OIL STATES INTERNATIONAL, INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read together with our condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and notes to those statements included in our 2024 Annual Report on Form 10-K in order to understand factors, such as charges and credits, financing transactions and changes in tax regulations, which may impact 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, Completion and Production 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. 18 Table of Contents Recent Developments Brent and West Texas Intermediate (“WTI”) crude oil and natural gas pricing trends were as follows: Average Price (1) for quarter ended Average Price (1) for year ended December 31 Year March 31 June 30 September 30 December 31 Brent Crude (per bbl) 2025 $ 75.87 2024 82.92 $ 84.68 $ 80.01 $ 74.66 $ 80.52 WTI Crude (per bbl) 2025 $ 71.78 2024 77.50 $ 81.81 $ 76.43 $ 70.73 $ 76.61 Henry Hub Natural Gas (per MMBtu) 2025 $ 4.14 2024 2.15 $ 2.07 $ 2.11 $ 2.44 $ 2.19 ________________ (1) Source: U.S. Energy Information Administration (spot prices). The spot price of WTI crude oil declined approximately 20% in April 2025 in response to the imposition of broad-based trade tariffs by the United States on imported goods and the announcement by OPEC+ of plans to increase crude oil production. These actions have raised uncertainties regarding the broad future effect of reciprocal trade tariff increases on the global economy as well as the future demand for and supply of crude oil. The ultimate magnitude and duration of the trade conflict and increased crude oil production by OPEC+, and the related impacts on crude oil prices and the global economy, remain uncertain. While it is difficult for management to assess or predict with precision the broad future effect of these events on the global economy, the energy industry or the Company, management expects that it could adversely affect demand for our products and services, particularly in the United States, over the balance of 2025 and possibly beyond. In 2024, we implemented initiatives to reduce future costs, which are continuing into 2025. 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 within two of our reportable segments. 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 the three months ended March 31, 2024 included $10.0 million in non-cash goodwill impairment charges as well as $2.5 million of facility consolidation and exit, patent defense and other charges. During the first quarter of 2025, we continued the exit of facilities closed in 2024 and further reduced headcount, incurring $0.9 million of associated pre-tax charges. During the first three months of 2025, we sold equipment and inventory (related to a service offering exited in 2024) that was classified as held for sale assets, generating net proceeds of $7.5 million and we purchased $5.3 million of our common stock. Overview 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 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 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; sanctions; tariffs; the willingness of operators to invest capital in the exploration for and development of resources; use of alternative fuels; improved vehicle fuel efficiency; timing of capital investments in alternative energy sources; a more sustained movement to electric vehicles; and the potential for ongoing supply/demand imbalances. U.S. 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. operations. 19 Table of Contents Customer spending in the natural gas shale plays has declined in recent years due to technological advancements and consolidation of oil and gas producers 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 90% of Offshore Manufactured Products segment sales in the first three months of 2025 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. Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies and state-run national oil companies) using relatively conservative crude oil and natural gas pricing assumptions. Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to change based on short-term fluctuations in the price of crude oil and natural gas. 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 increased to $357 million as of March 31, 2025 from $311 million as of December 31, 2024. Bookings totaled $136 million in the first quarter of 2025, yielding a book-to-bill ratio of 1.5x in the first quarter of 2025. This compares to total bookings of $66 million and a book-to-bill ratio of 0.8x in the first quarter of 2024. The following table sets forth backlog as of the dates indicated (in millions). Backlog as of Year March 31 June 30 September 30 December 31 2025 $ 357 2024 305 $ 300 $ 313 $ 311 2023 316 328 341 327 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. U.S. 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. operations, which are dependent primarily upon the level and complexity of drilling, completion and workover activity in our areas of operations. Well intensity and complexity have increased with the continuing transition to multi-well pads, the drilling of longer lateral wells and increased downhole pressures, along with the increased number of frac stages completed in horizontal wells. Our Downhole Technologies segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations. This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies. Product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools. 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 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. 20 Table of Contents 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. drilling rig count, as measured by Baker Hughes Company, as of and for the periods indicated. As of April 25, 2025 Average for the Three Months Ended March 31, 2025 2024 United States Rig Count: Land – Oil 469 468 483 Land – Natural gas and other 102 103 119 Offshore 16 17 21 587 588 623 The U.S. energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S. shale plays utilizing horizontal drilling and completion techniques. As of March 31, 2025, oil-directed drilling accounted for 82% of the total U.S. rig count – with the balance largely natural gas related. We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. In the first quarter of 2025, the United States imposed new or additional tariffs on a variety of imported raw materials and 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. On April 2, 2025, the U.S. government announced additional tariffs on goods imported into the United States, including steel and other metal products. 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. 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; competitive pricing pressures; customer consolidations; labor market constraints; supply chain disruptions; inflation in wages, materials, parts, equipment and other costs; climate-related and other regulatory changes; geopolitical conflicts and tensions; 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. Human Capital For more information on our health and safety policy and other workforce policies, please see “Part I, Item 1. Business – Human Capital” in our Annual Report on Form 10-K for the year ended December 31, 2024. 21 Table of Contents Selected Financial Data This selected financial data should be read in conjunction with our Consolidated Financial Statements and related notes included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in order to understand factors, such as charges, credits and financing transactions, which may impact comparability of the selected financial data. Unaudited Consolidated Results of Operations The following summarizes our consolidated results of operations for the three months ended March 31, 2025 and 2024 (in thousands, except per share amounts): Three Months Ended March 31, 2025 2024 Variance Revenues: Products $ 100,551 $ 94,329 $ 6,222 Services 59,387 72,933 (13,546) 159,938 167,262 (7,324) Costs and expenses: Product costs 80,329 75,137 5,192 Service costs 42,348 56,814 (14,466) Cost of revenues (exclusive of depreciation and amortization expense presented below) 122,677 131,951 (9,274) Selling, general and administrative expenses 22,530 22,496 34 Depreciation and amortization expense 12,025 14,195 (2,170) Impairment of goodwill — 10,000 (10,000) Other operating income, net (2,933) (203) (2,730) 154,299 178,439 (24,140) Operating income (loss) 5,639 (11,177) 16,816 Interest expense, net (1,578) (2,101) 523 Other income (expense), net 138 (72) 210 Income (loss) before income taxes 4,199 (13,350) 17,549 Income tax provision (1,041) (24) (1,017) Net income (loss) $ 3,158 $ (13,374) $ 16,532 Net income (loss) per share: Basic $ 0.05 $ (0.21) Diluted 0.05 (0.21) Weighted average number of common shares outstanding: Basic 60,167 62,503 Diluted 60,167 62,503 22 Table of Contents Unaudited Segment Results of Operations We manage and measure our business performance in three distinct operating segments: Offshore Manufactured Products, Completion and Production Services and Downhole Technologies. Supplemental financial information by operating segment for the three months ended March 31, 2025 and 2024 is summarized below (in thousands): Three Months Ended March 31, 2025 2024 Variance Revenues: Offshore Manufactured Products Project-driven: Products $ 59,124 $ 53,137 $ 5,987 Services 24,424 25,233 (809) 83,548 78,370 5,178 Military and other products 9,048 8,487 561 92,596 86,857 5,739 Completion and Production Services 34,519 47,292 (12,773) Downhole Technologies 32,823 33,113 (290) $ 159,938 $ 167,262 $ (7,324) Operating income (loss): Offshore Manufactured Products (1) $ 14,276 $ 10,603 $ 3,673 Completion and Production Services (2) 3,503 (419) 3,922 Downhole Technologies (3) (2,124) (12,079) 9,955 Corporate (10,016) (9,282) (734) $ 5,639 $ (11,177) $ 16,816 _______________ (1) During the three months ended March 31, 2024, we recognized facility consolidation charges of $1.5 million within the Offshore Manufactured Products segment, associated primarily with the segment’s consolidation and relocation of certain manufacturing and service locations. (2) During the three months ended March 31, 2024, we recognized charges of $1.0 million within the Completion and Production Services segment, associated primarily with the consolidation and exit of certain underperforming service locations. During the first quarter of 2025, the segment incurred charges of $0.9 million associated with the exit of facilities closed in 2024 and, to a lesser extent, additional headcount reductions. (3) During the three months ended March 31, 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 realignment of operations between segments. For further discussion of charges recognized during the three months ended March 31, 2025 and 2024, including the realignment of operations between segments during the first quarter of 2024, see Note 2, “Asset Impairments and Other Charges,” to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion. 23 Table of Contents Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024 We reported net income for the three months ended March 31, 2025 of $3.2 million, or $0.05 per share. These results compare to a net loss for the three months ended March 31, 2024 of $13.4 million, or $0.21 per share, which included a non-cash goodwill impairment charge of $10.0 million ($9.5 million after-tax, or $0.15 per share) and facility consolidation and other charges of $2.5 million ($2.0 million after-tax, or $0.03 per share). Our results of operations for the first three months of 2025 reflect the impact of management’s decision to exit certain underperforming locations and service offerings in the United States in 2024. The impact was partially offset by growth in offshore and international projects and associated backlog conversion. Revenues. Consolidated total revenues in the first three months of 2025 decreased $7.3 million, or 4%, from the first three months of 2024 due primarily to our Completion and Production Services segment’s exit of underperforming service offerings and locations during 2024. These exited operations generated $16.8 million of revenues in the first three months of 2024. Excluding the impact of operations exited during 2024, consolidated revenues increased $9.5 million, or 6%, year-over-year. Consolidated product revenues in the first three months of 2025 increased $6.2 million, or 7%, from the first three months of 2024, with the impact of higher customer demand for connector and military products, partially offset by a reduced U.S. customer demand for completion and perforating products. Consolidated service revenues in the first three months of 2025 decreased $13.5 million, or 19%, from the first three months of 2024. This decrease was concentrated in the United States – driven by our exit of certain underperforming service offerings in 2024 (which generated $16.8 million of revenues in the first three months of 2024). The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended March 31, 2025 and 2024 (in thousands): Offshore Manufactured Products Completion and Production Services Downhole Technologies Total Three Months Ended March 31 2025 2024 2025 2024 2025 2024 2025 2024 Project-driven: Products $ 59,124 $ 53,137 $ — $ — $ — $ — $ 59,124 $ 53,137 Services 24,424 25,233 — — — — 24,424 25,233 Total project-driven 83,548 78,370 — — — — 83,548 78,370 Military and other products 9,048 8,487 — — — — 9,048 8,487 Short-cycle: Products — — — — 32,379 32,705 32,379 32,705 Services — — 34,519 47,292 444 408 34,963 47,700 Total short-cycle — — 34,519 47,292 32,823 33,113 67,342 80,405 $ 92,596 $ 86,857 $ 34,519 $ 47,292 $ 32,823 $ 33,113 $ 159,938 $ 167,262 By destination: Offshore and international $ 85,241 $ 79,802 $ 13,390 $ 11,435 $ 7,606 $ 8,943 $ 106,237 $ 100,180 U.S. land 7,355 7,055 21,129 35,857 25,217 24,170 53,701 67,082 $ 92,596 $ 86,857 $ 34,519 $ 47,292 $ 32,823 $ 33,113 $ 159,938 $ 167,262 Cost of Revenues (exclusive of Depreciation and Amortization Expense). Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $9.3 million, or 7%, in the first three months of 2025 compared to the first three months of 2024. Consolidated product costs in the first three months of 2025 increased $5.2 million, or 7%, compared to the first three months of 2024 due primarily to the reported increase in product revenue as well as an unfavorable shift in product sales mix. Consolidated service costs in the first three months of 2025 decreased $14.5 million, or 25%, compared to the first three months of 2024, reflective primarily of the strategic management actions implemented in 2024 to improve reported results. Selling, General and Administrative Expense. Selling, general and administrative expense totaled $22.5 million in the first three months of 2025, consistent with the level reported in the first three months of 2024, which included $0.4 million of costs associated with enforcing certain of our patents. 24 Table of Contents Depreciation and Amortization Expense. Depreciation and amortization expense decreased $2.2 million, or 15%, in the first three months of 2025 compared to the prior-year period. Note 10, “Segments and Related Information,” to our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q 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 realignment of operations between segments. See Note 2, “Asset Impairments and Other Charges and Credits,” to our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Operating Income (Loss). Our consolidated operating income was $5.6 million in the first three months of 2025, which included $0.9 million in facility exit charges. This compares to consolidated operating loss of $11.2 million in the first three months of 2024, which included a $10.0 million non-cash goodwill impairment charge and $2.5 million in facility consolidation and other charges. Excluding these charges, operating results improved by $5.2 million year-over-year, driven by growth in offshore and international activity. Interest Expense, Net. Net interest expense totaled $1.6 million in the first three months of 2025, which compares to $2.1 million in the first three months of 2024. Interest expense as a percentage of total debt outstanding was approximately 7% in the first three months of 2025 and the first three months of 2024. Income Tax. Income tax expense for the first three months of 2025 and 2024 was calculated using a discrete approach. This methodology was used because changes in our results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate. For the first three months of 2025, our income tax provision was $1.0 million, which included the impact of certain discrete tax items and other non-deductible expenses on pre-tax income of $4.2 million. This compares to an income tax provision of $24 thousand, which included the impact of a $10.0 million goodwill impairment charge and other non-deductible expenses, on a pre-tax loss of $13.4 million for the first three months of 2024. Other Comprehensive Income (Loss). Reported comprehensive income (loss) is the sum of reported net income (loss) and other comprehensive income (loss). Other comprehensive income was $5.5 million in the first three months of 2025 compared to comprehensive loss of $3.0 million in the first three months of 2024 due to fluctuations in foreign currency exchange rates compared to the U.S. dollar for certain of the international operations of our operating segments. For the first three months of 2025 and 2024, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil. During the first three months of 2025, the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S. dollar. This compares to the first three months of 2024, when the exchange rates for both the British pound and the Brazilian real weakened compared to the U.S. dollar. Segment Operating Results Offshore Manufactured Products Revenues. Our Offshore Manufactured Products segment revenues increased $5.7 million, or 7%, in the first three months of 2025 compared to the first three months of 2024 due primarily to increased demand for the segment’s international and offshore project-driven connector and valve products. Operating Income. Our Offshore Manufactured Products segment reported operating income of $14.3 million in the first three months of 2025. This compares to operating income of $10.6 million in the first three months of 2024, which included $1.5 million in facility consolidation and other charges. Excluding these charges, the Offshore Manufactured Products segment’s operating income increased $2.2 million year-over-year due to the reported revenue growth and a favorable shift in revenue mix. Backlog. Backlog in our Offshore Manufactured Products segment totaled $357 million as of March 31, 2025 compared to $311 million as of December 31, 2024. Bookings during the first three months of 2025 were $136 million, yielding a book-to-bill ratio of 1.5x. 25 Table of Contents Completion and Production Services Revenues. Our Completion and Production Services segment revenues decreased $12.8 million, or 27%, in the first three months of 2025 compared to the first three months of 2024, driven primarily by the exit of underperforming service offerings and facilities during 2024. These exited operations generated $16.8 million of revenues in the first three months of 2024. Excluding the impact of operations exited during 2024, revenues increased $4.0 million, or 13%, year-over-year – driven primarily by increased customer activity in the Gulf of America. Operating Income (Loss). Our Completion and Production Services segment reported operating income of $3.5 million in the first three months of 2025, which included $0.9 million in facility exit charges. This compares to an operating loss of $0.4 million in the first three months of 2024, which included charges totaling $1.0 million associated with the exit of three facilities and the defense of patents. Excluding these charges, the Completion and Production Services segment’s operating results improved $3.8 million from the prior-year period, due primarily to the reported revenue growth within our current base operations and the cost reduction measures implemented in 2024. Downhole Technologies Revenues. Our Downhole Technologies segment revenues decreased $0.3 million, or 1%, in the first three months of 2025 from the first three months of 2024. Operating Loss. Our Downhole Technologies segment reported an operating loss of $2.1 million in the first three months of 2025. This compares to an operating loss of $12.1 million reported in the first three months of 2024, which included the $10.0 million non-cash goodwill impairment charge related to the segment realignment in the first quarter of 2024. Excluding the 2024 goodwill impairment charge, the Downhole Technologies segment’s operating loss was comparable with the prior year. Corporate Operating Loss. Corporate expenses in the first three months of 2025 increased $0.7 million, or 8%, from the first three months of 2024, due primarily to higher performance-based incentive compensation costs. 26 Table of Contents Liquidity, Capital Resources and Other Matters Our primary liquidity needs are to fund operating and capital expenditures, new product development, general working capital needs and debt repayment. In addition, capital has been used to fund share repurchases and fund strategic business acquisitions. Our primary sources of funds are cash flow from operations and proceeds from borrowings under our ABL Facility and, less frequently, capital markets transactions. Operating Activities Cash flows from operations totaled $9.3 million during the first three months of 2025, compared to $11.4 million used in operations during the first three months of 2024. During the first three months of 2025, $5.6 million was used to fund net working capital increases, primarily due to a decrease in accounts payable and payment of accrued short- and long-term cash incentive compensation, partially offset by the favorable impact of a decrease in accounts receivable. During 2024, $21.8 million was used to fund net working capital increases, primarily due to the payment of accrued 2023 short- and long-term cash incentives and a decrease in accounts payable. Investing Activities Investing activities were net cash neutral during the first three months of 2025, compared to $7.8 million used in investing activities during the first three months of 2024. Capital expenditures totaled $9.2 million and $10.1 million during the first three months of 2025 and 2024, respectively. These investments were offset by proceeds from the sale of property, equipment and assets held for sale of $9.2 million and $2.3 million during the first three months of 2025 and 2024, 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 the first three months of 2025, net cash of $8.0 million was used in financing activities, which included the repurchase of $5.3 million of our common stock. This compares to $3.7 million of cash used in financing activities during the first three months of 2024. As of March 31, 2025, we had cash and cash equivalents totaling $66.8 million, which compared to $65.4 million as of December 31, 2024. As of March 31, 2025, we had no borrowings outstanding under our ABL Facility, $123.5 million principal amount of our 2026 Notes outstanding and other debt of $2.6 million. Our reported interest expense included amortization of deferred financing costs of $0.3 million during the first three months of 2025. For the first three months of 2025, our contractual cash interest expense was $1.8 million, or approximately 6% of the average principal balance of debt outstanding. We believe that cash on-hand, cash flow from operations and borrowing capacity available under our ABL Facility will be sufficient to meet our full liquidity needs in the coming twelve months. Our 2026 Notes mature on April 1, 2026, and we anticipate that cash on hand, cash flow from operations generated during 2025 and borrowings under our ABL Facility will be sufficient to permit us to fully retire the 2026 Notes. Under the terms of the ABL Facility, if we have not reduced the principal amount of the 2026 Notes to less than $17.5 million on or prior to December 31, 2025, any amounts outstanding under our ABL Facility will become due and payable and we will no longer have borrowing capacity under our ABL Facility. Accordingly, we have been engaged in discussions with the lenders under our ABL Facility to eliminate such springing maturity provision in order to facilitate the efficient retirement of the 2026 Notes subsequent to the springing maturity date. If our plans or assumptions change, or are inaccurate, we may need to raise additional capital from other sources. Our ability to obtain capital to repay debt, for general liquidity needs and for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global banking and financial markets and other factors, many of which are beyond our control. 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 27 Table of Contents 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, and on March 27, 2025, the SEC announced it would end its defense of the Rules. Although the SEC’s rules are unlikely to become effective, certain states have enacted or are considering the adoption of similar rules. Thus, the ultimate impact on our business is uncertain, and we and our customers may incur increased compliance costs related to the assessment and disclosure of climate-related risks. For more information on our risks related to climate change, see the risk factors in “Part I, Item 1A. Risk Factors” included in our 2024 Annual Report on Form 10-K titled, “Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide,” “The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations” and “Increasing attention to ESG matters may impact our business.” Stock Repurchase Program. In October 2024, our Board of Directors authorized $50.0 million for repurchases of our common stock, par value $0.01 per share, through October 2026. Subject to applicable securities laws, such purchases will be at such times and in such amounts as we deem appropriate. During the three months ended March 31, 2025, $5.3 million in repurchases of common stock were made under these programs. The amount remaining under our new share repurchase authorization as of March 31, 2025 was $36.0 million. Revolving Credit Facility. 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. 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 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. Pursuant to this provision, our ABL Facility will mature, resulting in amounts thereunder becoming due and payable and borrowing availability terminating, if we have not reduced the outstanding principal amount of the 2026 Notes to less than $17.5 million on or prior to December 31, 2025. Accordingly, we have been engaged in discussions with the lenders under our ABL Facility to eliminate such springing maturity provision in order to facilitate the efficient retirement of the 2026 Notes subsequent to the springing maturity date. See Note 4, “Long-term Debt,” to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the ABL Agreement. As of March 31, 2025, we had $16.2 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement. The total amount available to be drawn as of March 31, 2025 was $62.1 million, calculated based on the then-current borrowing base less outstanding letters of credit. 2026 Notes. 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 March 31, 2025, 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. See Note 4, “Long-term Debt,” to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the 2026 Notes. As of March 31, 2025, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met. Our total debt represented 15% and 16% of our combined total debt and stockholders’ equity as of March 31, 2025 and December 31, 2024, respectively. Contingencies and Other Obligations. We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters. See Note 11, “Commitments and Contingencies,” to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion. Off-Balance Sheet Arrangements. As of March 31, 2025, we had no off-balance sheet arrangements. 28 Table of Contents Critical Accounting Policies For a discussion of the critical accounting policies and estimates that we use in the preparation of our condensed consolidated financial statements, see “Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection, and disclosure of these critical accounting policies and estimates with the audit committee of our Board of Directors. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based. 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. Management believes 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.