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What changed in Nine Energy Service, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Nine Energy Service, Inc.'s 2023 and 2024 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 2024 report.

+250 added−231 removedSource: 10-K (2025-03-06) vs 10-K (2024-03-08)

Top changes in Nine Energy Service, Inc.'s 2024 10-K

250 paragraphs added · 231 removed · 166 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

40 edited+26 added−15 removed135 unchanged
Biggest changeEndangered 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.
Biggest changePursuant 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. 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.
These conditions can cause personal injury or loss of life; damage to, or destruction of, property, the environment, and wildlife; and the suspension of our or our customers’ operations. 7 In addition, claims for loss of oil and gas production and damage to formations can occur in the oilfield services industry.
These conditions can cause personal injury or loss of life; damage to, or destruction of, property, the environment, and wildlife; and the suspension of our and/or our customers’ operations. 7 In addition, claims for loss of oil and gas production and damage to formations can occur in the oilfield services industry.
These persons include the current and former owner or operator of the site where the release occurred and anyone who transported or disposed or arranged for the transport or disposal of a hazardous substance released at the site.
These persons include the current and former owner or operator of the site where the release occurred and anyone who transported, disposed, or arranged for the transport or disposal of a hazardous substance released at the site.
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.
The new rule phases out 10 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 more.
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.
However, 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.
For example, the EPA has asserted federal regulatory authority pursuant to the federal Safe Drinking Water Act over certain hydraulic fracturing activities involving the use of diesel fuels in fracturing fluids and has issued permitting guidance that applies to such activities. There is considerable uncertainty surrounding regulation of the emissions of methane, which may be released during hydraulic fracturing.
For example, the EPA has asserted federal regulatory authority pursuant to the federal Safe Drinking Water Act over certain hydraulic fracturing activities involving the use of diesel fuels in fracturing fluids and has issued permitting guidance that applies to such 12 activities. There is considerable uncertainty surrounding regulation of the emissions of methane, which may be released during hydraulic fracturing.
Our comprehensive completion service offerings are mostly comprised of composite and dissolvable frac plugs in a variety of sizes to isolate stages during plug-and-perf operations. We have coupled patented tool designs with proprietary materials for our dissolvable offering, enabling us to serve the entire addressable plug market.
Our comprehensive completion service offerings are mostly comprised of composite, hybrid, and dissolvable frac plugs in a variety of sizes to isolate stages during plug-and-perf operations. We have coupled patented tool designs with proprietary materials for our dissolvable offering, enabling us to serve the entire addressable plug market.
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.
Our major competitors include Halliburton Company, Schlumberger Limited, NCS Multistage, Patterson-UTI Energy, KLX Energy Services Holdings, Innovex International, 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.
Following stage one, we perform plug-and-perf completions using a wireline or electric wireline truck and reel, as well as our composite or dissolvable frac plugs. Through our wireline units, we provide plug-and-perf services that, when combined with our fully-composite or dissolvable frac plugs, create perforations to isolate and divert the fracture to the correct stage.
Following stage one, we perform plug-and-perf completions using a wireline or electric wireline truck and reel, as well as our composite, hybrid, or dissolvable frac plugs. Through our wireline units, we provide plug-and-perf services that, when combined with our fully-composite, hybrid, or dissolvable frac plugs, create perforations to isolate and divert the fracture to the correct stage.
For example, the EPA issued a report on the potential impacts of hydraulic fracturing on drinking water resources, which concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under some circumstances,” noting that the following hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits.
For example, in December 2016, the EPA issued a report on the potential impacts of hydraulic fracturing on drinking water resources, which concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under some circumstances,” noting that the following hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits.
In the course of such evaluations, an agency will evaluate the potential direct, indirect, and cumulative impacts of a proposed project and, if necessary, will prepare a detailed Environmental Impact Statement that must be made available for public review and comment.
In the course of such evaluations, an agency will evaluate the potential direct, indirect, and cumulative impacts of a proposed project and, if 13 necessary, will prepare a detailed Environmental Impact Statement that must be made available for public review and comment.
Our completion tool technology focuses on composite and dissolvable frac plugs that isolate stages in a completion but also includes a number of other patented technologies sold in North America and abroad.
Our completion tool technology focuses on composite, hybrid, and dissolvable frac plugs that isolate stages in a completion but also includes a number of other patented technologies sold in North America and abroad.
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.
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, 2024, no supplier of the materials used in our services provided over 10% of our materials or equipment as a percentage of overall costs.
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.
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. The DOI has not yet issued a proposed rule.
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.
In July 2020, the Council on Environmental Quality (“CEQ”) revised NEPA’s implementing regulations in an effort to streamline approvals for projects. In October 2021, the Council on Environmental Quality announced its Phase I rule, the first of two planned rules to roll back the 2020 rule, which was finalized in April 2022.
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%.
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 2024, we completed approximately 26,000 cementing jobs, with an on-time rate of approximately 89%.
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.
For the year ended December 31, 2024, our top five customers collectively accounted for approximately 25% 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.
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.
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 As of December 31, 2024, we operated a fleet in excess of 580 commercial motor vehicles.
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.
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 2024, we deployed approximately 557,700 isolation, stage one, and casing flotation tools.
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%.
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 2024, we have performed approximately 8,300 jobs and deployed more than 218 million running feet of coiled tubing, with a success rate of over 99%.
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.
Employees As of December 31, 2024, we had 1,077 employees, all of which were full-time. We are not a party to any collective bargaining agreements.
In June 2016, the EPA finalized regulations establishing New Source Performance Standards, known as Subpart OOOOa, for methane and volatile organic compounds from new and modified oil and natural gas production and natural gas processing and transmission facilities. In September 2020, the EPA finalized two sets of amendments to the 2016 Subpart OOOOa standards.
In June 2016, the EPA finalized regulations establishing New Source Performance Standards, known as Subpart OOOOa, for methane and volatile organic compounds from new and modified oil and natural gas production and natural gas processing and transmission facilities.
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.
The final rule gives states, along with federal tribes that wish to regulate existing sources, until March 2026 to develop and submit their plans for reducing methane emissions from existing sources. The final emissions guidelines under Subpart OOOOc provide until 2029 for existing sources (i.e., sources constructed prior to December 6, 2022) to comply.
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.
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.
In addition, in September 2021, President Biden publicly announced the Global Methane Pledge, a pact that commits its signatories to the collective goal of reducing global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector.
GHG emissions by 50-52% by the year 2030 as compared with 2005 levels. In addition, in September 2021, the Biden Administration publicly announced the Global Methane Pledge, a pact that commits its signatories to the collective goal of reducing global methane emissions at least 30% below 2020 levels by 2030, including “all feasible reductions” in the energy sector.
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%.
We deploy proprietary specialized tools like our fully-composite, hybrid, and dissolvable frac plugs through our wireline units. From January 2018 through December 2024, we completed approximately 189,500 wireline stages with a success rate of over 99%.
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.
However, such legislation has periodically been introduced in the U.S. 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.
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.
In addition to the EPA’s new Subpart OOOO regulations discussed above, other federal agencies have promulgated rules regulating methane. In April 2024, the U.S. Bureau of Land Management (the “BLM”) finalized a rule to reduce the waste of natural gas during the production of oil and gas on federal and tribal lands. The final rule took effect in June 2024.
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.
Accordingly, future implementation and enforcement of these rules and policies is uncertain at this time. To the extent a future rule or court decision expands Clean Water Act 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.
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.
However, various state and local governments in the U.S. have publicly committed to furthering the goals of the Paris Agreement. 11 The U.S. Congress has from time to time considered adopting legislation to reduce emissions of GHGs, but no comprehensive federal laws regulating the emission of GHGs or directly imposing a price of carbon have been adopted in recent years.
As described elsewhere in this Annual Report, these risks are regulated under various state, federal, and local laws. Some states, counties, and municipalities have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements, well construction, and temporary or permanent bans on hydraulic fracturing in certain areas.
Some states, counties, and municipalities have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements, well construction, and temporary or permanent bans on hydraulic fracturing in certain areas.
Also, from time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process.
The EPA has also issued effluent limitation guidelines that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. Also, from time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process.
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.
At the 27th Conference of the Partie s, the United States 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.
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.
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.
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.
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.
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.
The fee imposed under the Methane Emissions and Waste Reduction Incentive Program for 2024 is $900 per ton emitted over annual methane emissions thresholds and increases to $1,200 in 2025 and $1,500 in 2026. In January 2025, industry associations challenged the Waste Emissions Charge rule in the D.C. Circuit Court of Appeals.
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.
The Phase I final rule generally restores certain regulatory provisions that were in effect prior to the 2020 rule. In May 2024, CEQ finalized the Phase II rule, which accelerates NEPA reviews while maintaining consideration of relevant environmental, climate change, and environmental justice effects of a proposed project.
Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations.
Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations. In June 2024, the U.S. Supreme Court issued a ruling in Loper Bright Enterprises v. Raimondo that ended the use of the Chevron doctrine when courts analyze federal regulations.
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.
Circuit Court of Appeals has commenced. In November 2024, the EPA finalized a rule implementing the Inflation Reduction Act’s Waste Emissions Charge, which became effective on January 1, 2025.
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.
As a result, substantial uncertainty exists with respect to future implementation of the September 2023 rule and the scope of Clean Water Act jurisdiction generally. In addition, in an April 2020 decision defining the scope of the Clean Water Act that was issued days after the NWPR was published, the U.S.
Removed
The first, known as the 2020 Technical Rule, reduced the 2016 rule’s fugitive emissions monitoring requirements and expanded exceptions to pneumatic pump requirements, among other changes. The second, known as the 2020 Policy Rule, rescinded the methane-specific requirements for certain oil and natural gas sources in the production and processing segments.
Added
However, roughly half of the states and other plaintiffs are continuing to challenge the September 2023 rule, and the EPA and the Corps are using the pre-2015 definition of WOTUS in these states while litigation continues.
Removed
On January 20, 2021, President Biden issued an Executive Order directing the EPA to rescind the 2020 Technical Rule by September 2021 and consider revising the 2020 Policy Rule. On June 30, 2021, President Biden signed a Congressional Review Act (the “CRA”) resolution passed by Congress that revoked the 2020 Policy Rule.
Added
Supreme Court held that, in certain cases, discharges from a point source to a WOTUS through groundwater require a permit if the discharge is the “functional equivalent” of a direct discharge. The Court rejected the EPA and the Corps’ assertion that groundwater should be totally excluded from the Clean Water Act.
Removed
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.
Added
In November 2023, the EPA issued draft guidance describing the functional equivalent analysis and the information that should be used to determine which discharges through groundwater may require a permit.
Removed
Since its formal launch at the United Nations 26th Conference of the Parties, over 150 countries have joined the pledge.
Added
However, in January 2025, President Trump issued executive orders directing (i) the EPA and the Corps to identify planned or potential actions that could be subject to emergency treatment under Section 404 of the Clean Water Act and (ii) the heads of all federal agencies to identify and begin the processes to suspend, revise, or rescind all agency actions, including all existing regulations and guidance documents, that are unduly burdensome on the identification, development, or use of domestic energy resources.
Removed
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.
Added
The final rule is subject to ongoing litigation but remains in effect. However, in January 2025, President Trump issued an executive order directing the heads of all federal agencies to identify and begin the processes to suspend, revise, or rescind all agency actions that are unduly burdensome on the identification, development, or use of domestic energy resources.
Removed
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
Consequently, future implementation and enforcement of the final rule remains uncertain at this time.
Removed
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
In November 2020, under the first Trump Administration, the U.S. withdrew from the Paris Agreement; however, various corporations, investors, and U.S. state and local governments continued to publicly pledge to further the goals of the Paris Agreement. In February 2021, under the Biden Administration, the United States rejoined the Paris Agreement and set a target to reduce U.S.
Removed
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
Most recently, at the 29th Conference of the Parties, delegates approved rules to operationalize international carbon markets under Article 6 of the Paris Agreement, including a new Paris Agreement Crediting Mechanism to trade UN-approved carbon credits.
Removed
The proposed rule would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including, but not limited to, information about the registrant’s governance of climate-related risks and relevant risk management processes; climate-related risks that are reasonably likely to have a material impact on the registrant’s business, results of operations, or financial condition and their actual and likely climate-related impacts on the registrant’s business strategy, model, and outlook; climate-related targets, goals and transition plan (if any); certain climate-related financial statement metrics in a note to their audited financial statements; Scope 1 and Scope 2 GHG emissions; and Scope 3 GHG emissions and intensity, if material, or if the registrant has set a GHG emissions reduction target, goal or plan that includes Scope 3 GHG emissions.
Added
However, in January 2025, President Trump issued an executive order directing the immediate notice to the United Nations of the United States’ withdrawal from the Paris Agreement and all other agreements made under the United Nations Framework Convention on Climate Change. The full impact of these actions remains unclear at this time.
Removed
Although the proposed rule’s ultimate date of effectiveness and the final form and substance of these requirements is not yet known and the ultimate scope and impact on our business is uncertain, compliance with the proposed rule, if finalized, may result in increased legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place strain on our personnel, systems, and resources.
Added
To implement the program, in May 2024, the EPA finalized revisions to the Greenhouse Gas Reporting Program for petroleum and natural gas facilities. The emissions reported under the Greenhouse Gas Reporting Program will be the basis for any payments under the Methane Emissions Reduction Program. However, petitions for reconsideration to the EPA are pending and litigation in the D.C.
Removed
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.
Added
However, in January 2025, President Trump issued an executive order directing the heads of all federal agencies to identify and begin the processes to suspend, revise, or rescind all agency actions that are unduly burdensome on the identification, development, or use of domestic energy resources.
Removed
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.
Added
In addition, based on the timing of the rule’s finalization and statements from congressional Republicans, the Waste Emissions Charge rule is potentially vulnerable to repeal by Congress under the Congressional Review Act, and the Inflation Reduction Act may also be subject to amendment or repeal through Congressional budget reconciliation.
Removed
However, given the long-term trend towards increasing regulation, future federal regulation of methane and other GHG emissions from the oil and gas industry remains a possibility. The EPA has also issued effluent limitation guidelines that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants.
Added
The Chevron doctrine required courts to defer to the reasonable interpretation of agencies when deciding if a regulation reflected the intent of Congress. While the end of Chevron is likely to introduce new complexity for federal agencies and administration of climate change policy and regulatory programs, many of these initiatives are expected to continue.
Removed
To the extent that our customers’ current activities, as well as proposed plans, on federal lands require governmental permits that are subject to the requirements of NEPA, this process has the potential to delay or impose additional conditions upon the development of oil and natural gas projects.
Added
For example, at the state level, California enacted legislation in October 2023 that will ultimately require certain companies that do business in California to publicly disclose their Scopes 1, 2, and 3 GHG emissions, with third-party assurance of such data, and issue public reports on their climate-related financial risk and related mitigation measures.
Removed
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.
Added
However, in May 2024, the states of North Dakota, Texas, Montana, Wyoming, and Utah challenged the rule. In September 2024, the U.S. District Court for the District of North Dakota granted a motion prohibiting the BLM from enforcing the rule against those states pending the outcome of the litigation.
Added
However, in January 2025, President Trump issued an executive order directing the heads of all federal agencies to identify and begin the processes to suspend, revise, or rescind all agency actions that are unduly burdensome on the identification, development, or use of domestic energy resources. Consequently, future implementation and enforcement of the final rule remains uncertain at this time.
Added
As described elsewhere in this Annual Report, these risks are regulated under various state, federal, and local laws. To date, the EPA has taken no further action in response to the 2016 report.
Added
Several states and environmental groups have challenged the Phase II rule in federal district court. The CEQ’s changes could result in increased NEPA review timelines for projects involving agency action regarding federal lands, federal funds, or federal permits or approvals.
Added
Additionally, in November 2024, a federal appeals court found that CEQ lacks statutory authority to issue NEPA regulations binding on other federal agencies. However, the court’s holding was confined to striking down the agencies’ action under review on separate grounds, and CEQ’s Phase I and II rules remain in effect.
Added
However, in January 2025, President Trump issued an executive order requiring CEQ to provide guidance on implementing NEPA and to propose rescinding and replacing CEQ’s NEPA regulations with implementing regulations at the agency level.
Added
The executive order also instructs federal agencies to adhere to only the relevant legislated requirements for environmental reviews and to prioritize efficiency and certainty over any other objectives in such reviews. In February 2025, CEQ sent an interim final rule to the White House Office of Management and Budget that would immediately withdraw the NEPA implementing regulations.
Added
The potential impact of further changes to the NEPA regulations and statutory text therefore remains uncertain and could have an effect on our customers’ business and operations, which could ultimately result in decreased demand for our services. Endangered Species Act and Migratory Bird Treaty Act The Endangered Species Act (“ESA”) was established to protect endangered and threatened species.
Added
In April 2024, the FWS finalized three rules that revise regulations regarding listing and reclassification of species and designation of critical habitat. These rules also clarify definitions that impact interagency cooperation and reinstated the general application of the “blanket rule” option for protecting newly listed threatened species. These rules were challenged in August 2024 in the Northern District of California.
Added
However, in January 2025, President Trump issued an executive order declaring a national energy emergency under the National Emergencies Act. As part of that executive order, agencies were directed to use, to the maximum extent permissible, the ESA regulation on consultations in emergencies to facilitate the domestic energy supply.
Added
The executive order also requires the quarterly convening of the Endangered Species Act Committee to ensure prompt and efficient review of all submissions for potential actions that could facilitate energy development.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+28 added−24 removed230 unchanged
Biggest changeFor 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.
Biggest changeFor example, 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; and in November 2024, the FMCSA’s rules were updated to require state driver licensing agencies to query the Clearinghouse before issuing, renewing, or upgrading a commercial driver’s license to confirm compliance with FMCSA rules.
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).
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 enactment of climate change-related regulations, policies and initiatives (at the government, regulator, corporate and/or investor 16 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).
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.
If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters (or meet sustainability goals and targets that we have set) as they continue to evolve, or if we are perceived to have not responded 17 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.
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.
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.
Actions arising under these laws and regulations could result in the shutdown of our operations, fines and penalties (administrative, civil, or criminal), revocations of permits to conduct business, expenditures for remediation or other corrective measures, and/or claims for liability for property damage, exposure to hazardous materials, exposure to hazardous waste, nuisance, or personal injuries.
Actions arising under these laws and regulations could result in the shutdown of our operations, fines and penalties (administrative, civil, and/or criminal), revocations of permits to conduct business, expenditures for remediation or other corrective measures, and/or claims for liability for property damage, exposure to hazardous materials, exposure to hazardous waste, nuisance, or personal injuries.
Sanctions for noncompliance with applicable environmental laws and regulations may also include the assessment of administrative, civil, or criminal penalties, revocation of permits and temporary or permanent cessation of operations in a particular location, and issuance of corrective action orders.
Sanctions for noncompliance with applicable environmental laws and regulations may also include the assessment of administrative, civil, and/or criminal penalties, revocation of permits and temporary or permanent cessation of operations in a particular location, and issuance of corrective action orders.
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.
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. We are dependent on customers in a single industry.
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.
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 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.
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.
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 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.
In addition, we may not be able to retain key employees of entities that we acquire in the future, which may impact our ability to successfully integrate or operate the assets we acquire. We may be unable to employ, or maintain the employment of, a sufficient number of key employees, technical personnel, and other skilled and qualified workers.
In addition, we may not be able to retain key employees of entities that we acquire in the future, which may impact our ability to successfully integrate or operate the assets we acquire. 29 We may be unable to employ, or maintain the employment of, a sufficient number of key employees, technical personnel, and other skilled and qualified workers.
In addition, any litigation or claim, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public, which could cause us to lose customers and substantial revenue, make it more difficult for us to compete effectively, or obtain adequate insurance in the future.
In addition, any litigation or claim, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public, which could cause us to lose customers and substantial revenue, make it more difficult for us to compete effectively, or obtain adequate 21 insurance in the future.
Additionally, if we expand the size or scope of our operations, we could be subject to regulatory requirements that are more stringent than the requirements under which we are currently allowed to operate or require additional authorizations to continue operations. Compliance with this additional regulatory burden could increase our operating or other costs.
Additionally, if we expand the size or scope of our operations, we could be subject to regulatory requirements that are more stringent than the requirements under which we are currently allowed to 25 operate or require additional authorizations to continue operations. Compliance with this additional regulatory burden could increase our operating or other costs.
We are also required to obtain federal, state, local, and/or third-party permits and authorizations in some jurisdictions in connection with our wireline services and trucking operations. The requirements for permits or authorizations vary depending on the location where the associated activities will be conducted.
We are also required to obtain federal, state, local, and/or third-party permits and authorizations in some 24 jurisdictions in connection with our wireline services and trucking operations. The requirements for permits or authorizations vary depending on the location where the associated activities will be conducted.
Future events or new information, including regarding the general economic environment, E&P activity levels, our financial performance and trends, and our strategies and business plans, may change management’s valuation of long-lived assets, other intangible assets, or other assets in a short amount of time.
Future events or new information, including 30 regarding the general economic environment, E&P activity levels, our financial performance and trends, and our strategies and business plans, may change management’s valuation of long-lived assets, other intangible assets, or other assets in a short amount of time.
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.
Volatility in oil and natural gas prices can impact our customers’ activity levels, 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.
If we are unable to compete effectively given these risks, our business and results of operations could be affected. We rely on a limited number of manufacturers to produce the proprietary products used in the provision of our services, which exposes us to risks.
If we are unable to compete effectively given these risks, our business and results of operations could be adversely affected. We rely on a limited number of manufacturers to produce the proprietary products used in the provision of our services, which exposes us to risks.
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.
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.
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.
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.
In addition, any future significant cancellations or deferrals of orders or the return of previously sold products could materially and adversely affect profit margins, increase inventory obsolescence, and restrict our ability to fund our operations.
In addition, any future significant cancellations or deferrals of orders or the return of previously sold products could materially and adversely affect profit margins, increase 22 inventory obsolescence, and restrict our ability to fund our operations.
The greater size of many of our competitors provides them with cost advantages as a result of their economies of scale and their ability to obtain volume discounts and purchase raw materials at lower prices.
The greater size of many of our competitors provides them with cost advantages as a result of their 20 economies of scale and their ability to obtain volume discounts and purchase raw materials at lower prices.
We can be held liable for violations under such laws and regulations either due to our acts or omissions or due to the acts or omissions of others, including intermediaries working on our behalf.
We can be held liable for violations under such laws and regulations either due to our acts or omissions or due to the acts or omissions of others, including intermediaries and agents working on our behalf.
Although we take measures to ensure that we use advanced technologies, changes in technology or improvements in our competitors’ equipment could make our equipment less competitive or require significant capital investments to keep our equipment competitive.
Although we take measures to ensure that we use advanced technologies, changes in technology or improvements in our competitors’ 28 equipment could make our equipment less competitive or require significant capital investments to keep our equipment competitive.
The restrictions in our debt agreements could also impact our ability to obtain capital to withstand a downturn in our business or the economy in general, or to otherwise conduct necessary corporate activities.
The restrictions in our debt agreements could also impact our ability to obtain capital to withstand a downturn in our 19 business or the economy in general, or to otherwise conduct necessary corporate activities.
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.
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, 2024 and 2023, 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 18 alternatives.
The terms of existing or future debt instruments may restrict us from adopting some of these alternatives.
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.
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, 2024, our five largest customers collectively accounted for approximately 25% of total revenues.
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, 2024, we had $300.0 million of 13.000% Senior Secured Notes due 2028 (the “2028 Notes”) outstanding, and we had $47.0 million of borrowings outstanding 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).
Subject to the terms and conditions of the Equity Distribution Agreement and such parameters, the Agent may sell the shares by any method deemed to be an “at the market offering” as defined by Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the New York Stock Exchange.
Subject to the terms and conditions of the Equity Distribution Agreement and such parameters, the Agent may sell the shares by any method deemed to be an “at the market offering” as defined by Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the NYSE.
Our current or future level of indebtedness could have significant adverse consequences on our business and future prospects, including in the following ways: • requiring us to dedicate a substantial portion of our cash flow from operations to service our existing debt, thereby reducing the cash available to finance our operations and other business activities; • limiting management’s discretion in operating our business and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • increasing our vulnerability to downturns and adverse developments in our business and the economy generally; • limiting our ability to access the capital markets to raise capital on favorable terms or to obtain additional financing for working capital, capital expenditures, or acquisitions or to refinance existing indebtedness; • placing us at a competitive disadvantage relative to competitors with lower levels of indebtedness in relation to their overall size or less restrictive terms governing their indebtedness; and • making it more difficult for us to satisfy our obligations under our debt instruments and increase the risk that we may default on our debt obligations.
Our current or future level of indebtedness could have significant adverse consequences on our business and future prospects, including in the following ways: • requiring us to dedicate a substantial portion of our cash flow from operations to service our existing debt, thereby reducing the cash available to finance our operations and other business activities; • limiting management’s discretion in operating our business and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • increasing our vulnerability to downturns and adverse developments in our business and the economy generally; • limiting our ability to access the capital markets to raise capital on favorable terms or to obtain additional financing for working capital, capital expenditures, or acquisitions or to refinance existing indebtedness; • placing us at a competitive disadvantage relative to competitors with lower levels of indebtedness in relation to their overall size or less restrictive terms governing their indebtedness; and • making it more difficult for us to satisfy our obligations under our debt instruments and increase the risk that we may default on our debt obligations. 18 Additionally, borrowings under the ABL Credit Facility bear interest at variable rates exposing us to interest rate risk.
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.
During the five years ending December 31, 2024, 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 $1.21 per MMBtu in November 2024 to a high of $23.86 per MMBtu in February 2021.
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.
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, 2024 and 2023, we spent approximately $10.4 million and $12.6 million, respectively, on capital expenditures related to maintenance.
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.
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 2024, we derived 4.6% of our revenue from sales to customers outside of the U.S.
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.
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; • the imposition of duties and tariffs and other trade barriers; • exposure under the FCPA or similar legislation, as discussed in the below risk factor; and • currency exchange controls.
Bribery Act (“UKBA”), Canada’s Corruption of Foreign Public Officials Act (the “CFPOA”), and similar anti-bribery and anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or improperly providing anything of value for the purpose of obtaining or retaining business.
The U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act (“UKBA”), Canada’s Corruption of Foreign Public Officials Act (the “CFPOA”), and similar anti-bribery and anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or improperly providing anything of value for the purpose of obtaining or retaining business.
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.
As of December 31, 2024, we had federal and state income tax NOLs of approximately $498.7 million, which will 32 begin to expire between 2025 and 2034. Utilization of these NOLs depends on many factors, including our future taxable income, which cannot be assured.
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.
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.
For example, oil and natural gas E&P may decline as a result of environmental requirements, including land use policies responsive to environmental concerns (e.g., numerous cities, including San Francisco, CA, and Seattle, WA, have banned the use of natural gas in new construction, and other cities, including New York, NY, are considering similar initiatives).
For example, oil and natural gas E&P may decline as a result of environmental requirements, including land use policies responsive to environmental concerns (e.g., numerous cities, including in Colorado, New York, Massachusetts, and Maryland, have, to varying degrees, banned the use of natural gas in new construction, and other cities are considering similar initiatives).
Pursuant to the Equity Distribution Agreement, we may, from time to time, sell, shares of our common stock having an aggregate offering price of up to $30.0 million through the Agent acting as the Company’s sales agent (the “ATM Program”) .
In November 2023, we entered an equity distribution agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (the “Agent”). Pursuant to the Equity Distribution Agreement, we may, from time to time, sell, shares of our common stock having an aggregate offering price of up to $30.0 million through the Agent acting as the Company’s sales agent (the “ATM Program”).
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.
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.
We may not be able to generate sufficient cash to service all of our indebtedness. Our ability to make scheduled payments with respect to our indebtedness depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business, and other factors beyond our control.
Our ability to make scheduled payments with respect to our indebtedness depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business, and other factors beyond our control.
Any regulation that restricts the ability of our customers to dispose of produced waters or increases their cost of doing business could cause them to curtail operation, which in turn could decrease demand for our products and services and have a material adverse effect on our business.
Any regulation that restricts the ability of our customers to dispose of produced waters or increases their cost of doing business could cause them to curtail operation, which in turn could decrease demand for our products and services and have a material adverse effect on our business. 26 We are subject to complex U.S. and foreign laws and regulations governing anti-corruption and export controls and economic sanctions .
A component of CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federal and state law enforcement personnel to determine a carrier’s safety performance.
A component of CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federal and state law enforcement personnel to determine a carrier’s safety performance. The SMS is intended to allow the DOT to identify carriers with safety issues and intervene to address those problems.
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.
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.
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.
See “Business – Regulatory Matters – Climate Change” for more information on existing and proposed climate change regulation. 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 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.
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.
We cannot predict whether, or in what form, any legislative or regulatory changes or municipal ordinances applicable to our logistics operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our business or operations.
We cannot predict whether, or in what form, any legislative or regulatory changes or municipal ordinances applicable to our logistics operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our business or operations. 27 Risks Related to Technology Our success may be affected by the use and protection of our proprietary technology as well as our ability to enter into license agreements.
Additionally, borrowings under the ABL Credit Facility bear interest at variable rates exposing us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remains the same, and our net income and cash available to finance our operations and other business activities would decrease.
If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remains the same, and our net income and cash available to finance our operations and other business activities would decrease. We may not be able to generate sufficient cash to service all of our indebtedness.
The Agent may also sell shares in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law, subject to our prior written consent. 30 In addition to any shares issued through the ATM Program, we may issue shares of our common stock or equity securities senior to our common stock in the future for a number of reasons, including to finance our operations and growth plans or to adjust our ratio of debt-to-equity.
In addition to any shares issued through the ATM Program, we may issue shares of our common stock or equity securities senior to our common stock in the future for a number of reasons, including to finance our operations and growth plans or to adjust our ratio of debt-to-equity.
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.
The average WTI price for 2024 was $76.63. 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.
Risks Related to Technology Our success may be affected by the use and protection of our proprietary technology as well as our ability to enter into license agreements. There are limitations to our intellectual property rights and, thus, our right to exclude others from the use of our proprietary technology.
There are limitations to our intellectual property rights and, thus, our right to exclude others from the use of our proprietary technology. Our success may be affected by our development and implementation of new product designs and improvements and by our ability to protect, obtain, and maintain intellectual property assets related to these developments.
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.
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 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.
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.
Any enhanced climate disclosure obligations could result in increased compliance burden and operating costs as well as increased litigation risk related to the required disclosures. 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.
Our success may be affected by our development and implementation of new product designs and improvements and by our ability to protect, obtain, and maintain intellectual property assets related to these developments. We rely on a combination of patents and trade secret laws to establish and protect this proprietary technology.
We rely on a combination of patents and trade secret laws to establish and protect this proprietary technology.
Removed
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.
Added
In addition, the Company’s efforts to research, establish, accomplish, and accurately report on the implementation of our sustainability strategy, including any specific sustainability objectives, may also create additional operational risks and expenses and expose us to reputational, legal, and other risks.
Removed
However, to the extent this rulemaking is finalized as proposed, we could incur increased costs relating to the assessment and disclosure of climate-related risks. We may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed.
Added
While we create and publish voluntary disclosures regarding sustainability matters from time to time, some of the statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
Removed
We are subject to complex U.S. and foreign laws and regulations governing anti-corruption and export controls and economic sanctions . The U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K.
Added
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many sustainability matters.
Removed
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.
Added
Our operations, projects, and growth opportunities require us to have strong relationships with various key stakeholders, including our shareholders, employees, suppliers, customers, local communities, and others.
Removed
(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.
Added
We may face pressure from stakeholders, many of whom are focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint, and promote sustainability while at the same time remaining a successfully operating public company.
Removed
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.
Added
If we do not successfully manage expectations across these varied stakeholder interests, it could erode stakeholder trust and thereby affect our brand and reputation.
Removed
This concentration of ownership by a small group of stockholders will limit other stockholders’ ability to influence corporate matters, and as a result, actions may be taken that other stockholders may not view as beneficial.
Added
Such erosion of confidence could negatively impact our business through decreased demand and growth opportunities, delays in projects, increased legal action and regulatory oversight, adverse press coverage and other adverse public statements, difficulty hiring and retaining top talent, difficulty obtaining necessary approvals and permits from governments and regulatory agencies on a timely basis and on acceptable terms, and difficulty securing investors and access to capital.
Removed
For example, this concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their shares of our common stock.
Added
In addition, although such projects may require material capital expenditures, there is no assurance that they will generate a positive return.
Removed
This concentration of stock ownership may also adversely affect the trading price of our common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders. A significant reduction by SCF of its ownership interests in us could adversely affect us.
Added
Tariffs and other trade measures could adversely affect our business, results of operations, financial position, and cash flows.
Removed
We believe that SCF’s substantial ownership interest in us provides them with an economic incentive to assist us to be successful. SCF is not subject to any obligation to maintain its ownership interest in us and may elect at any time to sell all or a substantial portion of or otherwise reduce its ownership interest in us.
Added
The cost of raw materials, parts, and components that are manufactured and supplied for our operations may be adversely affected by tariffs imposed by the U.S. government on products imported into the United States and tariffs or other retaliatory trade measures imposed by other jurisdictions.
Removed
If SCF sells all or a substantial portion of its ownership interest in us, it may have less incentive to assist in our success and its affiliates that serve as members of our board of directors may resign.
Added
Tariffs and other trade restrictions could also disrupt our supply chain and logistics, restrict or limit the availability of materials or supplies, and cause adverse financial impacts due to volatility in foreign exchange rates and interest rates or inflationary pressures on raw materials and energy.
Removed
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. Andrew L.
Added
We may not be able to fully mitigate the impact of these increased costs or pass price increases on to our customers.
Removed
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.
Added
While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position, and cash flows.
Removed
These positions may conflict with such individuals’ duties as one of our directors regarding business dealings and other matters between SCF and us. The resolution of these conflicts may not always be in our or our other stockholders’ best interest.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have established a Security Committee (the “SC”), comprised of senior departmental leadership including our Chief Financial Officer, Senior Vice President and General Counsel, Vice President – IT, Vice President – Internal Audit, and Vice President – Corporate Operations, each of whom has between 10 to 20 years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats.
Biggest changeWe have established a Security Committee (the “SC”), comprised of senior departmental leadership including our Chief Financial Officer, Executive Vice President and General Counsel, Senior Vice President – Strategic Development and Investor Relations, Vice President – IT, Vice President – Internal Audit, and Vice President – Corporate Operations, each of whom has between 10 to 20 years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats.
The SC meets quarterly to discuss and review cybersecurity concerns that arise during the year. The SC also identifies areas that should be addressed and reviews and updates security policies, as necessary. The SC has primary management oversight responsibility for assessing and managing risks from cybersecurity threats.
The SC meets quarterly to discuss and review cybersecurity concerns that arise during the 33 year. The SC also identifies areas that should be addressed and reviews and updates security policies, as necessary. The SC has primary management oversight responsibility for assessing and managing risks from cybersecurity threats.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. In addition, the Board receives reports addressing cybersecurity as part of our overall enterprise risk management program and to the extent cybersecurity matters are addressed therein, in regular business updates.
The Audit Committee reports to the Board regarding its activities, including those related to cybersecurity. In addition, the Board receives reports addressing cybersecurity as part of our overall enterprise risk management program and to the extent cybersecurity matters are addressed therein, in regular business updates.
Board Oversight and Management ’ s Role Our Board considers cybersecurity risk as part of its risk oversight function and has assigned oversight of cybersecurity risk management to the Audit Committee. The Audit Committee regularly receives reports from our management, including the SC (defined below) and our senior IT leadership, and third parties on cybersecurity matters.
Board Oversight and Management ’ s Role Our Board of Directors (the “Board”) considers cybersecurity risk as part of its risk oversight function and has assigned oversight of cybersecurity risk management to the Audit Committee. The Audit Committee regularly receives reports from our management, including the SC (defined below) and our senior IT leadership and third parties on cybersecurity matters.
Item 1C. Cybersecurity Risk Management and Strategy Identifying, assessing, and managing cybersecurity risks is an important component of our overall enterprise risk management program. Our cybersecurity programs have been developed based on the National Institute of Standards and Technology Cybersecurity Framework and seek to protect the Company against cybersecurity risks.
Item 1C. Cybersecurity Risk Management and Strategy Identifying, assessing, and managing cybersecurity risks is an important component of our overall enterprise risk management program. Our cybersecurity programs have been developed based on the National Institute of Standards and Technology Cybersecurity Framework and seek to protect us against cybersecurity risks.
For more information about these risks, see the risk factor titled “ Our operations are subject to cybersecurity risks that could have a material adverse effect on our results of operations and financial condition ” under Item 1A of Part I of this Annual Report.
For more information about these risks, see the risk factor titled “Our operations are subject to cybersecurity risks that could have a material adverse effect on our results of operations and financial condition” under Item 1A of Part I of this Annual Report.
Our IT team is led by our Vice President – IT, who has over 12 years of experience managing global IT operations, including strategy, applications, infrastructure, information security, support, and execution. 33
Our IT team is led by our Vice President – IT, who has over 13 years of experience managing global IT operations, including strategy, applications, infrastructure, information security, support, and execution.

Item 2. Properties

Properties — owned and leased real estate

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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
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 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, 2023.
Item 2. Properties The following table describes the material facilities owned or leased by us as of December 31, 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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. 34 PART II
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. 34 Item 4. Mine Safety Disclosures Not applicable. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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 NYSE under the symbol “NINE.” Holders As of March 3, 2025, we had 58 stockholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 35
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 36

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations Year Ended December 31, 2023 2022 Change Percentage Change (in thousands, except percentage change) Revenues $ 609,526 $ 593,382 $ 16,144 3 % Cost of revenues (exclusive of depreciation and amortization shown separately below) 490,750 457,093 33,657 7 % Adjusted gross profit $ 118,776 $ 136,289 $ (17,513) (13) % General and administrative expenses $ 59,817 $ 51,653 $ 8,164 16 % Depreciation 29,141 26,784 2,357 9 % Amortization of intangibles 11,516 13,463 (1,947) (14) % Loss on revaluation of contingent liability 437 454 (17) (4) % Loss on sale of property and equipment 292 367 (75) (20) % Income from operations 17,573 43,568 (25,995) (60) % Non-operating expenses 49,201 28,629 20,572 72 % Income (loss) before income taxes (31,628) 14,939 (46,567) (312) % Provision for income taxes 585 546 39 7 % Net income (loss) $ (32,213) $ 14,393 $ (46,606) (324) % Revenues Revenues increased $16.1 million, or 3%, to $609.5 million in 2023; while the average U.S. rig count remained relatively flat in comparison to 2022, the overall increase in revenues was attributable to a number of factors, including increased activity and changes in product mix.
Biggest changeFurthermore, although as noted above, our customers’ activity and spending levels, and thus demand for our services and products, are strongly influenced by current and expected oil and natural gas prices, even with price improvements in oil and natural gas, operator activity may not materially increase, as operators remain focused on operating within their capital plans, and uncertainty remains around supply and demand fundamentals. 39 Results of Operations Year Ended December 31, 2024 2023 Change Percentage Change (in thousands, except percentage change) Revenues $ 554,104 $ 609,526 $ (55,422) (9) % Cost of revenues (exclusive of depreciation and amortization shown separately below) 456,729 490,750 (34,021) (7) % Adjusted gross profit $ 97,375 $ 118,776 $ (21,401) (18) % General and administrative expenses $ 51,298 $ 59,817 $ (8,519) (14) % Depreciation 25,594 29,141 (3,547) (12) % Amortization of intangibles 11,183 11,516 (333) (3) % Loss on revaluation of contingent liability 104 437 (333) (76) % Loss on sale of property and equipment 256 292 (36) (12) % Income from operations 8,940 17,573 (8,633) (49) % Non-operating expenses 49,824 49,201 623 1 % Loss before income taxes (40,884) (31,628) (9,256) 29 % Provision for income taxes 198 585 (387) (66) % Net loss $ (41,082) $ (32,213) $ (8,869) 28 % Revenues Revenues decreased $55.4 million, or 9%, to $554.1 million in 2024.
The impact is included in our Consolidated Statements of Income and Comprehensive Income (Loss). For additional information on contingent liabilities, see Note 12 – Commitments and Contingencies included Item 8 of Part II of this Annual Report.
The impact is included in our Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). For additional information on contingent liabilities, see Note 12 – Commitments and Contingencies included in Item 8 of Part II of this Annual Report.
All stock-based compensation expense is recorded using the straight-line method and is included in “General and administrative expenses” in our Consolidated Statements of Income and Comprehensive Income (Loss). Fair value of all the options outstanding was measured using the Black-Scholes model.
All stock-based compensation expense is recorded using the straight-line method and is included in “General and administrative expenses” in our Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Fair value of all the options outstanding was measured using the Black-Scholes model.
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.
Significant factors that are likely to affect commodity prices moving forward include 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 the Middle East, Russia, South America and Africa; actions of the members of OPEC and other oil exporting nations that relate to or impact oil production or supply; weather conditions; 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; 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.
Determining the appropriate fair value model and calculating the fair value of options requires the input of highly subjective assumptions, including the expected volatility of the price of our stock, the risk-free rate, the expected term of the options, and the expected dividend yield of our common stock. These estimates involve inherent uncertainties and the application of management’s judgment.
Determining the appropriate fair value model and calculating the fair value of options requires the input of highly subjective assumptions, including the expected volatility of the price of our stock, the risk-free rate, the expected term of the options, and the expected dividend yield 48 of our common stock. These estimates involve inherent uncertainties and the application of management’s judgment.
Our liquidity position will continue to be impacted by the semi-annual interest payments ($19.5 million based on amounts outstanding as December 31, 2023) to the holders of the 2028 Notes, which began on August 1, 2023.
Our liquidity position will continue to be impacted by the semi-annual interest payments ($19.5 million based on amounts outstanding as December 31, 2024) to the holders of the 2028 Notes, which began on August 1, 2023.
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.
Impairment losses are reflected in “Income (loss) from operations” in our Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Recognition of Provisions for Contingencies In the ordinary course of business, we are subject to various claims, suits, and complaints.
The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on a regular basis.
The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related 47 disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on a regular basis.
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.
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.
Equipment held under finance leases is stated at the present value of its future minimum lease payments and is depreciated under the straight-line method over the shorter of the lease term or the estimated useful life of the asset.
Equipment held under finance leases is stated at the present value of its future minimum lease payments and is depreciated under the straight-line method over the shorter of the lease term and the estimated useful life of the asset.
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.
Another key component of labor costs relates to the ongoing training of our field service employees, which improves safety rates and reduces employee attrition. 37 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.
(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.
(3) Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the FLSA and/or similar state laws. 42 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.
The following table also presents ROIC (defined as net income (loss), divided by average total capital) and a reconciliation of the non-GAAP financial measure of adjusted after-tax net operating profit (loss) to the most directly comparable GAAP measure of net income (loss), in each case for the years ended December 31, 2023 and 2022.
The following table also presents ROIC (defined as net income (loss), divided by average total capital) and a reconciliation of the non-GAAP financial measure of adjusted after-tax net operating profit (loss) to the most directly comparable GAAP measure of net income (loss), in each case for the years ended December 31, 2024 and 2023.
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.
For the Excess Cash Flow Offer Date of November 14, 2024, 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.
Pursuant to the ABL Facility Amendment, the maturity date of the ABL Credit Facility was extended from October 25, 2023 to January 29, 2027.
Pursuant to the First ABL Facility Amendment, the maturity date of the ABL Credit Facility was extended from October 25, 2023 to January 29, 2027.
(2) 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.
(2) Amounts represent fees and expenses relating to our multiple Units offering and other refinancing activities, including cash incentive compensation to employees following the successful completion of the initial Units offering, that were not capitalized.
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.
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. Item 7A.
This measure should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) or as an indicator of our operating performance.
Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) or as an indicator of our operating performance.
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 decrease in comparison to 2023 was due to certain intangible assets being fully amortized over the last twelve months. (Gain) Loss on Revaluation of Contingent Liability We recorded a $0.1 million loss on the revaluation of contingent liability in 2024 compared to a $0.4 million loss in 2023.
Certain items excluded from this measure are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of this measure.
Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA.
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.
Management believes Adjusted EBITDA provides useful information to us and our investors regarding our financial condition and results of operations because it allows us and them 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.
We define adjusted gross profit (loss) as revenues less direct and indirect costs of revenues (excluding depreciation and amortization). This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses. Management uses adjusted gross profit (loss) to evaluate operating performance.
We define adjusted gross profit (loss) as revenues less direct and indirect costs of revenues (excluding depreciation and amortization). This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses.
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.
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.
Adjusted gross profit (loss) may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted gross profit (loss) or similarly titled measures in the same manner as we do. The following table presents a reconciliation of adjusted gross profit (loss) to GAAP gross profit (loss).
Adjusted gross profit (loss) may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted gross profit (loss) or similarly titled measures in the same manner as we do.
On January 17, 2023, we entered into the First Amendment to Credit Agreement (the “ABL Facility Amendment”) with JP Morgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, which amends certain terms of the 2018 ABL Credit Agreement (as amended the “ABL Credit Agreement”). The ABL Facility Amendment became effective on January 30, 2023.
On January 17, 2023, we entered into the First Amendment to Credit Agreement (the “First ABL Facility Amendment”) with JP Morgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, which became effective on January 30, 2023.
The overall increase in net cash used was largely offset by $279.8 million in proceeds received from the Units offering in 2023 that did not occur in 2022.
The overall decrease in net cash used was largely offset by $279.8 million in proceeds received from the Units offering in 2023, that did not reoccur in 2024.
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.
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.
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.
We were in compliance with all covenants under the ABL Credit Agreement as of December 31, 2024. 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.
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.
Year Ended December 31, 2024 2023 (in thousands) Calculation of gross profit: Revenues $ 554,104 $ 609,526 Cost of revenues (exclusive of depreciation and amortization shown separately below) 456,729 490,750 Depreciation (related to cost of revenues) 25,095 27,101 Amortization of intangibles 11,183 11,516 Gross profit $ 61,097 $ 80,159 Adjusted gross profit reconciliation: Gross profit $ 61,097 $ 80,159 Depreciation (related to cost of revenues) 25,095 27,101 Amortization of intangibles 11,183 11,516 Adjusted gross profit $ 97,375 $ 118,776 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.
Year 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.
Year Ended December 31, 2024 2023 (in thousands) Net loss $ (41,082) $ (32,213) Add back: Interest expense 51,321 51,119 Interest income (849) (1,270) Certain refinancing costs (1) — 6,396 Restructuring charges 701 2,027 Adjusted after-tax net operating income $ 10,091 $ 26,059 Total capital as of prior 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 prior period-end $ 293,389 $ 300,654 Total capital as of period-end: Total stockholders’ deficit $ (66,064) $ (35,630) Total debt 350,580 359,859 Less cash and cash equivalents (27,880) (30,840) Total capital as of period-end $ 256,636 $ 293,389 Average total capital $ 275,013 $ 297,022 ROIC (14.9) % (10.8) % Adjusted ROIC 3.7 % 8.8 % (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.
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.
Cash Flows Our cash flows for the years ended December 31, 2024, and 2023 are presented below: Year Ended December 31, 2024 2023 (in thousands) Operating activities $ 13,195 $ 45,509 Investing activities (14,178) (23,157) Financing activities (1,683) (8,893) Impact of foreign exchange rate on cash (294) (64) Net change in cash and cash equivalents $ (2,960) $ 13,395 Operating Activities Net cash provided by operating activities was $13.2 million in 2024 compared to $45.5 million in net cash provided by operating activities in 2023.
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.
Adjusted Gross Profit (Loss) Adjusted gross profit decreased $21.4 million to $97.4 million in 2024 as a result of the factors described above under “Revenues” and “Cost of Revenues.” General and Administrative Expenses General and administrative expenses decreased $8.5 million to $51.3 million in 2024.
We prepare adjusted gross profit (loss) to eliminate the impact of depreciation and amortization because we do not consider depreciation and amortization indicative of our core operating performance. Adjusted gross profit (loss) should not be considered as an alternative to gross profit (loss), operating income (loss), or any other measure of financial performance calculated and presented in accordance with GAAP.
Adjusted gross profit (loss) should not be considered as an alternative to gross profit (loss), operating income (loss), or any other measure of financial performance calculated and presented in accordance with GAAP.
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.
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. 41 The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss) for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 (in thousands) Net loss $ (41,082) $ (32,213) Interest expense 51,321 51,119 Interest income (849) (1,270) Provision for income taxes 198 585 Depreciation 25,594 29,141 Amortization of intangibles 11,183 11,516 EBITDA $ 46,365 $ 58,878 Adjusted EBITDA reconciliation: EBITDA $ 46,365 $ 58,878 Loss on revaluation of contingent liability (1) 104 437 Certain refinancing costs (2) — 6,396 Restructuring charges 701 2,027 Stock-based compensation expense 2,946 2,169 Cash award expense 2,832 2,698 Loss on sale of property and equipment 256 292 Legal fees and settlements (3) — 69 Adjusted EBITDA $ 53,204 $ 72,966 (1) Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.
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.
The decrease was attributed to a $9.8 million decrease in cash purchases of property and equipment, partially offset by a $0.8 million decrease in proceeds from the sale of property and equipment (including insurance), each in comparison to 2023.
Financing Activities Net cash used in financing activities was $8.9 million in 2023 compared to $4.8 million in net cash provided in 2022. The $13.7 million change was primarily attributed to the $307.3 million redemption of the 2023 Notes and $6.3 million in debt issuance costs associated with the Units offering in 2023 that did not occur in 2022.
Financing Activities Net cash used in financing activities was $1.7 million in 2024 compared to $8.9 million in net cash used in 2023. The decrease was primarily attributed to the $307.3 million redemption of the 2023 Notes as well as $6.3 million in debt issuance costs associated with the Units offering in 2023, neither of which reoccurred in 2024.
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.
In addition, the First 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) decreased the Canadian tranche sub-limit from $25.0 million to $5.0 million, and (d) decreased the letter of credit sub-limit from $50.0 million to $10.0 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.
As of December 31, 2024, we had $47.0 million of borrowings under the ABL Credit Facility, and our availability under the ABL Credit Facility was approximately $24.2 million, net of outstanding letters of credit of $2.2 million.
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.
Management believes Adjusted ROIC provides useful information to us and our investors regarding our financial condition and results of operations 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.
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.
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.
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 received proceeds of $279.8 million from the Units offering, after deducting underwriting discounts and commission, which, together with borrowings under the ABL Credit Facility, was used to fund the redemption of our 8.750% Senior Notes due 2023 (the “2023 Notes”).
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), and the 2023 Notes Indenture was discharged as of January 30, 2023.
On February 1, 2023, we redeemed all of the 2023 Notes at a redemption price of 100.0% of outstanding principal amount thereof ($307.3 million), plus accrued and unpaid interest ($6.7 million). 45 Each Unit separated into its constituent securities (the 2028 Notes and the shares of our common stock) automatically on October 27, 2023.
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.
Although we do not budget for acquisitions, pursuing growth through acquisitions may continue to be a part of our business strategy. 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.
The increase in comparison to 2022 was primarily due to an increase in capital expenditures over the last two years. Amortization of Intangibles Amortization of intangibles, which was primarily comprised of technology and customer relationships, decreased $1.9 million to $11.5 million in 2023.
The decrease in comparison to 2023 was primarily due to a decrease in capital expenditures across certain lines of service over the last twelve months. 40 Amortization of Intangibles Amortization of intangibles, which was comprised of technology and customer relationships, decreased $0.3 million to $11.2 million in 2024.
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”).
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”). Each Unit consisted of $1,000 principal amount of the 2028 Notes and five shares of our common stock.
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.
Management uses Adjusted ROIC to assist them in capital resource allocation decisions and in evaluating business performance. 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.
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 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. For 2025, our planned capital expenditure budget, excluding possible acquisitions, is expected to be between $15 million to $25 million.
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.
Additionally, the decrease was partly attributed to a $2.0 million reduction in payments on the ABL Credit Facility between periods as well as an increase of $1.0 million in proceeds from short term debt, each in comparison to 2023.
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.
The decrease in comparison to 2023 was primarily driven by a reduction in activity for certain lines of service as described under “Revenues.” More specifically, the decrease was due to a $15.4 million decrease in materials installed and consumed while performing services, a $12.5 million decrease in employee related costs, and a $6.1 million decrease in other costs such as repair and maintenance, vehicle expense, and travel, in comparison to 2023.
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.
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.
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.
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 were issued.
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.
We were in compliance with the provision of the 2028 Notes Indenture on December 31, 2024. 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.
The increase was primarily due to $6.4 million in costs associated with the Units offering in 2023 that did not occur in 2022. The increase was also partially attributed to a $1.7 million increase in marketing and communication costs in comparison to 2022. Depreciation Depreciation expense increased $2.4 million to $29.1 million in 2023.
The decrease in comparison to 2023 was primarily related to $6.4 million in costs associated with the Units offering in 2023 that did not occur in 2024.
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.
The losses for both periods were related to increases in the fair value of the earnout associated with our acquisition Frac Technology AS. Non-Operating Expenses (Income) Non-operating expenses increased $0.6 million to $49.8 million in 2024.
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.
In recent years, oil and natural gas prices have been extremely volatile, and commodity prices continued to be volatile in 2024. During 2024, natural gas prices continued to be extremely depressed, with average natural gas prices of $2.19 for 2024, which is 14% lower than average prices in 2023, which had already declined by over 60% as compared to 2022.
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.
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, which we cannot guarantee.
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.
On June 7, 2024, we entered into the Second Amendment to Credit Agreement (together with the First ABL Facility Amendment, the “ABL Facility Amendments”) with JP Morgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, to change the interest rate benchmark for borrowings denominated in Canadian dollars from Canadian Dollar Offered Rate (CDOR) to a rate based on the Canadian Overnight Repo Rate Average (CORRA), effective as of June 14, 2024. 46 The 2018 ABL Credit Agreement, as amended by the ABL Facility Amendments (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 increase in comparison to 2022 was primarily due to an increased interest rate on our senior notes (from 8.750% on the 2023 Notes (as defined and described below) to 13.000% on the 2028 Notes).
The increase in comparison to 2023 was primarily attributed to a $0.4 million decrease in interest income earned on cash in 2024, as our average cash balance in 2024 decreased in comparison to 2024, coupled with a $0.2 million increase in interest expense on the 2028 Notes in 2024 compared to interest expense on the 2023 Notes (as defined and described below) and the 2028 Notes in 2023.
Our tax provision for 2023 is primarily the result of our tax position in state and foreign tax jurisdictions. Adjusted EBITDA Adjusted EBITDA decreased $20.8 million to $73.0 million for 2023. The Adjusted EBITDA decrease was primarily due to the changes in revenue and expenses discussed above.
Provision (Benefit) for Income Taxes Our effective tax rate was (0.5)% for 2024 and (1.8)% for 2023. Our tax provision for 2024 was primarily attributed to our income tax position in state and foreign tax jurisdictions.
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.
The decrease was also partially attributed to a $11.8 million decrease in cash provided by operations driven mainly by an increased net loss in comparison to 2023. Investing Activities Net cash used in investing activities was $14.2 million in 2024 compared to $23.2 million in net cash used in investing activities in 2023.
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.
We remain cautiously optimistic on the outlook for the energy sector, and we believe there is potential upside for North American activity levels, especially if natural gas prices remain supportive.
Removed
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).
Added
This sustained lower natural gas price environment resulted in decreased activity and lower rig counts, especially in natural gas-levered basins like the Haynesville. The Haynesville rig count declined by 30% between 2024 and 2023, from 44 rigs at the end of the year in 2023 to 31 rigs at the end of 2024.
Removed
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.
Added
This decline was in addition to the previously sustained decline of 28 rigs, or 39%, between 2023 and 2022, from 72 rigs at the end of the year in 2022 to 44 rigs at the end of 2023. The decline in rig count between the end of the year 2024 and the end of the year 2022 was approximately 57%.
Removed
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.
Added
It also led to pricing pressure from customers, impacting both revenue and margins. During the third quarter of 2024, WTI prices dropped below $70 compared to the highest price in 2024 of $87.69, due to OPEC and other oil exporting nations potentially 38 bringing production back.
Removed
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.
Added
The ongoing conflict in the Middle East and demand from China, if weaker than expected, could have an impact on oil prices moving forward as well. Nonetheless, as discussed below, activity levels have remained relatively stable in oil-levered basins.
Removed
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.
Added
Due to the spot-market nature of our business, our revenue and profitability generally moves very similarly to rig, frac, and stage counts in U.S. rig count. Since the end of 2023, the U.S. rig count declined by around 33 rigs, or approximately 5%, through the end of 2024.
Removed
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.
Added
This is following a rig count decline of over 150 rigs from the end of 2022 to the end of 2023, creating an already depressed oil and gas market. In 2024, most public operators with acreage in oil-levered basins, like the Permian, kept activity and capital expenditure levels relatively flat year-over-year.
Removed
Additionally, the conflicts between Russia and Ukraine and in the Middle East provide increased uncertainty regarding global supply.
Added
However, both private and public operators with acreage in gas-levered basins, like the Haynesville and in the Northeast, maintained low activity levels in conjunction with low natural gas prices. During the second half of 2024, despite a declining rig count environment, we outperformed market drivers and improved our revenue in both the third and fourth quarter sequentially.
Removed
Furthermore, although as noted above, our customers’ activity and spending levels, and thus demand for our services and products, are strongly influenced by current and expected oil and natural gas prices, even with price improvements in oil and natural gas, operator activity may not materially increase, as operators remain focused on operating within their capital plans, and uncertainty remains around supply and demand fundamentals.
Added
This improvement was driven in large part by market share gains achieved by our cementing division, which we believe differentiated itself in the market with its advanced cementing slurries and excellent wellsite execution. We also had market share gains in our completion tools division that positively impacted earnings in the fourth quarter of 2024.
Removed
More specifically, wireline revenue increased $9.6 million, or 9%, due to increased activity, as total completed wireline stages increased 4%.
Added
We did have minimal negative impacts in the fourth quarter of 2024 due to typical budget exhaustion, weather, and holiday slow-downs, specifically in the Northeast.
Removed
In addition, although completion tools stages decreased 6% in comparison to 2022, tools revenue increased $7.2 million, or 5%, due to a significant international sale made to a customer during 2023 that did not occur in 2022, as well as a change in product mix between periods.

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