What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-25 · 118 added, 107 removed, 416 unchanged (35% of the section changed)

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Demand for our services is largely dependent on oil and natural gas prices, and our customers’ completion budgets and rig count.

Prolonged low oil and gas prices would generally depress the level of oil and natural gas exploration, development, production, and well completion activity and would result in a corresponding decline in the demand for the hydraulic fracturing services that we provide.

Historically, oil prices and markets have been extremely volatile.

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The average WTI oil prices per barrel were approximately $94 , $68 and $39 for the years ended December 31, 2022, 2021 and 2020, respectively.

Recently, WTI oil price reached a 7-year high of over $90 per barrel in February 2022.

In the last three years, the highly volatile and unpredictable nature of oil and natural gas prices caused a reduction in our customers’ spending and associated drilling and completion activities, which has had and may continue to have an adverse effect on our revenue and cash flows, if WTI oil prices remain highly volatile or decline in the future.

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• the cost of exploring for, developing, producing and delivering oil and natural gas;

• the supply of and demand for drilling and hydraulic fracturing equipment, including the supply and demand for lower emissions hydraulic fracturing equipment;

• the supply of and demand for drilling and hydraulic fracturing and wireline equipment, including the supply and demand for lower emissions hydraulic fracturing and wireline equipment;

• cost increases and supply chain constraints related to our services;

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Subsequently, Saudi Arabia announced plans to increase production and reduce the prices at which they sell oil.

These events, combined with the COVID-19 pandemic that has negatively impacted the economic activity and disrupted the supply chains of certain of our customers, have contributed to the unpredictable nature of crude oil prices.

In 2022, Russia launched a large-scale invasion of Ukraine, leading to armed hostilities and imposition of sanctions on Russian economic trades.

These events, combined with the COVID-19 pandemic which have impacted the economic activity and disrupted the global supply chain dynamics, have contributed to the unpredictable nature of crude oil prices.

The cyclical nature of the oil and natural gas industry may cause our operating results to fluctuate.

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By contracting services on a short‑term basis, we are exposed to the risks of a rapid reduction in market prices and utilization and resulting volatility in our revenues.

Events outside of our control, including an epidemic or outbreak of an infectious disease, such as COVID-19, may materially adversely affect our business.

We face risks related to epidemics, outbreaks or other public health events that are outside of our control, and could significantly disrupt our operations and adversely affect our financial condition.

The global or national outbreak of an illness or any other communicable disease, or any other public health crisis, such as COVID-19, may cause disruptions to our business and operational plans, which may include (i) shortages of employees, (ii) unavailability of contractors and subcontractors, (iii) interruption of supplies from third parties upon which we rely, (iv) recommendations of, or restrictions imposed by, government and health authorities, including quarantines, and (v) restrictions that we and our contractors, subcontractors and our customers impose, including facility shutdowns, to ensure the safety of employees.

For example, in response to COVID-19, we made adjustments to some of our business processes that helped and will continue to help address the impact to the COVID-19 pandemic.

The COVID-19 pandemic has spread across the globe and impacted financial markets and worldwide economic activity and adversely affected our operations in the recent years.

In addition, the effects of COVID-19 across the globe have negatively impacted the domestic and international demand for crude oil and natural gas, which has contributed to price volatility, impacted the operations and activity levels of our customers and materially and adversely affected the demand for oilfield services.

These factors also negatively impacted our current suppliers and their ability or willingness to provide the necessary equipment, parts or raw materials, and they may fail to deliver the products timely and in the quantities required.

Any resulting delays or restrictions from COVID-19 on the provision of our services could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As the potential impact from COVID-19 is difficult to predict, the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain.

Any potential impact will depend on future developments and new information that may emerge regarding the COVID-19 infection rate or the efficacy and distribution of COVID-19 vaccines, and the actions taken by authorities to contain it or treat its impact, all of which are beyond our control.

These potential impacts, while uncertain, could adversely affect our business, results of operations and financial condition.

The majority of our operations are located in the Permian Basin, making us vulnerable to risks associated with operating in one major geographic area.

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Due to the concentrated nature of our operations, we could experience any of the same conditions at the same time, resulting in a relatively greater impact on our revenue than they might have on other companies that have more geographically diverse operations.

The IRA 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations.

In August 2022, President Biden signed the IRA 2022 into law.

The IRA 2022 provides for hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.

These incentives could further accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for oil and gas and consequently adversely affect the business of our customers, thereby reducing demand for our services.

In addition, the IRA 2022 imposes the first ever federal fee on the emission of greenhouse gases through a methane emissions charge.

The IRA 2022 amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the offshore and onshore petroleum and natural gas production and gathering and boosting source categories.

The methane emissions charge will start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year after.

Calculation of the fee is based on certain thresholds established in the IRA 2022.

The methane emissions charge could increase our customers’ operating costs and adversely affect their businesses, thereby reducing demand for our services.

The COVID-19 outbreak has negatively impacted, and may continue to negatively impact crude oil prices and demand for our products and services.

The outbreak of COVID-19 has adversely impacted and may continue to adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our products and services.

The COVID-19 pandemic also altered the level of capital spending by oil and gas companies for exploration and production activities and adversely affected the economies and financial markets of many countries resulting in an economic downturn that affected demand for our products and services.

In response to the initial outbreak of COVID-19, many state and local jurisdictions imposed quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects.

In an effort to minimize the spread of illness, we and our customers implemented various worksite restrictions as well as quarantining in order to minimize the chances of a potential COVID-19 outbreak.

During 2021 and 2022, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded.

While the prices of and demand for crude oil have recovered, further outbreaks or the emergence of new strains of the COVID-19 virus, could result in the reimposition of domestic and international regulations directing individuals to stay at home, limiting travel, requiring facility closures and imposing quarantines.

Widespread implementation of these or similar restrictions could result in commodity price volatility, reduced demand for our products and services, as well as delays in or inability to fulfill our contractual obligations to customers, logistic constraints, increases in our costs, and workforce and raw material shortages.

The effects of the COVID-19 pandemic and related economic, business and market disruptions thus could continue and adversely affect us .

Our business may be adversely affected by a deterioration in general economic conditions or a weakening of the broader energy industry.

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As competitors and others use or develop new or comparable technologies in the future, we may lose market share or be placed at a competitive disadvantage.

The transition to lower emissions equipment is capital intensive and could require us to convert our conventional Tier II equipment to lower emissions equipment.

The transition to lower emissions equipment is capital intensive and could require us to convert all our conventional Tier II equipment to lower emissions equipment.

If we are unable to quickly transition to lower emissions equipment, the demand for our services could be adversely impacted.

For example, many E&P companies, including our customers, are transitioning to a lower emissions operating environment and may require us to invest in pressure pumping equipment with lower emissions profile.

For example, many E&P companies, including our customers, are transitioning to a lower emissions operating environment and may require us to invest in equipment with lower emissions profile.

Further, we may face competitive pressure to develop, implement or acquire and deploy certain technology improvements at a substantial cost, such as our DuraStim® fleets or the cost of implementing or purchasing a technology like DuraStim® may be substantially higher than anticipated, and we may not be able to successfully implement the DuraStim® fleets or other technologies we may purchase.

As of December 31, 2022 we recorded an impairment of $57.5 million on our DuraStim® equipment because they did not meet our expectations and remained idled with no near term plans to deploy the equipment to customers’ wellsites.

Some of our competitors have greater financial, technical and personnel resources that may allow them to enjoy technological advantages and develop and implement new products on a timely basis or at an acceptable cost.

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Any disruptions or volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availabil ity impacting our ability to finance our operations.

Our borrowing base changed from $61.1 million as of December 31, 2021 to approximate ly $79.0 million as of February 18, 2022 due to a change in our eligible accounts receivable.

Our borrowing base changed from $102.3 million as of December 31, 2022 to approximately $143.3 million as of February 20, 2023 due to a change in our eligible accounts receivable.

If our customer activity levels decline in the future resulting in a decrease in our eligible accounts receivable, our borrowing base could decline.

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Further, our actual capital expenditures could exceed our capital expenditure budget.

In the event our capital expenditure requirements at any time are greater than the amount of liquidity we have available, we could be required to seek additional sources of capital, which may include debt financing, joint venture partnerships, sales of assets, offerings of debt or equity securities or other means.

We may not be able to obtain any such alternative source of capital.

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Concerns over general economic, business or industry conditions may have a material adverse effect on our results of operations, liquidity and financial condition.

Concerns over global economic conditions, geopolitical issues, public health crises (including the COVID-19 pandemic), interest rates, inflation, the availability and cost of credit in the United States and foreign financial markets have contributed to increased economic uncertainty and diminished expectations for the global economy.

These factors, combined with volatility in commodity prices, business and consumer confidence and unemployment rates, could

precipitate an economic slowdown.

Concerns over global economic conditions, geopolitical issues (including the Russia-Ukraine war), public health crises (including the COVID-19 pandemic), interest rates, inflation, the availability and cost of credit in the United States and foreign financial markets have contributed to increased economic uncertainty and diminished expectations for the global economy.

These factors, combined with volatility in commodity prices, business and consumer confidence and unemployment rates, could precipitate an economic slowdown.

Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices.

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If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired.

If we violate any of the restrictions, covenants, ratios or tests in our ABL Credit Facility, a significant portion of our indebtedness may become immediately due and

payable and our lenders’ commitment to make further loans to us may terminate.

Further, our borrowing base, as redetermined monthly, is tied to 85.0% of eligible accounts receivable.

If we violate any of the restrictions, covenants, ratios or tests in our ABL Credit Facility, a significant portion of our indebtedness may become immediately due and payable and our lenders’ commitment to make further loans to us may terminate.

Further, our borrowing base, as redetermined monthly, is tied to 85.0% to 90.0% of eligible accounts receivable.

Changes to our operational activity levels or customer concentration levels have an impact on our total eligible accounts receivable, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Facility.

For example, our borrowing base changed from $61.1 million as of December 31, 2021 to approximatel y $79.0 million as of February 18, 2022 due to a change in our eligible accounts receivable.

For example, our borrowing base changed from $102.3 million as of December 31, 2022 to approximately $143.3 million as of February 20, 2023 due to a change in our eligible accounts receivable.

If our customer activity declines in the future, our borrowing base could decline.

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Changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our shares, and a rising interest rate environment could have an adverse impact on the price of our shares, our ability to issue equity or incur debt.

We may record losses or impairment charges related to goodwill and long-lived assets.

We may record losses or impairment charges related to goodwill and long-lived assets including intangible assets.

Changes in future market conditions and prolonged periods of low utilization, changes in technology or the sale of assets below their carrying value may cause us to experience losses in our results of operations.

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For example, in 2021, we recorded loss on disposal of asset $3.5 million in connection with the sale of our two turbines .

In addition, our DuraStim® equipment remains under evaluation and has yet to be commercialized.

If w e are not able to successfully commercialize the DuraStim® equipment, and are not able to deploy the equipment for alternative uses, we will incur impairment losses on the carrying value of the DuraStim® equipment.

As of December 31, 2021, the carrying value of our DuraStim® equipment is approximately $90 million.

In 2022, we recorded impairment charges of $57.5 million in connection with our DuraStim®

equipment, which remained idled with no near term plans to deploy the equipment to customers’ wellsites.

If oil and natural gas prices trade at depressed price levels as experienced in the first half of 2020, and our equipment remains idle or under-utilized, the estimated fair value of such equipment may decline, which will result in additional impairment expense in the future.

Our operations are subject to unforeseen interruptions and hazards inherent in the oil and natural gas industry, for which we may not be adequately insured and which could cause us to lose customers and substantial revenue.

Our operations are exposed to the risks inherent to our industry, such as equipment defects, vehicle accidents, worksite injuries to our or third-party personnel, fires, explosions, blowouts, surface cratering, uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards, such as oil

spills and releases of, and exposure to, hazardous substances.

For example, our operations are subject to risks associated with hydraulic fracturing, including any mishandling, surface spillage or potential underground migration of fracturing fluids, including hydrochloric acid and other chemical additives.

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Our insurance may not be adequate to cover all losses or liabilities we may suffer.

We are also self-insured up to $10 million per occurrence for certain losses arising from or attributable to fire and/or explosion at the wellsites.

We are also self-insured up to $10 million per occurrence for certain losses arising from or attributable to fire and/or explosion at wellsites.

Furthermore, we may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates.

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Losses due to catastrophic events, such as blowouts, are generally the responsibility of the customer.

However, despite this general allocation of risk, we might not succeed in enforcing such contractual allocation, might incur an unforeseen liability

falling outside the scope of such allocation or may be required to enter into an MSA with terms that vary from the above allocations of risk.

Litigation arising from a catastrophic occurrence at a location where our equipment and services are being used may result in our being named as a defendant in lawsuits asserting large claims.

However, despite this general allocation of risk, we might not succeed in enforcing such contractual allocation, might incur an unforeseen liability falling outside the scope of such allocation or may be required to enter into an MSA with terms that vary from the above allocations of risk.

Litigation arising from a catastrophic occurrence at a location where our equipment and services are being used may result in us being named as a defendant in lawsuits asserting large claims.

As a result, we may incur substantial losses which could materially and adversely affect our financial condition and results of operation.

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In addition, certain cyber incidents, such as unauthorized surveillance, may remain undetected for an extended period.

Our systems and insurance coverage for protecting against cyber security risks, including cyberattacks, may not be sufficient and may not protect against or cover all of the losses we may experience as a result of the realization of such risks.

Our systems and insurance coverage for protecting against cyber security risks, including cyberattacks, may not be sufficient and may not protect against or cover all of the losses (including potential reputational loss) we may experience as a result of the realization of such risks.

As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate the effects of cyber incidents.

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title or permit issues;

the incurrence of significant charges, such as impairment of goodwill, or property and equipment or restructuring charges;

the incurrence of significant charges, such as impairment of goodwill, property and equipment or intangible assets or restructuring charges;

and the incurrence of unanticipated liabilities and costs for which indemnification is unavailable or inadequate.

The process of upgrading acquired assets to our specifications and integrating acquired assets or businesses may also involve unforeseen costs and delays or other operational, technical and financial difficulties and may require a significant amount of time and resources and may divert management’s attention from existing operations or other priorities.

For example, in 2022, we consummated the Silvertip Acquisition, and we are in the process of fully integrating all parts of the acquired business into our operations.

We must plan and manage any acquisitions effectively to achieve revenue growth and maintain profitability in our evolving market.

Any failure to manage acquisitions effectively or integrate acquired assets or businesses into our existing operations successfully, or to realize the expected benefits from an acquisition or minimize any unforeseen operational difficulties, could have a material adverse effect on our business, financial condition, prospects or results of operations.

The Logan Lawsuit could have a material adverse effect on our business, financial condition, results of operation, and cash flows.

In September 2019, a complaint, captioned Richard Logan, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v.

ProPetro Holding Corp., et al., (the "Logan Lawsuit"), was filed against the Company and certain of its then current and former officers and directors in the U.S.

District Court for the Western District of Texas.

In July 2020, the Logan Lawsuit Lead Plaintiffs Nykredit Portefølje Administration A/S, Oklahoma Firefighters Pension and Retirement System, Oklahoma Law Enforcement Retirement System, Oklahoma Police Pension and Retirement System, and Oklahoma City Employee Retirement System, and additional named plaintiff Police and Fire Retirement System of the City of Detroit, individually and on behalf of a putative class of shareholders who purchased the Company’s common stock between March 17, 2017 and March 13, 2020, filed a third amended class action complaint in the U.S.

District Court for the Western District of Texas, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, as amended, and Rule l0b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933, as amended, based on allegedly inaccurate or misleading statements, or omissions of material facts, about the Company’s business, operations and prospects against the Company, certain former officers and current and former directors.

On September 13, 2021, the Court partially granted and partially denied motions to dismiss filed by the Company and the individual defendants.

Discovery is still ongoing.

In May 2020, the U.S.

District Court for the Western District of Texas consolidated two shareholder derivative lawsuits previously filed against the Company and certain of its current and former officers and directors into a single lawsuit captioned In re ProPetro Holding Corp.

Derivative Litigation (the "Shareholder Derivative Lawsuit").

2020, the plaintiffs in the Shareholder Derivative Lawsuit filed a consolidated complaint alleging (i) breaches of fiduciary duties, (ii) unjust enrichment and (iii) contribution.

The plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs, they seek various forms of relief, including (i) damages sustained by the Company as a result of the alleged misconduct, (ii) punitive damages and (iii) equitable relief in the form of improvements to the Company’s governance and controls.

On September 15, 2021, the Court granted the Company's motion to dismiss the complaint in its entirety, without prejudice.

On November 19, 2021, the Company received a demand letter from a law firm representing one of the purported shareholders of the Company that previously filed the dismissed Shareholder Derivative Lawsuit.

The demand letter alleged facts and claims substantially similar to the Shareholder Derivative Lawsuit.

The Board of Directors has constituted a committee to evaluate the demand letter and recommend a course of action to the Board of Directors, and the committee has retained counsel to assist with its review.

The committee’s review is ongoing.

We are presently unable to predict the duration, scope or result of the Logan Lawsuit or any other related lawsuit or investigation.

As of December 31, 2021, no provision was made by the Company in connection with this pending lawsuit as the final outcome cannot be reasonably estimated.

The ongoing Logan Lawsuit and any related future litigation give rise to risks and uncertainties that could adversely affect our business, results of operations and financial condition.

Such risks and uncertainties include, but are not limited to, uncertainty as to the scope, timing and ultimate outcome of the lawsuit, including the potential impact to the Company in the event of an adverse outcome and on the market price of the Company’s common stock;

the costs and expenses of the Logan Lawsuit including legal fees and possible settlement in the event of an adverse outcome;

the risk of additional potential litigation or regulatory action arising from matters relating to this lawsuit.

The outcome of the Logan Lawsuit and any other litigation is necessarily uncertain.

We could be forced to expend significant resources in the defense of this lawsuit or future ones, and we may not prevail.

We maintain director and officer insurance;

however, our insurance coverage is subject to certain exclusions (including, for example, any required SEC disgorgement or penalties) and we are responsible for meeting certain deductibles under the policies.

Moreover, we cannot assure you that our insurance coverage will adequately protect us from claims made in the Logan Lawsuit.

Further, as a result of the pending litigation and investigation the costs of insurance may increase and the availability of coverage may decrease.

As a result, we may not be able to maintain our current levels of insurance at a reasonable cost, or at all.

We may be adversely affected by the effects of inflation.

inflation rate has been steadily increasing since 2021 and through 2022.

Inflation in wages, materials, parts, equipment and other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers for our products and services.

In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

Sustained levels of high inflation have likewise caused the U.S.

Federal Reserve and other central banks to increase interest rates multiple times in 2022 and the U.S.

Federal Reserve has indicated its intention to continue to raise benchmark interest rates into 2023 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.

To the extent elevated inflation remains,

we may experience further cost increases for our operations, including labor costs and equipment.

We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to timely pass-through the cost increases to our customers, would negatively impact our business, financial condition and results of operations.

Risks Related to Customers, Suppliers and Competition

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One customer, Pioneer, accounted for 33.1% of our revenue for the year ended December 31, 2022 .

The revenue generated from our relationship with Pioneer is largely derived from pressure pumping and related services provided pursuant to the Pressure Pumping Services Agreement (the "Pioneer Services Agreement").

Although the Pioneer Services Agreement provides for the provision of services for a term of up to 10 years, Pioneer has the right to terminate the Pioneer Services Agreement in its sole discretion, in whole or part, effective as of December 31 of each of the calendar years of 2022, 2024 and 2026.

While management believes our relationship with Pioneer will continue beyond December 31, 2022, if Pioneer elects to terminate the Pioneer Services Agreement effective December 31, 2022, or seeks to renegotiate the terms on which we provide services to Pioneer, it could have a material adverse effect on our financial condition, results of operations and cash flows.

The revenue generated from our relationship with Pioneer is largely derived from the A&R Pressure Pumping Services Agreement, which reduced our committed fleet to six through December 31, 2022.

On October 31, 2022, we entered into the Fleet One Agreement and the Fleet Two Agreement with Pioneer to provide two committed fleets with terms ranging from eight to twelve month periods.

Each agreement was effective January 1, 2023 and is subject to certain termination and release rights .

In February 2023, Pioneer provided the Company notice (i) stating that Pioneer intended to release Fleet Two effective upon the completion of operations on the pad where the performance of Services (as defined in the Fleet Two Agreement) is in progress on May 12, 2023 and (ii) requesting that the Company agree to the termination of the Fleet Two Agreement as of the Release Date.

The Company agreed with such request, and, as a result, the Fleet Two Agreement will be terminated as of the Release Date.

If Pioneer elects to terminate the remaining committed fleet and we are unable to redeploy such fleet to another customer, it could have a material adverse effect on our financial condition, results of operations and cash flows.

See "Part I, Item 1.

Business — Customers" for further information regarding the agreements with Pioneer.

We face significant competition that may cause us to lose market share, and competition in our industry has intensified during the industry downturn.

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The amount of equipment available may exceed demand, which could result in active price competition.

In addition, some exploration and production companies have commenced completing their wells using their own hydraulic fracturing equipment and personnel.

In addition, some E&P companies have commenced completing their wells using their own hydraulic fracturing equipment and personnel.

Any increase in the development and utilization of in‑house fracturing capabilities by our customers could decrease the demand for our services and have a material adverse impact on our business.

Pressure on pricing for our services resulting from the industry downturn has impacted, and may continue to impact, our ability to maintain utilization and pricing for our services or implement price increases.

During periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results of operations.

During periods of declining pricing for our

services, we may not be able to reduce our costs accordingly, which could further adversely affect our results of operations.

Also, we may not be able to successfully increase prices without adversely affecting our utilization levels.

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We purchase specialized equipment, parts and raw materials (including, for example, frac sand, chemicals and fluid ends) from third party suppliers and affiliates.

In some cases, our customers are responsible for supplying necessary raw

materials (including frac sand), parts and/or equipment.

In some cases, our customers are responsible for supplying necessary raw materials (including frac sand), parts and/or equipment.

At times during the business cycle, there is a high demand for hydraulic fracturing and other oilfield services and extended lead times to obtain equipment and raw materials needed to provide these services.

For example, in 2021, we have seen significant disruption in supply chains around the world caused by the COVID-19 pandemic that have impacted our operations.

For example, in 2021 and 2022, we have seen significant disruption in supply chains around the world caused by the COVID-19 pandemic that have impacted our operations.

Should our current suppliers (or our customers’ suppliers where applicable) be unable or unwilling to provide the necessary equipment, parts or raw materials or otherwise fail to deliver the products timely and/or in the quantities required, any resulting delays in the provision of our services could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Our current agreements with Sand Suppliers expire at different times prior to December 31, 2025.

Disruption of our supply chain could adversely impact our ability to provide our services.

Our suppliers use multiple forms of transportation to bring their products to market, including truck, ocean and air-cargo shipments.

Disruption to the timely supply of raw materials, parts and finished goods or increases in the cost of transportation services, including due to general inflationary pressures, cost of fuel and labor, labor disputes, governmental regulation or governmental restrictions limiting specific forms of transportation, could have an adverse effect on our ability to provide our services, which would adversely affect our results of operations, cash flows and financial position

Risks Related to Employees

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In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled workers.

As a result of the COVID-19 pandemic, we have experienced difficulties in attracting and retaining skilled workers.

As a result of the COVID-19 pandemic and the physical nature of our operations, we have experienced difficulties in attracting and retaining skilled workers.

If demand for our services increases, we may experience difficulty in hiring or re-hiring skilled and unskilled workers in the future to meet that demand.

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The cost of compliance with these laws can be significant.

Failure to properly handle, transport or dispose of these materials or

otherwise conduct our operations in accordance with these and other environmental laws could expose us to substantial liability for administrative, civil and criminal penalties, cleanup and site restoration costs and liability associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations.

Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to substantial liability for administrative, civil and criminal penalties, cleanup and site restoration costs and liability associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations.

Such liability is commonly on a strict, joint and several liability basis, without regard to fault.

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Environmental laws and regulations have changed in the past, and they may change in the future and become more stringent.

For example, following the election of President Biden and Democratic control in both houses of Congress, President Biden has made climate change a focus of his administration.

For example, following the election of President Biden, President Biden has made climate change a focus of his administration.

For more information, see our risk factor 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.” Separately, current and future claims and liabilities may have a material adverse effect on us because of potential adverse outcomes, defense costs, diversion of management resources, unavailability of insurance coverage and other factors.

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As a result, our operations as well as the operations of our oil and natural gas exploration and production customers are subject to a series of regulatory, political, litigation, and financial risks associated with the production and processing of fossil fuels and emission of GHGs.

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

However, following the U.S.

In September 2020, the Trump Administration revised prior regulations to rescind certain methane standards and remove the transmission and storage segment from the oil and natural gas source category and rescinded the methane-segments from the source category for certain regulations.

In the United States, no comprehensive climate change legislation has been implemented at the federal level, though recently passed laws such as the IRA 2022 advance numerous climate-related objectives.

Additionally, following the U.S.

Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, implement New Source Performance Standards directing the reduction of certain pollutants from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the Department of Transportation ( " DOT ") , implementing GHG emissions limits on vehicles manufactured for operation in the United States.

In September 2020, the Trump Administration revised prior regulations to rescind certain methane standards and remove the transmission and storage segments from the source category for certain regulations.

However, subsequently, the U.S.

Congress approved, and President Biden signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions to the methane standards, effectively reinstating the prior standards.

Additionally, in November 2021, the EPA issued a proposed rule that, if finalized, would establish OOOO(b) new source and OOOO(c) first-time existing source standards of performance for methane and volatile organic compound emissions for oil and gas facilities.

Operators of affected facilities will have to comply with specific standards of performance to include leak detection using optical gas imaging and subsequent repair requirement, and reduction of emissions by 95% through capture and control systems.

The EPA plans to issue a supplemental proposal in 2022 containing additional requirements not included in the November 2021 proposed rule and anticipates the issuance of a final rule by the end of the year.

Additionally, in November 2021, the EPA issued a proposed rule that, if finalized, would establish OOOOb new source and OOOOc first-time existing source of standards of performance for methane and volatile organic compound emissions for oil and gas facilities.

Operators of affected facilities will have to comply with specific standards of performance to include leak detection using optical gas imaging and subsequent repair equipment, and reduction of emissions by 95% through capture and control systems.

In November 2022, the EPA published a supplemental methane proposal, which, among other items, sets forth specific revisions strengthening the first nationwide emission guidelines for states to limit methane emissions from existing crude oil and natural gas facilities.

The proposal also revises requirements for fugitive emissions monitoring and repair as well as equipment leaks and the frequency of monitoring surveys, establishes a " super-emitter " response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, and provides additional options for the use of advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions.

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

however, it is likely that these requirements will be subject to legal challenge.

Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas such as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, the United Nations-sponsored "Paris Agreement," requires member states to submit non-binding, individually-determined reduction goals known as Nationally Determined Contributions ("NDCs") every five years after 2020.

Following President Biden’s executive order in January 2021, the United States rejoined the Paris Agreement and, in April 2021, established a goal of reducing economy-wide net GHG emissions 50-52% below 2005 levels by 2030.

Additionally, at the 26th Conference of the Parties ("COP26") in Glasgow in November 2021, the United States and the European Union jointly announced the launch of the Global Methane Pledge;

an initiative committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including "all feasible reductions" in the energy sector.

At COP27 in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.

The US also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.

Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27, there can be no guarantees that countries will not seek to implement such a phase out in the future.

However, the impacts of these actions are unclear at this time.

Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

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However, the impacts of these actions are unclear at this time.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate-change-related pledges made by certain

candidates for public office.

On January 27, 2021, President Biden issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and an increased emphasis on climate-related risk across government agencies and economic sectors.

The executive order also suspends the issuance of new leases for oil and gas development on federal land;

for more information, see our regulatory disclosure titled “Regulation of Hydraulic Fracturing and Related Activities.

Other actions that the Biden Administration may take include the imposition of more restrictive requirements for the development of pipeline infrastructure or LNG export facilities, or more restrictive GHG emissions limitations for oil and gas facilities.

Litigation risks are also increasing as a number of cities and other local governments have sought to bring suit against certain oil and natural gas companies operating in the United States in state or federal court, alleging among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that such companies have been aware of the adverse effects of climate change but failed to adequately disclose those impacts to their investors or customers.

for more information, see our risk factor titled " Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

Other actions that the Biden Administration may take include the imposition of more restrictive requirements for the development of pipeline infrastructure or liquefied natural gas export facilities, or more restrictive GHG emissions limitations for oil and gas facilities.

Litigation risks are also increasing as a number of parties have sought to bring suit against certain oil and natural gas companies operating in the United States in state or federal court, alleging among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that such companies have been aware of the adverse effects of climate change but failed to adequately disclose those impacts to their investors or customers.

There are also increasing financial risks for companies in the fossil fuel sector as shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all of their investments into non-fossil fuel related sectors.

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Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities.

Additionally, the United States Securities and Exchange Commission has announced an intention to promulgate rules requiring climate disclosures.

Although the form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements.

In January 2023, the Federal Reserve launched a pilot climate scenario analysis exercise, with six of the United States’ largest banks participating to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.

Additionally, the United States Securities and Exchange Commission has announced a proposed rule that would require climate disclosures, including registrants’ Scope 1 and 2 emissions and, in some cases, Scope 3 emissions.

Although the final form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements.

We also cannot predict how financial institutions and investors might consider any information disclosed under the final rule when making investment decisions, and as a result it is possible that we could face increases with respect to the costs of, or restrictions imposed on, our access to capital.

The adoption and implementation of new or more stringent international, federal or state legislation, regulations or other regulatory initiatives that impose more stringent standards for GHG emissions from the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate GHG emissions could result in increased costs of compliance or costs of consuming, and thereby reduce demand for, oil and natural gas, which could reduce demand for our services and products.

Additionally, political, litigation and financial risks may result in our oil and natural gas customers restricting or cancelling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing their ability to continue to operate in an economic manner, which also could reduce demand for our services and products.

One or more of these developments could have a material adverse effect on our business, financial condition and results of operation

Moreover, climate change may result in various physical risks, such as the increased frequency or intensity of extreme weather events or changes in meteorological and hydrological patterns, that could adversely impact us, our customers’ and our suppliers’ operations.

One or more of these developments could have a material adverse effect on our business, financial condition and results of operations.

Moreover, climate change may result in various physical risks, such as the increased frequency or intensity of extreme weather events or changes in the meteorological and hydrological patterns, that could adversely impact us, our customers’ and our suppliers’ operations.

Such physical risks may result in damage to our customers’ facilities or otherwise adversely impact our operations, such as if facilities are subject to water use curtailments in response to drought, or demand for our customers’ products, such as to the extent warmer winters reduce the demand for energy for heating purposes, which may ultimately reduce demand for the products and services we provide.

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Although several of these rulemakings have been rescinded, modified or subjected to legal challenges, new or more stringent regulations may be promulgated by the Biden Administration.

For example, in January 2021, President Biden issued an executive order suspending new leasing activities, but not operations under existing leases, for oil and gas exploration and production on non-Indian federal lands pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices that take into consideration potential climate and other impacts associated with oil and gas activities on such lands and waters.

Although the federal court for the Western District of Louisiana issued a preliminary injunction against the leasing pause, in response to the executive order, the DOI issued a report recommending various changes to the federal leasing program, though many such changes would require Congressional action.

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

In January 2021, President Biden issued an executive order suspending new leasing activities, but not operations under existing leases, for oil and gas exploration and production on non-Indian federal lands pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices that take into consideration potential climate and other impacts associated with oil and gas activities on such lands and waters.

Although the leasing pause was effectively halted by a permanent injunction in August 2022, in response to the executive order, the DOI issued a report recommending various changes to the federal leasing program, though many such changes would require Congressional action.

As a result, we cannot predict the final scope of regulations or restrictions that may apply to oil and gas operations on federal lands.

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Subsequently, the TRRC ordered the indefinite suspension of all deep oil and gas produced water injection wells in the area, effective December 31, 2021.

The Gardendale Seismic Response area has since been expanded in response to an additional earthquake in December 2022, covering 17 additional wells.

While we cannot predict the ultimate outcome of these actions, any action that temporarily or permanently restricts the availability of disposal capacity for produced water or other oilfield fluids may increase our customers’ costs or require them to suspend operations, which may adversely impact demand for our products and services

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The commercial development of economically‑viable alternative energy sources and related products (such as electric vehicles, wind, solar, geothermal, tidal, fuel cells and biofuels) could have a similar effect.

The IRA 2022 appropriates significant federal funding for renewable energy initiatives, which could accelerate the use and commercial viability of alternative energy sources and decrease demand for oil and natural gas.

The IRA 2022 has incentivized the further development of and investment in clean energy through the use of tax credits, and future legislation could expand these benefits for alternative energy sources.

In addition, certain U.S.

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In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

Such ratings are used by some investors to inform their investment and voting decisions.

Such ratings are used by some investors to inform

their investment and voting decisions.

Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital.

Additionally, to the extent ESG matters negatively impact our

reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations.

Additionally, to the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations.

Certain of our completion services, particularly our hydraulic fracturing services, are substantially dependent on the availability of water.

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federal net operating loss carryforwards ("NOLs") generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such NOLs in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

As of December 31, 2021, we had approximately $408.0 million of federal NOLs, some of which will begin to expire in 2035.

Approximately $219.5 million of our federal NOLs relate to pre-2018 periods.

As of December 31, 2022, we had approximately $421.7 million of U.S.

federal NOLs, some of which will begin to expire in 2035.

Approximately $219.5 million of our U.S.

federal NOLs relate to pre-2018 periods.

As of December 31, 2022, our state net operating losses were approximately $50.4 million and will begin to expire in 2024.

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This section also requires that our independent registered public accounting firm issue an attestation report on such internal control.

If we or our auditors identify and report material weaknesses in our internal control over financial reporting, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, financial condition, prospects, results of operations and cash flows.

lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, financial condition, prospects, results of operations and cash flows.

Certain provisions of our certificate of incorporation, and bylaws, as well as Delaware law, may discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.

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We are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent a right to receive, common stock.

In addition, we may issue common stock as consideration in future mergers and acquisitions, as we did in the Silvertip Acquisition.

Any issuance of additional shares of our common stock or convertible securities will dilute the ownership interest of our common stockholders.

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

What changed 10-K

Item 1A. Risk Factors