What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-29 · 45 added, 44 removed, 275 unchanged (24% of the section changed)

6 unchanged sentences

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.

drilling conditions of these wells, the volume of production, the number of well completions and the level of well remediation activity, the number of wells put into production and the corresponding capital spending by oil and gas companies.

Demand for our products and services depends primarily upon the general level of activity in the oil and gas industry, including the number of drilling rigs in operation, the number of oil and gas wells being drilled, the depth, lateral length and drilling conditions of these wells, the volume of production, the number of well completions and the level of well remediation activity, the number of wells put into production and the corresponding capital spending by oil and gas exploration and production companies.

Oil and gas activity is in turn heavily influenced by, among other factors, current and anticipated oil and natural gas prices locally and worldwide, which have historically been volatile.

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The loss of qualified employees or an inability to retain and motivate additional highly‑skilled employees required for the operation and expansion of our business could hinder our ability to successfully maintain and expand our market share.

During the fourth quarter of 2023, our Chief Financial Officer (“CFO”) assumed responsibility for the Chief Executive Officer position in our Spoolable Technologies operating segment (the FlexSteel business) and was replaced with an interim CFO.

While the Company intends to appoint a new CFO during 2024, the changes in executive leadership could cause disruption to our business operations.

Political, regulatory, economic and social disruptions in the countries in which we conduct business and globally could adversely affect our business or results of operations.

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The effects of these developments 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.

In addition, the Biden administration has indicated it is delaying consideration of new natural gas export terminals in the United States.

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 material adverse effect on our business, results of operations and cash flows.

In January 2025, however, President Trump signed an executive order directing federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect, pending review by the newly appointed agency head, identify and exercise emergency authorities to facilitate conventional energy production, transportation, and refining, and mandate a review of existing regulations that may burden domestic energy development.

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 companies capable of competing effectively in our markets, including several large companies that possess substantially greater financial and other resources than we do.

Consolidation of our competitors and the entry of new competitors could result in a further increase in competition.

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

Many contracts are awarded on a bid basis, which may further increase competition based primarily on price.

In addition, adverse market conditions lower demand for well servicing equipment, which results in excess equipment and lower utilization rates.

In addition, adverse market conditions reduce demand for well servicing equipment, which results in excess equipment and lower utilization rates.

If market conditions deteriorate or if adverse market conditions persist, the prices we are able to charge and utilization rates may decline.

7 unchanged sentences

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.

Increased costs, increased transit times, increased tariffs, 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 and transport low-cost raw materials and components, such as steel, tube and bar stock, forgings and machined components is critical to our ability to successfully compete.

Among other things, the conflicts in Ukraine and

the Middle East may result in longer transit times, higher costs and reduced availability of raw materials and components used in our wide variety of products and systems.

Among other things, the conflicts in Ukraine and the Middle East may result in longer transit times, higher costs and reduced availability of raw materials and components used in our wide variety of products and systems.

Further union port labor related disruptions could also result in increased transit times and costs.

Transit times through and availability of the Panama Canal may be impacted by weather patterns and political tensions among the US, Panama and China.

In the United States, the Trump administration has indicated that it may increase existing tariffs or implement new tariffs that may result in increased costs and inflation impacting the cost of other raw materials.

There is no assurance 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.

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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, including sites in the Middle East.

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

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, results of operations and cash flows.

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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.

Risks inherent in our industry include the risks of equipment defects, installation errors, the presence of multiple contractors at the wellsite over which we have no control, vehicle accidents, fires, explosions, blowouts, surface cratering, uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards such as oil spills and releases of, and exposure to, hazardous substances.

uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards such as oil spills and releases of, and exposure to, hazardous substances.

For example, our operations are subject to risks associated with hydraulic fracturing, including any mishandling, surface spillage or potential underground migration of fracturing fluids, including chemical additives.

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In addition to our U.S.

operations, we have operations in, among other countries, China, Australia, Canada and the Middle East.

operations, we have operations in, among other countries, China, Australia, Canada, Vietnam and the Middle East.

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

2 unchanged sentences

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, among other countries, the United States, China, Australia, Canada and the Middle East 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, among other countries, the United States, China, Australia, Canada, Vietnam, India and the Middle East 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.

As a result, compliance with multiple trade sanctions, embargoes and import/export laws and regulations pose an ongoing 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 cash flows.

1 unchanged sentence

Environmental laws and regulations in the United States and foreign countries affect the equipment, systems and services we design, market and sell, as well as the facilities where we manufacture and produce our equipment and systems.

For example, we or our products may be affected by such laws as the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act and the Occupational Safety and Health Act of 1970.

For example, we may be affected by such laws as the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act and the Occupational Safety and Health Act of 1970.

Further, our customers may be subject to a range of laws and regulations governing hydraulic fracturing, drilling and greenhouse gas emissions.

1 unchanged sentence

Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, or the issuance of orders enjoining operations.

These laws and regulations, as well as the adoption of other new laws and regulations affecting our operations or the exploration and production and transportation of crude oil and natural gas by our customers, could adversely affect our business and operating results by increasing our costs of compliance, increasing the costs of compliance and costs of doing business for our customers, limiting the demand for our products and services or restricting our operations.

These laws and regulations, as well as the

adoption of other new laws and regulations affecting our operations or the exploration, production and transportation of crude oil and natural gas by our customers, could adversely affect our business and operating results by increasing our costs of compliance, increasing the costs of compliance and costs of doing business for our customers, limiting the demand for our products and services or restricting our operations.

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.

7 unchanged sentences

Additional compliance obligations could also increase costs of compliance and costs of doing business for our customers, thereby reducing demand for our products and services.

Finally, increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that could have

significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events;

Finally, increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, floods, wildfires and other climatic events;

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

Although the Trump Administration has signaled a shift in federal climate policy, state and local climate and energy initiatives may continue, and future presidential administrations may pursue executive orders similar to, or more restrictive than, those put in place by President Biden.

Many of our customers utilize hydraulic fracturing in their operations.

6 unchanged sentences

The bans 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.

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 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.

7 unchanged sentences

State or federal initiatives to incentivize a shift away from fossil fuels could also reduce demand for hydrocarbons.

For example, 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.

For example, 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 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 would reduce demand for our products and services and negatively impact our business.

In January 2025, however, President Trump signed executive orders that, among other things, direct federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect, pending review by the newly appointed agency head, call upon the EPA to submit a report on the continuing applicability of its endangerment finding for GHGs under the Clean Air Act and issue guidance on the “social cost of carbon” to consider whether such metric should be eliminated, and pause the disbursement of funds appropriated through the IRA and the Infrastructure Investments and Jobs Act.

However, future presidential administrations may pursue executive orders that increase the amount of regulation.

The global outbreak of COVID-19 had, and similar pandemics in the future may have, an adverse impact on our business and operations.

6 unchanged sentences

The ongoing conflicts in Ukraine and the Middle East could have adverse effects on global macroeconomic conditions which could negatively impact our business and results of operations.

The conflicts are highly unpredictable and have already resulted in volatility with oil and natural gas prices worldwide.

The conflicts are highly unpredictable and have resulted in volatility with oil and natural gas prices worldwide.

Elevated energy prices could result in higher inflation worldwide, causing economic uncertainty in the oil and natural gas markets as well as the stock market, resulting in stock price volatility, foreign currency fluctuations and supply chain disruptions.

13 unchanged sentences

and foreign jurisdictions) that may limit the amount of funds available for distribution and (ii) restrictions in relevant debt instruments issued by Cactus Companies or its subsidiaries.

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.

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.

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.

8 unchanged sentences

If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us.

In addition, some provisions of our amended and restated certificate of incorporation and amended and restated

bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including:

• limitations on the removal of directors, including a classified board whereby only one-third of the directors are elected each year;

In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including:

• limitations on the removal of directors, including a classified board whereby only one-third of the directors are elected each year, which will be phased out between 2025 and 2027;

• limitations on the ability of our shareholders to call special meetings;

• establishing advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders;

• providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws;

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In certain cases, payments under the TRA may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the TRA.

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 equivalent to the former one-year LIBOR) and such payment is expected to be substantial.

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 equivalent to the 30-day SOFR plus 0.715%) 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 CC Units (other than those held by Cactus Inc.) outstanding on the termination date are deemed to be redeemed on the termination date.

2 unchanged sentences

In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control.

If the TRA were terminated as of December 31, 2023, the estimated termination payments, based on the assumptions discussed above, would have been approximately $256.8 million (calculated using a discount rate equivalent to the former one-year LIBOR, applied against an undiscounted liability of approximately $397.0 million).

If the TRA were terminated as of December 31, 2024, the estimated termination payments, based on the assumptions discussed above, would have been approximately $273.7 million (calculated using a discount rate equal to the 12-month term SOFR published by CME Group Benchmark Administration Limited, plus 71.513 basis points, applied against an undiscounted liability of approximately $406.5 million).

The foregoing number is merely an estimate and the actual payment could differ materially.

11 unchanged sentences

Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that one or more such safe harbors shall apply.

For example, we intend to limit the number of unit holders of Cactus Companies, and the Cactus Companies LLC Agreement, which was entered into with Cactus LLC in connection with the closing of our IPO and amended as part of the CC Reorganization, provides for limitations on the ability of CC Unit Holders to transfer their CC Units and provides us, as managing member of Cactus Companies, with the right to impose restrictions (in addition to those already in place) on the ability of unit holders of

Cactus Companies to redeem their CC Units pursuant to the Redemption Right to the extent we believe it is necessary to ensure that Cactus Companies will continue to be treated as a partnership for U.S.

federal income tax purposes.

2 unchanged sentences

In addition, we would no longer have the benefit of certain increases in tax basis covered under the TRA, and we would not be able to recover any payments previously made by us under the TRA, even if the corresponding tax benefits (including any claimed increase in the tax basis of Cactus Companies’ assets) were subsequently determined to have been unavailable.

Risks Related to the FlexSteel acquisition

We may not realize the anticipated benefits from the FlexSteel acquisition, and it could adversely impact our business and our operating results.

We may not be able to achieve the full potential strategic and financial benefits that we expect to achieve from the acquisition of the FlexSteel business, or such benefits may be delayed or not occur at all.

If we fail to achieve some or all of the benefits expected to result from the acquisition, or if such benefits are delayed, our business could be harmed.

FlexSteel’s operations are subject to many of the same risks as our historical operations.

Risks Related to the FlexSteel Business

We may not realize the anticipated benefits from the FlexSteel acquisition, and failure to realize the anticipated benefits could adversely impact our business and our operating results.

We may not be able to achieve the full potential strategic and financial benefits that were expected to be achieved at the time of the acquisition of the FlexSteel business, or such benefits may be delayed or not occur at all.

If we fail to achieve some or all of the benefits expected to result from the acquisition, or if such benefits are delayed, our business could be impacted.

FlexSteel’s operations are subject to many of the same risks as the Pressure Control operations.

The failure of FlexSteel to achieve financial results after the closing date of the acquisition similar to those obtained in the past could adversely impact our business and our consolidated operating results.

We may experience difficulties in integrating the operations of FlexSteel into our business and in realizing the expected benefits of the Merger.

The success of the Merger will depend in part on our ability to realize the anticipated business opportunities from combining the operations of FlexSteel with our business in an efficient and effective manner.

The ongoing success of the Merger will depend in part on our ability to realize all of the anticipated business opportunities from combining the operations of FlexSteel with our Pressure Control business in an efficient and effective manner.

The integration process could take longer than anticipated and could result in the distraction of management, the loss of key employees from either company, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the FlexSteel acquisition, and could harm our financial performance.

In addition, the recent transition to new leadership in the FlexSteel business could delay or hinder our ability to achieve the anticipated benefits of the acquisition.

If we are unable to successfully or timely integrate the operations of FlexSteel with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth and other anticipated benefits resulting from the acquisition, and our business, results of operations and financial condition could be materially and adversely affected.

FlexSteel may have liabilities that are not known to us and the indemnities negotiated in the Merger Agreement may not offer adequate protection.

As part of the Merger, we have assumed certain liabilities of FlexSteel.

There may be liabilities that we failed or were unable to discover in the course of performing due diligence investigations into FlexSteel.

As part of the Merger, we assumed certain liabilities of FlexSteel.

There may be liabilities that we failed to identify or we were unable to discover in the course of performing due diligence investigations into FlexSteel.

We may also have not correctly assessed the significance of certain FlexSteel liabilities identified in the course of our due diligence.

Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

As we integrate FlexSteel into our operations, we may learn additional information about FlexSteel, such as unknown or contingent liabilities and issues relating to compliance with applicable laws, that could potentially have an adverse effect on our business, financial condition and results of operations.

As we continue to integrate FlexSteel into our operations, we may learn additional information about FlexSteel, such as unknown or contingent liabilities and issues relating to compliance with applicable laws, that could potentially have an adverse effect on our business, financial condition and results of operations.

We will not be able to enforce claims with respect to the representations and warranties that the sellers of FlexSteel provided under the Merger Agreement.

2 unchanged sentences

The sellers’ liability with respect to breaches of their representations and warranties under the Merger Agreement is limited.

To provide for coverage against certain breaches by the sellers of their representations and warranties and certain pre-closing taxes of FlexSteel, we have obtained a representation and warranty insurance policy.

To provide for coverage against certain breaches by the sellers of their representations and warranties and certain pre-closing taxes of FlexSteel, we obtained a representation and warranty insurance policy.

The policy is subject to a retention amount, exclusions, policy limits and certain other customary terms and conditions.

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As cyberattacks continue to evolve, including those leveraging artificial intelligence, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerabilities to cyberattacks.

In addition, new laws and regulations governing data privacy, cybersecurity, and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

In addition, new laws and

regulations governing data privacy, cybersecurity, and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

Our business is subject to complex and evolving laws and regulations regarding privacy and data protection (“data protection laws”).

22 unchanged sentences

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