What changed in this filing

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Item 1A. Risk Factors

2022-03-30 compared with 2021-02-26 · 169 added, 222 removed, 324 unchanged (55% of the section changed)

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Macroeconomic Conditions

The COVID-19 outbreak and its potential adverse effect on business operations and financial condition.

The outbreak of COVID-19 has spread across the globe and was declared a public health emergency by the WHO and a National Emergency by the President of the United States.

Most states and municipalities in the United States, including Texas, declared public health emergencies and announced aggressive actions to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders.

To the extent COVID-19 continues or worsens, governments may impose additional similar restrictions.

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has, and will likely continue to, adversely affect the operations of the Company’s business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas and an oversupply of crude oil.

Many E&P companies have announced significant cuts in capital spending and production in response to reduced demand and declining prices.

There has been a general slowdown in E&P company activity due to the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the oversupply of oil and natural gas in the market.

The direct impact to the Company’s operations began to take affect at the close of the first quarter ended March 31, 2020, and have continued through the year ended December 31, 2020, however, the extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact, newly discovered strains of the virus and uncertainty surrounding the vaccine supplies and implementation.

At the time of this filing, cases of COVID-19 in the U.S.

remain high, particularly in Texas, where we conduct significant operations.

Our operations are subject to inherent risks, some of which are beyond our control.

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Similarly, our operations involve the storage, handling and use of explosives.

Accidents resulting from the use of explosives

in our operations could expose us to reputational risks and liability for damages or otherwise adversely impact our operations or the operations of our customers.

Any such occurrneces could have a material adverse effect on our operating results, financial condition and cash flows.

Accidents resulting from the use of explosives in our operations could expose us to reputational risks and liability for damages or otherwise adversely impact our operations or the operations of our customers.

Any such occurrences could have a material adverse effect on our operating results, financial condition and cash flows.

We do not have insurance against all risks, either because insurance is not available or because of the high premium costs.

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Additionally, extended drought conditions in our operating regions could impact our ability or our customers’ ability to source sufficient water or increase the cost for such water.

As a result, a natural disaster or inclement weather conditions could severely disrupt the normal operation of our business and adversely impact our financial condition and results of operations.

In addition, some scientists have concluded that increasing concentrations of GHG in the atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climate events that could have an adverse effect on our operations and the operations of our customers.

As a result, a natural disaster or inclement

weather conditions could severely disrupt the normal operation of our business and adversely impact our 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 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.

Such physical risks may also impact our suppliers, which may adversely affect our ability to provide our products and services.

Extreme weather conditions can interfere with our operations and increase our costs, and damage resulting from extreme weather may not be fully insured.

A terrorist attack, armed conflict or civil unrest could harm our business.

The occurrence or threat of terrorist attacks in the United States or other countries, anti‑terrorist efforts and other armed conflicts involving the United States or other countries, including continued hostilities in the Middle East or domestic civil unrest, may adversely affect the United States and global economies and could prevent us from meeting our financial and other obligations.

For example, on February 24, 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 actors have levied severe sanctions on Russia.

The geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy.

If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on demand for our services and causing a reduction in our revenues.

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Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

The COVID-19 outbreak and its potential adverse effect on business operations and financial condition.

The outbreak of COVID-19 spread across the globe and was declared a public health emergency by the WHO and a National Emergency by the President of the United States in March of 2020.

Significant progress has been made to combat COVID-19 and its multiple variants, however, it remains a global challenge and continues to have an impact on our financial results.

The extent of the COVID-19 outbreak on the Company’s operational and financial performance will significantly depend on further developments, including the duration and spread of the outbreak and continued impact on our personnel, customer activity and third-party providers.

The COVID-19 pandemic resulted, and is likely to continue to result, in significant economic disruption and has, and will likely continue to, adversely affect the operations of the Company’s business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas and an oversupply of crude oil.

The direct impact to the Company’s operations began to take affect at the close of the first quarter ended March 31, 2020, and have continued through the year ended December 31, 2021, however, the extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact, newly discovered strains of the virus and uncertainty surrounding the vaccine supplies and implementation.

At the time of this filing, cases of COVID-19 in the U.S.

remain high, particularly in Texas, where we conduct significant operations.

Industry Conditions and Competition

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In addition, certain of our customers could become unable to pay their vendors and service providers, including us, as a result of the decline in commodity prices.

Reduced discovery rates of new oil and natural gas reserves in our areas of operation as a result of decreased capital spending may also have a negative long‑term impact on our business, even in an environment of stronger oil and natural gas prices, to the extent the reduced number of wells that need our services or equipment more than offsets new drilling and completion activity and complexity.

reduced number of wells that need our services or equipment more than offsets new drilling and completion activity and complexity.

Any of these conditions or events could adversely affect our operating results.

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Prices for oil and natural gas historically have been extremely volatile and are expected to continue to be volatile.

During the year ended December 31, 2019, the posted West Texas Intermediate (“WTI”) price for oil has ranged from a low of $44 per Barrel (“Bbl”) in January 2019 to a high of $67 per Bbl in April 2019.

During the year ended December 31, 2019, the posted Henry Hub price for natural gas has ranged from a low of $2.07 per Million British Thermal Units (“MMbtu”) in August 2019 to a high of $3.59 per MMbtu in January 2019.

During the year ended December 31, 2020, however, price for oil and natural gas declined significantly, with the closing price of oil reaching to lows of negative $37 per Bbl in April 2020.

During the year ended December 31, 2020, the posted West Texas Intermediate (“WTI”) price for oil has ranged from a low of negative $37 per Barrel (“Bbl”) in April 2020.

This negative pricing resulted from the holders of expiring front month oil purchase contracts being unable or unwilling to take physical delivery of crude oil and accordingly forced to make payments to purchasers of such contracts in order to transfer the corresponding purchase obligations.

During the second half of 2020, there was a partial recovery as the closing price of oil reached $49 per Bbl in December 2020 and increased further to over $63 per Bbl in February 2021, attributing to the continued volatility of oil pricing.

The significant decline in crude oil prices during 2020 is largely attributable to the global outbreak of COVID-19, which has reduced demand for oil and natural gas because of significantly reduced global and national economic activity.

In addition, in March 2020, OPEC Plus failed to agree on a plan to cut production of oil and natural gas.

Subsequently, Saudi Arabia announced plans to increase production to record levels and reduce the prices at which they sell oil and, in turn, Russia responded with threats to also increase production.

Collectively, these events created an unprecedented global oil and natural gas supply and demand imbalance, reduced global oil and natural gas storage capacity, caused oil prices to decline significantly and resulted in continued volatility in oil, natural gas and NGLs prices through 2020.

On April 12, 2020, OPEC Plus agreed to cut oil production by 9.7 million barrels per day (“mb/d”) in May and June 2020;

however, on July 15, 2020, OPEC Plus agreed to increase production by 1.6 million barrels per day starting in August 2020.

On December 3, 2020, OPEC Plus agreed to increase production by an additional 1.0 mb/d beginning in January 2021, resulting in total production cuts of 7.1 mb/d by the end of February 2021.

During the second half of 2020, there was a partial recovery as the closing price of oil reached $49 per Bbl in December 2020.

During the year ended December 31, 2021, the lowest price for oil was $47 per Bbl in January 2021, however increased significantly with the closing price of oil reaching a high of $85 per Bbl in October 2021.

In May 2020, the Texas Railroad Commission decided against imposing oil production cuts, however, waived fees related to new crude oil storage projects.

Several other state agencies have made similar decisions.

We cannot predict whether any of these activities will reduce the global supply and demand imbalance or whether or when oil and natural gas production

and economic activities will return to normalized levels.

We cannot predict whether any of these activities will reduce the global supply and demand imbalance or whether or when oil and natural gas production and economic activities will return to normalized levels.

In the absence of additional reductions to global production, oil, natural gas and NGLs prices could remain at current levels, or decline further, for an extended period of time, which will adversely impact the demand for our services.

If the prices of oil and natural gas continue to be volatile, reverse their recent increases or decline, our operations, financial condition, cash flows and level of expenditures may be materially and adversely affected.

If the prices of oil and natural gas continue to be volatile, reverse their recent

increases or decline, our operations, financial condition, cash flows and level of expenditures may be materially and adversely affected.

Fuel conservation measures could reduce demand for oil and natural gas which would in turn reduce the demand for our services.

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Additionally, there may be new companies that enter our business, or re‑enter our business with significantly reduced indebtedness following emergence from bankruptcy, or our existing and potential customers may develop their own oilfield services business.

Our ability to maintain current

revenues and cash flows, and our ability to market our services and expand our operations, could be adversely affected by the activities of our competitors and our customers.

If our competitors substantially increase the resources they devote to the development and marketing of competitive services or substantially decrease the prices at which they offer their services, we may be unable to effectively compete.

Our ability to maintain current revenues and cash flows, and our ability to market our services and expand our operations, could be adversely affected by the activities of our competitors and our customers.

If our competitors substantially increase the resources they devote to the

development and marketing of competitive services or substantially decrease the prices at which they offer their services, we may be unable to effectively compete.

Many contracts are awarded on a bid basis, which may further increase competition based primarily on price.

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Any inability to compete effectively could have a material adverse impact on our financial condition and results of operations.

Increasing competition for workers, as well as labor shortages, could adversely affect our business.

A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, increased competition for employees both within the oilfield service industry and the larger labor market, federal unemployment subsidies, including unemployment benefits offered in response to the ongoing COVID-19 pandemic, and other government regulations.

Although we have not experienced any material labor shortages to date, we have observed an increasingly competitive labor market.

The increasing competition for employees could result in higher compensation costs and difficulties in maintaining a capable workforce to operate our equipment.

If we are unable to hire and retain employees, or if mitigation measures we may take to respond to a decrease in labor availability have unintended negative effects, our business could be adversely affected.

A sustained labor shortage, lack of skilled labor force, increased turnover, or labor cost inflation, caused by the ongoing COVID-19 pandemic or as a result of general macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, which could negatively affect our ability to efficiently staff and operate our equipment, deploy additional assets to meet customer demand, and have other adverse effects on our results of operations and financial condition.

Customers and Employees

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It is likely that we will continue to derive a significant portion of our revenue from a relatively small number of customers in the future.

Our top five customers represented approximately 57% and 49% of our consolidated revenues for 2020 and 2019, respectively.

Within our High Specification Rig segment, our top five customers represented approximately 56% and 42% of our revenues for 2020 and 2019, respectively.

Within our Completion and Other Services segment, our top five customers represented approximately 82% and 71% of our revenues for 2020 and 2019, respectively.

Within our Processing Solutions segment, our top five customers represented approximately 67% and 82% of our revenues for 2020 and 2019.

During the year ended December 31, 2020, EOG Resources, Inc.

and Concho Resources, Inc., accounted for approximately 21% and 17%, respectively, of our consolidated revenues.

During the year ended December 31, 2021, EOG and Conoco, accounted for approximately 15% and 10% of our consolidated revenues, respectively.

The table below presents the percentage of revenues, for each respective segment, from our top five customers for the years ended December 31, 2021 and 2020.

Year Ended December 31,

High Specification Rigs 47 % 56 %

Wireline Services 68 % 100 %

Processing Solutions and Ancillary Services 38 % 44 %

Consolidated 42 % 57 %

Our customers may be forced to curtail or shut in production due to a lack of storage capacity.

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Because of the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the current oversupply of oil and natural gas in the market, available storage and transportation capacity for our customers’ production may be limited or completely unavailable in the future.

If there is insufficient capacity available on these systems, if these systems are unavailable to our customers, or if these systems are unavailable to our customers on commercially reasonable terms, the prices our customers receive for their production could be significantly depressed.

be significantly depressed.

In April 2020, extreme shortages of transportation and storage capacity caused the WTI oil futures closing price to go as low as a negative $37 per Bbl.

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As a result, we are not insured against any losses resulting from the death of our key employees.

Unsatisfactory safety performance may negatively affect our customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues.

Unsatisfactory safety performance may negatively affect our current and future customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues.

Our ability to retain existing customers and attract new business is dependent on many factors, including our ability to demonstrate that we can reliably and safely operate our business in a manner that is consistent with applicable laws, rules and permits, which legal requirements are subject to change.

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In September 2018, the BLM published a revised rule which rescinded and revised several components of the 2016 rule.

However, in July 2020 and October 2020, federal district courts in California and Wyoming, respectively, vacated the rule, and on January 20, 2021, President Biden published an executive order calling for the review and potential revision of the September 2018 rule.

However, in July 2020 and October 2020, federal district courts in California and Wyoming, respectively, vacated these rulemakings, and on January 20, 2021, President Biden published an executive order calling for the review and potential revision of the September 2018 rule.

Because of the foregoing, methane requirements on federal land remain uncertain at this time.

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As a result, the EPA may impose area-specific regulations in certain areas identified as tribal lands that may require additional emissions controls on existing equipment.

Such requirements will likely result in increased operating and compliance costs

for our customers in these regions.

Such requirements will likely result in increased operating and compliance costs for our customers in these regions.

Additionally, the Biden Administration has taken several actions to curtail oil and gas development on federal lands;

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The requirements for such permits vary depending on the location where such regulated activities will be conducted.

As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued, and the conditions that may be imposed in connection with the granting of the permit.

As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit

to be issued, and the conditions that may be imposed in connection with the granting of the permit.

In addition, some of our customers’ drilling and completion activities may take place on federal land or Native American lands, requiring leases and other approvals from the federal government or Native American tribes to conduct such drilling and completion activities or other regulated activities.

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From time to time regulators develop and implement plans directing certain wells located in proximity to seismic incidents to restrict or suspend disposal well operations.

In addition, ongoing lawsuits allege that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal

rules regulating waste disposal.

For example, in September 2021, the TRRC issued a notice to disposal well operators in the Gardendale Seismic Response Area near Midland, Texas to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18 month period.

The notice also required disposal well operators to provide injection data to TRRC staff to further analyze seismicity in the area.

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

In addition, ongoing lawsuits allege that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal.

These developments could result in additional regulation and restrictions on the use of injection wells by our customers to dispose of flowback and produced water and certain other oilfield fluids.

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In recent years, certain states, such as North Dakota and Texas, and certain counties have increased enforcement of weight limits on trucks used to transport raw materials, such as the fluids that we transport in connection with our fluids management services, on their public roads.

It is possible that the states, counties and cities in which we operate our business may modify their laws to further reduce truck weight limits or impose curfews or other restrictions on the use of roadways.

is possible that the states, counties and cities in which we operate our business may modify their laws to further reduce truck weight limits or impose curfews or other restrictions on the use of roadways.

Such legislation and enforcement efforts could result in delays in, and increased costs to, transport fluids and otherwise conduct our business.

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Moreover, accidental releases or spills may occur in the course of our operations, and we could incur significant costs and liabilities as a result of such releases or spills, including any third‑party claims for damage to property, natural resources or persons.

private parties, including the owners of properties upon which we perform services and facilities where our wastes are taken for reclamation or disposal, also may have the right to pursue legal actions to enforce compliance as well as to seek damages for non‑compliance with environmental laws and regulations or for personal injury or property or natural resource damages.

In addition, private parties, including the owners of properties upon which we perform services and facilities where our wastes are taken for reclamation or disposal, also may have the right to pursue legal actions to enforce compliance as well as to seek damages for non‑compliance with environmental laws and regulations or for personal injury or property or natural resource damages.

Some environmental laws and regulations may impose strict liability, which means that in some situations we could be exposed to liability even if our conduct was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties.

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Since the report did not find a direct link between hydraulic fracturing itself and contamination of groundwater resources, this years-long study report does not appear to provide any basis for further regulation of hydraulic fracturing at the federal level at this time.

However, certain of our customers have operations on federal lands.

On January 27, 2021, President Biden issued an

executive order that suspends the issuance of new leases for oil & gas development on federal lands to the extent permitted by law and calls for a review of existing leasing and permitting practices for such activities on federal lands.

Although the order does not apply to existing operations under valid leases, we cannot guarantee that further action will not be taken to curtail oil and gas development on federal land.

However, certain of our customers have operations on federal or tribal lands.

The Biden Administration has announced that it is considering more stringent regulations for operations on such lands, and 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 Department of Interior 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.

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

Various state and local governments have also implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements, well construction, and temporary or permanent bans on hydraulic fracturing in certain areas.

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In response to these concerns, regulators in some states are seeking to impose additional requirements on hydraulic fracturing fluid disposal practices, including restrictions on the operations of produced water disposal wells and imposing more stringent requirements on the permitting of such wells.

The adoption and implementation of any new laws or regulations that restrict our customers’ ability to dispose of produced water could result in increased operating costs for the customer, which in turn could indirectly reduce demand for our services.

For more information, see our regulatory disclosure titled “Hydraulic Fracturing.” The adoption and implementation of any new laws or regulations that restrict our customers’ ability to dispose of produced water could result in increased operating costs for the customer, which in turn could indirectly reduce demand for our services.

Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general or hydraulic fracturing in particular.

If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection

activities and make it more difficult or costly to perform hydraulic fracturing.

Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas E&P activities and, therefore, adversely affect demand for our services and our business.

Such laws or regulations could also materially increase our costs of compliance and doing business.

Climate change legislation or regulations restricting emissions of GHG could result in increased operating costs and reduced demand for our services.

Our operations, and those of our customers, are subject to a series of risks arising from climate change.

The threat of climate change continues to attract considerable attention in the United States and in foreign countries.

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However, President Biden has highlighted addressing climate change as a priority of his administration, which includes certain potential initiatives for climate change legislation to be proposed and passed into law.

Additionally, on January 27, 2021, President Biden issued an executive order that calls for substantial action on climate change, calling for, among other things, the increased use of zero-emission vehicles by the federal government, increased production of offshore wind energy, the elimination of subsidies provided to the fossil fuel industry, and the suspension of the issuance of new leases for oil & gas development on federal lands to the extent permitted by law.

Moreover, following the U.S.

Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States.

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 as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.

At the international level, there is a non-binding agreement, the United Nations-sponsored Paris Agreement, for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020.

Although the United States withdrew from the Paris Agreement on November 4, 2020, President Biden signed an Executive Order on January 20, 2021 recommitting the United States to the Paris Agreement.

However, the impacts of this executive order and the terms of any legislation or regulation to implement the United States’ commitment remain unclear at this time.

The federal regulation of methane emissions from oil and gas facilities has been subject to substantially controversy in recent years;

for more information, please see our regulatory disclosure “Air Emissions.” 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 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 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 a 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.

However, the impacts of these actions remain 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 political office.

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For more information, see our regulatory disclosure titled “Hydraulic Fracturing.” Other actions that could be pursued by the Biden Administration may include the imposition of more restrictive requirements for the establishment of pipeline infrastructure or the permitting of LNG export facilities, as well as more restrictive GHG emission 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 the largest oil and natural gas companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to climate change or alleging that companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.

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

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

There are also increasing financial risks for companies in the fossil fuel sector as shareholders currently invested in fossil-fuel related companies may elect in the future to shift some or all of their investments to other sectors.

Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.

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

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

There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.

Recently, the Federal Reserve announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector.

In late 2020, the Federal Reserve announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector.

Subsequently, the Federal Reserve has issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities.

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 Securities and Exchange Commission announced its 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.

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.

climatic changes, or impairing their ability to continue to operate in an economic manner, which also 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.

For more information, see our risk factor titled “Seasonal weather conditions and natural disasters could severely disrupt normal operations and harm our business.”

Increased attention to environmental, social, and governance (“ESG”) matters and conservation measures may adversely impact our or our customers’ business.

Increasing attention to, and societal expectations on companies to address, climate change and other environmental and social impacts, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our customers’ products, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets.

Increasing attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations and private litigation against us or our customers.

To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors.

For more information, see our risk factor titled “Our operations, and those of our suppliers and customers, are subject to a series of risks arising from climate change.”

Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, certain statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.

Additionally, we may announce various targets or product and service offerings in an attempt to improve our ESG profile.

However, we cannot guarantee that we will be able to meet any such targets or that such targets or offerings will have the intended results on our ESG profile, including but not limited to as a result of unforeseen 27 costs, consequences, or technical difficulties associated with such targets or offerings.

Also, despite any voluntary actions, we may receive pressure from certain investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals or policies, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.

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.

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.

The Endangered Species Act and Migratory Bird Treaty Act and other restrictions intended to protect certain species of wildlife govern our and our customers’ operations and additional restrictions may be imposed in the future, which constraints could have an adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new oil and natural gas wells.

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A cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss.

We depend on information technology systems that we manage, and others that are managed by our third-party service and equipment providers, to conduct our day-to-day operations, including critical systems, and these systems are subject to risk associated with cyber incidents or attacks.

Our technology systems and networks, and those of our vendors, suppliers and other business partners, may become the target of cyber-attacks or information security breaches.

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Risks Related to Our Ownership and Capital Structure

CSL and Other Directors

CSL has the ability to direct the voting of a majority of our voting stock, and their interests may conflict with those of our other shareholders.

The Legacy Owners, CSL Opportunities II, CSL Fund II Preferred Holdings, LLC and CSL Energy Opportunities Master Fund, LLC (“CSL Master Fund”) own approximately 57.5% of our voting interests.

CSL holds a majority of the voting interests in each of the Legacy Owners, CSL Opportunities II, CSL Fund II and CSL Master Fund.

CSL and its affiliates beneficially own an aggregate of approximately 3,025,247 shares of Class A Common Stock, 6,416,154 units in Ranger LLC (“Ranger Units”) and 6,416,154 shares of our Class B Common Stock, par value $0.01 per share (“Class B Common Stock”).

CSL’s beneficial ownership of greater than 50% of our voting stock means CSL will be able to control matters requiring shareholder approval, including the election of directors (other than certain rights of Bayou Holdings to designate nominees to our Board of Directors as discussed further herein), changes to our organizational documents and significant corporate transactions.

This concentration of ownership makes it unlikely that any other holder or group of holders of our Class A Common Stock (other than Bayou Holdings) will be able to affect the way we are managed or the direction of our business.

Further, we entered into a stockholders’ agreement with the Legacy Owners and Bayou Holdings, CSL Opportunities II and CSL Fund II (together, the “Bridge Loan Lenders”).

Among other things, the stockholders’ agreement provides (i) CSL with the right to designate a certain number of nominees to our Board of Directors for so long as CSL beneficially owns at least 10% of our common stock and (ii) Bayou Holdings with the right to designate two nominees to our Board of Directors for so long as CSL beneficially owns at least 50% of our common stock.

The interests of CSL and Bayou Holdings with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other shareholders.

Further, CSL and Bayou Holdings may have different tax positions from us, especially in light of the TRA we entered into with certain of our stockholders in connection with the Offering , that could influence their decisions regarding whether and when to support the disposition of assets, the incurrence or refinancing of new or existing indebtedness, or the termination of the TRA and the acceleration of our obligations thereunder.

In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any challenge by any taxing authority to our tax reporting positions may take into consideration CSL’s or Bayou Holdings’ tax or other considerations that may differ from the considerations of us or our other shareholders.

Given this concentrated ownership, CSL (and, in certain circumstances, Bayou Holdings) would have to approve any potential acquisition of us.

The existence of a significant shareholder and the stockholders’ agreement may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our company.

Moreover, CSL’s concentration of stock ownership may adversely affect the trading price of our Class A Common Stock to the extent investors perceive a disadvantage in owning stock of a company with a significant shareholder.

CSL, Bayou Holdings and their respective affiliates are not limited in their ability to compete with us, and the corporate opportunity provisions in our amended and restated certificate of incorporation could enable CSL and Bayou Holdings to benefit from corporate opportunities that might otherwise be available to us.

Our governing documents provide that CSL, Bayou Holdings and their respective affiliates (including portfolio investments of CSL and its affiliates) are not restricted from owning assets or engaging in businesses that compete directly or indirectly with us.

In particular, subject to the limitations of applicable law, our amended and restated certificate of incorporation, among other things:

• permits CSL, Bayou Holdings and their respective affiliates to conduct business that competes with us and to make investments in any kind of property in which we may make investments;

• provides that if CSL, Bayou Holdings or their respective affiliates, or any employee, partner, member, manager, officer or director of CSL, Bayou Holdings or their respective affiliates who is also one of our directors or officers, becomes aware of a potential business opportunity, transaction or other matter, they will have no duty to communicate or offer that opportunity to us.

CSL, Bayou Holdings or their respective affiliates may become aware, from time to time, of certain business opportunities and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunity.

Furthermore, such businesses may choose to compete with us for these opportunities, possibly causing these opportunities to not be available to us or causing them to be more expensive for us to pursue.

In addition, CSL, Bayou Holdings and their respective affiliates may dispose of equipment or other assets in the future, without any obligation to offer us the opportunity to purchase any of those assets.

As a result, our

renouncing our interest and expectancy in any business opportunity that may be from time to time presented to CSL, Bayou Holdings and their respective affiliates could adversely impact our business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for ours.

A significant reduction of CSL’s ownership interests in us could adversely affect us.

We believe that CSL’s ownership interest in us provides with it an economic incentive to assist us to be successful.

CSL is not subject to any obligation to maintain its ownership interest in us and may elect at any time to sell all or a substantial portion of or otherwise reduce its ownership interest in us.

If CSL sells all or a substantial portion of its ownership interest in us, it may have less incentive to assist in our success and its affiliate(s) that are expected to serve as members of our Board of Directors may resign.

Such actions could adversely affect our ability to successfully implement our business strategies which could adversely affect our cash flows or results of operations.

Certain of our executive officers and directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our executive officers and directors, who are responsible for managing the direction of our operations, hold positions of responsibility with other entities (including affiliated entities) that are in the oil and natural gas industry.

These executive officers and directors may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated.

Due to these existing and potential future affiliations, these individuals may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest.

They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present those opportunities to us.

These conflicts may not be resolved in our favor.

Tax Receivable Agreement (“TRA”) and Structure

We are required to make payments under the TRA for certain tax benefits that we may claim, and the amounts of such payments could be significant.

Holders of Ranger Units other than Ranger (the “Ranger Unit Holders”) have the right to exchange their Ranger Units (and a corresponding number of shares of Class B Common Stock) for shares of our Class A Common Stock at an exchange ratio of one share of Class A Common Stock for each Ranger Unit (and a corresponding number of shares of Class B Common Stock) exchanged (subject to conversion rate adjustments for stock splits, stock dividends and reclassifications), or, if either we or Ranger LLC so elects, cash.

We have entered into a TRA with certain members of Ranger Unit Holders (each such person a “TRA Holder”).

This agreement generally provides for the payment by us to each TRA Holder of 85% of the net cash savings, if any, in U.S.

federal, state and local income and franchise tax that we actually realize (computed using the estimated impact of state and local taxes) or are deemed to realize in certain circumstances in periods after the Offering as a result of certain increases in tax basis and certain benefits attributable to imputed interest.

We will retain the benefit of the remaining 15% of these cash savings.

Payments we make under the TRA will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return.

The term of the TRA commenced upon the completion of the Offering and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA (or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers, asset sales, other forms of business combination or other changes of control), and we make the termination payments specified in the TRA.

The payment obligations under the TRA are our obligations and not obligations of Ranger LLC, and we expect that the payments we will be required to make under the TRA will be substantial.

Estimating the amount and timing of payments that may become due under the TRA is by its nature imprecise.

For purposes of the TRA, cash savings in tax generally are calculated by comparing our actual tax liability (computed using the estimated impact of state and local taxes) to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the TRA.

The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of the redemptions of Ranger Units, the price of our Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming TRA Holder’s tax basis in its Ranger Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount, character and timing of the taxable income we generate in the future, the U.S.

federal income tax rates then applicable, and the portion of our payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.

Our ability to realize the tax benefits that we currently expect to be available as a result of the increases in tax basis created by redemptions and our ability to utilize the interest deductions imputed under the TRA depends on a number of assumptions, including that we earn sufficient taxable income each year during the period over which such deductions are available and that there are no adverse changes in applicable law or regulations.

If our actual taxable income was insufficient or there were adverse changes in applicable law or regulations, we may be unable to realize all or a portion of these expected benefits and our cash flows could be negatively affected.

In certain cases, payments under the TRA may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect to the tax attributes subject to the TRA.

If we experience a change of control (as defined under the TRA, which includes certain mergers, asset sales and other forms of business combinations) or the TRA terminates early (at our election or it is terminated early due to our breach of a material obligation thereunder) our obligations under the TRA would accelerate and we would be required to make a substantial immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate equal to one-year London Interbank Offered Rate (“LIBOR”) plus 150 basis points).

The calculation of hypothetical future payments will be based upon certain assumptions and deemed events set forth in the TRA, including (i) the assumption that we have sufficient taxable income to fully utilize the tax benefits covered by the TRA (including having sufficient taxable income to currently utilize any accumulated net operating loss carryforwards) and (ii) the assumption that any Ranger Units that the TRA Holders or their permitted transferees own on the termination date are deemed to be redeemed on the termination date.

Any early termination payment may be made significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the termination payment relates.

As a result of either an early termination or a change of control, we could be required to make payments under the TRA that exceed our actual cash tax savings under the TRA.

In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales or other forms of business combinations or changes of control that could be in the best interests of holders of our Class A Common Stock.

For example, if the TRA were terminated as of December 31, 2020 the present value of the estimated termination payments would, in the aggregate, be approximately $9.9 million (calculated using a discount rate equal to one-year LIBOR plus 150 basis points applied against an undiscounted liability of approximately $10.0 million).

The foregoing amount is merely an estimate and the actual payment could differ materially.

There can be no assurance that we will be able to finance our obligations under the TRA.

In the event that our payment obligations under the TRA are accelerated upon certain mergers, other forms of business combinations or other changes of control, the consideration payable to holders of our Class A Common Stock could be substantially reduced.

If we experience a change of control (as defined under the TRA, which includes certain mergers, asset sales and other forms of business combinations), we would be obligated to make a substantial, immediate lump-sum payment, and such payment may be significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the payment relates.

As a result of this payment obligation, holders of our Class A Common Stock could receive substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation.

Further, our payment obligations under the TRA will not be conditioned upon the TRA Holders having a continued interest in us or Ranger LLC.

Accordingly, the TRA Holders’ interests may conflict with those of the holders of our Class A Common Stock.

We will not be reimbursed for any payments made under the TRA in the event that any tax benefits are subsequently disallowed.

Payments under the TRA will be based on the tax reporting positions that we will determine.

The TRA Holders will not reimburse us for any payments previously made under the TRA if any tax benefits that have given rise to payments under the TRA are subsequently disallowed, except that excess payments made to any TRA Holder will be netted against payments that would otherwise be made to such TRA Holder, if any, after our determination of such excess.

As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity.

In certain circumstances, Ranger LLC will be required to make tax distributions to the Ranger Unit Holders, including us, and the tax distributions that Ranger LLC will be required to make may be substantial.

To the extent we receive tax distributions in excess of our tax liabilities and obligations to make payments under the TRA and do not distribute such cash balances as dividends on our Class A Common Stock, the Ranger Unit Holders (other than us) would benefit from such accumulated cash balances if they exercise their Redemption Right.

Ranger LLC is treated as a partnership for U.S.

federal income tax purposes and, as such, is not subject to U.S.

federal income tax.

Instead, taxable income is allocated to the Ranger Unit Holders, including us.

Pursuant to the Ranger LLC Agreement, Ranger LLC will make generally pro rata cash distributions, or tax distributions, to the Ranger Unit Holders, including us, calculated using an assumed tax rate, to allow each of the Ranger Unit Holders to pay its respective taxes on such holder’s allocable share of Ranger LLC’s taxable income.

Under applicable tax rules, Ranger LLC is required to allocate taxable income disproportionately to its members in certain circumstances.

Because tax distributions are determined based on the Ranger Unit Holder that is allocated the largest amount of taxable income on a per unit basis and on an assumed tax rate that is the highest possible rate applicable to any Ranger Unit Holder, but will be made pro rata based on ownership, Ranger LLC may be required to make tax distributions that, in the aggregate, exceed the amount of taxes that Ranger LLC would have paid if it were taxed on its net income at the assumed rate.

The pro rata distribution amounts may also be increased to the extent necessary, if any, to ensure that the amount distributed to Ranger Inc.

is sufficient to enable Ranger Inc.

to pay its actual tax liabilities and amounts payable under the TRA (other than accelerated amounts payable under the TRA as a result of a change of control or termination event, which we expect to be subject to restrictions contained in our Credit Facility).

Funds used by Ranger LLC to satisfy its tax distribution obligations will not be available for reinvestment in our business.

Moreover, the tax distributions Ranger LLC will be required to make may be substantial, and may exceed (as a percentage of Ranger LLC’s income) the overall effective tax rate applicable to a similarly situated corporate taxpayer.

In addition, because these payments will be calculated with reference to an assumed tax rate, and because of the disproportionate allocation of taxable income, these payments will likely significantly exceed the actual tax liability for many of the Ranger Unit Holders.

As a result of potential differences in the amount of taxable income allocable to us and to the other Ranger Unit Holders, as well as the use of an assumed tax rate in calculating Ranger LLC’s tax distribution obligations, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the TRA.

If we do not distribute such cash balances as dividends on our Class A Common Stock and instead, for example, hold such cash balances or lend them to Ranger LLC, the Ranger Unit Holders (other than us) would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A Common Stock following a redemption of their Ranger Units pursuant to the Redemption Right or their receipt of an equivalent amount of cash.

We are a holding company.

Our sole material asset is our equity interest in Ranger LLC and we are accordingly dependent upon distributions from Ranger LLC to pay taxes, make payments under the TRA and cover our corporate and other overhead expenses.

We are a holding company and have no material assets other than our equity interest in Ranger LLC.

We have no independent means of generating revenues.

To the extent Ranger LLC has available cash, we intend to cause Ranger LLC to make (i) generally pro rata distributions to its unit holders, including us, in an amount at least sufficient to allow us to pay our taxes and to make payments under the TRA and any subsequent tax receivable agreements that we may enter into in connection with future acquisitions and (ii) non-pro rata payments to us in an amount at least sufficient to reimburse us for our corporate and other overhead expenses.

We are limited, however, in our ability to cause Ranger LLC and its subsidiaries to make these and other distributions or payments to us due to certain limitations, including restrictions under our Credit Facility and the cash requirements and financial condition of Ranger LLC.

To the extent that we need funds and Ranger LLC or its subsidiaries are restricted from making such distributions or payments under applicable laws or regulations or under the terms of any future financing arrangements, or are otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

Moreover, because we have no independent means of generating revenue, our ability to make payments under the TRA is dependent on the ability of Ranger LLC to make distributions to us in an amount sufficient to cover our obligations under the TRA.

This ability, in turn, may depend on the ability of Ranger LLC’s subsidiaries to make distributions to it.

The ability of Ranger LLC, its subsidiaries and other entities in which it directly or indirectly holds an equity interest to make such distributions is subject to, among other things, (i) the applicable provisions of Delaware law (or other applicable jurisdiction) that may limit the amount of funds available for distribution and (ii) restrictions in relevant debt instruments entered into by Ranger LLC or its subsidiaries and/other entities in which it directly or indirectly holds an equity interest.

To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid.

If Ranger LLC were to become a publicly traded partnership taxable as a corporation for U.S.

federal income tax purposes, we and Ranger LLC might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the TRA even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.

We intend to continue to operate such that Ranger LLC does not become a publicly traded partnership taxable as a corporation for U.S.

federal income tax purposes.

A “publicly traded partnership” is a partnership, the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof.

Under certain circumstances, redemptions of Ranger Units pursuant to a Redemption Right (or our Call Right) or other transfers of Ranger Units could cause Ranger LLC to be treated as a publicly traded partnership.

Applicable U.S.

Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to continue to operate such that redemptions or other transfers of Ranger Units qualify for one or more such safe harbors.

For example, we intend to continue to limit the number of Ranger Unit Holders, and the Ranger LLC Agreement provides for limitations on the ability of Ranger Unit Holders to transfer their Ranger Units and provides us, as managing member of Ranger LLC, with the right to impose restrictions (in addition to those already in place) on the ability of Ranger Unit Holders to redeem their Ranger Units pursuant to a Redemption Right to the extent we believe it is necessary to ensure that Ranger LLC will continue to be treated as a partnership for U.S.

federal income tax purposes.

If Ranger LLC were to become a publicly traded partnership, significant tax inefficiencies might result for us and for Ranger LLC, as a result of our inability to file a consolidated U.S.

federal income tax return with Ranger LLC.

In addition, we may not be able to realize tax benefits covered under the TRA, and we would not be able to recover any payments previously made by us under the TRA, even if the corresponding tax benefits (including any claimed increase in the tax basis of Ranger LLC’s assets) were subsequently determined to have been unavailable.

Financial Leverage and Liquidity

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Our indebtedness could have adverse consequences, including:

• we may fail to comply with the various covenants in instruments governing any existing or future indebtedness;

• we may be unable to obtain financing in the future for working capital, capital expenditures, acquisitions, share repurchases, general corporate or other purposes;

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• we may be competitively disadvantaged compared to our competitors that have greater access to capital resources.

• we may fail to comply with the various covenants in instruments governing any existing or future indebtedness.

Our Credit Facility subjects us to various financial and other restrictive covenants.

These restrictions may limit our operational or financial flexibility and could subject us to potential defaults under our Credit Facility.

Our Credit Facility subjects us to significant financial and other restrictive covenants, such that our ability to comply with financial condition tests can be affected by events beyond our control, including economic, financial and industry conditions.

Our Revolving Credit Facility subjects us to various financial and other restrictive covenants.

These restrictions may limit our operational or financial flexibility and could subject us to potential defaults under our Revolving Credit Facility.

Our Revolving Credit Facility subjects us to significant financial and other restrictive covenants, such that our ability to comply with financial condition tests can be affected by events beyond our control, including economic, financial and industry conditions.

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

Further, the borrowing base of our Credit Facility is dependent upon our receivables, which may be significantly lower in the future due to reduced activity levels or decreases in pricing for our services.

Changes to our operational activity 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 Credit Facility.

If we are unable to remain in compliance with the financial covenants of our Credit Facility, then amounts outstanding thereunder may be accelerated and become due immediately.

Further, the borrowing base of our Revolving Credit Facility is dependent upon our receivables, which may be significantly lower in the future due to reduced activity levels or decreases in pricing for our services.

If we are unable to remain in compliance with the financial covenants of our Revolving Credit Facility, then amounts outstanding thereunder may be accelerated and become due immediately.

Any such acceleration could have a material adverse effect on our business, liquidity position, financial condition, results of operations and prospects.

In the event that we are unable to access sufficient capital to fund our business and planned capital expenditures, we may be required to curtail potential acquisitions, strategic growth projects, portions of our current operations and other activities.

A lack of capital could result in a decrease in our operations, subject us to claims of breach under customer and

supplier contracts and may force us to sell some of our assets or issue additional equity on an untimely or unfavorable basis, each of which could adversely affect our business, financial condition, results of operations and cash flows.

Our Credit Facility contains certain financial and other restrictive covenants, including a certain minimum fixed charge coverage ratio during certain testing periods.

The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of the Company’s eligible accounts receivable less certain reserves.

The Credit Facility includes cash dominion provisions that permit the Administrative Agent to sweep cash daily from the Company’s bank accounts into an account of the Administrative Agent to repay the Company’s obligations under the Credit Facility.

Such dominion is triggered when excess availability is less than the greater of $6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination.

When the Company is subject to dominion, for 30 consecutive days it is required to either (a) maintain excess availability in excess of the greater of $6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination and no event of default has occurred and is continuing or (b) have no revolver drawings and available cash of at least $20.0 million for dominion to revert back to the Company.

During the first quarter of 2020, the Company borrowed against the Credit Facility causing dominion to revert to the Administrative Agent, however after the 30 consecutive day period, as defined above, dominion reverted back to the Company in the second quarter of 2020.

A lack of capital could result in a decrease in our operations, subject us to claims of breach under customer and supplier contracts and may force us to sell some of our assets or issue additional equity on an untimely or unfavorable basis, each of which could adversely affect our business, financial condition, results of operations and cash flows.

Our Revolving Credit Facility contains certain financial and other restrictive covenants, including a certain minimum fixed charge coverage ratio during certain testing periods.

The Revolving Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of the Company’s eligible accounts receivable less certain reserves.

The Revolving Credit Facility includes cash dominion provisions where the Administrative Agent sweeps cash daily from the Company’s bank accounts into an account of the Administrative Agent to repay the Company’s obligations under the Revolving Credit Facility.

We may experience difficulties in integrating acquired assets, including assets acquired in the Patriot Acquisition, the PerfX Acquisition and the Basic Acquisition, into our business and in realizing the expected benefits of an acquisition.

The success of an acquisition, if completed, will depend in part on our ability to realize anticipated business opportunities from combining acquired assets, including assets acquired in the Patriot Acquisition, the PerfX Acquisition and the Basic Acquisition, with our business in an efficient and effective manner.

The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties or our ability to achieve the anticipated benefits, and could harm our financial performance.

If we are unable to successfully or timely integrate acquired assets with our business, we may incur unanticipated liabilities and be unable to realize the anticipated benefits, and our business, results of operations and financial condition could be materially and adversely affected.

The growth of our business through potential future acquisitions may expose us to various risks, including those relating to difficulties in identifying suitable, accretive acquisition opportunities and integrating businesses, assets and personnel, as well as difficulties in obtaining financing for targeted acquisitions and the potential for increased leverage or debt service requirements.

We have pursued and intend to continue to pursue selected, accretive acquisitions of complementary assets and businesses.

We will continue to pursue selected, accretive acquisitions of complementary assets and businesses.

Acquisitions involve numerous risks, including:

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Interest rates on future borrowings, credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly.

In addition, LIBOR and other “benchmark” rates are subject to ongoing national and international regulatory scrutiny and reform.

In addition, the London Interbank Offered Rate (“LIBOR”) and other “benchmark” rates are subject to ongoing national and international regulatory scrutiny and reform.

On July 27, 2017, the U.K.

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Dollar LIBOR:

the Secured Overnight Financing Rate, or “SOFR.” We are unable to predict the effect of the FCA Announcement or other reforms, whether currently enacted or enacted in the future.

the Secured Overnight Financing Rate, or “SOFR.” Lenders are considering We are unable to predict the effect of the FCA Announcement or other reforms, whether currently enacted or enacted in the future.

The outcome of reforms may result in increased interest expense to us.

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Equity and Common Stock

If we were to pay cash dividends in the future on our Class A Common Stock, our Credit Facility places certain restrictions on our ability to do so.

We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls, subject to any exemptions that we avail ourselves to under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

We and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as of December 31, 2021.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company is working to remediate the material weakness in internal control over financial reporting and is taking steps to improve the internal control environment.

Specifically, the Company is enhancing processes, and designing and implementing additional internal controls to properly account for complex transactions.

Additionally, the Company is hiring additional accounting personnel and implementing training of new and existing personnel on proper execution of designed control procedures.

Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Class A Common Stock.

If we were to pay cash dividends in the future on our Class A Common Stock, our Revolving Credit Facility places certain restrictions on our ability to do so.

Consequently, your only opportunity to achieve a return on your investment is if the price of our Class A Common Stock appreciates.

We have not paid any dividends since our inception to holders of our Class A Common Stock and currently intend to retain any future earnings to finance the growth of our business.

Additionally, our Credit Facility places certain restrictions on our ability to pay cash dividends.

Additionally, our Revolving Credit Facility places certain restrictions on our ability to pay cash dividends.

Consequently, your only opportunity to achieve a return on your investment in us will be if you sell your Class A Common Stock at a price greater than you paid for it.

There is no guarantee that the price of our Class A Common Stock that will prevail in the market will ever exceed the price that you paid for it.

Future sales of our Class A Common Stock in the public market, or the perception that such sales may occur, could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.

We may sell additional shares of Class A Common Stock or securities convertible into Class A Common Stock in subsequent public offerings.

As of February 24, 2021, we had 8,541,915 shares of Class A Common Stock outstanding, which may be resold immediately in the public market.

As of February 24, 2021, the Legacy Owners and the Bridge Loan Lenders owned 6,866,154 shares of our Class B Common Stock.

Future sales of our Class A Common Stock in the public market, or the perception that such sales may occur, could reduce our stock price, and any additional capital raised by us through the sale of equity or preferred stock or convertible securities may dilute your ownership in us.

We may sell additional shares of Class A Common Stock or preferred stock that is convertible into Class A Common Stock in subsequent public offerings.

As of March 23, 2022, we had 18,671,361 shares of Class A Common Stock outstanding, which may be resold immediately in the public market, and 6,000,001 shares of preferred stock outstanding.

The Legacy Owners and the Bridge Loan Lenders are parties to a registration rights agreement, which requires us to effect the registration of any shares of Class A Common Stock held by a Legacy Owner or Bridge Loan Lender or that a Legacy Owner or Bridge Loan Lender receives upon redemption of its shares of Class B Common Stock.

In connection with the Offering and in May 2019, we filed registration statements with the SEC on Form S-8 providing for the registration of 1,250,000 shares and 1,600,000 shares, respectively, of our Class A Common Stock issued or reserved for issuance under our long term incentive plan.

Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144, shares registered under the registration statement on Form S-8 are available for resale immediately in the public market without restriction.

We cannot predict the size of future issuances of our Class A Common Stock or securities convertible into Class A Common Stock or the effect, if any, that future issuances and sales of shares of our Class A Common Stock will have on the market price of our Class A Common Stock.

We cannot predict the size of future issuances of our Class A Common Stock or preferred stock convertible into Class A Common Stock or the effect, if any, that future issuances and sales of shares of our Class A Common Stock will have on the market price of our Class A Common Stock.

Sales of substantial amounts of our Class A Common Stock, or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A Common Stock.

We may issue preferred stock, the terms of which could adversely affect the voting power or value of our Class A Common Stock.

We may issue additional preferred stock, the terms of which could adversely affect the voting power or value of our Class A Common Stock.

Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our Class A Common Stock respecting dividends and distributions, as our Board of Directors may determine.

The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Class A Common Stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.

For example, we may grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the Class A Common Stock.

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For as long as we are an emerging growth company and/or a smaller reporting company, we will not be required to comply with certain reporting requirements that apply to other public companies.

We are classified as an “emerging growth company” under the JOBS Act and as a “smaller reporting company” under the Exchange Act.

For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things:

We are classified as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and as a “smaller reporting company” under the Exchange Act.

For as long as we are an emerging growth company (“EGC”), which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things:

(i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of Sarbanes-Oxley;

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or (iv) hold nonbinding advisory votes on executive compensation.

We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.07 billion of revenues in a fiscal year, have more than $700.0 million in market value of our Class A Common Stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period.

We will remain an EGC for up to five years, although we will lose that status sooner if we have more than $1.07 billion of revenues in a fiscal year, have more than $700.0 million in market value of our Class A Common Stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period.

The Company will lose its EGC status during the year ending December 31, 2022, as this will represent the fiscal year following the fifth anniversary of our initial Form S-1, which was filed in August 2017.

For as long as we are a smaller reporting company, we will have certain reduced disclosure requirements with the SEC, including the ability to provide two years of audited financial statements and corresponding Management's Discussion and Analysis disclosures.

We will lose our EGC status at the end of that five-year period, we will be required to comply with all the reporting requirements applicable to other public companies including, but not limited to, the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

We will remain a smaller reporting company until the aggregate market value of our outstanding common stock held by non-affiliates, calculated as of the end of our most recently complete second fiscal quarter, exceeds $250 million.

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If some investors find our common stock less attractive, there may be a less active trading market for our common stock and our stock price may be more volatile.

To the extent that we rely on any of the exemptions available to emerging growth companies and/or smaller reporting companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies.

To the extent that we rely on any of the exemptions available to EGC’s and/or SRC’s, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies.

If some investors find our Class A Common Stock to be less attractive as a result, there may be a less active trading market for our Class A Common Stock and our stock price may be more volatile.

We are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for, and intend to rely on exemptions from certain corporate governance requirements.

Through its interests in the Legacy Owners, CSL holds a majority of the voting power of our capital stock.

As a result, we are a controlled company within the meaning of NYSE corporate governance standards.

Under NYSE rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including the requirements that:

• a majority of the Board of Directors consist of independent directors as defined under the rules of the NYSE;

• the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

• the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

These requirements will not apply to us as long as we remain a controlled company.

Since our initial offering we have utilized some or all of these exemptions.

Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

As a result of the delay in completing the Rule 3-05 financial statements related to the Basic Energy acquisition, we are currently unable to register securities with the SEC.

This may adversely affect our ability to raise capital and the cost of raising future capital.

As a result of the delay in completing the Rule 3-05 financial statements required by the Current Report on Form 8-K relating to the acquisition of certain assets of Basic, we have been, and remain, unable to register securities for sale by us or for resale by other security holders, which adversely affects our ability to raise capital.

Additionally, following the filing of this Form 10-K we will remain ineligible to use Form S-3 to register securities until we have timely filed all periodic reports under the Exchange Act for at least 12 calendar months.

Should we wish to register the offer and sale of our securities to the public when we are ineligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase as a result of having to use Form S-1, making it more difficult to execute any such transaction quickly and successfully, and as a result potentially harming our financial condition.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A Common Stock or if our operating results do not meet their expectations, our stock price could decline.

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Moreover, if one or more of the analysts who cover our company adversely changes his or her recommendation with respect to our Class A Common Stock or if our operating results do not meet their expectations, our stock price could decline.

CSL and Other Directors

In particular, subject to the limitations of applicable law, our amended and restated certificate of incorporation, among other things:

• permits CSL, Bayou Holdings and their respective affiliates to conduct business that competes with us and to make investments in any kind of property in which we may make investments;

As a result, our renouncing our interest and expectancy in any business opportunity that may be from time to time presented to CSL, Bayou Holdings and their respective affiliates could adversely impact our business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for ours.

CSL controls a large portion of our voting stock, and their interests may conflict with those of our other shareholders.

CSL and its affiliates beneficially own an aggregate of approximately 38% of the outstanding shares of our Common Stock.

As long as CSL controls a large portion of our voting stock, it may be able to significantly influence the election of the Board of Directors and the outcome of all matters involving a shareholder vote.

CSL’s interests may differ from the interests of other shareholders and the status of their ownership could change at their discretion.

A significant reduction of CSL’s ownership interests in us could adversely affect us.

We believe that CSL’s ownership interest in us provides with it an economic incentive to assist us to be successful.

CSL is not subject to any obligation to maintain its ownership interest in us and may elect at any time to sell all or a substantial portion of or otherwise reduce its ownership interest in us.

Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors, who are responsible for managing the direction of our operations, hold positions of responsibility with other entities (including affiliated entities) that are in the oil and natural gas industry.

They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present those opportunities to us.

These conflicts may not be resolved in our favor.

Unresolved Staff Comments

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