What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-01 compared with 2022-02-28 · 107 added, 97 removed, 175 unchanged (54% of the section changed)

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became the sole managing member of Cactus LLC upon completion of our IPO and is responsible for all operational, management and administrative decisions relating to Cactus LLC’s business.

Pursuant to the First Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”), owners of CW Units are entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”) on a one-for-one basis, which results in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.

Pursuant to the Second Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”), owners of CW Units are entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”) on a one-for-one basis, which results in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.

We refer to the owners of CW Units, other than Cactus Inc.

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Cadent Energy Partners II, L.P.

(“Cadent”), an affiliate of Cadent Energy Partners LLC, owned more than 10% of issued and outstanding CW Units until March 2021, when it redeemed 4,111,250 of the CW Units (together with an equal number of shares of Class B common stock) owned by it in connection with our 2021 Secondary Offering, as defined below.

Subsequently, in a series of additional transactions throughout 2021, Cadent and its affiliates transferred or redeemed the remainder of its CW Units.

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Cactus WH Enterprises held approximately 17.6% of our voting power as of December 31, 2022.

Following a public offering completed on January 13, 2023, Cactus Inc.

owned 81.1% and CW Unit Holders owned 18.9% of Cactus LLC, which was based on 64.1 million shares of Class A common stock issued and outstanding and 15.0 million shares of Class B common stock issued and outstanding.

Cactus WH Enterprises held approximately 16.9% of our voting power as of the completion of such offering.

Since our IPO in February 2018, 45.6 million CW Units and a corresponding number of shares of Class B common stock have been redeemed in exchange for shares of Class A common stock.

The following is a rollforward of ownership of legacy CW Units by CW Unit Holders for the three years ended December 31, 2021:

The following is a rollforward of ownership of

legacy CW Units by CW Unit Holders for the three years ended December 31, 2022:

(in thousands)

CW Units held by legacy CW Unit Holders as of December 31, 2019 27,958

March 2019 follow-on equity offering (8,474)

Other CW Unit redemptions (804)

CW Units held by legacy CW Unit Holders as of December 31, 2019 27,958

Other CW Unit redemptions (303)

CW Unit redemptions (303)

CW Units held by legacy CW Unit Holders as of December 31, 2020 27,655

March 2021 follow-on equity offering (6,273)

Follow-on equity offering in March 2021 (6,273)

Cadent redemption in June 2021 (3,292)

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CW Units held by legacy CW Unit Holders as of December 31, 2021 16,674

On March 9, 2021, Cactus Inc.

entered into an underwriting agreement with Cactus LLC, certain selling stockholders of Cactus (the “Selling Stockholders”) and the underwriters named therein, providing for the offer and sale by the Selling Stockholders (the “2021 Secondary Offering”) of up to 6,325,000 shares of Class A common stock at a price to the underwriters of $30.555 per share.

On March 12, 2021, in connection with the 2021 Secondary Offering, certain of the Selling Stockholders exercised their right to redeem 6,272,500 CW Units, together with a corresponding number of shares of Class B common stock, as provided in the Cactus Wellhead LLC Agreement.

Upon the closing of the 2021 Secondary Offering, Cactus Inc.

acquired the redeemed CW Units and a corresponding number of shares of Class B common stock (which shares of Class B common stock were then canceled) and issued 6,272,500 new shares of Class A common stock to the underwriters at the direction of the redeeming Selling Stockholders, as provided in the Cactus Wellhead LLC Agreement.

In addition, certain other Selling Stockholders sold 52,500 shares of Class A common stock in the 2021 Secondary Offering, which shares were owned by them directly as of the time of the 2021 Secondary Offering.

Cactus did not receive any of the proceeds from the sale of common stock in the 2021 Secondary Offering, and there was no change in the combined number of Cactus Inc.

voting shares outstanding.

On June 17, 2021, Cadent transferred ownership of 944,093 CW Units, together with a corresponding number of shares of Class B common stock, to its general partner, Cadent Energy Partners II - GP, L.P., (“Cadent GP”), and its manager, Cadent Management Services, LLC (“Cadent Management”).

Cadent then redeemed its remaining 3.3 million CW Units, together with a corresponding number of shares of Class B common stock, as provided in the Cactus Wellhead LLC Agreement.

The redeemed CW Units (and the corresponding shares of Class B common stock) were canceled and Cactus Inc.

issued 3.3 million new shares of Class A common stock to Cadent, which then distributed such shares to its limited partners.

Cactus received no proceeds from these events, and there was no change in the combined number of Cactus Inc.

voting shares outstanding.

On September 13, 2021, Cadent GP and Cadent Management transferred their aggregate ownership of 228,878 CW Units, together with a corresponding number of shares of Class B common stock, to their respective owners, which included certain Cactus Inc.

board members and executive management.

The transfers were made at the discretion of Cadent GP and Cadent Management without the consent of the transferees.

Additionally, Cadent GP and Cadent Management redeemed their remaining 715,215 CW Units held, together with a corresponding number of shares of Class B common stock, thus liquidating its ownership in Cactus Wellhead, LLC.

These transactions were in accordance with the Cactus Wellhead LLC Agreement.

The redeemed CW Units (and the corresponding shares of Class B common stock) were canceled and Cactus Inc.

issued 715,215 new shares of Class A common stock.

Cactus received no proceeds from these events, and there was no change in the combined number of Cactus Inc.

voting shares outstanding.

In addition to these significant redemptions during 2021, 700,957 CW Units were redeemed in exchange for shares of Class A common stock during the year ended December 31, 2021 pursuant to our regular quarterly redemption program.

The above discussion focuses on the 2021 activity and redemptions.

For further information on the follow-on equity offering that occurred in March 2019, see Note 10 in the Notes to the Consolidated Financial Statements.

CW Unit redemptions (1,696)

CW Units held by legacy CW Unit Holders as of December 31, 2022 14,978

For a detailed discussion of significant 2021 activity and redemptions, See Note 10 in the Notes to the Consolidated Financial Statements.

The following diagram indicates our simplified ownership structure as of December 31, 2022:

Acquisition of FlexSteel

On December 30, 2022, Cactus Inc.

and its newly-formed subsidiary, Atlas Merger Sub, LLC, entered into a definitive agreement (the “Merger Agreement”) to acquire HighRidge on the terms and subject to the conditions set forth in the Merger Agreement.

The Merger closed on February 28, 2023 whereby Atlas Merger Sub, LLC merged into HighRidge, with HighRidge being the surviving entity.

HighRidge’s primary purpose was to own 100% of the equity in FlexSteel Holdings, Inc.

Subsequent to the Merger, FlexSteel Holdings, Inc.

was converted into a limited liability company, now named FlexSteel Holdings, LLC (previously defined as “FlexSteel”).

Also subsequent to the Merger, Cactus Inc.

contributed HighRidge to Cactus Acquisitions LLC (“Cactus Acquisitions”), a newly created entity, whereby HighRidge was converted into a limited liability company.

Finally, Cactus Acquisitions contributed FlexSteel to Cactus Companies (defined below) which had previously acquired all of the outstanding units of Cactus LLC in exchange for an equal number of CC Units (defined below) prior to the Merger closing.

FlexSteel is a leading manufacturer and provider of differentiated onshore spoolable pipe technologies and associated installation services.

FlexSteel operates through service centers and pipe yards located throughout the United States and Canada, while also providing equipment and services in select international markets.

FlexSteel has a manufacturing facility in Baytown, Texas.

We believe this acquisition enhances Cactus’ position as a premier manufacturer and provider of highly engineered equipment to the E&P industry and expands our reach further downstream.

We also believe FlexSteel’s products are highly complementary to Cactus’ equipment at the wellsite and provides meaningful growth potential for Cactus.

We acquired HighRidge on a cash-free, debt-free basis, for a purchase price of approximately $621.2 million, subject to certain working capital, debt and other customary adjustments set forth in the Merger Agreement.

In addition to the upfront consideration, there is a potential future earn-out payment of up to $75 million to be paid no later than the third quarter of 2024, if certain revenue growth targets are met by FlexSteel.

We funded the upfront purchase price using a combination of $165.6 million of net proceeds received from a public offering of shares of our Class A common stock completed on January 13, 2023, borrowings under the Amended ABL Credit Facility (as defined in Note 15 in the Notes to the Consolidated Financial Statements) and available cash on hand at the time of closing.

Internal Reorganization and Current Ownership Structure

On February 27, 2023, in order to facilitate the Merger, an internal reorganization (the “CC Reorganization”) was completed in which Cactus Companies, LLC (“Cactus Companies”), a wholly-owned subsidiary of Cactus Inc.

formed on February 6, 2023, acquired all of the outstanding units representing ownership interests in the operating subsidiary of Cactus Inc., Cactus LLC, in exchange for an equal number of units representing limited liability company interests in Cactus Companies (“CC Units”) issued to each of the previous owners of CW Units.

is a holding company whose only material asset is a direct and indirect equity interest consisting of CC Units following the completion of the CC Reorganization (which were CW Units from the IPO until the CC Reorganization).

was the sole managing member of Cactus LLC upon completion of our IPO until the CC Reorganization and became the sole managing member of Cactus Companies upon completion of the CC Reorganization.

In connection with the CC Reorganization, Cactus Inc., Cactus Acquisitions and the remaining owners of CC Units entered into the Amended and Restated Limited Liability Company Operating Agreement of Cactus Companies (the “Cactus Companies LLC Agreement”), which contains substantially the same terms and conditions as the Second Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”), which was the limited liability company operating agreement of Cactus LLC prior to the CC Reorganization.

was responsible for all operational, management and administrative decisions relating to Cactus LLC’s business for the period from completion of our IPO until the CC Reorganization and for the Cactus Companies’ business for periods after the CC Reorganization.

From the completion of our IPO until the CC Reorganization, pursuant to the Cactus Wellhead LLC Agreement, owners of CW Units were entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock on a one-for-one basis, which would have resulted in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.

After the CC Reorganization, we refer to the owners of CC Units, other than Cactus Inc.

(along with their permitted transferees), as “CC Unit Holders.” From the completion of our IPO until the CC Reorganization, CW Unit Holders owned one share of our Class B common stock for each CW Unit such CW Unit Holder owned and, upon the completion of the CC Reorganization, such CW Unit Holders ceased to be holders of CW Units and, instead, became holders of a number of CC Units equal to the number of CW Units such CW Unit Holders held immediately prior to the completion of the CC Reorganization.

Following the completion of the CC Reorganization, CC Unit Holders own one share of our Class B Common Stock for each CC Unit such CC Unit Holder owns and Cactus Companies is the sole member of Cactus LLC.

Pursuant to the Cactus Companies LLC Agreement, owners of CC Units are entitled to redeem their CC Units for shares of Cactus Inc.’s Class A common stock on a one-for-one basis, which would result in a corresponding

increase in Cactus Inc.’s membership interest in Cactus Companies and an increase in the number of shares of Class A common stock outstanding.

Holders of Class A common stock and Class B common stock continue to 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.

Cactus WH Enterprises remains the largest CC Unit Holder following the completion of the CC Reorganization.

As of February 28, 2023, following completion of the CC Reorganization, Cactus Inc.

owned 81.1% through direct and indirect ownership of Cactus Companies and the CC Unit Holders owned 18.9%, which was based on 64.1 million shares of Class A common stock issued and outstanding and 15.0 million shares of Class B common stock issued and outstanding.

Cactus WH Enterprises held approximately 16.9% of our voting power as of February 28, 2023.

The following diagram indicates our simplified ownership structure immediately following the completion of the CC Reorganization:

The remainder of this “Item 1.

Business” section specifically excludes the impact of the FlexSteel acquisition unless otherwise noted, as it was not a part of our business prior to December 31, 2022.

Additional details on the business can be found in our Form 8-K filed with the Securities and Exchange Commission (“SEC”) on January 3, 2023 announcing the signing of the Merger Agreement.

Our principal products include our Cactus SafeDrill ® wellhead systems as well as frac stacks, our Cactus SafeLink ® monobore, SafeClamp ® and SafeInject ® systems, zipper manifolds and production trees that we design and manufacture.

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Cactus, through its proprietary equipment, digital offerings and services, reduces the need for human intervention in the exclusion zone, minimizing non-productive time and leading to inherently safer and more environmentally responsible operations.

For the subsequent production phase of a well, we sell production trees and equipment, when required, to interface with various forms of artificial lift that regulate hydrocarbon production, which are installed on the wellhead after the frac stack has been removed.

For the subsequent production phase of a well, we sell production trees and equipment which are installed on the wellhead after the frac stack has been removed.

In addition, we provide mission-critical field services for all of our products and rental items, including 24-hour service crews to assist with the installation, maintenance, repair and safe handling of the wellhead and pressure control equipment.

Our innovative wellhead products and pressure control equipment are developed internally.

We believe our close relationship with our customers provides us with insight into the specific issues encountered in the drilling and completion processes, allowing us to provide them the highest quality products and service solutions.

We have achieved substantial market share, as measured by the percentage of total active U.S.

onshore rigs that we follow (which we define as the number of active U.S.

onshore drilling rigs to which we are the primary provider of wellhead products and corresponding services during drilling), and brand name recognition with respect to our engineered products, which we believe is due to our focus on safety, reliability, cost effectiveness and time saving features.

We optimize our products for pad drilling (i.e., the process of drilling multiple wellbores from a single surface location) to reduce rig time and

provide operators with significant efficiencies that translate into increased safety, reduced environmental impact and cost savings at the wellsite.

We believe that customers select our products, among other reasons, due to brand name recognition associated with our engineered products, which we believe is due to our focus on safety, reliability, cost effectiveness and time saving features.

We optimize our products for pad drilling (i.e., the process of drilling multiple wellbores from a single surface location) to reduce rig time and provide operators with significant efficiencies that translate into increased safety, reduced environmental impact and cost savings at the wellsite.

We primarily operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, Marcellus, Utica, Haynesville, Eagle Ford, Bakken and SCOOP/STACK, among other active oil and gas regions in the United States, and in Eastern Australia.

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Product revenues are primarily derived from the sale of wellhead systems and production trees.

Rental revenues are primarily derived from the rental of equipment used during the completion process, the repair of such equipment and the rental of drilling tools.

Rental revenues are primarily derived from the rental of equipment used during the completion process, the repair of such equipment and the rental of tools used during drilling operations.

Field service and other revenues are primarily earned when we provide installation and other field services for both product sales and equipment rental.

Additionally, other revenues are derived from providing repair and reconditioning services to customers that have previously installed wellheads or production trees.

Additionally, other revenues are derived from providing repair and reconditioning services to customers that have previously purchased wellheads or production trees.

Items sold or rented generally have an associated service component.

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In 2020, we derived 59% of our total revenues from the sale of our products, 19% from rental and 22% from field service and other.

We have predominantly domestic operations, with a small amount of activity in Australia and the Kingdom of Saudi Arabia.

We have predominantly domestic operations, with a small amount of sales in select international markets.

Most of our sales are made on a call out basis pursuant to agreements, wherein our clients provide delivery instructions for goods and/or services as their operations require.

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The principal elements of cost of sales for our products are the direct and indirect costs to manufacture and supply the product, including labor, materials, machine time, tariffs and duties, freight and lease expenses related to our facilities.

The principal elements of cost of sales for rentals are the direct and indirect costs of supplying rental equipment, including depreciation, repairs specifically performed on such rental equipment and freight.

The principal elements of cost of sales for rentals are the direct and indirect costs of supplying rental equipment, including

depreciation, repairs specifically performed on such rental equipment and freight.

The principal elements of cost of sales for field service and other are labor, equipment depreciation and repair, equipment and vehicle lease expenses, fuel and supplies.

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Suppliers and Raw Materials

Forgings and plate, castings, tube and bar stock represent the principal raw materials used in the manufacture of our products and rental equipment.

Forgings, castings, tube and bar stock represent the principal raw materials used in the manufacture of our products and rental equipment.

In addition, we require accessory items (such as elastomers, ring gaskets, studs and nuts) and machined components.

We purchase a majority of these items from vendors in the United States, China, India and Australia.

For the year ended December 31, 2021, two vendors each represented approximately 9% of our total third-party vendor purchases of raw materials, finished products, components, equipment, machining and other services.

During the years ended December 31, 2020 and 2019, we had one vendor who represented approximately 9% and 16%, respectively, of such purchases.

We purchase a majority of these items from vendors primarily located in the United States, China, India and Australia.

During each of the three years in the period ended December 31, 2022, no vendor represented 10% or more of our total third-party vendor purchases of raw materials, finished products, components, equipment, machining and other services.

We do not believe that we are overly dependent on any individual vendor to supply our required materials or services.

Notwithstanding the supply disruptions experienced starting in 2021, the materials and services essential to our business are normally readily available and, where we use one or a few vendors as a source of any particular materials or services, we believe that we can, within a reasonable period of time, make satisfactory alternative arrangements in the event of an interruption of supply from any vendor.

The materials and services essential to our business are normally readily available and, where we use one or a few vendors as a source of any particular materials or services, we believe that we can, within a reasonable period of time, make satisfactory alternative arrangements in the event of an interruption of supply from any vendor.

We believe our materials and services vendors have the capacity to meet additional demand should we require it, although at higher costs and with extended deliveries.

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The facilities are licensed to the latest American Petroleum Institute (“API”) 6A specification for wellheads and valves and API Q1 and ISO 9001:2015 quality management systems.

Where traditional manufacturing facilities are designed to run in batches with different machining processes occurring in stages, our Bossier City facility uses advanced computer numeric 5 Axis control machines to perform multiple machining operations with fewer steps.

We believe eliminating the queue times between machining operations allows us to offer significantly shorter order-to-delivery times compared to our competitors, albeit at higher costs than our facility in China.

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Our production facility in China is configured to efficiently produce our range of pressure control products and components for less time-sensitive, higher-volume orders.

The Suzhou facility assembles and tests finished and semi-finished machined components before shipment to Cactus facilities in the United States and Australia.

The Suzhou facility assembles and tests finished and semi-finished machined components before shipment to the United States, Australia and other international locations.

Our Suzhou subsidiary is wholly-owned, and its facility is staffed by Cactus employees, which we believe is a key factor in ensuring high quality and dependable deliveries.

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The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which have historically been volatile, and by the availability of capital and the associated capital spending discipline exercised by customers.

Declines, as well as anticipated declines, in oil and gas prices could negatively affect the level of these activities and capital spending, which could adversely affect demand for our products and services and, in certain instances, result in the cancellation, modification or rescheduling of existing and expected orders and the ability of our customers to pay us for our products and services.

cancellation, modification or rescheduling of existing and expected orders and the ability of our customers to pay us for our products and services.

These factors could have an adverse effect on our revenue and profitability.

Our business is not significantly impacted by seasonality, although our fourth quarter has historically been impacted by holidays and our customers’ budget cycles.

We serve over 200 customers representing majors, independents and other oil and gas companies with operations in the key U.S.

oil and gas producing basins as well as in Australia and the Kingdom of Saudi Arabia.

One customer represented approximately 12% of our total revenues during the year ended December 31, 2021, whereas no customer represented 10% or more of total revenues during the year ended December 31, 2020 and one customer represented approximately 10% of total revenues during the year ended December 31, 2019.

We serve over 200 customers representing private operators, publicly-traded independents, majors and other companies with operations in the key U.S.

oil and gas producing basins as well as in Australia, the Kingdom of Saudi Arabia and other international locations.

No customer represented more than 10% of total revenues during the year ended December 31, 2022.

The markets in which we operate are highly competitive.

We believe we are one of the largest suppliers of wellheads in the United States.

We compete with divisions of Schlumberger and TechnipFMC, as well as a large number of other

We believe we are one of the largest suppliers of wellheads used in the United States.

We compete with divisions of Schlumberger and TechnipFMC, as well as a large number of other companies.

We believe the rental market for frac stacks and related flow control equipment is more fragmented than the wellhead product market.

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Additionally, projects are often awarded on a bid basis, which tends to create a highly competitive environment.

While we seek to be competitive in our pricing, we believe many of our customers elect to work with us based on product features, safety, performance and quality of our people, equipment and services.

While we seek to be competitive in our pricing, we believe many of our customers elect to work with us based on product performance, features, safety and availability, as well as the quality of our people, equipment and services.

We seek to differentiate ourselves from our competitors by delivering the highest‑quality services and equipment possible, coupled with superior execution and operating efficiency in a safe working environment.

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Consequently, to the extent these environmental compliance costs, pollution mitigation costs or remediation costs are incurred by our customers, those customers could elect to delay, reduce or cancel drilling, exploration or production programs, which could reduce demand for our products and services and, as a result, have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Consistent with our quality assurance and Health, Safety & Environment (“HSE”) principles, we have established proactive environmental and worker safety policies in the United States and foreign countries for the management, handling, recycling or disposal of chemicals and gases and other materials and wastes resulting from our operations.

gases and other materials and wastes resulting from our operations.

Substantial fines and penalties can be imposed and orders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulations relating to worker health and safety.

Licenses and Certifications.

Our manufacturing facility in Bossier City, Louisiana and our production facility in Suzhou, China are currently licensed by the API to monogram manufactured products in accordance with API 6A, 21st Edition product specification for both wellheads and valves while the quality management system is certified to API Q1, 9th Edition, Addendum 2 and ISO 9001:2015.

These licenses and certifications expire every three years and are renewed upon successful completion of annual audits.

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Environmental concerns have been raised regarding the potential impact of hydraulic fracturing and the resulting wastewater disposal 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.

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, our products are used in 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.

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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.

In addition, the Texas Railroad Commission has overseen the development of well-operator-led response plans to reduce injection volumes in other portions of West Texas in order to reduce seismicity in these areas.

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.

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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 and the appeal is pending.

To the extent that the Department of the 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.

While the United States Department of the Interior announced in April 2022 that it would resume oil and gas leasing on public lands, the topic of oil and gas leasing on public land remains politically fraught, as the announcement indicated that federal land available for oil and gas leasing will be significantly reduced due to environmental and climate concerns.

To the extent that these developments 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.

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

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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.

For example, in August 2022, the Inflation Reduction Act

of 2022 (the “Inflation Reduction Act”) was signed into law.

The Inflation Reduction Act appropriates significant federal funding for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.

In addition, the Inflation Reduction Act imposes the first ever federal fee on the emission of greenhouse gases (“GHG”) through a methane emissions charge.

The Inflation Reduction Act amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production categories.

These developments could further accelerate the transition of the U.S.

economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could reduce demand for our products and services and negatively impact our business.

Insurance and Risk Management

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Human Capital Management

As of December 31, 2021, we employed over 1,000 people worldwide, of which a little more than 900 were employed in the United States.

As of December 31, 2022, we employed over 1,200 people worldwide (not including employees of FlexSteel), of which approximately 1,000 were employed in the United States.

FlexSteel employed 350 people as of December 31, 2022, with 340 employed in the United States and 10 in Canada.

We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages.

We consider our relations with our workforce to be good.

Our business’s success depends mainly on our ability to attract, retain and motivate a diverse population of talented employees at all levels of our organization, including the individuals who comprise our global workforce and executive officers and other key personnel.

To succeed in a competitive industry, we have developed key recruitment and retention strategies, objectives and measures which we focus on as part of the overall management of our business.

Recruiting and Development.

Our talent strategy is focused on attracting the best talent and rewarding their performance while developing and retaining them.

Fiscal year 2020 was a challenging year in which we made difficult staffing decisions, resulting in significant reductions to our workforce.

As the economy showed signs of improvement in late 2020 and throughout 2021, we rebuilt our workforce, increasing our workforce by approximately 57% during 2021.

We are approaching the workforce levels we were at right before the start of the pandemic in March 2020.

We strive to maintain good relationships with our employees and have prioritized rehiring our most experienced branch and field positions as the industry has recovered.

When hiring, we utilize employee referrals, a variety of social media platforms, regional job fairs and partner with educational organizations across the United States to find diverse, qualified, motivated and responsible candidates.

We are dedicated to the continual training and development of our employees, especially those in field and branch operations.

Additionally, we work with local workforce commissions to ensure we are attracting a diverse and qualified pool of candidates for each region in which we operate.

Training and Development.

We are dedicated to our employees’ training and development, especially those in field and branch operations.

Our internal training focuses on safety, corporate and personal responsibility, product knowledge, behavioral development and ethical conduct.

In 2021, Cactus built an internal database to track training progress and completion for all of our associates, with particular interest in tracking the training and skill sets of our field service technicians and managers.

This tracking tool enables us to take a holistic view of our strength by branch and job title, which helps us to manage our operations and assign associates with the proper skills, training and experience to safely and efficiently meet or exceed customer demand.

Cactus maintains an internal database to track training progress and completion for all of our associates, with a particular interest in tracking the training and skill sets of our field service technicians and managers.

This tracking tool enables us to take a holistic view of our strengths by branch and job title, which helps us to manage our operations and assign jobs to associates with the proper skills, training and experience to safely and efficiently meet or exceed customer demand.

Other training courses offered outside of the company are attended by employees with specialized skills, knowledge or certifications as needed for their ongoing success and professional development.

We believe our continued focus on training and development translates into a safer work environment, opportunities to promote within the organization, improved employee morale and increased employee retention.

Compensation and Benefits.

We provide compensation and benefits programs to help meet the needs of our employees.

In addition to salaries and wages, these programs (which vary by country) include annual bonuses, retirement plans such as a 401(k) plan, healthcare and insurance benefits, health savings accounts partially funded by the Company, standard flexible spending accounts, personal legal services insurance, company-sponsored long and short term disability, accident and critical illness, paid time off, family leave, partially paid maternity and paternity leave, family care resources and employee assistance programs, among others.

We also offer tuition reimbursement in certain circumstances to support the continued growth and development of our employees.

We provide compensation and benefits programs to help meet the needs of our employees and their families.

disability, accident and critical illness, paid time off, family leave, partially paid maternity and paternity leave, family care resources and employee assistance programs, among others.

We also offer tuition reimbursement in certain circumstances to support our employees’ continued growth and development.

Additionally, we use targeted equity-based grants with vesting conditions to facilitate the retention of key personnel.

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We are committed to the health, safety and wellness of our employees.

We provide our employees and their families with access to various flexible and convenient health and wellness programs.

We provide our employees and their families access to various flexible and convenient health and wellness programs.

These programs include benefits that offer protection and security to have peace of mind concerning events that may require time away from work or impact their financial well-being.

These tools also support their physical and mental health by providing resources to improve or maintain their health status.

In response to the COVID-19 pandemic, we implemented additional safety measures for employees performing critical on-site work.

Our facilities implemented mandatory personal protective wear, extensive deep cleaning and sanitation processes.

We also work with third-party vendors to offer vaccination clinics and schedule vaccines for any associate who requests help in doing so.

Any associate who has exhibited signs or symptoms or believes they may have been exposed to the virus is tested and quarantined based on guidelines provided by the Centers for Disease Control and Prevention.

We provide paid time off for our associates to get vaccinated and boosted.

We also provide additional time off for any fully vaccinated associates who miss work due to a breakthrough case of COVID-19.

Additionally, during certain time periods, we have allowed administrative employees

to work from home if desired.

Lastly, we encourage our employees to be fully vaccinated against COVID-19 and offer financial incentives within our medical benefits plan to those associates who are fully vaccinated.

In response to the COVID-19 pandemic, we implemented additional safety measures for employees performing critical on-site work as well as offering vaccination clinics and testing as necessary.

Available Information

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Our website address is www.CactusWHD.com.

Our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (“SEC”), including our Form 10-Ks, Form 10-Qs and Form 8-Ks, as well as amendments to such filings, are available free of charge through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC.

Our periodic reports and other information filed with or furnished to the SEC, including our Form 10-Ks, Form 10-Qs and Form 8-Ks, as well as amendments to such filings, are available free of charge through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC.

Information on our website or any other website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report.

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 1. Business