What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-22 · 194 added, 254 removed, 297 unchanged (60% 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 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.

We provide a broad range of manufactured products and services to customers in the energy, industrial and military sectors through our Offshore/Manufactured Products, Well Site Services and Downhole Technologies 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 well as regulatory pressures around ESG considerations.

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

Our customers' capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, making demand for our products and services sensitive to expectations regarding future crude oil and natural gas prices, as well as economic growth, commodity demand and estimates of resource production and regulatory pressures related to ESG considerations.

Recent Developments

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.

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, stabilize our cash flows and protect liquidity.

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.

Demand for oil and natural gas has increased steadily from the lows experienced in 2020 as the impact of the global response to the COVID-19 pandemic continues to wane, with commodity prices also driven by declines in crude oil supplies, concerns over sanctions resulting from the Russian invasion of Ukraine and slower crude oil production growth due to reduced investments by operators globally in recent years.

The spot price of Brent crude oil averaged $101 per barrel during 2022, an increase of 43% from the 2021 average, but crude oil prices decreased toward the end of the third quarter and through the fourth quarter of 2022 in response to, among other things, the growing risk of a global recession, which raised concerns over future crude oil demand destruction, and expanding commodity inventories.

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

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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.

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.

drilling rig count reported on February 10, 2023 was 761 rigs – slightly below the fourth quarter 2022 average.

In January 2022, we exited various underperforming domestic service lines within our Well Site Services segment.

These service offerings generated revenues of approximately $20 million in 2021.

The exit of these service lines improved our segment margins for 2022 despite tempering our reported revenue growth.

In March 2022, we recorded bad debt expense of $0.8 million related to receivables from Russia-based customers of our Offshore/Manufactured Products segment.

As of March 31 and December 31, 2022, we had no remaining material balance sheet exposure related to Russia.

In April 2022, our Offshore/Manufactured Products segment acquired E-Flow, a 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) was funded with cash on-hand.

In July 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) to fully settle our disputes, including $19.7 million in principal and accrued interest due under the GEO Note.

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

We recognized a gain of $6.1 million in connection with this settlement.

Current and expected future pricing for WTI crude oil, along with expectations regarding the regulatory environment in the regions in which we operate, 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 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.

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) and international tensions;

the perceived risk of a global economic recession;

global uncertainties related to the COVID-19 pandemic;

domestic or international crude oil production;

changes in governmental rules and regulations;

the willingness of operators to invest capital in the exploration for and development of resources;

use of alternative fuels;

improved vehicle fuel efficiency;

a more sustained movement to electric vehicles;

and the potential for ongoing supply/demand imbalances.

Capital investment by our customers temporarily declined due to these factors and the desire to generate sustainable cash flows.

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 also produces a variety of products for use in industrial, military and other applications outside the traditional energy industry.

Additionally, we are investing in research, have been awarded select contracts and are bidding on additional projects that facilitate the development of alternative energy sources, including offshore wind and deepsea mineral gathering opportunities.

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.

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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.

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 $308 million as of December 31, 2022 from $260 million as of December 31, 2021.

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2020 267 235 227 219

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.

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

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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.

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.

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.

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

Average for the

Demand for our completion-related 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 U.S.

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

As of February 10, 2023

Average for the

Year Ended December 31,

United States:

United States Rig Count:

Land – Oil 589 557 365

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Offshore 20 18 15

International:

International Rig Count:

Offshore 205 179

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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 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 2022 increased by 245 rigs, or 51%, compared to the average for 2021.

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.

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

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

In addition, in response to Russia’s invasion of Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland and other countries have enacted sanctions against Russia and Russian interests.

The effect of these sanctions and 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 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."

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.

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;

geopolitical tensions;

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.

This selected financial data should be read in conjunction with our Consolidated Financial Statements and related notes included in "Part II, Item 8.

Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" in order to understand factors, such as charges, credits and financing transactions, which may impact the comparability of the selected financial data.

Consolidated Results of Operations

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Depreciation and amortization expense 67,334 80,741 (13,407)

Impairments of goodwill (2)

— 406,056 (406,056)

Impairments of fixed and lease assets (2)

— 4,166 (4,166)

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

Other operating income, net (3)

(7,127) (1,042) (6,085)

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

734,801 637,953 96,848

Operating income (loss) 2,905 (64,792) 67,697

Interest expense, net (10,280) (10,170) (110)

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Loss before income taxes (4,060) (73,334) 69,274

Income tax benefit (5)

9,341 65,946 (56,605)

Income tax (provision) benefit (5,480) 9,341 (14,821)

Net loss $ (9,540) $ (63,993) $ 54,453

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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.

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

(3) During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation.

See Note 4, "Asset Impairments and Other Charges and Benefits," Note 5, "Details of Selected Balance Sheet Accounts" and Note 7, "Long-term Debt," 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 2022 and 2021.

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.

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

Supplemental financial information by operating segment for the years ended December 31, 2022 and 2021 is summarized below (in thousands):

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Total Offshore/Manufactured Products 381,723 298,729 82,994

Downhole Technologies 103,492 97,936 5,556

Well Site Services 231,189 170,940 60,249

Downhole Technologies 124,794 103,492 21,302

Total $ 737,706 $ 573,161 $ 164,545

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$ 45,268 $ 15,447 $ 29,821

Downhole Technologies (2)

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

Well Site Services (2)

4,865 (34,511) 39,376

Downhole Technologies (3)

(6,669) (13,470) 6,801

Corporate (40,559) (32,258) (8,301)

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________________

(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.

(1) Operating income in 2022 included a gain of $6.1 million recognized in connection with the settlement of outstanding litigation.

(2) Operating loss in 2021 included non-cash fixed and operating lease asset impairment charges of $4.2 million and inventory impairment charges of $1.5 million.

(3) Operating loss in 2021 included a non-cash inventory impairment charge of $2.1 million.

See Note 4, "Asset Impairments and Other Charges and Benefits," and Note 5, "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 2022 and 2021.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

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

The reported 2021 loss included:

We reported a net loss for the year ended December 31, 2022 of $9.5 million, or $0.15 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 year ended December 31, 2021 of $64.0 million, or $1.06 per share.

Reported results in 2021 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;

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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;

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

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

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 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.

Demand for most of our products and services increased throughout 2022 from the lows experienced in 2020 and 2021 due to the waning impact of the global response to the COVID-19 pandemic, which had adversely affected energy demand and prices.

Increased capital investments by our customers, together with internal cost reduction and strict capital discipline measures and other corporate actions, resulted in significant improvements in our consolidated results in 2022.

During 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 2022 increased $164.5 million, or 29%, from 2021.

Consolidated product revenues in 2022 increased $86.3 million, or 29%, from 2021, driven primarily by increased U.S.

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

Consolidated service revenues in 2022 increased $78.3 million, or 29%, from 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 approximately $20 million in 2021).

As can be derived from the following table, 61% of our consolidated revenues in 2022 were derived from sales of our short-cycle product and service offerings, which compares to 59% in the prior year.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the years ended December 31, 2022 and 2021 (in thousands):

Offshore/ Manufactured Products Downhole Technologies Well Site Services Total

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Year Ended December 31 2022 2021 2022 2021 2022 2021 2022 2021

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

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

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.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $108.2 million, or 23%, in 2022 compared to 2021, which included $3.6 million of non-cash inventory impairment charges.

Excluding these charges, consolidated cost of revenues increased $111.7 million, or 24%, from the prior year.

Consolidated product costs in 2022 increased $60.8 million, or 25%, compared to 2021, which included $2.1 million in non-cash inventory impairment charges.

Excluding these 2021 charges, consolidated product costs increased $62.9 million, or 26%, from the prior year due to the reported revenue growth and higher material, transportation, labor and other costs.

Consolidated service costs in 2022 increased $47.4 million, or 21%, compared to 2021, which included $1.5 million in non-cash inventory impairment charges.

Excluding these 2021 charges, consolidated service costs increased $48.8 million, or 22%, from the prior year due to the impact of higher customer activity levels and increased labor, material 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 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.

Selling, general and administrative expense increased $12.3 million, or 15%, in 2022 from 2021 due primarily to higher performance-based incentive compensation, professional services, bad debt and trade show expenses, partially offset by $3.7 million in severance and restructuring charges recognized in 2021.

Depreciation and Amortization Expense.

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

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

Impairments of Fixed and Lease Assets.

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 $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%.

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 operating lease assets to their estimated realizable value.

Other Operating Income, Net.

Net other operating income for 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 $2.9 million in 2022, which included the $6.1 million gain reported as other operating income, net (discussed above).

This compares to a consolidated operating loss of $64.8 million recognized in 2021, which included $7.7 million of asset impairment charges and $7.5 million of severance and restructuring costs.

Interest Expense, Net.

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).

Net interest expense totaled $10.3 million in 2022, which compares to $10.2 million in 2021.

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

Other Income, Net.

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.

Net other income for 2022 included a non-cash charge of $0.6 million recognized in connection with the settlement of disputes with the GEO Seller and non-cash gains of $0.2 million recognized in connection with our purchases of our 2023 Notes.

Net other income 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 our 2023 Notes.

These 2021 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.

For 2022, our income tax provision was $5.5 million on a pre-tax loss of $4.1 million, which included certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $9.3 million on a pre-tax loss of $73.3 million for 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 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.

Other comprehensive loss was $12.9 million in 2022 compared to comprehensive income of $5.4 million in 2021.

With the liquidation of the 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 for 2021 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.

For 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 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 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 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).

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.

Our Offshore/Manufactured Products segment revenues increased $83.0 million, or 28%, in 2022 compared to 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 $45.3 million in 2022, which included a $6.1 million gain in connection with the settlement of outstanding litigation.

The segment reported operating income of $15.4 million in 2021, which included severance and restructuring costs of $0.9 million.

This year-over-year increase was due primarily to the reported revenue growth and recognition of the $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 $308 million as of December 31, 2022 compared to $260 million as of December 31, 2021.

Bookings during 2022 totaled $435 million, yielding a book-to-bill ratio of 1.1x.

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.

Our Well Site Services segment revenues increased $60.2 million, or 35%, in 2022 compared to 2021, driven by increased U.S.

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

thru-tubing service offerings in January 2022 (which generated revenues of approximately $20 million in 2021).

Operating Income (Loss).

Our Well Site Services segment reported operating income of $4.9 million in 2022.

The 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.

Excluding these 2021 charges, the segment's operating results improved by $29.5 million compared to the prior year due primarily to the segment's reported revenue growth and a $11.6 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

Our Downhole Technologies segment revenues increased $21.3 million, or 21%, in 2022 from 2021 due primarily to increased customer demand for perforating and completion products in the United States.

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.

Our Downhole Technologies segment reported an operating loss of $6.7 million in 2022, compared to 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.

Excluding these 2021 charges, operating loss decreased $3.9 million in 2022 from the prior year due to the reported increase in revenues, partially offset by higher material, transportation, labor and other costs.

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.

Corporate expenses in 2022 increased $8.3 million, or 26%, from 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 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.

Cash flows from operations totaled $32.9 million during 2022, compared to $7.2 million generated by operations during 2021.

During 2022, $34.7 million was used to fund net working capital increases, primarily due to increases in accounts receivable and inventories driven by higher customer activity levels.

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, 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

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.

Net cash used in investing activities during 2022 totaled $22.7 million, compared to $6.6 million used in investing activities during 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 $20.3 million and $17.5 million during 2022 and 2021, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $5.9 million and $11.5 million during 2022 and 2021, respectively.

We expect to spend approximately $25 million in capital expenditures during 2023.

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.

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 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.

During 2022, net cash of $20.3 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 $8.7 million principal amount of our outstanding 2023 Notes.

This compares to $19.6 million of cash used in financing activities during 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 2021 was our issuance of $135.0 million principal amount of our 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 included 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 December 31, 2022, we had cash and cash equivalents totaling $42.0 million, which compared to $52.9 million as of December 31, 2021.

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.

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 December 31, 2022, we had no borrowings outstanding under our ABL Facility, $17.3 million principal amount of our 2023 Notes outstanding, $135.0 million principal amount of our 2026 Notes outstanding and other debt of $3.4 million.

Our reported interest expense included amortization of deferred financing costs of $1.9 million during 2022.

For 2022, our contractual cash interest expense was $8.5 million, or approximately 5% of the average principal balance of debt outstanding.

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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.

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.

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.

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 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.

On March 21, 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related information and risks.

We are currently assessing these rules, but at this time we cannot predict the costs of implementation or any potential adverse impacts resulting from these rules.

To the extent these rules are finalized as proposed, we expect that we and our customers would incur increased costs related to the assessment and disclosure of climate-related risks.

We may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed.

In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders in restricting or seeking more stringent conditions with respect to their investments in us, our customers and other companies like ours that support the energy industry.

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

Risk Factors" included in this Annual Report on Form 10-K 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" and "The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers' operations."

Stock Repurchase Program.

On February 16, 2023, the Board of Directors authorized $25.0 million for the repurchases of our common stock, par value $0.01 per share, through February 2025.

Subject to applicable securities laws, such purchases will be at such times and in such amounts as we deem appropriate.

Revolving Credit 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.

On December 13, 2022, we entered into an additional technical amendment to the ABL Facility to replace the reference benchmark rate of the London Inter Bank Offered Rate (known as LIBOR) with the Secured Overnight Financing Rate (known as SOFR).

This transition is not expected to materially impact our borrowing rate under the ABL Facility.

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 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.

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.

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 ABL Agreement.

As of December 31, 2022, we had $15.4 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.

The total amount available to be drawn as of December 31, 2022 was $92.1 million, calculated based on the then 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 Computershare Trust Company, National Association, as successor 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.

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

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 2026 Notes.

As of December 31, 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 Computershare Trust Company, National Association, as successor trustee as of March 1, 2022.

Since September 2019, we have purchased a cumulative $182.7 million principal amount of the 2023 Notes for $161.2 million in cash, with $17.3 million principal amount outstanding as of December 31, 2022.

On February 15, 2023, the remaining outstanding 2023 Notes were fully repaid.

Promissory Note.

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

We have incurred settlement costs and expenses of $7.5 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.

In connection with the GEODynamics Acquisition, we issued the GEO Note that was scheduled to mature on July 12, 2019.

Payments due under the GEO Note (original principal amount of $25.0 million) were subject to set-off, in full or in part, against certain indemnification claims related to matters occurring prior to the GEODynamics Acquisition.

We asserted indemnification claims against the GEO Seller, and the GEO Seller filed a breach of contract suit against us alleging that payments due under the GEO Note were required to be repaid in accordance with the terms of such note.

We incurred settlement costs and expenses of $7.5 million related to such indemnification claims and as of June 28, 2022, had reduced the carrying amount of such note in our consolidated balance sheet to $17.5 million, which was our then-current best estimate of what was owed after set-off for indemnification matters.

On June 28, 2022, we entered into a settlement agreement with the GEO Seller, which included the full and final settlement of all amounts due pursuant to 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 (having a market value of $10.3 million).

See Note 15, "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.

Our total debt represented 18% and 20% of our combined total debt and stockholders' equity as of December 31, 2022 and December 31, 2021, respectively.

Contractual Obligations.

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157,444 6,413 12,825 138,206 —

Promissory note (4)

19,440 19,440 — — —

Other debt and finance lease obligations 3,430 528 1,012 1,059 831

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The total amount available to be drawn as of December 31, 2022 was $92.1 million.

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

(2) Amount represents the full principal amount of the 2023 Notes together with interest payments, which were repaid on February 15, 2023.

(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.

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

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

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

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

(4) Amount represents 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.

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

(5) Our purchase obligations primarily relate to open purchase orders.

Contingencies and Other Obligations.

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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 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.

In August 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 15, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

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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.

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.

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See Note 2, "Summary of Significant Accounting Policies," and Note 10, "Income Taxes," to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for additional information with respect to tax matters.

Off-Balance Sheet Arrangements.

As of December 31, 2022, we had no off-balance sheet arrangements.

Critical Accounting Policies

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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.

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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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 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 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.

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

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

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

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

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

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

December 2020, 2021 and 2022 Assessments

As of December 1, 2022, 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 valuation techniques used in these annual assessments were consistent with those used during our interim 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, 2021 and 2022 was 15.3%, 14.5% and 15.0%, respectively.

The estimated returns required by market participants decreased in our 2020, 2021 and 2022 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.

As of December 31, 2022, our market capitalization was $477 million, or $213 million below our stockholder's equity carrying value.

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

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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.

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

No indicators of impairment were identified in 2022 that would indicate that the carrying values of our long-lived tangible and intangible assets are not recoverable.

Accordingly, no additional impairment losses were recorded.

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

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

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

We follow the liability method of accounting for income taxes.

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

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

federal net operating losses.

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

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.

As of December 31, 2022, our total investment, including earnings and profits, in foreign subsidiaries (except for our Canadian operations) is considered to be permanently reinvested outside the United States.

We account for the U.S.

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During 2022, 2021 and 2020, we recorded valuation allowances primarily with respect to foreign and U.S.

state net operating loss carryforwards.

state net operating loss ("NOL") carryforwards.

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

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

Unless otherwise discussed, 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 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 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.

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.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis