ Manufactured Products Downhole Technologies Well Site Services Total

Year Ended December 31 2021 2020 2021 2020 2021 2020 2021 2020

Major revenue categories -

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Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $91.4 million, or 16%, in 2021 compared to 2020.

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

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

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

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

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

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

shale play regions.

Cost of revenues in 2021 and 2020 included $3.6 million and $31.2 million, respectively, of non-cash inventory impairment charges.

Excluding these charges, consolidated cost of revenues decreased $63.8 million, or 12%, from the prior year.

Consolidated product costs were $246.6 million in 2021, which included a $2.1 million non-cash inventory impairment charge.

This compares to consolidated product costs of $287.6 million in 2020, which included $17.9 million of non-cash inventory impairment charges.

Excluding these charges, consolidated product costs decreased $25.2 million, or 9%, from the prior year due to reduced sales volumes.

Consolidated service costs were $223.8 million in 2021, which included a non-cash inventory impairment charge of $1.5 million.

This compares to consolidated services costs of $274.2 million in 2020, which included non-cash inventory impairment charges of $13.3 million.

Excluding these charges, consolidated service costs decreased $38.6 million, or 15%, from the prior year due to the decrease in revenues and implemented cost reduction measures.

Selling, General and Administrative Expense.

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

Selling, general and administrative expense decreased $10.4 million, or 11%, in 2021 from 2020 due primarily to reductions in personnel, compensation levels, professional services and bad debt expense along with other implemented cost reduction measures.

Depreciation and Amortization Expense.

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

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

Depreciation and amortization expense decreased $17.8 million, or 18%, in 2021 compared to the prior year, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 13, "Segments and Related Information," to our Consolidated Financial Statements presents depreciation and amortization expense by segment.

Impairments of Goodwill.

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

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.

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

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

Impairments of Fixed and Lease Assets.

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

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

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

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

During 2021, our Well Site Services segment recorded non-cash impairment charges of $4.2 million to reduce the carrying value of certain of the segment's fixed and lease assets to their estimated realizable value.

During 2020, our Well Site Services and Downhole Technologies segments recorded non-cash impairment charges of $8.8 million and $3.6 million, respectively, to reduce the carrying value of certain of the segments' fixed and lease assets to their estimated realizable value.

Operating Loss.

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

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

Our consolidated operating loss was $64.8 million in 2021, which included $7.7 million of non-cash asset impairment charges and $7.5 million of severance and restructuring costs.

This compares to a consolidated operating loss of $534.3 million recognized in 2020, which included the impact of $449.7 million non-cash asset impairment charges and $9.1 million in severance and restructuring costs.

Excluding these charges, consolidated operating loss decreased $26.1 million or 34%.

Interest Expense, Net.

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

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

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

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

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

Net interest expense was $10.2 million in 2021, which compares to $13.9 million in 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 5% in 2021 and 6% in 2020.

See Note 2, "Summary of Significant Accounting Policies," to our Consolidated Financial Statements for discussion of ASU 2020-06, which changed our method of accounting for the 2023 Notes upon adoption (effective January 1, 2021).

Other Income, Net.

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

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

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

federal net operating losses under the CARES Act.

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

Other income, net for 2021 included gains of $6.5 million recognized on the disposal of assets and 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.

These gains were offset by a $9.3 million non-cash loss associated with the reclassification of unrealized foreign currency translation adjustments to net loss upon our liquidation of an international operation, which was previously recorded as a component of other comprehensive loss within stockholders’ equity.

In 2020, we recognized non-cash gains of $10.7 million in connection with our purchases of $34.9 million principal amount of our 2023 Notes for $20.1 million in cash and recognized gains of $2.4 million on the disposal of assets.

For 2021, our income tax benefit was $9.3 million, or 13% of the pre-tax loss of $73.3 million, which included a non-cash foreign currency loss of $9.3 million and other expenses that are not deductible for income tax purposes.

This compares to an income tax benefit of $65.9 million, or 12% of the pre-tax loss of $534.3 million for 2020, which included non-cash goodwill charges (approximately $313.1 million) and other expenses that are not deductible for income tax purposes.

In 2020, the impact of these non-deductible expenses was partially offset by a $16.4 million discrete tax benefit related to the carryback of U.S.

net operating losses under the CARES Act.

Other Comprehensive Income (Loss).

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

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

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

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

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

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

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

Other comprehensive income was $5.4 million in 2021 compared to loss of $3.6 million in 2020.

With the liquidation of an international operation in 2021 noted above, we recognized other comprehensive income (resulting from the release of historical currency translation adjustments) of $9.3 million in 2021.

Excluding this benefit, our reported other comprehensive loss was $4.0 million, driven by fluctuations in foreign currency exchange rates compared to the U.S.

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

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

During 2021, the exchange rate for the British pound and the Brazilian real both weakened compared to the U.S.

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

dollar while the exchange rate for the Brazilian real weakened compared to the U.S.

Segment Operating Results

Well Site Services

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

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

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

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

Operating Loss.

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

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

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

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

Downhole Technologies

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

land-based customer completion activity and competitive pricing pressures.

Operating Income (Loss).

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

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

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

Offshore/Manufactured Products

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

Our Offshore/Manufactured Products segment revenues declined $41.6 million, or 12%, in 2021 compared to 2020 due primarily to a reduction in sales of connector products and service activities, partially offset by an increase in demand for short-cycle products.

Operating Income (Loss).

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

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

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

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

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

Our Offshore/Manufactured Products segment reported operating income of $15.4 million in 2021, which included $0.9 million of severance and restructuring charges.

The segment reported an operating loss of $80.8 million in 2020, which included severance and restructuring costs of $1.4 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 $7.0 million, or 30%, in 2021 compared to 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 $260 million as of December 31, 2021, an increase of 19% from December 31, 2020.

Bookings during 2021 totaled $345 million, yielding a book-to-bill ratio of 1.2x.

Downhole Technologies

Our Downhole Technologies segment revenues increased $5.6 million, or 6%, in 2021 from the prior year due primarily to higher U.S.

land-based customer completion activity.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $13.5 million in 2021, which included a non-cash inventory impairment charge of $2.1 million and $0.8 million of severance and restructuring charges.

The segment reported an operating loss of $224.4 million in the prior year, which included severance and restructuring costs of $2.0 million and non-cash impairment charges of $192.5 million related to goodwill, $5.9 million related to inventory and $3.6 million related to fixed and lease assets.

Excluding these charges, operating loss decreased $9.8 million, or 48%, in 2021 from the prior year due primarily to implemented cost reduction measures.

Well Site Services

Our Well Site Services segment revenues decreased $28.9 million, or 14%, in 2021 compared to the prior year, driven by higher customer completion and production activity during the first quarter of 2020, prior to the rapid decline in activity triggered by the COVID-19 pandemic.

Operating Loss.

Our Well Site Services segment reported an operating loss of $34.5 million in 2021, which included $4.3 million in severance and restructuring costs, non-cash fixed and lease asset impairment charges of $4.2 million and a non-cash inventory impairment charge of $1.5 million.

The segment reported an operating loss of $193.4 million in 2020, which included severance and restructuring costs of $4.3 million and non-cash impairment charges of $127.1 million related to goodwill, $9.0 million related to inventory and $8.8 million related to fixed assets.

Excluding these charges, our Well Site Services operating loss decreased $19.6 million, or 44%, from the prior year, with the impact of a $13.1 million decrease in depreciation and amortization expense and implemented cost reduction measures partially offset by the impact of the decrease in revenues.

Operating Loss.

Corporate expenses decreased $3.5 million, or 10%, in 2021 compared to the prior year, reflecting the impact of implemented cost reduction measures.

Liquidity, Capital Resources and Other Matters

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

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

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

Operating Activities

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

Cash flows from operations totaling $7.2 million were generated during the year ended December 31, 2021, compared to $132.8 million generated by operations during 2020.

During 2021, $17.2 million was used to fund net working capital increases, primarily due to the significant increase in activity levels in the latter part of 2021 as the global economy recovered.

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

Additionally, we filed carryback claims regarding U.S.

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

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

Additionally, during 2020, we received cash of $41.3 million related to carryback claims regarding U.S.

net operating losses generated in 2018 and 2019 that were filed in accordance with the rules and procedures of the CARES Act.

Investing Activities

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

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

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

Cash used in investing activities during 2021 totaled $6.6 million, compared to $3.7 million used in investing activities during 2020.

Capital expenditures totaled $17.5 million and $12.7 million during the years ended December 31, 2021 and 2020, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $11.5 million and $9.6 million during 2021 and 2020, respectively.

We expect to spend approximately $25 million in capital expenditures during 2022.

Whether planned expenditures will actually be made in 2022 depends on industry conditions, project approvals and schedules, vendor delivery timing, free cash flow generation and careful monitoring of our levels of liquidity.

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

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

Financing Activities

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

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

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

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

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

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

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

During the year ended December 31, 2021, net cash of $19.6 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 $65.0 million of cash used in financing activities during the year ended December 31, 2020, primarily as a result of $32.9 million in net repayments under our former revolving credit facility and our purchases of $34.9 million principal amount of our 2023 Notes for $20.1 million.

As of December 31, 2021, we had cash and cash equivalents totaling $52.9 million, which compared to $72.0 million as of December 31, 2020.

As of December 31, 2021, we had no borrowings outstanding under our ABL Facility (discussed below), $26.0 million principal amount of our 2023 Notes outstanding, $135.0 million principal amount of our 2026 Notes outstanding and other debt of $21.7 million.

Our reported interest expense, which appropriately included amortization of deferred financing costs of $2.3 million during 2021, was above our contractual cash interest expense.

For 2021, our contractual cash interest expense was $7.9 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.

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

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

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

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

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

has and may continue to reduce our ability to

access capital in the bank and capital markets;

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

Asset-based Revolving Credit Facility.

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

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

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

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

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

Capital availability will be affected by prevailing conditions in our industry, the global economy, the

global financial markets, stakeholder scrutiny of ESG matters and other factors, many of which are beyond our control.

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

For companies like ours that support the energy industry, this disruption (which in 2020 was exacerbated by the global crude oil supply and demand imbalance and resulting decline in crude oil prices) negatively impacted the value of our common stock and may reduce our ability to access capital in the bank and capital markets or 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 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, 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).

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

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

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

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

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

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

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

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

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

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

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

Revolving Credit Facility.

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

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

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

Lender commitments under the Amended Credit Agreement were reduced to $200 million in exchange for the suspension of the financial covenants from July 1, 2020 through March 30, 2021.

During the financial covenant suspension period, borrowing availability under the Revolving Credit Facility (as amended, the "Amended Revolving Credit Facility") was limited to 85% of the lesser of (i) $200 million or (ii) a borrowing base, calculated monthly, equal to the sum of 70% of the consolidated net book value of eligible receivables and 20% of the consolidated net book value of eligible inventory (the "Borrowing Base").

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

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

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

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

1.50% Convertible Senior Notes due February 2023.

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

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

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

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

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

We recorded the value of the conversion feature as a debt discount at the date of issuance, to be amortized as interest expense over the term of the Notes, with a similar amount allocated to additional paid-in capital.

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

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

Borrowings under the ABL Agreement are secured by a pledge of substantially all of our domestic assets (other than real property) and the stock of certain foreign subsidiaries.

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

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

The ABL Agreement places restrictions on our ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the 2023 Notes and 2026 Notes), engage in mergers, and other matters, in each case, subject to certain exceptions.

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

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;

to complete certain specified transactions;

or if an event of default has occurred and is continuing.

See Note 6, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the ABL Agreement.

As of December 31, 2021, we had $16.1 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

The total amount available to be drawn as of December 31, 2021 was $48.9 million, calculated based on the current borrowing base less outstanding letters of credit.

On March 16, 2021, we issued $135.0 million aggregate principal amount of the 2026 Notes pursuant to an indenture, dated as of March 16, 2021 (the "2026 Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.

Net proceeds from the 2026 Notes offering, after deducting issuance costs, totaled $130.6 million.

We used $120.0 million of the cash proceeds to purchase $125.0 million principal amount of the outstanding 2023 Notes, with the balance added to cash on-hand.

The 2026 Indenture contains certain events of default, including certain defaults by the Company with respect to other indebtedness of at least $40.0 million.

See Note 6, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the 2026 Notes.

As of December 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.

On January 30, 2018, we issued $200.0 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 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," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for further information regarding the 2023 Notes.

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

As of December 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.

Promissory Note.

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

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

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

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

In connection with the GEODynamics Acquisition, we issued a $25.0 million promissory note that was scheduled to mature on July 12, 2019.

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

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 December 31, 2021, which is our current best estimate of what is owed after set-off for indemnification matters.

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

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

Stock Repurchase Program.

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

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

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

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

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

Contractual Obligations.

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

Payments due by period

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

As discussed above, we believe that cash on-hand, cash flow from operations and borrowing capacity under our ABL facility will be sufficient to meet our liquidity needs in the coming twelve months.

The following summarizes our more significant contractual obligations as of December 31, 2021, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands):

Payments due by year

Total 2022 2023 and 2024 2025 and 2026 After 2026

Contractual obligations

Revolving Credit Facility (1)

ABL Facility (1)

$ — $ — $ — $ — $ —

1.50% convertible senior notes due February 2023 (2)

2023 Notes (2)

26,407 390 26,018 — —

2026 Notes (3)

162,253 6,413 12,825 143,016 —

Promissory note (4)

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____________________

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

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

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

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

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

(1) As of December 31, 2021, we had no borrowings outstanding under our ABL Facility.

The total amount available to be drawn as of December 31, 2021 was $48.9 million.

(2) Amount represents the full principal amount of the 2023 Notes together with cash interest payments due semi-annually.

(3) Amount represents the full principal amount of the 2026 Notes together with cash interest payments due semi-annually.

(4) Amount represents the net principal amount of the $25 million promissory note together with accrued and unpaid interest as of February 22, 2022.

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

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

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

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Contingencies and Other Obligations.

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

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

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

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

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

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

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

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

On September 20, 2021, a motion by the Seller for partial summary judgement was denied by the state court.

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

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

Effects of Inflation

Our revenues and results of operations have not been materially impacted by inflation in the past three fiscal years.

Off-Balance Sheet Arrangements

As of December 31, 2020, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S‑K.

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

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.

If we encounter difficulty in procuring these raw materials and component products as a result of tariffs, supply chain disruptions or other events, 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, cash flows and results of operations could be adversely affected.

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

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

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

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

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

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

In accordance with current accounting guidance, we do not amortize goodwill, but rather assess goodwill for impairment annually (as of December 1) and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

In the evaluation of goodwill, each reporting unit with goodwill on its balance sheet

is assessed separately using relevant events and circumstances.

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

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

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

December 2019 Impairment

During the fourth quarter of 2019, U.S.

land-based completion activity declined significantly from levels experienced over the previous three quarters.

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

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

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

shale play regions.

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

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

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

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

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded based on the excess of the carrying amount over the reporting unit's fair value.

March 2020 Impairments

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

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

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

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

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

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

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

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

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

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

December 2020 Assessment

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

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

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

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

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

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

December 2020 and 2021 Assessments

As of December 1, 2021 and 2020, we had only one reporting unit – Offshore/Manufactured Products – with a goodwill balance remaining.

We performed our annual quantitative assessments of goodwill for impairment, which indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount at each date and no additional impairments were required in either period.

The valuation techniques used in these annual assessments were consistent with those used during the March 31, 2020 assessment for the Offshore/Manufactured Products reporting unit.

The discount rate used to value the reporting unit as of December 1, 2020 and 2021 was 15.3% and 14.5%, respectively.

The estimated returns required by market participants decreased in our 2020 and 2021 annual assessments from the March 31, 2020 assessment given improvements in the global economy and financial markets.

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

As of December 31, 2021, our market capitalization was $305 million, or $391 million below our equity carrying value.

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

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

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Long-Lived Tangible and Intangible Assets

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

An assessment for impairment of long-lived tangible and intangible assets is conducted at the asset group level whenever changes in facts and circumstances indicate that the carrying value of such asset group may not be recoverable based on estimated undiscounted future cash flows.

Indicators of impairment might include persistent negative economic trends affecting the markets we serve, recurring losses or lowered expectations of future cash flows to be generated by our assets.

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

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

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

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

When necessary, the amount of impairment is determined based on the excess of carrying value over fair value of the asset group, using quoted market prices, if available, or our judgment as to the future operating cash flows to be generated from these assets throughout their estimated useful lives.

During 2021, 2020 and 2019, we recognized non-cash long-lived asset impairment charges totaling $4.2 million, $12.4 million and $33.7 million, respectively, to reduce the carrying value of certain equipment and facilities (owned and leased) to their estimated realizable value.

Based on our impairment assessment in 2021, the carrying values of our other long-lived tangible and intangible assets are recoverable.

Accordingly, no additional impairment losses were recorded.

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

Revenue and Cost Recognition

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

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

contract liability (deferred revenue).

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

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

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Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of products.

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

Accounting for Contingencies

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Examples of areas where we have made important estimates of future liabilities include duties, income taxes, litigation, insurance claims and contractual claims and obligations.

Estimation of Useful Lives

The selection of the useful lives of many of our assets requires the judgments of our operating personnel.

Our judgment in this area is influenced by our historical experience in operating our assets, technological developments and expectations of future demand for the assets.

Should our estimates be too long or short, we might eventually report a disproportionate number of losses or gains upon disposition or retirement of our long-lived assets.

We believe our estimates of useful lives are appropriate.

We follow the liability method of accounting for income taxes.

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

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

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

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

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

118, we recorded provisional estimates to reflect the effect of the Tax Reform Legislation on our income tax assets and liabilities as of December 31, 2017.

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

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

As of December 31, 2021, our total investment, including earnings and profits, in foreign subsidiaries is considered to be permanently reinvested outside the United States.

We account for the U.S.

tax effect of global intangible low-taxed income earned by foreign subsidiaries in the period that such income is earned.

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

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

We recognize liabilities for tax expenses based on our estimate of whether, and the extent to which, additional taxes will be due.

We account for uncertain tax positions using a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary.

We record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

We record an additional charge in our provision for taxes during the period in which we determine that the recorded tax liability is below the expected level of the ultimate assessment.

Recent Accounting Pronouncements

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

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

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

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

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

The updated standard eliminated the requirement that the carrying value of convertible debt instruments, such as the 2023 Notes, be allocated between the debt and equity components.

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

Adoption of the standard resulted in a $12.2 million increase in the net carrying value of the 2023 Notes, a $2.7 million decrease in deferred income taxes and an $9.5 million net decrease in stockholders' equity.

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

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

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

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

Prior periods were not retrospectively adjusted.

The effective interest rate associated with the 2023 Notes after adoption decreased from approximately 6% to approximately 2%, which compares to the contractual interest rate of 1.50%.

The 2026 Notes issued on March 19, 2021, have been accounted for in accordance with the provisions of this standard.

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What changed 10-K

Item 7. Management’s Discussion and Analysis