What changed in this filing

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Item 1. Business

2024-03-13 compared with 2023-02-23 · 123 added, 132 removed, 171 unchanged (60% of the section changed)

We are a leading integrated oilfield services company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline, and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the exploration and production ("E&P") of North American oil and natural gas resources.

We are a leading integrated oilfield service company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline, and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the E&P of North American oil and natural gas resources.

Our operations are primarily focused in the Permian Basin, where we have cultivated longstanding customer relationships with some of the region’s most active and well‑capitalized E&P companies.

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On November 1, 2022, we consummated the acquisition of all of the outstanding limited liability company interests of Silvertip Completion Services Operating, LLC (the "Silvertip Acquisition"), which provides wireline perforation and ancillary services solely in the Permian Basin in exchange for 10.1 million shares of our common stock valued at $106.7 million, $30.0 million of cash, the payoff of $7.2 million of assumed debt, and the payment of certain other closing and transaction costs.

The Silvertip Acquisition positions the Company as a leading completions-focused oilfield services provider headquartered in the Permian Basin.

Our competitors include many large and small oilfield services companies, including Halliburton Company, Liberty Energy Inc., ProFrac Holding Corp., Nextier Oilfield Solutions Inc., Patterson-UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses.

The Silvertip Acquisition positioned the Company as a more integrated and diversified completions-focused oilfield service provider headquartered in the Permian Basin.

On December 1, 2023, we consummated the purchase of the assets and operations of Par Five Energy Services LLC (“Par Five”), which provides cementing services in the Delaware Basin in exchange for $25.4 million of cash .

Par Five’s business complements our existing cementing business and enables us to serve both the Midland and Delaware Basins of the Permian Basin.

Our competitors include many large and small oilfield service companies, including Halliburton Company, Liberty Energy Inc., Patterson-UTI Energy Inc., ProFrac Holding Corp., RPC, Inc., and a number of private and locally-oriented businesses.

The markets in which we operate are highly competitive.

To be successful, an oilfield services company must provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices.

To be successful, an oilfield service company must provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices.

Competitive factors impacting sales of our services are price, reputation, technical expertise, emissions profile, service and equipment design and quality, and health and safety standards.

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We primarily provide hydraulic fracturing, wireline, and cementing completion services to E&P companies in the Permian Basin.

Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region's increasingly high-intensity well completions (including Simul-Frac, which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.

Effective September 1, 2022, we disposed of our coiled tubing assets to STEP Energy Services (USA) L td.

Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region's increasingly high-intensity well completions (including simultaneous hydraulic fracturing (“Simul-Frac”), which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.

Effective September 1, 2022, we disposed of our coiled tubing assets to STEP Energy Services L td.

("STEP") and shut down our coiled tubing operations.

We received approximately $2.8 million in cash and 2.6 million common shares of STEP, which have an estimated fair value of $11.8 million, as consideration.

We received approximately $2.8 million in cash and 2.6 million common shares of STEP, valued at $11.8 million, as consideration.

Upon the sale of our coiled tubing assets, we recorded a loss on sale of $13.8 million .

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The oil and gas industry has traditionally been volatile and is characterized by a combination of long-term, short-term and cyclical trends, including domestic and international supply and demand for oil and gas, current and expected future prices for oil and gas and the perceived stability and sustainability of those prices, and capital investments of E&P companies toward their development and production of oil and gas reserves.

The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, war and political instability in oil producing

countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.

The global public health crisis associated with the COVID-19 pandemic has had an adverse effect on global economic activity and the oil and gas industry in 2020 and 2021.

Some of the challenges resulting from the COVID-19 pandemic that have impacted our business include restrictions on movement of personnel and associated gatherings, shortage of skilled labor, cost inflation and supply chain disruptions.

In light of the COVID-19 pandemic, most companies, including our customers in the Permian Basin, reacted by closely managing their operating budget and exercising capital discipline in 2020 and 2021.

In February 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities.

As a result, the United States, the United Kingdom, the member states of the European Union and other public and private sectors have levied severe sanctions on Russian financial institutions, businesses and individuals.

This conflict, and the resulting sanctions, have contributed to significant increases and volatility in the prices for oil and natural gas.

The geopolitical and macroeconomic consequences of this invasion and associated sanctions remain uncertain, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and the oil and gas industry and may adversely affect our financial condition.

The Russia-Ukraine war, and the adverse impacts of the COVID-19 pandemic in recent years, including inflation, have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing.

In 2022, West Texas Intermediate ( "WTI") average crude oil price was approximately $94 per barrel, which is the highest average price in the last nine years.

We believe that the recent surge in global crude oil prices is partly due to the lack of reinvestment in the oil and gas industry in the last two years, and increased demand for oil and gas products, coupled with the adverse impact of the Russia-Ukraine war, which has led to various sanctions on Russian crude oil supply and businesses.

With the significant increase in global crude oil prices, including WTI crude oil prices, there has been an increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of December 2022, according to Baker Hughes.

Following the increase in rig count and WTI crude oil price, the oilfield service industry has experienced increased demand for its oil well completion services, and improved pricing.

As a result of the growing demand for oil well completion services and significant cost inflation across the industry, we negotiated pricing increases with certain of our customers for our oil well completion services, depending on job design.

Although we are currently operating in an improved pricing environment compared to 2020 and 2021, the rapid increase in cost inflation and supply chain tightness could adversely impact our future profitability.

inflation rate has been steadily increasing since 2021.

These inflationary pressures have resulted in and may result in additional increases to the costs of our oilfield goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise.

The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, war and political instability in oil producing countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.

Since October 2023, an ongoing conflict between Israel and Palestinian militants in the Israel-Gaza region has led to significant armed hostilities.

The geopolitical and macroeconomic consequences of this conflict remain uncertain, and such events, or any further hostilities in the Israel-Gaza region or elsewhere, could severely impact the world economy, the demand for and price of crude oil and the oil and gas industry generally and may adversely affect our financial condition.

Similarly, the geopolitical and macroeconomic consequences of the Russian invasion of Ukraine, including the associated sanctions, and the adverse impacts of the COVID-19 pandemic in recent years have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing.

As the global response to the COVID-19 pandemic began to wane, the demand and prices for crude oil increased from the lows experienced in 2020, with the West Texas Intermediate (“WTI”) average crude oil price reaching approximately $94 per barrel in 2022, the highest average price in the prior nine years.

However, in 2023, the WTI average crude oil price declined to approximately $78 per barrel.

We believe that the volatility of crude oil prices in recent years has been partly driven by declines in crude oil supplies, concerns over sanctions resulting from Russia's invasion of Ukraine, concerns over a potential disruption of Middle Eastern oil supplies resulting from the ongoing conflict between Israel and Palestinian militants in the Israel-Gaza region, slower crude oil production growth due to the lack of reinvestment in the oil and gas industry in the last two years, recent OPEC+ production cuts of approximately 1.3 million barrels per day and concerns of a potential global recession resulting from high inflation and interest rates.

With the significant increase in global crude oil prices from 2021, including the WTI crude oil price, there was a significant increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of 2022, according to the Baker Hughes Company (“Baker Hughes”).

Following the increase in rig count and the WTI crude oil price, the oilfield service industry has experienced increased demand for its completion services, and improved pricing.

However, we have recently experienced a 13% decrease in the rig count in 2023 to 309 at the end of 2023 which resulted in a reduction in the demand for completion services and pressure on pricing of our services.

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

Federal Reserve and other central banks to increase interest rates, and 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.

We cannot predict any future trends in the rate of inflation and crude oil prices.

A significant increase in or continued high levels of inflation, to the extent we are unable to timely pass-through the cost increases to our customers, or further declines in crude oil prices would negatively impact our business, financial condition and results of operations.

See Part II, Item 1A.

" Risk Factors—Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise.

Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including the upstream and oilfield services companies.

"Risk Factors—We may be adversely affected by the effects of inflation."

Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including upstream and oilfield service companies.

As a result, we are working with our customers and equipment manufacturers to transition our equipment to a lower emissions profile.

Currently, a number of lower emission solutions for pumping equipment, including Tier IV Dynamic Gas Blending (" DGB ") , electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future.

Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB dual-fuel , FORCE SM electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future.

We are continually evaluating these technologies and other investment and acquisition opportunities that would support our existing and new customer relationships.

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Over time, we may be required to convert substantially all of our conventional Tier II equipment to lower emissions equipment.

We have transitioned our active hydraulic fracturing equipment portfolio from approximately 10% lower emissions equipment in 2021 to approximately 35% in 2022, and expect to increase to approximately 65% in 2023.

The Permian Basin rig count increase, demand for oil and gas products, WTI crude oil price increase and costs inflation could be indicative of an energy market recovery.

I f the rig count and market conditions continue to improve, including improved customers' pricing and labor availability, and we are able to continue to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also continue to improve.

However, if market conditions do not improve or decline in the future, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows.

We have transitioned our hydraulic fracturing available equipment portfolio from approximately 10% lower emissions equipment in 2021 to approximately 35% in 2022 and 60% in 2023, and expect to increase to approximately 65% by the end of the first half of 2024.

To the extent any of our customers have certain expectations or requirements with respect to emissions reductions from their contractors, if we are unable to continue quickly transitioning to lower emissions equipment, the demand for our services could be adversely impacted.

If the Permian Basin rig count and market conditions improve, including improved pricing for our services and labor availability, and we are able to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also improve.

If the rig count or market conditions do not improve or decline in the future, and we are

unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows .

Our results of operations have historically reflected seasonal tendencies, typically in the fourth quarter, relating to the holiday season, inclement winter weather and exhaustion of our customers' annual budgets.

As a result, we typically experience declines in our operating and financial results in November and December, even in a stable commodity price and operations environment.

We have historically conducted our business through five operating segments:

hydraulic fracturing, cementing, coiled tubing, drilling and flowback.

For reporting purposes, the hydraulic fracturing and cementing operating segments were aggregated into one reportable segment—"Pressure Pumping" while coiled tubing, drilling and flowback operating segments, and corporate administrative expenses were aggregated into the "All Other" category.

In connection with the Silvertip Acquisition, we now have a wireline operating segment which has been aggregated with Pressure Pumping.

Additionally, the divestitures of our coiled tubing operations in September 2022 and our drilling and flowback operations in 2020 resulted in the "All Other" category having no operating segments and therefore in 2022, our corporate administrative expenses were aggregated into "Pressure Pumping", and prior periods have been restated accordingly.

During the fourth quarter of 2022, we renamed our "Pressure Pumping" reportable segment to "Completion Services" since the Company is now positioned to provide highly complementary completion services to its customers and has significant cross-selling opportunities across its combined customer base.

We have historically conducted our business through four operating segments:

hydraulic fracturing, wireline, cementing and coiled tubing.

Prior to the fourth quarter of fiscal year 2023, our operating segments met the aggregation criteria and were aggregated into the “Completion Services” reportable segment and our coiled tubing operations (which were divested in September 2022) were shown in the “All Other” category.

Effective as of the fourth quarter of fiscal year 2023, we revised our segment reporting as we determined that our three operating segments no longer met the criteria to be aggregated.

Our Hydraulic Fracturing and Wireline operating segments meet the criteria of a reportable segment.

Our cementing and our divested coiled tubing segments do not meet the reportable segment criteria and are included within the “All Other” category.

Prior period segment information has been revised to conform to our current presentation.

For additional financial information on our reportable segments presentation, please see reportable segment information in Part II - Item 8, "Financial Statements and Supplementary Data."

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We have significant expertise in multi‑stage fracturing of horizontal oil‑producing wells in unconventional geological formations.

Our total available hydraulic horsepower ("HHP") at December 31, 2022 wa s 1,315,000 HHP, which was comprised of 252,500 HHP of our Tier IV DGB equipment and 1,062,500 HHP of convention al Tier II equipment.

Our total available hydraulic horsepower ("HHP") at December 31, 2023 w as 1,461,500 HHP, which was comprised of 452,500 HHP of our Tier IV DGB dual-fuel equipment, 144,000 HHP of FORCE SM electric-powered equipment and 865,000 HHP of conventional Tier II equipment.

An individual fleet could range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite.

During the year ended December 31, 2022, we recorded an impairment with respect to our DuraStim® hydraulic fracturing pumps (108,000 HHP) that did not meet the manufacturer’s specifications or our expectations and have remained idled.

With the industry transition to lower emissions equipment and simultaneous hydraulic fracturing ("Simul-Frac"), in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.

In addition, in September 2021, August 2022 and December 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB, and purchase of new Tier IV DGB equipment.

As such, we entered into conversion and purchase agreements with our equipment manufacturers for a total of 362,500 HH P of Tier IV DGB equipment and as of December 31, 2022, we have received 192,500 HH P of the converted and new Tier IV DGB equipment and expect to receive the remaining 170,000 HHP by the second quarter of 2023.

In August 2022 and December 2022, we entered into leases for four electric fleets of 60,000 HHP per fleet.

We expect to take delivery of the electric fleets at different times during the second half of 2023.

We have entered into a contract with a customer for the use of one of our electric hydraulic fracturing fleets to provide committed services for a period of three years after we take delivery of the fleet.

Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region’s increasingly high-intensity well completions (including Simul-Frac, which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.

With the industry transition to lower emissions equipment and Simul-Frac, in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.

In addition, in 2021 and 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB dual-fuel equipment, and to purchase new Tier IV DGB dual-fuel equipment.

As such, we entered into conversion and purchase agreements with our equipment manufacturers for a total of 452,500 HHP of Tier IV DGB du al-fuel equipment and as of December 31, 2023, we have received all of the converted and new Tier IV DGB dual-fuel equipment.

In 2022, we entered into three-year electric fleet leases for a total of four FORCE SM electric-powered hydraulic fracturing fleets with 60,000 HHP per fleet.

As of December 31, 2023, we have re ceived 144,000 HHP of FORC E SM electric-powered equipment.

We currently expect to receive the remaining equipment associated with the second and third fleets and all equipment associated with the fourth fleet in the first half of 2024.

We have entered into contracts with customers for the use of two of our FORCE SM electric-powered hydraulic fracturing fleets to provide committed services for a period of up to three years .

The hydraulic fracturing process consists of pumping fracturing fluid into a well at sufficient pressure to fracture the formation.

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Each fleet has a designated team of personnel, which allows us to provide responsive and customized services, such as project design, proppant and other consumables procurement, real-time data provision and post‑completion analysis for each of our jobs.

hydraulic fracturing fleets and associated personnel have worked continuously with the same customer for the past several years promoting deep relationships and a high degree of coordination and visibility into future customer activity levels.

Many of our hydraulic fracturing fleets and associated personnel have worked continuously with the same customer for the past several years promoting deep relationships and a high degree of coordination and visibility into future customer activity levels.

Furthermore, in light of our substantial market presence and historically high fleet utilization levels, we have established a variety of trusted relationships with key equipment, sand and other downhole consumable suppliers.

We believe these strategic relationships position us to acquire equipment, parts and materials on a timely and economic basis and allow our dedicated procurement and logistics team to support consistently safe and reliable operations.

We provide wireline and ancillary services on new oil well completions in the Permian Basin.

Wireline utilizes equipment with a drum of wireline to deploy perforating guns in the well to perforate the casing, cement, and formation.

Once the well is perforated, it is ready to be fractured.

Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy or push the perforating guns attached to the wireline through the lateral section of a well.

We own and operate a fleet of mobile wireline units and other auxiliary equipment to perform well completion services.

We also refer to our wireline units, pressure control equipment, other equipment and vehicles necessary to perform a job as a "spread" and the personnel assigned to the spread as a "crew." On average, one wireline spread consists of a wireline tractor truck with a large cab functioning as a mobile office where the engineer controls the wireline spooled drum along with associated pressure control iron and equipment, trailers and vehicles.

We currently have 23 wireline units.

We provide cementing services for completion of new wells and remedial work on existing wells.

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We believe that our cementing segment provides an organic growth opportunity for us to expand our service offerings within our existing customer base.

We provide wireline and ancillary services such as pumpdown on new oil well completions in the Permian Basin.

Wireline utilizes equipment with a drum of wireline to deploy perforating guns in the well to perforate the casing, cement, and formation.

Once the well is perforated, it is ready to be fractured.

Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy or push the perforating guns attached to wireline through the lateral section of a well.

We own and operate a fleet of mobile wireline units and other auxiliary equipment to perform well completion services.

We also refer to our wireline units, pressure control equipment, other equipment and vehicles necessary to perform a job as a " spread " and the personnel assigned to the spread as a " crew.

" On average, one wireline spread consists of a wireline tractor truck with a large cab functioning as mobile office where the engineer controls the wireline spooled drum along with associated pressure control iron and equipment, trailers and vehicles.

We currently have 23 wireline units.

Other Services

Coiled Tubing

Coiled tubing services involve injecting coiled tubing into wells to perform various completion well intervention operations.

Coiled tubing is a flexible steel pipe with a diameter of typically less than three inches and manufactured in continuous lengths of thousands of feet.

It is wound or coiled on a truck‑mounted reel for onshore applications.

Due to its small diameter, coiled tubing can be inserted into existing production tubing and used to perform a variety of services (including drillout of plugs) to enhance the flow of oil or natural gas.

Effective September 1, 2022, we shut down our coiled tubing operations and disposed of all of the assets.

We currently have 40 cementing units.

Our Customers

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Our top five customers accounted for a pproximately 63.2%, 84.0% and 85.7% of our revenue, for the years ended December 31, 2023, 2022 and 2021, respectively.

For the year ended December 31, 2022, Pioneer Natural Resources USA Inc.

("Pioneer"), Endeavor Energy Resources and XTO Energy accounted for 33.1%, 28.3% and 15.0%, respectively, of total revenue.

For the year ended December 31, 2023, Endeavor Energy Resources and XTO Energy accounted for 19.7% and 18.2%, respectively, of total revenue.

No other customer accounted for more than 10% of our total revenue for the year ended December 31, 2023.

On March 31, 2022, we entered into an amended and restated pressure pumping services agreement (the "A&R Pressure Pumping Services Agreement") with Pioneer , which was initially entered into in connection with our purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the "Pioneer Pressure Pumping Acquisition") .

The A&R Pressure Pumping Services Agreement, which was effective from January 1, 2022 to December 31, 2022, reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, and replaced the idle fees arrangement with equipment reservation fees (the "Reservation fees").

As part of the Reservation fees arrangement, the Company was entitled to receive compensation for all eligible contracted fleets that were made available to Pioneer at the beginning of every quarter in 2022 through the term of the A&R Pressure Pumping Services Agreement.

There have been many recent mergers and acquisitions in the oil and gas industry.

In October 2023, Pioneer Natural Resources USA, Inc.

(“Pioneer”) entered into a merger agreement with Exxon Mobil Corporation.

Mergers and acquisitions involving our customers could negatively impact our future business with them or positively impact our business by providing us access to potential new customers.

The A&R Pressure Pumping Services Agreement expired at the conclusion of its term and was replaced by the Fleet One Agreement and the Fleet Two Agreement described below.

On October 31, 2022, we entered into two pressure pumping services agreements with Pioneer, pursuant to which we will provide hydraulic fracturing services with two committed fleets, subject to certain termination and release rights.

The Fleet One Agreement was effective as of January 1, 2023 and will terminate on August 31, 2023.

The Fleet Two Agreement was effective as of January 1, 2023 and was originally planned to terminate on the one year anniversary of the date on which the fleet dedicated thereunder converted from a Tier II diesel Simul-Frac fleet to a Tier IV dual fuel zipper fleet, which was expected to occur in May 2023.

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 (the “Release Date”) 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.

On October 31, 2022, we entered into two pressure pumping services agreements (the “Fleet One Agreement” and “Fleet Two Agreement”) with Pioneer, pursuant to which we provided hydraulic fracturing services with two committed fleets, subject to certain termination and release rights.

The Fleet One Agreement was effective as of January 1, 2023 and was terminated on August 31, 2023.

The Fleet Two Agreement was effective as of January 1, 2023 and was terminated on May 12, 2023.

The markets in which we operate are highly competitive.

To be successful, an oilfield services company must provide services and equipment that meet the specific needs of oil and natural gas E&P companies at competitive prices.

To be successful, an oilfield service company must provide services and equipment that meet the specific needs of oil and natural gas E&P companies at competitive prices.

Competitive factors impacting sales of our services are price, reputation, technical expertise, emissions profile, service and equipment design and quality, and health and safety standards.

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We provide our services primarily in the Permian Basin, and we compete against different companies in each service and product line we offer.

Our competition includes many large and small oilfield services companies, including the largest integrated oilfield services companies.

Our major competitors include Halliburton Company, Liberty Energy Inc., ProFrac Holding Corp., Nextier Oilfield Solutions Inc., Patterson‑UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses.

Our competition includes many large and small oilfield service companies, including the largest integrated oilfield service companies.

Our major competitors include Halliburton Company, Liberty Energy Inc., Patterson‑UTI Energy Inc., ProFrac Holding Corp., RPC, Inc., and a number of private and locally-oriented businesses.

Our results of operations have historically reflected seasonal tendencies, generally in the fourth quarter, relating to the conclusion of our customers’ annual capital expenditure budgets, the holidays and inclement winter weather during which we may experience declines in our operating and financial results.

Operating Risks and Insurance

Our operations are subject to hazards inherent in the oilfield services industry, such as accidents, blowouts, explosions, fires and spills and releases that can cause personal injury or loss of life, damage or destruction of property, equipment, natural resources and the environment and suspension of operations.

In addition, claims for loss of oil and natural gas production and damage to formations can occur in the oilfield services industry.

Our operations are subject to hazards inherent in the oilfield service industry, such as accidents, blowouts, explosions, fires and spills and releases that can cause personal injury or loss of life, damage or destruction of property, equipment, natural resources and the environment and suspension of operations.

In addition, claims for loss of oil and natural gas production and damage to formations can occur in the oilfield service industry.

If a serious accident were to occur at a location where our equipment and services are being used, it could result in us being named as a defendant in lawsuits asserting large claims.

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Further, we have pollution legal liability coverage for our business entities, which would cover, among other things, third party liability and costs of clean up relating to environmental contamination on our premises while our equipment is in transit and on our customers’ job site.

With respect to our operations, coverage would be available under our pollution legal liability policy for any surface or subsurface environmental clean‑up and liability to third parties arising from any surface or subsurface contamination.

With respect to our operations, coverage would be available under our pollution legal liability policy for any surface or subsurface environmental cleanup and liability to third parties arising from any surface or subsurface contamination.

We also have certain specific coverages for some of our businesses, including our hydraulic fracturing and wireline services.

We maintain directors and officers 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.

however, our insurance coverage is subject to certain exclusions (including, for example, any required United States Securities and Exchange Commission (“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 all future claims.

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Changes in environmental, health and safety laws and regulations occur frequently, and any changes that result in more stringent and costly requirements could materially adversely affect our operations and financial position.

For example, following the election of President Biden and passage of laws such as the IRA 2022, it is possible that our operations may be subject to greater environmental, health and safety restrictions, particularly with regards to hydraulic fracturing and wireline, permitting and greenhouse gases ( " GHG " ) emissions.

For example, following the passage of laws such as the IRA 2022, it is possible that our operations may be subject to greater environmental, health and safety restrictions, particularly with regards to hydraulic fracturing and wireline, permitting and greenhouse gases ( " GHG " ) emissions.

We have not experienced any material adverse effect from compliance with current requirements;

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Any such changes in these laws and regulations could have a material adverse effect on our capital expenditures and operating expenses.

Although we do not believe the current costs of managing our wastes, as presently classified, to be significant, any

legislative or regulatory reclassification of oil and natural gas exploration and production wastes could increase our costs to manage and dispose of such wastes.

Although we do not believe the current costs of managing our wastes, as presently classified, to be significant, any legislative or regulatory reclassification of oil and natural gas E&P wastes could increase our costs to manage and dispose of such wastes.

Remediation of Hazardous Substances.

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Liability for the costs of removing or remediating previously disposed wastes or contamination, damages to natural resources, the costs of conducting certain health studies, amongst other things, is strict and joint and several.

In the course of our operations, we use materials that, if released, would be subject to CERCLA and comparable state laws.

In the course of

our operations, we use materials that, if released, would be subject to CERCLA and comparable state laws.

Therefore, governmental agencies or third parties may seek to hold us responsible under CERCLA and comparable state statutes for all or part of the costs to clean up sites at which such hazardous substances have been released.

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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, the EPA has proposed more recent rules covering the standards of performance for methane and volatile organic compounds emissions for oil and gas facilities, including leak detection, monitoring and repair, and a "super-emitter" response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties.

Certain of these requirements are currently subject to public comment, and the rule is expected to be finalized in 2023;

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

Additionally, the EPA has recently finalized rules covering the standards of performance for methane and volatile organic compounds emissions for oil and gas facilities, including leak detection, monitoring and repair, and a "super-emitter" response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, triggering certain investigation and repair requirements.

These requirements were finalized in 2023, but may 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.

Some countries, including the United States, have additionally made commitments to reduce global methane

emissions through initiatives such as the Global Methane Pledge, and have been called upon to phase out inefficient fossil fuel subsidies.

Following the president’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.

Some countries, including the United States, have additionally made commitments to reduce global methane emissions through initiatives such as the Global Methane Pledge, and have been called upon to phase out inefficient fossil fuel subsidies.

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

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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 liquefied natural gas export facilities or more restrictive GHG emissions limitations for oil and gas facilities.

On January 27, 2021, the president 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 suspended the issuance of new leases for oil and gas development on federal land for a time;

for more information, see our regulatory disclosure titled "Regulation of Hydraulic Fracturing and Related

Activities." Other actions that the current government 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.

For example, in January 2024 the government announced a temporary pause on pending decisions on liquefied natural gas exports to certain countries.

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.

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For example, the dunes sagebrush lizard, which is found only in the active and semi-stable shinnery oak dunes of southeastern New Mexico and adjacent portions of Texas (including areas where our customers operate), was a candidate species for listing under the ESA by the FWS for many years.

As a result of a recent settlement with certain environmental groups, the FWS, in July 2020, acted on a petition to list the dunes sagebrush lizard finding sufficient information to warrant a formal one-year review to consider listing the species.

While that deadline has been missed, the listing review is reportedly ongoing and a decision is expected in June 2023;

additionally, FWS has also solicited comments on a proposed conservation agreement that would implement certain protective practices for the species and authorize incidental take of the species resulting from certain covered activities, including exploration and development of oil and gas fields.

Most recently, the dunes sagebrush lizard has been proposed for listing as endangered in July 2023, FWS has also entered into voluntary conservation agreements that implement certain protective practices for the species and authorize incidental take of the species resulting from certain covered activities, including exploration and development of oil and gas fields.

However, to the extent any protections are implemented for this or any other species, it could cause us or our customers to incur additional costs or become subject to operating restrictions or operating bans in the affected areas.

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However, federal agencies have asserted regulatory authority over certain aspects of the process.

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.

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

For example, the Bureau of Land Management (“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.

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

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

The Department of the Interior ("DOI") has also issued a report recommending various changes to the federal leasing program, though many such changes would require congressional action.

In July 2023, the BLM proposed a rule to update the fiscal terms of federal oil and gas leases, which would increase fees, rents, royalties, and bonding requirements.

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

BLM anticipates a final action on the proposal in Spring 2024.

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

However, any regulations that ban or effectively ban such operations may adversely impact demand for our products and services.

Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have previously been proposed in Congress.

However, any regulations that restrict, ban or effectively ban such operations may adversely impact demand for our products and services.

Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from

the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have previously been proposed in Congress.

Several states and local jurisdictions in which we or our customers operate also have adopted or are considering adopting regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids.

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Our primary human capital management objectives are to effectively engage, develop, retain and reward our employees.

As of December 31, 2022, we employed approximatel y 2,000 people , none of which are unionized.

All of our employees work for or support our Completion Services reportable segment.

Our employees are a key component of our ability to attract and retain customers as a result of their operational excellence in the field.

Some examples of significant programs and initiatives that are focused to attract, develop and retain our diverse workforce include:

• Diversity and inclusion.

We believe that in order to attract and retain talent with the skill sets and expertise required to maximize our operational efficiencies across all levels in the Company, it is in our best interest to attempt to recruit and develop a diverse team and create a culture that is inclusive and provides equal opportunities for hiring and advancement for all employees and prospective employees.

Some examples of this effort include;

As of December 31, 2023, we emplo yed approximately 2,070 people, and n one of our employees are represented by a union.

All of our employees work for or support our hydraulic fracturing, wireline and cementing operating segments.

We believe that we have good relations with our employees.

We believe that our employees are a key component of our ability to attract and retain customers as a result of their operational excellence in the field.

Some examples of significant programs and initiatives that support our objective of attracting, developing and retaining our diverse and inclusive workforce include:

• Opportunity and Engagement.

We are an equal opportunity employer and prohibit discrimination against any employee and applicant on the basis of any legally protected characteristic.

We believe that in order to attract and retain talent with the skill sets and expertise that can help to maximize our operational efficiencies across all levels in the Company, it is in our best interest to create a culture that is inclusive.

We conducted an employee engagement survey in 2023 related to inclusion, belonging and other engagement efforts.

Some examples of this effort to recruit and develop a diverse team and create an inclusive culture include:

◦ a commitment to conducting business in a manner that respects all human rights in compliance within the requirements of applicable laws;

◦ efforts to promote and encourage respect for human rights and fundamental freedoms for all without distinctions of any kind such as race, color, sex, language, religion, political or other opinions;

◦ working in partnership with personnel, business parties and other parties directly linked to our operations that share our commitment to these same principles;

◦ efforts in our employment practices, including through our code of conduct, our equal employment opportunity employer policy, and our anti-harassment policy;

◦ to make it possible for grievances regarding health and safety to be addressed early and remediated directly, in confidence and without fear of retaliation;

the Company provides an anonymous Ethics and Compliance hotline that is promoted internally and accessible from our intranet and internet.

◦ a commitment within our business operations to promoting and encouraging respect for human rights and fundamental freedoms for all without distinctions of any kind, such as race, color, sex, language, religion, political or other opinions;

◦ working with personnel, business partners and other parties directly linked to our operations that share our commitment to these same principles;

◦ maintaining employment policies reflecting our commitments, including our code of conduct, our equal employment opportunity employer policy, and our anti-harassment and anti-discrimination policy;

◦ providing an anonymous Ethics and Compliance hotline that is promoted internally and accessible from our intranet and website to make it possible for grievances regarding health and safety to be addressed early and remediated directly, in confidence and without fear of retaliation.

• Training and Safety.

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The safety of our employees, our customers, and the communities in which we operate is paramount.

We track and evaluate safety incidents at wellsites and offices, and if an accident does occur, we take actions to mitigate similar incidents from reoccurring in the future.

The Company incentivizes employees to focus on conducting operations in accordance with our strict safety standards and encourages employees to immediately report any breach of safety protocol.

Ten percent of our executive officers’ annual target bonuses under the 2022 annual incentive program were based upon the Company’s achievement of certain safety goals, including a target total recordable incident rate of less than 0.65.

We track and evaluate safety incidents at wellsites and offices, and if an accident does occur, we aim to take actions to mitigate similar incidents from reoccurring in the future.

The Company seeks to incentivize employees to focus on conducting operations in accordance with our strict safety standards and encourages employees to immediately report any breach of safety protocol.

Ten percent of our executive officers’ annual target bonuses under the 2023 annual incentive program were based upon the Company’s achievement of certain safety goals, including a target total recordable incident rate.

• Professional Development.

In 2022, ProPetro launched a leadership training initiative for all positions that are responsible for supervision and oversight of other employees.

This effort includes development of 255 frontline and above leadership positions over a seven month period.

In 2021, ProPetro introduced a Tuition Reimbursement Program to encourage employees to pursue professional development interests that will help strengthen skills and competencies required for their current position or future roles in the business.

• Health, Wellness and Benefits.

In 2023, the Company continued its focus on leadership development, targeting leadership positions including frontline supervisors and above.

In addition, we sought to make improvements to our succession planning tools and process to enable greater consistency, talent identification and development planning.

We also introduced behavioral optimization tools to aid individual and team performance and talent acquisition efforts.

• Compensation, Health, Wellness and Benefits.

Our employee benefit offerings are designed to meet the varied and evolving needs of a diverse workforce across the Company and we believe are consistent with those provided by our peer companies with which we compete for talent.

The Company provides employees with the ability to participate in health and welfare plans, including medical, dental, life, accidental death and dismemberment and short-term and long-term disability insurance plans.

We periodically review of our health-related benefits program to ensure that our offerings are market competitive and effectively utilized by employees.

Based on our recent review, we made comprehensive adjustments to our health-related benefits programs, which improved the cost and quality of coverage.

We significantly increased the number of employee meetings to provide education and encourage individuals to maximize the value of benefits offered, resulting in an overall increase in participation and positive feedback from employees.

In 2022, we implemented improvements to our 401(k) plan with a focus on improving plan structure, allowing for immediate vesting of employer’s contributions, reducing program administration, providing employee education and increasing plan participation.

We also implemented an hourly bonus structure in 2022 to provide greater reward and recognition and improve employee retention.

For hydraulic fracturing field employees and related field support positions, a performance element was included to drive key operating metrics.

In 2023, as part of our 401(k) plan, we introduced opportunities for holistic financial wellness education and group and individual consultations for employees.

The program opportunities included many crucial topics ranging from budgeting and debt management to understanding plan options and investment strategy.

Concerning health benefits, in 2023 we added additional services focused on emotional and mental health, as well as certain preventative health services related to the early detection of concerns including breast cancer, diabetes and cardiovascular disease.

We also strive to give back to the areas in which we conduct business operations, and in which our employees live and work.

Our employees give generously and receive up to 8 hours per year of paid time off to participate in community service.

Our employee-led P.U.M.P.

Committee also organizes or sponsors events in which employees can choose to participate in addition to our paid community service time benefit.

Availability of Filings

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the " Exchange Act " ), are made available free of charge on our internet website at www.propetroservices.com, as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are made available free of charge on our internet website at www.propetroservices.com, as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC.

The SEC maintains an internet site that contains our reports, proxy and information statements and our other SEC filings.

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

What changed 10-K

Item 1. Business