What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-31 compared with 2022-08-03 · 143 added, 123 removed, 344 unchanged (44% 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.

The Company recognizes the various global events—including COVID-19, the ongoing conflict in Ukraine, rising rates of inflation and the possibility of recession—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 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.

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 September 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.

Although commodity prices were lower in the quarter ended September 30, 2022, they, as well as our stock price and operational activity, have improved during the nine months ended September 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.

Heightened levels of inflation and the potential worsening of macro-economic conditions, including the possibility of recession, may present a risk for our business, our suppliers and the stability of the broader oil and gas industry.

Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry.

As commodity prices rise, the cost of oilfield goods and services generally also increase, while during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do.

In addition, the U.S.

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

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

Sustained levels of high inflation will continue to cause the U.S.

Federal Reserve and other central banks to increase interest rates, which could have the effects of raining the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt our business.

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 June 30, 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 September 30, 2022 under the CARES Act, which will become due on December 31, 2022.

In August 2022, President Biden signed the Inflation Reduction Act of 2022 (Public Law Number 117-169) into law.

This legislation is not expected to have a material impact on our financial statements.

In February 2022, Russia invaded neighboring Ukraine.

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Rig hours represent the aggregate number of hours that our well service rigs actively worked, whereas stage counts represent the number of completed stages during the periods presented.

Generally, during the period our services are being provided, our customers are billed on an hourly basis for our high-spec rig services or, as it relates to our wireline services, they are billed upon the earlier of the completion of the well or on a monthly basis.

Generally, during the

period our services are being provided, our customers are billed on an hourly basis for our high-spec rig services or, as it relates to our wireline services, they are billed upon the earlier of the completion of the well or on a monthly basis.

The rates for such rig hours and completed wells at which the customer is billed is generally predetermined based upon a contractual agreement.

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These costs are not attributable to any of our lines of businesses nor reporting segments.

We analyze our operating income or loss by segment, which we have defined as revenues less cost of services and depreciation expense.

We believe this is a key financial metric as it provides insight on profitability and operational performance based on the historical cost basis of our assets.

Operating Income or Loss

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Results of Operations

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

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

The following is an analysis of our operating results.

1 unchanged sentence

Three Months Ended

June 30, Variance

September 30, Variance

2022 2021 $ %

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Impairment of fixed assets 0.2 — 0.2 100 %

Loss on sale of assets 1.1 — 1.1 100 %

Gain (loss) on sale of assets (1.1) — (1.1) (100) %

Total operating expenses 159.0 89.8 69.2 77 %

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

Operating income (loss) 18.0 (8.1) 26.1 (322) %

Other (income) expenses

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Total other (income) expenses 1.0 1.2 (0.2) (17) %

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

Income (loss) before income tax benefit 17.0 (9.3) 26.3 (283) %

Tax (benefit) expense 3.4 (0.2) 3.6 (1800) %

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

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.

Net income (loss) $ 13.6 $ (9.1) $ 22.7 (249) %

Revenues for the three months ended September 30, 2022 increased $95.3 million, or 117%, to $177.0 million from $81.7 million for the three months ended September 30, 2021.

The change in revenues by segment was as follows:

High Specification Rigs.

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.

High Specification Rig revenue for the three months ended September 30, 2022 increased $49.8 million, or 167%, to $79.7 million from $29.9 million for the three months ended September 30, 2021.

The increase in rig services revenue included a 140% increase in total rig hours to 123,000 for the three months ended September 30, 2022 from 51,200 for the three months ended September 30, 2021.

The average revenue per rig hour increased 11% to $648 for the three months ended September 30, 2022 from $584 for the three months ended September 30, 2021.

Of the total segment revenue increase, $40.5 million is attributable to the assets acquired in the Basic Acquisition.

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Wireline Services.

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.

Wireline Services revenue for the three months ended September 30, 2022 increased $15.2 million, or 33%, to $60.6 million from $45.4 million for the three months ended September 30, 2021.

The increased wireline services revenue was primarily attributable to completion services of $4.3 million related to increased pricing and the addition of standby charges, offset by a 19% decrease in completed stage counts to 9,200 for the three months ended September 30, 2022 from 11,400 for the three months ended September 30, 2021.

Additional increased wireline services revenue was attributable to production services of $7.3 million, primarily related to increased pricing and utilization of assets from the acquisition of Patriot and PerfX.

Processing Solutions and Ancillary Services.

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.

Processing Solutions and Ancillary Services revenue for the three months ended September 30, 2022 increased $30.3 million, or 473%, to $36.7 million from $6.4 million for the three months ended

September 30, 2021.

Of the total segment revenue increase, $20.3 million is attributable to the Basic Acquisition.

The increase in processing

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.

The increase in processing solutions and ancillary services is primarily attributable to our coil tubing, equipment rentals and plugging and abandonment services, which amounted to $12.7 million, $9.8 million and $7.5 million, respectively.

Cost of services (exclusive of depreciation and amortization).

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.

Cost of services (exclusive of depreciation and amortization) for the three months ended September 30, 2022 increased $64.1 million, or 87%, to $138.1 million from $74.0 million for the three months ended September 30, 2021.

As a percentage of revenue, cost of services was 78% and 91% for the three months ended September 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 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.

High Specification Rig cost of services for the three months ended September 30, 2022 increased $37.6 million, or 150% to $62.7 million from $25.1 million for the three months ended September 30, 2021.

The increase was primarily attributable to an increase in variable expenses, notably employee related labor costs and fuel costs, which amounted to $22.4 million and $3.2 million, respectively, coupled with a $4.2 million increase in expense related to general operating expenses.

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 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.

Wireline Services cost of services for the three months ended September 30, 2022 increased $5.2 million, or 12%, to $49.2 million from $44.0 million for the three months ended September 30, 2021.

Wireline Services cost of services as a percentage of revenue decreased from 97% for the three months ended September 30, 2021 to 81% for the three months ended September 30, 2022 due to the increase in revenues attributed to increased utilization of assets from the acquisition of Patriot and PerfX.

The increase was primarily attributable to increased employee costs of $3.5 million primarily due to the acquisitions of PerfX and Patriot, and, to a lesser extent, maintenance costs of approximately $2.1 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 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.

Processing Solutions and Ancillary Services cost of services for the three months ended September 30, 2022 increased $21.3 million, or 435%, to $26.2 million from $4.9 million for the three months ended September 30, 2021.

The increase was primarily attributable to increased employee and maintenance costs with the upturn in operational activity, which amounted to approximately $9.4 million and $3.6 million, respectively.

Additionally, cost of service expense increased by $3.7 million primarily related to increased activity in our coil tubing and plugging and abandonment services.

Of the segment cost of services increase, $16.5 million is attributable to the Basic Acquisition.

General & Administrative.

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.

General and administrative expenses for the three months ended September 30, 2022 increased $3.9 million, or 55%, to $11.0 million from $7.1 million.

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

Depreciation and Amortization.

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.

Depreciation and amortization for the three months ended September 30, 2022 increased $2.1 million, or 24%, to $10.8 million from $8.7 million for the three months ended September 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 June 30, 2022.

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

Interest Expense, net.

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

Interest expense, net for the three months ended September 30, 2022 increased $0.6 million, or 50%, to $1.8 million from $1.2 million for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 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

Nine Months Ended

September 30, Variance

2022 2021 $ %

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Impairment of fixed assets 1.3 — 1.3 100 %

Loss on sale of assets 1.1 — 1.1 100 %

Gain (loss) on sale of assets — 0.1 (0.1) (100) %

Total operating expenses 443.6 193.9 249.7 129 %

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

Operating income (loss) 10.6 (23.9) 34.5 (144) %

Other (income) expenses

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Total other (income) expenses 2.1 2.5 (0.4) (16) %

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.

Income (loss) before income tax (benefit) expense 8.5 (26.4) 34.9 (132) %

Tax expense 1.0 0.1 0.9 900 %

Net income (loss) $ 7.5 $ (26.5) $ 34.0 (128) %

Revenues for the nine months ended September 30, 2022 increased $284.2 million, or 167%, to $454.2 million from $170.0 million for the nine months ended September 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.

High Specification Rig revenue for the nine months ended September 30, 2022 increased $140.0 million, or 174%, to $220.6 million from $80.6 million for the nine months ended September 30, 2021.

The increase in rig services revenue included a 143% increase in total rig hours to 355,400 for the nine months ended September 30, 2022 from 146,300 for the nine months ended September 30, 2021.

The average revenue per rig hour increased 13% to $621 from $551 for the nine months ended September 30, 2021.

Of the total segment revenue increase, $112.4 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.

Wireline Services revenue for the nine months ended September 30, 2022 increased $75.6 million, or 103%, to $148.7 million from $73.1 million for the nine months ended September 30, 2021.

The increased wireline services revenue was primarily attributable to completion services of $47.3 million, which included a 43% increase in completed stage counts to 24,600 for the nine months ended September 30, 2022 from 17,200 for the nine months ended September 30, 2021.

Additional increased wireline services revenue was attributable to production services of $20.0 million, primarily related to increased pricing and utilization of assets from the acquisition of Patriot and PerfX.

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.

Processing Solutions and Ancillary Services revenue for the nine months ended September 30, 2022 increased $68.6 million, or 421%, to $84.9 million from $16.3 million for the nine months ended September 30, 2021.

Of the total segment revenue increase, $44.9 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.

in processing solutions and ancillary services is primarily attributable to a $26.2 million increase in our coil tubing services, a $23.3 million increase in our equipment rentals services and a $19.2 million in our plugging and abandonment services.

Cost of services (exclusive of depreciation and amortization).

Cost of services for the nine months ended September 30, 2022 increased $223.9 million, or 147%, to $376.1 million from $152.2 million for the nine months ended September 30, 2021.

As a percentage of revenue, cost of services was 83% and 90% for the nine months ended September 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.

High Specification Rig cost of services for the nine months ended September 30, 2022 increased $107.2 million, or 157%, to $175.3 million from $68.1 million for the nine months ended September 30, 2021.

The increase was primarily attributable to an increase in variable expenses, notably employee-related labor costs, repair and maintenance costs, and general operating expenses of $63.9 million, $9.7 million, and $13.5 million, respectively.

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 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.

Wireline Services cost of services for the nine months ended September 30, 2022 increased $64.4 million, or 91%, to $134.8 million from $70.4 million for the nine months ended September 30, 2021.

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

The completion wireline activity accounted for approximately $57.0 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.

Processing Solutions and Ancillary Services cost of services for the nine months ended September 30, 2022 increased $52.3 million, or 382%, to $66.0 million from $13.7 million for the nine months ended September 30, 2021.

The increase was primarily attributable to increased employee costs and maintenance and repair with the upturn in operational activity, which amounted to $23.7 million and $8.8 million, respectively.

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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.

General and administrative expenses for the nine months ended September 30, 2022 increased $15.7 million, or 94%, to $32.4 million from $16.7 million.

The increase in general and administrative expenses is primarily due to corporate employee costs added subsequent to the Basic Acquisition, coupled with professional fees and transactional costs incurred during the nine months ended September 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.

Depreciation and amortization for the nine months ended September 30, 2022 increased $8.9 million, or 36%, to $33.8 million from $24.9 million for the nine months ended September 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.

This was partially offset by depreciation expense related to fixed assets disposed of during the nine months ended September 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.

Interest expense, net for the nine months ended September 30, 2022 increased $3.2 million, or 128%, to $5.7 million from $2.5 million for the nine months ended September 30, 2021.

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We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net loss determined in accordance with U.S.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with U.S.

Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA.

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

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

Three Months Ended September 30, 2022

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

6 unchanged sentences

Equity based compensation — — — 1.1 1.1

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

Loss on retirement of debt — — — — —

Gain on disposal of property and equipment — — — (1.1) (1.1)

Bargain purchase gain, net of tax — — — (0.8) (0.8)

3 unchanged sentences

Adjusted EBITDA $ 17.0 $ 11.4 $ 10.5 $ (8.6) $ 30.3

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

6 unchanged sentences

Equity based compensation — — — 0.3 0.3

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

Loss on retirement of debt — — — 0.2 0.2

Gain on disposal of property and equipment — — — — —

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

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Equity based compensation — — — 0.8 0.8

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

Loss on retirement of debt — — — (0.2) (0.2)

Gain on disposal of property and equipment — — — (1.1) (1.1)

Bargain purchase gain, net of tax — — — (0.8) (0.8)

3 unchanged sentences

Adjusted EBITDA $ 12.2 $ 10.0 $ 9.0 $ (4.2) $ 27.0

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.

Adjusted EBITDA for the three months ended September 30, 2022 increased $27.0 million to $30.3 million from $3.3 million for the three months ended September 30, 2021.

The change by segment was as follows:

High Specification Rigs .

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.

High Specification Rigs Adjusted EBITDA for the three months ended September 30, 2022 increased $12.2 million to $17.0 million from $4.8 million for the three months ended September 30, 2021, primarily due to increased revenues of $49.8 million, partially offset by a corresponding increase in cost of services of $37.6 million.

Wireline Services.

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.

Wireline Services Adjusted EBITDA for the three months ended September 30, 2022 increased $10.0 million to $11.4 million from $1.4 million for the three months ended September 30, 2021, primarily due to increased revenues of $15.2 million, partially offset by a corresponding increase in cost of services of $5.2 million.

Processing Solutions and Ancillary Services .

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.

Processing Solutions and Ancillary Services Adjusted EBITDA for the three months ended September 30, 2022 increased $9.0 million to $10.5 million from $1.5 million for the three months ended September 30, 2021, due to increased revenues of $30.3 million, offset by a corresponding increase in cost of services of $21.3 million.

Other Adjusted EBITDA for the three months ended September 30, 2022 increased $4.2 million to a loss of $8.6 million from a loss of $4.4 million for the three months ended September 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

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

TA Nine Months Ended September 30, 2022

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

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Interest expense, net — — — 5.7 5.7

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

Tax (benefit) expense — — — 1.0 1.0

Depreciation and amortization 20.8 8.3 3.3 1.4 33.8

1 unchanged sentence

Equity based compensation — — — 2.8 2.8

Loss on retirement of debt — — — — —

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

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Adjusted EBITDA $ 45.3 $ 13.9 $ 18.9 $ (20.2) $ 57.9

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

2 unchanged sentences

Interest expense, net — — — 2.5 2.5

Income tax (benefit) expense — — — 0.3 0.3

Tax (benefit) expense — — — 0.1 0.1

Depreciation and amortization 13.6 5.5 4.7 1.1 24.9

1 unchanged sentence

Equity based compensation — — — 2.1 2.1

Loss on retirement of debt — — — 0.2 0.2

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

8 unchanged sentences

Interest expense, net — — — 3.2 3.2

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

Tax (benefit) expense — — — 0.9 0.9

Depreciation and amortization 7.2 2.8 (1.4) 0.3 8.9

1 unchanged sentence

Equity based compensation — — — 0.7 0.7

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

Loss on retirement of debt — — — (0.2) (0.2)

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

Bargain purchase gain, net of tax — — — (3.6) (3.6)

Severance and reorganization costs — — — 2.2 2.2

2 unchanged sentences

Adjusted EBITDA $ 32.8 $ 11.2 $ 16.3 $ (7.5) $ 52.8

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.

Adjusted EBITDA for the nine months ended September 30, 2022 increased $52.8 million to $57.9 million from $5.1 million for the nine months ended September 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.

High Specification Rigs Adjusted EBITDA for the nine months ended September 30, 2022 increased $32.8 million to $45.3 million from $12.5 million for the nine months ended September 30, 2021, primarily due to increased revenues of $140.0 million, partially offset by a corresponding increase in cost of services of $107.2 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.

Wireline Services Adjusted EBITDA for the nine months ended September 30, 2022 increased $11.2 million to $13.9 million from $2.7 million for the nine months ended September 30, 2021, primarily due to increased revenues of $75.6 million, partially offset by an increase in cost of services of $64.4 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.

Processing Solutions and Ancillary Services Adjusted EBITDA for the nine months ended September 30, 2022 increased $16.3 million to $18.9 million from $2.6 million for the nine months ended September 30, 2021, primarily due to increased revenues of $68.6 million, partially offset by an increase in cost of services of $52.3 million.

Other Adjusted EBITDA for the nine months ended September 30, 2022 increased $7.5 million to a loss of $20.2 million from a loss of $12.7 million for the nine months ended September 30, 2021.

1 unchanged sentence

We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, investments and acquisitions.

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

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.

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

As of September 30, 2022, we had total liquidity of $35.7 million, consisting of $5.2 million of cash on hand and availability under our Revolving Credit Facility of $30.5 million.

As of September 30, 2022, our borrowing base under the Revolving Credit Facility was $57.0 million compared to $37.5 million and $45.0 million as of September 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.

We currently expect to have sufficient funds to meet the Company’s short and long term liquidity requirements and comply with our covenants of our debt agreements.

For further details, see “— Our Debt Agreements.”

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

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

2022 2021 $ %

(in millions)

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

Net cash provided by operating activities $ 18.5 $ 23.4 $ (4.9) 21 %

Net cash provided by (used in) investing activities 12.5 (5.9) 18.4 312 %

2 unchanged sentences

Operating Activities

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.

Net cash from operating activities decreased $4.9 million to cash provided of $18.5 million for nine months ended September 30, 2022 compared to cash provided of $23.4 million for the nine months ended September 30, 2021.

The change in cash flows from operating activities is primarily attributable to an increase in contract assets for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The use of working capital cash increased $48.5 million to $26.6 million for the nine months ended September 30, 2022, compared to cash generated of $21.9 million for the nine months ended September 30, 2021.

Investing Activities

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.

Net cash from investing activities increased $18.4 million to a cash provided of $12.5 million for nine months ended September 30, 2022 compared to cash used of $5.9 million for the nine months ended September 30, 2021.

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

Financing Activities

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.

Net cash from financing activities decreased $50.9 million from cash provided of $24.5 million for the nine months ended September 30, 2021 compared to cash used of $26.4 million for the nine months ended September 30, 2022.

The change in cash flows from financing activities is primarily attributable to cash from asset sales and operations being utilized to pay down debt.

During the three and nine months ended September 30, 2022 the Company retired Term Loan B and paid an aggregate of $25.3 million on all debt and financing liabilities.

Supplemental Disclosures

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.

During the nine months ended September 30, 2022, the Company added fixed assets of $4.2 million primarily related to finance leased assets across all operating segments.

Working Capital

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 working capital, which we define as total current assets less total current liabilities, was $54.0 million as of September 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.

Our Debt Agreements

2 unchanged sentences

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 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.

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

On January 7, 2022, the Company entered into the First Amendment to Loan and Security 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.

On September 23, 2022, the Company entered into the Amended Loan Agreement with EBC and Eclipse Business Capital SPV, LLC, which, among other things, designated the change in reference rate from LIBOR to SOFR, and designated a Letter of Credit in the amount of $1.6 million to be utilized for working capital and general corporate purposes, as needed.

Revolving Credit Facility

5 unchanged sentences

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 $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.

Under the Revolving Credit Facility, the total loan capacity was $57.0 million, which was based on a borrowing base certificate in effect as of September 30, 2022.

The Company had outstanding borrowings of $24.9 million under the Revolving Credit Facility, leaving a residual $30.5 million available for borrowings as of September 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 weighted average interest rate for the loan was approximately 5.9% for the nine months ended September 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 June 30, 2022 were $1.5 million.

Unamortized debt issuance costs as of September 30, 2022 were $1.4 million.

M&E Term Loan Facility

1 unchanged sentence

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 8.5% for the six months ended June 30, 2022.

The weighted average interest rate for the M&E Term Loan was 9.0% for the nine months ended September 30, 2022.

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

2 unchanged sentences

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 June 30, 2022 were $0.3 million.

Unamortized debt issuance costs as of September 30, 2022 were $0.2 million.

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

1 unchanged sentence

Term Loan B is scheduled to mature in September 2022.

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.

The weighted average interest rate for Term Loan B was 12.4% through the maturity date of August 16, 2022.

On October 1, 2021, the Term Loan B was drawn in full to repay borrowings under the Revolving Credit Facility and as of September 30, 2022.

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

1 unchanged sentence

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 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.

On August 16, 2022, the outstanding balance of Term Loan B was terminated.

At this time, the remaining balance of the loan was $0.3 million, which was paid utilizing funds from the Revolving Credit Facility.

At the time of the termination, the Company had capitalized fees associated with Term Loan B of $0.1 million.

This amount was charged to interest expense on the Condensed Consolidated Statement of Operations.

Secured Promissory Note

1 unchanged sentence

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

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

As of September 30, 2022, the aggregate principal balance outstanding was $7.0 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.

2 unchanged sentences

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 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.

As of September 30, 2022, the aggregate principal balance outstanding under the Installment Agreements was $0.6 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.

29 unchanged sentences

• our future revenue, income and operating performance;

• general economic conditions, including the impact of continued inflation and associated changes in monetary policy;

• the volatility in global crude oil demand and crude oil prices for an uncertain period of time that may lead to a significant reduction of domestic crude oil and natural gas production;

10 unchanged sentences

• business or asset acquisitions;

• general economic conditions;

• credit markets;

10 unchanged sentences

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