What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-01 · 112 added, 91 removed, 234 unchanged (46% of the section changed)

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Risks Related to the Oilfield Services Industry and Our Business

The global outbreak of COVID-19 and associated responses has had, and is expected to continue to have, an adverse impact on our business and operations.

The COVID-19 pandemic has negatively affected, and is expected to continue to negatively affect, our business and operations and has had and continues to have a negative impact on the oil and gas industry as well as the global economy.

In an attempt to slow the spread of the COVID-19 virus, governments worldwide have implemented measures such as travel restrictions, school and business closures and stay-at-home or shelter-in-place orders.

These actions have severely reduced the demand for fossil fuels which, in turn, has adversely affected demand for our products and services.

We have experienced, and may experience in the future, slowdowns or temporary idling of certain of our manufacturing and production facilities due to a number of factors, including implementing additional safety measures, testing of our team members, team member absenteeism and governmental orders.

In January 2020, our production facility in Suzhou, China closed for 10 days as a result of a government mandated closure.

We cannot be sure the Suzhou facility will not face additional closures in the future.

The global outbreak of COVID-19 and associated responses have had, and are expected to continue to have, an adverse impact on our business and operations.

The ongoing COVID-19 pandemic has negatively affected, and could continue to negatively affect, our revenues and operations.

We have experienced, and may experience in the future, slowdowns or temporary idling of certain of our manufacturing and service facilities due to a number of factors, including implementing additional safety measures, testing of our team members, team member absenteeism and governmental orders.

A prolonged closure could have a material adverse impact on our ability to operate our business and on our results of operations.

We have also experienced, and expect to continue to experience, disruption and volatility in our supply chain, which has resulted, and may continue to result, in increased costs for certain raw materials.

We have also experienced, and could continue to experience, disruption and volatility in our supply chain, which has resulted, and may continue to result, in increased costs for certain goods.

The spread of COVID-19 has also disrupted and may continue to disrupt logistics necessary to import, export and deliver products to us and our customers.

Ports and other channels of entry have been closed or were operating at only a portion of capacity, as workers have been prohibited or otherwise unable to report to work, and means of transporting products within regions or countries may be limited for the same reason.

As the United States and other countries have attempted to lessen travel restrictions and reopen their businesses and schools, even at reduced occupancy, there has been a resurgence in COVID-19 cases.

Governmental authorities at the federal, state and local levels may increase or impose new or stricter social distancing directives, stay-at-home restrictions, travel bans, quarantines, workforce and workplace restrictions or other measures related to the resurgence of the virus.

These actions and the broader economic impact of the COVID-19 pandemic have had, and are expected to continue to have, an adverse effect on our business, results of operations and financial condition.

The duration of the pandemic and its continued adverse impact on commodity prices and the oil and gas industry are unknown and impossible to predict with certainty.

Additionally, there remains uncertainty with regard to whether new work from home policies will remain in place once our communities achieve herd immunity and can return to the office safely.

Despite vaccines being distributed worldwide, the extent of future impacts of the coronavirus and any new variants that cause COVID-19 on general economic conditions and on our business, operations and results of operations remains uncertain.

Further, we might experience temporary shortages of labor, making it difficult to provide field service technicians to install or service our equipment.

The duration of the pandemic and its continued adverse impact on our business are unknown and impossible to predict with certainty.

Despite vaccines and boosters being administered worldwide, the extent of future impacts of the coronavirus and any new variants related to COVID-19 on general economic conditions and on our business, operations and results of operations remains uncertain.

Demand for our products and services depends on oil and gas industry activity and customer expenditure levels, which are directly affected by trends in the demand for and price of crude oil and natural gas and availability of capital.

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• available excess production capacity within OPEC and the level of oil and gas production by non‑OPEC countries;

• oil and gas inventory levels, production capacity and investment levels;

• the continued development of shale plays which may influence worldwide supply;

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• costs of exploring for, producing and delivering oil and natural gas;

• political and economic uncertainty and sociopolitical unrest;

• political and economic uncertainty and geopolitical unrest;

• oil refining activity and shifts in end‑customer preferences toward fuel efficiency and increased transition to electric vehicles;

• conservation measures and technological advances affecting energy consumption;

• government initiatives to address greenhouse gases and climate change (including incentives to promote alternative energy sources);

• potential acceleration of the commercial development of alternative energy sources (such as wind, solar, geothermal, tidal, fuel cells and biofuels);

• access to capital and credit markets, which may affect our customers’ activity levels and spending for our products and services;

• changes in laws and regulations related to hydraulic fracturing activities or oil and gas drilling, particularly on public properties;

• access to capital and credit markets and investors’ focus on shareholder returns, which may affect our customers’ activity levels and spending for our products and services;

• changes in laws and regulations related to hydraulic fracturing activities, saltwater disposal or oil and gas drilling, particularly on public properties;

• changes in environmental laws and regulations (including relating to the use of coal in power plants which can impact the demand for natural gas);

• adverse weather conditions and natural disasters;

• terrorist attacks and armed conflicts;

• adverse weather conditions and natural disasters (including adverse conditions related to climate change);

• supply disruptions in key oil producing regions;

• terrorist attacks and armed conflicts, including the current conflict between Russia and Ukraine could cause temporary price increases which could dampen demand;

• global pandemics.

The oil and gas industry is cyclical and has historically experienced periodic downturns, which have been characterized by diminished demand for our products and services and downward pressure on the prices we charge.

These downturns cause many exploration and production (“E&P”) companies to reduce their capital budgets and drilling activity.

Any future downturn or expected downturn could result in a significant decline in demand for oilfield services and adversely affect our results of operations, financial condition and cash flows.

These downturns cause many E&P companies to reduce their capital budgets and drilling activity.

Any future downturn or expected downturn could result in a significant decline in demand for oilfield services and adversely affect our business, results of operations and cash flows.

Growth in U.S.

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Growth in U.S.

drilling and completion activity may be impacted by, among other things, pressure pumping capacity, pipeline capacity, and material and labor shortages.

While there is no perceived shortage in capacity, should significant growth in activity occur there could be concerns over availability of the equipment, materials and labor required to drill and complete a well, together with the ability to move the produced oil and natural gas to market.

Should significant constraints develop that materially impact the economics of oil and gas producers, growth in U.S.

drilling and completion activity may be impacted by, among other things, the availability and cost of Oil Country Tubular Goods (OCTG), pipeline capacity, and material and labor shortages.

Should significant growth in activity occur there could be concerns over availability of the equipment, materials and labor required to drill and complete a well, together with the ability to move the produced oil and natural gas to market.

Should significant constraints develop that materially impact the efficiency and economics of oil and gas producers, growth in U.S.

drilling and completion activity could be adversely affected.

This would have an adverse impact on the demand for the products we sell and rent, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

This would have an adverse impact on the demand for the products we sell and rent, which could have a material adverse effect on our business, results of operations and cash flows.

We may be unable to employ a sufficient number of skilled and qualified workers to sustain or expand our current operations.

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In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force.

The demand for skilled workers is high while supply is limited, and the cost to attract and retain qualified personnel has increased.

The demand for skilled workers is high and the cost to attract and retain qualified personnel has increased.

During industry downturns, skilled workers may leave the industry, reducing the availability of qualified workers when conditions improve.

In addition, a significant increase in the wages paid by competing employers could result in increases in the wage rates that we must pay.

If we are not able to employ and retain skilled workers, our ability to respond quickly to customer demands or strong market conditions may inhibit our growth, which could have a material adverse effect on our business, results of operations and financial condition.

In addition, a significant increase in the wages paid by competing employers both within and outside of our industry could result in increases in the wage rates that we must pay.

Throughout 2021, we experienced notable increases in salaries and wages, especially in certain key oil and gas producing regions, as we restored our workforce while trying to meet increasing customer demand.

Our business is dependent on the continuing services of certain of our key managers and employees.

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In addition to our facilities in the United States, we operate one production facility in China and have facilities in Australia that sell and rent equipment as well as provide parts, repair services and field services associated with installation.

Instability and unforeseen changes in any of the markets in which we conduct business could have an adverse effect on the demand for, or supply of, our products and services, our results of operations and our financial condition.

Additionally, we provide rental and field service operations in the Kingdom of Saudi Arabia.

Instability and unforeseen changes in any of the markets in which we conduct business could have an adverse effect on the demand for, or supply of, our business, results of operations and cash flows.

These factors include, but are not limited to, the following:

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The loss of an important customer could adversely affect our results of operations and financial condition.

Our customers are engaged in the oil and natural gas E&P business primarily in the United States and also Australia.

Our customers are engaged in the oil and natural gas E&P business primarily in the United States, but also in Australia and the Kingdom of Saudi Arabia.

Historically, we have been dependent on a relatively small number of customers for our revenues.

Our business, results of operations and financial condition could be materially adversely affected if an important customer ceases to engage us for our services on favorable terms, or at all, or fails to pay or delays paying us significant amounts of our outstanding receivables.

Our business, results of operations and financial position could be materially adversely affected if an important customer ceases to engage us for our services on favorable terms, or at all, or fails to pay or delays paying us significant amounts of our outstanding receivables.

Additionally, the E&P industry is characterized by frequent consolidation activity.

Changes in ownership of our customers may result in the loss of, or reduction in, business from those customers, which could materially and adversely affect our business, results of operations and financial condition.

Changes in ownership of our customers may result in the loss of, or reduction in, business from those customers which could materially and adversely affect our business, results of operations and cash flows.

Delays in obtaining, or inability to obtain or renew, permits or authorizations by our customers for their operations could impair our business.

In both the United States and Australia, our customers are required to obtain permits or authorizations from one or more governmental agencies or other third parties to perform drilling and completion activities, including hydraulic fracturing.

Our customers are required to obtain permits or authorizations from one or more governmental agencies or other third parties to perform drilling and completion activities, including hydraulic fracturing.

Such permits or approvals are typically required by state agencies but can also be required by federal and local governmental agencies or other third parties.

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In addition, in January 2021, President Biden indefinitely suspended new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

This review could result in additional restrictions or limitations on the issuance of federal leases and permits for drilling on public lands.

Permitting, authorization or renewal delays, the inability to obtain new permits or the revocation of current permits could impact our customers’ operations and cause a loss of revenue and potentially have a materially adverse effect on our business, results of operations and financial condition.

In November 2021, the Department of the Interior completed its review and issued a report on the federal oil and gas leasing program.

The Department of the Interior’s report recommends several changes to federal leasing practices, including changes to royalty payments, bidding, and bonding requirements.

The effects of this report or other initiatives to reform the federal leasing process could result in additional restrictions or limitations on the issuance of federal leases and permits for drilling on public lands.

Competition within the oilfield services industry may adversely affect our ability to market our services.

The oilfield services industry is highly competitive and fragmented and includes numerous small companies capable of competing effectively in our markets on a local basis, as well as several large companies that possess substantially greater financial and other resources than we do.

The oilfield services industry is highly competitive and fragmented and includes numerous companies capable of competing effectively in our markets, including several large companies that possess substantially greater financial and other resources than we do.

The amount of equipment available may exceed demand, which could result in active price competition.

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If market conditions in our operating areas deteriorate from current levels or if adverse market conditions persist, the prices we are able to charge and utilization rates may decline.

Any significant future increase in overall market capacity for the products, rental equipment or services that we offer could adversely affect our business and results of operations.

Any significant future increase in overall market capacity for the products, rental equipment or services that we offer could adversely affect our business, results of operations and cash flows.

New technology may cause us to become less competitive.

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We cannot be certain that we will be able to continue to develop and implement new technologies or products.

Limits on our ability to develop, bring to market, effectively use and implement new and emerging technologies may have a material adverse effect on our business, results of operations and financial condition, including a reduction in the value of assets replaced by new technologies.

Limits on our ability to develop, bring to market, effectively use and implement new and emerging technologies may have a material adverse effect on our business, results of operations and cash flows, including a reduction in the value of assets replaced by new technologies.

Increased costs, or lack of availability, of raw materials and other components may result in increased operating expenses and adversely affect our results of operations and cash flows.

Our ability to source low cost raw materials and components, such as steel castings, bar stock and forgings, is critical to our ability to manufacture and sell our products and provide our services competitively.

Our results of operations may be adversely affected by our inability to manage rising costs and availability of raw materials and components, in particular steel, used in our wide variety of products and systems.

Additionally, freight costs, specifically ocean freight costs, may rise due to a number of factors including, but not limited to a shortage of shipping containers, congested seaports, capacity constraints on vessels or lockdown in certain markets.

We cannot assure that we will be able to continue to purchase and move these materials on a timely basis or at commercially viable prices, nor can we be certain of the impact of changes to tariffs and future legislation that may impact trade with China or other countries.

Our ability to source low cost raw materials and components, such as steel plate, tube and bar stock, forgings and machined components is critical to our ability to successfully compete.

Due to a shortage of steel caused primarily by production disruptions during the pandemic and increased demand as economies rebounded, steel and assembled component prices have been and continue to be elevated.

Our results of operations may be adversely affected by our inability to manage rising costs and the availability of raw materials and components used in our wide variety of products and systems.

Additionally, freight costs, specifically ocean freight costs, have risen significantly due to a number of factors including, but not limited to, a scarcity of shipping containers, congested seaports, a shortage of commercial drivers, capacity constraints on vessels or lockdowns in certain markets.

legislation that may impact trade with China or other countries.

Further, unexpected changes in the size of regional and/or product markets, particularly for short lead‑time products, could affect our results of operations and cash flows.

Should our current suppliers be unable to provide the necessary raw materials or components or otherwise fail to deliver such materials and

components timely and in the quantities required, resulting delays in the provision of products or services to our customers could have a material adverse effect on our business.

Should our current suppliers be unable to provide the necessary raw materials or components or otherwise fail to deliver such materials and components timely and in the quantities required, resulting delays in the provision of products or services to our customers could have a material adverse effect on our business, results of operations and cash flows.

Currently, the United States is experiencing the highest inflation in decades primarily due to supply-chain issues, a shortage of labor and a build-up of demand for goods and services.

The most noticeable adverse impact to our business has been increased freight, materials and vehicle-related costs as well as higher salaries and wages.

While we believe that the current rate of inflation is transitory as it is pandemic-driven, we are unsure how long an elevated rate will continue.

We cannot be confident that all costs will return to the lower levels experienced in prior years even as the rate of inflation abates.

Our results of operations may be adversely affected by these rising costs to the extent we are unable to recoup them from our customers.

In accordance with Section 1502 of the Dodd‑Frank Act, the SEC’s rules regarding mandatory disclosure and reporting requirements by public companies of their use of “conflict minerals” (tantalum, tin, tungsten and gold) originating in the Democratic Republic of Congo and adjoining countries became effective in 2014.

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This could have a material adverse effect on our ability to purchase these products in the future.

The costs of compliance, including those related to supply chain research, the limited number of suppliers and possible changes in the sourcing of these minerals, could have a material adverse effect on our results of operations and cash flows.

We design, manufacture, sell, rent and install equipment that is used in oil and gas E&P activities, which may subject us to liability, including claims for personal injury, property damage and environmental contamination should such equipment fail to perform to specifications.

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Some of our equipment is designed to operate in high‑temperature and/or high‑pressure environments, and some equipment is designed for use in hydraulic fracturing operations.

We also provide parts, repair services and field services associated with installation at all of our facilities and service centers in the United States and Australia, as well as at customer sites.

Because of applications to which our products and services are exposed, particularly those involving high pressure environments, a failure of such equipment, or a failure of our customers to maintain or operate the equipment properly, could cause damage to the equipment, damage to the property of customers and others, personal injury and environmental contamination and could lead to a variety of claims against us that could have an adverse effect on our business and results of operations.

We also provide parts, repair services and field services associated with installation at all of our facilities and service centers in the United States and Australia, as well as at customer sites, including sites in the Kingdom of Saudi Arabia.

We indemnify our customers against certain claims and liabilities resulting or arising from our provision of goods or services to them.

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We could incur substantial liabilities and damages that are either not covered by insurance or that are in excess of policy limits, or incur liability at a time when we are not able to obtain liability insurance.

Such potential liabilities could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Such potential liabilities could have a material adverse effect on our business, results of operations and cash flows.

Our operations are subject to hazards inherent in the oil and natural gas industry, which could expose us to substantial liability and cause us to lose customers and substantial revenue.

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The cost of managing such risks may be significant.

The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators.

The frequency and severity of such

incidents will affect operating costs, insurability and relationships with customers, employees and regulators.

In particular, our customers may elect not to purchase our products or services if they view our environmental or safety record as unacceptable, which could cause us to lose customers and substantial revenues.

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In addition, we may not be able to secure additional insurance or bonding that might be required by new governmental regulations.

This may cause us to restrict our operations, which might severely impact our financial condition.

This may cause us to restrict our operations, which might severely impact our business, results of operations and cash flows.

Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us.

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Furthermore, certain states, including Louisiana, New Mexico, Texas, and Wyoming, have enacted statutes generally referred to as “oilfield anti-indemnity acts” expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements.

Such oilfield anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, financial condition, prospects, and results of operations.

Such oilfield anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, results of operations and cash flows.

Our operations require us to comply with various domestic and international regulations, violations of which could have a material adverse effect on our results of operations, financial condition and cash flows.

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These laws and regulations are complex, frequently change and have tended to become more stringent over time.

They may be adopted, enacted, amended, enforced or interpreted in such a manner that the incremental cost of compliance could adversely impact our results of operations, financial condition and cash flows.

They may be adopted, enacted, amended, enforced or interpreted in such a manner that the incremental cost of compliance could adversely impact our business, results of operations and cash flows.

In addition to our U.S.

operations, we have operations in the People’s Republic of China, Australia and the Kingdom of Saudi Arabia.

Our operations outside of the United States require us to comply with numerous anti‑bribery and anti‑corruption regulations.

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We are also subject to the risks that our employees and agents outside of the United States may fail to comply with applicable laws.

In addition, we import raw materials, semi‑finished goods, and finished products into the United States, China and Australia for use in such countries or for manufacturing and/or finishing for re‑export and import into another country for use or further integration into equipment or systems.

In addition, we import raw materials, semi‑finished goods, and finished products into the United States, China, Australia and the Kingdom of Saudi Arabia for use in such countries or for manufacturing and/or finishing for re‑export and import into another country for use or further integration into equipment or systems.

Most movement of raw materials, semi‑finished or finished products involves imports and exports.

As a result, compliance with multiple trade sanctions, embargoes and import/export laws and regulations pose a constant challenge and risk to us since a portion of our business is conducted outside of the United States through our subsidiaries.

Our failure to comply with these laws and regulations could materially affect our business, results of operations and financial condition.

Our failure to comply with these laws and regulations could materially affect our business, results of operations and cash flows.

Compliance with environmental laws and regulations may adversely affect our business and results of operations.

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Increased regulation or a move away from the use of fossil fuels caused by additional regulation could also reduce demand for our products and services.

Existing or future laws and regulations related to greenhouse gases and public sentiment associated with climate change could have a negative impact on our business and may result in additional compliance obligations with respect

to the release, capture, and use of greenhouse gases that could have a material adverse effect on our business, results of operations, prospects, and financial condition.

Changes in environmental requirements related to greenhouse gas emissions and public sentiment associated with climate change may negatively impact demand for our products and services.

Existing or future laws and regulations related to greenhouse gases and climate change and related public and governmental initiatives and additional compliance obligations could have a material adverse effect on our business, results of operations, prospects, and financial condition.

Changes in environmental requirements related to greenhouse gas emissions may negatively impact demand for our products and services.

For example, oil and natural gas E&P may decline as a result of environmental requirements, including land use policies and other actions to restrict oil and gas leasing and permitting in response to environmental and climate change concerns.

In January 2021, the Acting Secretary of the Department of the Interior issued an order suspending new leasing and drilling permits for fossil fuel production on federal lands and waters for 60 days.

Then on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

To the extent that the review results in the development of additional restrictions on drilling, limitations on the availability of leases, or restrictions on the ability to obtain required permits, it could impact our customers’ opportunities and reduce demand for our products and services in the aforementioned areas.

Federal, state, and local agencies have been evaluating climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases in areas in which we conduct business.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to greenhouse gases and sentiment to climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws or regulations reduce demand for oil and natural gas.

Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, sequestration, and use of greenhouse gases.

President Biden then issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

Several states filed lawsuits challenging the suspension and in June 2021, a judge in the U.S.

District Court for the Western District of Louisiana issued a nationwide temporary injunction blocking the suspension.

The Department of the Interior appealed the U.S.

District Court’s ruling.

If the Department of the Interior succeeds on its appeal of the U.S.

District Court’s decision and reinstitutes a leasing suspension, the reinstitution of such suspension could reduce demand for our services.

Further, to the extent that the Department of Interior’s report or other initiatives to reform federal leasing practices result in the development of additional restrictions on drilling, limitations on the availability of leases, or restrictions on the ability to obtain required permits, it could impact our customers’ opportunities and reduce demand for our products and services in the aforementioned areas.

Federal, state, and local agencies continue to evaluate climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases in areas in which we conduct business.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to greenhouse gases could have a negative impact on our business if such laws or regulations reduce demand for oil and natural gas.

Likewise, such laws or regulations may result in additional compliance obligations with respect to the release, capture, sequestration, and use of greenhouse gases.

These additional obligations could increase our costs and have a material adverse effect on our business, results of operations, prospects, and financial condition.

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if such effects were to occur, they could have an adverse impact on our operations.

Many of our customers utilize hydraulic fracturing in their operations.

Environmental concerns have been raised regarding the potential impact of hydraulic fracturing on underground water supplies and seismic activity.

These concerns have led to several regulatory and governmental initiatives in the United States to restrict the hydraulic fracturing process, which could have an adverse impact on our customers’ completions or production activities.

Although we do not conduct hydraulic fracturing, increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques.

In December 2021, the Texas Railroad Commission, which regulates the state’s oil and gas industry, suspended the use of deep wastewater disposal wells in four oil-producing counties in West Texas.

The suspension is intended to mitigate earthquakes thought to be caused by the injection of waste fluids, including saltwater, that are a byproduct of hydraulic fracturing into disposal wells.

The ban will require oil and gas production companies to find other options to handle the wastewater, which may include piping or trucking it longer distances to other locations not under the ban.

The adoption of new laws or regulations at the federal, state, local or foreign level imposing reporting obligations on, or otherwise limiting, delaying or banning, the hydraulic fracturing process or other processes on which hydraulic fracturing and subsequent hydrocarbon production relies, such as water disposal, could make it more difficult to complete oil and natural gas wells.

Further, it could increase our customers’ costs of compliance and doing business, and otherwise adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for our products.

Increasing attention by the public and government agencies to climate change and environmental, social and governance (“ESG”) matters could also negatively impact demand for our products and services.

In recent years, increasing attention has been given to corporate activities related to ESG in public discourse and the investment community.

A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community.

These activities include increasing attention and demands for action related to climate change and energy rebalancing matters, such as promoting the use of substitutes to fossil fuel products and encouraging the divestment of fossil fuel equities, as well as pressuring lenders and other financial services companies to limit or curtail activities with fossil fuel companies.

If this were to continue, it could have a material adverse effect on the valuation of our Class A common stock and our ability to access equity capital markets.

In addition, our business could be impacted by initiatives to address greenhouse gases and climate change and incentives to conserve energy or use alternative energy sources.

For example, the Build Back Better Act, passed by the U.S.

House of Representatives and supported by President Biden, includes incentives to increase wind and solar electric generation and encourage consumers to use these alternative energy sources.

At this time, it is uncertain whether, and in what form, the Build Back Better Act may become law.

However, the Build Back Better Act or similar state or federal initiatives to incentivize a shift away from fossil fuels could reduce demand for hydrocarbons, thereby reducing demand for our products and services and negatively impacting our business.

Risks Related to Our Class A Common Stock

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To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid.

Cadent and Cactus WH Enterprises LLC have the ability to direct the voting of a significant percentage of the voting power of our common stock, and their interests may conflict with those of our other shareholders.

Cactus WH Enterprises LLC has the ability to direct the voting of a significant percentage of the voting power of our common stock, and its interests may conflict with those of our other shareholders.

Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our amended and restated certificate of incorporation.

Cadent and Cactus WH Enterprises owned approximately 11% and 23% of our voting power, respectively, as of December 31, 2020.

As a result, Cadent and Cactus WH Enterprises effectively control matters requiring stockholder approval, including the election of directors, changes to our organizational documents and significant corporate

transactions.

This concentration of ownership will limit your ability to affect the way we are managed or the direction of our business.

The interests of Cadent and Cactus WH Enterprises with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders.

In addition, the Chairman of our board of directors is currently a member of Cadent Energy Partners LLC.

This director’s duties as a partner of Cadent Energy Partners LLC may conflict with his duties as our director, and the resolution of these conflicts may not always be in our or your best interest.

Furthermore, in connection with our IPO, we entered into a stockholders’ agreement with Cadent and Cactus WH Enterprises.

Among other things, the stockholders’ agreement provides each of Cadent and Cactus WH Enterprises with the right to designate a certain number of nominees to our board of directors so long as they and their respective affiliates collectively beneficially own at least 5% of the outstanding shares of our common stock.

Cactus WH Enterprises owned approximately 20% of our voting power as of December 31, 2021.

This concentration of ownership may limit a stockholder’s ability to affect the way we are managed or the direction of our business.

The interests of Cactus WH Enterprises with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders.

Furthermore, in connection with our IPO, we entered into a stockholders’ agreement with Cactus WH Enterprises.

Among other things, the stockholders’ agreement provides Cactus WH Enterprises with the right to designate a certain number of nominees to our board of directors so long as they and their respective affiliates collectively beneficially own at least 5% of the outstanding shares of our common stock.

The existence of significant stockholders and the stockholders’ agreement may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management or limiting the ability of our other stockholders to approve transactions that they may deem to be in our best interests.

Cadent and Cactus WH Enterprises’ concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders.

Cactus WH Enterprises’ concentration of stock ownership may also adversely affect the trading price of our Class A

common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders.

See “Item 13.

Certain Relationships and Related Party Transactions, and Director Independence—Stockholders’ Agreement.”

Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors, who are responsible for managing the direction of our operations and acquisition activities, hold positions of responsibility with other entities (including Cadent and its affiliated entities) whose businesses are similar to our business.

The existing positions held by these directors may give rise to fiduciary or other duties that are in conflict with the duties they owe to us.

These directors may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated.

Due to these existing and potential future affiliations, they may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest.

They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present those opportunities to us.

These conflicts may not be resolved in our favor.

Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock.

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Subject to certain limitations and exceptions, the CW Unit Holders may cause Cactus LLC to redeem their CW Units for shares of Class A common stock (on a one‑for‑one basis, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions) and then sell those shares of Class A common stock.

Additionally,

we may issue additional shares of Class A common stock or convertible securities in subsequent public offerings.

We have 47,712,577 outstanding shares of Class A common stock and 27,655,077 outstanding shares of Class B common stock as of December 31, 2020.

Additionally, we may issue additional shares of Class A common stock or convertible securities in subsequent public offerings.

We had 59,035,237 outstanding shares of Class A common stock and 16,674,282 outstanding shares of Class B common stock as of December 31, 2021.

The CW Unit Holders own all 16,674,282 shares of Class B common stock, representing approximately 22.0% of our total outstanding common stock.

As required pursuant to the terms of the registration rights agreement that we entered into at the time of our IPO, we have filed a registration statement on Form S-3 under the Securities Act of 1933, as amended, to permit the public resale of shares of Class A common stock owned by Cadent, Cactus WH Enterprises, Lee Boquet and certain existing members of our board of directors.

As required pursuant to the terms of the registration rights agreement that we entered into at the time of our IPO, we have filed a registration statement on Form S-3 under the Securities Act of 1933, as amended, to permit the public resale of shares of Class A common stock owned by Cactus WH Enterprises, Lee Boquet and certain members of our board of directors.

See “Item 13.

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will retain the benefit of the remaining 15% of these net cash savings.

The term of the TRA will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we exercise our right to terminate the TRA (or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control), and we make the termination payment specified in the TRA.

In addition, payments we make under the TRA will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return.

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If we elect to terminate the TRA early or it is terminated early due to Cactus Inc.’s failure to honor a material obligation thereunder or due to certain mergers or other changes of control, our obligations under the TRA would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the TRA (determined by applying a discount rate of one‑year LIBOR plus 150 basis points) and such payment is expected to be substantial.

The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the TRA, including (i) the assumption that we have sufficient taxable income to fully utilize the tax benefits covered by the TRA and (ii) the assumption that any CW Units (other than those held by Cactus Inc.) outstanding on the

termination date are deemed to be redeemed on the termination date.

Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates.

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A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof.

Under certain circumstances, redemptions of CW Units pursuant to the Redemption Right (or our Call Right) or other transfers of CW Units could cause Cactus LLC to be treated as a publicly traded partnership.

Under certain circumstances, redemptions of CW Units pursuant to the Redemption Right (or our Call Right) or other transfers of CW Units

could cause Cactus LLC to be treated as a publicly traded partnership.

Applicable U.S.

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Holders of our Class A common stock may not receive dividends on their Class A common stock.

We declared our first dividend to Class A stockholders in the fourth quarter of 2019.

Holders of our Class A common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments.

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Third parties from time to time may also initiate litigation against us by asserting that our businesses infringe, impair, misappropriate, dilute or otherwise violate another party’s intellectual property rights.

We may not prevail in any such litigation, and our intellectual property rights may be found invalid or unenforceable or our products and services may be found to infringe, impair, misappropriate, dilute or otherwise violate the intellectual property rights of others.

We may not prevail in any such litigation, and our intellectual property rights may be found invalid or unenforceable or our products and services may

be found to infringe, impair, misappropriate, dilute or otherwise violate the intellectual property rights of others.

The results or costs of any such litigation may have an adverse effect on our business, results of operations and financial condition.

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

What changed 10-K

Item 1A. Risk Factors