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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-21 · 258 added, 115 removed, 290 unchanged (56% of the section changed)

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in “Part II Item 8 Financial Statements and Supplementary Data.” This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.

Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 .

This discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in “Part II Item 8 Financial Statements and Supplementary Data.” This discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations.

Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in “Part I, Item 1A.

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

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

We provide a broad range of manufactured products and services to customers in the energy, industrial and military sectors through our Offshore Manufactured Products, Completion and Production Services (previously referred to as Well Site Services) and Downhole Technologies segments.

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

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

Recent Developments

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

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

Average Price (1) for quarter ended

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2023 81.01 77.99 86.65 84.01 82.47

2022 100.87 113.84 100.71 88.77 100.99

WTI Crude (per bbl)

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2023 75.91 73.54 82.25 78.53 77.56

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

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Energy Information Administration (spot prices).

On February 9, 2024, Brent crude oil, WTI crude oil and natural gas spot prices closed at $83.58 per barrel, $77.26 per barrel and $1.74 per MMBtu, respectively.

In 2023, we began implementing initiatives, which continued throughout 2024, to reduce costs.

Management actions in 2024 included:

the consolidation, relocation and exit of certain underperforming locations;

the exit of certain service offerings;

reductions in our U.S.

work force as well as the realignment of operations discussed below.

We also incurred legal and other related costs to enforce certain patents related to our proprietary technologies.

As a result of these actions, our reported pre-tax results for 2024 included $24.6 million in non-cash goodwill, intangible asset and operating lease asset impairment charges as well as $13.7 million of facility consolidation and exit, patent defense and other charges.

Certain short-cycle, consumable product operations historically reported within the Offshore Manufactured Products segment (legacy frac plugs and elastomer products) were integrated into the Downhole Technologies segment in early 2024 to better align with the underlying activity demand drivers and current segment management structure, as well as provide for additional operational synergies.

Historical financial data, supplemental disaggregated revenue and backlog information as of and for the years ended December 31, 2023 and 2022 (presented herein) were conformed with the 2024 segment presentation.

Additionally, following the sale of its remaining U.S.

land-based drilling rigs and the exit of the flowback and well testing service offering in the third quarter of 2024, our Well Site Services segment name was changed to the Completion and Production Services segment.

On February 16, 2024, we amended the ABL Facility to extend its maturity date from February 10, 2025 to February 16, 2028.

During 2024, we sold two manufacturing and service facilities that were classified as held for sale assets, generating net proceeds of $35.1 million, we purchased $14.2 million of our common stock, and we purchased $11.5 million principal amount of our 2026 Notes for $10.8 million.

In October 2024, our Board of Directors terminated our existing common stock repurchase program and replaced it with a new $50.0 million common stock repurchase authorization, which expires in October 2026.

On February 14, 2025, Brent crude oil, WTI crude oil and natural gas spot prices closed at $75.81 per barrel, $71.05 per barrel and $4.60 per MMBtu, respectively – above the fourth quarter 2024 averages.

Additionally, the U.S.

drilling rig count reported on February 14, 2025 was 588 rigs – comparable to the fourth quarter 2024 average.

In February 2023, we repaid the $17.3 million in principal amount, plus accrued interest, outstanding under our 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 ABL Facility to extend its maturity date from February 10, 2025 to February 16, 2028.

Current and expected future pricing for WTI crude oil and natural gas and inflationary cost 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.

Crude oil prices and levels of demand for crude oil are likely to remain highly volatile due to numerous factors, including:

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

Crude oil and natural gas prices and levels of demand for crude oil and natural gas are likely to remain highly volatile due to numerous factors, including:

geopolitical conflicts in Europe and the Middle East, along with associated international tensions;

the perceived risk of a global economic recession;

domestic or international crude oil production;

the moderate perceived risk of a global economic recession;

the levels of domestic or international crude oil and natural gas production;

changes in governmental rules and regulations;

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and the potential for ongoing supply/demand imbalances.

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.

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.

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

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

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

drilling, completion and production activity and, in turn, our financial results, are sensitive to near-term fluctuations in commodity prices, particularly U.S.

crude oil and natural gas prices, given the short-term, call-out nature of our U.S.

Customer spending in the natural gas shale plays has declined in recent 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.

However, the extended outlook for natural gas in the United States is positive with increased exports of LNG, as well as increased power needs for the technology sector, namely data centers.

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

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 69% of Offshore/Manufactured Products segment sales in 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”).

Approximately 90% of Offshore Manufactured Products segment sales in 2024 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 $333 million as of December 31, 2023 from $308 million as of December 31, 2022.

Bookings totaled $472 million in 2023, yielding a book-to-bill ratio of 1.1x.

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

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

Backlog reported by our Offshore Manufactured Products segment decreased to $311 million as of December 31, 2024 from $327 million as of December 31, 2023.

Bookings totaled $392 million in 2024, yielding an annual book-to-bill ratio of 1.0x in 2024.

This compares to total bookings of $414 million in 2023 and a book-to-bill ratio of 1.1x.

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

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2022 255 232 248 300

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.

Our Completion and Production Services segment provides completion and production services in the United States (including the Gulf of America) and internationally.

Prior to the sale of its drilling rigs in August of 2024, the segment also provided land drilling services in the United States.

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

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

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

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

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

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

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

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

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

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Year Ended December 31,

2024 2023 2022

United States Rig Count:

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Offshore 16 19 21 18

588 599 686 723

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

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

The United States has imposed tariffs on a variety of imported products, including steel and aluminum.

In 2018, the United States imposed tariffs on a variety of imported products, including steel and aluminum.

In response to the U.S.

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

In addition, in response to Russia’s invasion of Ukraine,

governments in the European Union, the United States, the United Kingdom, Switzerland and other countries have enacted sanctions against Russia and Russian interests.

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

In early 2025, the Trump Administration, after taking office, proposed increases to existing U.S.

tariffs as well as the imposition of certain new tariffs.

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

If we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected.

While we cannot predict with certainty the impact of any new or increased tariffs, or the impact of any retaliatory tariffs, if we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected.

Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.

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

the general global economic environment (including disruptions in the banking sector);

the general global economic environment;

competitive pricing pressures;

public health crises;

natural disasters;

customer consolidations;

labor market constraints;

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geopolitical conflicts and tensions;

and changes in tax laws in the United States and international markets.

management’s implementation of strategic decisions;

public health crises;

natural disasters;

and changes in tax laws in the United States and in the international markets in which we operate.

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

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

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

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

In the first quarter of 2024, certain short-cycle manufacturing operations historically reported within the Offshore Manufactured Products segment (legacy frac plug and elastomer products) were integrated into the Downhole Technologies segment to better align with the underlying activity demand drivers and the current segment management structure, as well as provide for additional operational synergies.

Historical financial data, supplemental disaggregated revenue information and related discussion and analysis as of and for the years ended December 31, 2023 and 2022 (presented herein) were conformed with the 2024 segment presentation.

Additionally, following the sale of its remaining U.S.

Consolidated Results of Operations

The following summarizes our consolidated results of operations for the years ended December 31, 2024, 2023 and 2022 (in thousands, except per share amounts):

2023 2022 Variance

2024 2023 2022 2024 vs.

Products $ 402,565 $ 418,550 $ 385,564 $ (15,985) $ 32,986

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Depreciation and amortization expense 54,708 60,778 67,334 (6,070) (6,556)

Other operating expense (income), net (2)

Impairment of goodwill

10,000 — — 10,000 —

Impairments of intangible assets

10,787 — — 10,787 —

Operating income 23,164 2,905 20,259

Impairments of operating lease assets

3,767 — — 3,767 —

Other operating income, net (1)

(16,195) (2,732) (7,127) (13,463) 4,395

694,277 759,119 734,801 (64,842) 24,318

Operating (loss) income (1,689) 23,164 2,905 (24,853) 20,259

Interest expense, net (7,731) (8,189) (10,280) 458 2,091

Other income, net

Income (loss) before income taxes 15,824 (4,060) 19,884

1,568 849 3,315 719 (2,466)

(Loss) income before income taxes (7,852) 15,824 (4,060) (23,676) 19,884

Income tax provision (3,406) (2,933) (5,480) (473) 2,547

Net income (loss) $ 12,891 $ (9,540) $ 22,431

Net income (loss) per share:

Net (loss) income $ (11,258) $ 12,891 $ (9,540) $ (24,149) $ 22,431

Net (loss) income per share:

$ (0.18) $ 0.20 $ (0.15)

(0.18) 0.20 (0.15)

Weighted average number of common shares outstanding:

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(1) During 2023, we recognized $0.6 million, associated with the defense of certain Well Site Services segment patents related to proprietary technologies.

(2) During 2023, we recognized facility consolidation charges of $2.5 million associated with the Offshore/Manufactured Products segment’s ongoing consolidation and relocation of certain manufacturing and service locations.

During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation against certain service providers.

(1) During 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility.

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

Segment Results of Operations

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

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

Offshore Manufactured Products, Completion and Production Services and Downhole Technologies.

Supplemental financial information by operating segment for the years ended December 31, 2024, 2023 and 2022 is summarized below (in thousands):

2023 2022 Variance

2024 2023 2022 2024 vs.

Offshore Manufactured Products

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Military and other products 41,127 33,889 33,560 7,238 329

Short-cycle products 106,186 92,152 14,034

397,900 381,711 322,370 16,189 59,341

Well Site Services 242,633 231,189 11,444

Completion and Production Services

163,902 242,633 231,189 (78,731) 11,444

Downhole Technologies 130,786 157,939 184,147 (27,153) (26,208)

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$ 65,279 $ 56,289 $ 35,697 $ 8,990 $ 20,592

Well Site Services (2)

Completion and Production Services (2)

(23,225) 13,881 4,865 (37,106) 9,016

Downhole Technologies (3)

(20,904) (5,874) 2,902 (15,030) (8,776)

Corporate (4)

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$ (1,689) $ 23,164 $ 2,905 $ (24,853) $ 20,259

(1) During 2023, we recognized facility consolidation charges of $2.5 million associated with the Offshore/Manufactured Products segment’s ongoing consolidation and relocation of certain manufacturing and service locations.

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(1) During 2024 and 2023 , we recognized facility consolidation and other charges of $3.4 million and $2.5 million, respectively, within the Offshore Manufactured Products segment, associated primarily with the segment’s consolidation and relocation of certain manufacturing and service locations.

During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation against certain service providers.

(2) In 2023, we recognized $0.6 million in costs associated with the defense of certain Well Site Services segment patents related to proprietary technologies.

(2) During 2024, we recognized charges of $24.3 million within the Completion and Production Services segment, associated primarily with the exit of its flowback and well testing service offering, the consolidation and exit of certain underperforming service locations, and the defense of certain patents.

In 2023, we recognized $0.6 million in costs associated with the defense of certain of the segment’s patents.

(3) During 2024, we recognized a $10.0 million non-cash impairment charge within the Downhole Technologies segment related to goodwill reassigned to the business in connection with the segment realignment discussed above.

(4) During 2024, we recognized a net gain of $15.3 million within Corporate associated with the sale of a previously idled facility.

For further discussion of charges and credits recognized during the years ended December 31, 2024, 2023 and 2022, see Note 4, “Asset Impairments and Other Charges and Credits,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

We reported a net loss for the year ended December 31, 2024 of $11.3 million, or $0.18 per share.

The reported 2024 net loss included net charges and credits of $22.4 million ($22.0 million after tax, or $0.35 per share) associated with the restructuring of certain of our U.S.

land-based operations, facility consolidations and closures, patent defense, personnel reductions and debt extinguishment, partially offset by a gain recognized on the sale of a previously idled facility.

These results compare to net income for the year ended December 31, 2023 of $12.9 million, or $0.20 per share, which included facility consolidation charges of $2.5 million ($2.0 million after-tax, or $0.03 per share) and patent defense costs of $0.6 million ($0.5 million after-tax, or $0.01 per share).

Results of operations for 2024 reflect the impact of operators’ continued investment in offshore and international projects and associated backlog conversion, partially offset by a decline in land-based investments by our U.S.

customers, competitive market conditions and management’s decision to exit certain underperforming locations and service offerings in the United States.

Consolidated total revenues in 2024 decreased $89.7 million, or 11%, from 2023.

Of this decrease, $74.4 million, or 83%, was concentrated in service offerings and locations exited by our Completion and Production Services segment over the past 15 months.

Consolidated product revenues in 2024 decreased $16.0 million, or 4%, from 2023, with the impact of a decline in U.S.

customer demand for completion and perforating products partially offset by higher customer demand for military products.

Consolidated service revenues in 2024 decreased $73.7 million, or 20%, from 2023.

This decrease was concentrated in the United States – driven by lower land-based customer investments (particularly in natural gas basins), competitive market conditions and our exit of certain underperforming service offerings and locations during 2024, partially offset by higher offshore and international service activity.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the year ended December 31, 2024 and 2023 (in thousands):

Offshore Manufactured Products

Completion and Production Services

Downhole Technologies Total

Year Ended December 31 2024 2023 2024 2023 2024 2023 2024 2023

Project-driven:

Products $ 232,867 $ 235,080 $ — $ — $ — $ — $ 232,867 $ 235,080

Services 123,906 112,742 — — — — 123,906 112,742

Total project-driven 356,773 347,822 — — — — 356,773 347,822

Military and other products 41,127 33,889 — — — — 41,127 33,889

Products — — — — 128,571 149,581 128,571 149,581

Services — — 163,902 242,633 2,215 8,358 166,117 250,991

Total short-cycle

— — 163,902 242,633 130,786 157,939 294,688 400,572

$ 397,900 $ 381,711 $ 163,902 $ 242,633 $ 130,786 $ 157,939 $ 692,588 $ 782,283

By destination:

Offshore and international $ 369,535 $ 346,657 $ 46,150 $ 48,509 $ 35,163 $ 30,948 $ 450,848 $ 426,114

land 28,365 35,054 117,752 194,124 95,623 126,991 241,740 356,169

$ 397,900 $ 381,711 $ 163,902 $ 242,633 $ 130,786 $ 157,939 $ 692,588 $ 782,283

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

Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $70.7 million, or 12%, in 2024 compared to 2023.

Consolidated product costs in 2024 decreased $14.2 million, or 4%, compared to 2023 due primarily to the reported decrease in product revenue.

Consolidated service costs in 2024 decreased $56.5 million, or 20%, compared to 2023, with the impact of lower U.S.

activity levels and implemented cost control measures partially offset by facility consolidation and exit costs, and severance expenses incurred in 2024.

Selling, General and Administrative Expense.

Selling, general and administrative expense totaled $95.0 million in 2024, which included $2.8 million of costs associated with enforcing certain of our patents.

Excluding these patent defense costs, selling, general and administrative costs decreased $1.4 million, or 1%, from the level reported in 2023, with the impact of

lower short- and long-term incentive compensation expenses and cost reduction measures partially offset by an increase in the provision for bad debt.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $6.1 million, or 10%, in 2024 compared to the prior-year period.

Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K presents depreciation and amortization expense by segment.

Impairment of Goodwill.

In the first quarter of 2024, our Downhole Technologies operations recognized a non-cash impairment charge of $10.0 million related to goodwill transferred to the business in connection with the segment realignment discussed above.

See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Impairments of Intangible Assets.

In 2024, as a result of our decision to exit an underperforming service offering, our Completion and Production Services business recognized non-cash impairment charges of $10.8 million to reduce the carrying amount of its long-lived intangible assets to estimated fair value.

See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Impairments of Operating Lease Assets.

In 2024, management made strategic decisions to exit seven leased service locations within our Completion and Production Services segment and one within our Downhole Technologies segment.

As a result of these decisions, our Completion and Production Services and Downhole Technologies segments recognized non-cash impairment charges totaling $3.8 million to reduce the carrying amount of the related operating lease assets.

See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Other Operating Income, Net.

In 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility.

Other operating income, net for 2023 included gains on disposals of assets totaling $4.1 million, partially offset by charges of $2.5 million recognized in connection with our ongoing consolidation of certain manufacturing and service locations within our Offshore Manufactured Products segment.

Operating Income (Loss).

Our consolidated operating loss was $1.7 million in 2024, which included non-cash charges of $24.6 million for goodwill, intangible asset and operating lease asset impairments, other charges totaling $13.7 million associated with facility consolidations and exits, patent defense and other management actions, and a net gain of $15.3 million on the sale of an idled facility.

This compares to consolidated operating income of $23.2 million in 2023, which included facility consolidation and other charges of $3.1 million.

Excluding these charges, operating results declined $5.0 million year-over-year, driven by the substantial decline in activity levels in the United States during 2024.

Interest Expense, Net.

Net interest expense totaled $7.7 million in 2024, which compares to $8.2 million in 2023.

Interest expense as a percentage of total debt outstanding was approximately 7% in 2024 and 2023.

For 2024, our income tax provision was $3.4 million, which included the impact of a goodwill impairment charge, other non-deductible expenses and an increase in valuation allowances recorded against deferred tax assets, on a pre-tax loss of $7.9 million.

This compares to an income tax provision of $2.9 million, which included the impact of certain non-deductible expenses, discrete tax items and a reduction in valuation allowances recorded against deferred tax assets, on pre-tax income of $15.8 million for 2023.

Other Comprehensive Income (Loss).

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

Other comprehensive loss was $9.5 million in 2024 compared to comprehensive income of $9.0 million in 2023 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 2024 and 2023, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During 2024, the exchange rates for both the British pound and the Brazilian real weakened compared to the U.S.

This compares to 2023, when the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S.

Segment Operating Results

Offshore Manufactured Products

Our Offshore Manufactured Products segment revenues increased $16.2 million, or 4%, in 2024 compared to 2023 due primarily to increased demand for international and offshore-project driven services and military products.

Operating Income.

Our Offshore Manufactured Products segment reported operating income of $65.3 million in 2024, which included $3.4 million in facility consolidation and other charges.

This compares to operating income of $56.3 million in 2023, which included $2.5 million in facility consolidation and other charges.

Excluding these charges, the Offshore Manufactured Products segment’s operating income increased $9.9 million year-over-year due to the reported revenue growth in 2024 and a favorable shift in revenue mix.

Backlog in our Offshore Manufactured Products segment totaled $311 million as of December 31, 2024 compared to $327 million as of December 31, 2023.

Bookings during 2024 were $392 million, yielding a book-to-bill ratio of 1.0x.

Completion and Production Services

Our Completion and Production Services segment revenues decreased $78.7 million, or 32%, in 2024 compared to 2023, driven primarily by lower U.S.

customer activity levels (particularly in natural gas basins), competitive market conditions and the exit of two underperforming service offerings and four additional underperforming service facilities during 2024.

Operating Income (Loss).

Our Completion and Production Services segment reported an operating loss of $23.2 million in 2024, which included charges totaling $24.3 million associated with the exit of certain service offerings, facility consolidations and exits, the defense of patents and other management actions.

This compares to operating income of $13.9 million in 2023, which included patent defense costs of $0.6 million.

Excluding these charges, the Completion and Production Services segment’s operating results declined $13.4 million from the prior-year period, with the impact of a decrease in U.S.

land-based revenues partially offset by implemented cost control measures.

The segment’s U.S.

land-based service offerings and facilities exited during 2024 collectively generated revenues of $40.6 million and operating losses of $19.6 million in 2024, which included intangible and operating lease asset impairment, facility closure and other charges totaling $21.1 million as well as depreciation and amortization expense of $7.9 million.

Downhole Technologies

Our Downhole Technologies segment revenues decreased $27.2 million, or 17%, in 2024 from 2023 due to lower U.S.

customer demand for completion and perforating products during 2024.

Operating Loss.

Our Downhole Technologies segment reported an operating loss of $20.9 million in 2024, which included the $10.0 million non-cash goodwill impairment charge related to the segment realignment in the first quarter of 2024 and $1.2 million in charges related to the exit of a facility, personnel reductions and a customer bankruptcy.

This compares to an operating loss of $5.9 million reported in 2023.

Excluding the 2024 charges discussed above, the Downhole Technologies segment’s operating loss increased $3.9 million from the prior-year period, due primarily to the reported decrease in revenue and lower manufacturing volumes.

Operating Loss.

Corporate expenses in 2024 decreased $18.3 million, or 44%, from 2023, due primarily to the recognition in 2024 of a net gain of $15.3 million associated with the sale of a previously idled facility and lower short- and long-term incentive compensation expense.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

We reported net income for the year ended December 31, 2023 of $12.9 million, or $0.20 per share, which included facility consolidation charges of $2.5 million ($2.0 million after-tax, or $0.03 per share) and patent defense costs of $0.6 million ($0.5 million after-tax, or $0.01 per share).

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

Offshore/ Manufactured Products Well Site Services Downhole Technologies Total

Offshore Manufactured Products

Completion and Production Services

Downhole Technologies Total

Year Ended December 31

2023 2022 2023 2022 2023 2022 2023 2022

Project-driven:

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$ 381,711 $ 322,370 $ 242,633 $ 231,189 $ 157,939 $ 184,147 $ 782,283 $ 737,706

Percentage of total revenue by type -

Products 74 % 74 % — % — % 92 % 82 % 54 % 52 %

Services 26 % 26 % 100 % 100 % 8 % 18 % 46 % 48 %

By destination:

Offshore and international $ 346,657 $ 297,472 $ 48,509 $ 46,977 $ 30,948 $ 31,277 $ 426,114 $ 375,726

land 35,054 24,898 194,124 184,212 126,991 152,870 356,169 361,980

$ 381,711 $ 322,370 $ 242,633 $ 231,189 $ 157,939 $ 184,147 $ 782,283 $ 737,706

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

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Selling, general and administrative expense was $94.2 million in 2023, which included $0.6 million of legal and other costs associated with enforcing certain of our patents.

Excluding these patent defense costs, selling, general and administrative costs decreased $2.4 million, or 3%, from 2022, due primarily to reductions in short-term incentive and bad debt expenses.

Excluding these patent defense costs, selling, general and administrative costs decreased $2.4 million, or 3%, from 2022, due primarily to reductions in short-term incentive compensation and bad debt expenses.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $6.6 million, or 10%, in 2023 compared to the prior-year period, due to certain intangible assets reaching the end of their economic life coupled with reduced capital investments made in our Well Site Services segment in recent years.

Note 14, “Segments and Related Information,” to our Consolidated Financial Statements presents depreciation and amortization expense by segment.

Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K presents depreciation and amortization expense by segment.

Other Operating Income, Net.

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

For 2023, our income tax provision was $2.9 million on pre-tax income of $15.8 million, which included certain non-deductible expenses, discrete tax items and reductions in valuation allowances recorded against deferred tax assets.

This compares to an income tax provision of $5.5 million on a pre-tax loss of $4.1 million for 2022, which included certain non-deductible expenses and discrete tax items.

For 2023, our income tax provision was $2.9 million, which included the impact of certain non-deductible expenses, discrete tax items and reductions in valuation allowances recorded against deferred tax assets, on pre-tax income of $15.8 million.

This compares to an income tax provision of $5.5 million, which included the impact of certain non-deductible expenses and discrete tax items, on a pre-tax loss of $4.1 million for 2022.

Other Comprehensive Income (Loss).

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Operating Income.

Our Offshore/Manufactured Products segment reported operating income of $65.3 million in 2023, which included the $2.5 million in facility consolidation charges.

Our Offshore Manufactured Products segment reported operating income of $56.3 million in 2023, which included the $2.5 million in facility consolidation charges discussed above.

This compares to operating income of $35.7 million in 2022, which included a $6.1 million gain recognized in connection with the settlement of outstanding litigation.

Excluding the facility consolidation charges and prior-year litigation gain, operating income increased $28.6 million year-over-year due primarily to the Offshore/Manufactured Products segment’s reported revenue growth and lower bad debt expense, partially offset by the impact of higher material, transportation, labor and other costs.

Excluding the facility consolidation charges and 2022 litigation gain, operating income increased $29.2 million year-over-year due primarily to the Offshore Manufactured Products segment’s reported revenue growth and lower bad debt expense, partially offset by the impact of higher material, transportation, labor and other costs.

Backlog in our Offshore Manufactured Products segment totaled $327 million as of December 31, 2023 compared to $300 million as of December 31, 2022.

Bookings during 2023 totaled $414 million, yielding a year-to-date book-to-bill ratio of 1.1x.

Well Site Services

Our Well Site Services segment revenues increased $11.4 million, or 5%, in 2023 compared to 2022, driven primarily by higher U.S.

Completion and Production Services

Our Completion and Production Services segment revenues increased $11.4 million, or 5%, in 2023 compared to 2022, driven primarily by higher U.S.

customer activity levels during the first half of 2023.

Operating Income.

Our Well Site Services segment reported operating income of $13.9 million in 2023, compared to operating income of $4.9 million in 2022.

Excluding the 2023 patent defense costs, the Well Site Services segment’s operating results improved $9.6 million from the prior-year period, due to the reported revenue growth and a $3.2 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Our Completion and Production Services segment reported operating income of $13.9 million in 2023, compared to operating income of $4.9 million in 2022.

Excluding the 2023 patent defense costs, the Completion and Production Services segment’s operating results improved $9.6 million from the prior-year period, due to the reported revenue growth and a $3.2 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

Downhole Technologies

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Operating Loss.

Our Downhole Technologies segment reported an operating loss of $14.9 million in 2023, compared to an operating loss of $6.7 million reported in 2022.

This year-over-year increase in operating loss is due primarily to the reported decrease in the Downhole Technologies segment’s revenue, $1.1 million in incremental non-cash provisions for excess and obsolete inventory as well as higher labor, material and other costs.

Our Downhole Technologies segment reported an operating loss of $5.9 million in 2023, compared to operating income of $2.9 million reported in 2022.

This year-over-year decrease in operating results is due primarily to the reported decrease in the Downhole Technologies segment’s revenue, $1.1 million in incremental non-cash provisions for excess and obsolete inventory as well as higher labor, material and other costs.

Operating Loss.

Corporate expenses in 2023 increased $0.6 million, or 1%, from 2022, with the impact of higher personnel and marketing costs partially offset by lower short-term incentive and professional service expenses.

Corporate expenses in 2023 increased $0.6 million, or 1%, from 2022, with the impact of higher personnel and marketing costs partially offset by lower short-term incentive compensation and professional service expenses.

Liquidity, Capital Resources and Other Matters

Our primary liquidity needs are to fund operating and capital expenditures, new product development and general working capital needs.

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

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

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

Our primary sources of funds are cash flow from operations, asset sales and proceeds from borrowings under our ABL Facility and, less frequently, capital markets transactions.

Operating Activities

Cash flows from operations totaled $56.6 million during 2023, compared to $32.9 million provided by operations during 2022.

Cash flows from operations totaled $45.9 million during 2024, compared to $56.6 million generated by operations during 2023.

During 2024, $10.7 million was used to fund net working capital increases, primarily due to a decrease in accounts payable and accrued short- and long-term cash incentive compensation as well as an activity-driven increase in inventories, partially offset by the favorable impact of an increase in deferred revenue and a decrease in accounts receivable.

During 2023, $21.0 million was used to fund net working capital increases, primarily due to increases in inventories as well as decreases in accounts payable, accrued liabilities and deferred revenue, partially offset by a decrease in accounts receivable.

During 2022, $34.7 million was used to fund net working capital increases, primarily due to increases in accounts receivable and inventories.

Investing Activities

Net cash used in investing activities during 2023 totaled $25.6 million, compared to $22.7 million used in investing activities during 2022.

Within our Offshore Manufactured Products segment, we completed the consolidation of certain facilities in Houston, Texas during 2023 and strategically relocated our Asian manufacturing and service operations from Singapore to Batam, Indonesia.

With these consolidations, facilities classified as held for sale within prepaid expenses and other current assets as of December 31, 2023 were sold during 2024 for net proceeds of $35.1 million.

Given these and other sales proceeds, net cash of $2.7 million was provided by investing activities during 2024, compared to $25.6 million used in investing activities during 2023.

Capital expenditures totaled $37.5 million and $30.7 million during 2024 and 2023, respectively.

These investments were partially offset by proceeds from the sale of property and equipment of $5.3 million and $5.9 million during 2023 and 2022, respectively.

In 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.

Within our Offshore/Manufactured Products segment, we completed the consolidation of certain facilities in Houston, Texas during 2023 and are in the process of strategically relocating our Asian manufacturing and service operations from Singapore to Batam, Indonesia.

With these consolidations, two facilities are classified as held-for-sale assets within prepaid expenses and other current assets as of December 31, 2023.

Including the planned construction of a new facility in Batam, we expect to invest approximately $40 million in capital expenditures during 2024.

In 2024, we also expect to sell the two held-for-sale facilities (in Singapore and Houston), with expected proceeds ranging between $35 million and $40 million.

These investments were offset by proceeds from the sale of property, equipment and asset held for sale of $40.7 million and $5.3 million during 2024 and 2023, respectively.

Including investments associated with the continuing construction of a new facility in Batam, we expect to invest approximately $25 million in capital expenditures during 2025.

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

Financing Activities

During 2023, net cash of $26.7 million was used in financing activities, which included the repayment of the $17.3 million in principal amount of our outstanding 2023 Notes and the repurchases of $6.9 million of our common stock.

This compares to $20.3 million of cash used in financing activities during 2022, which included a cash payment of $10.0 million related to the settlement of a promissory note to the seller of GEODynamics, Inc.

(discussed below) and the purchase of $8.7 million principal amount of our outstanding 2023 Notes.

On June 28, 2022, we entered into a settlement agreement with the seller of GEODynamics, Inc.

(acquired in 2018), which provided for the full and final settlement of all amounts due under a promissory note to the seller of GEODynamics, Inc.

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

During 2024, net cash of $29.5 million was used in financing activities, which included the repurchase of $14.2 million of our common stock and the purchase of $11.5 million principal amount of our outstanding 2026 Notes for $10.8 million in cash.

This compares to $26.7 million of cash used in financing activities during 2023, which included the repayment of the $17.3 million principal amount outstanding under our 2023 Notes and the repurchase of $6.9 million of our common stock.

As of December 31, 2024, we had cash and cash equivalents totaling $65.4 million, which compared to $47.1 million as of December 31, 2023.

As of December 31, 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 $3.1 million.

As of December 31, 2024, we had no borrowings outstanding under our ABL Facility, $123.5 million principal amount of our 2026 Notes outstanding and other debt of $2.8 million.

Our reported interest expense included amortization of deferred financing costs of $1.5 million during 2024.

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

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

bank failures in 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 first half of 2024, 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 but, 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.

For companies like ours that support the energy industry, disruptions affecting the availability of capital have in the past and may in the future negatively impact 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 negatively affect our liquidity.

On March 6, 2024, the SEC finalized rules relating to the disclosure of a range of climate-related information (the “Rules”).

The Rules were temporarily stayed by the SEC on April 4, 2024 pending judicial review.

While subject to ongoing litigation, these new disclosure requirements are currently effective for us beginning with the year ending December 31, 2026, phased in over a five-year period.

The ultimate impact on our business is uncertain but 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 Rules 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.

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Stock Repurchase Program.

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

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

On October 24, 2024, our Board of Directors terminated our existing common stock repurchase program and replaced it with a new $50.0 million common stock repurchase authorization, which expires in October 2026.

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

As of December 31, 2023, $6.9 million of share repurchases have been made under this authorization.

During the year ended December 31, 2024, $14.2 million in repurchases of common stock were made under these programs.

The amount remaining under our new share repurchase authorization as of December 31, 2024 was $41.3 million.

Revolving Credit Facility.

On February 10, 2021, we entered into a senior secured credit facility, which provides for a $125.0 million asset-based revolving credit facility (as amended, the “ABL Facility”) under which credit availability is subject to a borrowing base calculation.

Our senior secured credit facility provides for a $125.0 million asset-based revolving credit facility (as amended, the “ABL Facility”) under which credit availability is subject to a borrowing base calculation.

On February 16, 2024, we amended the ABL Facility to extend the maturity date to February 16, 2028.

The ABL Facility is governed by a credit agreement, as amended, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (as amended, the “ABL Agreement”).

The ABL Agreement, as amended, matures on February 16, 2028 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million.

The ABL Agreement matures on February 16, 2028 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million.

See Note 7, “Long-term Debt,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the ABL Agreement.

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The total amount available to be drawn as of December 31, 2024 was $57.2 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.

The 2026 Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

We issued $135.0 million aggregate principal amount of 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.

As of December 31, 2024, we have purchased a cumulative $11.5 million principal amount of the 2026 Notes for $10.8 million in cash, with $123.5 million principal amount outstanding.

The outstanding 2026 Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

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

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On February 15, 2023, our 2023 Notes matured and the outstanding $17.3 million in principal amount was repaid in full.

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

Our total debt represented 16% of our combined total debt and stockholders’ equity as of December 31, 2024 and December 31, 2023.

Contractual Obligations.

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

The United States has imposed tariffs on a variety of imported products, including steel and aluminum.

In 2018, the United States imposed tariffs on a variety of imported products, including steel and aluminum.

In response to the U.S.

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

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

If we encounter difficulty in procuring these raw materials and component products as a result of tariffs, supply chain disruptions or other events, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected.

In early 2025, the Trump Administration, after taking office, proposed increases to existing U.S.

tariffs as well as the imposition of certain new tariffs.

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Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position.

The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain.

The critical accounting policies and estimates described in this section are those that are most

important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain.

We describe our significant accounting policies more fully in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in this Annual Report on Form 10‑K.

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

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

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

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

With the decline in operating results reported by the Downhole Technologies segment in 2023, we assessed the carrying value of the segment’s long-lived tangible and intangible assets by comparing management’s estimates of undiscounted future cash flows to the carrying value of the assets.

This assessment indicated that the segment’s long-lived assets were recoverable.

No other indicators of impairment were identified in 2023 that would indicate that the carrying values of our other long-lived tangible and intangible assets were not recoverable.

Accordingly, no impairment losses were recorded.

During 2024, in response to further reductions in customer activity in the United States, we made strategic decisions to exit our underperforming flowback and well testing service offering and sell the related equipment and inventory.

We also decided to exit eight leased facilities.

As a result of these events and actions, we recorded non-cash intangible asset (customer relationships and tradenames) impairment charges of $10.8 million associated with the exit of this service offering and operating lease impairments of $3.8 million related to facility closures.

Events and circumstances in 2024 also indicated that the long-lived tangible and intangible assets of an asset group within our Downhole Technologies segment (totaling $146.7 million as of December 31, 2024) may not be recoverable.

We assessed the carrying value of the long-lived assets of this group by comparing our estimates of undiscounted future cash flows to the carrying value of the assets.

This assessment indicated that the asset group’s long-lived assets were recoverable.

Accordingly, no additional long-lived asset impairment losses were recorded in 2024.

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

Recent Accounting Pronouncements

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

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

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

In 2024, we retrospectively expanded our reportable segment disclosures provided in Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report in accordance with the FASB guidance (“Accounting Standards Update 2023-07”) issued in November 2023.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis