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Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-07-28 · 193 added, 179 removed, 270 unchanged (58% of the section changed)

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Recent Developments

The spot price of Brent crude oil price averaged $114 per barrel during the second quarter of 2022, an increase of 13% from the first quarter 2022 average and the highest quarterly average level observed since the third quarter of 2008.

The higher commodity price environment was driven by declines in crude oil supplies, concerns over sanctions resulting from the Russian invasion of Ukraine on February 24, 2022, increased demand as the global effects of the COVID-19 pandemic have moderated and slower crude oil production growth due to reduced investments by operators globally.

As shown below, crude oil prices have declined since June 30, 2022 in response to, among other things, the perceived risk of a global recession.

The spot price of Brent crude oil averaged $101 per barrel during the third quarter of 2022, an increase of 37% from the third quarter 2021 average.

The higher commodity price environment was driven by declines in crude oil supplies, concerns over sanctions resulting from the Russian invasion of Ukraine on February 24, 2022, increased demand as the global effects of the COVID-19 pandemic moderated and slower crude oil production growth due to reduced investments by operators globally in recent years.

However, crude oil prices decreased toward the end of the third quarter of 2022 from the highs reported in the second quarter of 2022 in response to, among other things, the growing risk of a global recession, which raises concerns over future demand destruction.

Brent and West Texas Intermediate ("WTI") crude oil and natural gas pricing trends were as follows:

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Energy Information Administration (spot prices).

On July 22, 2022, Brent crude oil, WTI crude oil and natural gas spot prices closed at $106.77 per barrel, $97.71 per barrel and $8.25 per MMBtu, respectively.

On October 21, 2022, Brent crude oil, WTI crude oil and natural gas spot prices closed at $91.82 per barrel, $85.47 per barrel and $4.45 per MMBtu, respectively.

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

drilling rig count reported on July 22, 2022 was 758 rigs, 6% above the second quarter 2021 average.

In January of 2022, we completed the previously announced exit of certain non-performing service offerings within our Well Site Services segment.

These service offerings generated revenues of $9.5 million in the first six months of 2021.

drilling rig count reported on October 21, 2022 was 771 rigs – slightly above the third quarter 2022 average.

In January of 2022, we completed the exit of certain non-performing service offerings within our Well Site Services segment.

These service offerings generated revenues of $15.0 million in the first nine months of 2021.

During the first quarter of 2022, we recorded bad debt expense of $0.8 million related to receivables from Russia-based customers of the Offshore/Manufactured Products segment.

As of June 30, 2022, we had no remaining material balance sheet exposure related to Russia.

On April 14, 2022, our Offshore/Manufactured Products segment acquired E-Flow Control Holdings Limited ("E-Flow"), a U.K.-based global provider of fully integrated handling, control, monitoring and instrumentation solutions.

As of September 30, 2022, we had no remaining material balance sheet exposure related to Russia.

In April of 2022, our Offshore/Manufactured Products segment acquired E-Flow Control Holdings Limited ("E-Flow"), a U.K.-based global provider of fully integrated handling, control, monitoring and instrumentation solutions.

E-Flow, founded in 1988, provides a broad range of engineering, design, manufacturing, installation and commissioning services to its customers in the energy industry.

The purchase price of $8.1 million (net of cash acquired and subject to customary post-closing adjustments) was funded with cash on-hand.

During the second quarter of 2022, we purchased $6.5 million principal amount of our 1.50% convertible senior notes (the "2023 Notes").

As further discussed in Note 12, "Commitment and Contingencies," on June 28, 2022, we fully settled our disputes with the seller (the "GEO Seller") of GEODynamics, Inc.

("GEODynamics"), which we acquired in 2018, including the full and final settlement of all amounts due pursuant to the GEO Note (as defined below).

As consideration for such settlement, on July 1, 2022, we issued the GEO Seller approximately 1.9 million shares of our common stock (having a market value of $10.3 million on the date of issuance) and paid the GEO Seller $10.0 million in cash.

The final settlement will be reflected in the third quarter of 2022.

Current and expected future pricing for WTI crude oil, along with expectations regarding the regulatory environment, 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.

The purchase price of $8.1 million (net of cash acquired) was funded with cash on-hand.

As further discussed in Note 12, "Commitments and Contingencies," on June 28, 2022, we fully settled our disputes with the seller (the "GEO Seller") of GEODynamics, Inc.

("GEODynamics"), which we acquired in 2018, including the full and final settlement of all amounts due under the GEO Note (as defined below).

Pursuant to the settlement agreement, on July 1, 2022, we paid the GEO Seller $10.0 million in cash and issued approximately 1.9 million shares of our common stock (having a market value of $10.3 million).

In August of 2022, our Offshore/Manufactured Products segment settled outstanding litigation against certain service providers in exchange for cash totaling $6.9 million.

In connection with this settlement, the Company recognized a gain of $6.1 million in the third quarter of 2022.

Current and expected future pricing for WTI crude oil, along with expectations regarding the regulatory environment in the regions that we operate in, are factors that will continue to influence our customers' willingness to invest capital in their businesses.

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 and levels of demand for crude oil are likely to remain highly volatile due to numerous factors, including geopolitical conflicts (such as the direction and outcome of Russia's invasion of Ukraine), unrest and tensions;

the perceived risk of a global economic recession;

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and the potential for ongoing supply/demand imbalances.

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

Capital investment by our customers recently reached a 15-year low due to these factors and the desire to generate sustainable cash flows.

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 the United States.

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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 42% of Offshore/Manufactured Products segment sales in the first six months of 2022 were driven by our customers' capital spending for products used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as "project-driven products").

Approximately 41% of Offshore/Manufactured Products segment sales in the first nine months of 2022 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 $241 million as of June 30, 2022 from $214 million as of June 30, 2021.

Bookings totaled $168 million in the first six months of 2022, yielding a book-to-bill ratio of 0.9x.

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 change based on short-term fluctuations in the price of crude oil and natural gas.

Backlog reported by our Offshore/Manufactured Products segment increased to $258 million as of September 30, 2022 from $249 million as of September 30, 2021.

Bookings totaled $283 million in the first nine months of 2022, yielding a book-to-bill ratio of 1.0x.

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

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Average for the

As of July 22, 2022

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

As of October 21, 2022

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

2022 2021 2022 2021

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shale plays utilizing horizontal drilling and completion techniques.

As of June 30, 2022, oil-directed drilling accounted for 79% of the total U.S.

As of September 30, 2022, oil-directed drilling accounted for 79% of the total U.S.

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 from 790 rigs as of February 29, 2020 to a trough of 244 rigs as of August 14, 2020.

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 753 rigs as of June 30, 2022.

rig count has increased to 765 rigs as of September 30, 2022.

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

rig count for the first six months of 2022 increased by 252 rigs, or 60%, compared to the average for the first six months of 2021.

rig count for the first nine months of 2022 increased by 258 rigs, or 58%, compared to the average for the first nine months of 2021.

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

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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 12, "Commitments and Contingencies," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Other factors that can affect our business and financial results include but are not limited to:

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

Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2021 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.

Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2021 in order to understand factors, such as charges, credits and financing transactions, which may impact comparability of the selected financial data.

Unaudited Consolidated Results of Operations

The following summarizes our consolidated results of operations for the three and six months ended June 30, 2022 and 2021 (in thousands, except per share amounts):

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

The following summarizes our consolidated results of operations for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):

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

2022 2021 Variance 2022 2021 Variance

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

151,299 117,207 34,092 420,059 337,149 82,910

Selling, general and administrative expenses 23,374 20,078 3,296 70,964 63,395 7,569

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(6,750) (275) (6,475) (6,852) (714) (6,138)

Operating loss (1,090) (17,618) 16,528 (5,426) (37,380) 31,954

184,336 156,667 27,669 535,640 465,360 70,280

Operating income (loss) 5,058 (16,139) 21,197 (368) (53,519) 53,151

Interest expense, net (2,637) (2,569) (68) (7,947) (7,593) (354)

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491 2,137 (1,646) 1,892 7,917 (6,025)

Loss before income taxes (3,352) (18,497) 15,145 (9,335) (36,624) 27,289

Income tax benefit (1,792) 3,226 (5,018) (5,233) 5,543 (10,776)

Net loss $ (5,144) $ (15,271) $ 10,127 $ (14,568) $ (31,081) $ 16,513

Net loss per share:

Income (loss) before income taxes 2,912 (16,571) 19,483 (6,423) (53,195) 46,772

Income tax (provision) benefit (769) 3,529 (4,298) (6,002) 9,072 (15,074)

Net income (loss) $ 2,143 $ (13,042) $ 15,185 $ (12,425) $ (44,123) $ 31,698

Net income (loss) per share:

$ 0.03 $ (0.22) $ (0.20) $ (0.73)

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________________

(1) During the first quarter of 2021, we recognized non-cash impairment charges of $0.7 million to reduce the carrying value of certain fixed assets to their estimated realizable value.

During the second quarter of 2021, we recognized non-cash impairment charges of $2.8 million to reduce the carrying value of certain operating lease assets to their estimated realizable value.

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

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

See Note 3, "Asset Impairments and Other Restructuring Items," Note 4, "Details of Selected Balance Sheet Accounts" and Note 5, "Long-term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion of these and other charges and benefits recognized in the first six months of 2021.

(1) Cost of revenues (exclusive of depreciation and amortization expense) included a non-cash inventory impairment charge of $2.1 million (in product costs) recognized in the three and nine month ended September 30, 2021.

(2) During the first nine months of 2021, we recognized non-cash impairment charges of $3.4 million to reduce the carrying value of certain fixed and operating lease assets to their estimated realizable value.

(3) In the three and nine months ended September 30, 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation against certain service providers.

(4) During the first nine months of 2021, we recognized non-cash gains of $4.0 million in connection with our purchases of $131.4 million principal amount of our 2023 Notes.

See Note 3, "Asset Impairments and Other Charges and Benefits," Note 4, "Details of Selected Balance Sheet Accounts" and Note 5, "Long-term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion of these and other charges and benefits recognized in the first nine months of 2022 and 2021.

Unaudited Segment Results of Operations

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

Supplemental financial information by operating segment for the three and six months ended June 30, 2022 and 2021 is summarized below (in thousands):

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

Supplemental financial information by operating segment for the three and nine months ended September 30, 2022 and 2021 is summarized below (in thousands):

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

2022 2021 Variance 2022 2021 Variance

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Offshore/Manufactured Products (1)

$ 13,373 $ 1,764 $ 11,609 $ 33,010 $ 7,645 $ 25,365

Well Site Services (2)

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Downhole Technologies (3)

(342) (5,035) 4,693 (3,332) (8,945) 5,613

Corporate (10,332) (7,618) (2,714) (29,611) (25,526) (4,085)

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________________

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

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

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

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

We reported a net loss for the three months ended June 30, 2022 of $5.1 million, or $0.08 per share.

These results compare to a net loss for the three months ended June 30, 2021 of $15.3 million, or $0.25 per share, which included non-cash operating lease asset impairment charges of $2.8 million ($2.2 million after-tax, or $0.04 per share), restructuring charges of $2.6 million ($2.0 million after-tax, or $0.03 per share) and non-cash gains on extinguishment of our 2023 Notes of $0.4 million ($0.3 million after-tax, or $0.01 per share).

(1) Operating income in the three and nine months ended September 30, 2022 included a gain of $6.1 million recognized in connection with the settlement of outstanding litigation against certain service providers.

(2) Operating loss in the first nine months of 2021 included non-cash fixed and operating lease asset impairment charges of $3.4 million.

(3) Operating loss in the three and nine months ended September 30 2021 included a non-cash inventory impairment charge of $2.1 million.

See Note 3, "Asset Impairments and Other Charges and Benefits," and Note 4, "Details of Selected Balance Sheet Accounts," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion of these and other charges and benefits recognized in the first nine months of 2022 and 2021.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

We reported net income for the three months ended September 30, 2022 of $2.1 million, or $0.03 per share, which included a gain of $6.1 million ($4.6 million after-tax, or $0.07 per share) recognized in connection with the favorable settlement of a litigation matter.

These results compare to a net loss for the three months ended September 30, 2021 of $13.0 million, or $0.22 per share.

Reported third quarter 2021 results reflected the impact of Hurricane Ida, which negatively affected operations in southeast Louisiana and the Gulf of Mexico.

The third quarter 2021 loss also included a non-cash inventory impairment charge of $2.1 million ($1.7 million after-tax, or $0.03 per share) and severance and restructuring costs of $0.7 million ($0.6 million after-tax, or $0.01 per share).

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 continued to improve 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.

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

Consolidated total revenues in the second quarter of 2022 increased $36.1 million, or 25%, from the second quarter of 2021.

Consolidated product revenues in the second quarter of 2022 increased $21.0 million, or 27%, from the second quarter of 2021, driven primarily by increased U.S.

land-based customer activity and higher demand for project-related connector products.

Consolidated service revenues in the second quarter of 2022 increased $15.1 million, or 22%, from the second quarter of 2021 due primarily to higher customer spending in the U.S.

shale play regions and the Gulf of Mexico, partially offset by the exit of certain non-performing service offerings in January 2022.

As can be derived from the following table, 60% of our consolidated revenues in the second quarter of 2022 were derived from sales of our short-cycle product and service offerings, which compares to 58% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended June 30, 2022 and 2021 (in thousands):

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

During the third quarter of 2021, we recognized an aggregate $1.2 million reduction of payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") employee retention credit program.

Consolidated total revenues in the third quarter of 2022 increased $48.9 million, or 35%, from the third quarter of 2021.

Consolidated product revenues in the third quarter of 2022 increased $29.3 million, or 42%, from the third quarter of 2021, driven primarily by higher demand for project-related connector products and increased U.S.

land-based customer activity.

Consolidated service revenues in the third quarter of 2022 increased $19.5 million, or 28%, from the third quarter of 2021 due primarily to higher customer spending in the United States, partially offset by the exit of certain non-performing service offerings in January 2022 (which generated revenues of $5.5 million in the third quarter of 2021).

As can be derived from the following table, 62% of our consolidated revenues in the third quarter of 2022 were derived from sales of our short-cycle product and service offerings, which compares to 64% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended September 30, 2022 and 2021 (in thousands):

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Three Months Ended June 30 2022 2021 2022 2021 2022 2021 2022 2021

Three Months Ended September 30 2022 2021 2022 2021 2022 2021 2022 2021

Major revenue categories -

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $24.5 million, or 21%, in the second quarter of 2022 compared to the second quarter of 2021.

Consolidated product costs in the second quarter of 2022 increased $15.5 million, or 24%, from the second quarter of 2021.

Consolidated service costs in the second quarter of 2022 increased $9.1 million, or 17%, from the second quarter of 2021.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $34.1 million, or 29%, in the third quarter of 2022 compared to the third quarter of 2021.

Cost of revenues in the third quarter of 2021 included charges totaling $2.1 million for non-cash inventory impairments.

Excluding these charges, consolidated cost of revenues increased $36.2 million, or 31%, from the prior-year period.

Consolidated product costs were $81.6 million in the third quarter of 2022.

This compares to consolidated product costs of $60.3 million in the third quarter of 2021, which included $2.1 million in non-cash inventory impairment charges.

Excluding these charges, consolidated product costs increased $23.4 million, or 40%, from the third quarter of 2021, reflective of the reported revenue growth as well as higher material, transportation, labor and other costs.

Consolidated service costs in the third

quarter of 2022 increased $12.8 million, or 23%, from the third quarter of 2021, with the impact of higher customer activity levels and increased labor and other costs partially offset by the impact of the January 2022 exit of certain non-performing service offerings.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased $1.7 million, or 8%, in the second quarter of 2022 from the second quarter of 2021 due primarily to higher performance-based incentive compensation, professional service and trade show expenses, partially offset by $2.1 million in restructuring charges recognized in the prior-year quarter.

Selling, general and administrative expense increased $3.3 million, or 16%, in the third quarter of 2022 from the third quarter of 2021 due primarily to higher performance-based incentive compensation expenses.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $3.7 million, or 18%, in the second quarter of 2022 compared to the prior-year quarter, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Depreciation and amortization expense decreased $3.2 million, or 17%, in the third quarter of 2022 compared to the prior-year quarter, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 11, "Segments and Related Information," to our Unaudited Condensed Consolidated Financial Statements presents depreciation and amortization expense by segment.

Impairments of Fixed and Lease Assets.

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

Operating Loss.

Our consolidated operating loss was $1.1 million in the second quarter of 2022.

This compares to a consolidated operating loss of $17.6 million recognized in the second quarter of 2021, which included $2.8 million of non-cash operating lease asset impairment charges and $2.6 million of restructuring charges.

Other Operating Income, Net.

Net other operating income for the third quarter of 2022 included a gain of $6.1 million recognized in connection with the settlement of outstanding litigation against certain service providers within our Offshore/Manufactured Products segment.

Operating Income (Loss).

Our consolidated operating income was $5.1 million in the third quarter of 2022, which included the $6.1 million gain reported as other operating income, net.

This compares to a consolidated operating loss of $16.1 million recognized in the third quarter of 2021, which included a $2.1 million non-cash inventory impairment charge and $0.7 million of severance and restructuring charges.

Interest Expense, Net.

Net interest expense was $2.6 million in the second quarter of 2022, which compares to $2.7 million in the same period of 2021.

Interest expense as a percentage of total debt outstanding was approximately 6% in the second quarter of 2022 and 2021.

Other Income, Net.

Net other income for the second quarter of 2022 includes a non-cash charge of $0.6 million recognized in connection with the settlement of disputes with the GEO Seller.

Net other income for second quarter of 2022 and 2021 included non-cash gains of $0.2 million and $0.4 million, respectively, recognized in connection with our purchases of our 2023 Notes.

For the three months ended June 30, 2022, our income tax provision was $1.8 million on a pre-tax loss of $3.4 million.

Income tax expense in the second quarter of 2022 was negatively impacted by valuation allowances recorded against U.S.

deferred tax assets as well as certain non-deductible expenses.

This compares to an income tax benefit of $3.2 million on a pre-tax loss of $18.5 million for the three months ended June 30, 2021, which included certain non-deductible expenses.

Other Comprehensive Income (Loss).

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

Other comprehensive loss was $12.7 million in the second quarter of 2022 compared to comprehensive income of $3.2 million in the second quarter of 2021 due to fluctuations in currency exchange rates compared to the U.S.

Net interest expense totaled $2.6 million in the third quarter of 2022, which compares to $2.6 million in the same period of 2021.

Interest expense as a percentage of total debt outstanding was approximately 6% in the third quarter of 2022 and 2021.

For the three months ended September 30, 2022, our income tax provision was $0.8 million on pre-tax income of $2.9 million.

This compares to an income tax benefit of $3.5 million on a pre-tax loss of $16.6 million for the three months ended September 30, 2021, which included certain non-deductible expenses.

Other Comprehensive Loss.

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

Other comprehensive loss was $11.9 million in the third quarter of 2022 compared to comprehensive loss of $5.8 million in the third quarter of 2021 due to fluctuations in currency exchange rates compared to the U.S.

dollar which are used to translate certain of the international operations of our operating segments.

For the three months ended June 30, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During the second quarter of 2022, the exchange rate for both the British pound and the Brazilian real weakened compared to the U.S.

This compares to the second quarter of 2021, when the exchange rate for the British pound was flat compared to the U.S.

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

For the three months ended September 30, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

During the third quarters of 2022 and 2021, the exchange rates for both the British pound and the Brazilian real weakened compared to the U.S.

Segment Operating Results

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues increased $19.6 million, or 25%, in the second quarter of 2022 compared to the second quarter of 2021 due primarily to increased demand for short-cycle and project-related products.

Our Offshore/Manufactured Products segment revenues increased $27.0 million, or 39%, in the third quarter of 2022 compared to the third quarter of 2021 due primarily to increased demand for project-related connector equipment and short-cycle and military products.

In addition, Hurricane Ida tempered third quarter 2021 revenues and operating income.

Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $9.4 million in the second quarter of 2022, compared to operating income of $4.8 million in the second quarter of 2021 due primarily to the reported revenue growth.

Backlog in our Offshore/Manufactured Products segment totaled $241 million as of June 30, 2022, with second quarter 2022 bookings of $77 million and a quarterly book-to-bill ratio of 0.8x.

Our Offshore/Manufactured Products segment reported operating income of $13.4 million in the third quarter of 2022, compared to operating income of $1.8 million in the third quarter of 2021.

This year-over-year increase was due primarily to the segment's reported revenue growth and the third quarter 2022 recognition of a $6.1 million gain in connection with the settlement of certain outstanding litigation, partially offset by the impact of higher material, transportation, labor and other costs.

Backlog in our Offshore/Manufactured Products segment totaled $258 million as of September 30, 2022, with third quarter 2022 bookings of $115 million and a quarterly book-to-bill ratio of 1.2x.

Well Site Services

Our Well Site Services segment revenues increased $12.8 million, or 30%, in the second quarter of 2022 compared to the prior-year quarter, driven by increased U.S.

and international customer activity levels partially offset by the exit of U.S.

thru-tubing service offerings in January 2022.

Our Well Site Services segment revenues increased $14.5 million, or 32%, in the third quarter of 2022 compared to the prior-year quarter, driven by increased customer activity levels across all geographic regions, partially offset by the exit of U.S.

thru-tubing service offerings in January 2022 (which generated revenues of $5.5 million in the third quarter of 2021) and the prior-year impact of Hurricane Ida, which tempered third quarter 2021 revenues and operating income.

Operating Income (Loss).

Our Well Site Services segment reported operating income of $0.6 million in the second quarter of 2022.

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

Excluding these 2021 charges, the segment's operating income (loss) improved $7.0 million from the prior-year quarter due primarily to the reported revenues growth and a $3.2 million reduction in depreciation and amortization expense.

Our Well Site Services segment reported operating income of $2.4 million in the third quarter of 2022, compared to an operating loss of $5.3 million in the third quarter of 2021, which included $0.4 million in severance and restructuring charges.

Excluding these 2021 charges, the segment's operating income (loss) improved $7.3 million from the prior-year quarter due primarily to the segment's reported revenue growth and a $2.8 million reduction in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

Our Downhole Technologies segment revenues increased $3.8 million, or 14%, in the second quarter of 2022 from the prior-year period due primarily to higher customer demand for perforating and completion products in the United States.

Our Downhole Technologies segment revenues increased $7.3 million, or 29%, in the third quarter of 2022 from the prior-year period due primarily to higher customer demand for perforating and completion products in the United States.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $1.5 million in the second quarter of 2022, compared to an operating loss of $2.3 million in the prior-year period reflective of the reported increase in revenues.

Corporate expenses increased $1.1 million, or 13%, in the second quarter of 2022 from the prior-year period, due primarily to higher personnel costs and performance-based incentive compensation.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

We reported a net loss for the six months ended June 30, 2022 of $14.6 million, or $0.24 per share.

These results compare to a net loss for the six months ended June 30, 2021 of $31.1 million, or $0.52 per share, which included non-cash impairment charges of $3.4 million ($2.7 million after-tax, or $0.05 per share) associated with write-downs of fixed and lease assets, $6.0 million ($4.7 million after-tax, or $0.08 per share) of severance and restructuring costs and non-cash gains of $4.0 million ($3.2 million after-tax, or $0.05 per share) associated with extinguishment of our 2023 Notes.

Our Downhole Technologies segment reported an operating loss of $0.3 million in the third quarter of 2022, compared to an operating loss of $5.0 million in the prior-year period, which included a $2.1 million non-cash inventory impairment charge.

Excluding this charge, our Downhole Technologies operating loss decreased $2.6 million from the prior-year period due to the reported increase in revenues, partially offset by higher material, transportation, labor and other costs.

Corporate expenses increased $2.7 million, or 36%, in the third quarter of 2022 from the prior-year period, due primarily to higher personnel costs and performance-based incentive compensation.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

We reported a net loss for the nine months ended September 30, 2022 of $12.4 million, or $0.20 per share, which included a gain of $6.1 million ($4.6 million after-tax, or $0.07 per share) recognized in connection with the settlement of a litigation matter.

These results compare to a net loss for the nine months ended September 30, 2021 of $44.1 million, or $0.73 per share, which included non-cash impairment charges of $5.6 million ($4.4 million after-tax, or $0.08 per share) associated with write-downs of fixed and lease assets, $6.7 million ($5.3 million after-tax, or $0.09 per share) of severance and restructuring costs and non-cash gains of $4.0 million ($3.2 million after-tax, or $0.05 per share) associated with extinguishment of a portion of our 2023 Notes.

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

Consolidated total revenues in the first six months of 2022 increased $74.6 million, or 27%, from the first six months of 2021.

Consolidated product revenues in the first six months of 2022 increased $45.3 million, or 32%, from the first six months of 2021, driven primarily by increased U.S.

land-based customer activity and higher demand for project-related fixed platform and other equipment.

Consolidated service revenues in the first six months of 2022 increased $29.3 million, or 22%, from the first six months of 2021 due primarily to higher customer spending in the U.S.

shale play regions and the Gulf of Mexico, partially offset by the exit of certain non-performing service offerings in January 2022.

As can be derived from the following table, 61% of our consolidated revenues in the first six months of 2022 were derived from sales of our short-cycle product and service offerings, which compares to 60% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three and six months ended June 30, 2022 and 2021 (in thousands):

Customer-driven activity has continued to improve 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 and ESG considerations.

During the first nine months of 2021, we recognized an aggregate $8.8 million reduction of payroll tax expense (recognized within cost of revenues and selling, general and administrative expense) as part of the CARES Act employee retention credit program.

Consolidated total revenues in the first nine months of 2022 increased $123.4 million, or 30%, from the first nine months of 2021.

Consolidated product revenues in the first nine months of 2022 increased $74.6 million, or 36%, from the first nine months of 2021, driven primarily by increased U.S.

land-based customer activity and higher demand for project-related connector product and fixed platform and deck equipment.

Consolidated service revenues in the first nine months of 2022 increased $48.8 million, or 24%, from the first nine months of 2021 due primarily to higher customer spending in the United States, partially offset by the exit of certain non-performing service offerings in January 2022 (which generated revenues of $15.0 million in the first nine months of 2021).

As can be derived from the following table, 61% of our consolidated revenues in the first nine months of 2022 were derived from sales of our short-cycle product and service offerings, which compares to 61% in the same period last year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Six Months Ended June 30 2022 2021 2022 2021 2022 2021 2022 2021

Nine Months Ended September 30 2022 2021 2022 2021 2022 2021 2022 2021

Major revenue categories -

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $48.8 million, or 22%, in the first six months of 2022 compared to the first six months of 2021.

Consolidated product costs in the first six months of 2022 increased $30.8 million, or 27%, compared to the first six months of 2021.

Consolidated service costs in the first six months of 2022 increased $18.0 million, or 17%, compared to the first six months of 2021.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $82.9 million, or 25%, in the first nine months of 2022 compared to the first nine months of 2021.

Cost of revenues in the first nine months of 2021 included $2.1 million of non-cash inventory impairment charges.

Excluding these charges, consolidated cost of revenues increased $85.0 million, or 25%, from the prior-year period.

Consolidated product costs in the first nine months of 2022 increased $52.1 million, or 30%, compared to the first nine months of 2021, which included $2.1 million in non-cash inventory impairment charges.

Excluding these charges, consolidated product costs increased $54.2 million, or 32%, from the prior-year period due to the reported revenue growth and higher material, transportation, labor and other costs.

Consolidated service costs in the first nine months of 2022 increased $30.8 million, or 19%, compared to the first nine months of 2021 with the impact of higher customer activity levels and increased labor and other costs, partially offset by the impact of the January 2022 exit of certain non-performing service offerings.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased $4.3 million, or 10%, in the first six months of 2022 from the first six months of 2021 due primarily to higher performance-based incentive compensation, professional service, bad debt and trade show expenses, partially offset by $3.7 million in severance and restructuring charges recognized in the prior-year period.

Selling, general and administrative expense increased $7.6 million, or 12%, in the first nine months of 2022 from the first nine months of 2021 due primarily to higher performance-based incentive compensation, professional service, bad debt and trade show expenses, partially offset by $3.7 million in severance and restructuring charges recognized in the prior-year period.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $7.4 million, or 17%, in the first six months of 2022 compared to the prior-year period, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Depreciation and amortization expense decreased $10.6 million, or 17%, in the first nine months of 2022 compared to the prior-year period, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 11, "Segments and Related Information," to our Unaudited Condensed Consolidated Financial Statements presents depreciation and amortization expense by segment.

Impairments of Fixed and Lease Assets.

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

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

Other Operating Income, Net.

Net other operating income for the first nine months of 2022 included a gain of $6.1 million recognized in connection with the settlement of outstanding litigation against certain service providers within our Offshore/Manufactured Products segment.

Operating Loss.

Our consolidated operating loss was $5.4 million in the first six months of 2022.

This compares to a consolidated operating loss of $37.4 million recognized in the first six months of 2021, which included $3.4 million of non-cash fixed and operating lease asset impairment charges and $6.0 million of severance and restructuring costs.

Our consolidated operating loss was $0.4 million in the first nine months of 2022, which included the $6.1 million gain reported as other operating income, net.

This compares to a consolidated operating loss of $53.5 million recognized in the first nine months of 2021, which included $5.6 million of non-cash fixed and operating lease asset impairment charges and $6.7 million of severance and restructuring costs.

Interest Expense, Net.

Net interest expense was $5.3 million in the first six months of 2022, which compares to $5.0 million in the first six months of 2021.

Interest expense as a percentage of total debt outstanding was approximately 6% in the first six months of 2022 and 5% in the first six months of 2021.

Net interest expense totaled $7.9 million in the first nine months of 2022, which compares to $7.6 million in the first nine months of 2021.

Interest expense as a percentage of total debt outstanding was approximately 6% in the first nine months of 2022 and 5% in the first nine months of 2021.

Other Income, Net.

Net other income for the first six months of 2022 includes a non-cash charge of $0.6 million recognized in connection with the settlement of disputes with the GEO Seller.

Net other income for the first six months of 2022 and 2021 included non-cash gains of $0.2 million and $4.0 million, respectively, recognized in connection with our purchases of our 2023 Notes.

For the first six months of 2022, our income tax provision was $5.2 million on a pre-tax loss of $9.3 million.

Income tax expense in the first six months of 2022 was negatively impacted by valuation allowances recorded against U.S.

Net other income for the first nine months of 2022 included a non-cash charge of $0.6 million recognized in connection with the settlement of disputes with the GEO Seller.

Net other income for the first nine months of 2022 and 2021 included non-cash gains of $0.2 million and $4.0 million, respectively, recognized in connection with our purchases of our 2023 Notes.

For the first nine months of 2022, our income tax provision was $6.0 million on a pre-tax loss of $6.4 million.

Income tax expense in the first nine months of 2022 was negatively impacted by valuation allowances recorded against U.S.

deferred tax assets as well as certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $5.5 million on a pre-tax loss of $36.6 million for the first six months of 2021, which included certain non-deductible expenses and discrete tax items.

Other Comprehensive Income (Loss).

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

Other comprehensive loss was $11.8 million in the first six months of 2022 compared to comprehensive income of $1.6 million in the first six months of 2021 due to fluctuations in foreign currency exchange rates compared to the U.S.

This compares to an income tax benefit of $9.1 million on a pre-tax loss of $53.2 million for the first nine months of 2021, which included certain non-deductible expenses and discrete tax items.

Other Comprehensive Loss.

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

Other comprehensive loss was $23.8 million in the first nine months of 2022 compared to comprehensive loss of $4.2 million in the first nine months of 2021 due to fluctuations in foreign currency exchange rates compared to the U.S.

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

For the first six months of 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During the first six months of 2022, the exchange rate for the British pound weakened compared to the U.S.

For the first nine months of 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

During the first nine months of 2022, the exchange rate for the British pound weakened compared to the U.S.

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

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

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

Segment Operating Results

Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues increased $43.1 million, or 31%, in the first six months of 2022 compared to the first six months of 2021 due primarily to increased demand for project-related fixed platform and other equipment and short-cycle products.

Our Offshore/Manufactured Products segment revenues increased $70.1 million, or 34%, in the first nine months of 2022 compared to the first nine months of 2021 due to increased demand for all of the segment's product and service offerings, particularly project-related connector and short-cycle products.

Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $19.6 million in the first six months of 2022.

The segment reported operating income of $5.9 million in the first six months of 2021, which included severance and restructuring costs of $0.3 million.

Backlog in our Offshore/Manufactured Products segment totaled $241 million as of June 30, 2022 compared to $260 million as of December 31, 2021.

Bookings during the first six months of 2022 totaled $168 million, yielding a book-to-bill ratio of 0.9x.

Our Offshore/Manufactured Products segment reported operating income of $33.0 million in the first nine months of 2022, which included a $6.1 million gain in connection with the settlement of certain outstanding litigation.

The segment reported operating income of $7.6 million in the first nine months of 2021, which included severance and restructuring costs of $0.5 million.

This year-over-year increase was due primarily to the reported revenue growth and the recognition of a $6.1 million gain in connection with the settlement of litigation, partially offset by the impact of higher material, transportation, labor and other costs.

Backlog in our Offshore/Manufactured Products segment totaled $258 million as of September 30, 2022 compared to $260 million as of December 31, 2021.

Bookings during the first nine months of 2022 totaled $283 million, yielding a book-to-bill ratio of 1.0x.

Well Site Services

Our Well Site Services segment revenues increased $21.4 million, or 26%, in the first six months of 2022 compared to the same prior-year period, driven by increased U.S.

Our Well Site Services segment revenues increased $35.9 million, or 28%, in the first nine months of 2022 compared to the same prior-year period, driven by increased U.S.

customer activity levels partially offset by the exit of U.S.

thru-tubing service offerings in January 2022.

thru-tubing service offerings in January 2022 (which generated revenues of $15.0 million in the first nine months of 2021).

Operating Loss.

Our Well Site Services segment reported an operating loss of $2.8 million in the first six months of 2022.

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

Excluding these 2021 changes, the segment's operating loss decreased $11.5 million compared to the same prior-year period due primarily to the reported revenue growth coupled with a $6.8 million decrease in depreciation and amortization expense.

Our Well Site Services segment reported an operating loss of $0.4 million in the first nine months of 2022.

The segment reported an operating loss of $26.7 million in the first nine months of 2021, which included $4.0 million in severance and restructuring costs and non-cash fixed and lease asset impairment charges of $3.4 million.

Excluding these 2021 charges, the segment's operating loss decreased $18.8 million compared to the same prior-year period due primarily to the segment's reported revenue growth coupled with a $6.1 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

Our Downhole Technologies segment revenues increased $10.1 million, or 19%, in the first six months of 2022 from the same prior-year period due primarily to increased customer demand for perforating and completion products in the United States.

Our Downhole Technologies segment revenues increased $17.4 million, or 22%, in the first nine months of 2022 from the same prior-year period due primarily to increased customer demand for perforating and completion products in the United States.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $3.0 million in the first six months of 2022.

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

Our Downhole Technologies segment reported an operating loss of $3.3 million in the first nine months of 2022.

The segment reported an operating loss of $8.9 million in the first nine months of 2021, which included a non-cash inventory impairment charge of $2.1 million and $0.6 million of severance and restructuring charges.

Excluding these 2021 charges, operating loss decreased $2.9 million in the first nine months of 2022 from the prior-year period due to the reported increase in revenues, partially offset by higher material, transportation, labor and other costs.

Operating Loss.

Corporate expenses in the first six months of 2022 increased $1.4 million, or 8%, from the first six months of 2021 due primarily to higher personnel costs, performance-based incentive compensation and professional fees, partially offset by $1.6 million of severance costs recognized in the prior-year period.

Corporate expenses in the first nine months of 2022 increased $4.1 million, or 16%, from the first nine months of 2021 due primarily to higher personnel costs, performance-based incentive compensation and professional fees, partially offset by $1.6 million of severance costs recognized in the prior-year period.

Liquidity, Capital Resources and Other Matters

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Operating Activities

Cash flows used in operations totaled $10.0 million during the six months ended June 30, 2022, compared to $13.9 million generated by operations during the first six months of 2021.

During the first six months of 2022, $37.4 million was used to fund net working capital increases, primarily due to increases in accounts receivable and inventories driven by higher activity levels.

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

Cash flows from operations totaled $19.0 million during the nine months ended September 30, 2022, compared to $20.6 million generated by operations during the first nine months of 2021.

During the first nine months of 2022, $27.5 million was used to fund net working capital increases, primarily due to increases in accounts receivable and inventories driven by higher activity levels.

During the first nine months of 2021, $6.6 million was provided by net working capital decreases, primarily due to an increase in accounts payable and accrued liabilities, partially offset by an increase in inventories.

Investing Activities

Cash used in investing activities during the first six months of 2022 totaled $13.0 million, compared to $4.2 million used in investing activities during the first six months of 2021.

Cash used in investing activities during the first nine months of 2022 totaled $19.3 million, compared to $5.3 million used in investing activities during the first nine months of 2021.

As discussed under "Recent Developments," we acquired E-Flow on April 14, 2022 for net cash consideration of $8.1 million.

Capital expenditures totaled $6.5 million and $7.3 million during the first six months of 2022 and 2021, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $1.7 million and $3.4 million during the first six months of 2022 and 2021, respectively.

Capital expenditures totaled $13.3 million and $11.0 million during the first nine months of 2022 and 2021, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $2.2 million and $6.2 million during the first nine months of 2022 and 2021, respectively.

We expect to spend approximately $20 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 ABL Facility discussed below.

Financing Activities

During the six months ended June 30, 2022, net cash of $7.7 million was used in financing activities, including the purchase of $6.5 million principal amount of our outstanding 2023 Notes.

This compares to $19.1 million of cash used in financing activities during the six months ended June 30, 2021, 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 in the first six months of 2021 was our issuance of $135.0 million principal amount of our 4.75% convertible senior notes due 2026 (the "2026 Notes") yielding net cash proceeds of $130.6 million.

On June 28, 2022, we entered into a settlement agreement with the GEO Seller including the full and final settlement of all amounts due pursuant to the GEO Note.

On July 1, 2022, we issued the GEO Seller approximately 1.9 million shares of our common stock along with a cash payment of $10.0 million as part of such settlement.

The final settlement with be reflected in the third quarter of 2022.

As of June 30, 2022, we had cash and cash equivalents totaling $22.2 million, which compared to $52.9 million as of December 31, 2021.

Cash was used during the period to fund the E-Flow acquisition, fund capital expenditures and purchase a portion of our 2023 Notes.

As of June 30, 2022, we had no borrowings outstanding under our ABL Facility, $19.5 million principal amount of our 2023 Notes outstanding, $135.0 million principal amount of our 2026 Notes outstanding and other debt of $21.3 million.

Our reported interest expense, which included amortization of deferred financing costs of $0.9 million during the first six months of 2022, was above our contractual cash interest expense.

For the first six months of 2022, our contractual cash interest expense was $4.5 million, or approximately 5% of the average principal balance of debt outstanding.

During the nine months ended September 30, 2022, net cash of $17.9 million was used in financing activities, including a cash payment of $10.0 million related to the GEO Note settlement (discussed below) and the purchase of $6.5 million principal amount of our outstanding 2023 Notes.

This compares to $19.4 million of cash used in financing activities during the nine months ended September 30, 2021, 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 in the first nine months of 2021 was our issuance of $135.0 million principal amount of our 4.75% convertible senior notes due 2026 (the "2026 Notes") yielding net cash proceeds of $130.6 million.

On June 28, 2022, we entered into a settlement agreement with the GEO Seller, which provided for the full and final settlement of all amounts due under the GEO Note.

Pursuant to the settlement agreement, on July 1, 2022, we paid the GEO Seller $10.0 million in cash and issued approximately 1.9 million shares of our common stock.

As of September 30, 2022, we had cash and cash equivalents totaling $33.1 million, which compared to $52.9 million as of December 31, 2021.

Cash was used during the period to settle the GEO Note, fund the E-Flow acquisition, fund capital expenditures and purchase a portion of our 2023 Notes.

As of September 30, 2022, we had no borrowings outstanding under our ABL Facility, $19.5 million principal amount of our 2023 Notes outstanding, $135.0 million principal amount of our 2026 Notes outstanding and other debt of $3.6 million.

Our reported interest expense included amortization of deferred financing costs of $1.4 million during the first nine months of 2022.

For the first nine months of 2022, our contractual cash interest expense was $6.5 million, or approximately 5% 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.

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 ESG matters and other factors, many of which are beyond our control.

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For more information on our risks related to climate change, see the risk factor in "Part I, Item 1A.

Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2021 titled, "Our and our customers' operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide."

ABL Facility.

Risk Factors" included in this Quarterly Report on Form 10-Q titled, "The Inflation Reduction Act of 2021 could accelerate the transition to a low carbon economy and could impose new costs on our customers' operations."

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 "ABL Facility") under which credit availability is subject to a borrowing base calculation.

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See Note 5, "Long-term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the ABL Agreement.

As of June 30, 2022, we had $18.6 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

The total amount available to be drawn as of June 30, 2022 was $61.8 million, calculated based on the current borrowing base less outstanding letters of credit.

As of September 30, 2022, we had $17.6 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

The total amount available to be drawn as of September 30, 2022 was $79.9 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 us and Wells Fargo Bank, National Association, as trustee.

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See Note 5, "Long-term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the 2026 Notes.

As of June 30, 2022, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

As of September 30, 2022, 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 us and Wells Fargo Bank, National Association, as trustee.

Computershare Trust Company, National Association, assumed the role of trustee as of March 1, 2022.

Since September 2019, we have purchased a cumulative $180.5 million principal amount of the 2023 Notes for $159.0 million in cash, with $19.5 million principal amount outstanding as of June 30, 2022.

Since September 2019, we have purchased a cumulative $180.5 million principal amount of the 2023 Notes for $159.0 million in cash, with $19.5 million principal amount outstanding as of September 30, 2022.

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

See Note 5, "Long-term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the 2023 Notes.

As of June 30, 2022, none of the conditions allowing holders of the 2023 Notes to convert, or requiring us to repurchase the 2023 Notes, had been met.

As of September 30, 2022, 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.

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On June 28, 2022, we entered into a settlement agreement with the GEO Seller, including the full and final settlement of all amounts due pursuant to the GEO Note.

See Note 12, "Commitments and Contingencies," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.

Our total debt represented 20% and 20% of our combined total debt and stockholders' equity as of June 30, 2022 and December 31, 2021, respectively.

Our total debt represented 19% and 20% of our combined total debt and stockholders' equity as of September 30, 2022 and December 31, 2021, respectively.

Contingencies and Other Obligations.

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

On June 28, 2022, we fully settled the GEO Note (together with related accrued interest) along with disputes that arose with the GEO Seller.

On June 28, 2022, we entered into a settlement agreement with the GEO Seller, including the full and final settlement of all amounts due under the GEO Note.

In August of 2022, our Offshore/Manufactured Products segment settled outstanding litigation against certain service providers in exchange for the receipt of cash totaling $6.9 million.

In connection with this settlement, we recognized a gain of $6.1 million in the third quarter of 2022.

See Note 12, "Commitments and Contingencies," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.

Off-Balance Sheet Arrangements.

As of June 30, 2022, we had no off-balance sheet arrangements.

As of September 30, 2022, we had no off-balance sheet arrangements.

Critical Accounting Policies

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What changed 10-Q

Item 2. Management’s Discussion and Analysis