What changed in Nine Energy Service, Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, Nine Energy Service, Inc. (NINE) added 239 paragraphs, removed 239, and edited 172 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+94/−95), Item 1A. Risk Factors (+77/−83), Item 1. Business (+63/−56).

Did Nine Energy Service, Inc. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 77 new/edited paragraphs and 83 removed paragraphs versus the 2022 10-K.

What changed in Nine Energy Service, Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 94 new/edited paragraphs and 95 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did Nine Energy Service, Inc.'s Legal Proceedings (Item 3) change in 2023?

Item 3 shows 1 added/edited paragraphs and 1 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this NINE 10-K diff come from?

The source filings are Nine Energy Service, Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in Nine Energy Service, Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of Nine Energy Service, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+239 added−239 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-08)

Top changes in Nine Energy Service, Inc.'s 2023 10-K

239 paragraphs added · 239 removed · 172 edited across 6 sections

Item 7. Management's Discussion & Analysis+94 / −95 · 64 edited
Item 1A. Risk Factors+77 / −83 · 61 edited
Item 1. Business+63 / −56 · 43 edited
Item 5. Market for Registrant's Common Equity+2 / −2 · 1 edited
Item 2. Properties+2 / −2 · 2 edited

Item 1. Business

Business — how the company describes what it does

43 edited+20 added−13 removed127 unchanged

2022 filing

2023 filing

Biggest changeSubstantial 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 the safe operation of commercial motor vehicles.

Biggest changeIn connection with these rules, 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 the safe operation of commercial motor vehicles. 9 Water Discharges The Federal Water Pollution Control Act (the “Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States (“WOTUS”) and state waters.

Finally, most scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have 11 significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events; if such effects were to occur, they could have an adverse impact on our operations.

Finally, most scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events; if such effects were to occur, they could have an adverse impact on our operations.

In addition to the EPA’s Subpart OOOO regulations and proposed rules discussed above, other federal agencies have promulgated rules regulating methane. On November 30, 2022, the U.S. Bureau of Land Management (the “BLM”) proposed new regulations to reduce the waste of natural gas during the production of oil and gas on federal and tribal lands.

In addition to the EPA’s new Subpart OOOO regulations discussed above, other federal agencies have promulgated rules regulating methane. In November 2022, the U.S. Bureau of Land Management (the “BLM”) proposed new regulations to reduce the waste of natural gas during the production of oil and gas on federal and tribal lands.

The proposed rule would require new and existing operators to submit waste minimization plans with all applications for permits to drill oil wells and includes a number of specific affirmative obligations that operators must take to avoid wasting oil or gas through venting, flaring, and leaks.

The proposed rule 12 would require new and existing operators to submit waste minimization plans with all applications for permits to drill oil wells and includes a number of specific affirmative obligations that operators must take to avoid wasting oil or gas through venting, flaring, and leaks.

On January 7, 2021, the DOI finalized a rule limiting application of the MBTA; however, the DOI revoked the rule in October 2021 and issued an advance notice of proposed rulemaking seeking comment on the DOI’s plan to develop regulations that authorize incidental take under certain prescribed conditions.

In January 2021, the DOI finalized a rule limiting application of the MBTA; however, the DOI revoked the rule in October 2021 and issued an advance notice of proposed rulemaking seeking comment on the DOI’s plan to develop regulations that authorize incidental take under certain prescribed conditions.

However, any new regulations implementing stricter permitting requirements could delay or impair our or our customers’ ability to obtain air emission permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant.

Any new regulations implementing stricter permitting requirements could delay or impair our or our customers’ ability to obtain air emission permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant.

Endangered Species Act and Migratory Bird Treaty Act The Endangered Species Act (the “ESA”) was established to protect endangered and threatened species. Pursuant to that act, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species or its habitat. The U.S.

Endangered Species Act and Migratory Bird Treaty Act The Endangered Species Act was established to protect endangered and threatened species. Pursuant to that act, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species or its habitat. The U.S.

For example, some states have banned the use of 12 high-volume hydraulic fracturing, and others have adopted regulations that impose new or more stringent permitting, disclosure, disposal, and well construction requirements on hydraulic fracturing operations.

For example, some states have banned the use of high-volume hydraulic fracturing, and others have adopted regulations that impose new or more stringent permitting, disclosure, disposal, and well construction requirements on hydraulic fracturing operations.

While we are not dependent on any single supplier for those materials, parts, or components, certain product lines depend on a limited number of third-party suppliers and vendors. During the year ended December 31, 2022, no supplier of the materials used in our services provided over 10% of our materials or equipment as a percentage of overall costs.

While we are not dependent on any single supplier for those materials, parts, or components, certain product lines depend on a limited number of third-party suppliers and vendors. During the year ended December 31, 2023, no supplier of the materials used in our services provided over 10% of our materials or equipment as a percentage of overall costs.

For the year ended December 31, 2022, our top five customers collectively accounted for approximately 21% of our revenues. Demand for our services and products is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers’ willingness to spend capital on the exploration for and development of oil and natural gas.

For the year ended December 31, 2023, our top five customers collectively accounted for approximately 21% of our revenues. Demand for our services and products is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers’ willingness to spend capital on the exploration for and development of oil and natural gas.

There is also increasing interest in nature-related matters beyond protected species, such as general biodiversity, which may similarly require us or our customers to incur costs or take other measures that may adversely impact our business or operations. 13

Our “extended reach” units are capable of reaching the toe of wells with total measured depths of 24,000 feet and beyond, including lateral lengths in excess of 12,500 feet, keeping pace with the industry’s most challenging downhole environments.

Our “extended reach” units are capable of reaching the toe of wells with total measured depths of 27,000 feet and beyond, including lateral lengths in excess of 12,500 feet, keeping pace with the industry’s most challenging downhole environments.

To the extent a future rule expands the range of properties subject to the Clean Water Act’s jurisdiction, certain energy companies could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas, which in turn could reduce demand for our services.

To the extent a future rule or court decision expands the range of properties subject to the Clean Water Act’s jurisdiction, certain energy companies could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas, which in turn could reduce demand for our services.

During the winter months (portions of the first and fourth quarters) and periods of heavy snow, ice, or rain, particularly in the northeastern U.S., North Dakota, Rockies, and western Canada, our customers may delay operations or we may not be able to operate or move our equipment between locations.

During the winter months (portions of the first and fourth quarters) and periods of heavy snow, ice, or rain, particularly in the northeastern U.S., North Dakota, Rocky Mountains, and western Canada, our customers may delay operations or we may not be able to operate or move our equipment between locations.

On July 16, 2020, the Council on Environmental Quality revised NEPA’s implementing regulations in an effort to streamline approvals for projects. On October 6, 2021, the Council on Environmental Quality announced its Phase 1 rule, the first of two planned rules to roll back the 2020 rule, which was finalized on April 20, 2022.

In July 2020, the Council on Environmental Quality revised NEPA’s implementing regulations in an effort to streamline approvals for projects. In October 2021, the Council on Environmental Quality announced its Phase 1 rule, the first of two planned rules to roll back the 2020 rule, which was finalized in April 2022.

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 these laws and regulations. Transportation Safety and Compliance At December 31, 2022, we operated a fleet in excess of 550 commercial motor vehicles.

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 these laws and regulations. Transportation Safety and Compliance At December 31, 2023, we operated a fleet in excess of 590 commercial motor vehicles.

Punctuality of service has become one of the primary metrics that E&P operators use to evaluate the cementing services they receive. Key contributors to our 90% on-time rate include our lab capabilities, personnel, close proximity to our customers’ acreage, dual-sided bulk loading plants, and our service-driven culture. Completion Tools: We provide downhole solutions and technology used for multistage completions.

Punctuality of service is one of the primary metrics that E&P operators use to evaluate the cementing services they receive. Key contributors to our 89% on-time rate include our lab capabilities, personnel, close proximity to our customers’ acreage, dual-sided bulk loading plants, and our service-driven culture. Completion Tools: We provide downhole solutions and technology used for multistage completions.

We have converted and continue to convert our hydraulic wireline units to electric, which significantly reduces carbon emissions and the use of diesel. We currently have wireline units equipped with Coated Line, which is a coated wireline that significantly reduces injector oil use.

We have converted several of our hydraulic wireline units to electric, which significantly reduces carbon emissions and the use of diesel. We currently have wireline units equipped with Coated Line, which is a coated wireline that significantly reduces injector oil use.

In light of concerns about seismic activity being triggered by the injection of produced waters into underground wells, certain regulators are also considering additional requirements related to seismic safety for hydraulic fracturing activities. A 2015 U.S.

In light of concerns about seismic activity being triggered by the injection of produced waters into underground wells, certain regulators have also implemented or are considering implementing additional requirements related to seismic safety for hydraulic fracturing activities. A 2015 U.S.

Our major competitors include Halliburton Company, Schlumberger Limited, NCS Multistage, NexTier Oilfield Solutions, KLX Energy Services Holdings, Innovex, and a significant number of private and locally-oriented businesses. Suppliers We purchase a wide variety of raw materials, parts, and components that are manufactured and supplied for our operations from various suppliers.

Our major competitors include Halliburton Company, Schlumberger Limited, NCS Multistage, Patterson-UTI Energy, KLX Energy Services Holdings, Innovex, and a significant number of private and locally-oriented businesses. Suppliers We purchase a wide variety of raw materials, parts, and components that are manufactured and supplied for our operations from various suppliers.

While we specialize in larger-diameter (2 3/8” and 2 5/8”) coiled tubing units, we also offer 2” and 1 1/4” 5 diameter solutions to our customers. From January 2018 through December 2022, we have performed approximately 5,890 jobs and deployed more than 160 million running feet of coiled tubing, with a success rate of over 99%.

While we specialize in larger-diameter (2 3/8” and 2 5/8”) coiled tubing units, we also offer 2” and 1 1/4” 5 diameter solutions to our customers. From January 2018 through December 2023, we have performed approximately 7,100 jobs and deployed more than 191 million running feet of coiled tubing, with a success rate of over 99%.

Through these reductions in cycle time, our dissolvable plugs can help increase our customers’ internal rate of return and provide a safer and more efficient working environment. From January 2018 through December 2022, we deployed approximately 377,100 isolation, stage one, and casing flotation tools.

Through these reductions in cycle time, our dissolvable plugs can help increase our customers’ internal rate of return and provide a safer and more efficient working environment. From January 2018 through December 2023, we deployed approximately 470,600 isolation, stage one, and casing flotation tools.

Employees As of December 31, 2022, we had 1,212 employees, all of which were full-time. We are not a party to any collective bargaining agreements.

Employees As of December 31, 2023, we had 1,157 employees, all of which were full-time. We are not a party to any collective bargaining agreements.

This customized design significantly decreases our risk of downtime due to mechanical failure and eliminates the necessity of having an additional cementing unit on standby. We have invested in the highest quality cementing equipment. From January 2018 through December 2022, we completed approximately 18,100 cementing jobs, with an on-time rate of approximately 90%.

This customized design significantly decreases our risk of downtime due to mechanical failure and eliminates the necessity of having an additional cementing unit on standby. We have invested in the highest quality cementing equipment. From January 2018 through December 2023, we completed approximately 22,000 cementing jobs, with an on-time rate of approximately 89%.

We deploy proprietary specialized tools like our fully-composite and dissolvable frac plugs through our wireline units. From January 2018 through December 2022, we completed approximately 140,700 wireline stages with a success rate of approximately 99%.

We deploy proprietary specialized tools like our fully-composite and dissolvable frac plugs through our wireline units. From January 2018 through December 2023, we completed approximately 163,600 wireline stages with a success rate of approximately 99%.

Regulatory Matters Our operations are subject to numerous stringent and complex laws and regulations at the U.S. federal, state, and local levels governing the discharge of materials into the environment, environmental protection, and health and safety aspects of our operations. In addition, due to our operations in Canada, we are subject to Canadian environmental statutes and regulations.

Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and many states have already established regional GHG “cap-and-trade” programs, no new comprehensive federal laws regulating the emission of GHGs or directly imposing a price of carbon have been adopted in recent years. However, such legislation has periodically been introduced in the U.S.

Congress has from time to time considered adopting legislation to reduce emissions of GHGs, but no new comprehensive federal laws regulating the emission of GHGs or directly imposing a price of carbon have been adopted in recent years. However, such legislation has periodically been introduced in the U.S.

The proposed rule would make the existing regulations in Subpart OOOOa more stringent and create a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).

The new rule makes the existing regulations in Subpart OOOOa more stringent and creates a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources that commenced construction, modification, or reconstruction after December 6, 2022, including standards focusing on certain source types that have never been regulated under the CAA (including intermittent vent pneumatic controllers, associated gas, and liquids unloading facilities).

The impacts of these orders, pledges, agreements, and any legislation, regulation, regulatory initiatives, changes to existing regulation or executive actions promulgated to fulfill the United States’ commitments under the Paris Agreement, COP26, or other international conventions cannot be predicted at this time. While the Biden Administration has pursued executive actions to address climate change, the U.S.

The impacts of these orders, pledges, agreements, and any legislation, regulation, regulatory initiatives, changes to existing regulation or executive actions cannot be predicted at this time. While the Biden Administration has pursued executive actions to address climate change, the U.S.

In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by EPA.

In addition, the final rule establishes “Emissions Guidelines” in Subpart OOOOc, which requires states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by EPA.

Our systems provide completion efficiencies at the wellsite by reducing our customers’ equipment needs and stimulation time and allowing for specific zonal treatment. Our dissolvable frac plugs help operators reduce cycle times to bring production online faster, decrease the amount of equipment and people needed on location, and significantly reduce carbon emissions compared to a traditional composite plug completion.

Our dissolvable frac plugs help operators reduce cycle times to bring production online faster, decrease the amount of equipment and people needed on location, and significantly reduce carbon emissions compared to a traditional composite plug completion.

In addition, many state and local leaders have intensified or stated their intent to intensify efforts to support international climate commitments and treaties, in addition to developing programs that are aimed at reducing GHG emissions by means of cap-and-trade programs, carbon taxes, or encouraging the use of renewable energy or alternative low-carbon fuels.

In addition, many U.S. state and local governments have intensified or stated their intent to intensify efforts to support international climate commitments and treaties, in addition to developing programs that are aimed at tracking and reducing GHG emissions by means of carbon taxes, policies or incentives to encourage the use of renewable energy or alternative low-carbon fuels, the development of GHG inventories, and cap-and-trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting GHGs.

Pursuant to its obligations as a signatory to the Paris Agreement, the United States has set a target to reduce its GHG emissions by 50-52% by the year 2030 as compared with 2005 levels and has agreed to provide periodic updates on its progress.

In February 2021, the United States rejoined the Paris Agreement and announced that it was setting a target to reduce U.S. GHG emissions by 50-52% by the year 2030 as compared with 2005 levels and agreed to provide periodic updates on its progress.

The discharge of pollutants into, and other impacts to, regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. The scope of federal jurisdictional reach over waters of the United States has been subject to substantial revision in recent years.

The discharge of pollutants into, and other impacts to, regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA, the U.S. Army Corps of Engineers (the “Corps”) or an analogous state agency.

A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development.

Fish and Wildlife Service (the “FWS”) must also designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development.

As such, we are subject to a number of federal and state laws and regulations, including the Federal Motor Carrier Safety Regulations and Hazardous Material Regulations for interstate travel and comparable state regulations for intrastate travel.

As such, we are subject to regulation as a motor carrier by the U.S. Department of Transportation (the “DOT”) and analogous state agencies and their applicable federal and state laws and regulations, including the Federal Motor Carrier Safety Regulations and Hazardous Materials Regulations for interstate travel promulgated by the FMCSA under the DOT and comparable state regulations for intrastate travel.

The proposed rule has received over 3500 public comments, and the final rule may face challenges and legal scrutiny. As a result, future implementation of methane rules by the BLM is uncertain at this time.

A final rule was expected by January 2024 but has not been issued to date, and such final rule, once published, may face challenges and legal scrutiny. As a result, future implementation of methane rules by the BLM is uncertain at this time.

The CRA did not address the 2020 Technical Rule. On November 15, 2021, the EPA proposed a new rule intended to reduce methane emissions from oil and gas sources.

The CRA resolution did not address the 2020 Technical Rule. In December 2023, the EPA issued a final rule, under the CAA’s New Source Performance Standards, intended to reduce methane emissions from new and existing oil and gas sources.

A coalition of states and cities, environmental groups, and agricultural groups challenged the NWPR, which was vacated by a federal district court in August 2021. The EPA is undergoing a two-phase rulemaking process to redefine the definition of waters of the U.S., which could be impacted by the U.S. Supreme Court’s upcoming decision in Sackett v.

A coalition of states and cities, environmental groups, and agricultural groups challenged the NWPR, which was vacated by a federal district court in August 2021. In January 2023, the EPA and the Corps issued a final rule that based the definition of WOTUS on the pre-2015 definition. Separately, in May 2023, the U.S. Supreme Court’s decision in Sackett v.

In September 2015, the EPA and U.S. Army Corps of Engineers (“Corps”) issued a rule defining the scope of federal jurisdiction over wetlands and other waters of the U.S., which never took effect before being replaced by the Navigable Waters Protection Rule (the “NWPR”) in December 2019.

The scope of federal jurisdictional reach over waters of the United States has been subject to substantial revision in recent years. In 2015, the EPA and the Corps issued a rule defining the scope of federal jurisdiction over WOTUS, which never took effect before being replaced by the Navigable Waters Protection Rule (the “NWPR”) in 2020.

Additionally, on March 21, 2022, the SEC issued a proposed rule regarding the enhancement and standardization of mandatory climate-related disclosures for investors.

Regulations requiring the disclosure of GHG emissions, and other climate-related information or information substantiating climate-related claims, are also increasingly being adopted or proposed at the federal and state level. For example, the SEC issued a proposed rule in March 2022 regarding the enhancement and standardization of mandatory climate-related disclosures for investors.

Congress and may be proposed or adopted in the future.

Congress and may be proposed or adopted in the future, and energy legislation and other regulatory initiatives have been proposed that are relevant to GHG emissions issues.

The Phase 1 final rule generally restores certain regulatory provisions that were in effect prior to the 2020 rule.

The Phase 1 final rule generally restores certain regulatory provisions that were in effect prior to the 2020 rule. In July 2023, the Council on Environmental Quality proposed a Phase 2 rule that would accelerate NEPA reviews while maintaining consideration of relevant environmental, climate change, 13 and environmental justice effects. The final rule is expected in April 2024.

Removed

Water Discharges The Federal Water Pollution Control Act (the “Clean Water Act”) and analogous state laws impose restrictions and 9 strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into federal and state waters.

Added

Our tool portfolio also includes a multi-cycle barrier valve to address the international, conventional markets. Our systems provide completion efficiencies at the wellsite by reducing our customers’ equipment needs and stimulation time and allowing for specific zonal treatment.

Removed

EPA, a case regarding the proper test in determining whether wetlands qualify as “Waters of the United States” or WOTUS. A final rule, known as “Rule 1,” was announced by the EPA and Corps in December 2022.

Added

In addition, due to our operations in Canada, we are subject to Canadian environmental statutes and regulations as well as Canada’s new anti-forced labor law.

Removed

The EPA and Corps are expected to propose a second rule, known as “Rule 2,” further refining Rule 1 by November 2023 and issue a final rule by July 2024.

Added

These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations, regulatory safety, equipment testing, driver requirements and specifications, and insurance requirements.

Removed

Under the proposed rule, states would have three years to develop their compliance plan for existing sources, and the regulations for new sources would take effect immediately upon issuance of a final rule. On November 11, 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.

Added

EPA narrowed federal jurisdiction over wetlands to “traditional navigable waters” and wetlands or other waters that have a “continuous surface connection” with, or are otherwise indistinguishable from, traditional navigable waters. In September 2023, the EPA and the Corps published a direct-to-final rule that conforms the regulatory definition of WOTUS to the Supreme Court’s May 2023 decision in Sackett .

Removed

Among other things, the November 2022 supplemental proposed rule removed an emissions monitoring exemption for small wellhead-only sites and creates a new third-party monitoring program to flag large emissions events, referred to in the proposed rule as “super emitters.” The EPA is expected to issue a final rule by August 2023.

Added

However, litigation opposing the September 2023 final rule remains ongoing and substantial uncertainty exists with respect to future implementation of the September 2023 rule and the scope of the Clean Water Act’s jurisdiction more generally.

Removed

As a result of these regulatory changes, the scope of any final methane regulations or the costs for complying with 10 federal methane regulations are uncertain.

Added

The new rule phases out flaring through Subpart OOOOb, which prohibits routine flaring from new oil wells after the phase-in period, and through a new Subpart OOOOc, which prohibits flaring absent a showing of technical infeasibility for existing wells with documented methane emissions of 40 tons per year or 10 more.

Removed

Although the agreement did not create any binding obligations for nations to limit their GHG emissions, it did include pledges to voluntarily limit or reduce future emissions. On June 1, 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement and completed the process of withdrawing from the Paris Agreement on November 4, 2020.

Added

The final rule gives states, along with federal tribes that wish to regulate existing sources, two years to develop and submit their plans for reducing methane emissions from existing sources. The final emissions guidelines under Subpart OOOOc provide three years from the plan submission deadline for existing sources (i.e., sources constructed prior to December 6, 2022) to comply.

Removed

However, on January 20, 2021, President Biden issued written notification to the United Nations of the United States’ intention to rejoin the Paris Agreement, which became effective on February 19, 2021.

Added

Although there may be an adverse financial impact (including compliance costs, potential permitting delays and increased regulatory requirements) associated with these regulatory changes, the extent and magnitude of impacts cannot be reliably or accurately estimated due to the present uncertainty regarding any additional measures and how they will be implemented.

Removed

Since its formal launch at the United Nations Climate Change Conference (“COP26”), in Glasgow, at least 150 countries have joined the pledge. COP26 then concluded with the finalization of the Glasgow Climate Pact, which stated long-term global goals (including those in the Paris Agreement) to limit the increase in the global average temperature and emphasized reductions in GHG emissions.

Added

Since its formal launch at the United Nations 26th Conference of the Parties, over 150 countries have joined the pledge.

Removed

Fish and Wildlife Service (the “FWS”) must also designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species.

Added

At the 27th Conference of the Parties, President Biden announced the EPA’s supplemental proposed rule to reduce methane emissions from existing oil and gas sources and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.

Removed

In August 2019, the FWS and National Marine Fisheries Service issued three rules amending implementation of the ESA regulations revising, among other things, the process for listing species and designating critical habitat, which was challenged by a coalition of states and environmental groups.

Added

At the 28th Conference of the Parties, member countries agreed to the first “global stocktake,” which calls on countries to contribute to global efforts, including a tripling of renewable energy capacity and doubling energy efficiency improvements by 2030, accelerating efforts toward the phase-down of unabated coal power, phasing out inefficient fossil fuel subsidies, and transitioning away from fossil fuels in energy systems.

Removed

In addition, on December 18, 2020, the FWS amended its regulations governing critical habitat designations, which were also subject to litigation. In June and July 2022, the FWS issued final rules rescinding the regulations defining “habitat” and governing critical habitat exclusions.

Added

For example, the Inflation Reduction Act of 2022, which appropriates significant funding for renewable energy initiatives and, for the first time, imposes a fee on GHG emissions from certain oil and gas facilities, was signed into law in August 2022.

Removed

The notice of proposed rulemaking is anticipated in March 2023 and is expected to be finalized by the end of 2023. Future implementation of the rules implementing the Endangered Species Act and the MBTA are uncertain.

Added

The Inflation Reduction Act amends the CAA to include a Methane Emissions and Waste Reduction Incentive Program, which requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under the EPA’s Greenhouse Gas Reporting Program.

Added

To implement the program, the Inflation Reduction Act requires revisions to GHG reporting regulations for 11 petroleum and natural gas systems (Subpart W) by 2024. In July 2023, the EPA proposed to expand the scope of the Greenhouse Gas Reporting Program for petroleum and natural gas facilities, as required by the Inflation Reduction Act.

Added

Among other things, the proposed rule would expand the emissions events that are subject to reporting requirements to include “other large release events” and apply reporting requirements to certain new sources and sectors.

Added

The rule is expected to be finalized in the spring of 2024 and become effective on January 1, 2025, in advance of the deadline for GHG reporting for 2024 (March 2025). In January 2024, the EPA proposed a rule implementing the Inflation Reduction Act’s methane emissions charge.

Added

The proposed rule includes potential methodologies for calculating the amount by which a facility’s reported methane emissions are below or exceed the waste emissions thresholds and contemplates approaches for implementing certain exemptions created by the Inflation Reduction Act.

Added

The methane emissions charge imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 would be $900 per ton emitted over annual methane emissions thresholds and would increase to $1,200 in 2025 and $1,500 in 2026.

Added

The emissions fee and funding provisions of the law could increase operating costs within the oil and gas industry and accelerate the transition away from fossil fuels, which could in turn adversely affect our and our customers’ business and results of operations.

Added

The notice of proposed rulemaking was anticipated in November 2023, with final action expected in April 2024, but the FWS instead announced in November 2023 that it had received additional technical comments that need further review. As a result, future amendments to the MBTA are uncertain.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+16 added−22 removed230 unchanged

2022 filing

2023 filing

Biggest changeOur business is cyclical, and we depend on our customers’ willingness to make operating and capital expenditures to explore for, develop, and produce oil and natural gas, which, in turn, largely depends on prevailing industry and financial market conditions that are influenced by numerous factors beyond our control, including: • the level of prices, and expectations about future prices, for oil and natural gas; • the domestic and foreign supply of, and demand for, oil and natural gas and related products; • the level of global and domestic oil and natural gas production; • the supply of, and demand for, hydraulic fracturing and other oilfield services and equipment; • governmental regulations, including the policies of governments regarding the exploration for and production and development of their oil and natural gas reserves; • the cost of exploring for, developing, producing, and delivering oil and natural gas; • available pipeline, storage, and other transportation capacity; • worldwide political, military, and economic conditions; • global or national health epidemics or concerns, such as the coronavirus pandemic that began in 2020, which may reduce demand for oil, natural gas, and related products because of reduced global or national economic activity; • lead times associated with acquiring equipment and products and availability of qualified personnel; • the discovery rates of new oil and natural gas reserves; • federal, state, and local regulation of hydraulic fracturing and other oilfield service activities, as well as E&P activities, including public pressure on governmental bodies and regulatory agencies to regulate our industry; • economic and political conditions in oil and natural gas producing countries; • actions of OPEC, its members, and other state-controlled oil companies relating to oil price and production levels, including announcements of potential changes to such levels; • advances in exploration, development, and production technologies or in technologies affecting energy consumption; • activities by non-governmental organizations to restrict the exploration, development, and production of oil and natural gas so as to minimize emissions of carbon dioxide, a GHG; • the price and availability of alternative fuels and energy sources; • global weather conditions and natural disasters, including those related to climate change; and 14 • uncertainty in capital and commodities markets and the ability of oil and natural gas producers to access capital.

Biggest changeOur business is cyclical, and we depend on our customers’ willingness to make operating and capital expenditures to explore for, develop, and produce oil and natural gas, which, in turn, largely depends on prevailing industry and financial market conditions that are influenced by numerous factors beyond our control, including: • the level of prices, and expectations about future prices, for oil and natural gas; • the domestic and foreign supply of, and demand for, oil and natural gas and related products; • the level of global and domestic oil and natural gas production; • the supply of, and demand for, hydraulic fracturing and other oilfield services and equipment; • governmental regulations, including the policies of governments regarding the exploration for and production and development of their oil and natural gas reserves; • the cost of exploring for, developing, producing, and delivering oil and natural gas; • available pipeline, storage, and other transportation capacity; • worldwide political, military, and economic conditions; • lead times associated with acquiring equipment and products and availability of qualified personnel; • the discovery rates of new oil and natural gas reserves; • federal, state, and local regulation of hydraulic fracturing and other oilfield service activities, as well as E&P activities, including public pressure on governmental bodies and regulatory agencies to regulate our industry; • economic and political conditions in oil and natural gas producing countries; • actions of OPEC, its members, and other state-controlled oil companies relating to oil price and production levels, including announcements of potential changes to such levels; • advances in exploration, development, and production technologies or in technologies affecting energy consumption; • activities by non-governmental organizations to restrict the exploration, development, and production of oil and natural gas so as to minimize emissions of carbon dioxide, a GHG; • the price and availability of alternative fuels and energy sources; • global weather conditions and natural disasters, including those related to the physical effects of climate change; and • uncertainty in capital and commodities markets and the ability of oil and natural gas producers to access capital. 15 A decline in oil and natural gas commodity prices may adversely affect the demand for our products and services and the rates we are able to charge.

An event of default, if not waived, could result in acceleration of the indebtedness outstanding under the applicable agreement and an event of default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements to which we are a party. Any such accelerated indebtedness would become immediately due and payable.

Also, as a part of resolving such disputes, we may enter into cross-licenses or other agreements, which could reduce the value of our existing intellectual property rights. The results or costs of any such dispute resolution or litigation proceedings may have an adverse effect on our business, operating results, and financial condition.

Also, as a part of resolving such disputes, we may enter into licenses, cross-licenses or other agreements, which could reduce the value of our existing intellectual property rights. The results or costs of any such dispute resolution or litigation proceedings may have an adverse effect on our business, operating results, and financial condition.

Competitive pressures could reduce our market share or require us to reduce the price of our services and products, particularly during industry downturns, either of which would harm our business and operating results. Significant increases in 19 overall market capacity have also caused active price competition and led to lower pricing and utilization levels for our services and products.

Competitive pressures could reduce our market share or require us to reduce the price of our services and products, particularly during industry downturns, either of which would harm our business and operating results. Significant increases in overall market capacity have also caused active price competition and led to lower pricing and utilization levels for our services and products.

Increased attention to climate change from governmental and regulatory bodies, investors, consumers, industry and 15 other stakeholders, changes in consumer behavior and related demand for alternatives to oil and natural gas, societal expectations on companies to address climate change, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies and initiatives (at the government, regulator, corporate and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions measures and responsible energy development, technological advances with respect to the generation, transmission, storage and consumption of energy, and increased availability and competitiveness of alternative energy sources (such as wind, solar geothermal, tidal, fuel cells, and biofuels).

Increased attention to climate change from governmental and regulatory bodies, investors, consumers, industry and other stakeholders, changes in consumer behavior and related demand for alternatives to oil and natural gas, societal expectations on companies to address climate change, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the 16 enactment of climate change-related regulations, policies and initiatives (at the government, regulator, corporate and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions measures and responsible energy development, technological advances with respect to the generation, transmission, storage and consumption of energy, and increased availability and competitiveness of alternative energy sources (such as wind, solar geothermal, tidal, fuel cells, and biofuels).

These risks could have a material adverse effect on our business, financial condition, and results of operations and could lead to litigation or regulatory action against us. Risks Related to Certain Significant Stockholders Significant ownership of our common stock by certain stockholders could adversely affect our other stockholders. SCF VII, L.P. and SCF-VII(A), L.P.

These risks could have a material adverse effect on our business, financial condition, and results of operations and could lead to litigation or regulatory action against us. 28 Risks Related to Certain Significant Stockholders Significant ownership of our common stock by certain stockholders could adversely affect our other stockholders. SCF VII, L.P. and SCF-VII(A), L.P.

In the case of an NOL that arose in a taxable year beginning before January 1, 2018, any unused annual limitation with respect to an NOL generally may be carried over to later years, subject to the expiration of such NOL 20 years after it arose.

In the case of an NOL that arose in a taxable year beginning before January 1, 2018, any unused annual 32 limitation with respect to an NOL generally may be carried over to later years, subject to the expiration of such NOL 20 years after it arose.

If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters (or 16 meet sustainability goals and targets that we have set) as they continue to evolve, or if we are perceived to have not responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected.

If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters (or 17 meet sustainability goals and targets that we have set) as they continue to evolve, or if we are perceived to have not responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected.

Any significant future increase in overall market capacity for completion services may adversely affect our business, financial condition, and results of operations. Operational Risks Our operations are subject to conditions inherent in the oilfield services industry.

Any significant future increase in overall market capacity for completion services may adversely affect our business, financial condition, and results of operations. 20 Operational Risks Our operations are subject to conditions inherent in the oilfield services industry.

Sales to customers in countries other than the U.S. are subject to various risks, including: • volatility in political, social, and economic conditions; • social unrest, acts of terrorism, war, or other armed conflicts; • confiscatory taxation or other adverse tax policies; • deprivation of contract rights; • trade and economic sanctions or other restrictions imposed by the European Union, the U.S., or other countries; 30 • exposure under the FCPA or similar legislation, as discussed in the below risk factor; and • currency exchange controls.

Sales to customers in countries other than the U.S. are subject to various risks, including: • volatility in political, social, and economic conditions; • social unrest, acts of terrorism, war, or other armed conflicts; • confiscatory taxation or other adverse tax policies; • deprivation of contract rights; • trade and economic sanctions or other restrictions imposed by the European Union, the U.S., or other countries; 31 • exposure under the FCPA or similar legislation, as discussed in the below risk factor; and • currency exchange controls.

The SMS is intended to allow the DOT to identify carriers with safety issues and intervene to address those problems. 25 The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period, and limits on vehicle weight and size.

The SMS is intended to allow the DOT to identify carriers with safety issues and intervene to address those problems. 26 The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period, and limits on vehicle weight and size.

During the past five years ending December 31, 2022, the posted price for West Texas Intermediate (“WTI”) oil has ranged from a low of $(36.98) per barrel in April 2020 to a high of $123.64 per barrel in March 2022, and the Henry Hub spot market price of gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $23.86 per MMBtu in February 2021.

During the five years ending December 31, 2023, the posted price for West Texas Intermediate (“WTI”) oil has ranged from a low of $(36.98) per barrel in April 2020 to a high of $123.64 per barrel in March 2022, and the Henry Hub spot market price of gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $23.86 per MMBtu in February 2021.

In addition, some parties have initiated public nuisance claims under federal or state common law against certain companies involved in the production of oil and natural gas, or claims alleging that the companies have been aware of the adverse effects of climate change for some time but failed to adequately disclose such impacts to their investors or customer.

Any actual or perceived conflicts of interest with respect to the foregoing could have an adverse impact on the trading price of our common stock. 28 Risks Related to Human Capital Our executive officers and certain key personnel are critical to our business, and these officers and key personnel may not remain with us in the future.

Any actual or perceived conflicts of interest with respect to the foregoing could have an 29 adverse impact on the trading price of our common stock. Risks Related to Human Capital Our executive officers and certain key personnel are critical to our business, and these officers and key personnel may not remain with us in the future.

Inflationary factors, such as increases in the labor costs, material costs, and overhead costs, may also adversely affect our financial position and operating results. Like others in our industry, in 2021 and 2022 we faced, and we continue to face, cost inflation with both labor and materials, which could offset any price increases for our products and services.

Inflationary factors, such as increases in the labor costs, material costs, and overhead costs, may also adversely affect our financial position and operating results. Like others in our industry, we faced, and we continue to face, cost inflation with both labor and materials, which could offset any price increases for our products and services.

Such actions could adversely affect our ability to successfully implement our business strategies, which could adversely affect our cash flows or results of operations. Certain of our directors may have conflicts of interest because they are also affiliates of SCF. The resolution of these conflicts of interest may not be in our or other stockholders’ best interests.

Volatility in oil and natural gas prices can impact our customers’ activity levels, 18 and current energy prices are important contributors to cash flow for our customers and their actual or perceived ability to fund exploration and development activities, which may limit our ability to increase or maintain prices.

Volatility in oil and natural gas prices can impact our customers’ activity levels, 19 and current energy prices are important contributors to cash flow for our customers and their actual or perceived ability to fund exploration and development activities, which may limit our ability to increase or maintain prices.

In addition, most scientists have concluded that increasing concentrations of GHGs 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.

Additionally, the SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies. We cannot predict the costs of implementation or any potential adverse impacts resulting from the rulemaking.

For example, the SEC issued a proposed rule in March 25 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies. We cannot predict the costs of implementation or any potential adverse impacts resulting from the rulemaking.

If our systems for protecting against cyber security risks prove not to be sufficient, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, customer or business data; interruption of business operations; or additional costs to prevent, respond to, or mitigate cyber security attacks.

If our systems for protecting against cybersecurity risks prove not to be sufficient, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, customer or business data; interruption of business operations; or additional costs to prevent, respond to, or mitigate cybersecurity attacks.

In addition, although such projects may require material capital expenditures, there is no assurance that they will generate a positive return. Seasonal and adverse weather conditions and the physical risks arising from climate change may have a negative impact on our business and result of operations, including by adversely affecting demand for our products and services.

In addition, although such projects may require material capital expenditures, there is no assurance that they will generate a positive return. 21 Seasonal and adverse weather conditions and the physical risks arising from climate change may have a negative impact on our business and result of operations, including by impacting operations, increasing costs, and adversely affecting demand for our products and services.

Consequently, SCF is able to strongly influence all matters that require approval by our stockholders, including the election and removal of directors, changes to our organizational documents, and approval of acquisition offers and other significant corporate transactions. In addition, another one of our stockholders beneficially owned approximately 10% of our outstanding common stock as of December 31, 2022.

Consequently, SCF is able to strongly influence all matters that require approval by our stockholders, including the election and removal of directors, changes to our organizational documents, and approval of acquisition offers and other significant corporate transactions. In addition, another one of our stockholders beneficially owned approximately 8% of our outstanding common stock as of December 31, 2023.

Significant factors that are likely to affect near-term commodity prices include the extent to which members of OPEC and other oil exporting nations, including Russia, continue to reduce oil export prices and increase production; the effect of U.S. energy, monetary, and trade policies; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa; changes to energy and EPA policies; and overall North American natural gas supply and demand fundamentals, including the pace at which export capacity grows.

Significant factors that are likely to affect near-term commodity prices include actions of members of OPEC and other oil exporting nations, including Russia, relating to oil export prices and production levels; the effect of U.S. energy, monetary, and trade policies; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa; changes to energy and EPA policies; and overall North American natural gas supply and demand fundamentals, including the pace at which export capacity grows.

Our operations are subject to cyber security risks that could have a material adverse effect on our results of operations and financial condition. The efficient operation of our business is dependent on our information technology (“IT”) systems.

Our operations are subject to cybersecurity risks that could have a material adverse effect on our results of operations and financial condition. The efficient operation of our business is dependent on our information technology (“IT”) systems.

Also, during the spring thaw, which normally starts in late March and continues through June, some areas, primarily in western Canada, impose transportation restrictions to prevent damage caused by the spring thaw. For the years ended December 31, 2022 and 2021, we generated approximately 0.3% and 0.6%, respectively, of our revenue from our operations in western Canada.

Also, during the spring thaw, which normally starts in late March and continues through June, some areas, primarily in western Canada, impose transportation restrictions to prevent damage caused by the spring thaw. For both the years ended December 31, 2023 and 2022, we generated approximately 0.3% of our revenue from our operations in western Canada.

The terms of existing or future debt instruments may restrict us from adopting some of these 17 alternatives.

The terms of existing or future debt instruments may restrict us from adopting some of these 18 alternatives.

The inability to maintain our pricing and to increase our pricing as costs increase could have a material adverse effect on our business, financial position, results of operations, and cash flows. Intense competition in the markets for our dissolvable plug products may lead to pricing pressures, reduced sales, or reduced market share.

A 2015 U.S. Geological Survey report identified eight states, including Texas, with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction.

Geological Survey report identified eight states, including Texas, with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction.

A portion of our revenue is derived from sales to customers outside of the U.S., which exposes us to risks inherent in doing business internationally. In 2022, we derived 4.2% of our revenue from sales to customers outside of the U.S.

A portion of our revenue is derived from sales to customers outside of the U.S., which exposes us to risks inherent in doing business internationally. In 2023, we derived 4.7% of our revenue from sales to customers outside of the U.S.

As of February 1, 2023, we had $300.0 million of 13.000% Senior Secured Notes due 2028 (the “2028 Notes”) outstanding, and we had $72.0 million of borrowings under the ABL Credit Facility (as defined and described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Item 7 of Part II of this Annual Report) outstanding.

At December 31, 2023, we had $300.0 million of 13.000% Senior Secured Notes due 2028 (the “2028 Notes”) outstanding, and we had $57.0 million of borrowings under the ABL Credit Facility (as defined and described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Item 7 of Part II of this Annual Report) outstanding.

As of December 31, 2022, we had federal and state income tax NOLs of approximately $442.2 million, which will begin to expire between 2023 and 2034. Utilization of these NOLs depends on many factors, including our future taxable income, which cannot be assured.

As of December 31, 2023, we had federal and state income tax NOLs of approximately $471.8 million, which will begin to expire between 2024 and 2034. Utilization of these NOLs depends on many factors, including our future taxable income, which cannot be assured.

(collectively, “SCF”) owned approximately 27% of our outstanding common 27 stock as of December 31, 2022. In addition, certain of our directors are currently employed by SCF.

(collectively, “SCF”) owned approximately 26% of our outstanding common stock as of December 31, 2023. In addition, certain of our directors are currently employed by SCF.

The current trend in the insurance industry is towards larger deductibles and self-insured retentions. In addition, insurance may not be available in the future at rates that we consider reasonable and commercially justifiable, compelling us to have larger deductibles or self-insured retentions to effectively manage expenses.

Further, our insurance has deductibles or self-insured retentions and contains certain coverage exclusions. The current trend in the insurance industry is towards larger deductibles and self-insured retentions. In addition, insurance may not be available in 23 the future at rates that we consider reasonable and commercially justifiable, compelling us to have larger deductibles or self-insured retentions to effectively manage expenses.

These exclusive forum provisions are not intended to apply to actions arising under the Exchange Act or the Securities Act of 1933, as amended.

These exclusive forum provisions are not intended to apply to actions arising under the Exchange Act or the Securities Act.

We maintain what we believe is customary and reasonable insurance to protect our business against most potential losses, but such insurance may not be adequate to cover our liabilities, especially as the inherent risks in our operations increase with increasing well complexity, and we are not fully insured against all risks, including alleged employment-related liabilities. 22 Further, our insurance has deductibles or self-insured retentions and contains certain coverage exclusions.

Consequently, unless we revise our dividend policy, a stockholder’s only opportunity to achieve a return on his investment in us will be by selling his common stock at a price greater than the stockholder paid for it.

Consequently, currently, a stockholder’s only opportunity to achieve a return on his investment in us will be by selling his common stock at a price greater than the stockholder paid for it.

Nuclear Regulation Commission, Bureau of Alcohol, Tobacco, Firearms and Explosives, OSHA, and state regulatory agencies that regulate operations to prevent air, soil, and water pollution or to protect against the effects of ionizing radiation.

We are subject to the oversight of the EPA, the DOT, the U.S. Nuclear Regulation Commission, Bureau of Alcohol, Tobacco, Firearms and Explosives, OSHA, and state regulatory agencies that regulate operations to prevent air, soil, and water pollution or to protect against the effects of ionizing radiation.

If any such effects were to occur, they could adversely affect or delay demand for oil and natural gas, which, in turn, could also reduce the demand for our products and services; cause us to incur significant costs in preparing for or responding to the effects of climatic events themselves, which may not be fully insured; or cause an adverse impact on our operations.

There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price at which a stockholder purchased his shares of our common stock. We have operated at a loss in the past, and there is no assurance of our profitability in the future.

There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price at which a stockholder purchased his shares of our common stock.

The issuance of additional stock in the IPO, combined with ownership shifts over the rolling three-year period, resulted in an ownership change under Section 382, and we may be prevented from fully utilizing our NOLs prior to their expiration. Future changes in our stock ownership or future regulatory changes could also limit our ability to utilize our NOLs.

The issuance of additional stock in our initial public offering in 2018, combined with ownership shifts over the rolling three-year period, resulted in an ownership change under Section 382, and we may be prevented from fully utilizing our NOLs prior to their expiration.

To the extent we are not able to offset future taxable income with our NOLs, our net income and cash flows may be adversely affected. 32 Item 1B. Unresolved Staff Comments None.

Future changes in our stock ownership or future regulatory changes could also limit our ability to utilize our NOLs. To the extent we are not able to offset future taxable income with our NOLs, our net income and cash flows may be adversely affected. Item 1B. Unresolved Staff Comments None.

Certain of our directors, namely David C. Baldwin and Andrew L. Waite, are currently officers of SCF’s ultimate general partner. In addition, Mr. Waite is a director of National Energy Reunited Corp., a corporation in which SCF owns an approximate 9% equity interest as of December 31, 2022.

Waite, one of our directors, is currently an officer of SCF’s ultimate general partner. In addition, Mr. Waite is a director of National Energy Reunited Corp., a corporation in which SCF owns an approximate 9% equity interest as of December 31, 2023.

Parties concerned about the potential effects of climate change have directed their attention at sources of financing for energy companies, which has resulted in certain financial institutions, funds and other capital providers restricting or eliminating their investment in oil and natural gas activities.

Parties concerned about the potential effects of climate change have directed their attention at sources of financing for energy companies, including by promoting divestment of fossil fuel equities and pressuring lenders to limit funding and insurance underwriters to limit coverage to companies engaged in the extraction of fossil fuel reserves, which has resulted in certain financial institutions, funds, and other capital providers restricting or eliminating their investment in oil and natural gas activities.

We may not prevail in such appeal or in any dispute resolution proceedings relating to intellectual property rights, 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 26 otherwise violate the intellectual property rights of others.

We may not prevail in such appeal or in any other proceedings relating to intellectual property rights, and our intellectual property rights may be found 27 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, in which case we may be required to pay damages or other compensation to the other party (which could be costly) and/or cease use of such intellectual property.

Third parties from time to time may also initiate dispute resolution or litigation proceedings against us by asserting that our businesses infringe, impair, misappropriate, dilute, or otherwise violate another party’s intellectual property rights. For example, in April 2020, a third party filed a lawsuit asserting that our BreakThru Casing Flotation Device TM infringed its intellectual property rights.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to GHGs and 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. 24 Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, sequestration, and use of GHGs that could have a material adverse effect on our business, results of operations, prospects, and financial condition.

Average rig count increased by 51% from 2021 to 2022 and was 67% higher in 2022 than 2020. If prices of oil and natural gas decline or our customers do not increase capex and activity levels, our business, financial condition, results of operations, cash flows, and prospects may be materially and adversely affected.

If prices of oil and natural gas decline or our customers do not increase capex and activity levels, our business, financial condition, results of operations, cash flows, and prospects may be materially and adversely affected.

Consequently, a stockholder’s only opportunity to achieve a return on his investment is if the price of our common stock appreciates. We do not plan to declare dividends on shares of our common stock in the foreseeable future. Additionally, our debt 29 agreements place certain restrictions on our ability to pay cash dividends.

Other Material Risks We do not intend to pay dividends on our common stock, and our debt agreements place restrictions on our ability to do so. Consequently, a stockholder’s only opportunity to achieve a return on his investment is if the price of our common stock appreciates.

Additionally, an increase in regulatory requirements or limitations, restrictions, or moratoria on oil and natural gas exploration and completion activities at a federal, state, or local level could significantly delay or interrupt our operations, limit the amount of work we can perform, increase our costs of compliance, or increase the cost of our services, thereby possibly having a material adverse impact on our financial condition. 24 If we do not perform our operations in accordance with government, industry, customer, or our own stringent occupational safety, health, and environmental standards, we could lose business from our customers, many of whom have an increased focus on environmental and safety issues.

Opposition toward the oil and natural gas industry has been growing globally and is particularly pronounced in the United States. Companies in the oil and natural gas industry are often the target of activist efforts from both individuals and non-governmental organizations regarding safety, human rights, climate change, environmental matters, sustainability, and business practices.

Companies in the oil and natural gas industry are often the target of activist efforts from both individuals and non-governmental organizations or subject to pressure from other stakeholders regarding safety, human rights, climate change and other environmental matters, sustainability, and business practices.

We are dependent on customers in a single industry. The loss of one or more significant customers could adversely affect our financial condition, prospects, and results of operations. Our customers are engaged in the oil and natural gas E&P business, which has been historically volatile.

The loss of one or more significant customers could adversely affect our financial condition, prospects, and results of operations. Our customers are engaged in the oil and natural gas E&P business, which has been historically volatile. For the year ended December 31, 2023, our five largest customers collectively accounted for approximately 21% of total revenues.

Likewise, our customers may seek pricing declines more precipitously than our ability to reduce costs, leaving us unable to achieve or maintain pricing to our customers at a level sufficient to cover our costs. Furthermore, our industry has generally experienced price erosion for new technologies as additional competing products enter the market.

For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking a commercial driver’s license, and effective December 2017, the FMCSA has mandated electronic logging devices in all interstate commercial trucks.

For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking a commercial driver’s license; in December 2017, the FMCSA mandated electronic logging devices in all interstate commercial trucks; and in June 2020, the FMCSA revised its Hours-of-Service Rule to modify break requirements for drivers and the number of hours they may drive in adverse conditions.

Our assets require capital for maintenance, upgrades, and refurbishment, and we may require capital expenditures for new equipment. Our equipment requires capital investment in maintenance, upgrades, and refurbishment to maintain their competitiveness. For the years ended December 31, 2023 and 2022, we spent approximately $12.6 million and $13.6 million, respectively, on capital expenditures related to maintenance.

Further, if a customer was to enter into bankruptcy, it could also result in the cancellation of all or a portion of our service contracts with such customer at significant expense or loss of expected revenues to us. 21 In addition, during times when the oil or natural gas markets weaken, our customers are more likely to experience financial difficulties, including being unable to access debt or equity financing, which could result in a reduction in our customers’ spending for our products and services.

In addition, during times when the oil or natural gas markets weaken, our customers are more likely to experience financial difficulties, including being unable to access debt or equity financing, which could result in a reduction in our 22 customers’ spending for our products and services. We are dependent on customers in a single industry.

Studies by either state or federal agencies demonstrating a correlation between earthquakes and oil and natural gas activities could result in increased regulatory and operational burdens. In light of concerns about seismic activity being triggered by the injection of produced waters into underground wells, certain regulators are also considering additional requirements related to seismic safety for hydraulic fracturing activities.

In light of concerns about seismic activity being triggered by the injection of produced waters into underground wells, certain regulators have implemented or are considering implementing additional requirements related to seismic safety for hydraulic fracturing activities. A 2015 U.S.

The theme of capital discipline for E&P operators in the energy industry has led to a significant disconnect between commodity prices and market activity. The average WTI price for 2022 was $94.90, an increase of 39% over 2021 and $55.74 higher than 2020 and $37.91 higher than 2019.

Moreover, the theme of capital discipline for E&P operators in the energy industry has led to a disconnect between commodity prices and market activity. The average WTI price for 2023 was $77.58, an increase of 36% over the average WTI price in 2019; however, the average rig count decreased by 27% over that same period.

In January 2022, a jury in the Western District of Texas, Waco Division, found in the third party’s favor. However, we intend to appeal the jury’s verdict.

For example, in April 2020, a third party filed a lawsuit asserting that our BreakThru Casing Flotation Device TM infringed its intellectual property rights, and in January 2022, a jury in the Western District of Texas, Waco Division, found in the third party’s favor. However, we intend to appeal the jury’s verdict.

Any maintenance, upgrade, or refurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities. Further, such projects may require proportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms.

Further, such projects may require proportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms. To the extent we are unable to fund such projects, we may have less equipment available for service or our equipment may not be attractive to potential or current customers.

To the extent we are unable to fund such projects, we may have less equipment available for service or our equipment may not be attractive to potential or current customers. Additionally, competition or advances in technology within our industry 20 may require us to update our products and services.

Additionally, competition or advances in technology within our industry may require us to update our products and services.

Other Material Risks The coronavirus pandemic and related economic repercussions have had, and may continue to have, a material adverse effect on our business, liquidity, results of operations, and financial condition.

Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, sequestration, and use of GHGs that could have a material adverse effect on our business, results of operations, prospects, and financial condition.

Removed

A decline in oil and natural gas commodity prices may adversely affect the demand for our products and services and the rates we are able to charge.

Added

Opposition toward the oil and natural gas industry has been growing globally and is particularly pronounced in the United States.

Removed

Recent equity returns in the sector versus other industry sectors have led to lower oil and gas representation in certain key equity market indices.

Added

Institutional lenders who provide financing to energy companies have also become more attentive to sustainable lending practices, and some may elect not to provide traditional energy producers or companies that support such producers with funding.

Removed

The oil and natural gas industry is intensely competitive and has been characterized by price erosion for new technologies as additional competing products enter the market.

Added

Our equipment typically does not generate revenue while it is undergoing maintenance, upgrades, or refurbishment. Any maintenance, upgrade, or refurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities.

Removed

In 2020, we experienced a decline in the pricing and profitability of our dissolvable plug products and, to a lesser extent, our composite plug products due to the impacts of the coronavirus pandemic on the oil and natural gas industry.

Added

Removed

Pricing toward the end of 2021 and throughout 2022 mostly stabilized; however, any future price declines, future lack of availability of materials, or future increases in prices in materials may harm our business.

Added

Additionally, regulations requiring the disclosure of GHG emissions and other climate-related information are increasingly being adopted or proposed at the federal and state level.

Removed

For the years ended December 31, 2022 and 2021, we spent approximately $13.6 million and $7.4 million, respectively, on capital expenditures related to maintenance, and we expect to spend approximately $20 million to $30 million on capital expenditures related to maintenance in 2023. Our equipment typically does not generate revenue while it is undergoing maintenance, upgrades, or refurbishment.

Added

In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors. See “Business – Regulatory Matters – Climate Change” for more information on existing and proposed climate change regulation.

Removed

For the year ended December 31, 2022, our five largest customers collectively accounted for approximately 21% of total revenues.

Added

Studies by either state or federal agencies demonstrating a correlation between earthquakes and oil and natural gas activities could result in increased regulatory and operational burdens.

Removed

If we do not perform our operations in accordance with government, industry, customer, or our own stringent occupational safety, health, and environmental standards, we could lose business from our customers, many of whom have an increased focus on environmental and safety issues. We are subject to the oversight of the EPA, the U.S. Department of Transportation (the “DOT”), the U.S.

Added

We do not plan to declare dividends on shares of our common stock in the foreseeable future. Additionally, our debt agreements place restrictions on our ability to pay cash dividends.

Removed

The coronavirus pandemic and related economic repercussions created, and any resurgence of the pandemic or emergence of another global or national health epidemic or concern could again create significant volatility, uncertainty, and turmoil in the oil and gas industry and significant weakening of the demand for our services and products.

Added

The market price of our common stock could be adversely affected by, and our stockholders may experience dilution as a result of, sales of substantial amounts of common stock in the public or private markets, including sales by the Company or other large holders.

Removed

Other effects included, and or may in the future include: disruption to our supply chain for raw materials essential to our business, including restrictions on importing and exporting products; disruptions to our operations due to lockdowns or other governmental restrictions or due to employee impacts from illness; liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies; limitations on access to sources of liquidity or higher borrowing costs due to significant volatility or disruption of the global financial markets; a need to preserve liquidity, which could result in a delay or change in our capital investment plan; cyber security issues, as digital technologies may become more vulnerable and experience a higher rate of cyber attacks in an environment of remote connectivity; reduction of our workforce to adjust to market conditions, which could result in severance payments, retention issues, and an inability to hire employees when market conditions improve; impairments along with other accounting charges as demand for our services and products decreases; changes in the regulation of the production of hydrocarbons, such as the imposition of limitations on the production of oil and gas by states or other jurisdictions, that may result in additional limits on demand for our products and services; and a structural shift in the global economy and its demand for oil and natural gas as a result of changes in the way people work, travel, and interact, or in connection with a global recession or depression.

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Item 2. Properties

Properties — owned and leased real estate

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2022 filing

2023 filing

Biggest changeLocation Basin/Region Leased or Owned Principal/Most Significant Use Houston, TX — Leased Corporate Headquarters/Administrative Athens, TX — Leased Operations Baker, MT Bakken Owned Operations/Administrative Bergen, Norway — Leased Operations Charleroi, PA Marcellus/Utica Leased Operations Corpus Christi, TX — Leased Operations/Administrative Corpus Christi, TX — Leased Operations/Administrative Corpus Christi, TX — Leased Administrative Dickinson, ND Bakken Leased Operations/Administrative El Reno, OK SCOOP/STACK Leased Operations Fort Worth, TX — Leased Administrative Hobbs, NM Permian Leased Operations Jacksboro, TX Barnett Leased Operations Jacksboro, TX Barnett Leased Operations Kilgore, TX Haynesville Leased Operations Lacombe, AB, Canada WCSB Leased Operations/Administrative Longview, TX Haynesville Owned Operations Marietta, OH Marcellus/Utica Leased Operations/Administrative Mead, CO Rockies Leased Operations Midland, TX Permian Leased Operations/Administrative Monahans, TX Permian Leased Operations/Administrative Oklahoma City, OK SCOOP/STACK Leased Operations Pleasanton, TX Eagle Ford Leased Operations Poolville, TX — Owned Operations Sweetwater, TX Permian Leased Operations Tyler, TX Haynesville Leased Operations Ulster, PA Marcellus/Utica Leased Operations Williston, ND Bakken Owned Operations/Administrative

Biggest changeLocation Basin/Region Leased or Owned Principal/Most Significant Use Houston, TX — Leased Corporate Headquarters/Administrative Athens, TX — Leased Operations Baker, MT Bakken Owned Operations/Administrative Bergen, Norway — Leased Operations Charleroi, PA Marcellus/Utica Leased Operations Corpus Christi, TX — Leased Operations/Administrative Corpus Christi, TX — Leased Administrative Dickinson, ND Bakken Leased Operations/Administrative El Reno, OK SCOOP/STACK Leased Operations Fort Worth, TX — Leased Administrative Hobbs, NM Permian Leased Operations Jacksboro, TX Barnett Leased Operations Jacksboro, TX Barnett Leased Operations Kilgore, TX Haynesville Leased Operations Lacombe, AB, Canada WCSB Leased Operations/Administrative Longview, TX Haynesville Owned Operations Marietta, OH Marcellus/Utica Leased Operations/Administrative Mead, CO Rockies Leased Operations Midland, TX Permian Leased Operations/Administrative Monahans, TX Permian Leased Operations/Administrative Oklahoma City, OK SCOOP/STACK Leased Operations Pleasanton, TX Eagle Ford Leased Operations Poolville, TX — Owned Operations Sweetwater, TX Permian Leased Operations Tyler, TX Haynesville Leased Operations Ulster, PA Marcellus/Utica Leased Operations Williston, ND Bakken Owned Operations/Administrative

Item 2. Properties The following table describes the material facilities owned or leased by us as of December 31, 2022.

Item 2. Properties The following table describes the material facilities owned or leased by us as of December 31, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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2022 filing

2023 filing

Biggest changeFor additional information related to legal proceedings, see Note 12 – Commitments and Contingencies included in Item 8 of Part II of this Annual Report. Item 4. Mine Safety Disclosures Not applicable. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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2022 filing

2023 filing

Biggest changeItem 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Nine Energy Service, Inc.’s common stock is traded on the New York Stock Exchange under the symbol “NINE.” Holders As of March 3, 2023, we had 57 stockholders of record.

Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Nine Energy Service, Inc.’s common stock is traded on the New York Stock Exchange under the symbol “NINE.” Holders As of March 4, 2024, we had 59 stockholders of record.

Removed

Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth our repurchases of our equity securities registered under Section 12 of the Exchange Act that have occurred during the three months ended December 31, 2022: Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs October 1, 2022 – October 31, 2022 244 $ 2.64 — — November 1, 2022 – November 30, 2022 — — — — December 1, 2022 – December 31, 2022 — — — — Total 244 $ 2.64 — — (a) Reflects the number of shares we have withheld to pay taxes upon vesting of restricted stock.

Added

Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 35

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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2022 filing

2023 filing

Biggest changeThe following table provides an explanation of our calculation of ROIC for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands) Net income (loss) $ 14,393 $ (64,575) Add back: Interest expense 32,486 32,527 Interest income (305) (26) Restructuring charges 3,393 1,588 Gain on extinguishment of debt (2,843) (17,618) After-tax net operating income (loss) $ 47,124 $ (48,104) Total capital as of prior period-end: Total stockholders’ equity (deficit) $ (39,267) $ 20,409 Total debt 337,436 348,637 Less cash and cash equivalents (21,509) (68,864) Total capital as of prior period-end $ 276,660 $ 300,182 Total capital as of period-end: Total stockholders’ deficit $ (23,507) $ (39,267) Total debt 341,606 337,436 Less cash and cash equivalents (17,445) (21,509) Total capital as of period-end $ 300,654 $ 276,660 Average total capital $ 288,657 $ 288,421 ROIC 16.3 % (16.7) % 41 Adjusted Gross Profit (Loss) GAAP defines gross profit (loss) as revenues less cost of revenues and includes depreciation and amortization in costs of revenues.

Biggest changeYear Ended December 31, 2023 2022 (in thousands) Net income (loss) $ (32,213) $ 14,393 Add back: Interest expense 51,119 32,486 Interest income (1,270) (305) Certain refinancing costs (1) 6,396 — Restructuring charges 2,027 3,393 Gain on extinguishment of debt — (2,843) Adjusted after-tax net operating income $ 26,059 $ 47,124 Total capital as of prior period-end: Total stockholders’ deficit $ (23,507) $ (39,267) Total debt 341,606 337,436 Less cash and cash equivalents (17,445) (21,509) Total capital as of prior period-end $ 300,654 $ 276,660 Total capital as of period-end: Total stockholders’ deficit $ (35,630) $ (23,507) Total debt 359,859 341,606 Less cash and cash equivalents (30,840) (17,445) Total capital as of period-end $ 293,389 $ 300,654 Average total capital $ 297,022 $ 288,657 ROIC (10.8) % 5.0 % Adjusted ROIC 8.8 % 16.3 % (1) Amounts represent fees and expenses relating to our Units offering and other refinancing activities, including cash incentive compensation to employees following the successful completion of the Units offering, that were not capitalized. 43 Adjusted Gross Profit (Loss) GAAP defines gross profit (loss) as revenues less cost of revenues and includes depreciation and amortization in costs of revenues.

Our principal uses of cash are to fund capital expenditures, service our outstanding debt, fund our working capital requirements and fund acquisitions. Due to our high level of variable costs and the asset-light make-up of our business, we have historically been able to quickly implement cost-cutting measures and will continue to adapt as the market dictates.

Our principal uses of cash are to fund capital expenditures, service our outstanding debt, and fund our working capital requirements. Due to our high level of variable costs and the asset-light make-up of our business, we have historically been able to quickly implement cost-cutting measures and will continue to adapt as the market dictates.

Expected Dividend Yield – We do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. Fair value of the stock-based compensation for all of the performance share units as well as performance cash awards outstanding was measured using a Monte Carlo simulation model.

Expected Dividend Yield – We do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. Fair value of the stock-based compensation for all of the performance share units as well as the fair value of the performance cash awards was measured using a Monte Carlo simulation model.

Management believes ROIC is a meaningful measure because it quantifies how well we generate operating income relative to the capital we have invested in our business and illustrates the profitability of a business or project taking into account the capital invested. Management uses ROIC to assist them in capital resource allocation decisions and in evaluating business performance.

Management believes Adjusted ROIC is a meaningful measure because it quantifies how well we generate operating income relative to the capital we have invested in our business and illustrates the profitability of a business or project taking into account the capital invested. Management uses Adjusted ROIC to assist them in capital resource allocation decisions and in evaluating business performance.

The obligations under the Canadian tranche were and are further secured by security interests (subject to permitted liens) in substantially all of the personal property of Nine Energy Canada, Inc., a corporation organized under the laws of Alberta, Canada, and its restricted subsidiaries, excluding certain assets.

The obligations under the Canadian tranche are further secured by security interests (subject to permitted liens) in substantially all of the personal property of Nine Energy Canada, Inc., a corporation organized under the laws of Alberta, Canada, and its restricted subsidiaries, excluding certain assets.

Pursuant to the 2018 ABL Credit Agreement, the ABL Credit Facility was set to mature on October 25, 2023 or, if earlier, on the date that is 180 days before the scheduled maturity date of the 2023 Notes if they had not been redeemed or repurchased by such date.

Pursuant to the 2018 ABL Credit Agreement, the ABL Credit Facility was set to mature on October 25, 2023 or, if earlier, on the date that was 180 days before the scheduled maturity date of the 2023 Notes if they had not been redeemed or repurchased by such date.

Impairment losses are reflected in “Income (loss) from operations” in our Consolidated Statements of Income and Comprehensive Income (Loss). Recognition of Provisions for Contingencies In the ordinary course of business, we are subject to various claims, suits, and complaints.

Impairment losses are reflected in “Income (loss) from operations” in our Consolidated Statements of Income and Comprehensive Income (Loss). 48 Recognition of Provisions for Contingencies In the ordinary course of business, we are subject to various claims, suits, and complaints.

In addition, the ABL Facility Amendment, among other changes, revised the terms of the ABL Credit Facility as follows: (a) decreased the size of the ABL Credit Facility from $200.0 million to $150.0 million, subject to the borrowing base, (b) changed the interest rate benchmark from London Interbank Offered Rate to Term Secured Overnight Financing Rate with a 10 basis point spread adjustment and increased pricing from the existing range of 1.75% to 2.25% to a range of 2.00% to 2.50%, in each case depending on our leverage ratio, (c) modified the financial covenant, enhanced reporting 44 and cash dominion triggers in the ABL Credit Facility from the existing minimum availability threshold of the greater of $18.75 million and 12.5% of the loan limit to a minimum availability threshold of (i) $12.5 million from January 30, 2023 until May 31, 2023 and (ii) the greater of $17.5 million and 12.5% of the loan limit thereafter, (d) decreased the Canadian tranche sub-limit from $25.0 million to $5.0 million, (e) decreased the letter of credit sub-limit from $50.0 million to $10.0 million and (f) made satisfaction of the Payment Conditions (as defined in the ABL Facility Amendment) a condition to an Excess Cash Flow Offer in addition to a condition to voluntary payments of the 2028 Notes.

In addition, the ABL Facility Amendment, among other changes, revised the terms of the ABL Credit Facility as follows: (a) decreased the size of the ABL Credit Facility from $200.0 million to $150.0 million, subject to 46 the borrowing base (the “Loan Limit”), (b) changed the interest rate benchmark from London Interbank Offered Rate to Term Secured Overnight Financing Rate with a 10 basis point spread adjustment and increased pricing from the existing range of 1.75% to 2.25% to a range of 2.00% to 2.50%, in each case depending on our leverage ratio, (c) modified the financial covenant, enhanced reporting and cash dominion triggers in the ABL Credit Facility from the existing minimum availability threshold of the greater of $18.75 million and 12.5% of the Loan Limit to a minimum availability threshold of (i) $12.5 million from January 30, 2023 until May 31, 2023 and (ii) the greater of $17.5 million and 12.5% of the Loan Limit thereafter, (d) decreased the Canadian tranche sub-limit from $25.0 million to $5.0 million, (e) decreased the letter of credit sub-limit from $50.0 million to $10.0 million and (f) made satisfaction of the Payment Conditions (as defined in the ABL Facility Amendment) a condition to an Excess Cash Flow Offer in addition to a condition to voluntary payments of the 2028 Notes.

If it is determined that the reasonable estimate of the loss is a range and that there is no best estimate within the 46 range, provision will be made for the lower amount of the range.

If it is determined that the reasonable estimate of the loss is a range and that there is no best estimate within the range, provision will be made for the lower amount of the range.

The 2023 Notes bore interest at annual rate of 8.750% payable on May 1 and November 1 of each year. The 2023 Notes were senior unsecured obligations and were fully and unconditionally guaranteed on a senior unsecured basis by each of our current domestic subsidiaries and by certain future subsidiaries.

Significant factors that are likely to affect commodity prices moving forward include actions of the members of OPEC and other oil exporting nations that relate to or impact oil production or supply; the effect of energy, monetary, and trade policies of the U.S.; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa and including recovery from the coronavirus pandemic and any resurgence thereof; changes to energy regulations and policies, including those of the EPA and other governmental bodies; and overall North American oil and natural gas supply and demand fundamentals, including the pace at which export capacity grows.

Significant factors that are likely to affect commodity prices moving forward include actions of the members of OPEC and other oil exporting nations that relate to or impact oil production or supply; the effect of energy, monetary, and trade policies of the U.S.; the pace of economic growth in the U.S. and throughout the world, including the potential for macro weakness; geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa; changes to energy regulations and policies, including those of the EPA and other governmental bodies; and overall North American oil and natural gas supply and demand fundamentals, including the pace at which export capacity grows.

We define Adjusted EBITDA as EBITDA (which is net income (loss) before interest, taxes, depreciation, and amortization) further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) loss or gain on revaluation of contingent liabilities, (iv) loss or gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation and cash award expense, (viii) loss or gain on sale of property and equipment, and (ix) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business.

We define Adjusted EBITDA as EBITDA (which is net income (loss) before interest, taxes, depreciation, and amortization) further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units offering and other refinancing activities, (iv) loss or gain on revaluation of contingent liabilities, (v) loss or gain on the extinguishment of debt, (vi) loss or gain on the sale of subsidiaries, (vii) restructuring charges, (viii) stock-based compensation and cash award expense, (ix) loss or gain on sale of property and equipment, and (x) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business.

Our ability to make significant additional acquisitions for cash will require us to obtain additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all. In 2023, our planned capital expenditure budget, excluding possible acquisitions, is expected to be between $25.0 million to $35.0 million.

Our ability to make significant additional acquisitions for cash will require us to obtain additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all. In 2024, our planned capital expenditure budget, excluding possible acquisitions, is expected to be between $15.0 million to $25.0 million.

Pursuant to the 2018 ABL Credit Agreement, all of the obligations under the ABL Credit Facility were, and pursuant to the ABL Credit Agreement, all obligations under the ABL Credit Facility are, secured by security interests (subject to permitted liens) in substantially all of the personal property of our domestic subsidiaries, excluding certain assets.

Pursuant to the ABL Credit Agreement, all of the obligations under the ABL Credit Facility are secured by security interests (subject to permitted liens) in substantially all of the personal property of our domestic subsidiaries, excluding certain assets.

As such, we are eligible to comply with the scaled disclosure requirements in several Regulation S-K and Regulation S-X items. Our disclosures in this Annual Report reflect these scaled requirements. 47 Item 7A.

As such, we are eligible to comply with the scaled disclosure requirements in several Regulation S-K and Regulation S-X items. Our disclosures in this Annual Report reflect these scaled requirements.

For additional information, see “Non-GAAP Financial Measures” below. • Adjusted EBITDA : We define Adjusted EBITDA as net income (loss) before interest, taxes, and depreciation and amortization, further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) loss or gain on revaluation of contingent liabilities, (iv) loss or gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation and cash award expense, (viii) loss or gain on sale of property and equipment, and (ix) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business.

For additional information, see “Non-GAAP Financial Measures” below. • Adjusted EBITDA : We define Adjusted EBITDA as EBITDA (which is net income (loss) before interest, taxes, and depreciation and amortization) further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units (as defined and described below) offering and other refinancing activities, (iv) loss or gain on revaluation of contingent liabilities, (v) loss or gain on the extinguishment of debt, (vi) loss or gain on the sale of subsidiaries, (vii) restructuring charges, (viii) stock-based compensation and cash award expense, (ix) loss or gain on sale of property and equipment, and (x) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business.

Both the ABL Credit Facility and the Units collateralization were completed within 30 days after closing in accordance with the terms of the ABL Facility Amendment and the Units offering.

Both the ABL Credit Facility and the Units collateralization were completed within 30 days after closing of the Units offering in accordance with the terms of the ABL Facility Amendment and the 2028 Notes Indenture.

(2) Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the FLSA and/or similar state laws. 40 Return on Invested Capital ROIC is a supplemental non-GAAP financial measure. We define ROIC as after-tax net operating profit (loss), divided by average total capital.

(3) Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the FLSA and/or similar state laws. 41 Adjusted Return on Invested Capital Adjusted ROIC is a non-GAAP financial measure. We define Adjusted ROIC as adjusted after-tax net operating profit (loss), divided by average total capital.

For additional information, see “Non-GAAP Financial Measures” below. • Return on Invested Capital (“ROIC”): We define ROIC as after-tax net operating profit (loss), divided by average total capital.

For additional information, see “Non-GAAP Financial Measures” below. • Adjusted Return on Invested Capital (“Adjusted ROIC”): We define Adjusted ROIC as adjusted after-tax net operating profit (loss), divided by average total capital.

On each May 15 and November 14, commencing November 14, 2023 (each, an “Excess Cash Flow Offer Date”), we are required to make an offer (an “Excess Cash Flow Offer”) to all holders of the 2028 Notes and, if required by the terms of any Pari Passu Notes Lien Indebtedness (as defined in the 2028 Notes Indenture), to any holders of any Pari Passu Notes Lien Indebtedness to purchase, prepay or redeem, together on a pro-rata basis, the maximum principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (plus all accrued interest (including additional interest, if any) on the 2028 Notes and any such Pari Passu Notes Lien Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed using an amount of cash equal to the Excess Cash Flow Amount (as defined in the 2028 Notes Indenture and which is 75.0% of Excess Cash Flow (as defined in the 2028 Notes Indenture), as determined immediately prior to the Excess Cash Flow Offer Date), if any, subject to certain exceptions set forth in the 2028 Notes Indenture.

The 2028 Notes are our senior secured obligations and are guaranteed on a senior secured basis by each of our current domestic subsidiaries and will be so guaranteed by certain future subsidiaries, subject to agreed guaranty and security principles and certain exclusions. 45 On each May 15 and November 14, commencing November 14, 2023 (each, an “Excess Cash Flow Offer Date”), we are required to make an offer (an “Excess Cash Flow Offer”) to all holders of the 2028 Notes and, if required by the terms of any Pari Passu Notes Lien Indebtedness (as defined in the 2028 Notes Indenture), to any holders of any Pari Passu Notes Lien Indebtedness to purchase, prepay or redeem, together on a pro-rata basis, the maximum principal amount of the 2028 Notes and any such Pari Passu Notes Lien Indebtedness (plus all accrued interest (including additional interest, if any) on the 2028 Notes and any such Pari Passu Notes Lien Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed using an amount of cash equal to the Excess Cash Flow Amount (as defined in the 2028 Notes Indenture and which is 75.0% of Excess Cash Flow (as defined in the 2028 Notes Indenture), as determined immediately prior to the Excess Cash Flow Offer Date), if any, subject to certain exceptions set forth in the 2028 Notes Indenture.

We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute the average of the current and prior period-end total capital for use in this analysis.

We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute and use the average of the current and prior period-end total capital in determining Adjusted ROIC.

We define after-tax net operating profit (loss) as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) interest expense (income), (iv) restructuring charges, (v) loss (gain) on the sale of subsidiaries, (vi) loss (gain) on the extinguishment of debt, and (vii) the provision (benefit) for deferred income taxes.

We define adjusted after-tax net operating profit (loss) as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units offering and other refinancing activities,(iv) interest expense (income), (v) restructuring charges, (vi) loss (gain) on the sale of subsidiaries, (vii) loss (gain) on the extinguishment of debt, and (viii) the provision (benefit) for deferred income taxes.

We define total capital as book value of equity plus the book value of debt less balance sheet cash and cash equivalents. We compute the average of the current and prior period-end total capital for use in this analysis.

We define total capital as book value of equity plus the book value of debt less balance sheet cash and cash equivalents. We compute and use the average of the current and prior period-end total capital in determining Adjusted ROIC.

Each Unit consists of $1,000 principal amount of the 2028 Notes and five shares of our common 43 stock. We received proceeds of $279.8 million from the Units offering, after deducting underwriting discounts and commission, which was used to fund a portion of the redemption price of the 2023 Notes.

Each Unit consisted of $1,000 principal amount of the 2028 Notes and five shares of our common stock (the “Common Stock”). We received proceeds of $279.8 million from the Units offering, after deducting underwriting discounts and commission, which was used to fund a portion of the redemption price of our 8.750% Senior Notes due 2023 (the “2023 Notes”).

We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and company initiatives. At December 31, 2022, we had $17.4 million of cash and cash equivalents and $66.6 million of availability under the ABL Credit Facility, which resulted in a total liquidity position of $84.0 million.

We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and company initiatives. At December 31, 2023, we had $30.8 million of cash and cash equivalents and $28.1 million of availability under the ABL Credit Facility, which resulted in a total liquidity position of $58.9 million.

Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders, and rating agencies.

See “Non-GAAP Financial Measures” below for further explanation. 39 Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders, and rating agencies.

The 2018 ABL Credit Agreement contained, and the ABL Credit Agreement contains, various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions) and transactions with affiliates.

The ABL Credit Agreement contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions) and transactions with affiliates. We were in compliance with all covenants under the ABL Credit Agreement as of December 31, 2023.

We define adjusted after-tax net operating profit (loss), which is a non-GAAP financial measure, as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our Units offering and other refinancing activities, (iv) interest expense (income), (v) restructuring charges, (vi) loss (gain) on the sale of subsidiaries, (vii) loss (gain) on the extinguishment of debt, and (viii) the provision (benefit) for deferred income taxes.

We continually monitor potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to continue to access outside sources of capital. Although we do not budget for acquisitions, pursuing growth through acquisitions may continue to be a part of our business strategy.

Our future success and growth will be highly dependent on our ability to continue to access outside sources of capital. Although we do not budget for acquisitions, pursuing growth through acquisitions may continue to be a part of our business strategy.

(Gain) Loss on Revaluation of Contingent Liability We recorded a $0.5 million loss on the revaluation of contingent liability in both 2022 and 2021. The losses for both periods were related to increases of the value of the earnout associated with our acquisition Frac Technology AS.

The losses for both periods were related to increases of the value of the earnout associated with our acquisition Frac Technology AS. (Gain) Loss on Sale of Property and Equipment We recorded a loss on sale of property and equipment of $0.3 million in 2023 compared to a loss on sale of property and equipment of $0.4 million in 2022.

Recent Accounting Pronouncements For additional information on recent accounting pronouncements, see Note 2 – Significant Accounting Policies included in Item 8 of Part II of this Annual Report. Emerging Growth Company Status We are an “emerging growth company” as defined in the JOBS Act.

Recent Accounting Pronouncements For additional information on recent accounting pronouncements, see Note 2 – Significant Accounting Policies included in Item 8 of Part II of this Annual Report. Smaller Reporting Company Status We are a “smaller reporting company” as defined by the SEC.

Cash Flows Our cash flows for the years ended December 31, 2022, and 2021 are presented below: Year Ended December 31, 2022 2021 (in thousands) Operating activities $ 16,672 $ (40,416) Investing activities (25,417) (11,921) Financing activities 4,849 5,048 Impact of foreign exchange rate on cash (168) (66) Net change in cash and cash equivalents $ (4,064) $ (47,355) Operating Activities Net cash provided by operating activities was $16.7 million in 2022 compared to $40.4 million in net cash used in operating activities in 2021.

Cash Flows Our cash flows for the years ended December 31, 2023, and 2022 are presented below: Year Ended December 31, 2023 2022 (in thousands) Operating activities $ 45,509 $ 16,672 Investing activities (23,157) (25,417) Financing activities (8,893) 4,849 Impact of foreign exchange rate on cash (64) (168) Net change in cash and cash equivalents $ 13,395 $ (4,064) Operating Activities Net cash provided by operating activities was $45.5 million in 2023 compared to $16.7 million in net cash provided by operating activities in 2022.

Investing Activities Net cash used in investing activities was $25.4 million in 2022 compared to $11.9 million in net cash used in investing activities in 2021.

Investing Activities Net cash used in investing activities was $23.2 million in 2023 compared to $25.4 million in net cash used in investing activities in 2022.

Year Ended December 31, 2022 2021 (in thousands) Calculation of gross profit (loss) Revenues $ 593,382 $ 349,419 Cost of revenues (exclusive of depreciation and amortization shown separately below) 457,093 307,992 Depreciation (related to cost of revenues) 24,909 26,882 Amortization of intangibles 13,463 16,116 Gross profit (loss) $ 97,917 $ (1,571) Adjusted gross profit reconciliation: Gross profit (loss) $ 97,917 $ (1,571) Depreciation (related to cost of revenues) 24,909 26,882 Amortization of intangibles 13,463 16,116 Adjusted gross profit $ 136,289 $ 41,427 42 Liquidity and Capital Resources Sources and Uses of Liquidity Historically, we have met our liquidity needs principally from cash on hand, cash flows from operations and, if needed, external borrowings and issuances of debt securities.

Year Ended December 31, 2023 2022 (in thousands) Calculation of gross profit: Revenues $ 609,526 $ 593,382 Cost of revenues (exclusive of depreciation and amortization shown separately below) 490,750 457,093 Depreciation (related to cost of revenues) 27,101 24,909 Amortization of intangibles 11,516 13,463 Gross profit $ 80,159 $ 97,917 Adjusted gross profit reconciliation: Gross profit $ 80,159 $ 97,917 Depreciation (related to cost of revenues) 27,101 24,909 Amortization of intangibles 11,516 13,463 Adjusted gross profit $ 118,776 $ 136,289 44 Liquidity and Capital Resources Sources and Uses of Liquidity Historically, we have met our liquidity needs principally from cash on hand, cash flows from operations and, if needed, external borrowings and issuances of debt securities.

Our computation of this measure may not be comparable to other similarly titled measures of other companies. 39 The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss): Year Ended December 31, 2022 2021 (in thousands) EBITDA reconciliation: Net income (loss) $ 14,393 $ (64,575) Interest expense 32,486 32,527 Interest income (305) (26) Provision (benefit) for income taxes 546 (25) Depreciation 26,784 28,905 Amortization of intangibles 13,463 16,116 EBITDA $ 87,367 $ 12,922 Adjusted EBITDA reconciliation: EBITDA $ 87,367 $ 12,922 Loss on revaluation of contingent liability (1) 454 460 Gain on extinguishment of debt (2,843) (17,618) Restructuring charges 3,393 1,588 Stock-based compensation and cash award expense 4,914 5,406 Loss on sale of property and equipment 367 660 Legal fees and settlements (2) 86 1,809 Adjusted EBITDA $ 93,738 $ 5,227 (1) Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.

Our computation of this measure may not be comparable to other similarly titled measures of other companies. 40 The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss): Year Ended December 31, 2023 2022 (in thousands) Net income (loss) $ (32,213) $ 14,393 Interest expense 51,119 32,486 Interest income (1,270) (305) Provision for income taxes 585 546 Depreciation 29,141 26,784 Amortization of intangibles 11,516 13,463 EBITDA $ 58,878 $ 87,367 Adjusted EBITDA reconciliation: EBITDA $ 58,878 $ 87,367 Loss on revaluation of contingent liability (1) 437 454 Gain on extinguishment of debt — (2,843) Certain refinancing costs (2) 6,396 — Restructuring charges 2,027 3,393 Stock-based compensation and cash award expense 4,867 4,914 Loss on sale of property and equipment 292 367 Legal fees and settlements (3) 69 86 Adjusted EBITDA $ 72,966 $ 93,738 (1) Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.

The $57.1 million increase in net cash provided by operating activities was primarily a result of an $85.5 million increase in cash flow provided by operations, adjusted for any non-cash items, and primarily driven by an increase in revenue and income in comparison to 2021.

The increase in net cash provided by operating activities was offset by a $36.1 million decrease in cash flow provided by operations, adjusted for any non-cash items, primarily driven by a decrease in income in comparison to 2022.

How We Evaluate Our Operations We evaluate our performance based on a number of financial and non-financial measures, including the following: • Revenue : We compare actual revenue achieved each month to the most recent projection for that month and to the annual plan for the month established at the beginning of the year.

Another key component of labor costs relates to the ongoing training of our field service employees, which improves safety rates and reduces employee attrition. 36 How We Evaluate Our Operations We evaluate our performance based on a number of financial and non-financial measures, including the following: • Revenue : We compare actual revenue achieved each month to the most recent projection for that month and to the annual plan for the month established at the beginning of the year.

Although ROIC is commonly used as a measure of capital efficiency, definitions of ROIC differ, and our computation of ROIC may not be comparable to other similarly titled measures of other companies.

Although Adjusted ROIC is commonly used as a measure of capital efficiency, definitions of Adjusted ROIC differ, and our computation of Adjusted ROIC may not be comparable to other similarly titled measures of other companies. 42 The following table provides our calculation of Adjusted ROIC for the years ended December 31, 2023 and 2022.

More specifically, the increase was related to a $79.2 million increase in materials installed and consumed while performing services, a $54.4 million increase in employee costs, and a $15.5 million increase in other costs such as repairs and maintenance, travel, and vehicle expenses, in comparison to 2021.

More specifically, the increase was due to a $16.3 million increase in employee related costs, a $13.8 million increase in materials installed and consumed while performing services, a $3.1 million increase in repairs and maintenance, and a $0.5 million increase in other costs such as vehicle expense and travel, in comparison to 2022.

We have also used cash to make open market repurchases of our debt and may, from time to time, continue to make such repurchases (including with respect to the 2028 Notes) when it is opportunistic to do so to manage our debt maturity profile.

We have also used cash to make open market repurchases of our debt and may, from time to time, continue to make such repurchases when it is opportunistic to do so to manage our debt maturity profile. We continually monitor potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements.

We primarily earn our revenues pursuant to work orders entered into with our customers on a job-by-job basis. We typically will enter into an MSA with each customer that provides a framework of general terms and conditions of our services that will govern any future transactions or jobs awarded to us.

We typically will enter into an MSA with each customer that provides a framework of general terms and conditions of our services that will govern any future transactions or jobs awarded to us. Each specific job is obtained through competitive bidding or as a result of negotiations with customers.

At December 31, 2022, we had $32.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $66.6 million, net of outstanding letters of credit of $1.3 million.

At December 31, 2023, we had $57.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $28.1 million, net of outstanding letters of credit of $1.1 million. On February 14, 2024, we repaid approximately $5.0 million of our outstanding borrowings under the ABL Credit Facility.

The $13.5 million increase was primarily due to a $13.1 million increase in cash purchases of property and equipment, coupled with $0.4 million decrease in proceeds from the sale of property and equipment (including insurance), in each case, in comparison to 2021. 45 Financing Activities Net cash provided by financing activities was $4.8 million in 2022 compared to $5.0 million in net cash provided by financing activities in 2021.

The $2.2 million decrease was primarily due to a $4.0 million decrease in cash purchases of property and 47 equipment, partially offset by a $1.7 million decrease in proceeds from the sale of property and equipment (including insurance), in each case, in comparison to 2022.

Management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure and helps identify underlying trends in our operations that could otherwise be distorted by the effect of impairments, acquisitions and dispositions and costs that are not reflective of the ongoing performance of our business.

Adjusted Gross Profit (Loss) Adjusted gross profit increased $94.9 million to $136.3 million in 2022 as a result of the factors described above under “Revenues” and “Cost of Revenues.” General and Administrative Expenses General and administrative expenses increased $6.4 million to $51.7 million in 2022.

Adjusted Gross Profit (Loss) Adjusted gross profit decreased $17.5 million to $118.8 million in 2023 as a result of the factors described above under “Revenues” and “Cost of Revenues.” General and Administrative Expenses General and administrative expenses increased $8.2 million to $59.8 million in 2023.

For additional information, see “Non-GAAP Financial Measures” below. • Safety : We measure safety by tracking the total recordable incident rate (“TRIR”), which is reviewed on a monthly basis. TRIR is a measure of the rate of recordable workplace injuries, defined below, normalized and stated on the basis of 100 workers for an annual period.

TRIR is a measure of the rate of recordable workplace injuries, defined below, normalized and stated on the basis of 100 workers for an annual period.

The decrease was partially offset by a $9.0 million increase in proceeds from the ABL Credit Facility in 2022 in comparison to 2021. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.

Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.

Each specific job is obtained through competitive bidding or as a result of negotiations with customers. The rate we charge is determined by location, complexity of the job, operating conditions, duration of the contract, and market conditions.

The rate we charge is determined by location, complexity of the job, operating conditions, duration of the contract, and market conditions.

The increase in net cash provided by operating activities was offset by a $28.4 million decrease in cash provided by working capital, including an increase in accounts receivable from increased product and service sales, which has the effect of lagging cash collections, in each case, in comparison to 2021.

The $28.8 million increase in net cash provided by operating activities was primarily a result of a $64.9 million increase in cash provided by working capital, including an increase in accounts receivable from increased product and service sales between periods.

A recordable injury includes occupational death, nonfatal occupational illness, and other occupational injuries that involve loss of consciousness, restriction of work or motion, transfer to another job, or medical treatment other than first aid. 36 Industry Trends and Outlook Our business depends, to a significant extent, on the level of unconventional resource development activity and corresponding capital spending of oil and natural gas companies.

Cost of Revenues (Exclusive of Depreciation and Amortization) Cost of revenues increased $149.1 million, or 48%, to $457.1 million in 2022. The increase in comparison to 2021 was prevalent across all lines of service and was primarily related to increased activity coupled with cost inflation associated with both labor and materials as well as headcount increases.

Cost of Revenues (Exclusive of Depreciation and Amortization) Cost of revenues increased $33.7 million, or 7%, to $490.8 million in 2023. The increase in comparison to 2022 was primarily driven by increased activity in wireline and coiled tubing, coupled with cost inflation over all lines of service associated with both labor and materials.

We repurchased approximately $13.0 million of 2023 Notes at a repurchase price of approximately $10.1 million in cash for the year ended December 31, 2022. We also repurchased approximately $26.3 million of 2023 Notes at a repurchase price of approximately $8.4 million in cash for the year ended December 31, 2021.

We repurchased approximately $13.0 million of 2023 Notes at a repurchase price of approximately $10.1 million in cash for the year ended December 31, 2022. For additional information on the 2023 Notes, see Note 9 – Debt Obligations included in Item 8 of Part II of this Annual Report.

On January 30, 2023, we, and certain of our subsidiaries entered into an indenture, dated as of January 30, 2023 (the “2028 Notes Indenture”), with U.S. Bank Trust Company, National Association, as the trustee and as notes collateral agent, pursuant to which the 2028 Notes, which form a part of the Units, were issued.

Bank Trust Company, National Association, as the trustee and as notes collateral agent, pursuant to which the 2028 Notes, which formed a part of the Units, were issued.

Recent Events On January 30, 2023, we completed our public offering of 300,000 units with an aggregate stated amount of $300.0 million (the “Units”). Each Unit consists of $1,000 principal amount of the 2028 Notes and five shares of our common stock.

During the quarter ended December 31, 2023, no sales were made under the Equity Distribution Agreement. Units Offering and 2028 Notes On January 30, 2023, we completed our public offering of 300,000 units with an aggregate stated amount of $300.0 million (the “Units”).

For additional information on the 2023 Notes, see Note 9 – Debt Obligations included in Item 8 of Part II of this Annual Report. Units Offering and 2028 Notes On January 30, 2023, we completed our public offering of Units and issued 300,000 Units with an aggregate stated amount of $300.0 million.

For additional information on the Units and the 2028 Notes, see Note 9 – Debt Obligations included in Item 8 of Part II of this Annual Report. 2023 Notes On October 25, 2018, we issued $400.0 million of 2023 Notes under an indenture, dated as of October 25, 2018 (the “2023 Notes Indenture”), by and among us, including certain of our subsidiaries, and Wells Fargo, National Association, as trustee.

For additional information on our Units offering, the ABL Credit Facility, which was amended in connection with such offering, and the redemption of the 2023 Notes, see Note 9 – Debt Obligations included in Item 8 of Part II of this Annual Report. 35 How We Generate Revenue and the Costs of Conducting Our Business We generate our revenues by providing completion services to E&P customers across all major onshore basins in both the U.S. and Canada as well as abroad.

How We Generate Revenue and the Costs of Conducting Our Business We generate our revenues by providing completion services to E&P customers across all major onshore basins in both the U.S. and Canada as well as abroad. We primarily earn our revenues pursuant to work orders entered into with our customers on a job-by-job basis.

However, we can make no assurance regarding our ability to achieve our forecasts, which are materially dependent on our financial performance and the ever-changing market. 2023 Notes On October 25, 2018, we issued $400.0 million of 2023 Notes under an indenture, dated as of October 25, 2018 (the “2023 Notes Indenture”), by and among us, including certain of our subsidiaries, and Wells Fargo, National Association, as Trustee.

However, we can make no assurance regarding our ability to achieve our forecasts, which are materially dependent on our financial performance and the ever-changing market.

The 2028 Notes Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, limit our ability and the ability of our restricted subsidiaries to engage in certain activities. For additional information on the Units and the 2028 Notes, see Note 9 – Debt Obligations included in Item 8 of Part II of this Annual Report.

For the Excess Cash Flow Offer Date of November 14, 2023, the Excess Cash Flow Amount was $0 and, as such, no Excess Cash Flow Offer was made. The 2028 Notes Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, limit our ability and the ability of our restricted subsidiaries to engage in certain activities.

Each Unit will be separated into its constituent securities (the 2028 Notes and the shares of our common stock) automatically on October 27, 2023, or, if earlier, on the date, if any, on which a change of control or event of default (each as defined in the indenture governing the 2028 Notes) occurs.

Each Unit separated into its constituent securities (the 2028 Notes and the shares of our Common Stock) automatically on October 27, 2023. On January 30, 2023, we, and certain of our subsidiaries entered into an indenture, dated as of January 30, 2023 (the “2028 Notes Indenture”), with U.S.

The 2023 Notes Indenture contained covenants that limited our ability and the ability of our restricted subsidiaries to engage in certain activities. We were in compliance with the provisions of the 2023 Notes Indenture at December 31, 2022.

We were in compliance with the provision of the 2028 Notes Indenture at December 31, 2023.

These activity and spending levels are strongly influenced by current and expected oil and natural gas prices.

Industry Trends and Outlook Our business depends, to a significant extent, on the level of unconventional resource development activity and corresponding capital spending of oil and natural gas companies. These activity and spending levels are strongly influenced by current and expected oil and natural gas prices.

The $0.2 million decrease was primarily related to a $7.0 million payment on the ABL Credit Facility in 2022 that did not occur in 2021 as well as a $2.2 million increase in payments on short-term debt in comparison to 2021.

The increase in net cash used was also partly attributed to an $8.0 million increase in payments on the ABL Credit Facility and an increase of $1.3 million in payments on short-term debt, each in comparison to 2022.

The decrease in comparison to 2021 was primarily due to certain assets becoming fully depreciated in the last twelve months. 38 Amortization of Intangibles Intangible amortization expense decreased $2.7 million to $13.5 million in 2022 and was primarily attributable to technology and customer relationships. The decrease was related to certain intangible assets being fully amortized in 2022.

The decrease in comparison to 2022 was due to certain intangible assets being fully amortized over the last twelve months. (Gain) Loss on Revaluation of Contingent Liability We recorded a $0.4 million loss on the revaluation of contingent liability in 2023 compared to a $0.5 million loss in 2022.

The overall increase in non-operating expenses was partially offset by a $0.7 million increase in interest and other income between periods. Provision (Benefit) for Income Taxes Our effective tax rate was 3.7% for 2022 and 0.01% for 2021. Our tax provision for 2022 is primarily the result of our tax position in state and foreign tax jurisdictions.

The increase was also partially due to a $2.8 million gain on the extinguishment of debt related to the repurchase of our 2023 Notes in 2022 that did not recur in 2023. Provision (Benefit) for Income Taxes Our effective tax rate was (1.8)% for 2023 and 3.7% for 2022.

Removed

We received proceeds of $279.8 million from the Units offering, after deducting underwriting discounts and commission, which was deposited with the trustee of the 8.750% Senior Notes due 2023 (the “2023 Notes”), along with $40.0 million of cash received from borrowings under the ABL Credit Facility.

Added

Previously, in our SEC filings press releases and other investor materials issued prior to December 31, 2023, we referred to (a) Adjusted ROIC as ROIC and (b) adjusted after-tax net operating profit (loss) as after-tax net operating profit (loss).

Removed

On January 30, 2023, we instructed the trustee of the 2023 Notes to apply such deposits toward the payment of the 2023 Notes on February 1, 2023, and we elected to discharge the indenture governing the 2023 Notes, thereby releasing us from our remaining obligations under such indenture as of January 30, 2023.

Added

We have made no changes to the manner in which these measures are calculated and have only revised the titles of these measures to more clearly identify them as non-GAAP measures. For additional information, see “Non-GAAP Financial Measures” below. • Safety : We measure safety by tracking the total recordable incident rate (“TRIR”), which is reviewed on a monthly basis.

Removed

On February 1, 2023, all of the outstanding 2023 Notes were redeemed at a redemption price of 100.0% of the principal amount thereof ($307.3 million), plus accrued and unpaid interest ($6.7 million). We also wrote off the unamortized deferred financing costs associated with the 2023 Notes in conjunction with the redemption.

Added

In recent years, oil and natural gas prices have been extremely volatile, and commodity prices continued to be volatile in 2023, with both oil and natural gas prices significantly lower than 2022, leading to lower activity levels, particularly in the natural gas regions.

Removed

Another key component of labor costs relates to the ongoing training of our field service employees, which improves safety rates and reduces employee attrition.

Added

The average WTI price in 2023 declined by approximately 18% versus 2022, and the average natural gas price declined by approximately 61% over that same time period. Since the end of 2022, the U.S. rig count declined by 157 rigs, or approximately 20%, through the end of 2023.

Removed

Throughout 2022, oil and natural gas prices were very supportive, with an average WTI price of $94.90 for the year, although prices began to decline during the third quarter of 2022 in response to some indications of slowing economic growth, inflation, and rising interest rates.

Added

With the decline in commodity 37 prices and overall activity levels in 2023, we received pricing pressure from customers across service lines and basins, impacting both our revenue and margins.

Removed

In addition, over the last several months, we have seen a sharp decline in natural gas prices, which has and will likely continue to affect activity levels in the Northeast and Haynesville. We anticipate these effects will be felt more strongly in the Haynesville in the near-term.

Added

For 2024, most public operators appear to be keeping activity and capital expenditure levels relatively flat year over year, and with where commodity prices are today, private operators are not likely to increase activity.

Removed

Industry dynamics can shift very quickly, however, and we are operating this business for the long-term. Together, the Northeast and Haynesville comprised 30% of our total 2022 revenue, and we believe that these basins are vital to supplying the global markets and are important pieces of our footprint.

Added

As such, although the market can change quickly, we do not foresee any activity increases in the near-term, and thus far in 2024, we have experienced activity levels and pricing that is generally consistent with that of the last quarter of 2023.

Removed

In 2022, operators increased activity levels with the average U.S. rig count, according to Baker Hughes, increasing by 51% year over year. Total U.S. completions in 2022 increased by approximately 22% over 2021 according to the Energy Information Administration (the “EIA”).

Added

We remain cautiously optimistic on the long-term outlook for the energy sector, and we believe there is potential upside for North American activity levels. OPEC has maintained production cuts, and public U.S. producers remaining committed to capital discipline, rather than increasing drilling, could help lessen the impact of any supply surplus.

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Top changes in Nine Energy Service, Inc.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 3. Legal Proceedings

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

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