What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-01 compared with 2020-03-02 · 410 added, 386 removed, 482 unchanged (62% of the section changed)

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Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Item 1A.

“Risk Factors” and the section entitled “Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K.

“Risk Factors” and the section entitled “Forward-Looking Statements” appearing elsewhere in this annual report.

We are an integrated, growth-oriented company serving both the electric utility and oil and gas industries in North America.

Our primary business objective is to grow our operations and create value for stockholders through organic growth opportunities and accretive acquisitions.

Our suite of services includes infrastructure services, pressure pumping services, natural sand proppant services, drilling services and other services, which includes coil tubing, equipment rental, full service transportation, crude oil hauling, remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services.

Our suite of services includes infrastructure services, well completion services, natural sand proppant services, drilling services and other services, which includes aviation, equipment rental, crude oil hauling, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

Our infrastructure services division provides construction, upgrade, maintenance and repair services to the electrical infrastructure industry.

Our pressure pumping services division provides hydraulic fracturing, sand hauling and water transfer services.

Our well compeltion services division provides hydraulic fracturing, sand hauling and water transfer services.

Our natural sand proppant services division mines, processes and sells natural sand proppant used for hydraulic fracturing.

Our drilling services division currently provides rental equipment, such as mud motors and operational tools, for both vertical and horizontal drilling as well as rig moving services.

In addition to these service divisions, we also provide coil tubing services, pressure control services, equipment rentals, full service transportation, crude oil hauling services, remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services.

Our drilling services division currently provides rental equipment, such as mud motors and operational tools, for both vertical and horizontal drilling.

In addition to these service divisions, we also provide aviation services, equipment rentals, crude oil hauling services, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

We believe that the services we offer play a critical role in maintaining and improving electrical infrastructure as well as in increasing the ultimate recovery and present value of production streams from unconventional resources.

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Our transformation towards an industrial based company is ongoing.

During the fourth quarter of 2019, we began infrastructure engineering operations focused on the transmission and distribution industry and also commenced oilfield equipment manufacturing operations.

The startup of oilfield equipment manufacturing operations provides us with the ability to repair much of our existing equipment in-house, as well as the option to manufacture certain new equipment we may need in the future.

The oilfield equipment manufacturing operations will initially serve our internal needs for our water transfer and equipment rental businesses, but we expect to expand into third party sales in the future.

During the fourth quarter of 2019, we began infrastructure engineering operations focused on the transmission and distribution industry and also commenced equipment manufacturing operations.

Our equipment manufacturing operations provide us with the ability to repair much of our existing equipment in-house, as well as the option to manufacture certain new equipment we may need in the future.

The equipment manufacturing operations have initially served the internal needs for our water transfer, equipment rental and infrastructure businesses, but we expect to expand into third party sales in the future.

We are continuing to explore other opportunities to expand our business lines as we shift to a broader industrial focus.

On November 24, 2014, Mammoth Energy Holdings LLC, or Mammoth Holdings, Gulfport Energy Corporation, or Gulfport, and Rhino Exploration LLC, or Rhino, contributed to the Company their respective interests in the following entities:

Bison Drilling and Field Services, LLC, or Bison Drilling;

Bison Trucking LLC, or Bison Trucking;

White Wing Tubular Services LLC, or White Wing;

Barracuda Logistics LLC, or Barracuda;

Panther Drilling Systems LLC, or Panther Drilling;

Redback Energy Services LLC, or Redback Energy Services;

Redback Coil Tubing LLC, or Redback Coil Tubing;

Muskie Proppant LLC, or Muskie Proppant;

Stingray Pressure Pumping LLC, or Pressure Pumping;

Stingray Logistics LLC, or Logistics;

and Great White Sand Tiger Lodging Ltd., or Sand Tiger.

Upon completion of these contributions, Mammoth Holdings, Gulfport and Rhino beneficially owned a 68.7%, 30.5% and 0.8% equity interest, respectively, in the Partnership.

Subsequently, the Partnership formed Redback Pumpdown Services LLC, or Pumpdown, Mr.

Inspections LLC, or Mr.

Inspections, Silverback Energy Services LLC, or Silverback, and Mammoth Inc.

as wholly-owned subsidiaries.

On October 12, 2016, prior to and in connection with the IPO, the Partnership converted to a Delaware limited liability company named Mammoth Energy Partners LLC, or Mammoth LLC, and Mammoth Holdings, Gulfport and Rhino contributed their respective membership interests in Mammoth LLC to us in exchange for shares of our common stock, and Mammoth LLC became our wholly-owned subsidiary.

On October 19, 2016, Mammoth Inc.

closed its IPO of 7,750,000 shares of common stock, of which 7,500,000 shares were sold by Mammoth Inc.

and the remaining 250,000 shares were sold by certain selling stockholders, at a price to the public of $15.00 per share.

Mammoth Inc.’s common stock is traded on the Nasdaq Global Select Market under the symbol “TUSK.” Mammoth Inc.

was formed in June 2016, and did not conduct any material business operations prior to the completion of the IPO and the contribution described below completed on October 12, 2016 immediately prior to the IPO.

Prior to the IPO, Mammoth Inc.

was a wholly-owned subsidiary of the Partnership.

On June 5, 2017, we acquired Sturgeon Acquisitions LLC, or Sturgeon, and Sturgeon's wholly owned subsidiaries Taylor Frac, LLC, or Taylor Frac, Taylor Real Estate Investments, LLC, or Taylor Real Estate, and South River Road, LLC, or South River Road.

Prior to the acquisition, we and Sturgeon were under common control and, in accordance with generally accepted accounting principles in the United States, or GAAP, we have accounted for this acquisition in a manner similar to the pooling of interest method of accounting.

Therefore, our historical financial information for all periods included in this Annual Report on Form 10-K has been recast to combine Sturgeon's financial results with our financial results as if the acquisition had been effective since Sturgeon commenced operations.

Our revenues, operating (loss) income and identifiable assets are primarily attributable to four reportable segments:

infrastructure services;

pressure pumping services;

well completion services;

natural sand proppant services;

and drilling services.

For the year ended December 31, 2018, we identified three reportable segments consisting of infrastructure services, pressure pumping services and natural sand proppant services.

Based on our assessment of FASB ASC 280, Segment Reporting, guidance at December 31, 2019, we changed our reportable segment presentation in 2019 to include drilling services, which includes Bison Drilling, Bison Trucking, Panther Drilling, Mako Acquisitions and White Wing Tubular, as its own reportable segment.

Segment evaluation is determined on a quantitative basis based on a function of operating income (loss), as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

The results of operations for 2018 and 2017 below have been retroactively adjusted to reflect this change in reportable segments.

In 2019, we included Barracuda Logistics LLC, or Barracuda, in our pressure pumping segment, Cobra Aviation Services LLC, or Cobra Aviation, Air Rescue Systems Corporation, or ARS, and Leopard Aviation LLC, or Leopard, in our infrastructure segment and Mako Acquisitions LLC, or Mako, in our drilling segment.

Based on our assessment of FASB ASC 280, Segment Reporting , guidance at December 31, 2020, we changed our presentation in 2020 to move Barracuda to the sand segment and Cobra Aviation, ARS, Leopard and Mako to the reconciling column titled “All Other”.

Additionally, we changed the name of our pressure pumping segment to the well completion segment in 2020.

The results for the years ended December 31, 2019 and 2018 have been retroactively adjusted to reflect these changes.

Since the dates presented below, we have conducted our operations through the following entities:

Pressure Pumping Services Segment

Pressure Pumping—March 2012

Silverback Energy, formerly Logistics—November 2012

Barracuda—October 2014

Pumpdown—January 2015

Inspections—January 2015

Mammoth Equipment Leasing LLC—November 2016

Bison Sand Logistics LLC—January 2018

Aquahawk Energy LLC, or Aquahawk—June 2018

Infrastructure Services Segment

• Cobra Acquisitions LLC, or Cobra—January 2017

Lion Power Services, formerly Cobra Energy LLC—January 2017

Higher Power Electrical LLC, or Higher Power—April 2017

5 Star Electric LLC, or 5 Star—July 2017

Dire Wolf Energy Services LLC—January 2018

Cobra Aviation LLC, or Cobra Aviation—January 2018

• Lion Power Services LLC, formerly Cobra Energy LLC—January 2017

• Higher Power Electrical LLC—April 2017

• 5 Star Electric LLC—July 2017

• Cobra Logistics LLC—February 2018

• Cobra Caribbean LLC—October 2018

Air Rescue Systems LLC, or ARS—December 2018

• Python Equipment LLC—December 2018

Predator Aviation LLC—April 2019

Leopard Aviation—April 2019

Well Completion Services Segment

• Stingray Pressure Pumping LLC—March 2012

• Silverback Energy LLC—November 2012

• Redback Pump Down Services LLC—January 2015

Inspections LLC—January 2015

• Mammoth Equipment Leasing LLC—November 2016

• Bison Sand Logistics LLC—January 2018

• Aquahawk Energy LLC—June 2018

Natural Sand Proppant Services Segment

Muskie Proppant—September 2011

Piranha Proppant LLC, or Piranha—May 2017

Sturgeon Acquisitions—June 2017

Taylor Frac—June 2017

Taylor Real Estate—June 2017

South River Road—June 2017

• Muskie Proppant LLC—September 2011

• Barracuda—October 2014

• Piranha Proppant LLC—May 2017

• Sturgeon Acquisitions LLC—June 2017

• Taylor Frac, LLC—June 2017

• Taylor Real Estate Investments, LLC—June 2017

• South River Road, LLC—June 2017

Drilling Services Segment

Bison Drilling—November 2010

Panther Drilling—December 2012

Bison Trucking—August 2013

White Wing—September 2014

Mako Acquisitions LLC—March 2017

Sand Tiger—October 2007

Redback Energy Services—October 2011

Redback Coil Tubing—May 2012

• Bison Drilling and Field Services, LLC—November 2010

• Panther Drilling Systems LLC—December 2012

• Bison Trucking LLC—August 2013

• White Wing Tubular Services LLC—September 2014

• Great White Sand Tiger Lodging Ltd.—October 2007

• Redback Energy Services, LLC—October 2011

• Redback Coil Tubing, LLC—May 2012

• WTL Oil LLC, or WTL, formerly Silverback—June 2016

• Mammoth Energy Partners, LLC—June 2016

• Mako —March 2017

• Stingray Energy Services LLC, or Stingray Energy Services—June 2017

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• Tiger Shark Logistics LLC—October 2017

• Dire Wolf Energy Services LLC—January 2018

• Cobra Aviation—January 2018

• Black Mamba Energy LLC—March 2018

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• IFX Transport LLC—December 2018

• ARS—December 2018

• Predator Aviation LLC—April 2019

• Leopard—April 2019

• Anaconda Manufacturing LLC—September 2019

• Aquawolf LLC—September 2019

Revolving Credit Facility

As of December 31, 2019, our revolving credit facility contained two financial covenants:

a minimum interest coverage ratio (3.0 to 1.0) and a maximum leverage ratio (4.0 to 1.0).

As of December 31, 2019, we were in compliance with the financial covenants under our revolving credit facility.

However, we believe that our adjusted EBITDA for the trailing four fiscal quarters would have resulted in a breach of the maximum leverage ratio and/or the interest coverage ratio as early as the end of the first quarter of 2020 if we did not receive payments due from PREPA before the end of such quarter.

As we believe that such payments from PREPA are unlikely to be received by March 31, 2020, on February 26, 2020, we amended our revolving credit facility to, among other things, (i) amend our financial covenants, (ii) decrease the maximum revolving advance amount from $185 million to $130 million, (iii) decrease the amount that the maximum revolving advance can be increased to (the accordion) from $350 million to $180 million, (iv) increase the applicable margin ranges from 2.00% to 2.50% per annum in the case of the alternate base rate and from 3.00% to 3.50% per annum in the case of LIBOR, (v) increase the aggregate amount of permitted asset dispositions, and (vi) permit certain sale-leaseback transactions.

For additional information regarding the amendments to our revolving credit facility, see “—Our Revolving Credit Facility” below.

Impact of the Ongoing COVID-19 Pandemic and Volatility in Commodity Prices

On March 11, 2020, the World Health Organization characterized the global spread of the novel strain of coronavirus, COVID-19, as a “pandemic.” To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and a reduction in demand for many products from direct or ultimate customers.

While many of the stay-at-home orders have expired, the COVID-19 pandemic has resulted in a widespread health crisis and a swift and unprecedented reduction in international and U.S.

economic activity which, in turn, has adversely affected, and continues to adversely affect, the demand for oil and natural gas and caused significant volatility and disruption of the capital and financial markets.

In March and April 2020, concurrent with the spread of COVID-19 and quarantine orders in the U.S.

and worldwide, oil prices dropped sharply to below zero for the first time in history due to factors including significantly reduced demand and a shortage of storage facilities.

While OPEC members and certain other nations agreed in April 2020 to cut production and subsequently extended such production cuts through December 2020, which helped to reduce a portion of the excess supply in the market and improve crude oil prices, they agreed to increase production by 500,000 barrels per day beginning in January 2021.

As a result, downward pressure on commodity prices could continue for the foreseeable future.

We cannot predict if, or when, commodity prices will stabilize and at what price points and when global inventories will return to normalized levels.

Beginning in early March 2020, in response to the ongoing COVID-19 pandemic and the depressed commodity prices, many exploration and production companies, including our customers, immediately began to substantially reduce their capital expenditure budgets.

As a result, demand for our oilfield services, which was already under considerable pressure from reductions in our customers' capital expenditure budgets in 2019, declined further at the end of the first quarter of 2020 and continued to decline further throughout the remainder of 2020.

Demand for both gasoline and oil rebounded to some extent toward the end of the second quarter of 2020 and stabilized to some degree throughout the second half of 2020, but remains below historical levels.

As a result, depressed levels of oilfield service activity are expected to continue for the foreseeable future.

The ongoing COVID-19 pandemic, the broad reduction in economic activity, the current conditions in the energy industry and the adverse macroeconomic conditions have also had, and are likely to continue to have, an adverse effect on both pricing and utilization for our oilfield services.

We have taken, and continue to take, responsible steps to protect the health and safety of our employees during the COVID-19 pandemic.

We are also actively monitoring the impact of the COVID-19 pandemic and the adverse industry and market conditions and have taken mitigating steps to preserve liquidity, reduce costs and lower capital expenditures.

These actions have included reducing headcount, adjusting pay and limiting spending.

We will continue to take further actions that we deem to be in the best interest of the Company and our stockholders if the current conditions continue, do not improve or worsen.

Given the dynamic nature of these events, we are unable to predict the ultimate impact of the COVID-19 pandemic, the depressed commodity markets, the reduced demand for oil and oilfield services and adverse macroeconomic conditions on our business, financial condition, results of operations, cash flows and stock price or the pace or extent of any subsequent recovery.

2020 Highlights

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See “Non-GAAP Financial Measures” below for a reconciliation of net loss to Adjusted EBITDA.

Paid cash dividends of $0.25 per share.

Beginning with the second quarter of 2019, we suspended the quarterly cash dividend in response to oilfield market conditions and other factors, which include collections from PREPA.

Formed an infrastructure engineering company focused on the transmission and distribution industry and commenced oilfield equipment manufacturing operations.

Hired a new president for our infrastructure division and recently added experienced industry personnel to key management positions.

• In the fourth quarter of 2020, approximately 66% of our revenue was derived from the industrial sector.

Given the expected demand in the industrial sector, we believe that we are well positioned to grow our industrial business rapidly over the coming years.

Overview of Our Industries

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Our commercial services include the installation, maintenance and repair of commercial wiring.

We also provide storm repair and restoration services in response to storms and

other disasters.

We also provide storm repair and restoration services in response to storms and other disasters.

We provide infrastructure services primarily in the northeast, southwest and midwest portions of the United States.

We currently have agreements in place with private utilities, public IOUs and Co-Ops.

Since we commenced operations in this line of business, substantially all of our infrastructure revenues has been generated from storm restoration work, primarily from PREPA, due to damage caused by Hurricane Maria.

On October 19, 2017, Cobra Acquisitions LLC, or Cobra, and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid.

Since we commenced operations in this line of business, a substanital portion of our infrastructure revenue has been generated from storm restoration work, primarily from PREPA, due to damage caused by Hurricane Maria.

On October 19, 2017, Cobra and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid.

The one-year contract, as amended, provided for payments of up to $945 million.

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District Court for the District of Puerto Rico.

As a result, PREPA's ability to meet its payment obligations under the contracts is largely dependent upon funding from the Federal Emergency Management Agency or other sources.

As a result, PREPA's ability to meet its payment obligations under the contracts is

largely dependent upon funding from the FEMA or other sources.

On September 30, 2019, we filed a motion with the U.S.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to us by PREPA.

PREPA filed a motion to stay our motion on the ground that the ongoing criminal proceedings described below against the former president of Cobra and two other individuals may affect our recovery of those amounts.

On October 17, 2019, the court granted PREPA’s request to stay our motion and, on February 3, 2020, extended the stay until a status conference to be held on June 17, 2020.

In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to us or (iii) otherwise does not pay amounts owed to us for services performed, the receivable may not be collected and our financial condition, results of operations and cash flows would be materially and adversely affected.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to us by PREPA, which motion was stayed by the court.

On March 25, 2020, we filed an urgent motion to modify the stay order and allow our recovery of approximately $62 million in claims related to a tax gross-up provision contained in the emergency master service agreement, as amended, that was entered into with PREPA on October 19, 2017.

This emergency motion was denied on June 3, 2020 and the court extended the stay of our motion.

On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status motion by June 7, 2021.In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to us or (iii) otherwise does not pay amounts owed to us for services performed, the receivable may not be collected and our financial condition, results of operations and cash flows would be materially and adversely affected.

In addition, government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits and compliance reviews by government agencies and representatives.

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Further, as noted above, our contracts with PREPA have concluded and we have not obtained, and there can be no assurance that we will be able to obtain, one or more contracts with PREPA or other customers to replace the level of services that we provided to PREPA under our previous contracts.

Since the completion of our work in Puerto Rico on March 31, 2019, we focused on right-sizing our infrastructure operations and performing required maintenance on our equipment, which had been subjected to harsh working conditions.

This process, with its associated costs, was completed during the fourth quarter of 2019.

Demand for our infrastructure services in the continental United States has increased since we began operations in 2017.

We had a total of approximately 140 transmission and distribution crews as of December 31, 2019 , as compared to approximately 105 at December 31, 2018 and approximately 50 at December 31, 2017.

Demand for our infrastructure services in the continental United States remains steady, and our crew count remained stable at approximately 115 crews throughout 2020.

The COVID-19 pandemic and resulting economic conditions have not had a material impact on demand or pricing for our infrastructure services.

Transmission crew size varies based upon the scope of the project and factors such as voltage, structure type, number of conductors and type of foundation.

Each distribution crew generally consists of five employees.

These transmission and distribution crews are working for multiple utilities primarily across the northeastern, midwestern and southwestern portions of the United States.

We recently hired a new president for our infrastructure division and have added experienced industry personnel to key management positions.

These transmission and distribution crews work for multiple utilities primarily across the northeastern, midwestern and southwestern portions of the United States.

During the fourth quarter of 2019, we hired a new president for our infrastructure division and have added experienced industry personnel to key management positions.

Our infrastructure management team also has experience with both solar and wind projects and we believe that this experience, combined with our vertically integrated service offering, positions us well to compete and win renewable projects.

With this team in place, we believe we will be able to grow our customer base and increase our revenues in the continental United States over the coming years.

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Oil and Natural Gas Industry

rates and the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling, completion and related services and products budget.

The oil and natural gas industry is also impacted by general domestic and international economic conditions, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of customer demand, the availability of pipeline capacity and other conditions and factors that are beyond our control.

The oil and natural gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including the domestic and international supply and demand for oil and natural gas, current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices, production depletion rates and the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling, completion and related services and products budget.

The oil and natural gas industry is also impacted by general domestic and international economic conditions, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of customer demand, the availability of pipeline capacity, storage capacity and other conditions and factors that are beyond our control.

See “Recent Developments—Impact of the Ongoing COVID-19 Pandemic and Volatility in Commodity Prices” above.

Demand for most of our oil and natural gas products and services depends substantially on the level of expenditures by companies in the oil and natural gas industry.

The levels of capital expenditures of our customers are predominantly driven by the prices of oil and natural gas.

Over the past several years, commodity prices, particularly oil, has seen significant volatility with pricing ranging from a high of $110.53 per barrel on September 6, 2013 to a low of $26.19 per barrel on February 11, 2016.

During 2019, oil prices fluctuated between a low of $45.41 on January 1, 2019 and a high of $66.30 on April 23, 2019, and averaged $57.03 per barrel for the year.

Certain factors related to world politics and major oil producers caused fluctuations in the oil price during 2019.

However, overall, the price of oil stayed relatively stable throughout the year.

We anticipate demand for our oil and natural gas services and products will continue to be dependent on the level of expenditures by companies in the oil and natural gas industry and, ultimately, commodity prices.

We experienced a weakening in demand for our oilfield services beginning in the third quarter of 2019, which continued throughout the fourth quarter of 2019 as a result of budget exhaustion and capital discipline from our customers.

In addition, other factors, including access to capital and the need to refinance or repay maturing debt, have had a significant influence on some of our customers' capital budgets and activity levels.

While we still expect commodity prices to be the primary driver of capex spending and industry activity levels in the future, other factors may play a significant role in the ultimate level of capex spending by the companies that use our completion and production, natural sand proppant and directional drilling businesses.

During 2019, we experienced lower utilization rates and pricing for our oil and natural gas services, including our pressure pumping, contract drilling, coil tubing and directional drilling equipment and services, as compared to 2018.

Further, in response to market conditions, in July 2019 we temporarily shut down our cementing and acidizing operations and flowback operations.

Additionally, in December 2019 we temporarily shut down our contract drilling operations.

As discussed above, oil prices dropped sharply throughout March and April of 2020 and have continued to experience significant volatility.

Oil and natural gas prices are expected to continue to be volatile and we cannot predict if, or when, commodity prices will improve and stabilize.

We experienced a weakening in demand for our oilfield services during 2019 as a result of reductions in our customers' capital expenditure budgets.

The sharp decline in oil prices beginning in March 2020 further reduced the utilization and pricing of our oilfield services.

In response to market conditions, we temporarily shut down our cementing and acidizing operations and flowback operations beginning in July 2019, our contract drilling operations beginning in December 2019, our rig hauling operations

beginning in April 2020 and our coil tubing and full service transportation operations beginning in July 2020.

We continue to monitor the market to determine if and when we can recommence these services.

Based on current feedback from our exploration and production customers, we expect them to take a cautious approach to activity levels in 2020 given the recent volatility in oil prices and investor sentiment calling for activities to remain within or below cash flows.

Market fundamentals are challenging for our oil field businesses.

Although we believe the reported retirement of equipment across the industry is beginning to help the market, pricing and utilization for our oil field businesses are, and are expected to remain depressed for the foreseeable future.

Further, we are currently only operating one of our six pressure pumping fleets.

Based on current feedback from our exploration and production customers, they are taking a cautious approach to activity levels for 2021 given the recent volatility in oil prices and investor sentiment calling for activities to remain within or below cash flows.

Market fundamentals are challenging for our oilfield businesses and we expect this trend to continue for at least the first half of 2021.

Although we believe the reported retirement of equipment across the industry may, at some point, help the market, pricing and utilization for our oilfield services are expected to remain depressed for the foreseeable future.

While the oilfield portion of our service offerings continue to experience significant challenges, we expect to be ready to ramp up our oilfield service offerings when oilfield demand, pricing and margins strengthen.

We intend to closely monitor our cost structure in response to market conditions and pursue cost savings where possible.

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On December 28, 2019, Gulfport filed a lawsuit alleging our breach of this contract and seeking to terminate the contract and recover damages for alleged overpayments, audit costs and legal fees.

We believe this action is without merit and will vigorously defend the lawsuit.

However, the termination of our relationship with Gulfport, or nonrenewal of our contract with Gulfport, or one or more of our other customers, if not replaced with comparable or greater levels of service from other customers, would result in lower utilization rates for our pressure pumping equipment and, as a result, would have a material adverse effect on our business, financial condition, results of operations and cash flow.

Gulfport has not made the payments owed to us under this contract for any periods subsequent to its alleged December 28, 2019 termination date.

We believe Gulfport's actions are without merit and are vigorously defending the lawsuit.

Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

Gulfport may take action in its chapter 11 proceeding to terminate its agreement with us and/or seek to reduce our claims for services and damages to which we may be entitled.

We cannot assure you of the outcome of our claims in Gulfport’s chapter 11 proceeding, what our recovery on those claims might be or whether we will be able to preserve, extend or renew our contract with Gulfport on favorable terms and conditions or at all.

Likewise, we cannot assure you whether we would be able to obtain replacement long-term contracts with other customers sufficient to continue providing the level of services that we currently provide to Gulfport.

The termination of our relationship or nonrenewal of our contract with Gulfport, or one or more of our other significant customers, would have a material adverse effect on our business, financial condition, results of operations and cash flows.

Natural Sand Proppant Industry

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In 2018 and 2019, several new and existing suppliers completed planned capacity additions of frac sand supply, particularly in the Permian Basin.

The industry expansion, coupled with increased capital discipline and budget exhaustion, caused the frac sand market to become oversupplied, particularly in finer grades, during the second half of 2019.

With the frac sand market oversupplied, pricing for certain grades has fallen significantly from the peaks experienced throughout 2018 and during the first half of 2019.

The industry expansion, coupled with increased capital discipline, budget exhaustion and the impact on oil demand from the COVID-19 pandemic, caused the frac sand market to become oversupplied, particularly in finer grades.

With the frac sand market oversupplied, pricing for all grades has fallen significantly from the peaks experienced throughout 2018 and during the first half of 2019.

This oversupply resulted in several industry participants idling and closing high cost mines in an attempt to restore the supply and demand balance and reduce the number of industry participants.

Nevertheless, demand for our sand declined significantly in the second half of 2019 as a result of increased capital discipline by our customers and budget exhaustion, among other factors.

Nevertheless, demand for our sand declined significantly in the second half of 2019 and throughout 2020 as a result of completion activity falling due to lower oil demand and pricing as discussed above, increased capital discipline by our customers and budget exhaustion, among other factors.

We cannot predict if and when demand and pricing will recover sufficiently to return our natural sand proppant services segment to profitability.

During the first half of 2018, constraints in the rail system adversely impacted frac sand deliveries from our Taylor sand facility in Jackson County, Wisconsin.

As a result, we estimate production at our Taylor facility was 23% lower during the

first half of 2018 than it would have been in the absence of these constraints.

These rail system constraints were largely alleviated during the third quarter of 2018 and we do not believe they had an impact on our operations in 2019.

Production at our Piranha facility was not impacted by these rail constraints.

Further, as a result of adverse market conditions, production at our Muskie sand facility in Pierce County, Wisconsin has been temporarily idled since September 2018.

Our Taylor sand facility in Taylor, Wisconsin and Piranha sand facility in New Auburn, Wisconsin are currently running at 20% to 25% capacity.

Our Taylor sand facility in Taylor, Wisconsin and Piranha sand facility in New Auburn, Wisconsin are currently running at approximately 12% capacity.

Our contracted capacity has provided a strong baseline of business, which has kept our Taylor and Piranha plants operating and our costs low.

Our blended production costs have declined 24% from $15.54 during 2018 to $11.82 during 2019.

Our subsidiary Muskie Proppant is a party to a contract with Gulfport under which we sell and deliver specified amounts of sand to Gulfport.

The agreement, as amended, has a term ending in December 2021.

This agreement is not subject to the current disputes with Gulfport regarding the our pressure pumping contract.

A portion of our revenue from our natural sand proppant business is derived from Gulfport pursuant to a contract that expires in December 2021.

Gulfport has not made the payments owed to us under this contract for any periods subsequent to May 2020.

In September 2020, we filed a lawsuit seeking to recover delinquent payments owed to us under this contract.

Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

Gulfport may take action in its chapter 11 proceeding to terminate its agreement with us and/or seek to reduce our claims for services and damages to which we may be entitled.

The termination of our relationship or nonrenewal of our contract with Gulfport, or one or more of our other customers, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands)

Infrastructure services $ 155,241 $ 213,264

Pressure pumping services

Well completion services 88,325 243,802

Natural sand proppant services 34,360 97,063

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Other services 31,339 88,607

Eliminations (3,974) (49,688)

Total revenue 313,076 625,012

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Infrastructure services (exclusive of depreciation and amortization of $29,337 and $30,323, respectively, for 2020 and 2019) 122,369 173,269

Pressure pumping services (exclusive of depreciation and amortization of $40,198 and $51,417, respectively, for 2019 and 2018)

Well completion services (exclusive of depreciation and amortization of $30,395 and $40,117, respectively, for 2020 and 2019) 47,483 206,543

Natural sand proppant services (exclusive of depreciation, depletion and accretion of $9,758 and $14,039, respectively, for 2020 and 2019) 25,955 87,652

1 unchanged sentence

Other services (exclusive of depreciation and amortization of $15,713 and $19,323, respectively, for 2020 and 2019) 29,279 89,119

Eliminations (3,974) (49,748)

Total cost of revenue 232,021 543,788

3 unchanged sentences

Impairment of other long-lived assets 12,897 7,358

Operating (loss) income

Operating loss (149,317) (128,383)

Interest expense, net (5,397) (4,958)

Other income (expense), net

(Loss) income before income taxes

(Benefit) provision for income taxes

Net (loss) income

Revenue for 2019 decreased $1.1 billion , or 63% , to $625 million from $1.7 billion for 2018 .

The decline in total revenue is primarily attributable to a $868 million decrease in infrastructure services revenue, representing 81% of the overall decrease.

Additionally, pressure pumping services and natural sand proppant services revenue decreased $123 million and $68 million, respectively, representing 12% and 6% of the overall decrease.

Other income, net 34,938 42,216

Loss before income taxes (119,776) (91,125)

Benefit for income taxes (12,169) (12,081)

Net loss $ (107,607) $ (79,044)

Revenue for 2020 decreased $312 million, or 50%, to $313 million from $625 million for 2019.

The decrease in total revenue is attributable to declines in revenue across all business lines.

Revenue derived from related parties was $51 million, or 16% of our total revenue, for 2020 and $130 million, or 21% of our total revenue, for 2019.

Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts.

For additional information regarding the status of these contracts, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 20.

Commitments and Contingencies to our consolidated financial statements included elsewhere in this report.

Revenue by division was as follows:

Infrastructure Services.

Infrastructure services division revenue decreased $868 million , or 80% , to $214 million for 2019 from $1.1 billion for 2018 primarily due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria.

Infrastructure services division revenue decreased $58 million, or 27%, to $155 million for 2020 from $213 million for 2019 primarily due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria.

For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our Industries - Electrical Infrastructure Industry” above.

Revenue from our operations in the continental United States increased $37 million, or 31%, to $155 million for 2020 from $118 million for 2019.

Pressure Pumping Services .

Pressure pumping services division revenue decreased $123 million , or 33% , to $246 million for 2019 from $369 million for 2018 .

Revenue derived from related parties was $91 million , or 37% of total pressure pumping revenue, for 2019 and $96 million , or 26% of total pressure pumping revenue, for 2018 .

Well Completion Services .

Well completion services division revenue decreased $156 million, or 64%, to $88 million for 2020 from $244 million for 2019.

Revenue derived from related parties was $42 million, or 48% of total well completion revenue, for 2020 and $91 million, or 37% of total well completion revenue, for 2019.

Substantially all of our related party revenue is derived from Gulfport under a pressure pumping contract.

For additional information regarding the status of this contract, see Note 20.

Commitments and Contingencies to our consolidated financial statements included elsewhere in this annual report.

Intersegment revenue, consisting primarily of revenue derived from our sand segment, totaled $4 million and $7 million , respectively, for 2019 and 2018 .

The decrease in our pressure pumping services revenue was primarily driven by a decline in pricing as well as a decline in utilization.

On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

In 2020, we recognized pre-petition revenue totaling $39 million and post-petition revenue totaling $4 million in accordance with the terms of this contract.

For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above.

Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, totaled $1 million and $2 million, respectively, for 2020 and 2019.

The decrease in our well completion services revenue was primarily driven by a decline in pricing as well as a decline in utilization.

The number of stages completed decreased 46% to 2,880 for 2020 from 5,378 for 2019.

3 unchanged sentences

Revenue derived from related parties was $8 million, or 24% of total sand revenue, for 2020 and $28 million, or 29% of total sand revenue, for 2019.

All of our related party revenue is derived from Gulfport under a contract effective through December 31, 2021.

Intersegment revenue, consisting primarily of revenue derived from our pressure pumping segment, totaled $30 million , or 30% of total sand revenue, for 2019 and $67 million , or 40% of total sand revenue, for 2018 .

All of our related party revenue is derived from Gulfport under a sand supply contract.

On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

In 2020, we recognized pre-petition revenue totaling $7 million and post-petition revenue totaling $1 million in accordance with the terms of this contract.

For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above.

Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was nominal for 2020 and $30 million, or 31% of total sand revenue, for 2019.

The decrease in our natural sand proppant services revenue was primarily attributable to a 75% decline in tons of sand sold from approximately 2.0 million tons in 2019 to 0.5 million tons in 2020 coupled with a 51% decline in average price per ton of sand sold from $29.70 in 2019 to $14.58 in 2020.

Included in natural sand proppant services revenue is shortfall revenue of $25 million and $3 million, respectively, for the 2020 and 2019.

Drilling Services .

Drilling services division revenue decreased $24 million, or 75%, to $8 million for 2020, from $32 million for 2019.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $1 million for each of 2019 and 2018 .

The decline in our drilling services revenue was primarily attributable to decreases in revenue for our contract land drilling and directional drilling businesses of $19 million and $11 million, respectively, due to declines in utilization.

Our average active rigs decreased from 4.3 in 2018 to 1.4 in 2019 .

Directional drilling utilization declined from 49% in 2018 to 30% in 2019 .

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was nominal for 2020 and $1 million for 2019.

The decline in our drilling services revenue was primarily attributable to declines in contract land drilling, rig hauling and directional drilling revenue of $9 million, $9 million and $6 million, respectively.

In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020.

Other Services.

Revenue from other services, consisting of revenue derived from our coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, crude oil hauling, full service transportation and remote accommodation businesses, decreased $15 million, or 18%, to $69 million for 2019 from $84 million for 2018 .

Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport, was $9 million , or 13% of total other services revenue, for 2019 and $21 million , or 25% of total other services revenue, for 2018 .

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and pressure pumping segments, totaled $2 million and $6 million , respectively, for 2019 and 2018 .

The decrease in other services revenue was primarily due to a decline in utilization from 39% in 2018 to 17% in 2019 for our coil tubing business.

Additionally, due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations during the third quarter of 2019 resulting in a decline in revenue.

We continue to monitor market conditions to evaluate if and when we can recommence providing these services.

These decreases were partially offset by an increase in activity for our equipment rental business.

of 557 pieces of equipment were rented during 2019, an increase of 41% from 395 pieces of equipment rented during 2018.

Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, crude oil hauling, full service transportation, remote accommodation, equipment manufacturing and infrastructure engineering and design businesses, decreased $58 million, or 65%, to $31 million for 2020 from $89 million for 2019.

Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $1 million, or 3% of total other services revenue, for 2020 and $11 million, or 12% of total other services revenue, for 2019.

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $3 million and $15 million, respectively, for 2020 and 2019.

The decrease in our other services revenue was primarily due to a decline in utilization for our equipment rental business.

We rented an average of 204 pieces of equipment to customers during 2020, a decrease of 63% from an average of 557 pieces of equipment rented to customers during 2019.

Additionally, utilization for our crude oil hauling and aviation businesses declined.

Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations in July 2019 and our coil tubing and full service transportation operations beginning in July 2020.

These decreases were partially offset by increases in revenue for our remote accommodations and infrastructure engineering businesses.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense) .

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $550 million from $1.1 billion , or 65% of total revenue, for 2018 to $544 million , or 87% of total revenue, for 2019 .

The decrease was primarily due to a decline in activity across all business lines.

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $312 million from $544 million, or 87% of

total revenue, for 2019 to $232 million, or 74% of total revenue, for 2020.

The decrease was primarily due to a decline in activity across all of our business lines.

Cost of revenue by operating division was as follows:

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As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $29 million in 2020 and $30 million in 2019, was 79% and 81%, respectively, for 2020 and 2019.

Pressure Pumping Services .

Pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense, decreased $84 million , or 29% , from $294 million for 2018 to $210 million for 2019 primarily due to a decline in activity.

As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of $40 million in 2019 and $51 million in 2018 , was 85% and 79% , respectively, for 2019 and 2018 .

The increase in costs as a percentage of revenue was primarily due to a decline in utilization.

Well Completion Services .

Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $160 million, or 77%, from $207 million for 2019 to $47 million for 2020 primarily due to a decline in activity.

As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $30 million in 2020 and $40 million in 2019, was 54% and 85%, respectively, for 2020 and 2019.

The decrease was primarily due to the recognition of standby revenue during 2020, of which there was a lower percentage of costs recognized compared to 2019.

Additionally, during 2019 we provided sand and chemicals with our service package to customers, resulting in higher cost of goods sold as a percentage of revenue for this period in comparison to 2020.

Natural Sand Proppant Services.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $43 million , or 32% , from $133 million for 2018 to $90 million for 2019 primarily due to a decrease in cost of goods sold as well as a 24% decline in production costs per ton of sand.

As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $14 million in both 2019 and 2018 , was 91% and 79% , respectively, for 2019 and 2018 .

The increase in cost as a percentage of revenue is primarily due to a 24% decline in average price per ton of sand sold.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $62 million, or 70%, from $88 million for 2019 to $26 million for 2020 primarily due to a decrease in cost of goods sold as a result of a decrease in tons of sand sold.

As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $10 million in 2020 and $14 million in 2019, was 76% and 90%, respectively, for 2020 and 2019.

The decrease in cost as a percentage of revenue is primarily due to an increase in shortfall revenue, partially offset by a 51% decline in average price per ton of sand sold.

Drilling Services.

Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $24 million , or 39% , from $61 million for 2018 to $37 million for 2019 primarily due a decline in activity for our contract land drilling and directional drilling businesses.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13 million in 2019 and $18 million in 2018 , was 114% and 91% , respectively, for 2019 and 2018 .

The increase is primarily due to an increase in labor-related costs as a percentage of revenue.

Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $26 million, or 70%, from $37 million for 2019 to $11 million for 2020, as a result of reduced activity.

In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020.

As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $10 million in 2020 and $13 million in 2019, was 140% and 116%, respectively, for 2020 and 2019.

The increase was primarily due to a decline in utilization.

Other Services .

Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $4 million , or 5% , from $76 million for 2018 to $72 million for 2019 primarily due to a decline in costs for our coil tubing business as a result of reduced activity.

Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $60 million, or 67%, from $89 million for 2019 to $29 million for 2020, primarily due to declines in costs for our equipment rental and crude oil hauling businesses as a result of reduced activity.

Additionally, due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 and our coil tubing and full service transportation operations beginning in July 2020.

We continue to monitor market conditions to evaluate if and when we can recommence providing these services.

These declines were partially offset by an increase in costs for our equipment rental and crude oil hauling businesses.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $18 million and $16 million in 2019 and 2018 , was 104% and 91% , respectively, for 2019 and 2018 .

These declines were partially offset by an increase in costs for our equipment manufacturing and infrastructure engineering and design businesses.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $16 million in 2020 and $19 million in 2019, was 93% and 101%, respectively, for 2020 and 2019.

Selling, General and Administrative Expenses .

1 unchanged sentence

Following is a breakout of SG&A expenses for the periods indicated (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Cash expenses:

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Non-cash expenses:

Bad debt provision (b)

Equity based compensation (c)

Bad debt provision 21,958 1,434

Stock based compensation 1,618 3,326

2 unchanged sentences

Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.

During the year ended December 31, 2018, we received payment for amounts previously reserved in 2017.

As a result, during the year ended December 31, 2018, we reversed bad debt expense of $16 million recognized in 2017.

Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).

Depreciation, Depletion, Amortization and Accretion .

Depreciation, depletion, amortization and accretion decreased $22 million, or 19%, to $95 million for 2020 from $117 million in 2019.

The decrease is primarily due to a decline in intangible asset amortization expense partially offset by an increase in property and equipment depreciation expense.

The decrease is primarily due to a decline in property and equipment depreciation expense as well as a decline in depletion expense.

Impairment of Goodwill .

We recorded impairment of goodwill of $55 million and $34 million, respectively, in 2020 and 2019.

As a result of market conditions, we performed an impairment assessment of our goodwill as of March 31, 2020.

We determined that the carrying value of goodwill for certain of our entities exceeded their fair values, resulting in impairment expense of $55 million.

As a result of our annual assessment of goodwill, we determined that the carrying value of goodwill for certain of our entities exceeded their fair values at December 31, 2019, resulting in impairment expense of $30 million.

During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3 million.

We recorded expense of $3 million in 2018 related to impairment of goodwill as a result of the movement of certain cementing equipment from the Utica Shale to the Permian Basin.

Impairment of Other Long-lived Assets .

We recorded impairments of other long-lived assets of $13 million and $7 million, respectively, in 2020 and 2019.

During 2019 , we temporarily shut down our our flowback operations, resulting in fixed asset impairments of $4 million during 2019 .

During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $13 million.

During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $4 million during 2019.

Additionally, we recorded impairment expense $3 million related to specified drilling rigs and $1 million related to WTL's customer relationship intangible asset during 2019.

We recorded impairment expense of $4 million related to specified drilling rigs in 2018 and $1 million related to impairment of intangible assets as a result of the movement of certain cementing equipment from the Utica shale to the Permian basin.

Operating (Loss) Income.

Operating income decreased $522 million to an operating loss of $128 million for 2019 compared to operating income of $394 million for 2018 .

The decrease is primarily due to a $438 million decline in operating income for our infrastructure services division due to a decline in activity.

Operating Loss.

We reported an operating loss of $149 million for 2020 compared to an operating loss $128 million for 2019.

The increased operating loss was primarily due to increases in impairment expense of $27 million and SG&A expense of $15 million, partially offset by a 15% decline in cost of revenue as a percentage of revenue.

Interest Expense, net .

Interest expense, net increased $2 million to $5 million during 2019 compared to $3 million during 2018 primarily due to an increase in average borrowings outstanding under our revolving credit facility.

Interest expense, net remained relatively flat at $5 million for each of 2020 and 2019.

Other Income (Expense), net.

Other income, net increased $44 million during 2019 compared to 2018 primarily due to the recognition of interest on trade accounts receivable totaling $42 million pursuant to the terms of our contracts with PREPA.

Other income, net decreased $7 million during 2020 compared to 2019 primarily due to a decline in the recognition of interest on trade accounts receivable pursuant to the terms of our contracts with PREPA.

Income Taxes .

During 2019 , we recorded an income tax benefit of $12 million on pre-tax loss of $91 million compared to income tax expense of $153 million on pre-tax income of $389 million for 2018 .

During 2020, we recorded an income tax benefit of $12 million on pre-tax loss of $120 million compared to an income tax benefit of $12 million on pre-tax loss of $91 million for 2019.

Our effective tax rate was 10.2% for 2020 compared to 13.3% for 2019.

Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and equity based compensation that may not be consistent from year to year.

Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and changes in the valuation allowance that may not be consistent from year to year.

See Note 14 to our consolidated financial statements for additional detail regarding our change in tax expense.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

December 31, 2018

December 31, 2017

December 31, 2019 December 31, 2018

(in thousands)

Infrastructure services $ 213,264 $ 1,085,977

Pressure pumping services

Well completion services 243,802 357,252

Natural sand proppant services 97,063 175,922

1 unchanged sentence

Other services 88,607 122,278

Eliminations (49,688) (117,677)

Total revenue 625,012 1,690,084

1 unchanged sentence

Infrastructure services (exclusive of depreciation and amortization of $30,323 and $20,175, respectively, for 2019 and 2018) 173,269 622,293

Pressure pumping services (exclusive of depreciation and amortization of $51,417 and $45,381, respectively, for 2018 and 2017)

Well completion services (exclusive of depreciation and amortization of $40,117 and $51,295, respectively, for 2019 and 2018) 206,543 277,693

Natural sand proppant services (exclusive of depreciation, depletion and accretion of $14,039 and $13,668, respectively, for 2019 and 2018) 87,652 144,192

1 unchanged sentence

Other services (exclusive of depreciation and amortization of $19,323 and $16,516, respectively, for 2019 and 2018) 89,119 106,403

Eliminations (49,748) (117,650)

Total cost of revenue 543,788 1,093,804

5 unchanged sentences

Interest expense, net (4,958) (3,187)

Bargain purchase gain

Other expense, net 42,216 (2,036)

1 unchanged sentence

Provision for income taxes (12,081) 153,263

Revenue for 2018 increased $999 million , or 144% , to $1.7 billion from $691 million for 2017 .

The increase in total revenue is primarily attributable to a $858 million increase in infrastructure services revenue, representing 86% of the overall increase.

Additionally, pressure pumping services revenue increased $90 million , representing 9% of the overall increase.

Net income $ (79,044) $ 235,965

Revenue for 2019 decreased $1.1 billion, or 63%, to $625 million from $1.7 billion for 2018.

The decrease in total revenue is primarily attributable to a $873 million decrease in infrastructure services revenue, representing 82% of the overall decrease.

Additionally, well completion services and natural sand proppant services revenue decreased $113 million and $79 million, respectively, representing 11% and 7% of the overall decrease.

Revenue derived from related parties was $130 million, or 21% of our total revenues, for 2019 and $143 million, or 8% of our total revenues, for 2018.

Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts.

Commitments and Contingencies to our consolidated financial statements included elsewhere in this report.

Revenue by division was as follows:

Infrastructure Services .

Infrastructure services division revenue increased $858 million, or 382%, to $1 billion for 2018 from $224 million for 2017.

For 2018 and 2017, we generated 94% and 90%, respectively, of total infrastructure services revenue from our contracts with PREPA for repairs to and reconstruction of Puerto Rico's electrical grid as a result of Hurricane Maria.

For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our Industries - Electrical Infrastructure Industry” above.

Pressure Pumping Services .

Pressure pumping services division revenue increased $90 million , or 32% , to $369 million for 2018 from $279 million for 2017 .

Revenue derived from related parties was $96 million , or 26% of total pressure pumping revenue, for 2018 and $144 million, or 52% of total pressure pumping revenue, for 2017 .

Substantially all of our related party revenue was derived from Gulfport under a pressure pumping contract.

For additional information regarding the status of this contract, see Note 20.

Commitments and Contingencies to our consolidated financial statements included elsewhere in this annual report.

Infrastructure services division revenue decreased $873 million, or 80%, to $213 million for 2019 from $1.1 billion for 2018 primarily due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria.

For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our

Industries - Electrical Infrastructure Industry” above.

Revenue from our operations in the continental United States increased $58 million, or 96%, to $118 million for 2019 from $60 million for 2018.

Well Completion Services .

Well completion services division revenue decreased $113 million, or 32%, to $244 million for 2019 from $357 million for 2018.

Revenue derived from related parties was $91 million, or 37% of total well completion revenue, for 2019 and $96 million, or 27% of total well completion revenue, for 2018.

Substantially all of our related party revenue was derived from Gulfport under a well completion contract.

For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above.

Intersegment revenue, consisting primarily of revenue derived from our sand segment, was $2 million and $1 million, respectively, for 2019 and 2018.

The increase in our pressure pumping services revenue was primarily driven by the startup of our fourth, fifth and sixth pressure pumping fleets in June, August and October 2017, respectively, in the SCOOP/STACK and Permian Basin, which contributed revenues of $148 million in 2018 compared to $100 million in 2017.

Additionally, the number of stages completed increased to 6,245 for 2018 from 5,139 for 2017.

The decrease in our well completion services revenue was primarily driven by a decline in pricing as well as a decline in utilization.

The number of stages completed decreased 14% to 5,378 for 2019 from 6,245 for 2018.

An average of 2.4 of our fleets were active throughout 2019 compared to 3.6 fleets for 2018.

Natural Sand Proppant Services.

Natural sand proppant services division revenue increased $51 million , or 44% , to $168 million for 2018 , from $117 million for 2017 .

Natural sand proppant services division revenue decreased $79 million, or 45%, to $97 million for 2019, from $176 million for 2018.

Revenue derived from related parties was $28 million, or 29% of total sand revenues, for 2019 and $25 million, or 14% of total sand revenues, for 2018.

Substantially all of our related party revenue was derived from Gulfport under a contract effective through December 31, 2021.

Intersegment revenue, consisting primarily of revenue derived from our pressure pumping segment, was $67 million , or 40% of total sand revenue, for 2018 and $27 million , or 23% of total sand revenue, for 2017 .

The increase in our natural sand proppant services revenue was primarily attributable to a 59% increase in tons of sand sold from approximately 1.7 million tons in 2017 to 2.7 million tons in 2018.

In May 2017, we acquired a wet and dry plant and sand mine located on approximately 600 acres in New Auburn, Wisconsin through our purchase of the assets of Chieftain.

These assets contributed revenue of $38 million to our natural sand proppant services division in 2018 compared to $23 million in 2017.

All of our related party revenue is derived from Gulfport under a sand supply contract.

For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above.

Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was $30 million, or 31% of total sand revenue, for 2019 and $69 million, or 39% of total sand revenue, for 2018.

The decrease in our natural sand proppant services revenue was primarily attributable to a 25% decline in tons of sand sold from approximately 2.7 million tons in 2018 to 2.0 million tons in 2019 coupled with a 24% decline in average price per ton of sand sold from $39.16 in 2018 to $29.70 in 2019.

Drilling Services.

Drilling services division revenue increased $16 million , or 31%, to $67 million for 2018 , from $51 million for 2017 .

Revenue derived from related parties, consisting primarily of directional drilling revenue from Gulfport and El Toro Resources LLC, was $1 million and $4 million , respectively, for 2018 and 2017 .

Revenue for our directional drilling services increased $13 million in 2018 compared to 2017 primarily due to an increase in utilization from 27% in 2017 to 49% in 2018.

Drilling services division revenue decreased $34 million, or 52%, to $32 million for 2019, from $66 million for 2018.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $1 million for each of 2019 and 2018.

Our average active rigs decreased from 4.3 in 2018 to 1.4 in 2019.

Directional drilling utilization declined from 49% in 2018 to 30% in 2019.

Other Services .

Revenue from other services, consisting of revenue derived from our coil tubing, pressure control, flowback, cementing, equipment rental and remote accommodation businesses, increased $32 million , or 62% , to $84 million for 2018 from $52 million for 2017 .

Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport, was $21 million , or 25% of total other services revenue, for 2018 and $18 million , or 35% of total other services revenue, for 2017 .

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and pressure pumping segments, was $6 million and $2 million , respectively for 2018 and 2017 .

Revenue for Stingray Cementing and Stingray Energy, which we acquired in June 2017, increased $16 million for 2018 compared to 2017.

During the second quarter of 2018, we acquired RTS, a cementing and acidizing business, and WTL, a crude oil hauling business.

These businesses contributed revenue of $14 million during 2018.

Revenue from our coil tubing, pressure control and flowback services increased $7 million for 2018 compared to 2017 primarily due to increases in utilization.

These increases were partially offset by a $6 million decrease in revenue from our remote accommodations business due to a decline in utilization.

Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, flowback, cementing, equipment rental and remote accommodation businesses, decreased $33 million, or 27%, to $89 million for 2019 from $122 million for 2018.

Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport and aviation revenue from Brim, was $11 million, or 12% of total other services revenue, for 2019 and $21 million, or 17% of total other services revenue, for 2018.

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, was $15 million and $44 million, respectively for 2019 and 2018.

The decrease in other services revenue was primarily due to a decline in intersegment aviation revenue with our infrastructure segment.

We provided aviation services to our transmission and distribution business in Puerto Rico under their contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria.

Work under these contracts concluded on March 31, 2019.

Additionally, other services revenue decreased due to a decline in utilization from 39% in 2018 to 17% in 2019 for our coil tubing business.

Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations during the third quarter of 2019 resulting in a decline in revenue.

We continue to monitor market conditions to evaluate if and when we can recommence providing these services.

These decreases were partially offset by an increase in activity for our equipment rental business.

An average of 557 pieces of equipment were rented during 2019, an increase of 41% from 395 pieces of equipment rented during 2018.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion) .

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, increased $611 million from $483 million , or 70% of total revenue, for 2017 to $1.1 billion , or 65% of total revenue, for 2018 .

The increase was primarily due to an expansion of our service offerings into the infrastructure services business, which represented a $489 million increase in cost of revenue, as well as an increase in pressure pumping division costs of $83 million, primarily related to the addition of three new fleets in 2017 .

Cost of revenue by division was as follows:

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $550 million from $1.1 billion, or 65% of total revenue, for 2018 to $544 million, or 87% of total revenue, for 2019.

The decrease was primarily due to a decline in activity across all business lines.

Cost of revenue by operating division was as follows:

Infrastructure Services .

Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, increased $489 million from $122 million for 2017 to $611 million for 2018.

The increase is due to the expansion of our infrastructure business in late 2017 and 2018.

The largest components of our cost of revenue include labor-related costs, contract labor and travel, meals and lodging expense.

As a percentage of revenue,

cost of revenue, exclusive of depreciation and amortization expense of $20 million in 2018 and $3 million in 2017, was 56% and 54%, respectively, for 2018 and 2017.

Pressure Pumping Services .

Pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense, increased $83 million, or 39% , from $211 million for 2017 to $294 million for 2018 .

The increase was primarily due to the expansion of services into the SCOOP/STACK and Permian Basin with the addition of three fleets in 2017.

As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of $51 million in 2018 and $45 million in 2017, was 79% and 76%, respectively, for 2018 and 2017.

The increase in costs as a percentage of revenue was primarily due to an increase in cost of goods sold as a result of selling sand with our service package to customers in the mid-continent region.

Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $449 million from $622 million for 2018 to $173 million for 2019.

The decline is due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $30 million in 2019 and $20 million in 2018, was 81% and 57%, respectively, for 2019 and 2018.

Well Completion Services .

Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $71 million, or 26%, from $278 million for 2018 to $207 million for 2019 primarily due to a decline in activity.

As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $40 million in 2019 and $51 million in 2018, was 85% and 78%, respectively, for 2019 and 2018.

The increase in costs as a percentage of revenue was primarily due to a decline in utilization.

Natural Sand Proppant Services.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, increased $40 million, or 43%, from $93 million for 2017 to $133 million for 2018 primarily due to an increase in cost of goods sold as a result of a 59% increase in tons of sand sold in 2018 compared to 2017, partially offset by a decrease in production costs per ton of sand in 2018.

As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $14 million in 2018 and $9 million in 2017, was 79% for both 2018 and 2017.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $56 million, or 39%, from $144 million for 2018 to $88 million for 2019 primarily due to a decrease in cost of goods sold as well as a 24% decline in production costs per ton of sand.

As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $14 million in both 2019 and 2018, was 90% and 82%, respectively, for 2019 and 2018.

The increase in cost as a percentage of revenue is primarily due to a 24% decline in average price per ton of sand sold.

Drilling Services.

Drilling services cost of revenue, exclusive of depreciation and amortization expense, increased $14 million , or 30% , from $47 million for 2017 to $61 million for 2018 primarily due to an increase in costs for our directional drilling business due to increased utilization.

As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $18 million in 2018 and $20 million in 2017, was 91% and 93% , respectively, for 2018 and 2017.

Other Services .

Other services cost of revenue, exclusive of depreciation and amortization expense, increased $34 million, or 81%, from $42 million for 2017 to $76 million for 2018 , primarily due to the acquisition of Stingray Cementing and Stingray Energy, partially offset by a decline in costs for our remote accommodations business and declines in labor-related costs and repairs and maintenance expense for our coil tubing and flowback businesses.

Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $24 million, or 39%, from $61 million for 2018 to $37 million for 2019 primarily due a decline in activity for our contract land drilling and directional drilling businesses.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13 million in 2019 and $18 million in 2018, was 116% and 92%, respectively, for 2019 and 2018.

The increase is primarily due to an increase in labor-related costs as a percentage of revenue.

Other Services .

Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $17 million, or 16%, from $106 million for 2018 to $89 million for 2019, primarily due to a decline in costs for our coil tubing business as a result of reduced activity.

We continue to monitor market conditions to evaluate if and when we can recommence providing these services.

These declines were partially offset by an increase in costs for our equipment rental and crude oil hauling businesses.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $19 million and $17 million in 2019 and 2018, was 101% and 87%, respectively, for 2019 and 2018.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses represent the costs associated with managing and supporting our operations.

These expenses increased $23 million , or 47% , to $73 million for 2018 , from $50 million for 2017 .

Following is a breakout of SG&A expenses for the periods indicated (in thousands):

December 31, 2018

December 31, 2017

December 31, 2019 December 31, 2018

Cash expenses:

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Professional services 17,128 11,854

10,300 10,718

Total cash SG&A expense 46,792 65,522

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Bad debt provision (b)

1,434 (14,578)

Equity based compensation (c)

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Depreciation, Depletion, Amortization and Accretion .

Depreciation, depletion, accretion and amortization increased $28 million , or 30% , to $120 million for 2018 from $92 million in 2017 .

The increase is primarily attributable to an increase in

property and equipment purchases in the second half of 2017 and 2018, resulting in increased depreciation expense.

Additionally, depletion expense increased in 2018 as a result of the Chieftain assets purchased in 2017.

Depreciation, depletion, accretion and amortization decreased $3 million, or 2%, to $117 million for 2019 from $120 million in 2018.

The decrease is primarily due to a decline in intangible asset amortization expense partially offset by an increase in property and equipment depreciation expense.

Impairment of Goodwill .

We recorded impairment of goodwill of $34 million and $3 million, respectively, in 2019 and 2018.

During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3 million.

We recorded expense of $3 million in 2018 related to impairment of goodwill as a result of the movement of certain cementing equipment from the Utica Shale to the Permian Basin.

Impairment of Other Long-lived Assets .

We recorded an impairment of other long-lived assets of $6 million in 2018 , of which $4 million related to specified drilling rigs and $1 million related to impairment of intangible assets as a result of the movement of certain cementing equipment from the Utica Shale to the Permian Basin.

Impairments were $4 million in 2017, primarily related to specified drilling rig assets.

Operating Income (Loss).

Operating income increased $331 million, or 525%, to $394 million for 2018 compared to $63 million for 2017 .

The increase was primarily the result of an expansion of our infrastructure businesses, which accounted for $346 million of the increase in operating income and a $9 million increase in natural sand proppant operating income.

These were partially offset by a $19 million decrease in pressure pumping operating income primarily due to the recognition of non-cash equity compensation expense during 2018.

We recorded impairments of other long-lived assets of $7 million and $6 million, respectively, in 2019 and 2018.

During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $4 million during 2019.

Additionally, we recorded impairment expense $3 million related to specified drilling rigs and $1 million related to WTL's customer relationship intangible asset during 2019.

Operating (Loss) Income.

Operating income decreased $522 million to an operating loss of $128 million for 2019 compared to operating income of $394 million for 2018.

The decrease is primarily due to a $432 million decline in operating income for our infrastructure services division due to a decline in activity.

Interest Expense, net .

Interest expense, net decreased $1 million , or 26% , to $3 million during 2018 compared to $4 million during 2017.

The decline in interest expense was attributable to a decrease in average borrowings on our credit facility during 2018 compared to 2017.

Bargain Purchase Gain .

The purchase of the Chieftain assets resulted in a bargain purchase gain of $4 million for 2017.

See Note 4 to our consolidated financial statements included elsewhere in this annual report for more information.

Other Expense, net.

Non-operating charges resulted in other expense, net, of $2 million for 2018 compared to $1 million for 2017.

The 2018 amount included $1 million of loss on the disposal of assets during the period compared to a nominal loss for 2017.

Other Income (Expense), net.

Income Taxes .

During 2018, we recorded income tax expense of $153 million on pre-tax income of $389 million compared to income tax expense of $3 million on pre-tax loss of $62 million for 2017.

Our effective tax rate was 39.4% for 2018 and 4.9% for 2017.

2017 included the recognition of a $31 million credit related to the Tax Act enacted in 2017.

Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as equity based compensation that may not be consistent from year to year.

During 2019, we recorded an income tax benefit of $12 million on pre-tax loss of $91 million compared to income tax expense of $153 million on pre-tax income of $389 million for 2018.

Our effective tax rate was 13.3% for 2019 compared to 39.4% for 2018.

See Note 14 to our consolidated financial statements for additional detail regarding our change in tax expense.

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Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.

We define Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion, impairment of long-lived assets, inventory obsolescence charges, acquisition related costs, public offering costs, equity based compensation, stock based compensation, bargain purchase gain, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets and interest on delinquent accounts receivable) and provision (benefit) for income taxes, further adjusted to add back interest on trade accounts receivable.

We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industries 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 income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.

We define Adjusted EBITDA as net (loss) income before depreciation, depletion, amortization and accretion, impairment of goodwill, impairment of other long-lived assets, inventory obsolescence charges, acquisition related costs, public offering costs, equity based compensation, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets and interest on trade accounts receivable) and (benefit) provision for income taxes, further adjusted to add back interest on trade accounts receivable.

We exclude the items listed above from net (loss) income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industries 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) income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.

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 components of Adjusted EBITDA.

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Reconciliation of Adjusted EBITDA to net (loss) income:

2020 2019 2018

Net (loss) income $ (107,607) $ (79,044) $ 235,965

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Stock based compensation 1,952 4,177 5,425

Bargain purchase gain

Interest expense, net 5,397 4,958 3,187

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(Benefit) provision for income taxes (12,169) (12,081) 153,263

Interest on delinquent accounts receivable

Interest on trade accounts receivable 34,130 42,040 —

Adjusted EBITDA $ 49,952 $ 77,283 $ 547,268

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net income:

Reconciliation of Adjusted EBITDA to net (loss) income:

2020 2019 2018

Net (loss) income $ (30) $ 18,778 $ 316,185

Depreciation, depletion, amortization and accretion 29,373 30,349 20,206

Impairment of goodwill

Impairment of other long-lived assets — — 308

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Provision for income taxes 7,133 7,908 100,774

Interest on delinquent accounts receivable

Interest on trade accounts receivable 32,214 42,040 —

Adjusted EBITDA $ 39,608 $ 59,634 $ 440,954

Pressure Pumping Services

Well Completion Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net income (loss):

Net (loss) income

Reconciliation of Adjusted EBITDA to net loss:

2020 2019 2018

Net loss $ (69,073) $ (39,020) $ (2,587)

Depreciation, depletion, amortization and accretion 30,411 40,159 51,332

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Interest expense 1,130 1,228 1,114

Other expense, net

Other (income) expense, net (2,274) 580 100

Interest on trade accounts receivable 1,888 — —

Adjusted EBITDA $ 20,218 $ 28,081 $ 69,499

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net income (loss):

Reconciliation of Adjusted EBITDA to net (loss) income:

2020 2019 2018

Net (loss) income $ (11,324) $ (12,589) $ 10,383

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Impairment of goodwill — 2,684 —

Impairment of other long-lived assets

Acquisition related costs — 8 (38)

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Stock based compensation 425 812 788

Bargain purchase gain

Interest expense 312 193 291

Other expense, net 1,839 67 859

Benefit for income taxes

Interest on trade accounts receivable 3 — —

Adjusted EBITDA $ 1,026 $ 5,225 $ 26,103

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net income (loss):

Reconciliation of Adjusted EBITDA to net loss:

2020 2019 2018

Net loss $ (16,865) $ (26,117) $ (23,202)

Depreciation, depletion, amortization and accretion 10,039 13,143 18,144

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Stock based compensation 203 361 576

Interest expense, net

Interest expense 454 862 823

Other (income) expense, net (227) (9) 461

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net income (loss):

Net (loss) income

Reconciliation of Adjusted EBITDA to net loss:

2020 2019 2018

Net loss $ (10,315) $ (20,156) $ (64,787)

Depreciation, depletion, amortization and accretion 15,723 19,332 16,520

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Interest expense, net 726 1,001 538

Other expense, net

Other (income) expense, net (1,839) (905) 61

(Benefit) provision for income taxes (19,302) (19,989) 52,489

Interest on trade accounts receivable 25 — —

Adjusted EBITDA $ (4,830) $ (6,914) $ 9,927

Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations services and corporate related activities.

Includes results for our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services and corporate related activities.

Our corporate related activities do not generate revenue.

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Years Ended December 31,

2020 2019 2018

(in thousands, except per share amounts)

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

Our primary sources of liquidity have been cash on hand, borrowings under our revolving credit facility and cash flows from operations.

Our primary uses of capital have been for investing in property and equipment used to provide our services, to acquire complementary businesses and to pay dividends to our stockholders.

In July 2019, as a result of oilfield market conditions as well as other factors, which include collections from PREPA, our board of directors suspended the quarterly cash dividend.

Our primary sources of liquidity have been cash flows from operations and borrowings under our revolving credit facility.

Our primary uses of capital have been for investing in property and equipment used to provide our services and acquire complementary businesses.

In July 2019, as a result of oilfield market conditions as well as other factors, which include collections from PREPA, our board of directors suspended our quarterly cash dividend.

Future declaration of cash dividends are subject to approval by our board of directors and may be adjusted at its discretion based on market conditions and capital availability.

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Less borrowings (78,000) (80,000)

Less letter of credit facilities (bonding program) (5,000) —

Less letter of credit facilities (insurance programs) (3,890) (4,105)

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Net working capital (less cash) (a)

321,328 270,711

Total $ 374,897 $ 372,955

Net working capital (less cash) is a non-GAAP measure and, as of December 31, 2020, is calculated by subtracting total current liabilities of $129 million and cash and cash equivalents of $15 million from total current assets of $465 million.

As of December 31, 2019, net working capital (less cash) is calculated by subtracting total current liabilities of $130 million and cash and cash equivalents of $6 million from total current assets of $407 million.

As of February 26, 2020, we had $87 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $21 million of available borrowing capacity under this facility, after giving effect to our recent amendment that reduced the maximum revolving advance amount to $130 million.

The available borrowing capacity is reduced by (i) a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9 million of outstanding letters of credit.

Amounts include receivables due from PREPA and Gulfport of $301 million and $28 million, respectively, at December 31, 2020, and $269 million and $7 million, respectively, at December 31, 2019.

As of February 24, 2021, we had $75 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $42 million of available borrowing capacity under this facility, after giving effect to $13 million of outstanding letters of credit.

Liquidity and Cash Flows

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Years Ended December 31,

Net cash (used in) provided by operating activities

2020 2019 2018

Net cash provided by (used in) operating activities $ 6,967 $ (95,318) $ 386,668

Net cash used in investing activities (2,295) (33,224) (211,955)

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Operating Activities

Net cash (used in) provided by operating activities was ($95) million , $387 million and $58 million , respectively, for the years ended December 31, 2019 , 2018 and 2017 .

The decrease in operating cash flows from 2018 to 2019 was primarily attributable to a decline in activity for our infrastructure services segment as well as a timing difference between cash outflows for income tax payments and cash inflows for accounts receivable.

The increase in operating cash flows from 2017 to 2018 was primarily attributable to an increase in net income as a result of the expansion of our infrastructure services business.

Net cash provided by (used in) operating activities was $7 million, ($95) million and $387 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

The increase in operating cash flows was primarily attributable to the timing of cash inflows for accounts receivable and cash outflows for income tax payments during 2019.

Investing Activities

Net cash used in investing activities was $2 million, $33 million and $212 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

Net cash used for acquisitions totaled $21 million and $42 million , respectively, for 2018 and 2017 .

The Company did not make any acquisitions during 2019.

Substantially all remaining cash used in investing activities was used to purchase property and equipment that is utilized to provide our services.

Net cash used for acquisitions totaled $21 million for 2018.

We did not make any acquisitions during 2020 or 2019.

Substantially all remaining cash used in investing activities was used to purchase property and equipment that is utilized to provide our services, which was partially offset by proceeds from the disposal of property and equipment.

The following table summarizes our capital expenditures by operating division for the periods indicated (in thousands):

Years Ended December 31,

2020 2019 2018

Infrastructure services (a)

Pressure pumping services (b)

$ 258 $ 3,456 $ 99,006

Well completion services (b)

4,358 14,703 33,774

Natural sand proppant services (c)

1,073 2,877 17,935

Drilling services (d)

432 3,156 8,698

716 11,569 32,530

Total capital expenditures $ 6,837 $ 35,761 $ 191,943

Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for the years ended December 31, 2020, 2019 and 2018.

Capital expenditures primarily for pressure pumping equipment, including three new fleets, for the year ended December 31, 2017 and various pressure pumping and water transfer equipment for the years ended December 31, 2019 and 2018 .

Capital expenditures primarily for the upgrade and expansion of our plants for the years ended December 31, 2018 and 2017 and maintenance for the year ended December 31, 2019 .

Capital expenditures primarily for upgrades to our rig fleet and purchases of directional drilling equipment for the years ended December 31, 2019 , 2018 and 2017 .

Capital expenditures primarily for various pressure pumping and water transfer equipment for the years ended December 31, 2020, 2019 and 2018.

Capital expenditures primarily for the upgrade and expansion of our plants for the year ended December 31, 2018 and maintenance for the years ended December 31, 2020 and 2019.

Capital expenditures primarily for directional drilling equipment for the year ended December 31, 2020 and upgrades to our rig fleet for the years ended December 31, 2019 and 2018.

Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for the years ended December 31, 2019 and 2018 and various equipment for the year ended December 31, 2020.

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Net cash provided by (used in) financing activities was $4 million, $67 million and ($113) million, respectively, for the years ended December 31, 2020, 2019 and 2018.

Net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to proceeds of $5 million received from a sale leaseback transaction and proceeds of $5 million received from a note payable, partially offset by net payments under our revolving credit facility of $2 million, principal payment on financing leases and equipment notes of $2 million and payment of debt issuance costs of $1 million.

Net cash provided by financing activities for the year ended December 31, 2019 was primarily attributable to net borrowings under our revolving credit facility of $80 million, partially offset by dividends paid of $11 million.

Net cash used in financing activities for the year ended December 31, 2018 was primarily attributable to net repayments under our revolving credit facility of $100 million and cash dividends paid totaling $11 million.

Net cash provided by financing activities for the year ended December 31, 2017 was primarily attributable to net borrowings under our revolving credit facility of $100 million, which was partially offset by the repayment of acquiree debt of $9 million.

Effect of Foreign Exchange Rate on Cash

The effect of foreign exchange rate on cash was $0.1 million , ($0.1) million and a nominal amount, respectively, for the years ended December 31, 2019 , 2018 and 2017 .

The effect of foreign exchange rate on cash was a nominal amount, $0.1 million and ($0.1) million, respectively, for the years ended December 31, 2020, 2019 and 2018.

The year-over-year effect was driven primarily by a favorable (unfavorable) shift in the weakness (strength) of the Canadian dollar relative to the U.S.

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Our Revolving Credit Facility

On October 19, 2018, we and certain of our direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit facility with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders, which among other things, (i) extended the maturity date to October 19, 2023, (ii) increased the maximum revolving advance amount to $185 million, with the ability to further increase the maximum revolving advance amount to $350 million under certain circumstances, (iii) increased the letter of credit sublimit to 20% of the maximum revolving advance amount and (iv) decreased the interest rates applicable to loans.

On November 5, 2019, we entered into a first amendment to our amended and restated revolving credit facility, to amend the interest coverage ratio definition to give accrual treatment to certain cash taxes included in the ratio calculation.

As a result, certain cash tax payments that were made in 2019 were treated as if they were made in 2018, the year in which the income related to such tax payments was actually received.

As of December 31, 2019, we were in compliance with the financial covenants under our revolving credit facility.

As we believe that such payments from PREPA are unlikely to be received by March 31, 2020, on February 26, 2020, we further amended our revolving credit facility to, among other things, (i) amend our financial covenants, as outlined below, (ii) decrease the maximum revolving advance amount from $185 million to $130 million, (iii) decrease the amount that the maximum revolving advance can be increased to (the accordion) from $350 million to $180 million, (iv) increase the applicable margin ranges from 2.00% to 2.50% per annum in the case of the alternate base rate and from 3.00% to 3.50% per annum in the case of LIBOR, (v) increase the aggregate amount of permitted asset dispositions, and (vi) permit certain sale-leaseback transactions.

The financial covenants under our revolving credit facility were amended as follows:

the minimum interest coverage ratio of 3.0 to 1.0 was eliminated;

the maximum leverage coverage ratio of 4.0 to 1.0 was eliminated for the first two fiscal quarters of 2020 and, beginning with the fiscal quarter ended September 30, 2020, changed to 2.5 to 1.0;

beginning with the fiscal quarter ended September 30, 2020, a minimum fixed charge coverage ratio of at least 1.1 to 1.0 was added;

from the effective date of February 26, 2020 through September 30, 2020, a minimum excess availability covenant of 10% of the maximum revolving advance amount was added.

We cannot assure you that we will be able to remain in compliance with the covenants contained in our revolving credit facility as amended and restated.

If an event of default occurs under our revolving credit facility and remains uncured, it

could have a material adverse affect on our business, financial condition, results of operations and cash flows.

The lenders (i) would not be required to lend any additional amounts to us, (ii) could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, and (iii) may have the ability to require us to apply all of our available cash to repay our outstanding borrowings.

At December 31, 2019, we had outstanding borrowings under our revolving credit facility of $80.0 million .

At February 26, 2020, we had $87.4 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $20.6 million of available borrowing capacity under this facility, after giving effect to our recent amendment that (i) reduced the maximum revolving advance amount to $130 million and imposed a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9.0 million of outstanding letters of credit.

On October 19, 2018, we and certain of our direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit facility, as subsequently amended, with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders.

At December 31, 2020, we had outstanding borrowings under our revolving credit facility of $78 million and $39 million of available borrowing capacity, after giving effect to $13 million of outstanding letters of credit.

As of December 31, 2020, we were in compliance with the covenants under our revolving credit facility.

For additional information regarding our revolving credit facility, see Note 11.

Debt to our consolidated financial statements included elsewhere in this report.

Sale Leaseback Transaction

On December 30, 2020, we entered into an agreement with First National Capital, LLC, or FNC, whereby we agreed to sell certain assets from our infrastructure segment to FNC for aggregate proceeds of $5.0 million.

Concurrent with the sale of assets, we entered into a 36 month lease agreement whereby we will lease back the assets at a monthly rental rate of $0.1 million.

Under the agreement, we have the option to purchase the assets at the end of the lease term.

We recorded a liability for the proceeds received and will continue to depreciate the assets.

We imputed an interest rate so that the carrying amount of the financial liability will be the expected repurchase price at the end of the initial lease term.

Aviation Note

On November 6, 2020, Leopard and Cobra Aviation entered into a 39 month promissory note agreement with Bank7, or the Aviation Note, in an aggregate principal amount of $4.6 million and received net proceeds of $4.5 million.

The Aviation Note bears interest at a rate based on the Wall Street Journal Prime Rate plus a margin of 1%.

Principal and interest payments of $0.1 million are due monthly beginning on March 1, 2021, with a final payment of $0.2 million due on February 1, 2024.

The Aviation Note is collateralized by Leopard and Cobra Aviation's assets, including a $1.8 million certificate of deposit.

The Aviation Note contains various customary affirmative and restrictive covenants.

Capital Requirements and Sources of Liquidity

During 2019 , our capital expenditures totaled $36 million and included $6 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews, $15 million in our pressure pumping segment primarily related to various pressure pumping and water transfer equipment, $3 million in our natural sand proppant services segment for various maintenance equipment, $3 million in our drilling services segment primarily for upgrades to our rig fleet and $9 million for our other businesses primarily related to equipment additions for our equipment rental business.

During 2020 , we currently estimate that our aggregate capital expenditures will be up to $20 million , depending upon industry conditions and our financial results.

These capital expenditures include $8 million in our infrastructure segment for assets for additional crews, $8 million in our pressure pumping segment for conversion of a portion of our fleet to include DGB capabilities, maintenance to our existing pressure pumping fleet and additional water transfer equipment and $4 million for our other divisions, primarily for additional equipment for our rental business.

However, if industry conditions remain the same or weaken further, we expect that our capital expenditures for 2020 will be materially less.

During 2020, our capital expenditures totaled $7 million and included $0.3 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews, $4 million in our well completion segment primarily related to various pressure pumping and water transfer equipment, $1 million in our natural sand proppant services segment for various maintenance equipment, $0.4 million in our drilling services segment primarily for upgrades to our rig fleet and $1 million for our other businesses primarily related to equipment additions for our equipment rental business.

During 2021, we currently estimate that our aggregate capital expenditures will be $9 million, depending upon industry conditions and our financial results.

These capital expenditures include $6 million in our infrastructure segment for assets for additional crews, $2.5 million in our well completion segment for conversion of a portion of our fleet to include DGB capabilities and maintenance to our existing pressure pumping fleet and $0.5 million for our other divisions, primarily for additional equipment for our rental business.

We believe that our cash on hand, operating cash flow and available borrowings under our credit facility will be sufficient to fund our operations for at least the next twelve months.

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In addition, while we regularly evaluate acquisition opportunities, we do not have a specific acquisition budget for 2021 since the timing and size of acquisitions cannot be accurately forecasted.

We continue to evaluate acquisition opportunities, including transactions involving entities controlled by Wexford and Gulfport.

We continue to evaluate acquisition opportunities, including those in the renewable energy sector as well as transactions involving entities controlled by Wexford.

Our acquisitions may be undertaken with cash, our common stock or a combination of cash, common stock and/or other consideration.

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The following table summarizes our contractual obligations and commercial commitments as of December 31, 2020 (in thousands):

Less than 1 year

More than 5 Years

Total Less than 1 year 1-3 Years 3-5 Years More than 5 Years

Contractual obligations:

Long-term debt (a)

Interest and commitment fees on long-term debt (b)

Operating lease obligations (c)

Financing lease obligations (d)

Equipment financing obligations (e)

Purchase commitments (f)

Capital purchase commitments (g)

Revolving credit facility (a)

$ 78,000 $ — $ 78,000 $ — $ —

Interest and commitment fees on revolving credit facility (b)

8,666 3,098 5,568 — —

Aviation note (c)

4,958 1,389 3,240 329 —

Sale leaseback arrangement (d)

4,563 1,619 2,944 — —

Operating lease obligations (e)

21,210 9,150 9,537 2,104 419

Financing lease obligations (f)

6,551 1,682 3,094 1,107 668

Equipment financing obligations (g)

1,221 731 490 — —

Purchase commitments (h)

800 698 102 — —

Capital purchase commitments (i)

1,275 1,275 — — —

$ 127,244 $ 19,642 $ 102,975 $ 3,540 $ 1,087

Excludes interest payments.

Assumption of long-term debt balance outstanding as of December 31, 2019 of $80 million using the weighted average interest rate as of December 31, 2019 of 4.05%.

Assumption of revolving credit facility balance outstanding as of December 31, 2020 of $78 million using the weighted average interest rate as of December 31, 2020 of 3.72%

Assumption of an interest rate of 5%.

Obligations under a sale leaseback arrangement for a portion of our infrastructure segment assets.

Operating lease obligations primarily relate to rail cars, real estate and other equipment.

Financing lease obligations primarily relate to equipment for our infrastructure segment.

Equipment financing obligations primarily relate to vehicles and other equipment for our pressure pumping segment.

Purchase commitments are comprised primarily of sand and coil tubing string.

Included in these amounts are sand purchase commitments of $20 million .

Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $23 million .

The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $2 million as of December 31, 2019 .

Obligations arising from capital improvements/equipment purchases.

Equipment financing obligations primarily relate to vehicles and other equipment for our well completion segment.

Purchase commitments are comprised primarily of software subscriptions.

Obligations arising from capital improvements and equipment purchases

Off-Balance Sheet Arrangements

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Year ended December 31:

Capital Spend Commitments

Minimum Purchase Commitments (a)

Included in these amounts are sand purchase commitments of $20 million .

Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $23 million .

The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $2 million as of December 31, 2019 .

Other Commitments

Subsequent to December 31, 2019 , we ordered additional capital equipment with aggregate commitments of $2 million .

Capital Spend Commitments Minimum Purchase Commitments (a)

2020 $ 1,275 $ 698

Thereafter — —

$ 1,275 $ 800

Critical Accounting Policies and Estimates

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Actual results could differ from those estimates.

Significant estimates include but are not limited to the Company's sand reserves and their impact on calculating depletion expense, allowance for doubtful accounts, asset retirement obligations, reserves for self-insurance, depreciation and amortization of property and equipment, business combination valuations, amortization of intangible assets, and future cash flows and fair values used to assess recoverability and impairment of long-lived assets, including goodwill.

Significant estimates include but are not limited to our sand reserves and their impact on calculating depletion expense, allowance for doubtful accounts, asset retirement obligations, reserves for self-insurance, depreciation and amortization of property and equipment, business combination valuations, amortization of intangible assets, and future cash flows and fair values used to assess recoverability and impairment of long-lived assets, including goodwill, estimates of income taxes and the estimated effects of litigation and other contingencies.

Revenue Recognition .

On January 1, 2018, we adopted the new revenue guidance under ASC 606, Revenue from Contracts with Customers , using the modified retrospective method applied to contracts which were not completed as of January 1, 2018.

Revenues for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported under previous revenue recognition guidance.

The adoption of ASC 606 did not have a material impact on our consolidated financial statements.

The Company's primary revenue streams include infrastructure services, pressure pumping services, natural sand proppant services, drilling services and other services, which includes coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations services.

Our primary revenue streams include infrastructure services, well completion services, natural sand proppant services, drilling services and other services, which includes aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

Infrastructure Services.

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Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis).

We account for infrastructure services as a single performance obligation satisfied over time.

Generally, we account for infrastructure services as a single performance obligation satisfied over time.

In certain circumstances, we supply materials that are utilized during the jobs as part of the agreement with the customer.

We account for these infrastructure agreements as multiple performance obligations satisfied over time.

Revenue is recognized over time as work progresses based on the days completed or as the contract is completed.

Under certain customer contracts in our infrastructure services segment, the Company warranties equipment and labor performed for a specified period following substantial completion of the work.

Pressure Pumping Services.

Pressure pumping services are typically provided based upon a purchase order, contract or on a spot market basis.

Under certain customer contracts in our infrastructure services segment, we warrant equipment and labor performed for a specified period following substantial completion of the work.

Well Completion Services.

Well completion services are typically provided based upon a purchase order, contract or on a spot market basis.

Services are provided on a day rate, contracted or hourly basis.

Generally, we account for pressure pumping services as a single performance obligation satisfied over time.

Generally, we account for well completion services as a single performance obligation satisfied over time.

In certain circumstances, we supply proppant that is utilized for pressure pumping as part of the agreement with the customer.

These pressure pumping agreements are accounted for as multiple performance obligations satisfied over time.

Jobs for pressure pumping services are typically short-term in nature and range from a few hours to multiple days.

Jobs for well completion services are typically short-term in nature and range from a few hours to multiple days.

Generally, revenue is recognized over time upon the completion of each segment of work based upon a completed field ticket, which includes the charges for the services performed, mobilization of the equipment to the location and personnel.

Pursuant to a contract with one of its customers, we have agreed to provide that customer with use of up to two pressure pumping fleets for the period covered by the contract.

Pursuant to a contract with Gulfport, we have agreed to provide that customer with use of up to two pressure pumping fleets for the period covered by the contract.

Under this agreement, performance obligations are satisfied as services are rendered based on the passage of time rather than the completion of each segment of work.

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All consideration owed to us for services performed during the contractual period is fixed and the right to receive it is unconditional.

Gulfport has filed a legal action in Delaware state court seeking the termination of this contract and monetary damages.

Further, On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above.

Additional revenue is generated through labor charges and the sale of consumable supplies that are incidental to the service being performed.

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Mobilization revenue and costs were recognized over the days of actual drilling.

As a result of market conditions, the Company temporarily shutdown its contract land drilling operations in December 2019.

As a result of market conditions, we temporarily shutdown our contract land drilling operations beginning in December 2019 and our rig moving operations beginning in April 2020.

Other Services.

During the periods presented in this report, we also provided coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations services, which are reported under other services.

As a result of market conditions, the Company has temporarily shut down its cementing and acidizing operations as well as its flowback operations beginning in July 2019.

During the periods presented in this report, we also provided aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services, which are reported under other services.

As a result of market conditions, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 and our coil tubing and full service transportation operations beginning in July 2020.

Other services are typically provided based upon a purchase order, contract or on a spot market basis.

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In evaluating the level of established reserves, we make judgments regarding our customers’ ability to make required payments, economic events and other factors.

As the financial condition of customers change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.

In the event we were to determine that a customer may not be able to make required payments, we would increase the allowance through a charge to income in the period in which that determination is made.

Uncollectable accounts receivable are periodically charged against the allowance for doubtful accounts once final determination is made of their uncollectibility.

As the financial condition of customers changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.

In the event we expect that a customer may not be able to make required payments, we would increase the allowance through a charge to income in the period in which that determination is made.

If it is determined that previously reserved amounts are collectible, we would decrease the allowance through a credit to income in the period in which that determination is made.

Uncollectible accounts receivable are periodically charged against the allowance for doubtful accounts once a final determination is made regarding their uncollectability.

Depreciation, Depletion, Amortization and Accretion .

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A valuation allowance for deferred tax assets is recognized when it is more likely than not that the benefit of deferred tax assets will not be realized.

Litigation and Contingencies .

Accruals for litigation and contingencies are based on our assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies.

Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable.

Accruals are based on information available at the time of the assessment due to the uncertain nature of such matters.

As additional information becomes available, we reassess potential liabilities related to pending claims and litigation and may revise previous estimates, which could materially affect our results of operations in a given period.

New Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02 “Leases (Topic 842)” amending the current accounting for leases.

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We adopted this ASU effective January 1, 2019 and estimated the fair value of our non-employee awards was approximately $18.9 million as of this date.

Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU No.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments.

This ASU requires entities to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade accounts receivable.

We will adopt this standard effective January 1, 2020.

This standard will not have a material impact on our consolidated financial statements and related disclosures.

This ASU requires entities to reflect its current estimate of all expected credit losses.

The guidance affects most financial assets, including trade accounts receivable.

This ASU is effective for fiscal years beginning after December 31, 2019, with early adoption permitted.

We adopted this standard effective January 1, 2020.

It did not have a material impact on the our consolidated financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis