What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-17 · 95 added, 113 removed, 235 unchanged (47% of the section changed)

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Our Board of Directors (the “Board”) has documented its governance practices by adopting several corporate governance policies.

These governance policies, including our Corporate Governance Guidelines, Corporate Code of Business Conduct, Financial Code of Ethics for Senior Officers, Supplier Code of Conduct and Human Rights, as well as the charters for the committees of the Board (Audit Committee, Compensation Committee and Nominating, Governance and Sustainability Committee) may also be viewed on our website.

The financial code of ethics applies to our principal executive officer, principal financial officer, principal accounting officer and other senior officers.

These governance policies, including our Corporate Governance Guidelines, Corporate Code of Business Conduct and Ethics, Financial Code of Ethics for Senior Officers, Supplier Code of Conduct and Human Rights Policy, as well as the charters for the committees of the Board (Audit Committee, Compensation Committee and Nominating, Governance and Sustainability Committee) may also be viewed on our website.

The Financial Code of Ethics for Senior Officers applies to our principal executive officer, principal financial officer, principal accounting officer and other senior officers.

Copies of such documents will be provided to stockholders without charge upon written request to the corporate secretary at the address shown on the cover page of this Annual Report on Form 10‑K.

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Our investments are focused in areas where we expect to be able to expand market share through our new and existing technology offerings and where we believe we can achieve an attractive return on our investment.

As part of our long-term strategy, we continue to review business expansion, make complementary acquisitions, invest in research and development and fund organic capital expenditures to enhance our cash flows, leverage our cost structure and increase our stockholders'

For additional discussion of our business strategy, please read “Part II, Item 7.

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Recent Developments

Demand for most of our products and services has increased from the lows experienced in 2020 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, have resulted in improvements in our consolidated operating results as shown below (in thousands).

Year ended December 31, Year-over-Year Change

2022 2021 2020 2022 vs 2021 2021 vs 2020

Increased capital investments by our offshore and international customers, together with internal cost reduction and strict capital discipline measures and other corporate actions, have resulted in improvements to our consolidated operating results in 2023, as shown below (in thousands).

Year ended December 31,

2023 2022 Change

Revenues $ 782,283 $ 737,706 $ 44,577

Operating income (loss) 2,905 (64,792) (534,340) 67,697 469,548

This reported growth has been tempered by the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory and market pressures around environmental, social and governance ("ESG") considerations as well as labor and supply chain constraints.

In January 2022, our Well Site Services segment exited various underperforming domestic service lines, which had 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 the Offshore/Manufactured Products segment following the onset of military actions between Russia and Ukraine.

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 Control Holdings Limited ("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 seller ("GEO Seller") of GEODynamics, Inc.

("GEODynamics") $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 a promissory note to the GEO Seller (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.

Operating income

23,164 2,905 20,259

Net income (loss)

12,891 (9,540) 22,431

Cash flow from operations

56,575 32,862 23,713

The favorable impact of continued growth in offshore and international project activity and backlog conversion in 2023 was partially offset by the impact of an industry-wide decline in U.S.

well completions (the U.S.

year-end rig count declined 20% from December 2022) – triggered by weaker commodity prices.

Additionally, improvements in operating results have been tempered by the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory and market pressures around environmental, social and governance (“ESG”) considerations.

In February 2023, we repaid the $17.3 million in principal amount, plus accrued interest, outstanding under our 1.50% convertible senior notes due 2023 (the “2023 Notes”).

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

During 2023, $6.9 million of share repurchases were made under this authorization.

On February 16, 2024, we amended our senior secured credit facility, which provides for a $125.0 million asset-based revolving credit facility (as amended, the “ABL Facility”), to extend its maturity date from February 10, 2025 to February 16, 2028.

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

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Our historical financial results reflect the cyclical nature of the oilfield services industry – witnessed by periods of increasing and decreasing activity in each of our operating segments.

In recent years, the global response to the COVID-19 pandemic adversely affected the economies and financial markets of many countries, resulting in an economic downturn that led to a material reduction in the level of capital spending by oil and gas companies for exploration and production activities.

As a result, capital investment by our customers declined, which affected demand for and pricing of our products and services.

As discussed previously, we saw significant growth and recovery during 2021 and 2022.

We expect activity to improve further in 2023 as our customers benefit from higher free cash flows, which should allow them to grow their capital budgets.

The level of capital spending in recent years by oil and gas companies for exploration and production activities has improved from the lows observed during 2020 and 2021, which resulted from the economic downturn associated with the global response to the COVID-19 pandemic.

As discussed previously, we saw continued growth and recovery in offshore and international project activity in 2023, partially offset by a decline in U.S.

well completion activity due to a decline in commodity prices from 2022 levels.

For additional information about activities in each of our segments, see “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Demand for the products and services supplied by our Offshore/Manufactured Products segment is generally driven by both the longer-term outlook for commodity prices and changes in land-based drilling and completion activity.

Over recent years, lower crude oil prices, coupled with a relatively uncertain outlook around shorter-term and possibly longer-term commodity prices, caused exploration and production companies to reevaluate their capital expenditures in regard to deepwater projects since they are expensive to drill and complete, have long lead times to first production and may be considered uneconomical relative to the risk involved.

Bidding and quoting activity, along with customer orders, for deepwater projects improved in 2022 from 2021 levels, following a substantial increase in crude oil prices and associated increases in customer spending commitments.

With these market improvements, we grew our backlog and related revenues in 2022.

Demand for the products and services supplied by our Offshore/Manufactured Products segment is generally driven by both the longer-term outlook for commodity prices and, to a lesser extent, changes in land-based drilling and completion activity.

In this regard, exploration and production companies generally evaluate their capital expenditure commitments for

offshore (particularly deepwater) and international projects based on the longer-term outlook for commodity prices since they are expensive to drill and complete and have long lead times to first production.

Conversely, near-term variations in crude oil and natural gas prices affect land-based drilling and completion activity, particularly in the United States.

Bidding and quoting activity, along with customer orders, for offshore and international projects continued to increase in 2023, following improvements in recent years in the longer-term outlook for crude oil prices and associated increases in customer spending commitments.

With these market improvements, we grew our backlog and related project-driven revenues in 2023.

Demand for our Well Site Services segment is primarily affected by drilling and completion activity in the United States, including the Gulf of Mexico, and, to a lesser extent, the rest of the world.

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Offshore/Manufactured Products

For the years ended December 31, 2022, 2021 and 2020, our Offshore/Manufactured Products segment generated approximately 52% to 54% of our consolidated revenue.

For the years ended December 31, 2023, 2022 and 2021, our Offshore/Manufactured Products segment generated 52% to 56% of our consolidated revenue.

Through this segment, we provide technology-driven, highly-engineered products and services for offshore oil and natural gas production systems and facilities, military and other energy applications, as well as certain products and services to the offshore and land-based drilling and completion markets.

Products and services used primarily in deepwater producing regions include our FlexJoint ® technology, advanced connector systems, high-pressure riser systems, compact valves, deepwater mooring systems, cranes, subsea pipeline products, specialty welding, fabrication, cladding and machining services, offshore installation services and inspection and repair services.

In addition, we design, manufacture and market numerous other products and services used in both land and offshore drilling and completion activities and by non-oil and gas customers, including consumable downhole elastomer products used in onshore completion activities, valves and sound and vibration dampening products used in military applications.

We have facilities that support our Offshore/Manufactured Products segment in Arlington, Houston and Lampasas, Texas;

Houma, Louisiana;

Oklahoma City and Tulsa, Oklahoma;

the United Kingdom;

and the United Arab Emirates.

Products and services used primarily in deepwater producing regions include our FlexJoint ® technology, advanced connector systems, high-pressure riser systems, managed pressure drilling systems, compact valves, deepwater mooring systems, cranes, subsea pipeline products, specialty welding, fabrication, cladding and machining services, offshore installation services and inspection and repair services.

In addition, we design, manufacture and market numerous other products and services used in both land and offshore drilling and completion activities and by non-oil and gas customers, including consumable downhole elastomer products used in onshore completion activities, subsea mineral gathering systems, valves and sound and vibration dampening products used in military applications.

We have facilities globally that support our Offshore/Manufactured Products segment.

The market for products and services offered by our Offshore/Manufactured Products segment centers primarily on the development of infrastructure for offshore production facilities and their subsequent operations, exploration and drilling activities, and to a lesser extent, on-vessel construction, refurbishments or upgrades.

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Products and Services

In operation for 80 years, our Offshore/Manufactured Products segment provides a broad range of products and services for use in offshore development and drilling activities.

In operation for over 80 years, our Offshore/Manufactured Products segment provides a broad range of products and services for use in offshore development and drilling activities.

This segment also provides products for onshore oil and natural gas, defense and other industries.

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We expect approximately 70% of our backlog as of December 31, 2023 to be recognized as revenue during 2024.

In some instances, these purchase orders are cancellable by the customer, subject to the payment of termination fees and/or the reimbursement of our costs incurred.

Backlog cancellations have historically been insignificant, totaling $3.5 million in 2022 and $1.8 million in 2021.

Additional cancellations may occur in the future, which would reduce our backlog if they occur.

In some instances, these purchase

orders are cancellable by the customer, subject to the payment of termination fees and/or the reimbursement of our costs incurred.

While backlog cancellations have historically been insignificant, material cancellations may occur in the future.

We believe backlog is an important indicator of future Offshore/Manufactured Products’ shipments and major project revenues;

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No customer in this segment represented more than 10% of our total consolidated revenue in any period presented.

Our main competitors in this segment include AFG Holdings, Inc., Baker Hughes Company, Hutchinson Group (a subsidiary of Total S.A.), NOV Inc., Oceaneering International, Inc., Sparrows Offshore Group Limited, TenarisHydril (a division of Tenaris S.A.) and W-Industries LLC.

Our main competitors in this segment include Baker Hughes Company, Hutchinson Group (a subsidiary of Total S.A.), NOV Inc., Oceaneering International, Inc., OneSubsea (a joint venture between SLB, Aker Solutions and Subsea 7), Sparrows Offshore Group Limited, TenarisHydril (a division of Tenaris S.A.) and W-Industries LLC.

Well Site Services

For the years ended December 31, 2022, 2021 and 2020, our Well Site Services segment generated approximately 30% to 31% of our consolidated revenue.

For the years ended December 31, 2023, 2022 and 2021, our Well Site Services segment generated 30% to 31% of our consolidated revenue.

Our Well Site Services segment includes a broad range of equipment and services that are used to drill for, establish and maintain the flow of oil and natural gas from a well throughout its life cycle.

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Activity levels have been, and we expect will continue to be, highly correlated with hydrocarbon commodity prices.

Our Well Site Services business, which is primarily marketed through the brand names Oil States Energy Services, Falcon and Tempress, provides a wide range of services used in the onshore and offshore oil and gas industry, including:

• wellhead isolation services;

• frac valve services;

• wireline and coiled tubing support services;

• flowback and well testing, including separators and line heaters;

• downhole and extended-reach services;

• pipe recovery systems;

• gravel pack and sand control operations on wellbores;

• hydraulic chokes and manifolds;

• BOP services;

• drilling services.

As of December 31, 2023, we provided completion and drilling services through approximately 20 locations serving our customers in the United States, including the Gulf of Mexico, and international markets.

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Downhole Technologies

For the years ended December 31, 2022, 2021 and 2020, our Downhole Technologies segment contributed approximately 15% to 18% of our consolidated revenue.

This segment is comprised of the GEODynamics business we acquired in January 2018 (the "GEODynamics Acquisition") and provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations.

For the years ended December 31, 2023, 2022 and 2021, our Downhole Technologies segment contributed 13% to 18% of our consolidated revenue.

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

This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies.

Downhole Technologies Market

Similar to our Well Site Services segment, demand for our Downhole Technologies segment products is predominantly tied to land-based oil and natural gas exploration and production activity levels in the United States.

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As of December 31, 2023, we had a total of 2,752 full-time employees – with 61% in our Offshore/Manufactured Products segment, 26% in our Well Site Services segment, 10% in our Downhole Technologies segment and 3% in our corporate headquarters.

We were party to collective bargaining agreements covering fewer than 100 employees located outside the United States as of December 31, 2022.

We were party to collective bargaining agreements covering approximately 350 employees located outside the United States as of December 31, 2023.

We believe we have good labor relations with our employees.

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We establish global targets in an effort to promote HSE improvement and monitor our performance through real-time reporting.

Executive management and operations personnel review incidents and loss trends on a weekly basis and we update our board of directors no less than monthly.

For certain divisional and operational teams, a portion of their annual incentive compensation is linked to established safety metrics.

Executive management and operations personnel review incidents and loss trends on a weekly basis and we update our Board no less than monthly.

We seek to encourage our employees to actively participate in HSE initiatives through safety committees, behavior-based observations, and employees stopping work if at-risk conditions are observed, among other aspects of our safety management system.

We monitor global compliance with our internal policies and procedures, internationally recognized/certified management systems and all applicable national, state, local and international laws and regulations.

COVID-19 Response

Our dedicated employees across the globe provided essential services to the energy industry during 2020, 2021 and 2022, and will continue to do so into 2023.

The COVID-19 outbreak expanded into a global pandemic in early 2020 – requiring swift and effective responses by us in order to protect the health and safety of our employees and others, as well as the communities in which we operate.

We implemented measures to enable our employees to work safely, including:

adjustments to facility workflows and operating schedules;

enhanced cleaning procedures;

health monitoring procedures;

and strict travel protocols.

Additionally, when possible, we requested that employees work from home to limit social contact in support of government instructions.

Our focus on safety was recognized with the 2023 NOIA Safety in Seas Culture of Safety Award, which recognizes overall organizational immersion in, and commitment to, safety through measurable and sustained safety performance over a prolonged period of time.

We recognize that our employees are critical to our long-term success.

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Additionally, 20% of our executive and senior management roles in 2023 were held by women, including our Chief Executive Officer and President who has served in this role and as a member of our Board since 2007.

As of December 31, 2022, three (38%) of our eight Board members are women and one (13%) of our Board members is Hispanic.

As of December 31, 2023, three (43%) of our seven Board members are women and one (14%) of our Board members is Hispanic.

Hiring, Training and Development of our Workforce

Our employee hiring, training, career development and retention practices are key to our success.

We recruit and train our employees while providing competitive wages and benefits.

We recruit and train our workforce while providing competitive wages and benefits.

Our industry is cyclical, leading to varying headcount needs during industry cycles.

We prioritize recalling our experienced employees for manufacturing and field positions to the extent possible as conditions improve following an industry downturn such as the one which began in early 2020.

We invest in continual training and development of our employees through technical and non-technical courses and programs.

Employee training and development includes course work as well as on the job mentoring – emphasizing, among others matters, safety, ethical behavior, compliance with our internal policies and laws and regulations, protection of the environment, and skills and competencies necessary for a specific position.

We prioritize recalling our experienced employees for manufacturing and field positions to the extent possible as conditions improve following an industry downturn.

We invest in ongoing training and development of our employees through technical and non-technical courses and programs, which are regularly refreshed to meet the requirements of an evolving business landscape.

Employee training and development includes course work as well as on the job mentoring – emphasizing, among others matters, safety, ethical behavior, compliance with our internal policies and laws and regulations, protection of the environment, cyber and other security threats, and skills and competencies necessary for a specific position.

In addition to internal training and development, we also value the benefits of continuing formal education and maintain an educational assistance program that reimburses eligible expenses from accredited institutions.

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the occurrence of restrictions, delays or cancellations in the permitting, development or expansion of projects;

and issuance of injunctions restricting or prohibiting some or all of our activities in a particular area.

and issuance of injunctions restricting or prohibiting some or all of our activities in a

particular area.

We have incurred and will continue to incur operating and capital expenditures, some of which may be material, to comply with environmental and occupational health and safety laws and regulations.

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Additionally, the EPA issued a final regulation under the CWA prohibiting discharges to publicly owned treatment works of wastewater from onshore unconventional oil and gas extraction facilities.

In late 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on

drinking water resources, concluding that "water cycle" activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances.

Also in 2016, the federal Bureau of Land Management ("BLM") under the Obama Administration published a final rule imposing more stringent standards on hydraulic fracturing on federal lands;

however, in late 2018, the BLM under the Trump Administration published a final rule rescinding the 2016 final rule.

Since that time, litigation challenging the BLM's 2016 final rule and the 2018 final rule has resulted in rescission in federal courts of both the 2016 rule and the 2018 final rule but appeals of one or both of those decisions are ongoing.

Additionally, the Biden Administration may pursue further regulatory restrictions.

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

The suspension of these federal leasing activities prompted legal action by several states against the Biden Administration, resulting in issuance of a nationwide preliminary injunction by a federal district judge in Louisiana in June 2021 and a permanent injunction in August 2022, effectively halting implementation of the leasing suspension with respect to those leases canceled or postponed prior to March 24, 2021.

In April 2022, the DOI reopened onshore leasing for approximately 144,000 acres of federal, non-Indian land, although this sale is presently subject to ongoing litigation.

The DOI has also announced its intention to scope additional land for onshore leasing.

In late 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances.

The Biden Administration has also called for revisions and restrictions to the leasing and permitting programs for oil and gas development on federal lands and, for a time, suspended federal oil and gas leasing activities.

Future actions taken by the federal government to limit the availability of new oil and gas leases would adversely impact the oil and gas industry and impact demand for our products and services.

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and performing more meaningful public and tribal consultations regarding the leasing and permitting processes.

Several of the report recommendations require action by the Congress and cannot be implemented unilaterally by the Biden Administration and, thus, the extent to which this administration will act upon the report's recommendations cannot be predicted at this time;

Several of the report recommendations require action by Congress and cannot be implemented unilaterally by the Biden Administration and, thus, the extent to which this administration will act upon the report’s recommendations cannot be predicted at this time;

however, any revisions to the federal leasing or permitting process that make it more difficult for our customers to pursue operations on federal lands or waters may adversely impact demand for our products and services.

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

For example, in November 2022 the BLM proposed a rule that would limit flaring from well sites on federal lands, as well as allow the delay or denial of permits if BLM finds that an operator's methane waste minimization plan is insufficient.

For example, in November 2022, the federal Bureau of Land Management (“BLM”) proposed a rule that would limit flaring from well sites on federal lands, as well as allow an increase in the costs associated with federal oil and gas leasing and the delay or denial of permits if the BLM finds that an operator’s methane waste minimization plan is insufficient.

Additionally, in July 2023, the BLM proposed a rule to update the fiscal terms of federal oil and gas leases, increasing fees, rents, royalties, and bonding requirements.

The rule would also add new criteria for the BLM to consider when determining whether to lease nominated land, including the presence of important habitats or wetlands, the presence of historical properties or sacred sites, and recreational use of the land.

The BLM anticipates final action on this proposal in spring 2024.

At the state level, many states have adopted legal requirements that have imposed new or more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities, including states where our oil and gas exploration and production customers operate.

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In this regard, the Texas Railroad Commission has pursued several regulatory initiatives during the latter half of 2021 as a result of recent seismic activity in an area of the Midland Basin from northeast Ector County to southwest Martin County known as the Gardendale Seismic Response Area (“SRA”), including voluntary reductions in produced water disposals from injection wells in the Gardendale SRA, suspending injection operations of certain deep disposal wells within the Gardendale SRA, and suspending all disposal well permits to inject oil and gas waste into deep strata within the boundaries of the Gardendale SRA.

More recently, in response to a December 31, 2021 earthquake some 25 miles northeast of Midland, Texas, the Texas Railroad Commission established the Stanton SRA in January 2022 as a prelude to coordinating future industry-led actions to reduce the seismic hazard in this SRA.

In response to a December 31, 2021 earthquake approximately 25 miles northeast of Midland, Texas, the Texas Railroad Commission established the Stanton SRA in January 2022, resulting in a May 2022 Operator-Led Response Plan to coordinate future industry-led actions to reduce the seismic hazard in this SRA.

In December 2023, the Northern Culberson-Reeves SRA was established, resulting in the suspension of 23 deep disposal permits in the area.

The Oklahoma Corporation Commission has similarly suspended certain deep disposal well operations in the recent past following earthquakes of certain magnitudes in Oklahoma.

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• Offshore marine safety .

In the United States, President Biden has placed a moratorium on new oil and natural gas leases on federal lands and waters, including the federal Outer Continental Shelf ("OCS"), although a permanent injunction against this moratorium applicable to those leases canceled or postponed prior to March 24, 2021 was obtained in August 2022.

In the United States, President Biden previously placed a moratorium on new oil and natural gas leases on federal lands and waters, including the federal Outer Continental Shelf (“OCS”).

In addition, the Inflation Reduction Act of 2022 (“IRA 2022”) contains provisions requiring particular offshore oil and gas lease sales under the 2017 – 2022 leasing program to proceed and the DOI has reinstated or announced plans for those sales.

In July 2022, the DOI published a proposed offshore leasing program for 2023 – 2028, although the approval process is ongoing and may be subject to change or challenge.

In 2023, the DOI published a final offshore leasing program for 2024-2029.

Although leasing has resumed, the areas offered for leasing in the 2024-2029 program are the smallest since federal offshore leasing for oil and gas development began.

The Biden Administration may pursue further regulatory initiatives, executive actions and legislation in support of his regulatory agenda.

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Since that time, the EPA has issued area designations with respect to ground-level ozone and final requirements that apply to state, local and tribal air agencies for implementing the 2015 NAAQS for ground-level ozone and, more recently, in December 2020, the EPA (under the Trump Administration) published a final action that, upon conducting a periodic review of the ozone standard in accord with CAA requirements, elected to retain the 2015 ozone NAAQS without revision on a going-forward basis.

However, several groups have filed litigation over this December 2020 decision, and in October 2021, the EPA announced it will reconsider its December 2020 decision and is targeting to complete its reconsideration by the end of 2023.

While a draft assessment released in April 2022 indicates that EPA staff have reached a preliminary conclusion that the December 2020 decision will stand, a final decision continues to not be expected until 2023.

However, several groups have filed litigation over this December 2020 decision, and the EPA’s consideration is still ongoing.

State implementation of a revised NAAQS could, among other things, require installation of new emission controls on some of our or our customers’ equipment, result in longer permitting timelines, and significantly increase our or our customers’ capital expenditures and operating costs.

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Army Corps of Engineers (“Corps”) under the Obama, Trump and Biden Administrations have pursued multiple rulemakings since 2015 in an attempt to determine the scope of such reach.

While the EPA and Corps under the Trump Administration issued a final rule in April 2020 narrowing federal jurisdictional reach over waters of the United States, President Biden issued an executive order in January 2021 to further review and assess these regulations consistent with the new administration's policy objectives, following which the EPA and Corps announced plans in June 2021 to initiate a new rulemaking process that would repeal the 2020 rule and restore protections that were in place prior to 2015.

Following two federal district court decisions to vacate the 2020 rule, the EPA and the Corps announced a final rule defining "waters of the United States" according to the broader pre-2015 standards and including updates to incorporate existing Supreme Court decisions, which was published in January 2023.

At the same time, the Supreme Court is also expected to rule on certain aspects of the definition in 2023, and the January 2023 rule is likely to be subject to legal challenge.

Therefore, the final substance of this definition and its impacts on the scope of the CWA remain uncertain at this time.

To the extent that the EPA and the Corps under the Biden Administration issues any rule that expands the scope of the CWA's jurisdiction in areas where our customers conduct operations, such developments could delay, restrict or halt permitting or development of projects, result in longer permitting timelines, or increased compliance expenditures or mitigation costs for our customers’ operations, which may reduce the rate of production from operators.

Following legal actions on a 2020 rule, the EPA and the Corps announced a final rule (published in January 2023) defining “waters of the United States” according to the broader pre-2015 standards that includes updates to incorporate then-existing Supreme Court decisions.

The January 2023 rule was subject to legal action, and is currently enjoined in 27 states.

Subsequently, the U.S.

Supreme Court ruled on Sackett v.

EPA , finding that the “continuous surface connection” test was the proper legal test to apply to wetlands to determine whether they are waters of the United States.

The agencies published a rule in September 2023 to incorporate this decision, but did not define the term “continuous surface connection.” Further, the injunction on the January 2023 rule continues to apply.

Therefore, implementation of the rule is currently split by jurisdiction:

for the 27 states subject to the injunction, the agencies are implementing the pre-2015 rule and the changes made by the Sackett decision;

in the remaining 23 states, the agencies are implementing their September 2023 rule.

Therefore, the implementation of this rule and its impacts on the scope of the CWA remain uncertain at this time.

To the extent that any action further expands the scope of the CWA’s jurisdiction in areas where our customers conduct operations, such developments could delay, restrict or halt permitting or development of projects, result in longer permitting timelines, or increased compliance expenditures or mitigation costs for our customers’ operations, which may reduce the rate of production from operators.

• Climate change .

In the United States, no comprehensive climate change legislation has been implemented at the federal level.

However, President Biden has made action on climate change a priority of his administration's agenda, and laws, such as the IRA 2022, advance numerous climate-related objectives.

However, President Biden has made action on climate change a priority of his administration’s agenda, and certain federal laws, such as the IRA 2022, were enacted to advance numerous climate-related objectives.

Moreover, with the U.S.

impose new standards reducing methane emissions from oil and gas operations through limitations on venting and flaring and the implementation of enhanced emission leak detection and repair requirements.

Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources, and impose new standards reducing methane emissions from oil and gas operations through limitations on venting and flaring and the implementation of enhanced emission leak detection and repair requirements.

In recent years, there has been considerable uncertainty surrounding regulation of methane emissions.

While the Trump Administration took a number of actions to revise federal regulation of methane from the oil and natural gas sector, these actions were subsequently reversed by both the Biden Administration and Congress.

In November 2021, the EPA issued a proposed rule that, if finalized, would establish the so-called Quad Ob new source and Quad Oc first-time existing source standards of performance under applicable agency regulations established at 40 C.F.R.

Part 60 for methane and volatile organic compound ("VOC") emissions for the crude oil and natural gas source category new source and existing sources, respectively.

Owners or operators of affected emission units or processes would have to comply with specific standards of performance that may include leak detecting using optical gas imaging and subsequent repair requirements, reduction of regulated emissions through capture and control systems, zero-emission requirements for certain equipment or processes, operations and maintenance requirements and requirements for "green well" completions.

The EPA published a supplemental proposal in November 2022, which, among other items, would impose expanded inspection, monitoring and emissions control requirements on oil and gas sites, as well as strengthen requirements related to emissions from equipment and routine flaring.

The proposal would also establish a "Super Emitter Response Program" that would require operator response to emissions events exceeding 200 pounds per hour, as detected by regulatory authorities or qualified third parties.

The proposal is currently subject to public comment and is expected to be finalized in 2023;

however, all of these regulatory actions will likely be subject to legal challenges.

In December 2023, the EPA published a final rule that established the so-called Quad Ob new source and Quad Oc first-time existing source standards of performance under applicable agency regulations established at 40 C.F.R.

Part 60 for methane and volatile organic compound emissions for the crude oil and natural gas source category.

Owners or operators of affected emission units or processes will have to comply with specific standards of performance that may include leak detecting using optical gas imaging and subsequent repair requirements, reduction of regulated emissions through capture and control systems, zero-emission requirements for certain equipment or processes, operations and maintenance requirements and requirements for “green well” completions.

The rules also impose expanded inspection, monitoring and emissions control requirements on oil and gas sites, as well as strengthen requirements related to emissions from equipment and routine flaring, as well as establish a “Super Emitter Response Program” that would trigger certain operator investigation and repair requirements in response to emissions events exceeding 200 pounds per hour, as detected by regulatory authorities or qualified third parties.

It is likely that the rule will be subject to legal challenges.

As a result, we cannot predict the scope of any final methane regulatory requirements, or the expected cost to comply with such requirements, but any such increase in regulatory scope and oversight may increase compliance expenditures or mitigation costs for our or our customers’ operations.

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These goals were reaffirmed at the 27 th Conference of the Parties (“COP27”) in November 2022.

While the degree and manner in which countries may implement COP26 or COP27 commitments is uncertain at this time, there is increasing political risk regarding climate change.

At the 28 th Conference of the Parties in December 2023 (“COP28”), the parties agreed to transition away from fossil fuels in energy systems and increase renewable energy capacity, though no timeline for doing so was set.

While non-binding, the agreements coming out of COP28 could result in increased

pressure among financial institutions and various stakeholders to reduce or otherwise impose more stringent limitations on funding for and increase potential opposition to the production and use of fossil fuels.

While the degree and manner in which countries may implement these voluntary international climate commitments is uncertain at this time, there is increasing political risk regarding climate change.

In the United States, President Biden has issued several executive orders calling for more expansive action to address climate change and limit new oil and gas operations on federal lands or waters.

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Business – Environmental and Occupational Health and Safety Matters – Hydraulic fracturing” for more information.

Other actions that may be pursued by the Biden Administration may include the imposition of more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquefied natural gas export facilities, as well as more restrictive GHG emissions limitations for oil and gas facilities.

Other actions that may be pursued by the Biden Administration may include the imposition of more restrictive requirements for the establishment of pipeline infrastructure or the permitting of LNG export facilities, as well as more restrictive GHG emissions limitations for oil and gas facilities.

Additionally, the IRA 2022 was signed into law in August 2022, which contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, and supporting infrastructure and carbon capture and sequestration, among other provisions.

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The IRA 2022 also imposes the first-ever federal fee on the emissions of GHGs through a methane emissions charge.

The regulations to implement such a charge were proposed in January 2024 and will be subject to public comment.

Litigation risks are also increasing, as a number of states, municipalities and other plaintiffs have sought to bring suit against oil and natural gas companies in state or federal court, alleging, among other things, that such energy companies created public nuisances by producing fuels that contributed to global warming effects or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.

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banks have made “net zero” carbon emission commitments and have announced that they will be assessing their portfolios and taking steps to quantify and reduce funding to companies with carbon emissions.

At COP26, the Glasgow Financial Alliance for Net Zero ("GFANZ") announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in

capital committed to net zero goals.

At COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals.

The various sub-alliance of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero by 2050.

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In addition, the SEC has proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks, material climate-related impacts on strategy, outlook and business model, climate risk management, Scope 1 and 2 GHG emissions and Scope 3 GHG emissions under certain circumstances, and if the registrant has set them, climate-related targets and goals.

The SEC missed its self-imposed October 2022 deadline for issuing a final rule, and the final rule is now expected in early 2023.

Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that an issuer's existing climate disclosures were misleading or deficient.

Several states have also enacted or are considering enhanced climate-related disclosure requirements.

Such enhanced disclosure could increase our operating costs and may also lead to reputational or other harm with customers, regulators or other stakeholders.

These changes could also increase our litigation risks relating to alleged climate-related damages resulting from our operations, statements alleged to have been made by us or others in our industry regarding climate-change risks, or in connection with any future disclosures we may make regarding reported emissions, particularly given the inherent uncertainties and estimation with respect to calculation and reporting GHG emissions.

The SEC has also, from time to time, focused additional scrutiny on existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that an issuer’s existing climate disclosures were misleading or deficient.

Such public and private sector efforts have made and may continue to make it more difficult for certain of our customers’ to secure financing for their projects, which in turn may reduce the demand for our products and services.

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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-K

Item 1. Business