What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-04-29 · 217 added, 82 removed, 250 unchanged (54% of the section changed)

22 unchanged sentences

Recent Events and Outlook

The Company recognizes the various global events—including COVID-19 and the ongoing conflict in Ukraine—that have an impact on its operational and financial performance.

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.

While commodity prices, as well as our stock price and operational activity, have improved during the quarter ended March 31, 2022, we expect this global market volatility to continue at least until the outbreak of COVID-19, including any new variants, stabilizes, if not longer.

The direct impact to our operations began to take affect at the close of the first quarter ended March 31, 2020, and has continued through June 30, 2022, however 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.

While commodity prices, as well as our stock price and operational activity, have improved during the quarter ended June 30, 2022, we expect this global market volatility to continue at least until the outbreak of COVID-19, including any new variants, stabilizes, if not longer.

government implemented a number of programs in the early wake of the impacts of COVID-19, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the largest relief package in U.S.

history, and the Main Street Lending Program established by the Federal Reserve.

We qualified for limited aid under the CARES Act and have deferred payroll tax payments of $1.1 million as of March 31, 2022 under the CARES Act, which will become due on December 31, 2022.

We qualified for limited aid under the CARES Act and have deferred payroll tax payments of $1.1 million as of June 30, 2022 under the CARES Act, which will become due on December 31, 2022.

In February 2022, Russia invaded neighboring Ukraine.

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Cost of Services.

Our primary costs associated with our cost of services are related to personnel expenses, repairs and maintenance of our fixed assets and perforating and gun costs.

Our primary costs associated with our cost of services are related to personnel expenses, repairs and maintenance of our fixed assets and, as it relates to our Wireline Services segment, perforating and gun costs.

A significant portion of these expenses are variable, and therefore typically managed, based on industry conditions and demand for our services.

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We view Adjusted EBITDA, which is a non‑GAAP financial measure, as an important indicator of performance.

We define Adjusted EBITDA as net income or loss before net interest expense, income tax provision (benefit), depreciation and amortization, equity‑based compensation, acquisition‑related and severance costs, gain and loss on disposal of assets, legal fees and settlements, and other non‑cash and certain other items that we do not view as indicative of our ongoing performance.

We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense (benefit), depreciation and amortization, equity‑based compensation, acquisition‑related and severance costs, gain and loss on disposal of assets, legal fees and settlements, and other non‑cash and certain other items that we do not view as indicative of our ongoing performance.

See “—Results of Operations” and “—Note Regarding Non‑GAAP Financial Measure” for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Results of Operations

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

The following is an analysis of our operating results.

1 unchanged sentence

Three Months Ended

March 31, Variance

June 30, Variance

2022 2021 $ %

11 unchanged sentences

Depreciation and amortization 11.4 8.2 3.2 39 %

Gain on sale of assets — — — 100 %

Impairment of fixed assets 1.1 — 1.1 100 %

Loss on sale of assets 1.1 — 1.1 100 %

Total operating expenses 155.8 58.5 97.3 166 %

Operating loss (2.2) (8.5) 6.3 (74) %

Other expenses

Other (income) expenses

Interest expense, net 1.8 0.7 1.1 157 %

Total other expenses 2.1 0.6 1.5 250 %

Loss before income tax expense (7.3) (7.9) 0.6 (8) %

Gain on bargain purchase, net of tax (2.8) — (2.8) (100) %

Total other (income) expenses (1.0) 0.7 (1.7) (243) %

Loss before income tax (benefit) expense (1.2) (9.2) 8.0 (87) %

Tax (benefit) expense (0.8) (0.1) (0.7) 700 %

Net loss $ (0.4) $ (9.1) $ 8.7 (96) %

Revenues for the three months ended March 31, 2022 increased $85.3 million, or 223%, to $123.6 million from $38.3 million for the three months ended March 31, 2021.

Revenues for the three months ended June 30, 2022 increased $103.6 million, or 207%, to $153.6 million from $50.0 million for the three months ended June 30, 2021.

The change in revenues by segment was as follows:

High Specification Rigs.

High Specification Rig revenues for the three months ended March 31, 2022 increased $43.2 million, or 199%, to $64.9 million from $21.7 million for the three months ended March 31, 2021.

The increase in rig services revenue included a 161% increase in total rig hours to 112,500 for the three months ended March 31, 2022 from 43,200 for the three months ended March 31, 2021.

The average revenue per rig hour increased 17% to $577 for the three months ended March 31, 2022 from $493 for the three months ended March 31, 2021.

High Specification Rig revenue for the three months ended June 30, 2022 increased $47.0 million, or 162%, to $76.0 million from $29.0 million for the three months ended June 30, 2021.

The increase in rig services revenue included a 139% increase in total rig hours to 119,900 for the three months ended June 30, 2022 from 50,100 for the three months ended June 30, 2021.

The average revenue per rig hour increased 8% to $632 for the three months ended June 30, 2022 from $587 for the three months ended June 30, 2021.

Of the total segment revenue increase, $39.2 million is attributable to the assets acquired in the Basic Acquisition.

The increase in revenue, rig hours and average revenue per rig hour is also related to increased crude oil pricing and industry activity.

The increase in revenue, rig hours and average revenue per rig hour is also related to increased crude oil pricing driving higher levels of oilfield activity.

Wireline Services.

Wireline Services revenues for the three months ended March 31, 2022 increased $26.5 million, or 219%, to $38.6 million from $12.1 million for the three months ended March 31, 2021.

The increased wireline services revenue was primarily attributable to completion services which included a 163% increase in completed stage count to 7,400 for the three months ended March 31, 2022 from 2,800 for the three months ended March 31, 2021 related to completion services.

The increase in wireline services revenue included a 133% increase in average active wireline units to fourteen units for the three months ended March 31, 2022 from six units for the three months ended March 31, 2021.

Of the segment revenue, $7.3 million and $24.5 million are attributable to the assets acquired in the Patriot and PerfX Acquisitions, respectively.

Wireline Services revenue for the three months ended June 30, 2022 increased $33.9 million, or 217%, to $49.5 million from $15.6 million for the three months ended June 30, 2021.

The increased wireline services revenue was primarily attributable to completion services of $24.2 million, which included a 167% increase in completed stage counts to 8,000 for the three months ended June 30, 2022 from 3,000 for the three months ended June 30, 2021.

Of the segment revenue increase, $8.7 million and $30.2 million are attributable to the assets acquired in the Patriot and PerfX Acquisitions, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services revenues for the three months ended March 31, 2022 increased $15.6 million, or 347%, to $20.1 million from $4.5 million for the three months ended March 31, 2021.

Processing Solutions and Ancillary Services revenue for the three months ended June 30, 2022 increased $22.7 million, or 420%, to $28.1 million from $5.4 million for the three months ended June 30, 2021.

Of the total segment revenue increase, $15.1 million is attributable to the Basic Acquisition.

The increase in processing

solutions and ancillary services is primarily attributable to a $5.5 million increase in both of our equipment rentals and plugging and abandonment services to $6.0 million and $5.7 million, respectively.

solutions and ancillary services is primarily attributable to our coil tubing, equipment rentals and plugging and abandonment services, which amounted to $8.5 million, $8.3 million and $6.2 million, respectively.

Cost of services (exclusive of depreciation and amortization).

Cost of services (exclusive of depreciation and amortization) for the three months ended March 31, 2022 increased $73.9 million, or 217%, to $108.0 million from $34.1 million for the three months ended March 31, 2021.

As a percentage of revenue, cost of services was 87% and 89% for the three months ended March 31, 2022 and 2021, respectively.

Cost of services (exclusive of depreciation and amortization) for the three months ended June 30, 2022 increased $85.9 million, or 195%, to $130.0 million from $44.1 million for the three months ended June 30, 2021.

As a percentage of revenue, cost of services was 85% and 88% for the three months ended June 30, 2022 and 2021, respectively.

The change in cost of services by segment was as follows:

High Specification Rigs.

High Specification Rig cost of services for the three months ended March 31, 2022 increased $31.8 million, or 167% to $50.8 million from $19.0 million for the three months ended March 31, 2021.

The increase was primarily attributable to an increase in variable expenses, notably employee costs and fuel costs, which amounted to $18.3 million and $2.9 million, respectively.

High Specification Rig cost of services for the three months ended June 30, 2022 increased $37.8 million, or 158% to $61.8 million from $24.0 million for the three months ended June 30, 2021.

The increase was primarily attributable to an increase in variable expenses, notably employee related labor costs, fuel and insurance costs, which amounted to $23.2 million and $3.6 million, respectively, coupled with a $2.0 million increase in expense related to insurance costs.

Additionally, the increase corresponds with the increase in rig hours and revenues.

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Wireline Services.

Wireline Services cost of services for the three months ended March 31, 2022 increased $29.1 million, or 258%, to $40.4 million from $11.3 million for the three months ended March 31, 2021.

The increase was primarily attributable to increased employee costs due to the acquisitions of PerfX and Patriot, and, to a lesser extent, maintenance costs.

Of the total segment cost of services, $26.6 million and $6.4 million is attributable to the assets acquired in the PerfX and Patriot Acquisitions, respectively, whereas the increased maintenance costs amounted to $1.6 million.

Wireline Services cost of services for the three months ended June 30, 2022 increased $30.1 million, or 199%, to $45.2 million from $15.1 million for the three months ended June 30, 2021.

The increase was primarily attributable to increased employee costs of $12.7 million primarily due to the acquisitions of PerfX and Patriot, and, to a lesser extent, maintenance costs of approximately $2.4 million.

Of the total segment cost of services, $29.9 million and $5.8 million is attributable to the assets acquired in the PerfX and Patriot Acquisitions, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services cost of services for the three months ended March 31, 2022 increased $13.0 million, or 342%, to $16.8 million from $3.8 million for the three months ended March 31, 2021.

The increase was primarily attributable to increased employee costs with the upturn in operational activity, which amounted to $6.2 million.

Processing Solutions and Ancillary Services cost of services for the three months ended June 30, 2022 increased $18.0 million, or 360%, to $23.0 million from $5.0 million for the three months ended June 30, 2021.

The increase was primarily attributable to increased employee and maintenance costs with the upturn in operational activity, which amounted to $8.3 million and $2.9 million, respectively.

Of the segment cost of services increase, $12.6 million is attributable to the Basic Acquisition.

General & Administrative.

General and administrative expenses for the three months ended March 31, 2022 increased $5.7 million, or 163%, to $9.2 million from $3.5 million.

The increase in general and administrative expenses is primarily due to corporate employee costs and increased professional fees during three months ended March 31, 2022.

General and administrative expenses for the three months ended June 30, 2022 increased $6.0 million, or 97%, to $12.2 million from $6.2 million.

The increase in general and administrative expenses is primarily due to corporate employee costs added post-Basic Acquisition and increased professional fees during three months ended June 30, 2022.

Depreciation and Amortization.

Depreciation and amortization for the three months ended March 31, 2022 increased $3.6 million, or 45%, to $11.6 million from $8.0 million for the three months ended March 31, 2021.

Depreciation and amortization for the three months ended June 30, 2022 increased $3.2 million, or 39%, to $11.4 million from $8.2 million for the three months ended June 30, 2021.

The increase was attributable to assets acquired through the business combinations during the last half of the year ended December 31, 2021.

This was partially offset by depreciation expense related to fixed assets disposed of during the three months ended March 31, 2021.

This was partially offset by depreciation expense related to fixed assets disposed of during the three months ended June 30, 2022.

Interest Expense, net.

Interest expense, net for the three months ended March 31, 2022 increased $1.5 million, or 250%, to $2.1 million from $0.6 million for the three months ended March 31, 2021.

Interest expense, net for the three months ended June 30, 2022 increased $1.1 million, or 157%, to $1.8 million from $0.7 million for the three months ended June 30, 2021.

The increase to net interest expense was attributable to the increased principal balance on our Revolving Credit Facility (as defined below), higher interest rates on each tranche of the Loan and Security Agreement that closed on September 27, 2021, and interest paid on the Secured Promissory Note issued in connection with the PerfX Acquisition.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

The following is an analysis of our operating results.

See “—How We Evaluate Our Operations” for definitions of rig hours, stage counts and other analogous information.

Six Months Ended

June 30, Variance

2022 2021 $ %

High specification rigs $ 140.9 $ 50.7 $ 90.2 178 %

Wireline services 88.1 27.7 60.4 218 %

Processing solutions and ancillary services 48.2 9.9 38.3 387 %

Total revenues 277.2 88.3 188.9 214 %

Operating expenses

Cost of services (exclusive of depreciation and amortization):

High specification rigs 112.6 43.0 69.6 162 %

Wireline services 85.6 26.4 59.2 224 %

Processing solutions and ancillary services 39.8 8.8 31.0 352 %

Total cost of services 238.0 78.2 159.8 204 %

General and administrative 21.4 9.7 11.7 121 %

Depreciation and amortization 23.0 16.2 6.8 42 %

Impairment of fixed assets 1.1 — 1.1 100 %

Loss on sale of assets 1.1 — 1.1 100 %

Total operating expenses 284.6 104.1 180.5 173 %

Operating loss (7.4) (15.8) 8.4 (53) %

Other (income) expenses

Interest expense, net 3.9 1.3 2.6 200 %

Gain on bargain purchase, net of tax (2.8) — (2.8) (100) %

Total other (income) expenses 1.1 1.3 (0.2) (15) %

Loss before income tax (benefit) expense (8.5) (17.1) 8.6 (50) %

Tax (benefit) expense (2.4) 0.3 (2.7) (900) %

Net loss $ (6.1) $ (17.4) $ 11.3 (65) %

Revenues for the six months ended June 30, 2022 increased $188.9 million, or 214%, to $277.2 million from $88.3 million for the six months ended June 30, 2021.

The change in revenues by segment was as follows:

High Specification Rigs.

High Specification Rig revenue for the six months ended June 30, 2022 increased $90.2 million, or 178%, to $140.9 million from $50.7 million for the six months ended June 30, 2021.

The increase in rig services revenue included a 149% increase in total rig hours to 232,400 for the six months ended June 30, 2022 from 93,300 for the six months ended June 30, 2021.

The average revenue per rig hour increased 12% to $606 from $543 for the six months ended June 30, 2021.

Of the total segment revenue increase, $71.9 million is attributable to the assets acquired in the Basic Acquisition.

Wireline Services.

Wireline Services revenue for the six months ended June 30, 2022 increased $60.4 million, or 218%, to $88.1 million from $27.7 million for the six months ended June 30, 2021.

The increased wireline services revenue was primarily attributable to completion services of $43.0 million, which included a 166% increase in completed stage counts to 15,400 for the six months ended June 30, 2022 from 5,800 for the six months ended June 30, 2021 related to completion services.

Of the segment revenue increase, $16.1 million and $54.7 million are attributable to the assets acquired in the Patriot and PerfX Acquisitions, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services revenue for the six months ended June 30, 2022 increased $38.3 million, or 387%, to $48.2 million from $9.9 million for the six months ended June 30, 2021.

Of the total segment revenue increase, $24.6 million is attributable to the Basic Acquisition.

The increase in processing solutions and ancillary services is primarily attributable to a $13.5 million increase in our coil tubing services, a $13.5 million increase in our equipment rentals services and a $11.7 million in our plugging and abandonment services to $13.5 million, $17.0 million, and $12.2 million, respectively.

Cost of services (excluding depreciation and amortization).

Cost of services for the six months ended June 30, 2022 increase $159.8 million, or 204%, to $238.0 million from $78.2 million for the six months ended June 30, 2021.

As a percentage of revenue, cost of services was 86% and 89% for the six months ended June 30, 2022 and 2021, respectively.

The change in cost of services by segment was as follows:

High Specification Rigs.

High Specification Rig cost of services for the six months ended June 30, 2022 increased $69.6 million, or 162% to $112.6 million from $43.0 million for the six months ended June 30, 2021.

The increase was primarily attributable to an increase in variable expenses, notably employee-related labor costs and repair and maintenance costs of $41.5 million and $5.2 million, respectively.

Additionally, the increase corresponds with the increase in rig hours and revenues.

Of the segment cost of services, $55.4 million is attributable to the Basic Acquisition.

Wireline Services.

Wireline Services cost of services for the six months ended June 30, 2022 increased $59.2 million, or 224%, to $85.6 million from $26.4 million for the six months ended June 30, 2021.

The increase was primarily attributable to the wireline business, which includes activity from the acquisition of Patriot and PerfX during the six months ended June 30, 2022.

The completion wireline activity accounted for approximately $45.8 million of the segment cost of services increase.

Of the segment cost of services, $12.2 million and $56.5 million of costs related to Patriot and PerfX, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services cost of services for the six months ended June 30, 2022 increase $31.0 million, or 352%, to $39.8 million from $8.8 million for the six months ended June 30, 2021.

The increase was primarily attributable to increased employee costs and maintenance and repair with the upturn in operational activity, which amounted to $14.3 million and $5.2 million, respectively.

Of the segment cost of services increase, $22.2 million is attributable to the Basic Acquisition.

General & Administrative.

General and administrative expenses for the six months ended June 30, 2022 increased $11.7 million, or 121%, to $21.4 million from $9.7 million.

The increase in general and administrative expenses is primarily due to corporate employee costs added post-Basic Acquisition, coupled with professional fees and transactional costs incurred during the six months ended June 30, 2022 related to the Basic Acquisition.

Depreciation and Amortization.

Depreciation and amortization for the six months ended June 30, 2022 increase $6.8 million, or 42%, to $23.0 million from $16.2 million for the six months ended June 30, 2021.

The increase was attributable to assets acquired through the business combinations during the last half of the year ended December 31, 2021.

This was partially offset by depreciation expense related to fixed assets disposed of during the six months ended June 30, 2022.

Interest Expense, net.

Interest expense, net for the six months ended June 30, 2022 increase $2.6 million, or 200%, to $3.9 million from $1.3 million for the six months ended June 30, 2021.

Note Regarding Non-GAAP Financial Measure

Adjusted EBITDA is not a financial measure determined in accordance with U.S.

We define Adjusted EBITDA as net income or loss before net interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation, acquisition-related and severance costs, gain or loss on disposal of assets, legal fees and settlements, and other non-cash and certain other items that we do not view as indicative of our ongoing performance.

We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense (benefit), depreciation and amortization, equity-based compensation, acquisition-related and severance costs, gain or loss on disposal of assets, legal fees and settlements, and other non-cash and certain other items that we do not view as indicative of our ongoing performance.

We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure.

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The following table presents reconciliations of net income (loss) to Adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance with U.S.

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

The following is an analysis of our Adjusted EBITDA.

Financial Information—Note 15—Segment Reporting” and “—Results of Operations” for further details.

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

4 unchanged sentences

Depreciation and amortization 8.1 2.8 — 0.5 11.4

Impairment of fixed assets — — — 1.1 1.1

Equity based compensation — — — 0.9 0.9

Gain on disposal of property and equipment — — — (1.0) (1.0)

Loss on disposal of property and equipment — — — 2.1 2.1

Bargain purchase gain, net of tax — — — (2.8) (2.8)

Severance and reorganization costs — — — 0.5 0.5

2 unchanged sentences

Adjusted EBITDA $ 14.2 $ 4.3 $ 5.1 $ (5.6) $ 18.0

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

4 unchanged sentences

Depreciation and amortization 4.7 1.6 1.6 0.3 8.2

Impairment of fixed assets — — — — —

Equity based compensation — — — 0.9 0.9

Gain on disposal of property and equipment — — — (0.4) (0.4)

Loss on disposal of property and equipment — — — 0.5 0.5

Bargain purchase gain, net of tax — — — — —

Severance and reorganization costs — — — 0.3 0.3

8 unchanged sentences

Depreciation and amortization 3.4 1.2 (1.6) 0.2 3.2

Impairment of fixed assets — — — 1.1 1.1

Equity based compensation — — — — —

Gain on disposal of property and equipment — — — (0.6) (0.6)

Loss on disposal of property and equipment — — — 1.6 1.6

Bargain purchase gain, net of tax — — — (2.8) (2.8)

Severance and reorganization costs — — — 0.2 0.2

2 unchanged sentences

Adjusted EBITDA $ 9.2 $ 3.8 $ 4.7 $ (1.7) $ 16.0

Adjusted EBITDA for the three months ended March 31, 2022 increased $9.8 million to income of $9.6 million from a loss of $0.2 million for the three months ended March 31, 2021.

Adjusted EBITDA for the three months ended June 30, 2022 increased $16.0 million to $18.0 million from $2.0 million for the three months ended June 30, 2021.

The change by segment was as follows:

High Specification Rigs .

High Specification Rigs Adjusted EBITDA for the three months ended March 31, 2022 increased $11.4 million to $14.1 million from $2.7 million for the three months ended March 31, 2021, primarily due to increased revenues of $43.2 million, partially offset by a corresponding increase in cost of services of $31.8 million.

High Specification Rigs Adjusted EBITDA for the three months ended June 30, 2022 increased $9.2 million to $14.2 million from $5.0 million for the three months ended June 30, 2021, primarily due to increased revenues of $47.0 million, partially offset by a corresponding increase in cost of services of $37.8 million.

Wireline Services.

Wireline Services Adjusted EBITDA for the three months ended March 31, 2022 decreased $2.6 million to a loss of $1.8 million from income of $0.8 million for the three months ended March 31, 2021, primarily due to an increase in cost of services of $29.1 million, offset by increased revenues of $26.5 million.

Wireline Services Adjusted EBITDA for the three months ended June 30, 2022 increased $3.8 million to $4.3 million from $0.5 million for the three months ended June 30, 2021, primarily due to increased revenues of $33.9 million, partially offset by a corresponding increase in cost of services of $30.1 million.

Processing Solutions and Ancillary Services .

Processing Solutions and Ancillary Services Adjusted EBITDA for the three months ended March 31, 2022 increased $2.6 million to $3.3 million from $0.7 million for the three months ended March 31, 2021, due to increased revenues of $15.6 million, offset by a corresponding increase in cost of services of $13.0 million.

Other Adjusted EBITDA for the three months ended March 31, 2022 decreased $1.6 million to a loss of $6.0 million from a loss of $4.4 million for the three months ended March 31, 2021.

Processing Solutions and Ancillary Services Adjusted EBITDA for the three months ended June 30, 2022 increased $4.7 million to $5.1 million from $0.4 million for the three months ended June 30, 2021, due to increased revenues of $22.7 million, offset by a corresponding increase in cost of services of $18.0 million.

Other Adjusted EBITDA for the three months ended June 30, 2022 increased $1.7 million to a loss of $5.6 million from a loss of $3.9 million for the three months ended June 30, 2021.

The balances included in Other reflect other general and administrative costs, which are not directly attributable to High Specification Rigs, Wireline Services or Processing Solutions and Ancillary Services.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

TA Six Months Ended June 30, 2022

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

Net income (loss) $ 13.8 $ (3.0) $ 6.4 $ (23.3) $ (6.1)

Interest expense, net — — — 3.9 3.9

Income tax (benefit) expense — — — (2.4) (2.4)

Depreciation and amortization 14.5 5.5 2.0 1.0 23.0

Impairment of fixed assets — — — 1.1 1.1

Equity based compensation — — — 1.7 1.7

Loss on disposal of property and equipment — — — 1.1 1.1

Bargain purchase gain, net of tax — — — (2.8) (2.8)

Severance and reorganization costs — — — 0.5 0.5

Acquisition related costs — — — 6.5 6.5

Legal fees and settlements — — — 1.1 1.1

Adjusted EBITDA $ 28.3 $ 2.5 $ 8.4 $ (11.6) $ 27.6

Six Months Ended June 30, 2021

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

Net income (loss) $ (1.8) $ (1.5) $ (2.1) $ (12.0) $ (17.4)

Interest expense, net — — — 1.3 1.3

Income tax (benefit) expense — — — 0.3 0.3

Depreciation and amortization 9.5 2.8 3.2 0.7 16.2

Impairment of fixed assets — — — — —

Equity based compensation — — — 1.8 1.8

Loss on disposal of property and equipment — — — 0.1 0.1

Bargain purchase gain, net of tax — — — — —

Severance and reorganization costs — — — (1.1) (1.1)

Acquisition related costs — — — 0.6 0.6

Legal fees and settlements — — — — —

Adjusted EBITDA $ 7.7 $ 1.3 $ 1.1 $ (8.3) $ 1.8

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

Net income (loss) $ 15.6 $ (1.5) $ 8.5 $ (11.3) $ 11.3

Interest expense, net — — — 2.6 2.6

Income tax (benefit) expense — — — (2.7) (2.7)

Depreciation and amortization 5.0 2.7 (1.2) 0.3 6.8

Impairment of fixed assets — — — 1.1 1.1

Equity based compensation — — — (0.1) (0.1)

Bargain purchase gain, net of tax — — — (2.8) (2.8)

Loss on disposal of property and equipment — — — 1.0 1.0

Severance and reorganization costs — — — 1.6 1.6

Acquisition related costs — — — 5.9 5.9

Legal fees and settlements — — — 1.1 1.1

Adjusted EBITDA $ 20.6 $ 1.2 $ 7.3 $ (3.3) $ 25.8

Adjusted EBITDA for the six months ended June 30, 2022 increased $25.8 million to $27.6 million from $1.8 million for the six months ended June 30, 2021.

The change by segment was as follows:

High Specification Rigs .

High Specification Rigs Adjusted EBITDA for the six months ended June 30, 2022 increased $20.6 million to $28.3 million from $7.7 million for the six months ended June 30, 2021, primarily due to increased revenues of $90.2 million, partially offset by a corresponding increase in cost of services of $69.6 million.

Wireline Services.

Wireline Services Adjusted EBITDA for the six months ended June 30, 2022 increased $1.2 million to $2.5 million from $1.3 million for the six months ended June 30, 2021, primarily due to increase revenues of $60.4 million, partially offset by an increase in cost of services of $59.2 million.

Processing Solutions and Ancillary Services .

Processing Solutions and Ancillary Services Adjusted EBITDA for the six months ended June 30, 2022 increased $7.3 million to $8.4 million from $1.1 million for the six months ended June 30, 2021, primarily due to increased revenues of $38.3 million, partially offset by a increase in cost of services of $31.0 million.

Other Adjusted EBITDA for the six months ended June 30, 2022 increased $3.3 million to a loss of $11.6 million from a loss of $8.3 million for the six months ended June 30, 2021.

Liquidity and Capital Resources

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Our primary sources of liquidity are cash generated from operations and borrowings under our EBC Credit Facility.

As of March 31, 2022, we had total liquidity of $10.2 million, consisting of $3.8 million of cash on hand and availability under our Revolving Credit Facility of $6.4 million.

As of March 31, 2022, our borrowing base under the Revolving Credit Facility was $51.2 million compared to $19.8 million and $45.0 million as of March 31, 2021 and December 31, 2021, respectively, as a result of increased operational activity and accounts receivable balances.

We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements and to permit us to manage the cyclicality associated with our business.

As of June 30, 2022, we had total liquidity of $28.3 million, consisting of $5.1 million of cash on hand and availability under our Revolving Credit Facility of $23.2 million.

As of June 30, 2022, our borrowing base under the Revolving Credit Facility was $57.1 million compared to $22.5 million and $45.0 million as of June 30, 2021 and December 31, 2021, respectively, as a result of increased operational activity and accounts receivable balances.

We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements that permit us to manage the cyclicality associated with our business.

We currently expect to have sufficient funds to meet the Company’s liquidity requirements and comply with our covenants of our debt agreements for at least the next 12 months from the date of issuance of these financial statements.

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The following table presents our cash flows for the periods indicated:

Three Months Ended March 31, Change

Six Months Ended June 30, Change

2022 2021 $ %

(in millions)

Net cash used in operating activities $ (12.1) $ (1.9) $ (10.2) 537 %

Net cash provided by investing activities 5.0 — 5.0 100 %

Net cash provided by financing activities 10.3 0.6 9.7 1,617 %

Net cash provided by (used in) operating activities $ 7.8 $ (4.1) $ 11.9 290 %

Net cash provided by (used in) investing activities 8.2 (4.9) 13.1 267 %

Net cash provided by (used in) financing activities (11.5) 9.6 (21.1) (220) %

Net change in cash $ 4.5 $ 0.6 $ 3.9 650 %

Operating Activities

Net cash used in operating activities increased $10.2 million to cash used of $12.1 million for three months ended March 31, 2022 compared to cash used of $1.9 million for the three months ended March 31, 2021.

The change in cash flows from operating activities is primarily attributable to a decrease in gross margins and operating income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The use of working capital cash increased $6.3 million to $8.6 million for the three months ended March 31, 2022, compared to $2.3 million for the three months ended March 31, 2021.

Net cash from operating activities increased $11.9 million to cash provided of $7.8 million for six months ended June 30, 2022 compared to cash used of $4.1 million for the six months ended June 30, 2021.

The change in cash flows from operating activities is primarily attributable to an increase in gross margins and operating income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The use of working capital cash increased $14.6 million to $20.9 million for the six months ended June 30, 2022, compared to $6.3 million for the six months ended June 30, 2021.

Investing Activities

Net cash provided by investing activities increased $5.0 million from no cash provided, nor used in, investing activities for the three months ended March 31, 2021.

The change in cash flows from investing activities is attributable to the significant asset sales that took place during the three months ended March 31, 2022, partially offset by the fixed asset additions.

Net cash from investing activities increased $13.1 million to a cash provided of $8.2 million for six months ended June 30, 2022 compared to cash used of $4.9 million for the six months ended June 30, 2021.

The change in cash flows from investing activities is attributable to the significant asset sales that took place during the six months ended June 30, 2022, partially offset by fixed asset additions.

Financing Activities

Net cash provided by financing activities increased $9.7 million from cash provided of $0.6 million for the three months ended March 31, 2021 compared to cash provided of $10.3 million for the three months ended March 31, 2022.

The change in cash flows from financing activities is attributable to increased net borrowings of $16.8 million to fund working capital obligations.

Net cash from financing activities decreased $21.1 million from cash provided of $9.6 million for the six months ended June 30, 2021 compared to cash used of $11.5 million for the six months ended June 30, 2022.

The change in cash flows from financing activities is primarily attributable to principal payments of $9.4 million on Term Loan B related to the sale of assets acquired from the Basic Acquisition.

Supplemental Disclosures

During the three months ended March 31, 2022, the Company added fixed assets of $0.8 million in finance leased assets, within our High-Spec Rigs and Wireline segments.

During the six months ended June 30, 2022, the Company added fixed assets of $2.0 million in finance leased assets, within our High-Spec Rigs and Wireline segments.

Working Capital

Our working capital, which we define as total current assets less total current liabilities, was $11.7 million as of March 31, 2022, compared to $2.5 million as of December 31, 2021.

The increased accounts receivable and contract assets, coupled with assets considered to be held for sale led to the working capital increase, however was partially offset by increased net borrowings under the EBC Revolving Credit Facility.

Our working capital, which we define as total current assets less total current liabilities, was $24.3 million as of June 30, 2022, compared to $2.5 million as of December 31, 2021.

The increased accounts receivable and contract assets, coupled with assets considered to be held for sale led to the working capital increase, however this was partially offset by increased net borrowings under the Revolving Credit Facility.

Our Debt Agreements

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Debt under the Eclipse Loan and Security Agreement is secured by a lien on substantially all of the Company’s assets.

The Company was in compliance with the Eclipse Loan and Security Agreement covenants as of March 31, 2022.

The Company was in compliance with the Eclipse Loan and Security Agreement covenants as of June 30, 2022.

On January 7, 2022, the Company entered into the First Amendment to Loan and Security Agreement (the Eclipse Loan and Security Agreement, as amended by the First Amendment, the “Amended Loan Agreement”) with EBC and Eclipse Business Capital SPV, LLC, which increased the Maximum Revolving Facility Amount (as defined in the Amended Loan Agreement) to $65.0 million, among other things.

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The borrowings of the Revolving Credit Facility, therefore, will be classified as Long-term debt, current portion on the Condensed Consolidated Balance Sheet.

Under the Revolving Credit Facility, the total loan capacity was $51.2 million, which was based on a borrowing base certificate in effect as of March 31, 2022.

The Company had outstanding borrowings of $44.8 million under the Revolving Credit Facility, leaving a residual $6.4 million available for borrowings as of March 31, 2022.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to 5% in excess of the LIBOR Rate and 4% in excess of the Base Rate through April 1, 2022.

The weighted average interest rate for the loan was 6.0% for the three months ended March 31, 2022.

Under the Revolving Credit Facility, the total loan capacity was $57.1 million, which was based on a borrowing base certificate in effect as of June 30, 2022.

The Company had outstanding borrowings of $33.9 million under the Revolving Credit Facility, leaving a residual $23.2 million available for borrowings as of June 30, 2022.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum ranging from 4.5% to 5% in excess of the LIBOR Rate and 3.5% to 4% in excess of the Base Rate, dependent on the fixed cost coverage ratio, through July 1, 2022.

The weighted average interest rate for the loan was approximately 5.5% for the six months ended June 30, 2022.

The Company capitalized fees of $1.8 million associated with the Revolving Credit Facility, which are included in Other assets in the Condensed Consolidated Balance Sheets.

Such fees will continue to be amortized through maturity and are included in Interest expense, net on the Condensed Consolidated Statement of Operations.

Unamortized debt issuance costs as of March 31, 2022 were $1.6 million.

Unamortized debt issuance costs as of June 30, 2022 were $1.5 million.

M&E Term Loan Facility

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Borrowings under the M&E Term Loan Facility bear interest at a rate per annum equal to 8% in excess of the LIBOR Rate and 7% in excess of the Base Rate.

The weighted average interest rate for the M&E Term Loan was 9.0% for the three months ended March 31, 2022.

The weighted average interest rate for the M&E Term Loan was 8.5% for the six months ended June 30, 2022.

The M&E Term Loan Facility is scheduled to mature in September 2025.

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Such fees will continue to be amortized through maturity and are included in Interest expense, net on the Condensed Consolidated Statement of Operations.

Unamortized debt issuance costs as of March 31, 2022 were $0.3 million.

Unamortized debt issuance costs as of June 30, 2022 were $0.3 million.

On October 1, 2021, the Term Loan B, was finalized in connection with the closing of the Basic Acquisition.

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Term Loan B is scheduled to mature in September 2022.

The weighted average interest rate for Term Loan B was 13.0% for the three months ended March 31, 2022.

On October 1, 2021, the Term Loan B was drawn in full to repay borrowings under the Revolving Credit Facility and as of March 31, 2022 the principal balance outstanding was $11.0 million.

The weighted average interest rate for Term Loan B was 12.7% for the three months ended June 30, 2022.

On October 1, 2021, the Term Loan B was drawn in full to repay borrowings under the Revolving Credit Facility and as of June 30, 2022 the principal balance outstanding was $2.8 million.

Principal payments are generated from the proceeds from the sale of Basic assets, and may not be reborrowed.

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Such fees will continue to be amortized through maturity and are included in Interest Expense, net on the Condensed Consolidated Statement of Operations.

Unamortized debt issuance costs as of March 31, 2022 were $0.3 million.

The Company paid approximately $4.9 million on Term Loan B subsequent to March 31, 2022, where such cash was generated from the sale of Basic assets under the Term Loan B.

Unamortized debt issuance costs as of June 30, 2022 were $0.1 million.

The Company paid approximately $1.8 million on Term Loan B subsequent to June 30, 2022, where such cash was generated from the sale of Basic assets under the Term Loan B.

Secured Promissory Note

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Certain of the assets acquired serve as collateral under the Secured Promissory Note.

As of March 31, 2022, the aggregate principal balance outstanding was $8.3 million.

As of June 30, 2022, the aggregate principal balance outstanding was $7.7 million.

Borrowings under the Secured Promissory Note bear interest at a rate of 8.5% per annum and is scheduled to mature in January 2024.

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During the year ended December 31, 2021, the Company entered into various Installment and Security Agreements (collectively, the “Installment Agreements”) in connection with the purchase of certain ancillary equipment, where such assets are being held as collateral.

As of March 31, 2022, the aggregate principal balance outstanding under the Installment Agreements was $0.9 million and is payable ratably over 36 months from the time of each purchase.

As of June 30, 2022, the aggregate principal balance outstanding under the Installment Agreements was $0.7 million and is payable ratably over 36 months from the time of each purchase.

The monthly installment payments contain an imputed interest rate that are consistent with the Company’s incremental borrowing rate and is not significant to the Company.

Tax Receivable Agreement (“TRA”)

During the year ended December 31, 2021, the Company entered into a definitive agreement with affiliates of CSL Capital Management (“CSL”) and Bayou Holdings (“Bayou”) to terminate the TRA (the “Tax Receivable Agreement”).

In consideration of the TRA Termination Agreement, the Company issued an aggregate of 376,185 shares of Class A Common Stock of the Company to affiliates of CSL Capital Management and Bayou Holdings.

During the year ended December 31, 2021, in connection with the TRA Termination Agreement, Ranger LLC redeemed CSL’s and Bayou’s outstanding units in Ranger LLC and the corresponding shares of its Class B Common Stock for an equivalent number of shares of Class A Common Stock.

Following this redemption, no shares of Class B Common Stock were issued or outstanding.

During the year ended December 31, 2021, pursuant to TRA Termination Agreement, Ranger LLC redeemed CSL’s and Bayou’s outstanding units in Ranger LLC, and the corresponding shares of the Company’s Class B Common Stock were exchanged for an equivalent number of shares of Class A Common Stock.

Following these transactions, no shares of Class B Common Stock were issued or outstanding.

Critical Accounting Policies and Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis