What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-04-28 · 177 added, 89 removed, 209 unchanged (56% of the section changed)

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2023 $ 81.01 $ 77.99

2022 100.87 113.84 $ 100.71 $ 88.77 $ 100.99

WTI Crude (per bbl)

2023 $ 75.91 $ 73.54

2022 95.18 108.83 $ 93.06 $ 82.79 $ 94.90

Henry Hub Natural Gas (per MMBtu)

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2022 4.67 7.50 $ 8.03 $ 5.55 $ 6.45

________________

Energy Information Administration (spot prices).

On April 21, 2023, Brent crude oil, WTI crude oil and natural gas spot prices closed at $83.36 per barrel, $77.86 per barrel and $2.20 per MMBtu, respectively.

On July 21, 2023, Brent crude oil, WTI crude oil and natural gas spot prices closed at $81.06 per barrel, $77.06 per barrel and $2.61 per MMBtu, respectively.

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

drilling rig count reported on April 21, 2023 was 753 rigs – comparable to the first quarter 2023 average.

In February 2023, we repaid the $17.3 million principal amount, plus accrued interest, of outstanding 2023 Notes (as defined below).

drilling rig count reported on July 21, 2023 was 669 rigs – 7% below the second quarter 2023 average.

In February 2023, we repaid the $17.3 million principal amount, plus accrued interest, outstanding under our 2023 Notes (as defined below).

Additionally, our Board of Directors authorized a $25.0 million stock repurchase plan, which extends through February 2025.

No repurchases have been made under the plan as of March 31, 2023.

Current and expected future pricing for WTI crude oil and inflationary costs increases, 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.

During the second quarter of 2023, $3.0 million of share repurchases were made under this authorization.

Current and expected future pricing for WTI crude oil and natural gas and inflationary costs increases, 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.

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Capital investment by our customers temporarily declined 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.

Customer spending in the natural gas shale plays has moderated over the last ten years 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.

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.

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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 40% of Offshore/Manufactured Products segment sales in the first three months of 2023 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 63% of Offshore/Manufactured Products segment sales in the first six months of 2023 were driven by our customers' capital spending for

products and services 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 and services").

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

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Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to 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 $326 million as of March 31, 2023 from $308 million as of December 31, 2022 and $265 million as of March 31, 2022.

Bookings totaled $118 million in the first quarter of 2023, yielding a book-to-bill ratio of 1.2x.

Backlog reported by our Offshore/Manufactured Products segment increased to $338 million as of June 30, 2023 from $308 million as of December 31, 2022 and $241 million as of June 30, 2022.

Bookings totaled $106 million in the second quarter of 2023, yielding a book-to-bill ratio of 1.1x (1.2x year-to-date).

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

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2022 265 241 $ 258 $ 308

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.

2021 226 214 249 260

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 internationally.

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.

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

As of April 21, 2023

As of July 21, 2023

Average for the

Three Months Ended March 31,

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

2023 2022 2023 2022

United States Rig Count:

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Offshore 22 22 16 20 17

669 719 713 736 675

International Rig Count:

Land 844 733 871 781

Offshore 231 197 228 195

1,075 930 1,099 976

1,794 1,643 1,835 1,651

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

shale plays utilizing horizontal drilling and completion techniques.

As of March 31, 2023, oil-directed drilling accounted for 78% of the total U.S.

As of June 30, 2023, oil-directed drilling accounted for 81% of the total U.S.

rig count – with the balance largely natural gas related.

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

rig count for the first three months of 2023 increased by 120 rigs, or 19%, compared to the average for the first three months of 2022.

rig count for the first six months of 2023 increased by 61 rigs, or 9%, compared to the average for the first six months of 2022.

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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Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2022 in order to understand factors which may impact comparability of the selected financial data.

We revised our presentation of supplemental disclosure of disaggregated revenue information in the second quarter of 2023.

Prior-period disclosures of disaggregated revenue information presented within this discussion and analysis were conformed with the current-period presentation.

Unaudited Consolidated Results of Operations

The following summarizes our consolidated results of operations for the three months ended March 31, 2023 and 2022 (in thousands, except per share amounts):

The following summarizes our consolidated results of operations for the three and six months ended June 30, 2023 and 2022 (in thousands, except per share amounts):

Three Months Ended

2023 2022 Variance

June 30, Six Months Ended

2023 2022 Variance 2023 2022 Variance

Products $ 92,630 $ 99,033 $ (6,403) $ 192,470 $ 184,794 $ 7,676

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$ 0.01 $ (0.08) $ 0.04 $ (0.24)

0.01 (0.08) 0.04 (0.24)

Weighted average number of common shares outstanding:

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

Supplemental financial information by operating segment for the three months ended March 31, 2023 and 2022 is summarized below (in thousands):

Supplemental financial information by operating segment for the three and six months ended June 30, 2023 and 2022 is summarized below (in thousands):

Three Months Ended

2023 2022 Variance

June 30, Six Months Ended

2023 2022 Variance 2023 2022 Variance

Offshore/Manufactured Products

Project-driven products $ 39,132 $ 33,844 $ 5,288

Project-driven:

Products $ 32,210 $ 41,098 $ (8,888) $ 71,342 $ 74,942 $ (3,600)

Services 24,846 23,995 851 49,476 48,293 1,183

57,056 65,093 (8,037) 120,818 123,235 (2,417)

Military and other products 7,965 7,763 202 14,962 13,109 1,853

Short-cycle products 29,065 23,611 5,454 56,505 44,235 12,270

Other products and services 31,627 29,644 1,983

Total Offshore/Manufactured Products 94,086 96,467 (2,381) 192,285 180,579 11,706

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Downhole Technologies 24,907 30,548 (5,641) 55,849 62,308 (6,459)

Total $ 196,199 $ 164,044 $ 32,155

$ 183,529 $ 181,834 $ 1,695 $ 379,728 $ 345,878 $ 33,850

Operating income (loss):

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Corporate (10,180) (9,647) (533) (20,842) (19,279) (1,563)

Total $ 5,875 $ (4,336) $ 10,211

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

We reported net income for the three months ended March 31, 2023 of $2.2 million, or $0.03 per share.

These results compare to a net loss for the three months ended March 31, 2022 of $9.4 million, or $0.16 per share.

$ 3,269 $ (1,090) $ 4,359 $ 9,144 $ (5,426) $ 14,570

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

We reported net income for the three months ended June 30, 2023 of $0.6 million, or $0.01 per share.

These results compare to a net loss for the three months ended June 30, 2022 of $5.1 million, or $0.08 per share.

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

Consolidated total revenues in the first three months of 2023 increased $32.2 million, or 20%, from the first three months of 2022.

Consolidated product revenues in the first three months of 2023 increased $14.1 million, or 16%, from the first three months of 2022, driven primarily by higher customer demand for connector, drilling and short-cycle products.

Consolidated service revenues in the first three months of 2023 increased $18.1 million, or 23%, from the first three months of 2022 due primarily to increased customer spending in the U.S.

Consolidated total revenues in the second quarter of 2023 increased $1.7 million, or 1%, from the second quarter of 2022.

Consolidated product revenues in the second quarter of 2023 decreased $6.4 million, or 6%, from the second quarter of 2022, driven primarily by the timing of conversion of production facility and connector products from backlog into revenue and lower customer demand for perforating products.

Consolidated service revenues in the second quarter of 2023 increased $8.1 million, or 10%, from the second quarter of 2022 due primarily to increased customer spending in the U.S.

shale play regions and the Gulf of Mexico.

As can be derived from the following table, 64% of our consolidated revenues in the first three months of 2023 were derived from sales of our short-cycle product and service offerings, which compares to 61% in the prior-year period.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended March 31, 2023 and 2022 (in thousands):

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended June 30, 2023 and 2022 (in thousands):

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Three Months Ended March 31 2023 2022 2023 2022 2023 2022 2023 2022

Major revenue categories -

Project-driven products $ 39,132 $ 33,844 $ — $ — $ — $ — $ 39,132 $ 33,844

Completion products and services 17,955 13,580 65,406 45,166 30,942 31,760 114,303 90,506

Drilling services — — 1,652 3,006 — — 1,652 3,006

Other products 9,485 7,044 — — — — 9,485 7,044

Three Months Ended June 30 2023 2022 2023 2022 2023 2022 2023 2022

Project-driven:

Products $ 32,210 $ 41,098 $ — $ — $ — $ — $ 32,210 $ 41,098

Services 24,846 23,995 — — — — 24,846 23,995

Total project-driven 57,056 65,093 — — — — 57,056 65,093

Military and other products 7,965 7,763 — — — — 7,965 7,763

Products 29,065 23,611 — — 23,390 26,561 52,455 50,172

Services — — 64,536 54,819 1,517 3,987 66,053 58,806

Total short-cycle 29,065 23,611 64,536 54,819 24,907 30,548 118,508 108,978

Other products and services 31,627 29,644 — — — — 31,627 29,644

$ 94,086 $ 96,467 $ 64,536 $ 54,819 $ 24,907 $ 30,548 $ 183,529 $ 181,834

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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 $24.1 million, or 19%, in the first three months of 2023 compared to the first three months of 2022.

Consolidated product costs in the first three months of 2023 increased $13.9 million, or 21%, compared to the first three months of 2022 due to the reported revenue growth and a shift in sales mix, as well as higher material transportation, labor and other costs.

Consolidated service costs in the first three months of 2023 increased $10.3 million, or 17%, compared to the first three months of 2022, due to the impact of higher revenue levels and increased labor and other costs.

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) in the second quarter of 2023 was comparable to the level reported in the second quarter of 2022.

Consolidated product costs the second quarter of 2023 decreased $6.7 million, or 8%, from the second quarter of 2022 due to the reported revenue decrease and a shift in sales mix, partially offset by higher material, transportation, labor and other costs.

Consolidated service costs in the second quarter of 2023 increased $6.6 million, or 11%, from the second quarter of 2022, due to the impact of higher revenue levels and increased labor and other costs.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased $0.2 million, or 1%, in the first three months of 2023 from the first three months of 2022, despite a 20% increase in total revenues.

Selling, general and administrative expense in the second quarter of 2023 was comparable to the level reported in the second quarter of 2022.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $2.6 million, or 14%, in the first three months of 2023 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 $1.7 million, or 10%, in the second quarter of 2023 compared to the prior-year quarter, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 9, "Segments and Related Information," to our Unaudited Condensed Consolidated Financial Statements presents depreciation and amortization expense by segment.

Operating Income (Loss).

Our consolidated operating income was $5.9 million in the first three months of 2023.

This compares to a consolidated operating loss of $4.3 million recognized in the first three months of 2022.

Our consolidated operating income was $3.3 million in the second quarter of 2023.

This compares to a consolidated operating loss of $1.1 million recognized in the second quarter of 2022.

Interest Expense, Net.

Net interest expense totaled $2.4 million in the first three months of 2023, which compares to $2.7 million in the first three months of 2022.

Interest expense as a percentage of total debt outstanding was approximately 7% in the first three months of 2023 and 6% in the first three months of 2022.

Income tax expense for the the first three months of 2023 was calculated using a discrete approach.

Net interest expense totaled $2.1 million in the second quarter of 2023, which compares to $2.6 million in the same period of 2022.

Interest expense as a percentage of total debt outstanding was approximately 7% in the second quarter of 2023, compared to 6% in the second quarter of 2022.

Income tax expense for the three months ended June 30, 2023 was calculated using a discrete approach.

This methodology was used because changes in our results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate.

For the first three months of 2023, our income tax provision was $1.6 million on pre-tax income of $3.8 million, which included certain non-deductible expenses and discrete tax items.

This compares to an income tax provision of $3.4 million on a pre-tax loss of $6.0 million for the first three months of 2022, which included the impact of valuation allowances recorded against tax assets as well as certain non-deductible expenses and discrete tax items.

Other Comprehensive Income.

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

Other comprehensive income was $4.1 million in the first three months of 2023 compared to comprehensive income of $0.9 million in the first three months of 2022 due to fluctuations in foreign currency exchange rates compared to the U.S.

For the three months ended June 30, 2023, our income tax provision was $0.9 million on pre-tax income of $1.4 million, which included certain non-deductible expenses, discrete tax items and a favorable change in valuation allowances recorded against deferred tax assets.

This compares to an income tax provision of $1.8 million on a pre-tax loss of $3.4 million for the three months ended June 30, 2022, which was negatively impacted by valuation allowances recorded against deferred tax assets as well as certain non-deductible expenses.

Other Comprehensive Income (Loss).

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

Other comprehensive income was $3.3 million in the second quarter of 2023 compared to comprehensive loss of $12.7 million in the second quarter of 2022 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, 2023 and 2022, 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 2023, the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S.

This compares to the second quarter of 2022, when 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 decreased $2.4 million, or 2%, in the second quarter of 2023 compared to the second quarter of 2022 due primarily to the timing of conversion of production facility and connector products from backlog into revenue, partially offset by higher short-cycle product revenue.

Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $11.3 million in the second quarter of 2023, compared to operating income of $9.4 million in the second quarter of 2022.

This year-over-year increase was due primarily to a favorable shift in product sales mix.

Backlog in our Offshore/Manufactured Products segment totaled $338 million as of June 30, 2023, with second quarter 2023 bookings of $106 million and a quarterly book-to-bill ratio of 1.1x.

Well Site Services

Our Well Site Services segment revenues increased $9.7 million, or 18%, in the second quarter of 2023 compared to the prior-year quarter, driven primarily by increased U.S.

customer activity levels.

Operating Income.

Our Well Site Services segment reported operating income of $4.7 million in the second quarter of 2023, compared to operating income of $0.6 million in the second quarter of 2022.

The segment's operating results improved $4.1 million from the prior-year period, due primarily to the reported revenue growth and an $0.8 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

Our Downhole Technologies segment revenues decreased $5.6 million, or 18%, in the second quarter of 2023 from the prior-year period.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $2.5 million in the second quarter of 2023, which included a $1.0 million non-cash provision for excess and obsolete inventory.

This compares to an operating loss of $1.5 million in the prior-year period.

Operating Loss.

Corporate expenses increased $0.5 million, or 6%, in the second quarter of 2023 from the prior-year period, due primarily to higher marketing and personnel costs.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

We reported net income for the six months ended June 30, 2023 of $2.7 million, or $0.04 per share.

These results compare to a net loss for the six months ended June 30, 2022 of $14.6 million, or $0.24 per share.

Consolidated total revenues in the first six months of 2023 increased $33.9 million, or 10%, from the first six months of 2022.

Consolidated product revenues in the first six months of 2023 increased $7.7 million, or 4%, from the first six months of 2022, driven primarily by higher customer demand for short-cycle products.

Consolidated service revenues in the first six months of 2023 increased $26.2 million, or 16%, from the first six months of 2022 due primarily to increased customer spending in the U.S.

shale play regions and the Gulf of Mexico.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the six months ended June 30, 2023 and 2022 (in thousands):

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Six Months Ended June 30 2023 2022 2023 2022 2023 2022 2023 2022

Project-driven:

Products $ 71,342 $ 74,942 $ — $ — $ — $ — $ 71,342 $ 74,942

Services 49,476 48,293 — — — — 49,476 48,293

Total project-driven 120,818 123,235 — — — — 120,818 123,235

Military and other products 14,962 13,109 — — — — 14,962 13,109

Products 56,505 44,235 — — 49,661 52,508 106,166 96,743

Services — — 131,594 102,991 6,188 9,800 137,782 112,791

Total short-cycle 56,505 44,235 131,594 102,991 55,849 62,308 243,948 209,534

$ 192,285 $ 180,579 $ 131,594 $ 102,991 $ 55,849 $ 62,308 $ 379,728 $ 345,878

Percentage of total revenue by type -

Products 74 % 73 % — % — % 89 % 84 % 51 % 53 %

Services 26 % 27 % 100 % 100 % 11 % 16 % 49 % 47 %

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $24.0 million, or 9%, in the first six months of 2023 compared to the first six months of 2022.

Consolidated product costs in the first six months of 2023 increased $7.1 million, or 5%, compared to the first six months of 2022 due primarily to the reported revenue growth and a shift in sales mix, as well as higher material, transportation, labor and other costs.

Consolidated service costs in the first six months of 2023 increased $16.9 million, or 14%, compared to the first six months of 2022, due primarily to the impact of higher revenue levels and increased labor and other costs.

Selling, General and Administrative Expense.

Selling, general and administrative expense in the first six months of 2023 was comparable to the first six months of 2022, despite a 10% increase in total revenues.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $4.3 million, or 12%, in the first six months of 2023 compared to the prior-year period, driven primarily by reduced capital investments made in our Well Site Services segment in recent years.

Note 9, "Segments and Related Information," to our Unaudited Condensed Consolidated Financial Statements presents depreciation and amortization expense by segment.

Operating Income (Loss).

Our consolidated operating income was $9.1 million in the first six months of 2023.

This compares to a consolidated operating loss of $5.4 million recognized in the first six months of 2022.

Interest Expense, Net.

Net interest expense totaled $4.5 million in the first six months of 2023, which compares to $5.3 million in the first six months of 2022.

Interest expense as a percentage of total debt outstanding was approximately 7% in the first six months of 2023, compared to 6% in the first six months of 2022.

Income tax expense for the first six months of 2023 was calculated using a discrete approach.

This methodology was used because changes in our results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate.

For the first six months of 2023, our income tax provision was $2.5 million on pre-tax income of $5.2 million, which included certain non-deductible expenses, discrete tax items and a favorable change in valuation allowances recorded against deferred tax assets.

This compares to an income tax provision of $5.2 million on a pre-tax loss of $9.3 million for the first six months of 2022, which was negatively impacted by valuation allowances recorded against deferred tax assets as well as certain non-deductible expenses and discrete tax items.

Other Comprehensive Income (Loss).

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

Other comprehensive income was $7.4 million in the first six months of 2023 compared to comprehensive loss of $11.8 million in the first six months of 2022 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 three months of 2023 and 2022, currency translation adjustments recognized as a component of other comprehensive income were primarily attributable to the United Kingdom and Brazil.

During the first three months of 2023, the exchange rates for the British pound and the Brazilian real strengthened compared to the U.S.

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

For the first six months of 2023 and 2022, 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 2023, the exchange rates for the British pound and the Brazilian real strengthened compared to the U.S.

During the first six 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.

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Offshore/Manufactured Products

Our Offshore/Manufactured Products segment revenues increased $14.1 million, or 17%, in the first three months of 2023 compared to the first three months of 2022 due primarily to increased demand for connector, drilling and short-cycle products.

Our Offshore/Manufactured Products segment revenues increased $11.7 million, or 6%, in the first six months of 2023 compared to the first six months of 2022 due primarily to increased demand for short-cycle and industrial products.

Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $11.1 million in the first three months of 2023, compared to operating income of $10.2 million in the first three months of 2022.

This year-over-year increase was due primarily to the segment's reported revenue growth, partially offset by a shift in product sales mix and the impact of higher material, transportation, labor and other costs.

Backlog in our Offshore/Manufactured Products segment totaled $326 million as of March 31, 2023 compared to $308 million as of December 31, 2022.

Bookings during the first three months of 2023 totaled $118 million, yielding a book-to-bill ratio of 1.2x.

Our Offshore/Manufactured Products segment reported operating income of $22.3 million in the first six months of 2023, compared to operating income of $19.6 million in the first six months of 2022.

This year-over-year increase was due primarily to the segment's reported revenue growth and lower professional fees and bad debt expense, partially offset by a shift in product sales mix and the impact of higher material, transportation, labor and other costs.

Backlog in our Offshore/Manufactured Products segment totaled $338 million as of June 30, 2023 compared to $308 million as of December 31, 2022.

Bookings during the first six months of 2023 totaled $224 million, yielding a year-to-date book-to-bill ratio of 1.2x.

Well Site Services

Our Well Site Services segment revenues increased $18.9 million, or 39%, in the first three months of 2023 compared to the first three months of 2022, driven primarily by increased U.S.

Our Well Site Services segment revenues increased $28.6 million, or 28%, in the first six months of 2023 compared to the first six months of 2022, driven primarily by higher U.S.

customer activity levels.

Operating Income (Loss).

Our Well Site Services segment reported operating income of $7.0 million in the first three months of 2023, compared to an operating loss of $3.4 million in the first three months of 2022.

Our Well Site Services segment reported operating income of $11.7 million in the first six months of 2023, compared to an operating loss of $2.8 million in the first six months of 2022.

The segment's operating results improved $14.5 million from the prior-year period, due to the reported revenue growth and a $2.6 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

Our Downhole Technologies segment revenues decreased $0.8 million, or 3%, in the first three months of 2023 from the first three months of 2022.

Our Downhole Technologies segment revenues decreased $6.5 million, or 10%, in the first six months of 2023 from the first six months of 2022.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $1.5 million in the first three months of 2023, consistent with the results reported in the first three months of 2022.

Our Downhole Technologies segment reported an operating loss of $4.1 million in the first six months of 2023, compared to an operating loss of $3.0 million reported in the first six months of 2022.

This year-over-year increase in operating loss is due primarily to the reported decrease in the segment's revenue.

Operating Loss.

Corporate expenses in the first three months of 2023 increased $1.0 million, or 11%, from the first three months of 2022, due primarily to higher personnel costs and professional fees.

Corporate expenses in the first six months of 2023 increased $1.6 million, or 8%, from the first six months of 2022, due primarily to higher personnel and marketing costs.

Liquidity, Capital Resources and Other Matters

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Operating Activities

Cash flows used in operations totaled $5.9 million during the first three months of 2023, compared to $10.7 million used in operations during the first three months of 2022.

During 2023, $25.6 million was used to fund net working capital increases, primarily due to the payment of accrued 2022 short- and long-term cash incentives and an activity-driven increase in inventories.

During the first quarter of 2022, $21.3 million was used to fund net working capital increases, primarily due to increases in inventories and accounts receivable driven by higher activity levels.

Cash flows from operations totaled $38.7 million during the first six months of 2023, compared to $10.0 million used in operations during the first six months of 2022.

During the first six months of 2023, $0.8 million was provided by net working capital decreases, with the favorable impact of a decrease in accounts receivable and an increase in deferred revenues, substantially offset by an activity-driven increase in inventories and the payment of accrued 2022 short-and long-term cash incentives in the first quarter of 2023.

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.

Investing Activities

Net cash used in investing activities during the first three months of 2023 totaled $6.4 million, compared to $2.1 million used in investing activities during the first three months of 2022.

Capital expenditures totaled $6.6 million and $2.9 million during the first three months of 2023 and 2022, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $0.2 million and $0.9 million during the first three months of 2023 and 2022, respectively.

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

Net cash used in investing activities during the first six months of 2023 totaled $16.7 million, compared to $13.0 million used in investing activities during the first six months of 2022.

Capital expenditures totaled $17.3 million and $6.5 million during the first six months of 2023 and 2022, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $0.7 million and $1.7 million during the first six months of 2023 and 2022, respectively.

In the second quarter of 2022, we acquired E-Flow Control Holdings Limited, a global provider of fully integrated handling, control, monitoring and instrumentation solutions.

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

We expect to invest approximately $28 million in capital expenditures during 2023.

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 first three months of 2023, net cash of $14.4 million was used in financing activities, which included the repayment of the $17.3 million principal amount of our outstanding 2023 Notes.

This compares to $1.2 million of cash used in financing activities during the first three months of 2022.

As of March 31, 2023, we had cash and cash equivalents totaling $15.8 million, which compared to $42.0 million as of December 31, 2022.

As of March 31, 2023, we had $5.0 million in borrowings outstanding under our ABL Facility, $135.0 million principal amount of our 2026 Notes (as defined below) outstanding and other debt of $3.3 million.

Our reported interest expense included amortization of deferred financing costs of $0.4 million during the first three months of 2023.

For the first three months of 2023, our contractual cash interest expense was $2.0 million, or approximately 5% of the average principal balance of debt outstanding.

During the first six months of 2023, net cash of $22.6 million was used in financing activities, which included the repayment of the $17.3 million principal amount of our outstanding 2023 Notes and the repurchases of $3.0 million of the Company's common stock.

This compares to $7.7 million of cash used in financing activities during the first six months of 2022.

As of June 30, 2023, we had cash and cash equivalents totaling $42.4 million, which compared to $42.0 million as of December 31, 2022.

As of June 30, 2023, we had no borrowings outstanding under our ABL Facility, $135.0 million principal amount of our 2026 Notes (as defined below) outstanding and other debt of $3.2 million.

Our reported interest expense included amortization of deferred financing costs of $0.9 million during the first six months of 2023.

For the first six months of 2023, our contractual cash interest expense was $4.0 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.

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In this regard, the effect of the two U.S.

bank failures in March 2023 resulted in significant disruptions to global banking and financial markets.

bank failures in March 2023, as well as the third bank failure in May 2023, resulted in significant disruptions to global banking and financial markets.

For companies like ours that support the energy industry, these disruptions 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.

A final rule is expected to be released in the second quarter of 2023, but we cannot predict the final form and substance of the rule and its requirements at this time.

A final rule is expected to be released in the fourth quarter of 2023, but we cannot predict the final form and substance of the rule and its requirements at this time.

The ultimate impact on our business is uncertain and, upon finalization, we and our customers may incur increased compliance 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 access to capital or seeking more stringent conditions with respect to their investments in us, our customers and other companies like ours that support the energy industry.

In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders in restricting access to capital 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.

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

As of March 31, 2023, no repurchases were made under this authorization.

As of June 30, 2023, $3.0 million of share repurchases have been made under this authorization.

Revolving Credit Facility.

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See Note 3, "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 March 31, 2023, we had $5.0 million of outstanding borrowings and $15.9 million of outstanding letters of credit under the ABL Agreement.

The total amount available to be drawn as of March 31, 2023 was $92.8 million, calculated based on the then-current borrowing base less outstanding letters of credit.

As of June 30, 2023, we had $15.1 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, 2023 was $90.9 million, calculated based on the then-current borrowing base less outstanding letters of credit.

We issued $135.0 million aggregate principal amount of 4.75% convertible senior notes due 2026 (the "2026 Notes") pursuant to an indenture, dated as of March 19, 2021 (the "2026 Indenture"), between us and Computershare Trust Company, National Association, as successor trustee.

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See Note 3, "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 March 31, 2023, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

As of June 30, 2023, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

On February 15, 2023, our 1.50% convertible senior notes due 2023 (the "2023 Notes") matured and the outstanding $17.3 million principal amount was repaid in full.

Our total debt represented 17% and 18% of our combined total debt and stockholders' equity as of March 31, 2023 and December 31, 2022, respectively.

Our total debt represented 16% and 18% of our combined total debt and stockholders' equity as of June 30, 2023 and December 31, 2022, respectively.

Contingencies and Other Obligations.

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Off-Balance Sheet Arrangements.

As of March 31, 2023, we had no off-balance sheet arrangements.

As of June 30, 2023, we had no off-balance sheet arrangements.

Critical Accounting Policies

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis