What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-03-04 · 328 added, 382 removed, 490 unchanged (59% of the section changed)

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

We are an integrated, growth-oriented energy services company focused on the construction and repair of the electric grid for private utilities, public investor-owned utilities and co-operative utilities through its infrastructure services businesses.

We also provide products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserves.

We are an integrated, growth-oriented energy services company focused on providing products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserve as well as the construction and repair of the electric grid for private utilities, public investor-owned utilities and co-operative utilities through our infrastructure services businesses.

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, well completion services, natural sand proppant services, drilling services and other services.

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

Our suite of services includes well completion services, infrastructure services, natural sand proppant services, drilling services and other services.

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

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

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

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

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.

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

Our complementary suite of services provides us with the opportunity to cross-sell our services and expand our customer base and geographic positioning.

Our transformation towards an industrial based company is ongoing.

The growth of our industrial businesses is ongoing.

We offer infrastructure engineering services focused on the transmission and distribution industry and also have equipment manufacturing operations and offer fiber optic services.

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.

Our fiber optic services include the installation of both aerial and buried fiber.

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

We are continuing to explore other opportunities to expand our industrial business lines.

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

infrastructure services;

well completion services;

infrastructure services;

natural sand proppant services;

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

Infrastructure Services Segment

• Cobra Acquisitions LLC, or Cobra—January 2017

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

• Higher Power Electrical LLC—April 2017

• 5 Star Electric LLC—July 2017

• Python Equipment LLC—December 2018

• Aquawolf LLC—September 2019

• Falcon Fiber Solutions LLC—May 2021

Well Completion Services Segment

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• Aquahawk Energy LLC—June 2018

Infrastructure Services Segment

• Cobra Acquisitions LLC, or Cobra—January 2017

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

• Higher Power Electrical LLC—April 2017

• 5 Star Electric LLC—July 2017

• Python Equipment LLC—December 2018

• Aquawolf LLC—September 2019

• Falcon Fiber Solutions LLC—May 2021

Natural Sand Proppant Services Segment

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• Anaconda Manufacturing LLC—September 2019

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

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.

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

As a result, demand for our oilfield services declined at the end of the first quarter of 2020 and continued to decline further throughout the remainder of 2020.

Exploration and production companies set their 2021 budgets based on the prevailing prices for oil and gas at the time.

Although demand for oil and natural gas and commodity prices increased during the fourth quarter of 2021, these budgets for the publicly traded exploration and production companies remained relatively unchanged throughout 2021 with any excess cash flows used for debt repayment or shareholder returns rather than to increase production, as has been the case in the past.

Although activity levels for many exploration and production companies increased during the fourth quarter of 2021 and early 2022 due to the recent improvement in the U.S.

and global economic activity, easing of the COVID-19 pandemic related restrictions, availability of vaccines and treatments and rising energy use and commodity prices, the emergence of the Delta COVID-19 variant in the latter part of 2021 and the subsequent surge of the highly transmissible Omicron variant continued to contribute to the economic and pricing volatility and a cautious production outlook for 2022.

On July 18, 2021, the OPEC+ reached an agreement to phase out 5.8 million barrels per day of oil production cuts by September 2022 as prices of crude oil reached their highest levels in more than two years.

Coordinated increases in oil supply by OPEC+ began in August 2021, increasing overall oil production by 400,000 barrels per day on a monthly basis from that point forward.

Further, on January 4, 2022, OPEC+ agreed to raise its output target by 400,000 Bbl per day in February 2022, which move is expected to further boost oil supply in response to rising demand.

In its report issued on February 10, 2022, OPEC noted its expectation that world oil demand will rise by 4.15 million Bbl per day in 2022, as the global economy continues to post a strong recovery from the COVID-19 pandemic.

Although this demand outlook is expected to underpin oil prices, which have already seen a seven-year high in early 2022, we cannot predict the impact of these events on commodity prices and expect a competitive market for oilfield services for the foreseeable future.

In addition, the current Russian/Ukrainian military conflict could result in a humanitarian crisis and have an adverse impact on the global energy and capital markets and global stability.

Our Response to COVID-19 and Related Market Conditions

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 continuing to monitor the adverse industry and market conditions resulting from the COVID-19 pandemic and have taken mitigating steps in an effort to preserve liquidity, reduce costs and lower capital expenditures.

We are also continuing to monitor the industry and market conditions resulting from the COVID-19 pandemic and have taken mitigating steps in an effort 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 worsen.

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

We will continue to take further actions that we deem to be in the best interest of the Company and our stockholders if the adverse conditions recur.

Given the dynamic nature of these events, we are unable to predict the ultimate impact of the COVID-19 pandemic, the volatility in commodity markets, inflationary pressures, rising interest rates, any changes in the near-term or long-term outlook for our industries or overall macroeconomic conditions on our business, financial condition, results of operations, cash flows and stock price or the pace or extent of any subsequent recovery.

Although demand across our three largest segments has improved during 2022 and remained strong in the fourth quarter of 2022, we continue to address the external challenges in today’s economic environment as we remain disciplined with our spending and are focused on continuing to improve our operational efficiencies and cost structure and on enhancing value for our stockholders.

2022 Highlights

• Net loss of $101.4 million, or $2.18 per diluted share, and adjusted net loss of $99.3 million, or $2.13 per diluted share, for the year ended December 31, 2021.

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

• Adjusted EBITDA of ($11.6) million for the year ended December 31, 2021.

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

• Organically started a fiber division, which was awarded a fiber installation contract with a cooperative in the Midwest in late 2021 with an expected aggregate revenue of $4.5 million throughout 2022.

• Awarded a contract by a major utility to provide engineering and design services for the building of electric vehicle charging station infrastructure with an expected aggregate revenue of $5 million over the next three years.

• Net loss of $0.6 million, or $0.01 per diluted share, for the year ended December 31, 2022 as compared to net loss of $101.4 million, or $2.18 per diluted share, for the year ended December 31, 2021.

• Adjusted EBITDA of $86.1 million for the year ended December 31, 2022, a $97.7 million increase compared to ($11.6) million for the year ended December 31, 2021.

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

• Doubled our active frac fleet count from two at the beginning of 2022 to four active fleets to close out the year and have added an additional fleet subsequent to December 31, 2022 for a total of five of our six fleets active currently

• Executed two sand supply agreements with third-party service providers with terms of 12 months and 21 months, respectively, beginning on January 1, 2023.

Under the terms of the agreements, we have agreed to supply, in aggregate, approximately 1.75 million tons of sand over the contract periods.

• As part of our environmental and social responsibility initiatives, we previously converted one of our pressure pumping fleets to a dual fuel spread and, subject to market conditions, supply chain constraints and liquidity requirements, have plans to convert our sixth pressure pumping fleet to Tier 4, dual fuel, which we expect will be put into operation in the second half of 2023, as well as upgrade two of our existing fleets to Tier 2, dual fuel, giving us a total of four dual fuel fleets by year-end 2023.

Overview of Our Industries

Oil and Natural Gas Industry

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 budgets.

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, shortages of equipment and materials and other conditions and factors that are beyond our control.

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.

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

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

In 2021, U.S.

oil production stabilized as commodity prices increased and demand for crude oil rebounded.

We saw improvements in the oilfield services industry and in both pricing and utilization of our well completion and drilling services during 2022 and we expect both pricing and utilization to remain at these levels throughout 2023 as a result of an increase in budgets for publicly traded exploration and production companies and elevated activity levels, driven by improved energy demand and strong commodity prices.

The ongoing war and related humanitarian crisis in Ukraine, however, could have an adverse impact on the global energy markets and volatility of commodity prices.

In response to market conditions, we have 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, our coil tubing, pressure control and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.

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

During 2022, our well completion services division exhibited strong performance, fueled by the increase in demand in the pressure pumping industry.

We are currently operating five of our six pressure pumping fleets.

Subject to market conditions, supply chain constraints and liquidity requirements, we have plans to upgrade our sixth spread to Tier 4, dual fuel to be put into operation in the second half of 2023, as well as upgrade two of our existing fleets to Tier 2, dual fuel, giving us a total of four dual fuel fleets by year-end 2023.

However, strong demand in the pressure pumping industry and continuing supply chain disruptions have resulted in backlogs of equipment and replacement parts for our and our competitors’ pressure pumping fleets, which we expect to persist through at least the first half of 2023.

Any of these factors may result in the delay of our plans to convert or activate our sixth pressure pumping fleet, or upgrade two of our existing fleets, in the second half of 2023, which may adversely impact our business, financial condition and cash flow.

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

Further, a significant portion of our revenue from our pressure pumping business had historically been derived from Gulfport.

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

Gulfport did not make the payments owed to us under this contract for any periods subsequent to its alleged December 28, 2019

termination date.

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

On September 21, 2021, we reached a settlement with Gulfport under which all litigation relating to the Stingray Pressure Pumping contract was terminated, Stingray Pressure Pumping released all claims against Gulfport and its subsidiaries with respect to Gulfport’s bankruptcy proceedings and each of the parties released all claims they had against the others with respect to the litigation matters discussed above.

We have not been able to obtain long-term contracts with other customers to replace our contract with Gulfport.

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

Natural Sand Proppant Industry

In our natural sand proppant services business, we experienced a significant decline in demand of our sand proppant in the second half of 2019 and throughout 2020 as a result of completion activity falling due to lower oil demand and pricing, increased capital discipline by our customers, budget exhaustion and the COVID-19 pandemic.

Activity rebounded modestly in 2021 and continued to increase throughout 2022 as we saw an increase in the volume of sand sold.

Supply constraints from labor shortages have negatively affected West Texas in-basin mine operations and increased demand for Northern White frac sand for the region in 2022.

Demand from oil and gas companies in Western Canada and the Marcellus Shale has also being strong in 2022.

The increase in activity in 2022 resulted in an increase in demand and pricing for our sand and we expect that prices will remain at these levels throughout 2023.

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

A portion of our revenue from our natural sand proppant business historically had been derived from Gulfport pursuant to a long-term contract.

Gulfport did 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.

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

On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Muskie contract was terminated and a portion of Muskie’s contract claim against Gulfport was allowed under Gulfport’s plan of reorganization.

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

Energy Infrastructure Industry

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

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

We provide infrastructure services primarily in the northeastern, southwestern, midwestern and western portions of the United States.

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

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The one-year contract, as amended, provided for payments of up to $945 million (the “first contract”).

On May 26, 2018, Cobra and PREPA entered into a second one-year, $900 million master services agreement to provide additional repair services and begin the initial phase of reconstruction of the electrical power system in Puerto Rico (the “second contract”).

On May 26, 2018, Cobra and PREPA entered into a second one-year master services agreement, which provided for payments of up to $900 million, to provide additional repair services and begin the initial phase of reconstruction of the electrical power system in Puerto Rico (the “second contract”).

Our work under each of the contracts with PREPA ended on March 31, 2019.

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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 first contract.

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 first contract.

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

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On July 23, 2021, with our aid, PREPA filed an appeal of the entire $47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum.

The appeal is currently pending.

FEMA approved the appeal in part and denied the appeal in part.

FEMA found that staffing costs of $24.4 million are eligible for funding.

On August 4, 2021, the Court denied Cobra’s April 6, 2021 motion to lift the stay order, extended the stay of our motion seeking recovery of amounts owed to Cobra and directed the parties to file an additional joint status report, which was filed on January 22, 2022.

On January 26, 2022, the Court extended the stay and directed the parties to file a further status report by July 25, 2022.

On June 7, 2022, Cobra filed a motion to lift the stay order.

On June 29, 2022 the Court denied Cobra’s motion and extended the stay to January 2023.

On November 21, 2022, FEMA issued a Determination Memorandum related to the 100% federal funded portion of the second contract between Cobra and PREPA in which FEMA concluded that approximately $5.6 million in costs were not authorized costs under the contract.

On December 21, 2022, FEMA issued a Determination Memorandum related to the 90% federal cost share portion of the second contract between Cobra and PREPA in which FEMA concluded that approximately $68.1 million in costs were not authorized costs under the contract.

PREPA filed a first-level administrative appeal of the November 21, 2022 Determination Memorandum and has indicated that they will review the December 21, 2022 Determination Memorandums and, to the extent they feel plausible, file a first-level administrative appeal of the unauthorized amounts.

On January 7, 2023, Cobra and PREPA filed a joint status report with the Court, in which PREPA requested that the Court continue the stay through July 31, 2023 and Cobra requested that the stay be lifted.

On January 18, 2023, the Court entered an order extending the stay and directing the parties to file a further status report addressing (i) the status of any administrative appeals in connection with the November and December determination memorandums regarding the second contract, (ii) the status of the criminal proceedings against the former Cobra president and the FEMA official that concluded in December 2022, and (iii) a summary of the outstanding and unpaid amounts arising from the first and second contracts and whether PREPA disputes Cobra’s entitlement to these amounts with the Court by July 31, 2023.

On January 20, 2023, Cobra submitted a certified claim for approximately $379 million to FEMA pursuant to the federal Contract Disputes Act.

On February 1, 2023, FEMA notified Cobra that it had reviewed the claim and determined that no contract, expressed or implied, exists between FEMA and Cobra.

Therefore, no final decision will be issued in response to Cobra’s claim.

Cobra has 90 days from the February 1, 2023 decision to file a notice of appeal.

We believe all amounts charged to PREPA were in accordance with the terms of the contracts.

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Two other individuals were also charged in the indictment.

The indictment is focused on the interactions between a former FEMA official and the former President of Cobra.

The indictment was focused on the interactions between a former FEMA official and the former President of Cobra.

Neither we nor any of our subsidiaries were charged in the indictment.

We are continuing to cooperate with the related investigation.

We are also subject to investigations and legal proceedings related to our contracts with PREPA.

Given the uncertainty inherent in the criminal litigation, investigations and legal proceedings, it is not possible at this time to determine the potential outcome or other potential impacts that they could have on us.

On May 18, 2022, the former FEMA official and the former president of Cobra each pled guilty to one-count information charging gratuities related to a project that Cobra never bid upon and was never awarded or received any monies for.

On December 13, 2022, the Court sentenced the former Cobra president to custody of the Bureau of Prisons for six months and one day, a term of supervised release of six months and a fine of $25,000.

The Court sentenced the FEMA official to custody of the Bureau of Prisons for six months and one day, a term of supervised release of six months and a fine of $15,000.

The Court also dismissed the indictment against the two defendants.

We do not expect any additional activity in the criminal proceeding.

Given the uncertainty inherent in the criminal litigation, however, it is not possible at this time to determine the potential impacts that the sentencings could have on us.

PREPA has stated in Court filings that it may contend the alleged criminal activity affects Cobra's entitlement to payment under its contracts with PREPA.

It is unclear what PREPA's position will be going forward.

Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information regarding these investigations and proceedings.

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 other customers to replace the level of services that we provided to PREPA.

management changes, which resulted in crew departures, as well as a decline in storm restoration activities.

Our crew count declined from approximately 100 crews as of December 31, 2020 to approximately 82 crews as of December 31, 2021.

During the third quarter of 2021, we made leadership changes in our infrastructure group.

We are focused on cutting costs and enhancing accountability across the division, and we have already seen improvement in both areas.

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 other customers to replace the level of services that we provided to PREPA.

Although the COVID-19 pandemic and resulting economic conditions have not had a material impact on demand or pricing for our infrastructure services, revenues for our infrastructure services declined in 2021 as a result of certain management changes throughout the year, which resulted in crew departures, and a decline in storm restoration activities.

During the third quarter of 2021, we made leadership changes in our infrastructure group and have focused on cutting costs, improving margins and enhancing accountability across the division.

During 2022, operational improvements combined with increased crew count drove enhanced results.

Our average crew count increased from approximately 82 crews as of December 31, 2021 to approximately 91 crews as of December 31, 2022, and we continue to add crew capacity for a sector that has a healthy bidding environment.

Funding for projects in the infrastructure space remains strong with added opportunities expected from the Infrastructure Investment and Jobs Act, which was signed into law on November 15, 2021.

We continue to pursue opportunities within this sector as we strategically structure our service offerings for growth, intending to increase our infrastructure services activity and expand both our geographic footprint and depth of projects.

We anticipate the federal spending to begin fueling additional projects in this sector beginning in late 2023.

We continue to focus on operational execution and pursue opportunities within this sector as we strategically structure our service offerings for growth, intending to increase our infrastructure services activity and expand both our geographic footprint and depth of projects, especially in fiber maintenance and installation projects.

In late 2021, we were awarded a fiber installation contract as well as an electric vehicle charging station engineering contract.

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We are seeking to leverage this experience and our service offerings to grow our customer base and increase our revenues in the continental United States over the coming years.

Oil and Natural Gas Industry

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 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 capital 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.

As discussed above, oil prices dropped sharply throughout March and April of 2020.

While improved commodity pricing has contributed to positive industry movement and increased equipment utilization, oil and natural gas prices are expected to continue to be volatile and we cannot predict if, or at what levels, commodity prices will 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, the continued volatility and strategic operating decisions by producers to curtail drilling activity have continued to adversely impact the utilization and pricing of our oilfield services.

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

We are currently operating two of our six pressure pumping fleets.

Based on feedback from our exploration and production customers, we believe they plan to take a cautious approach with respect to their activity levels for 2022 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.

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

Subject to our liquidity requirements, we expect to be ready to ramp up our oilfield service offerings when oilfield demand, pricing and margins strengthen.

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

Further, a significant portion of our revenue from our pressure pumping business had historically been derived from Gulfport.

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

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

subsidiaries with respect to Gulfport’s bankruptcy proceedings and each of the parties released all claims they had against the others with respect to the litigation matters discussed above.

We have not been able to obtain long-term contracts with other customers to replace our contract with Gulfport.

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

Natural Sand Proppant Industry

In the natural sand proppant industry, demand growth for frac sand and other proppants is primarily driven by advancements in oil and natural gas drilling and well completion technology and techniques, such as horizontal drilling and hydraulic fracturing, as well as overall industry activity growth.

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, 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 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, budget exhaustion and the COVID-19 pandemic.

Activity has rebounded modestly in 2021 as we have seen an increase in the volume of sand sold, however the prices of frac sand have continued to be depressed compared to prior levels.

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

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

A portion of our revenue from our natural sand proppant business historically had been derived from Gulfport pursuant to a long-term contract.

Gulfport did 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.

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

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

Results of Operations

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(in thousands)

Infrastructure services $ 93,403 $ 157,751

Well completion services $ 170,663 $ 84,334

Infrastructure services 111,452 93,403

Natural sand proppant services 51,391 34,860

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Cost of revenue:

Infrastructure services (exclusive of depreciation and amortization of $21,841 and $29,337, respectively, for 2021 and 2020) 90,559 124,555

Well completion services (exclusive of depreciation and amortization of $22,080 and $26,356, respectively, for 2022 and 2021) 128,742 64,552

Infrastructure services (exclusive of depreciation and amortization of $16,149 and $21,841, respectively, for 2022 and 2021) 91,649 90,559

Natural sand proppant services (exclusive of depreciation, depletion and accretion of $8,725 and $8,993, respectively, for 2022 and 2021) 36,783 27,232

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Depreciation, depletion, amortization and accretion 64,271 78,475

Gains on disposal of assets, net (3,908) (5,147)

Impairment of goodwill — 891

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Other income, net 40,912 5,154

Loss before income taxes (124,293) (119,776)

Benefit for income taxes (22,863) (12,169)

Income (loss) before income taxes 12,988 (124,293)

Provision (benefit) for income taxes 13,607 (22,863)

Net loss $ (619) $ (101,430)

Revenue for 2021 decreased $84.1 million, or 27%, to $229.0 million from $313.1 million for 2020.

The decrease in total revenue is attributable to declines in revenue across all business lines other than our natural sand proppant services division.

Revenue derived from related parties was $17.9 million, or 8% of our total revenue, for 2021 and $50.6 million, or 16% of our total revenue, for 2020.

Substantially all of our related party revenue was derived from Gulfport under pressure pumping and sand contracts which have ended.

For additional information regarding the status of these contracts and the related litigation, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 19.

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

Revenue for 2022 increased $133.1 million, or 58%, to $362.1 million from $229.0 million for 2021.

The increase in total revenue is primarily attributable to increases in utilization across all operating divisions.

Revenue derived from related parties was $1.1 million for 2022 compared to $17.9 million for 2021.

Substantially all of our related party revenue for 2021 was derived from Gulfport under pressure pumping and sand contracts which have since ended.

Revenue by division was as follows:

Infrastructure Services.

Infrastructure services division revenue decreased $64.3 million, or 41%, to $93.4 million for 2021 from $157.8 million for 2020 primarily due to less storm activity during the year ended December 31, 2021 compared to the year ended December 31, 2020 resulting in an $58.4 million decline in storm restoration revenue.

Additionally, infrastructure services revenue was negatively impacted by the decrease in crew count from

approximately 100 crews as of December 31, 2020 to 82 crews as of December 31, 2021.

These crew departures were driven by changes in division level management.

Well Completion Services .

Well completion services division revenue decreased $4.0 million, or 5%, to $84.3 million for 2021 from $88.3 million for 2020.

Revenue derived from related parties was $15 million, or 18% of total well completion revenue, for 2021 and $42.5 million, or 48% of total well completion revenue, for 2020.

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

In 2021, we recognized revenue totaling $15 million related to the modification of our pressure pumping contract with Gulfport.

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

Well completion services division revenue increased $86.4 million, or 102%, to $170.7 million for 2022 from $84.3 million for 2021.

Revenue derived from related parties was $14.8 million, or 18% of total well completion revenue, for 2021.

All of our related party revenue for 2021 was derived from Gulfport under a pressure pumping contract which has ended.

Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, totaled $0.8 million and $0.1 million, for 2022 and 2021, respectively.

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

The number of stages completed decreased 12% to 2,544 for 2021 from 2,880 for 2020.

The increase in our well completion services revenue was primarily driven by an increase in both utilization and pricing.

The number of stages completed increased 142% to 6,149 for 2022 from 2,544 for 2021.

An average of 3.0 of our six fleets were active throughout 2022 compared to 1.1 fleets for 2021.

Infrastructure Services.

Infrastructure services division revenue increased $18.1 million, or 19%, to $111.5 million for 2022 from $93.4 million for 2021 primarily due to an increase in average crew count from 82 crews during the year ended December 31, 2021 to an average of 91 crews during the year ended December 31, 2022 as well as improved operational efficiency.

This was partially offset by a decline in storm restoration activity during the year ended December 31, 2022 compared to the year ended December 31, 2021, resulting in an $11.0 million decrease in storm restoration revenue.

Natural Sand Proppant Services.

Natural sand proppant services division revenue increased $16.5 million, or 47%, to $51.4 million for 2022, from $34.9 million for 2021.

Revenue derived from related parties was $2.1 million, or 6% of total sand revenue, for 2021 and $8.4 million, or 24% of total sand revenue, for 2020.

All of our related party revenue was 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 2021, we recognized revenue totaling $2 million related to the modification of our sand supply contract with Gulfport.

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 $4.0 million, or 11% of total sand revenue, for 2021 and a nominal amount for 2020.

The increase in our natural sand proppant services revenue was primarily attributable to a 107% increase in tons of sand sold from approximately 0.5 million tons in 2020 to 1.0 million tons in 2021 coupled with a 15% increase in average price per ton of sand sold from $14.58 in 2020 to $16.76 in 2021.

Revenue derived from related parties was $2.1 million, or 6% of total sand revenue, for 2021.

All of our related party revenue for 2021 was derived from Gulfport under a sand supply contract which has ended.

Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was $2.5 million, or 5% of total sand revenue, for 2022 and $4.0 million, or 11% of total sand revenue, for 2021.

The increase in our natural sand proppant services revenue was primarily attributable to a 62% increase in average price per ton of sand sold from $16.76 in 2021 to $27.11 in 2022 coupled with a 40% increase in tons of sand sold from approximately 1.0 million tons in 2021 to 1.4 million tons in 2022.

Included in natural sand proppant services revenue is shortfall revenue of $3.1 million and $12.0 million, for 2022 and 2021, respectively.

Drilling Services .

Drilling services division revenue decreased $3.5 million, or 44%, to $4.3 million for 2021, from $7.8 million for 2020.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $0.6 million for 2021 and a nominal amount for 2020.

The decline in our drilling services revenue was primarily attributable to declines in utilization for our directional drilling and rig hauling businesses.

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.

Drilling services division revenue increased $6.1 million, or 142%, to $10.4 million for 2022, from $4.3 million for 2021.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $0.8 million for 2022 and $0.6 million for 2021.

The increase in our drilling services revenue was primarily attributable to increased utilization for our directional drilling business from 21% for 2021 to 44% for 2022 as well as a 44% increase in the average day rate from 2021 to 2022.

Other Services.

Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, equipment rental, crude oil hauling, full service transportation, remote accommodation and equipment manufacturing, decreased $10.3 million, or 36%, to $18.5 million for 2021 from $28.8 million for 2020.

Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $0.4 million, or 2% of total other services revenue, for 2021 and $1.0 million, or 3% of total other services revenue, for 2020.

Revenue from other services, consisting of revenue derived from our aviation, equipment rental, remote accommodation and equipment manufacturing, increased $4.6 million, or 25%, to $23.1 million for 2022 from $18.5 million for 2021.

Revenue derived from related parties, consisting primarily of aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $0.3 million, or 1% of total other services revenue, for 2022 and $0.4 million, or 2% of total other services revenue, for 2021.

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $1.6 million and $2.2 million, for 2022 and 2021, respectively.

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 135 pieces of equipment to customers during 2021, a decrease of 34% from an average of 204 pieces of equipment rented to customers during 2020.

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

Due to market conditions, we temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.

The increase in our other services revenue was primarily due to improved utilization for our equipment rental business.

We rented an average of 249 pieces of equipment to customers during 2022, an increase of 84% from an average of 135 pieces of equipment rented to customers during 2021.

Additionally, utilization for remote accommodations business increased.

On average, 172 rooms were utilized per night during 2022, a 91% increase from an average of 90 rooms utilized per night in 2021.

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

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $33.7 million from $232.0 million, or 74% of total revenue, for 2020 to $198.3 million, or 87% of total revenue, for 2021.

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

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, increased $80.3 million from $198.3 million, or 87% of total revenue, for 2021 to $278.6 million, or 77% of total revenue, for 2022.

The increase was primarily due to an increase in cost of revenue across all divisions as a result of improved utilization.

Cost of revenue by operating division was as follows:

Infrastructure Services.

Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $34.0 million from $124.6 million for 2020 to $90.6 million for 2021, primarily due to a decline in activity.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $21.9 million in 2021 and $29.4 million in 2020, was 97% and 79%, for 2021 and 2020, respectively.

The increase as a percentage of revenue is primarily due to increased labor costs as a percentage of revenue.

Well Completion Services .

Well completion services division cost of revenue, exclusive of depreciation and amortization expense, increased $17.1 million, or 36%, from $47.5 million for 2020 to $64.6 million for 2021 primarily due to an increase in cost of goods sold as a result of providing sand and chemicals with our service package to customers in 2021.

Well completion services division cost of revenue, exclusive of depreciation and amortization expense, increased $64.1 million, or 99%, from $64.6 million for 2021 to $128.7 million for 2022 primarily due to an increase in cost of goods sold as a result of providing sand and chemicals with our service package to customers during 2022 as well as an increase in labor costs as a result of additional fleets in service.

As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $22.1 million in 2022 and $26.4 million in 2021, was 75% and 77%, for 2022 and 2021, respectively.

The increase as a percentage of revenue was primarily due to the recognition of more pressure pumping services standby revenue in 2020, of which there was a lower percentage of costs recognized compared to 2021.

Additionally, during 2021 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.

Infrastructure Services.

Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, increased $1.0 million from $90.6 million for 2021 to $91.6 million for 2022.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $16.2 million in 2022 and $21.9 million in 2021, was 82% and 97%, for 2022 and 2021, respectively.

The decline as a percentage of revenue is

primarily due to improved pricing as well as a decline in labor related costs as a result of improved efficiency of our crews.

Natural Sand Proppant Services.

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As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $8.7 million in 2022 and $9.0 million in 2021, was 72% and 78%, for 2022 and 2021, respectively.

The decrease in cost as a percentage of revenue is primarily due to a 62% increase in average sales price and a 37% increase in tons sold.

Drilling Services.

Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $4.8 million, or 44%, from $10.9 million for 2020 to $6.1 million for 2021, as a result of reduced activity.

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

Drilling services division cost of revenue, exclusive of depreciation and amortization expense, increased $3.7 million, or 61%, from $6.1 million for 2021 to $9.8 million for 2022, as a result of increased activity.

As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $6.5 million in 2022 and $8.0 million in 2021, was 94% and 141%, for 2022 and 2021, respectively.

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

The decline in 2022 is primarily due to increases in utilization and pricing.

Other Services .

Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $10.7 million, or 40%, from $27.1 million for 2020 to $16.3 million for 2021, primarily due to a decline in costs for our equipment rental, coil tubing, and full service transportation businesses as a result of reduced activity.

Due to market conditions, we have temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.

Other services cost of revenue, exclusive of depreciation and amortization expense, increased $0.2 million, or 1%, from $16.3 million for 2021 to $16.5 million for 2022.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $10.8 million in 2022 and $13.2 million in 2021, was 71% and 88%, for 2022 and 2021, respectively.

The decrease as a percentage of revenue is primarily due to a decline in equipment rental costs as a percentage of revenue.

The decrease as a percentage of revenue in 2022 is primarily due to an increase in utilization.

Selling, General and Administrative Expenses .

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

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

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

December 31, 2022 December 31, 2021

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Non-cash expenses:

Bad debt provision 41,662 21,958

Bad debt provision (b)

Stock based compensation 923 1,068

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The bad debt provision for the year ended December 31, 2021 includes $41.2 million related to the Stingray Pressure Pumping and Muskie contracts with Gulfport.

The bad debt provision for the year ended December 31, 2020, included $19.4 million related to the voluntary petitions for relief filed on November 13, 2020, by Gulfport and certain of its subsidiaries.

See Notes 2 and 19 of the Notes to the Consolidated Financial Statements.

Depreciation, Depletion, Amortization and Accretion .

Depreciation, depletion, amortization and accretion decreased $14.2 million, or 18%, to $64.3 million for 2022 from $78.5 million in 2021.

The decrease is primarily due to a decline in property and equipment depreciation expense as a result of lower capital expenditures.

The decrease is primarily due to a decline in property and equipment depreciation expense as a result of lower capital expenditures and existing assets being fully depreciated or impaired.

Gains on Disposal of Assets, Net.

Gains on the disposal of assets decreased $1.2 million, or 24%, to $3.9 million for 2022 from $5.1 million in 2021.

Gains on the disposal of assets is primarily related to the sale of trucks, land and buildings for the year ended December 31, 2022 and trucking assets for the year ended December 31, 2021.

Impairment of Goodwill .

We recorded impairment of goodwill of $0.9 million and $55.0 million in 2021 and 2020, respectively.

We recorded impairment of goodwill of $0.9 million in 2021.

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, 2021, resulting in impairment expense of $0.9 million.

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 $55.0 million.

We did not recognize any impairment of goodwill in 2022.

Impairment of Other Long-lived Assets .

We recorded impairments of other long-lived assets of $1.2 million and $12.9 million, in 2021 and 2020, respectively.

We recorded impairments of other long-lived assets of $1.2 million for 2021.

Beginning in 2021, we temporarily shut down our crude oil hauling operations, resulting in impairment of trade names of $0.5 million.

Additionally, as a result of a review of intangible asset balances as of December 31, 2021, we determined the fair value of Higher Power’s trade names and customer relationships was less than their carrying value, resulting in impairment expense of $0.7 million.

During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $12.9 million.

We did not recognize any impairment of other long-lived assets in 2022.

Operating Loss.

We reported an operating loss of $16.4 million for 2022 compared to an operating loss $123.0 million for 2021.

The reduced operating loss was primarily due to the recognition of $67.9 million in impairment expenses during 2020, as compared to $2.1 million in 2021, partially offset by a $19.7 million increase in bad debt expense primarily due to the settlement with Gulfport.

The reduced operating loss in 2022 was primarily due to a decline in costs as a percentage of revenue as well as increased activity across all operating divisions as described above.

Interest Expense, net .

Interest expense, net increased $1.0 million to $6.4 million for 2021 from $5.4 million for 2020, primarily due to an increase in expense recognized on sale-leaseback transactions.

Other Income (Expense), net.

Other income, net decreased $22.7 million during 2021 compared to 2020.

Interest expense, net increased $5.1 million to $11.5 million for 2022 from $6.4 million for 2021, primarily due to an increase in the interest rate and average borrowings outstanding under our revolving credit facility.

Other Income, net.

Other income, net increased $35.7 million during 2022 compared to 2021.

During 2021, we recognized expense of $25.0 million related to an agreement to settle a legal matter and legal fees related to the matter totaling $5.4 million.

This expense was partially offset by a $4.4 million increase in gains on asset disposals and a $4.4 million increase in interest on delinquent account receivables.

We recognized interest on trade accounts receivable of $41.3 million in 2022 compared to $34.7 million in 2021.

Income Taxes .

During 2021, we recorded an income tax benefit of $22.9 million on pre-tax loss of $124.3 million compared to an income tax benefit of $12.2 million on pre-tax loss of $119.8 million for 2020.

During 2022, we recorded an income tax expense of $13.6 million on pre-tax income of $13.0 million compared to an income tax benefit of $22.9 million on pre-tax loss of $124.3 million for 2021.

Our effective tax rate was 104.8% for 2022 compared to 18.4% for 2021.

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.

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 changes in the valuation allowance that may not be consistent from year to year.

See Note 13 to our consolidated financial statements for additional detail regarding our change in tax expense.

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(in thousands)

Infrastructure services $ 157,751 $ 213,285

Well completion services $ 84,334 $ 88,325

Infrastructure services 93,403 157,751

Natural sand proppant services 34,860 34,360

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Cost of Revenue:

Infrastructure services (exclusive of depreciation and amortization of $29,337 and $30,323, respectively, for 2020 and 2019) 124,555 173,551

Well completion services (exclusive of depreciation and amortization of $26,356 and $30,395, respectively, for 2021 and 2020) 64,552 47,483

Infrastructure services (exclusive of depreciation and amortization of $21,841 and $29,337, respectively, for 2021 and 2020) 90,559 124,555

Natural sand proppant services (exclusive of depreciation, depletion and accretion of $8,993 and $9,758, respectively, for 2021 and 2020) 27,232 25,955

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Depreciation, depletion, amortization and accretion 78,475 95,317

Gains on disposal of assets, net (5,147) (638)

Impairment of goodwill 891 54,973

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Revenue for 2021 decreased $84.1 million, or 27%, to $229.0 million from $313.1 million for 2020.

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

The decrease in total revenue is attributable to declines in revenue across all business lines other than our natural sand proppant services division.

Revenue derived from related parties was $17.9 million, or 8% of our total revenue, for 2021 and $50.6 million, or 16% of our total revenue, for 2020.

Substantially all of our related party revenue was 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 19.

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 $55.5 million, or 26%, to $157.8 million for 2020 from $213.3 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 $41.1 million, or 35%, to $157.8 million for 2020 from $116.7 million for 2019.

Well Completion Services .

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Revenue derived from related parties was $15 million, or 18% of total well completion revenue, for 2021 and $42.5 million, or 48% of total well completion revenue, for 2020.

Substantially all of our related party revenue was derived from Gulfport under a well completion 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 $38.5 million and post-petition revenue totaling $3.9 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, was $0.9 million and $1.9 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.

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

In 2021, we recognized revenue totaling $15 million related to the modification of our pressure pumping contract with Gulfport.

Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, totaled $0.1 million and $1.1 million, for 2021 and 2020, respectively.

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

The number of stages completed decreased 12% to 2,544 for 2021 from 2,880 for 2020.

An average of 1.5 of our fleets were active throughout 2020 compared to 2.4 fleets for 2019.

An average of 1.1 of our six fleets were active throughout 2021 compared to 1.5 fleets for 2020.

Infrastructure Services .

Infrastructure services division revenue decreased $64.3 million, or 41%, to $93.4 million for 2021 from $157.8 million for 2020 primarily due to due to less storm activity during the year ended December 31, 2021 compared to the year ended December 31, 2020 resulting in an $58.4 million decline in storm restoration revenue.

Additionally, infrastructure services revenue was negatively impacted by the decrease in crew count from approximately 100 crews as of December 31, 2020 to 82 crews as of December 31, 2021.

These crew departures were driven by changes in division level management.

Natural Sand Proppant Services.

Natural sand proppant services division revenue decreased $62.7 million, or 65%, to $34.4 million for 2020, from $97.1 million for 2019.

Natural sand proppant services division revenue increased $0.5 million, or 1%, to $34.9 million for 2021, from $34.4 million for 2020.

Revenue derived from related parties was $2.1 million, or 6% of total sand revenue, for 2021 and $8.4 million, or 24% of total sand revenue, for 2020.

All of our related party revenue was 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 $6.5 million and post-petition revenue totaling $1.0 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 $24.8 million and $2.8 million, respectively, for 2020 and 2019.

All of our related party revenue was derived from Gulfport under a sand supply contract which has ended.

In 2021, we recognized revenue totaling $2 million related to the modification of our sand supply contract with Gulfport.

Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was $4 million, or 11% of total sand revenue, for 2021 and a nominal amount for 2020.

Included in natural sand proppant services

revenue is shortfall revenue of $12.0 million and $24.8 million, for 2021 and 2020, respectively.

Drilling Services.

Drilling services division revenue decreased $3.5 million, or 44%, to $4.3 million for 2021, from $7.8 million for 2020.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was nominal for 2020 and $0.6 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 $9.2 million, $8.6 million, and $6.3 million, respectively.

Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $0.6 million for 2021 and a nominal amount for 2020.

The decline in our drilling services revenue was primarily attributable to declines in utilization for our directional drilling and rig hauling businesses.

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.

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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 $10.3 million, or 36%, to $18.5 million for 2021 from $28.8 million for 2020.

Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $1.0 million, or 3% of total other services revenue, for 2020 and $10.9 million, or 12% of total other services revenue, for 2019.

Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim was $0.4 million, or 2% of total other services revenue, for 2021 and $1.0 million, or 3% of total other services revenue, for 2020.

Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $2.2 million and $2.7 million, respectively for 2021 and 2020.

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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 an increase in revenue for our remote accommodations business.

Due to market conditions, we temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.

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

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Cost of revenue by operating division was as follows:

Infrastructure Services .

Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $49.0 million from $173.6 million for 2019 to $124.6 million for 2020.

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 $29.4 million in 2020 and $30.3 million in 2019, was 79% and 81%, respectively, for 2020 and 2019.

Well Completion Services .

Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $159.6 million, or 77%, from $206.5 million for 2019 to $47.5 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 $30.4 million in 2020 and $40.2 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 costs of goods sold as a percentage of revenue for this period in comparison to 2020.

As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $26.4 million in 2021 and $30.4 million in 2020, was 77% and 54%, respectively, for 2021 and 2020, respectively.

The increase as a percentage of revenue was primarily due to the recognition of more pressure pumping services standby revenue in 2020, of which there was a lower percentage of

costs recognized compared to 2021.

Infrastructure Services .

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $21.9 million in 2021 and $29.4 million in 2020, was 97% and 79%, for 2021 and 2020, respectively.

The increase as a percentage of revenue is primarily due to increased labor costs as a percentage of revenue.

Natural Sand Proppant Services.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $61.7 million, or 70%, from $87.7 million for 2019 to $26.0 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 $9.8 million in 2020 and $14.1 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.

Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, increased $1.2 million, or 5%, from $26.0 million for 2020 to $27.2 million for 2021.

As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $9.0 million in 2021 and $9.8 million in 2020, was 78% and 76%, respectively, for 2021 and 2020, respectively.

Drilling Services.

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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 $10.0 million in 2020 and $13.1 million in 2019, was 140% and 116%, respectively, for 2020 and 2019.

The increase was primarily due to a decline in utilization.

As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $8.0 million in 2021 and $10.0 million in 2020, was 141% and 116%, respectively, for 2021 and 2020, respectively.

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

Other Services .

Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $62.7 million, or 71%, from $88.8 million for 2019 to $27.1 million for 2020, primarily due to a decline 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, pressure control 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 manufacturing business.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $15.7 million in 2020 and $19.3 million in 2019, was 93% and 101%, respectively, for 2020 and 2019.

Due to market conditions, we temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.

As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13.2 million in 2021 and $15.7 million in 2020, was 88% and 94%, for 2021 and 2020, respectively.

The decrease as a percentage of revenue is primarily due to a decline in equipment rental costs as a percentage of revenue.

Selling, General and Administrative Expenses .

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Non-cash expenses:

Bad debt provision 21,958 1,434

Bad debt provision (b)

41,662 21,958

Stock based compensation 1,068 1,618

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

The bad debt provision for the year ended December 31, 2021 includes $41.2 million related to the Stingray Pressure Pumping and Muskie contracts with Gulfport.

See Notes 2 and 19 of the Notes to the Consolidated Financial Statements.

Depreciation, Depletion, Amortization and Accretion .

Depreciation, depletion, accretion and amortization decreased $16.8 million, or 18%, to $78.5 million for 2021 from $95.3 million in 2020.

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

The decrease is primarily due to a decline in property and equipment depreciation expense as a result of lower capital expenditures.

Gains on Disposal of Assets, Net.

Gains on the disposal of assets increased by $4.5 million, or 707%, to $5.1 million for 2021 from $0.6 million in 2020, primarily due to an increase in sales of trucking assets in 2021.

Impairment of Goodwill .

We recorded impairment of goodwill of $0.9 million and $55.0 million, respectively, in 2021 and 2020.

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 $55.0 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 $33.7 million.

During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3.1 million.

Impairment of Other Long-lived Assets .

We recorded impairments of other long-lived assets of $1.2 million and $12.9 million, respectively, in 2021 and 2020.

Beginning in 2021, we temporarily shut down our crude oil hauling operations, resulting in impairment of trade names of $0.5 million.

During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $12.9 million.

During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $3.6 million during 2019.

Additionally, we recorded impairment expense $3.0 million related to specified drilling rigs and $0.8 million related to WTL’s customer relationship intangible asset during 2019.

Operating Loss.

We reported an operating loss of $123.0 million for 2021 compared to operating loss of $148.7 million for 2020.

The increased operating loss was primarily due to increases in impairment expense of $26.8 million and SG&A expense of $15.6 million, partially offset by a 15% decline in cost of revenue as a percentage of revenue.

Interest Expense, net .

Interest expense, net remained relatively flat at $5.4 million and $5.0 million for 2020 and 2019, respectively.

Interest expense, net increased $1.0 million to $6.4 million and $5.4 million for 2021 and 2020, primarily due to an increase in expense recognized on sale-leaseback transactions.

Other Income (Expense), net.

Other income, net decreased $7.3 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.

Other income, net decreased $29.1 million during 2021 compared to 2020.

During 2021, we recognized expense of $25.0 million related to an agreement to settle a legal matter and legal fees related to the matter totaling $5.4 million.

This expense was partially offset by a $4.4 million increase in interest on delinquent account receivables.

Income Taxes .

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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 (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, interest on trade accounts receivable and certain legal expenses) and (benefit) provision for income taxes, further adjusted to add back interest on trade accounts receivable.

We define Adjusted EBITDA as net (loss) income before depreciation, depletion, amortization and accretion, gains on disposal of assets, net, impairment of goodwill, impairment of other long-lived assets, public offering costs, stock based compensation, interest expense, net, other income, net (which is comprised of interest on trade accounts receivable and certain legal expenses) and provision (benefit) 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.

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Depreciation, depletion, amortization and accretion 64,271 78,475 95,317

Gains on disposal of assets, net (3,908) (5,147) (638)

Impairment of goodwill — 891 54,973

Impairment of other long-lived assets — 1,212 12,897

Inventory obsolescence charges — — 1,349

Acquisition related costs — — 45

Public offering costs — 91 —

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Other income, net (40,912) (5,154) (34,300)

Benefit for income taxes (22,863) (12,169) (12,081)

Provision (benefit) for income taxes 13,607 (22,863) (12,169)

Interest on trade accounts receivable 41,276 34,709 34,130

Adjusted EBITDA $ 86,144 $ (11,619) $ 49,952

Infrastructure Services

Well Completion Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net (loss) income:

Reconciliation of Adjusted EBITDA to net income (loss):

2022 2021 2020

Net (loss) income $ (36,711) $ (928) $ 18,135

Net income (loss) $ 10,194 $ (58,051) $ (69,073)

Depreciation, depletion, amortization and accretion 22,103 26,377 30,411

Gains on disposal of assets, net (615) (770) (388)

Impairment of goodwill — — 53,406

Impairment of other long-lived assets — — 4,203

Acquisition related costs — — 12

Public offering costs — 31 —

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Interest expense 1,940 1,107 1,130

Other income, net (6,785) (32,437) (41,949)

Provision for income taxes 712 7,133 7,908

Other (income) expense, net (343) 1,843 (1,886)

Interest on trade accounts receivable — (1,841) 1,888

Adjusted EBITDA $ 33,659 $ (30,971) $ 20,218

Well Completion Services

Infrastructure Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net loss:

Reconciliation of Adjusted EBITDA to net income (loss):

2022 2021 2020

Net loss $ (58,051) $ (69,073) $ (39,020)

Net income (loss) $ 4,933 $ (36,711) $ (928)

Depreciation, depletion, amortization and accretion 16,171 21,880 29,373

Gains on disposal of assets, net (795) (286) (443)

Impairment of goodwill — 891 —

Impairment of other long-lived assets — 665 —

Acquisition related costs — — 18

Public offering costs — 39 —

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Interest expense 7,390 3,925 2,794

Other expense (income), net 1,073 (2,274) 580

Other income, net (40,470) (6,499) (31,994)

Provision for income taxes 13,427 712 7,133

Interest on trade accounts receivable 41,276 36,551 32,214

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net (loss) income:

Reconciliation of Adjusted EBITDA to net loss:

2022 2021 2020

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Depreciation, depletion, amortization and accretion 8,732 9,005 9,771

Impairment of goodwill — — 2,684

Acquisition related costs — — 8

Gains on disposal of assets, net (89) (30) 1,829

Public offering costs — 12 —

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Depreciation, depletion, amortization and accretion 6,467 7,996 10,039

Gains on disposal of assets, net (172) (202) (353)

Impairment of other long-lived assets — — 326

Acquisition related costs — — 2

Public offering costs — 2 —

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Years Ended December 31,

Reconciliation of Adjusted EBITDA to net loss:

Reconciliation of Adjusted EBITDA to net (loss) income:

2022 2021 2020

Net income (loss) $ 10,967 $ (9,417) $ (19,514)

Net (loss) income $ (6,291) $ 10,967 $ (9,417)

Depreciation, depletion, amortization and accretion 10,798 13,217 15,722

Gains on disposal of assets, net (2,237) (3,859) (1,283)

Impairment of goodwill — — 1,567

Impairment of other long-lived assets — 547 8,368

Inventory obsolescence charges — — 1,349

Acquisition related costs — — 5

Public offering costs — 7 —

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Other income, net (85) 321 (556)

Benefit for income taxes (23,575) (19,302) (19,989)

Provision (benefit) for income taxes 180 (23,575) (19,302)

Interest on trade accounts receivable — — 25

Adjusted EBITDA $ 3,300 $ (1,688) $ (3,952)

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

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

Our corporate related activities do not generate revenue.

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Adjusted net loss and adjusted basic and diluted loss per share are supplemental non-GAAP financial measures that are used by management to evaluate our operating and financial performance.

Management believes these measures provide meaningful information about the Company’s performance by excluding certain non-cash charges, such as impairment expense, that may not be indicative of the Company’s ongoing operating results.

Management believes these measures provide meaningful information about the Company’s performance by excluding certain non-cash charges, such as impairment of goodwill and impairment of other long-lived assets, that may not be indicative of the Company’s ongoing operating results, from net loss.

Adjusted net loss and adjusted loss per share should not be considered in isolation or as a substitute for net loss and loss per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

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Liquidity and Capital Resources

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 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 the status of 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.

As of December 31, 2021, we had outstanding borrowing under our revolving credit facility of $83.4 million.

We require capital to fund ongoing operations including maintenance expenditures on our existing fleet of equipment, organic growth initiatives, investments and acquisitions, and the litigation settlement obligations described in Note 19 “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements and under “Capital Requirements and Sources of Liquidity” below.

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 and to acquire complementary businesses.

The following table summarizes our liquidity as of the dates indicated (in thousands):

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Revolving credit facility availability 119,756 118,948

Less long-term debt (85,240) (81,338)

Less current and long-term debt (83,520) (86,708)

Less available borrowing capacity reserve (10,000) (10,000)

Less letter of credit facilities (bonding program) (1,000) (5,000)

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

Less letter of credit facilities (environmental remediation) (3,694) (3,694)

Less letter of credit facilities (insurance programs) (2,800) (3,890)

Less letter of credit facilities (bonding program) — (1,000)

Less letter of credit facilities (rail car commitments) — (455)

Net working capital (less cash) (a)

Net working capital (less cash and current portion of long-term debt) (a)

325,719 282,118

Total $ 362,743 $ 305,218

Net working capital (less cash) is a non-GAAP measure and, as of December 31, 2021, is calculated by subtracting total current liabilities of $150.2 million and cash and cash equivalents of $9.9 million from total current assets of $440.8 million.

As of December 31, 2020, net working capital (less cash) is calculated by subtracting total current liabilities of $128.6 million and cash and cash equivalents of $14.8 million from total current assets of $464.7 million.

Net working capital (less cash and current portion of long-term debt) is a non-GAAP measure and, as of December 31, 2022, is calculated by subtracting total current liabilities of $237.2 million and cash and cash equivalents of $17.3 million from total current assets of $496.7 million, further adjusted to add current portion of long-term debt of $83.5 million.

As of December 31, 2021, net working capital (less cash) is calculated by subtracting total current liabilities of $150.2 million and cash and cash equivalents of $9.9 million from total current assets of $440.8 million, further adjusted to add current portion of long-term debt of $1.5 million.

Amounts include receivables due from PREPA of $379.0 million and $337.8 million and corresponding liabilities of $47.6 million and $42.3 million at December 31, 2022 and 2021, respectively.

As of March 2, 2022, we had $83.7 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $10.6 million of available borrowing capacity under this facility, after giving effect to $8.5 million of outstanding letters of credit and the requirement to maintain a $7.5 million reserve out of the available borrowing capacity.

Continued prolonged volatility in the capital, financial and/or credit markets due to the COVID-19 pandemic, volatility in commodity prices and/or adverse macroeconomic conditions may further limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all.

In addition, if we are unable to comply with the covenants under our amended revolving credit facility following the expiration of the waiver period contemplated thereunder, or obtain an additional waiver of such covenants, as discussed below, and an event of default occurs and remains uncured, our lenders would not be required to lend any additional amounts to us, could elect to increase our interest rate by 200 basis points, could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, may have the ability to require us to apply all of our available cash to repay our outstanding borrowings and may foreclose on substantially all of our assets.

As of February 22, 2023, we had $79.7 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $22.3 million of available borrowing capacity under this facility, after giving effect to $6.4 million of outstanding letters of credit and the requirement to maintain a $10.0 million reserve out of the available borrowing capacity.

Our revolving credit facility is currently scheduled to mature on October 19, 2023.

See “Our Revolving Credit Facility” below for additional detail.

Continued prolonged volatility in the capital, financial and/or credit markets due to the COVID-19 pandemic, inflationary pressures or otherwise and volatility in commodity prices and/or adverse macroeconomic conditions may further limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all.

In addition, if we are unable to comply with the financial covenants under our amended revolving credit facility, or obtain a waiver of forecasted or actual non-compliance with any such financial covenants from our lenders, and an event of default occurs and remains uncured, our lenders would not be required to lend any additional amounts to us, could elect to increase our interest rate by 200 basis points, could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, may have the ability to require us to apply all of our available cash to repay our outstanding borrowings and may foreclose on substantially all of our assets.

Further, we may not be able to extend, repay or refinance our existing revolving credit facility at or prior to maturity on the terms acceptable to us or at all.

Liquidity and Cash Flows

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2022 2021 2020

Net cash (used in) provided by operating activities $ (18,865) $ 6,967 $ (95,318)

Net cash provided by (used in) investing activities 5,507 (2,295) (33,224)

Net cash provided by financing activities 8,428 4,266 66,702

Net cash provided by (used in) operating activities $ 15,266 $ (18,865) $ 6,967

Net cash (used in) provided by investing activities (2,124) 5,507 (2,295)

Net cash (used in) provided by financing activities (5,601) 8,428 4,266

Effect of foreign exchange rate on cash (158) 7 12

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Operating Activities

Net cash (used in) provided by operating activities was ($18.9) million, $7.0 million and ($95.3) million, respectively, for the years ended December 31, 2021, 2020 and 2019.

The decrease in operating cash flows was primarily attributable to the timing of cash inflows for accounts receivable.

Net cash provided by (used in) operating activities was $15.3 million, ($18.9) million and $7.0 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

The change in operating cash flows from 2021 to 2022 was primarily due to an increase in activity and utilization across all of our operating divisions as described in Results of Operations above.

Investing Activities

Net cash provided by (used in) investing activities was $5.5 million, ($2.3) million and ($33.2) million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Net cash (used in) provided by investing activities was ($2.1) million, $5.5 million and ($2.3) million, respectively, for the years ended December 31, 2022, 2021 and 2020.

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.

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2022 2021 2020

Infrastructure services (a)

$ 627 $ 258 $ 3,456

Well completion services (b)

Well completion services (a)

$ 11,421 $ 4,327 $ 4,358

Infrastructure services (b)

Natural sand proppant services (c)

484 1,073 2,877

Drilling services (d)

361 716 11,569

Eliminations (153) — —

Total capital expenditures $ 12,737 $ 5,843 $ 6,837

Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for the years ended December 31, 2021, 2020 and 2019.

Capital expenditures primarily for upgrades to our pressure pumping fleet and water transfer equipment for the years ended December 31, 2021, 2020 and 2019.

Capital expenditures primarily for upgrades to our pressure pumping fleet to reduce greenhouse gas emissions and maintenance for the years ended December 31, 2022, 2021 and 2020.

Capital expenditures primarily for truck, tooling and other equipment purchases for new infrastructure crews for the years ended December 31, 2022, 2021 and 2020.

Capital expenditures primarily for maintenance for the years ended December 31, 2022, 2021 and 2020.

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

Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for the years ended December 31, 2021, 2020 and 2019.

Capital expenditures primarily for maintenance for the years ended December 31, 2022 and 2021, and for directional drilling equipment for the year ended December 31, 2020.

Capital expenditures primarily for equipment for our remote accommodations and equipment rental businesses for the years ended December 31, 2022, 2021 and 2020.

Financing Activities

Net cash provided by financing activities was $8.4 million, $4.3 million and $66.7 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Net cash (used in) provided by financing activities was ($5.6) million, $8.4 million and $4.3 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Net cash used in financing activities for the year ended December 31, 2022 was primarily attributable to net repayments under our revolving credit facility of $1.5 million and principal payments on financing leases and equipment notes of $4.3 million, partially offset by net proceeds received from sale-leaseback transactions of $0.2 million.

Net cash provided by financing activities for the year ended December 31, 2021 was primarily attributable to net proceeds received from sale-leaseback transactions of $6.5 million and net borrowings under our revolving credit facility of $4.2 million, partially offset by principal payment on financing leases and equipment notes of $2.3 million.

Net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to net proceeds of $4.7 million received from a sale-leaseback transaction and net borrowings under our revolving credit facility of $2.6 million, principal payment on financing leases and equipment notes of $2.0 million and payment of debt issuance costs of $1.0 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 $80.0 million, partially offset by dividends paid of $11.2 million.

Net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to net proceeds of $4.7 million received

from a sale-leaseback transaction and net borrowings under our revolving credit facility of $2.6 million, principal payment on financing leases and equipment notes of $2.0 million and payment of debt issuance costs of $1.1 million.

Effect of Foreign Exchange Rate on Cash

The effect of foreign exchange rate on cash was a nominal amount for both of the years ended December 31, 2021 and 2020, and $0.1 million for 2019.

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.

The effect of foreign exchange rate on cash was ($0.2) million for the year ended December 31, 2022 and was a nominal amount for both of the years ended December 31, 2021, and 2020.

The year-over-year effect was driven primarily by an unfavorable shift in the strength of the Canadian dollar relative to the U.S.

dollar for the cash held in Canadian accounts.

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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, 2021, we had outstanding borrowings under our revolving credit facility of $83.4 million and $16.5 million of available borrowing capacity, after giving effect to $9.0 million of outstanding letters of credit and the requirement to maintain a $10.0 million reserve out of the available borrowing

capacity during the limited waiver period as discussed below.

As a result of the lack of payment from PREPA, we projected that we would likely breach the leverage ratio covenant contained in our revolving credit facility for the fiscal quarter ended on September 30, 2021.

On November 3, 2021, we entered into a third amendment to the revolving credit facility (the “Third Amendment”) to, among other things, (i) suspend the leverage ratio and fixed charges coverage ratio covenants for the quarters ending September 30, 2021 and December 31, 2021, (ii) permanently reduce the maximum revolving advance amount from $130 million to $120 million, (iii) add a minimum adjusted EBITDA financial covenant of $6.0 million for the quarter ending December 31, 2021, (iv) set the applicable margin on all loans at 3.50% during the limited covenant waiver period, (v) add a requirement to maintain revolver availability of not less than $10.0 million at all times during the limited covenant waiver period, (vi) permanently reduce the maximum revolving advance amount in an amount equal to fifty percent (50%) of any mandatory prepayments made with non-recurring proceeds that are received during the limited covenant waiver period, and (vii) eliminate the declaration of unrestricted subsidiaries during the limited covenant waiver period.

The limited covenant waiver period commenced on the effective date of the Third Amendment and was scheduled to end on the earlier to occur of (i) May 15, 2022, (ii) our reporting compliance with both the leverage ratio and the fixed charge coverage ratio covenants for either its fiscal quarter ending September 30, 2021 or December 31, 2021, and (iii) the occurrence of any event of default after the effective date of the Third Amendment.

Under the Third Amendment, we also agreed to engage an advisor during the limited covenant waiver period to advise us and our subsidiaries with regard to, among other things, efforts to achieve certain operational efficiencies, improvement in results of operations, and general business strategy, and provide assistance to us and our subsidiaries in the preparation of the supplemental reporting and information required by the Third Amendment.

As of December 31, 2021, we were in compliance with the covenants under our revolving credit facility, as amended and waived by the Third Amendment.

On February 28, 2022, we entered into a fourth amendment to the revolving credit facility (the “Fourth Amendment”) to, among other things, (i) amend our financial covenants as outlined below, (ii) provide for a conditional increase of the applicable interest margin, (iii) permit certain sale-leaseback transactions, (iv) provide for a reduction in the maximum revolving advance amount in an amount equal to 50% of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classifies the payments pursuant to our settlement agreement with MasTec Renewables Puerto Rico, LLC as restricted payments and requires $20.0 million of availability both before and after making such payments.

At December 31, 2022, we had outstanding borrowings under our revolving credit facility of $83.5 million and $19.7 million of available borrowing capacity, after giving effect to $6.5 million of outstanding letters of credit and the requirement to maintain a $10.0 million reserve out of the available borrowing capacity.

On February 28, 2022, we entered into a fourth amendment to the revolving credit facility (the “Fourth Amendment”) to, among other things, (i) amend our financial covenants as outlined below, (ii) provide for a conditional increase of the applicable interest margin, (iii) permit certain sale-leaseback transactions, (iv) provide for a reduction in the maximum revolving advance amount in an amount equal to 50% of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classifies the payments pursuant to our settlement agreement with MasTec Renewables Puerto Rico, LLC as restricted payments and required $20.0 million of availability both before and after making such payments.

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

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• a minimum adjusted EBITDA covenant of $4.7 million, excluding interest on the accounts receivable from PREPA, for the five months ending May 31, 2022 was added;

• the minimum excess availability covenant was reduced to $7.5 million through the earlier of (i) March 31, 2022 or (ii) the date on which proceeds of permitted sale-leaseback transactions are received, after which the minimum excess availability covenant will increase to $10.0 million.

The Fourth Amendment also permanently waived compliance by the borrowers with the leverage ratio and fixed charge coverage ratio covenants in our revolving credit facility for the fiscal quarters ended September 30, 2021 and December 31, 2021, respectively, ending the limited covenant waiver period under the Third Amendment.

• the minimum excess availability covenant was reduced to $7.5 million through March 31, 2022, after which the minimum excess availability covenant increased to $10.0 million.

We were in compliance with the applicable financial covenants under our amended revolving credit facility in effect as of December 31, 2022.

For additional information regarding our revolving credit facility, see Note 10.

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

As of February 22, 2023, our outstanding borrowings under our amended revolving credit facility were $79.7 million, leaving an aggregate of $22.3 million of available borrowing capacity, after giving effect to $6.4 million of outstanding letters of credit and the requirement to maintain a $10.0 million reserve out of the available borrowing capacity.

If we fail to comply with the financial covenants contemplated by our amended revolving credit facility, or obtain a waiver of forecasted or actual non-compliance with any such financial covenants from our lenders, and an event of default occurs and remains uncured, it will have a material adverse effect on our business, financial condition, liquidity and results of operations.

In addition, our revolving credit facility is currently scheduled to mature on October 19, 2023.

We continue to explore various strategic alternatives to extend, refinance, or repay our revolving credit facility on or before the scheduled maturity date.

There is no guarantee that such extension, refinancing or repayment will be secured.

Considering the maturity date of our revolving credit facility, current macroeconomic conditions and recessionary pressures, we will likely be required to extend, refinance or repay our existing revolving credit facility in unfavorable credit markets.

As a result, any such extended or new

credit facility could have terms that are less favorable to us than the terms of our existing revolving credit facility, which may significantly increase our cost of capital and may have a material adverse effect on our liquidity and financial condition.

For additional information regarding our amended revolving credit facility and financial covenants thereunder, see Note 10.

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

Sale-Leaseback Transactions

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On June 1, 2021, we entered into another agreement with FNC whereby we sold additional assets from our infrastructure segment to FNC for aggregate proceeds of $9.5 million and entered into a 42 month lease agreement whereby we lease back the assets at a monthly rental rate of $0.2 million.

On June 1, 2022, we entered into another agreement with FNC whereby we sold additional assets from our infrastructure segment to FNC for aggregate proceeds of $4.6 million and entered into a 42 month lease agreement whereby we lease back the assets at a monthly rental rate of $0.1 million.

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

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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, 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.

As of December 31, 2021, we did not meet the minimum debt coverage ratio of 1.25 to 1.0 set forth in the Aviation Note.

On March 2, 2022, Bank7 granted us a waiver of this event of default.

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

The Aviation Note was paid off on September 30, 2022.

Equipment Financing Note

In December 2022, we entered into a 42 month financing arrangement with FNC for the purchase of seven new pressure pumping units for an aggregate value of $9.7 million.

Under this arrangement, we have agreed to make monthly principal and interest payments totaling $0.3 million over the term of the agreement.

This note is secured by the seven pressure pumping units and bears interest at an imputed rate of approximately 14.3%.

Capital Requirements and Sources of Liquidity

As we pursue our business and financial strategy, we regularly consider which capital resources are available to meet our future financial obligations and liquidity requirement.

We believe that our cash on hand, operating cash flow and available borrowings under our credit facility will be sufficient to meet our short-term and long-term funding requirements, including funding our current operations, planned capital expenditures, debt service obligations, litigation settlement obligations and other known contingencies.

However, future cash flows are subject to a number of variables (including receipt of payments from our customers, including PREPA).

Our liquidity and future cash flows, however, are subject to a number of variables, including receipt of payments from our customers, including PREPA, and our ability to extend, refinance or repay our revolving credit facility at or prior to its scheduled maturity date of October 19, 2023.

As of December 31, 2022, PREPA owed Cobra approximately $379.0 million for services performed, including $152.0 million of interest charges.

Throughout 2021, we released significant data that we obtained through Freedom of Information Act requests that affirm the work performed by Cobra in Puerto Rico.

Throughout 2021 and 2022, we have released significant data that we obtained through Freedom of Information Act requests along with reviews of both our work and our contracts by the Federal Emergency Management Agency that, we believe, affirm the work performed by Cobra in Puerto Rico.

We believe these documents in conjunction with the current Administration’s focus on the recovery of Puerto Rico and our enhanced lobbying efforts will aid in collecting the outstanding amounts owed to us by PREPA.

However, 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 Cobra or (iii) otherwise does not pay amounts owed to Cobra for services performed, the receivable may not be collectible, which may adversely impact our liquidity.

During 2021, our capital expenditures totaled $5.8 million and included $0.6 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews, $4.3 million in our well completion segment primarily related to upgrades to our pressure pumping fleet and water transfer equipment, $0.5 million in our natural sand proppant services segment for various maintenance equipment and $0.4 million for our other businesses primarily related to equipment additions for our equipment rental business.

During 2022, our capital expenditures totaled $12.7 million, included $11.4 million in our well completion segment primarily related to upgrades to our pressure pumping fleet and water transfer equipment, $0.9 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews and $0.4 million for our other divisions primarily related to equipment additions for our remote accommodations and equipment rental businesses.

During 2023, we currently estimate that our aggregate capital expenditures will be $64 million, depending upon industry conditions and our financial results.

These capital expenditures include $2.5 million in our infrastructure segment for assets for additional equipment, $3.0 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.

These capital expenditures include $42 million for our well completions segment,

$12 million for our infrastructure segment, $3 million for our natural sand proppant segment, $1 million for our drilling segment and $6 million for our other businesses.

Also, as noted above in this report, in response to market conditions we have (i) temporarily shut down certain of our oilfield service offerings, including coil tubing, pressure control, flowback, crude oil hauling, cementing, acidizing and land drilling services, (ii) idled certain facilities, including our sand processing plant in Pierce County, Wisconsin and (iii) reduced our workforce across all of our operations.

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In the event we make one or more acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital.

If we seek additional capital for any of the above or other reasons, we may do so through borrowings under our revolving credit facility, joint venture partnerships, sale-leaseback transactions, asset sales, offerings of debt or equity securities or other means.

Although we expect that our sources of capital will be adequate to fund our short-term and long-term liquidity requirement, we cannot assure you that this additional capital will be available on acceptable terms or at all.

If we are unable to obtain funds we need, our ability to conduct operations, make capital expenditures, satisfy debt services obligations, pay

litigation settlement obligations, fund contingencies and/or complete acquisitions that may be favorable to us will be impaired, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we seek additional capital for any of the above or other reasons, we may do so through borrowings under a revolving credit facility, joint venture partnerships, sale-leaseback transactions, asset sales, offerings of debt or equity securities or other means.

Although we expect that our sources of capital will be adequate to fund our short-term and long-term liquidity requirements, we cannot assure you that this additional capital will be available on acceptable terms or at all.

If we are unable to obtain funds we need, our ability to conduct operations, make capital expenditures, satisfy debt services obligations, pay litigation settlement obligations, fund contingencies and/or complete acquisitions that may be favorable to us will be impaired, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

What changed 10-K

Item 7. Management’s Discussion and Analysis