What changed in this filing

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Item 1A. Risk Factors

2024-03-01 compared with 2023-02-24 · 126 added, 141 removed, 650 unchanged (29% of the section changed)

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Cobra, one of our infrastructure services subsidiaries, was party to service contracts with PREPA.

PREPA is currently subject to bankruptcy proceedings and, as a result, PREPA ’ s ability to meet its payment obligations under the contracts is largely dependent upon funding from the FEMA or other sources.

Due to PREPA’s bankruptcy proceedings, PREPA ’ s ability to meet its payment obligations under the contracts is largely dependent upon funding from the FEMA or other sources.

In the event that PREPA does not pay amounts owed to us for services performed, our financial condition, results of operations and cash flows would be materially and adversely affected.

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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”).

As of December 31, 2022, PREPA owed us approximately $227.0 million for services performed excluding $152.0 million of interest charged on these delinquent balances.

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”).

As of December 31, 2023, PREPA owed us approximately $204.8 million for services performed excluding $197.5 million of interest charged on delinquent balances.

PREPA is currently subject to bankruptcy proceedings pending in the U.S.

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As a result, PREPA’s ability to meet its payment obligations under the contracts is largely dependent upon funding from the FEMA or other sources.

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

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

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

On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status report by June 7, 2021.

On April 6, 2021, we filed a motion to lift the stay order.

Following this filing, PREPA initiated discussion with Cobra, which resulted in PREPA and Cobra filing a joint motion to adjourn all deadlines relative to the April 6, 2021 motion until the June 16, 2021 omnibus hearing as a result of PREPA’s understanding that FEMA would be releasing a report in the near future relating to the first contract.

The joint motion was granted by the court on April 14, 2021.

On May 26, 2021, FEMA issued a Determination Memorandum related to the first contract between Cobra and PREPA in which, among other things, FEMA raised two contract compliance issues and, as a result, concluded that approximately $47 million in costs were not authorized costs under the contract.

On June 14, 2021, the Court issued an order adjourning Cobra’s motion to lift the stay order to a hearing on August 4, 2021 and directing Cobra and PREPA to meet and confer in good faith concerning, among other things, (i) the May 26, 2021 Determination Memorandum issued by FEMA and (ii) whether and when a second determination memorandum is expected.

The parties were further directed to file an additional status report, which was filed on July 20, 2021.

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.

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 Memorandum 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 proceeding 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.

Since September 30, 2019, we have been pursuing litigation in the U.S.

District Court for the District of Puerto Rico and other dispute resolution efforts seeking recovery of the amounts owed to Cobra by PREPA for restoration services in Puerto Rico, which proceedings are discussed in more detail in Note 20—“Commitments and Contingencies—Litigation” included elsewhere in this report.

In connection with these efforts, in 2023, an aggregate of $99 million was approved by FEMA for reimbursement to Cobra for services performed by Cobra, of which amount approximately $22.2 million was paid by PREPA to Cobra in 2023.

On December 1, 2023, Cobra, as seller, and Mammoth, as guarantor, entered into an assignment agreement (the “Assignment Agreement”) with SPCP Group, LLC (“SPCP Group”), pursuant to which Cobra transferred to SPCP Group all of its rights, title and interest in $54.4 million of outstanding accounts receivable with PREPA and received net proceeds of $46.1 million.

See “—Liquidity and Capital Resources—Cobra Assignment Agreement” for additional information.

On December 4, 2023, following submission of a joint status report by Cobra and FEMA on December 1, 2023, in which, among other things, PREPA reported that they submitted a request for reimbursement to the Government of Puerto Rico’s Central Recovery and Reconstruction Office (“COR3”) on November 1, 2023 for $82.4 million and is disputing approximately $1.5 million of invoices from Cobra, the Court ordered PREPA to provide a detailed summary of each of their objections to the disputed amounts and directed the parties to report the status of any remaining unpaid approved invoices in connection with the status report due on January 16, 2024.

On January 16, 2024, the parties filed a joint status report in which, among other things, PREPA reported that on December 28, 2023, it received a disbursement from COR3 for the amount requested on November 1, 2023 and was in the process of paying approximately $13.4 million in approved but unpaid invoices for reimbursements for services performed by Cobra to SPCP Group, as Cobra’s assignee, which amount was paid by PREPA on January 18, 2024.

PREPA, however, also informed the Court that it will withhold the release of any further funds to Cobra approved by FEMA for reimbursement to Cobra due to the municipal and construction excise tax claims against Cobra allegedly aggregating to $70.4 million.

Cobra believes it is exempt from the construction excise taxes and strongly disagrees with PREPA’s decision to withhold funds.

On January 17, 2024, Cobra filed a Writ of Certiorari requesting the Court of Appeals to reverse the order from the Humacao Superior Court.

On February 15, 2024, Cobra’s request was granted by the Court of Appeals and the order instructing PREPA to withhold the $9.0 million payment from Cobra was revoked.

The case was remanded to the lower Court for continuation of the proceedings in accordance with the Court of Appeals’ order.

The municipality has 15 days to request reconsideration.

On January 19, 2024, the Court extended the previously ordered stay in the proceedings through April 5, 2024, and directed the parties to file a joint status report addressing (i) the status of any administrative appeals in connection with the November 2022 and December 2022 determination memoranda regarding the second contract, (ii) the status of any remaining approved, but unpaid invoices, and (iii) whether the parties are actively engaged in mediation to resolve their outstanding issues by March 27, 2024.

Subsequent to December 31, 2023, PREPA paid $64.0 million with respect to the outstanding PREPA receivable, of which $9.6 million was paid to Cobra and $54.4 million was paid to SPCP Group, as Cobra’s assignee under the Assignment Agreement, which fully extinguished Cobra’s and Mammoth’s obligations to SPCP Group under the Assignment Agreement, and the Assignment Agreement was terminated.

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

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

Our ability to generate sufficient cash in the next nine months necessary to repay or refinance our existing revolving credit facility at or prior to maturity is subject to a number of risks and uncertainties.

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

As of February 22, 2023, we had cash on hand of $9.5 million and outstanding borrowings under our revolving credit facility of $79.7 million, 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 ability to extend, refinance or repay our existing revolving credit facility at or prior to maturity will depend on our ability to generate significant operating cash flow in the future and collect our receivables, among other factors.

This ability is, to a significant extent, subject to general economic, financial, competitive and other factors, many of which are beyond our control.

We cannot assure you that our business will generate cash flow from operations in amounts sufficient to enable us fund these and our other liquidity needs.

As a result, we may need to seek additional debt or equity financing, sell existing assets or enter into other strategic transactions.

We cannot assure you that we will be able to do so on commercially reasonable terms or at all, or on terms that would be advantageous to our stockholders.

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.

If we are unable to generate sufficient cash flow, complete any sale transactions, repay or refinance our indebtedness or incur additional indebtedness on commercially reasonable terms or at all, our financial condition will be adversely impacted.

If we default under our existing revolving credit facility, the lenders could exercise their rights as described in this report under Note 10.

Debt to our consolidated financial statements included elsewhere in this report, and we could be forced into bankruptcy or liquidation.

Our customer base is concentrated and the loss of one or more of our significant customers, or their failure to pay the amounts they owe us, could cause our revenue to decline substantially.

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Our top five customers accounted for approximately 35%, 36% and 35%, respectively, of our revenue for the years ended December 31, 2023, 2022 and 2021.

Gulfport accounted for approximately 7% of our revenue for the year ended December 31, 2021 and was our largest customer for the year ended December 31, 2020, accounting for approximately 16% of our revenue;

however, our services with Gulfport ended in 2021.

It is likely that we will continue to derive a significant portion of our revenue from a relatively small number of

customers in the future.

See the risk factors below for additional information.

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

In addition, we are subject to credit risk due to the concentration of our customer base.

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An unexpected change in customer financial condition or future economic uncertainty could result in additional requirements for specific reserves, which could have a material effect on our business, financial condition, results of operations and cash flows.

Our business and operations have been and will likely continue to be adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has caused, and is continuing to cause, severe disruptions in the worldwide and U.S.

economy, including the global and domestic demand for oil and natural gas, which has had an adverse effect primarily on our oilfield services business and, as a result, our financial condition, results of operations, cash flows and stock price.

There continues to be many variables and uncertainties regarding the COVID-19 pandemic, including the emergence, contagiousness and threat of new and different strains of the virus and their severity;

the effectiveness of treatments or vaccines against the virus or its new strains;

the extent of travel restrictions, business closures and other measures that are or may be imposed in affected areas or countries by governmental authorities;

disruptions in the supply chain;

an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID-19 pandemic;

shortages of equipment and materials;

increased logistics costs;

additional costs due to remote working arrangements;

adherence to social distancing guidelines;

and other COVID-19-related challenges.

Further, there remain increased risks of cyberattacks on information technology systems used in remote or hybrid working environments;

increased privacy-related risks due to processing health-related personal information;

absence of workforce due to illness;

the impact of the pandemic on any of our contractual counterparties;

and other factors that are currently unknown or considered immaterial.

It is difficult to assess the ultimate impact of the COVID-19 pandemic on our business, financial condition and cash flows.

We cannot predict the impact of the ongoing war and the related humanitarian crisis in Ukraine on the global economy, energy markets, geopolitical stability, industries in which we operate and our business.

We cannot predict the impact of the ongoing war in Ukraine and the recent Israel-Hamas war on the global economy, energy markets, geopolitical stability, industries in which we operate and our business.

All of our infrastructure, well completion, natural sand proppant, drilling and other services are concentrated in North America.

However, the broader consequences of the Russian-Ukrainian conflict, which may include further sanctions, embargoes, regional instability and geopolitical shifts, may have adverse effects on global macroeconomic conditions, increase volatility in the price and demand for oil and natural gas, which would adversely impact the oilfield services industry, increase exposure to cyberattacks, cause disruptions in global supply chains, increase foreign currency fluctuations, cause constraints or disruption in the capital markets and limit sources of liquidity.

We cannot predict the extent of this war’s effect on our business and results of operations as well as on the global economy, energy markets and industries in which we operate.

However, the broader consequences of the Russian-Ukrainian conflict, and the Israel-Hamas war may increase volatility in the price and demand for oil and natural gas, which would adversely impact the oilfield services industry, increase exposure to cyberattacks, cause disruptions in global supply chains, increase foreign currency fluctuations, cause constraints or disruption in the capital markets and limit sources of liquidity.

We cannot predict the extent of these wars’ effect on our business and results of operations as well as on the global economy, energy markets and industries in which we operate.

The outcomes of investigations and litigation relating to our contracts with PREPA may have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Given the uncertainty inherent in criminal litigation, however, it is not possible at this time to determine the potential impacts that the sentencing 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.

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.

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Both the SEC and DOJ investigations relate to the same subjects as those at issue in the criminal matter referenced above.

We are cooperating with the DOJ and are not able to predict the outcome of this investigation or if it will have a material impact on our business, financial condition, results of operations or cash flows.

We have cooperated with the DOJ and are not able to predict the outcome of this investigation or if it will have a material impact on our business, financial condition, results of operations or cash flows.

With regard to the SEC investigation, on July 6, 2022, the SEC sent a letter saying that it had concluded its investigation as to the Company and that based on information the SEC has as of this date, it does not intend to recommend an enforcement action by the SEC against us.

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See the preceding risk factors for information regarding the investigations and legal proceedings relating to our contracts with PREPA.

Our revolving credit facility imposes, and any of our future credit facilities may impose, restrictions on us that may affect our ability to successfully operate our business.

Our revolving credit facility limits, and any of our future credit facilities may limit, our ability to take various actions, such as:

Our revolving credit facility and term credit facility impose restrictions on us that may affect our ability to successfully operate our business.

Our revolving credit facility and term credit facility limit, our ability to take various actions, such as:

• incurring additional indebtedness;

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• selling all or substantially all of our assets.

We cannot assure you that we will be able to maintain compliance with the covenants contained in our revolving credit facility as amended by the recent amendment discussed elsewhere in this report, or, if applicable, obtain a waiver of forecasted or actual non-compliance with certain financial covenants from our lenders.

If an event of default occurs under our revolving credit facility and remains uncured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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

See also " Our ability to generate sufficient cash in the next nine months necessary to repay or refinance our existing revolving credit facility at or prior to maturity is subject to a number of risks and uncertainties " above.

A portion of our business depends on the oil and natural gas industry and particularly on the level of exploration and production activity within the United States and Canada, and continued volatility in the oil and natural gas markets have impacted, and are likely to continue to impact, our oilfield services and, as a result, our business, financial condition, results of operations, cash flows and stock price.

Demand for 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.

The levels of capital expenditures of our customers are driven by many factors, including 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.

Although commodity prices have strongly rebounded, with oil prices averaging $94.35 per barrel during 2022, they are expected to continue to be volatile as a result of production levels, inventories and demand, national and international economic performance and outlook.

In 2021, U.S.

oil production stabilized as commodity prices increased and demand for crude oil rebounded throughout 2022.

During 2023, pricing for crude oil and natural gas declined from levels seen in 2022 and are expected to continue to be volatile as a result of production levels, inventories and demand, national and international economic performance and outlook.

Other significant factors that are likely to continue to affect commodity prices in current and future periods include, but are not limited to, the effect of U.S.

energy, monetary and trade policies, U.S.

and global political developments, the impact and duration of the ongoing COVID-19 pandemic and conditions in the U.S.

oil and gas industry, actions of OPEC+ members, the impact of the ongoing war in Ukraine on the global energy and capital markets and global stability and other factors.

and global political developments, conditions in the U.S.

oil and gas industry, actions of OPEC+ members, the impact of the ongoing war in Ukraine and the recent Israel-Hamas war on the global energy and capital markets and global stability and other factors.

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

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• the price and quantity of foreign imports;

• political and economic conditions in oil producing countries, including the Middle East, Africa, South America and Russia, including the impact of the ongoing war in Ukraine on the global energy and capital markets and global stability;

• political and economic conditions in oil producing countries, including the Middle East, Africa, South America and Russia, including the impact of the ongoing war in Ukraine and the recent Israel-Hamas war on the global energy and capital markets and global stability;

• the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

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• the ability of oil and natural gas producers to raise equity capital and debt financing;

• global or national health concerns, including the outbreak of pandemic or contagious diseases such as the coronavirus;

• global or national health concerns, including the outbreak of pandemic or contagious diseases;

• merger and divestiture activity among oil and natural gas producers;

• governmental laws, policies, regulations, subsidies, and other actions, including initiatives to promote the use of renewable energy sources;

• overall domestic and global economic conditions.

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

During 2022, West Texas Intermediate posted prices ranged from $71.02 to $123.70 per barrel and the New York Mercantile Exchange natural gas futures prices ranged from $3.72 to $9.68 per MMBtu.

During 2023, West Texas Intermediate posted prices ranged from $66.74 to $93.68 per barrel and the New York Mercantile Exchange natural

gas futures prices ranged from $1.99 to $4.48 per MMBtu.

If the prices of oil and natural gas decline from current levels, our operations, financial condition and level of expenditures may be materially and adversely affected.

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Furthermore, if we fail or are perceived to not effectively implement an energy transition strategy, comply with new and evolving regulatory requirements on climate change, or if investors or financial institutions shift funding away from companies in fossil fuel related industries, our business, access to capital and the market for our securities could be negatively impacted.

Investor and regulatory focus on environmental, social and governance (“ESG”) matters continues to increase.

In addition to climate change, there is increasing attention on topics such as diversity and inclusion, human rights, and human and natural capital, in companies’ own operations as well as their supply chains.

In addition, perspectives on the efficacy of ESG considerations continue to evolve, and we cannot currently predict how regulators’, investors’ and other stakeholders’ views on ESG matters may affect the regulatory and investment landscape and affect our business, financial condition, and results of operations.

In addition, our inability to timely address these new and evolving regulatory requirements or pressures may result in regulatory enforcement actions or shareholder litigation and otherwise damage our reputation.

In March 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks and other information.

To the extent this rule is finalized as proposed, we and/or our customers could incur increased costs related to the assessment and disclosure of climate-related information.

Enhanced climate disclosure requirements could also accelerate any trend by certain stakeholders and capital providers to restrict or seek more stringent conditions with respect to their financing of certain carbon intensive sectors.

Increasing attention to global climate change has resulted in increased investor attention and an increased risk of public and private litigation, which could increase our costs or otherwise adversely affect us.

For example, shareholder activism has recently been increasing in our industry, and shareholders may attempt to effect changes to our business or governance to deal with climate change-related issues, whether by shareholder proposals, public campaigns, proxy solicitations or otherwise, which may result in significant management distraction and potentially significant expense.

Additionally, cities, counties, and other governmental entities in several states in the U.S.

have filed lawsuits against energy companies seeking damages allegedly associated with climate change.

Similar lawsuits may be filed in other jurisdictions.

If any such lawsuits were to be filed against us, we could incur substantial legal defense costs and, if any such litigation were adversely determined, we could incur substantial damages.

Any of these climate change-related litigation risks could result in unexpected costs, negative sentiments about our company, disruptions to our business, and increases to our operating expenses, which in turn could have an adverse effect on our business, financial condition and cash flow.

The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and could impose new costs on our operations.

In August 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law.

The IRA contains billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions.

In recent years, federal, state and local governments have taken steps to reduce emissions of greenhouse gases.

For example, the Infrastructure Investment and Jobs Act and the IRA contain billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions.

Also, the EPA has proposed ambitious rules to reduce harmful air pollutant emissions, including greenhouse gases, from light-, medium-, and heavy-duty vehicles beginning in model year 2027.

In addition, the IRA imposes the first ever federal fee on the emission of GHGs through a methane emissions charge, which will be phased-in starting in 2024.

The IRA could accelerate the transition of the economy away from the use of fossil fuels

towards lower- or zero-carbon emissions alternatives, which could decrease demand for our services related to the oil and natural gas industry.

The IRA could accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for our services related to the oil and natural gas industry.

Deterioration of the commodity price environment can negatively impact oil and natural gas exploration and production companies and, in some cases, impair their ability to timely pay for products or services provided or result in their insolvency or bankruptcy, any of which exposes us to credit risk of our oil and natural gas exploration and production customers.

In certain economic and commodity price environments, we may experience increased difficulties, delays or failures in collecting outstanding receivables from our customers, due to, among other reasons, a reduction in their cash flow from operations, their inability to access the credit markets and, in certain cases, their insolvencies.

operations, their inability to access the credit markets and, in certain cases, their insolvencies.

Such increases in collection issues could have a material adverse effect on our business, results of operations, cash flows and financial condition.

We cannot assure you that the reserves we have established for potential credit losses will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.

To the extent one or more of our key customers commences bankruptcy proceedings, as was the case with Gulfport, our contracts with these customers may be subject to rejection under applicable provisions of the United States Bankruptcy Code, or may be renegotiated.

To the extent one or more of our key customers commences bankruptcy proceedings, as was the case with Gulfport Energy Corporation, our contracts with these customers may be subject to rejection under applicable provisions of the United States Bankruptcy Code, or may be renegotiated.

Further, during any such bankruptcy proceeding, prior to assumption, rejection or renegotiation of such contracts, the bankruptcy court may temporarily authorize the payment of value for our services less than contractually required, which could also have a material adverse effect on our business, results of operations, cash flows and financial condition.

Shortages, delays in delivery and interruptions in supply of major components, replacement parts or, other equipment, supplies or materials may adversely affect our pressure pumping business and our drilling business.

Shortages, delays in delivery and interruptions in supply of major components, replacement parts or, other equipment, supplies or materials may adversely affect our pressure pumping business.

During periods of increased demand for drilling and completion services, such as those in the second half of 2022 and early 2023, the industry has experienced shortages of major components, replacement parts, other equipment, supplies and materials, including, in the case of our pressure pumping operations, replacement parts, engines and other equipment, proppants, acid, gel and water.

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Oilfield services equipment, refurbishment and new asset construction projects, as well as the reactivation of oilfield service assets that have been idle for six months or longer, are subject to risks which could cause delays or cost overruns and adversely affect our business, cash flows, results of operations and financial position.

Oilfield services equipment or assets being upgraded, converted or re-activated following a period of inactivity may experience significant start-up costs and complications and may encounter other operational problems that could result in significant delays, uncompensated downtime, reduced dayrates or the cancellation, termination or non-renewal of contracts.

Oilfield services equipment or assets being upgraded, converted or re-activated following a period of inactivity may experience significant start-up costs and complications and may encounter other operational problems that could result in significant delays, uncompensated downtime, reduced day rates or the cancellation, termination or non-renewal of contracts.

In this regard, due to market conditions, we have temporarily shut down certain of our service offerings, including contract land drilling, flowback, cementing, acidizing and crude oil hauling operations as well as certain of our facilities, such as our sand processing plant in Pierce County, Wisconsin.

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We purchase specialized equipment and parts from third party suppliers.

At times during the business cycle, there is a high demand for hydraulic fracturing, coiled tubing and other oilfield services and extended lead times to obtain equipment needed to provide these services.

At times during the business cycle, there is a high demand for hydraulic fracturing and other oilfield services and extended lead times to obtain equipment needed to provide these services.

Further, there are a limited number of suppliers that manufacture the equipment we use.

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Under these contracts, we typically set the price of our services on a per unit or aggregate basis and assume the risk that costs associated with our performance may be greater than what we estimated.

In addition to master service and other service agreements, we enter into contracts for specific projects or jobs that may require the installation or construction of an

entire infrastructure system or specified units within an infrastructure system, which are priced on a per unit basis.

In addition to master service and other service agreements, we enter into contracts for specific projects or jobs that may require the installation or construction of an entire infrastructure system or specified units within an infrastructure system, which are priced on a per unit basis.

Profitability will be reduced if actual costs to complete a project exceed our original estimates.

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A variety of factors could negatively affect these costs, such as lower than anticipated productivity, conditions at work sites differing materially from those anticipated at the time we bid on the contract and higher than expected costs of materials and labor.

These variations, along with other risks inherent in performing fixed price contracts, could cause actual project revenue and profits to differ from original estimates, which could result in lower margins than anticipated, or losses, which could reduce our profitability, cash flows and liquidity.

These variations, along with other risks inherent in performing fixed price contracts, could cause actual project revenue

and profits to differ from original estimates, which could result in lower margins than anticipated, or losses, which could reduce our profitability, cash flows and liquidity.

We may be unable to obtain sufficient bonding capacity to support certain service offerings, and the need for performance and surety bonds could reduce availability under our credit facility.

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The selection of, timing of, or failure to obtain projects, delays in awards of projects, the re-bidding or termination of projects due to budget overruns, cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets, which could lower our overall profitability and reduce our cash flows.

we are awarded contracts, we face additional risks that could affect whether, or when, work will begin.

Even if we are awarded contracts, we face additional risks that could affect whether, or when, work will begin.

This can present difficulty in matching workforce size and equipment location with contract needs.

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Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments from the customer.

Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such significant projects have not been replaced in the current period.

Finally, the winding down or

completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such significant projects have not been replaced in the current period.

Many of our contracts may be canceled upon short notice, typically 30 to 90 days, even if we are not in default under the contract, and we may be unsuccessful in replacing our contracts if they are canceled or as they are completed or expire.

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In addition, our current customer contracts require us to deliver frac sand that meets certain specifications.

If the estimates of the quality of our sand reserves, including the volumes of the various specifications of those reserves, prove to be inaccurate, we may incur significantly higher excavation costs without corresponding increases in revenues, we may not be able to meet our contractual obligations, or our facilities may have a shorter than expected reserve life, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If the estimates of the

quality of our sand reserves, including the volumes of the various specifications of those reserves, prove to be inaccurate, we may incur significantly higher excavation costs without corresponding increases in revenues, we may not be able to meet our contractual obligations, or our facilities may have a shorter than expected reserve life, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As part of our natural sand proppant services business, we rely on third parties for raw materials and transportation, and the suspension or termination of our relationship with one or more of these third parties could adversely affect our business, financial conditions, results of operations and cash flows.

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A significant shift in demand from frac sand to other proppants, or the development of new processes to replace hydraulic fracturing altogether, could cause a decline in the demand for the frac sand we produce and result in a material adverse effect on our business, financial condition, results of operations and cash flows.

Further, federal and state governments and agencies have adopted various laws and regulations or are evaluating proposed legislation and regulations that are focused on the extraction of

shale gas or oil using hydraulic fracturing, a process which utilizes proppants such as those that we produce.

Further, federal and state governments and agencies have adopted various laws and regulations or are evaluating proposed legislation and regulations that are focused on the extraction of shale gas or oil using hydraulic fracturing, a process which utilizes proppants such as those that we produce.

Future hydraulic fracturing-related legislation or regulations could restrict the ability of our customers to utilize, or increase the cost associated with, hydraulic fracturing, which could reduce demand for our proppants and adversely affect our business, financial condition, results of operations and cash flows.

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As a result, some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supply.

Our inability, or customers’ inability, to obtain water to use in our operations from local sources or to effectively utilize flowback water could have an adverse effect on our business, financial condition, results of operations and cash flows.

For example, in 2021, the Texas Legislature directed the Texas Railroad Commission to adopt rules encouraging fluid oil and gas waste recycling.

In October 2023, the Commission announced draft amendments to its water protection rules to, among other things, encourage waste recycling.

Our inability, or

customers’ inability, to obtain water to use in our operations from local sources or to effectively utilize flowback water could have an adverse effect on our business, financial condition, results of operations and cash flows.

The customized nature, and remote location, of the modular camps that we provide and service present unique challenges that could adversely affect our ability to successfully operate our remote accommodations business.

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

We provide remote accommodation services

in the oil sands in Alberta, Canada.

We provide remote accommodation services in the oil sands in Alberta, Canada.

We serve these markets through our facilities and service centers located in Ohio, Oklahoma, Texas, Wisconsin, Kentucky, California, Colorado, Oregon, Indiana and Alberta, Canada.

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If the economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish, which could impact the price at which oil, natural gas and natural gas liquids can be sold, which could affect the ability of our customers to continue operations and ultimately adversely impact our results of operations, liquidity and financial condition.

Public health emergencies and resulting adverse economic conditions have had, and may continue to have, a material adverse effect on our financial condition, results of operations, and cash flows.

Public health emergencies have caused, and could again cause, a significant reduction in global economic activity, significantly weakening demand for oil and gas, and in turn, demand for our products and services.

Other effects of public health emergencies have included, and may continue to include, significant volatility and disruption of the global financial markets;

adverse revenue and net income effects;

disruptions to our operations;

customer shutdowns of oil and gas exploration and production;

downward revisions to customer budgets;

limitations on access to sources of liquidity;

supply chain disruptions;

employee impacts from illness;

and local and regional closures or lockdowns, including temporary closures of our facilities and the facilities of our customers and suppliers.

The extent to which our operating and financial results will be and may continue to be affected by public health emergencies will depend on various factors beyond our control, such as the continued severity and duration of the public health emergencies, including any sustained geographic resurgence;

the emergence of new variants and strains of a contagious disease or virus;

and the success of actions to contain or mitigate the effects of the public health emergency.

A terrorist attack or armed conflict could harm our business.

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Our capital budget for 2024 is estimated to be $15 million, depending upon industry conditions and our financial results.

We fund our capital expenditures primarily with cash generated by operations, borrowings under our revolving credit facility and sale-leaseback transactions.

We fund our capital expenditures primarily with cash generated by operations and borrowings under our revolving credit facility and term loan facility.

We may be unable to generate sufficient cash from operations and other capital resources to meet our operating needs and/or maintain planned or future levels of capital expenditures which, among other things, may prevent us from acquiring new equipment, properly maintaining our existing equipment or restarting idled businesses or expanding existing operations as demand may warrant.

Also, our existing revolving credit facility is currently scheduled to mature on October 19, 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Revolving Credit Facility.

Further, any disruptions or continuing volatility in the global financial markets and rising interest rates due to efforts to curb persistent inflation may lead to a contraction in credit availability and an increase in our cost of capital, which will adversely impact our ability to finance our operations.

increase in our cost of capital, which will adversely impact our ability to finance our operations.

This could put us at a competitive disadvantage, impair our ability to meet our operating needs or interfere with our growth plans.

our actual capital expenditures for 2023 or future years could exceed our capital expenditure budget.

Further, our actual capital expenditures for 2024 or future years could exceed our capital expenditure budget.

In the event our operating or capital expenditure requirements at any time are greater than the amount we have available, we could be required to seek additional sources of capital, which may include debt financing, joint venture partnerships, sales of assets, sale-leaseback transactions, offerings of debt or equity securities or other means.

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• our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness.

Our revolving credit facility provides, and any future credit facilities may provide, for fluctuating interest rates, which may increase or decrease our interest expense.

Our revolving credit facility provides for fluctuating interest rates, primarily based on rates set by the U.S.

Our revolving credit facility and term credit facility provide for fluctuating interest rates, which may increase or decrease our interest expense.

Our revolving credit facility and term credit facility provide for fluctuating interest rates, primarily based on rates set by the U.S.

Federal Reserve.

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Throughout 2022 and 2023, the Federal Reserve increased its benchmark interest rates eight times for an aggregate increase of 4.75 percentage points and may continue increasing benchmark interest rates in the future.

At December 31, 2022, we had $83.5 million borrowings outstanding under our revolving credit facility and availability under our credit facility was approximately $19.7 million, 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.

A 1% increase or decrease in the interest rate at that time would have increased or decreased our interest expense by approximately $0.8 million per year, based on $83.5 million outstanding.

We have not hedged our interest rate exposure with respect to our floating rate debt.

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The markets in which we operate are generally highly competitive and have relatively few barriers to entry.

The principal competitive factors in our markets are price, product and service quality and availability, responsiveness, experience, technology, equipment quality and reputation for safety.

The principal competitive factors in our markets are price, product and service quality and availability, responsiveness, experience,

technology, equipment quality and reputation for safety.

We compete with large national and multi-national companies that have longer operating histories, greater financial, technical and other resources and greater name recognition than we do.

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As part of our business, we handle, transport and dispose of a variety of fluids and substances, including hydraulic fracturing fluids which can contain hydrochloric acid and certain petrochemicals.

This activity poses some risks of

environmental liability, including leakage of hazardous substances from the wells to surface and subsurface soils, surface water or groundwater.

This activity poses some risks of environmental liability, including leakage of hazardous substances from the wells to surface and subsurface soils, surface water or groundwater.

We also handle, transport and store these substances.

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the Resource Conservation and Recovery Act;

the Comprehensive Environmental Response, Compensation, and Liability Act;

the Comprehensive

Environmental Response, Compensation, and Liability Act;

the Clean Water Act;

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Business—Regulations” above.

Further, in connection with providing our infrastructure services, we have made a substantial investment in

construction equipment that utilizes petroleum-based fuel.

Any changes in laws requiring us to use equipment that runs on

alternative fuels could require a significant investment, which could have a material adverse effect on our results of operations,

cash flows and liquidity.

Further, in connection with providing our infrastructure services, we have made a substantial investment in construction equipment that utilizes petroleum-based fuel.

Any changes in laws requiring us to use equipment that runs on alternative fuels could require a significant investment, which could have a material adverse effect on our results of operations, cash flows and liquidity.

Legislation or regulatory initiatives intended to address seismic activity could restrict our drilling and production activities, as well as our ability to dispose of produced water gathered from such activities, which could have a material adverse effect on our business.

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Mineral properties sometimes contain claims or transfer histories that examiners cannot verify.

A successful claim that we do not have title to our property or lack appropriate water rights could cause us to lose any rights to explore, develop and extract minerals, without compensation

for our prior expenditures relating to such property.

A successful claim that we do not have title to our property or lack appropriate water rights could cause us to lose any rights to explore, develop and extract minerals, without compensation for our prior expenditures relating to such property.

Our business may suffer a material adverse effect in the event we have title deficiencies.

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We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for income taxes.

We do not recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon challenge by a tax authority.

We do not recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon

challenge by a tax authority.

Although we believe our tax provisions are adequate, the final determination of tax audits and any related disputes could be materially different from our historical income tax provisions and accruals.

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Loss of our information and computer systems could adversely affect our business.

We are heavily dependent on our information systems and computer based programs, including our well operations information and accounting data.

If any of such programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, whether due to cyberattack or otherwise, possible consequences include our loss of communication links and inability to automatically process commercial transactions or engage in similar automated or computerized business activities.

We are heavily dependent on our information systems and computer-based programs.

If our programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, whether due to cyberattack or otherwise, possible consequences include our loss of communication links and inability to automatically process commercial transactions or engage in similar automated or computerized business activities.

Any such consequence could have a material adverse effect on our business.

We are subject to cyber security risks.

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

The energy services industry has become increasingly dependent on digital technologies to conduct certain processing activities.

Cyber incidents or intrusions may result in information theft, data corruption, operational disruption and/or financial loss.

Our operations have become increasingly dependent on digital technologies to conduct certain processing activities.

For example, we depend on digital technologies to perform many of our services and process and record financial and operating data.

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government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats.

Our technologies, systems and networks, and those of our vendors, suppliers and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business operations.

Our technologies, systems and networks, and those of our vendors, suppliers and other business partners, have been and could continue to be the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business operations.

In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.

Our systems and insurance coverage for

protecting against cyber security risks may not be sufficient.

As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents.

Our security programs and measures, as well as security programs of our customers, suppliers, or other third parties, may not prevent all intrusions and our systems and insurance coverage for protecting against cyber security risks may not be sufficient.

As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our

protective measures or to investigate and remediate any vulnerability to cyber incidents.

Laws and regulations governing cybersecurity, data privacy, and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges, and failure to comply with these laws could result in penalties and legal liability.

Our insurance coverage for cyberattacks may not be sufficient to cover all the losses we may experience as a result of such cyberattacks.

Increased regulation by state and federal governments related to cybersecurity protections and disclosures may require additional resources for compliance, and any inability, or perceived inability, to adequately address new requirements could subject us to regulatory enforcement, private litigation, public criticism, disrupt our operations, cause us to lose customers, result in additional costs and legal liability, damage our reputation or otherwise harm our business.

Risks Inherent to Our Common Stock

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If we are unable to continue comply with Section 404 or if the costs related to compliance are significant, our profitability, stock price, results of operations and financial condition could be materially adversely affected.

As a smaller reporting company and, as of December 31, 2022, a non-accelerated filer, we are required to document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting under Section 404 of the Sarbanes Act of 2002.

We are required to document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting under Section 404 of the Sarbanes Act of 2002.

As we perform the required testing of our internal control over financial reporting, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review.

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Wexford beneficially owns a substantial amount of our common stock and may sell such common stock in the public or private markets.

Sales of these shares of common stock or sales of substantial amounts of our common stock by other stockholders, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock.

Sales of these shares of common stock or sales of substantial amounts of our common stock by other

stockholders, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock.

As of December 31, 2023, Wexford beneficially owned 47.1% shares of our common stock.

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The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Moreover, if one or more of the analysts who cover our company downgrades our stock or if our operating results do not meet their expectations, our stock price could decline.

If analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Moreover, if analysts who cover our company downgrades our stock or if our operating results do not meet their expectations, our stock price could decline.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

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Based on its evaluation of these factors, the board of directors may determine not to declare a dividend, or declare dividends at rates that are less than anticipated, either of which could reduce returns to our stockholders.

Unresolved Staff Comments

Our ability to repurchase stock may be limited and no assurance can be given that we will be able to effectuate our stock repurchase program in the future at indicated levels or at all.

On August 10, 2023, our board of directors approved a stock repurchase program pursuant to which we would be authorized to repurchase up to the lesser of $55 million or 10 million shares of its common stock, subject to the factors discussed below.

Following the completion of the refinancing transactions discussed in this report, any stock repurchases under this program may be made opportunistically from time to time in open market or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Act of 1934, as amended, including any 10b5-1 plan, and will be subject to market conditions, applicable legal and contractual restrictions, liquidity requirements and other factors.

The repurchase program has no time limit, does not require us to repurchase any specific number of shares and may be suspended from time to time, modified or discontinued by our board of directors at any time.

Any common stock repurchased as part of such stock repurchase program will be cancelled and retired.

No assurance can be given that we will effectuate stock buybacks in the future, which could materially and adversely affect the market price of our common stock.

We have not repurchased any shares of our common stock under the stock repurchase program as of December 31, 2023 or to date.

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

What changed 10-K

Item 1A. Risk Factors