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What changed in ProPetro Holding Corp.'s 10-K — 2022 vs 2023

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

+450 added−420 removedSource: 10-K (2024-03-13) vs 10-K (2023-02-23)

Top changes in ProPetro Holding Corp.'s 2023 10-K

450 paragraphs added · 420 removed · 309 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

68 edited+23 added−31 removed78 unchanged
Biggest changeSome examples of this effort include; ◦ a commitment to conducting business in a manner that respects all human rights in compliance within the requirements of applicable laws; 9 ◦ efforts to promote and encourage respect for human rights and fundamental freedoms for all without distinctions of any kind such as race, color, sex, language, religion, political or other opinions; ◦ working in partnership with personnel, business parties and other parties directly linked to our operations that share our commitment to these same principles; ◦ efforts in our employment practices, including through our code of conduct, our equal employment opportunity employer policy, and our anti-harassment policy; and ◦ to make it possible for grievances regarding health and safety to be addressed early and remediated directly, in confidence and without fear of retaliation; the Company provides an anonymous Ethics and Compliance hotline that is promoted internally and accessible from our intranet and internet. • Training and Safety.
Biggest changeSome examples of this effort to recruit and develop a diverse team and create an inclusive culture include: ◦ a commitment to conducting business in a manner that respects all human rights in compliance within the requirements of applicable laws; ◦ a commitment within our business operations to promoting and encouraging respect for human rights and fundamental freedoms for all without distinctions of any kind, such as race, color, sex, language, religion, political or other opinions; ◦ working with personnel, business partners and other parties directly linked to our operations that share our commitment to these same principles; 9 ◦ maintaining employment policies reflecting our commitments, including our code of conduct, our equal employment opportunity employer policy, and our anti-harassment and anti-discrimination policy; and ◦ providing an anonymous Ethics and Compliance hotline that is promoted internally and accessible from our intranet and website to make it possible for grievances regarding health and safety to be addressed early and remediated directly, in confidence and without fear of retaliation. • Training and Safety.
The markets in which we operate are highly competitive. To be successful, an oilfield services company must provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices. Competitive factors impacting sales of our services are price, reputation, technical expertise, emissions profile, service and equipment design and quality, and health and safety standards.
The markets in which we operate are highly competitive. To be successful, an oilfield service company must provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices. Competitive factors impacting sales of our services are price, reputation, technical expertise, emissions profile, service and equipment design and quality, and health and safety standards.
Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy or push the perforating guns attached to wireline through the lateral section of a well. We own and operate a fleet of mobile wireline units and other auxiliary equipment to perform well completion services.
Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy or push the perforating guns attached to the wireline through the lateral section of a well. We own and operate a fleet of mobile wireline units and other auxiliary equipment to perform well completion services.
We provide our services primarily in the Permian Basin, and we compete against different companies in each service and product line we offer. Our competition includes many large and small oilfield services companies, including the largest integrated oilfield services companies.
We provide our services primarily in the Permian Basin, and we compete against different companies in each service and product line we offer. Our competition includes many large and small oilfield service companies, including the largest integrated oilfield service companies.
Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have previously been proposed in Congress.
Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from 8 the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have previously been proposed in Congress.
The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, war and political instability in oil producing 1 countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.
The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, war and political instability in oil producing countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.
Liability for the costs of removing or remediating previously disposed wastes or contamination, damages to natural resources, the costs of conducting certain health studies, amongst other things, is strict and joint and several. In the course of our operations, we use materials that, if released, would be subject to CERCLA and comparable state laws.
Liability for the costs of removing or remediating previously disposed wastes or contamination, damages to natural resources, the costs of conducting certain health studies, amongst other things, is strict and joint and several. In the course of 6 our operations, we use materials that, if released, would be subject to CERCLA and comparable state laws.
On January 27, 2021, President Biden issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry and an increased emphasis on climate-related risk across government agencies and economic sectors.
On January 27, 2021, the president issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry and an increased emphasis on climate-related risk across government agencies and economic sectors.
In addition, claims for loss of oil and natural gas production and damage to formations can occur in the oilfield services industry. If a serious accident were to occur at a location where our equipment and services are being used, it could result in us being named as a defendant in lawsuits asserting large claims.
In addition, claims for loss of oil and natural gas production and damage to formations can occur in the oilfield service industry. If a serious accident were to occur at a location where our equipment and services are being used, it could result in us being named as a defendant in lawsuits asserting large claims.
Some countries, including the United States, have additionally made commitments to reduce global methane 7 emissions through initiatives such as the Global Methane Pledge, and have been called upon to phase out inefficient fossil fuel subsidies. However, the impacts of these actions are unclear at this time.
Some countries, including the United States, have additionally made commitments to reduce global methane emissions through initiatives such as the Global Methane Pledge, and have been called upon to phase out inefficient fossil fuel subsidies. However, the impacts of these actions are unclear at this time.
On March 31, 2022, we entered into an amended and restated pressure pumping services agreement (the "A&R Pressure Pumping Services Agreement") with Pioneer , which was initially entered into in connection with our purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the "Pioneer Pressure Pumping Acquisition") .
On March 31, 2022, we entered into an amended and restated pressure pumping services agreement (the "A&R Pressure Pumping Services Agreement") with Pioneer , which was initially entered into in connection with our purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services, LLC (the "Pioneer Pressure Pumping Acquisition") .
Many of our 3 hydraulic fracturing fleets and associated personnel have worked continuously with the same customer for the past several years promoting deep relationships and a high degree of coordination and visibility into future customer activity levels.
Many of our hydraulic fracturing fleets and associated personnel have worked continuously with the same customer for the past several years promoting deep relationships and a high degree of coordination and visibility into future customer activity levels.
Following the increase in rig count and WTI crude oil price, the oilfield service industry has experienced increased demand for its oil well completion services, and improved pricing.
Following the increase in rig count and the WTI crude oil price, the oilfield service industry has experienced increased demand for its completion services, and improved pricing.
Operating Risks and Insurance Our operations are subject to hazards inherent in the oilfield services industry, such as accidents, blowouts, explosions, fires and spills and releases that can cause personal injury or loss of life, damage or destruction of property, equipment, natural resources and the environment and suspension of operations.
Operating Risks and Insurance Our operations are subject to hazards inherent in the oilfield service industry, such as accidents, blowouts, explosions, fires and spills and releases that can cause personal injury or loss of life, damage or destruction of property, equipment, natural resources and the environment and suspension of operations.
Availability of Filings Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the " Exchange Act " ), are made available free of charge on our internet website at www.propetroservices.com, as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC.
Availability of Filings Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are made available free of charge on our internet website at www.propetroservices.com, as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC.
Item 1. Business. Our Company We are a leading integrated oilfield services company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline, and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the exploration and production ("E&P") of North American oil and natural gas resources.
Item 1. Business. Our Company We are a leading integrated oilfield service company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline, and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the E&P of North American oil and natural gas resources.
With respect to our operations, coverage would be available under our pollution legal liability policy for any surface or subsurface environmental clean‑up and liability to third parties arising from any surface or subsurface contamination. We also have certain specific coverages for some of our businesses, including our hydraulic fracturing and wireline services.
With respect to our operations, coverage would be available under our pollution legal liability policy for any surface or subsurface environmental cleanup and liability to third parties arising from any surface or subsurface contamination. We also have certain specific coverages for some of our businesses, including our hydraulic fracturing and wireline services.
With the industry transition to lower emissions equipment and simultaneous hydraulic fracturing ("Simul-Frac"), in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.
With the industry transition to lower emissions equipment and Simul-Frac, in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.
For example, following the election of President Biden and passage of laws such as the IRA 2022, it is possible that our operations may be subject to greater environmental, health and safety restrictions, particularly with regards to hydraulic fracturing and wireline, permitting and greenhouse gases ( " GHG " ) emissions.
For example, following the passage of laws such as the IRA 2022, it is possible that our operations may be subject to greater environmental, health and safety restrictions, particularly with regards to hydraulic fracturing and wireline, permitting and greenhouse gases ( " GHG " ) emissions.
We track and evaluate safety incidents at wellsites and offices, and if an accident does occur, we take actions to mitigate similar incidents from reoccurring in the future. The Company incentivizes employees to focus on conducting operations in accordance with our strict safety standards and encourages employees to immediately report any breach of safety protocol.
We track and evaluate safety incidents at wellsites and offices, and if an accident does occur, we aim to take actions to mitigate similar incidents from reoccurring in the future. The Company seeks to incentivize employees to focus on conducting operations in accordance with our strict safety standards and encourages employees to immediately report any breach of safety protocol.
Following President Biden’s executive order in January 2021, the United States rejoined the Paris Agreement and, in April 2021, established a goal of reducing economy-wide net GHG emissions 50-52% below 2005 levels by 2030.
Following the president’s executive order in January 2021, the United States rejoined the Paris Agreement and, in April 2021, established a goal of reducing economy-wide net GHG emissions 50-52% below 2005 levels by 2030.
Our major competitors include Halliburton Company, Liberty Energy Inc., ProFrac Holding Corp., Nextier Oilfield Solutions Inc., Patterson‑UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses.
Our major competitors include Halliburton Company, Liberty Energy Inc., Patterson‑UTI Energy Inc., ProFrac Holding Corp., RPC, Inc., and a number of private and locally-oriented businesses.
Although we do not believe the current costs of managing our wastes, as presently classified, to be significant, any 6 legislative or regulatory reclassification of oil and natural gas exploration and production wastes could increase our costs to manage and dispose of such wastes. Remediation of Hazardous Substances.
Although we do not believe the current costs of managing our wastes, as presently classified, to be significant, any legislative or regulatory reclassification of oil and natural gas E&P wastes could increase our costs to manage and dispose of such wastes. Remediation of Hazardous Substances.
However, federal agencies have asserted regulatory authority over certain aspects of the process. Although several of these rulemakings have been rescinded, modified or subjected to legal challenges, new or more 8 stringent regulations may be promulgated by the Biden administration.
However, federal agencies have asserted regulatory authority over certain aspects of the process. Although several of these rulemakings have been rescinded, modified or subjected to legal challenges, new or more stringent regulations may be promulgated by the current government.
Currently, a number of lower emission solutions for pumping equipment, including Tier IV Dynamic Gas Blending (" DGB ") , electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future.
Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB dual-fuel , FORCE SM electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future.
The Biden Administration has also called for revisions and restrictions to the leasing and permitting programs for oil and gas development on federal lands and, for a time, suspended federal oil and gas leasing activities.
The current government has also called for revisions and restrictions to the leasing and permitting programs for oil and gas development on federal lands and, for a time, suspended federal oil and gas leasing activities.
We maintain directors and officers insurance; however, our insurance coverage is subject to certain exclusions (including, for example, any required SEC disgorgement or penalties) and we are responsible for meeting certain deductibles under the policies. Moreover, we cannot assure you that our insurance coverage will adequately protect us from all future claims.
We maintain directors and officers insurance; however, our insurance coverage is subject to certain exclusions (including, for example, any required United States Securities and Exchange Commission (“SEC”) disgorgement or penalties) and we are 5 responsible for meeting certain deductibles under the policies. Moreover, we cannot assure you that our insurance coverage will adequately protect us from all future claims.
Additionally, the EPA has proposed more recent rules covering the standards of performance for methane and volatile organic compounds emissions for oil and gas facilities, including leak detection, monitoring and repair, and a "super-emitter" response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties.
Additionally, the EPA has recently finalized rules covering the standards of performance for methane and volatile organic compounds emissions for oil and gas facilities, including leak detection, monitoring and repair, and a "super-emitter" response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, triggering certain investigation and repair requirements.
We also refer to all of our fracturing units, other equipment and vehicles necessary to perform a fracturing job as a "fleet" and the personnel assigned to each fleet as a "crew." Our hydraulic fracturing units consist primarily of a high pressure hydraulic pumps, diesel or dual gas engines, transmissions and various hoses, valves, tanks and other supporting equipment like blenders, irons, hoses and datavans.
We also refer to all of our fracturing units, other equipment and vehicles necessary to perform a fracturing job as a "fleet" and the personnel assigned to each fleet as a "crew." Our hydraulic fracturing units consist primarily of a high pressure hydraulic pumps, diesel or dual gas engines, transmissions and various hoses, valves, tanks and other supporting equipment like blenders, irons, hoses and datavans. 3 We provide dedicated equipment, personnel and services that are tailored to meet each of our customer’s needs.
We provide dedicated equipment, personnel and services that are tailored to meet each of our customer’s needs. Each fleet has a designated team of personnel, which allows us to provide responsive and customized services, such as project design, proppant and other consumables procurement, real‑time data provision and post‑completion analysis for each of our jobs.
Each fleet has a designated team of personnel, which allows us to provide responsive and customized services, such as project design, proppant and other consumables procurement, real-time data provision and post‑completion analysis for each of our jobs.
In addition, in September 2021, August 2022 and December 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB, and purchase of new Tier IV DGB equipment.
In addition, in 2021 and 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB dual-fuel equipment, and to purchase new Tier IV DGB dual-fuel equipment.
Effective September 1, 2022, we disposed of our coiled tubing assets to STEP Energy Services (USA) L td. ("STEP") and shut down our coiled tubing operations. We received approximately $2.8 million in cash and 2.6 million common shares of STEP, which have an estimated fair value of $11.8 million, as consideration.
Effective September 1, 2022, we disposed of our coiled tubing assets to STEP Energy Services L td. ("STEP") and shut down our coiled tubing operations. We received approximately $2.8 million in cash and 2.6 million common shares of STEP, valued at $11.8 million, as consideration.
I f the rig count and market conditions continue to improve, including improved customers' pricing and labor availability, and we are able to continue to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also continue to improve.
If the Permian Basin rig count and market conditions improve, including improved pricing for our services and labor availability, and we are able to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also improve.
Commodity Price and Other Economic Conditions The oil and gas industry has traditionally been volatile and is characterized by a combination of long-term, short-term and cyclical trends, including domestic and international supply and demand for oil and gas, current and expected future prices for oil and gas and the perceived stability and sustainability of those prices, and capital investments of E&P companies toward their development and production of oil and gas reserves.
Upon the sale of our coiled tubing assets, we recorded a loss on sale of $13.8 million . 1 Commodity Price and Other Economic Conditions The oil and gas industry has traditionally been volatile and is characterized by a combination of long-term, short-term and cyclical trends, including domestic and international supply and demand for oil and gas, current and expected future prices for oil and gas and the perceived stability and sustainability of those prices, and capital investments of E&P companies toward their development and production of oil and gas reserves.
With the significant increase in global crude oil prices, including WTI crude oil prices, there has been an increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of December 2022, according to Baker Hughes.
With the significant increase in global crude oil prices from 2021, including the WTI crude oil price, there was a significant increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of 2022, according to the Baker Hughes Company (“Baker Hughes”).
" Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including the upstream and oilfield services companies. As a result, we are working with our customers and equipment manufacturers to transition our equipment to a lower emissions profile.
"Risk Factors—We may be adversely affected by the effects of inflation." Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including upstream and oilfield service companies. As a result, we are working with our customers and equipment manufacturers to transition our equipment to a lower emissions profile.
Federal Reserve and other central banks to increase interest rates, and to the extent elevated inflation remains, we may experience further cost increases for our operations, including labor costs and equipment.
Federal Reserve and other central banks to increase interest rates, and to the extent elevated inflation remains, we may experience further cost increases for our operations, including interest rates, labor costs and equipment. We cannot predict any future trends in the rate of inflation and crude oil prices.
Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas such as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.
These requirements were finalized in 2023, but may be subject to legal challenge. Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas such as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.
" On average, one wireline spread consists of a wireline tractor truck with a large cab functioning as mobile office where the engineer controls the wireline spooled drum along with associated pressure control iron and equipment, trailers and vehicles. We currently have 23 wireline units.
We also refer to our wireline units, pressure control equipment, other equipment and vehicles necessary to perform a job as a "spread" and the personnel assigned to the spread as a "crew." On average, one wireline spread consists of a wireline tractor truck with a large cab functioning as a mobile office where the engineer controls the wireline spooled drum along with associated pressure control iron and equipment, trailers and vehicles.
The Russia-Ukraine war, and the adverse impacts of the COVID-19 pandemic in recent years, including inflation, have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing.
Similarly, the geopolitical and macroeconomic consequences of the Russian invasion of Ukraine, including the associated sanctions, and the adverse impacts of the COVID-19 pandemic in recent years have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing.
The geopolitical and macroeconomic consequences of this invasion and associated sanctions remain uncertain, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and the oil and gas industry and may adversely affect our financial condition.
The geopolitical and macroeconomic consequences of this conflict remain uncertain, and such events, or any further hostilities in the Israel-Gaza region or elsewhere, could severely impact the world economy, the demand for and price of crude oil and the oil and gas industry generally and may adversely affect our financial condition.
We have entered into a contract with a customer for the use of one of our electric hydraulic fracturing fleets to provide committed services for a period of three years after we take delivery of the fleet. The hydraulic fracturing process consists of pumping fracturing fluid into a well at sufficient pressure to fracture the formation.
We have entered into contracts with customers for the use of two of our FORCE SM electric-powered hydraulic fracturing fleets to provide committed services for a period of up to three years . The hydraulic fracturing process consists of pumping fracturing fluid into a well at sufficient pressure to fracture the formation.
We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to timely pass-through the cost increases to our customers, would negatively impact our business, financial condition and results of operations. See Part II, Item 1A.
A significant increase in or continued high levels of inflation, to the extent we are unable to timely pass-through the cost increases to our customers, or further declines in crude oil prices would negatively impact our business, financial condition and results of operations. See Part II, Item 1A.
The Company agreed with such request, and, as a result, the Fleet Two Agreement will be terminated as of the Release Date. Competition The markets in which we operate are highly competitive. To be successful, an oilfield services company must provide services and equipment that meet the specific needs of oil and natural gas E&P companies at competitive prices.
The Fleet Two Agreement was effective as of January 1, 2023 and was terminated on May 12, 2023. 4 Competition The markets in which we operate are highly competitive. To be successful, an oilfield service company must provide services and equipment that meet the specific needs of oil and natural gas E&P companies at competitive prices.
We believe these strategic relationships position us to acquire equipment, parts and materials on a timely and economic basis and allow our dedicated procurement and logistics team to support consistently safe and reliable operations. Cementing We provide cementing services for completion of new wells and remedial work on existing wells.
We believe these strategic relationships position us to acquire equipment, parts and materials on a timely and economic basis and allow our dedicated procurement and logistics team to support consistently safe and reliable operations. Wireline We provide wireline and ancillary services on new oil well completions in the Permian Basin.
However, if market conditions do not improve or decline in the future, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows. 2 Our results of operations have historically reflected seasonal tendencies, typically in the fourth quarter, relating to the holiday season, inclement winter weather and exhaustion of our customers' annual budgets.
If the rig count or market conditions do not improve or decline in the future, and we are 2 unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows .
We have significant expertise in multi‑stage fracturing of horizontal oil‑producing wells in unconventional geological formations. Our total available hydraulic horsepower ("HHP") at December 31, 2022 wa s 1,315,000 HHP, which was comprised of 252,500 HHP of our Tier IV DGB equipment and 1,062,500 HHP of convention al Tier II equipment.
We have significant expertise in multi‑stage fracturing of horizontal oil‑producing wells in unconventional geological formations. Our total available hydraulic horsepower ("HHP") at December 31, 2023 w as 1,461,500 HHP, which was comprised of 452,500 HHP of our Tier IV DGB dual-fuel equipment, 144,000 HHP of FORCE SM electric-powered equipment and 865,000 HHP of conventional Tier II equipment.
Any significant increase in the frequency or severity of these incidents, or the general level of compensation awards, could adversely affect the cost of, or our ability to obtain workers’ compensation and other forms of insurance, and could have other material adverse effects on our financial condition and results of operations. 5 We maintain commercial general liability, workers’ compensation, business automobile, commercial property, umbrella liability, excess liability, and directors and officers insurance policies providing coverages of risks and amounts that we believe to be customary in our industry.
Any significant increase in the frequency or severity of these incidents, or the general level of compensation awards, could adversely affect the cost of, or our ability to obtain workers’ compensation and other forms of insurance, and could have other material adverse effects on our financial condition and results of operations.
Cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole.
We currently have 23 wireline units. Cementing We provide cementing services for completion of new wells and remedial work on existing wells. Cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole.
As such, we entered into conversion and purchase agreements with our equipment manufacturers for a total of 362,500 HH P of Tier IV DGB equipment and as of December 31, 2022, we have received 192,500 HH P of the converted and new Tier IV DGB equipment and expect to receive the remaining 170,000 HHP by the second quarter of 2023.
As such, we entered into conversion and purchase agreements with our equipment manufacturers for a total of 452,500 HHP of Tier IV DGB du al-fuel equipment and as of December 31, 2023, we have received all of the converted and new Tier IV DGB dual-fuel equipment.
The A&R Pressure Pumping Services Agreement expired at the conclusion of its term and was replaced by the Fleet One Agreement and the Fleet Two Agreement described below. 4 On October 31, 2022, we entered into two pressure pumping services agreements with Pioneer, pursuant to which we will provide hydraulic fracturing services with two committed fleets, subject to certain termination and release rights.
On October 31, 2022, we entered into two pressure pumping services agreements (the “Fleet One Agreement” and “Fleet Two Agreement”) with Pioneer, pursuant to which we provided hydraulic fracturing services with two committed fleets, subject to certain termination and release rights. The Fleet One Agreement was effective as of January 1, 2023 and was terminated on August 31, 2023.
Ten percent of our executive officers’ annual target bonuses under the 2022 annual incentive program were based upon the Company’s achievement of certain safety goals, including a target total recordable incident rate of less than 0.65. • Professional Development. In 2022, ProPetro launched a leadership training initiative for all positions that are responsible for supervision and oversight of other employees.
Ten percent of our executive officers’ annual target bonuses under the 2023 annual incentive program were based upon the Company’s achievement of certain safety goals, including a target total recordable incident rate. • Professional Development. In 2023, the Company continued its focus on leadership development, targeting leadership positions including frontline supervisors and above.
We believe that in order to attract and retain talent with the skill sets and expertise required to maximize our operational efficiencies across all levels in the Company, it is in our best interest to attempt to recruit and develop a diverse team and create a culture that is inclusive and provides equal opportunities for hiring and advancement for all employees and prospective employees.
We believe that in order to attract and retain talent with the skill sets and expertise that can help to maximize our operational efficiencies across all levels in the Company, it is in our best interest to create a culture that is inclusive. We conducted an employee engagement survey in 2023 related to inclusion, belonging and other engagement efforts.
The Silvertip Acquisition positions the Company as a leading completions-focused oilfield services provider headquartered in the Permian Basin. Our competitors include many large and small oilfield services companies, including Halliburton Company, Liberty Energy Inc., ProFrac Holding Corp., Nextier Oilfield Solutions Inc., Patterson-UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses.
Par Five’s business complements our existing cementing business and enables us to serve both the Midland and Delaware Basins of the Permian Basin. Our competitors include many large and small oilfield service companies, including Halliburton Company, Liberty Energy Inc., Patterson-UTI Energy Inc., ProFrac Holding Corp., RPC, Inc., and a number of private and locally-oriented businesses.
While that deadline has been missed, the listing review is reportedly ongoing and a decision is expected in June 2023; additionally, FWS has also solicited comments on a proposed conservation agreement that would implement certain protective practices for the species and authorize incidental take of the species resulting from certain covered activities, including exploration and development of oil and gas fields.
Most recently, the dunes sagebrush lizard has been proposed for listing as endangered in July 2023, FWS has also entered into voluntary conservation agreements that implement certain protective practices for the species and authorize incidental take of the species resulting from certain covered activities, including exploration and development of oil and gas fields.
The executive order also suspends the issuance of new leases for oil and gas development on federal land; for more information, see our regulatory disclosure titled " Regulation of Hydraulic Fracturing and Related Activities.
The executive order also suspended the issuance of new leases for oil and gas development on federal land for a time; for more information, see our regulatory disclosure titled "Regulation of Hydraulic Fracturing and Related 7 Activities." Other actions that the current government may take include the imposition of more restrictive requirements for the development of pipeline infrastructure or liquefied natural gas export facilities or more restrictive GHG emissions limitations for oil and gas facilities.
Our Customers Our customers consist primarily of oil and natural gas producers in North America. Our top five customers accounted for a pproximately 84.0%, 85.7% and 86.5% of our revenue, for the years ended December 31, 2022, 2021 and 2020, respectively. For the year ended December 31, 2022, Pioneer Natural Resources USA Inc.
Our top five customers accounted for a pproximately 63.2%, 84.0% and 85.7% of our revenue, for the years ended December 31, 2023, 2022 and 2021, respectively. For the year ended December 31, 2023, Endeavor Energy Resources and XTO Energy accounted for 19.7% and 18.2%, respectively, of total revenue.
However, any regulations that ban or effectively ban such operations may adversely impact demand for our products and services.
As a result, we cannot predict the final scope of regulations or restrictions that may apply to oil and gas operations on federal lands. However, any regulations that restrict, ban or effectively ban such operations may adversely impact demand for our products and services.
The Company provides employees with the ability to participate in health and welfare plans, including medical, dental, life, accidental death and dismemberment and short-term and long-term disability insurance plans. We periodically review of our health-related benefits program to ensure that our offerings are market competitive and effectively utilized by employees.
The Company provides employees with the ability to participate in health and welfare plans, including medical, dental, life, accidental death and dismemberment and short-term and long-term disability insurance plans. In 2023, as part of our 401(k) plan, we introduced opportunities for holistic financial wellness education and group and individual consultations for employees.
We believe that our cementing segment provides an organic growth opportunity for us to expand our service offerings within our existing customer base. Wireline We provide wireline and ancillary services such as pumpdown on new oil well completions in the Permian Basin.
We believe that our cementing segment provides an organic growth opportunity for us to expand our service offerings within our existing customer base. We currently have 40 cementing units. Our Customers Our customers consist primarily of oil and natural gas producers in North America.
We have transitioned our active hydraulic fracturing equipment portfolio from approximately 10% lower emissions equipment in 2021 to approximately 35% in 2022, and expect to increase to approximately 65% in 2023. The Permian Basin rig count increase, demand for oil and gas products, WTI crude oil price increase and costs inflation could be indicative of an energy market recovery.
We have transitioned our hydraulic fracturing available equipment portfolio from approximately 10% lower emissions equipment in 2021 to approximately 35% in 2022 and 60% in 2023, and expect to increase to approximately 65% by the end of the first half of 2024.
The Department of the Interior ( " DOI " ) has also issued a report recommending various changes to the federal leasing program, though many such changes would require Congressional action. As a result, we cannot predict the final scope of regulations or restrictions that may apply to oil and gas operations on federal lands.
The Department of the Interior ("DOI") has also issued a report recommending various changes to the federal leasing program, though many such changes would require congressional action. In July 2023, the BLM proposed a rule to update the fiscal terms of federal oil and gas leases, which would increase fees, rents, royalties, and bonding requirements.
An individual fleet could range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite. During the year ended December 31, 2022, we recorded an impairment with respect to our DuraStim® hydraulic fracturing pumps (108,000 HHP) that did not meet the manufacturer’s specifications or our expectations and have remained idled.
An individual fleet could range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite.
As a result, we typically experience declines in our operating and financial results in November and December, even in a stable commodity price and operations environment. Our Services We have historically conducted our business through five operating segments: hydraulic fracturing, cementing, coiled tubing, drilling and flowback.
Our results of operations have historically reflected seasonal tendencies, typically in the fourth quarter, relating to the holiday season, inclement winter weather and exhaustion of our customers' annual budgets. As a result, we typically experience declines in our operating and financial results in November and December, even in a stable commodity price and operations environment.
In 2022, West Texas Intermediate ( "WTI") average crude oil price was approximately $94 per barrel, which is the highest average price in the last nine years.
As the global response to the COVID-19 pandemic began to wane, the demand and prices for crude oil increased from the lows experienced in 2020, with the West Texas Intermediate (“WTI”) average crude oil price reaching approximately $94 per barrel in 2022, the highest average price in the prior nine years.
As of December 31, 2022, we employed approximatel y 2,000 people , none of which are unionized. All of our employees work for or support our Completion Services reportable segment. Our employees are a key component of our ability to attract and retain customers as a result of their operational excellence in the field.
We believe that our employees are a key component of our ability to attract and retain customers as a result of their operational excellence in the field. Some examples of significant programs and initiatives that support our objective of attracting, developing and retaining our diverse and inclusive workforce include: • Opportunity and Engagement.
In August 2022 and December 2022, we entered into leases for four electric fleets of 60,000 HHP per fleet. We expect to take delivery of the electric fleets at different times during the second half of 2023.
In 2022, we entered into three-year electric fleet leases for a total of four FORCE SM electric-powered hydraulic fracturing fleets with 60,000 HHP per fleet. As of December 31, 2023, we have re ceived 144,000 HHP of FORC E SM electric-powered equipment.
("Pioneer"), Endeavor Energy Resources and XTO Energy accounted for 33.1%, 28.3% and 15.0%, respectively, of total revenue. No other customer accounted for more than 10% of our total revenue for the year ended December 31, 2022.
No other customer accounted for more than 10% of our total revenue for the year ended December 31, 2023. There have been many recent mergers and acquisitions in the oil and gas industry. In October 2023, Pioneer Natural Resources USA, Inc. (“Pioneer”) entered into a merger agreement with Exxon Mobil Corporation.
Removed
Upon the sale of our coiled tubing assets, we recorded a loss on sale of $13.8 million .
Added
The Silvertip Acquisition positioned the Company as a more integrated and diversified completions-focused oilfield service provider headquartered in the Permian Basin. On December 1, 2023, we consummated the purchase of the assets and operations of Par Five Energy Services LLC (“Par Five”), which provides cementing services in the Delaware Basin in exchange for $25.4 million of cash .
Removed
The global public health crisis associated with the COVID-19 pandemic has had an adverse effect on global economic activity and the oil and gas industry in 2020 and 2021.
Added
Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region's increasingly high-intensity well completions (including simultaneous hydraulic fracturing (“Simul-Frac”), which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.
Removed
Some of the challenges resulting from the COVID-19 pandemic that have impacted our business include restrictions on movement of personnel and associated gatherings, shortage of skilled labor, cost inflation and supply chain disruptions.
Added
Since October 2023, an ongoing conflict between Israel and Palestinian militants in the Israel-Gaza region has led to significant armed hostilities.
Removed
In light of the COVID-19 pandemic, most companies, including our customers in the Permian Basin, reacted by closely managing their operating budget and exercising capital discipline in 2020 and 2021. In February 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities.
Added
However, in 2023, the WTI average crude oil price declined to approximately $78 per barrel.
Removed
As a result, the United States, the United Kingdom, the member states of the European Union and other public and private sectors have levied severe sanctions on Russian financial institutions, businesses and individuals. This conflict, and the resulting sanctions, have contributed to significant increases and volatility in the prices for oil and natural gas.
Added
We believe that the volatility of crude oil prices in recent years has been partly driven by declines in crude oil supplies, concerns over sanctions resulting from Russia's invasion of Ukraine, concerns over a potential disruption of Middle Eastern oil supplies resulting from the ongoing conflict between Israel and Palestinian militants in the Israel-Gaza region, slower crude oil production growth due to the lack of reinvestment in the oil and gas industry in the last two years, recent OPEC+ production cuts of approximately 1.3 million barrels per day and concerns of a potential global recession resulting from high inflation and interest rates.
Removed
We believe that the recent surge in global crude oil prices is partly due to the lack of reinvestment in the oil and gas industry in the last two years, and increased demand for oil and gas products, coupled with the adverse impact of the Russia-Ukraine war, which has led to various sanctions on Russian crude oil supply and businesses.
Added
However, we have recently experienced a 13% decrease in the rig count in 2023 to 309 at the end of 2023 which resulted in a reduction in the demand for completion services and pressure on pricing of our services. Sustained levels of high inflation have likewise caused the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMany factors over which we have no control affect the supply of, and demand for our services, and our customers’ willingness to explore, develop and produce oil and natural gas, and therefore, influence prices for our services, including: • the severity and duration of world health events, including the COVID-19 pandemic, related economic repercussions; • the actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations; • the domestic and foreign supply of, and demand for, oil and natural gas; • the level of prices, and expectations about future prices, of oil and natural gas; • the level of global oil and natural gas exploration and production; • the cost of exploring for, developing, producing and delivering oil and natural gas; • the supply of and demand for drilling and hydraulic fracturing and wireline equipment, including the supply and demand for lower emissions hydraulic fracturing and wireline equipment; • cost increases and supply chain constraints related to our services; • the expected decline rates of current production; • the price and quantity of foreign imports; • political and economic conditions in oil and natural gas producing countries and regions, including the United States, the Middle East, Africa, South America and Russia; 11 • operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; • speculative trading in crude oil and natural gas derivative contracts; • the level of consumer product demand; • the discovery rates of new oil and natural gas reserves; • contractions in the credit market; • the strength or weakness of the U.S. dollar; • available pipeline and other transportation capacity; • the levels of oil and natural gas storage; • weather conditions and other natural disasters; • domestic and foreign tax policy; • domestic and foreign governmental approvals and regulatory requirements and conditions, including tighter emissions standards in the energy industry; • the continued threat of terrorism and the impact of military and other action, including military action in the Middle East; • political or civil unrest in the United States or elsewhere; • technical advances affecting energy consumption; • the proximity and capacity of oil and natural gas pipelines and other transportation facilities; • the price and availability of alternative fuels; • the ability of oil and natural gas producers to raise equity capital and debt financing; • merger and divestiture activity among oil and natural gas producers; and • overall domestic and global economic conditions.
Biggest changeMany factors over which we have no control affect the supply of, and demand for our services, and our customers’ willingness to explore, develop and produce oil and natural gas, and therefore, influence prices for our services, including: • the actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations; • the domestic and foreign supply of, and demand for, oil and natural gas; • the level of prices, and expectations about future prices, of oil and natural gas; • the level of global oil and natural gas E&P; • the cost of exploring for, developing, producing and delivering oil and natural gas; • the supply of and demand for drilling and hydraulic fracturing and wireline equipment, including the supply and demand for lower emissions hydraulic fracturing and wireline equipment; • cost increases and supply chain constraints related to our services; • the expected decline in rates of current production; • the price and quantity of foreign imports; • political and economic conditions in oil and natural gas producing countries and regions, including the United States, the Middle East, Africa, South America and Russia; • the actions taken by the United States and other countries on climate change or to transition away from fossil fuels; • the severity and duration of world health events and related economic repercussions; • speculative trading in crude oil and natural gas derivative contracts; • the level of consumer product demand; 11 • the discovery rates of new oil and natural gas reserves; • contractions in the credit market; • the strength or weakness of the U.S. dollar; • available pipeline and other transportation capacity; • the levels of oil and natural gas storage; • weather conditions and other natural disasters; • domestic and foreign tax policy; • domestic and foreign governmental approvals and regulatory requirements and conditions, including tighter emissions standards in the energy industry; • the continued threat of terrorism and the impact of military and other action, including military action in the Middle East; • political or civil unrest in the United States or elsewhere, including the Russia-Ukraine war and the conflict in the Israel-Gaza region and related instability in the Middle East, including from Houthi rebels in Yemen; • technical advances affecting energy consumption; • the proximity and capacity of oil and natural gas pipelines and other transportation facilities; • the price and availability of alternative fuels; • the ability of oil and natural gas producers to raise equity capital and debt financing; • merger and divestiture activity among oil and natural gas producers; and • overall domestic and global economic conditions.
We may be required to pay fees to certain of our sand suppliers based on minimum volumes under long-term contracts regardless of actual volumes received. We enter into purchase agreements with sand suppliers (the " Sand Suppliers " ) to secure supply of sand in the normal course of our business.
We may be required to pay fees to certain of our Sand Suppliers based on minimum volumes under long-term contracts regardless of actual volumes received. We enter into purchase agreements with the Sand Suppliers to secure supply of sand in the normal course of our business.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the " DGCL " ), our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.
In addition, some provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including: • limitations on the removal of directors; • limitations on the ability of our shareholders to call special meetings; • advance notice provisions for shareholder proposals and nominations for elections to the Board to be acted upon at meetings of shareholders; • providing that the Board is expressly authorized to adopt, or to alter or repeal our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings.
In addition, some provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including: 27 • limitations on the removal of directors; • limitations on the ability of our shareholders to call special meetings; • advance notice provisions for shareholder proposals and nominations for elections to the Board to be acted upon at meetings of shareholders; • providing that the Board is expressly authorized to adopt, or to alter or repeal our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings.
For example, our ABL Credit Facility restricts or limits our ability to: • grant liens; • incur additional indebtedness; • engage in a merger, consolidation or dissolution; • enter into transactions with affiliates; 15 • sell or otherwise dispose of assets, businesses and operations; • materially alter the character of our business as currently conducted; and • make acquisitions, investments and capital expenditures.
For example, our ABL Credit Facility restricts or limits our ability to: • grant liens; • incur additional indebtedness; • engage in a merger, consolidation or dissolution; • enter into transactions with affiliates; • sell or otherwise dispose of assets, businesses and operations; • materially alter the character of our business as currently conducted; and • make acquisitions, investments and capital expenditures.
Our operations are exposed to the risks inherent to our industry, such as equipment defects, vehicle accidents, worksite injuries to our or third-party personnel, fires, explosions, blowouts, surface cratering, uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards, such as oil spills and releases of, and exposure to, hazardous substances.
Our operations are exposed to the risks inherent to our industry, such as equipment defects, vehicle accidents, worksite injuries to our or third-party personnel, fires, explosions, blowouts, surface cratering, uncontrollable flows of gas or well fluids, pipe or pipeline failures, abnormally pressured formations and various environmental hazards, such as oil spills and releases of, and 15 exposure to, hazardous substances.
As a result of this concentration, we may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in the Permian Basin caused by significant governmental regulation, processing or transportation capacity constraints, market limitations, curtailment of production or interruption of the processing or transportation of oil and natural gas produced from the wells in these areas.
As a result of this concentration, we may be disproportionately exposed to the impact of regional supply and demand factors, 12 delays or interruptions of production from wells in the Permian Basin caused by significant governmental regulation, processing or transportation capacity constraints, market limitations, curtailment of production or interruption of the processing or transportation of oil and natural gas produced from the wells in these areas.
Additionally, at the 26th Conference of the Parties ("COP26") in Glasgow in November 2021, the United States and the European Union jointly announced the launch of the Global Methane Pledge; an initiative committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including "all feasible reductions" in the energy sector.
Additionally, at the 26th Conference of the Parties ("COP26") in Glasgow in November 2021, the United States and the European Union jointly announced the launch of the Global Methane Pledge; an initiative committing to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030, including "all feasible reductions" in the energy sector.
On January 27, 2021, President Biden issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and an increased emphasis on climate-related risk across government agencies and economic sectors.
On January 27, 2021, the president issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and an increased emphasis on climate-related risk across government agencies and economic sectors.
Additionally, political, litigation and financial risks may result in our oil and natural gas customers restricting or cancelling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing their ability to continue to operate in an economic manner, which also could reduce demand for our services and products.
Additionally, political, litigation and financial risks may result in our oil and natural gas customers restricting or cancelling production activities, incurring liability for infrastructure damages as a result of climatic changes, or 23 impairing their ability to continue to operate in an economic manner, which also could reduce demand for our services and products.
The delivery of our services requires skilled and qualified workers with specialized skills and experience who can perform physically demanding work. As a result of the volatility of the oilfield services industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a less challenging work environment at wage rates that are competitive.
The delivery of our services requires skilled and qualified workers with specialized skills and experience who can perform physically demanding work. As a result of the volatility of the oilfield service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a less challenging work environment at wage rates that are competitive.
The oilfield services industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent or other intellectual property protections. As competitors and others use or develop new or comparable technologies in the future, we may lose market share or be placed at a competitive disadvantage.
The oilfield service industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent or other intellectual property protections. As competitors and others use or develop new or comparable technologies in the future, we may lose market share or be placed at a competitive disadvantage.
In the event our capital expenditure requirements at any time are greater than the amount of liquidity we have available, we could be required to seek additional sources of capital, which may include debt financing, joint venture partnerships, sales of assets, offerings of debt or equity securities or other 14 means.
In the event our capital expenditure requirements at any time are greater than the amount of liquidity we have available, we could be required to seek additional sources of capital, which may include debt financing, joint venture partnerships, sales of assets, offerings of debt or equity securities or other means.
Additionally, at the COP26 in Glasgow in November 2021, the United States and the European Union jointly announced the launch of a Global Methane Pledge; an initiative committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including “all feasible reductions” in the energy sector.
Additionally, at the COP26 in Glasgow in November 2021, the United States and the European Union jointly announced the launch of a Global Methane Pledge; an initiative committing to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030, including “all feasible reductions” in the energy sector.
The TRRC has adopted similar rules and, in September 2021, issued a notice to disposal well operators in the Gardendale Seismic Response Area near Midland, Texas to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18 month period.
The TRRC has adopted similar rules and, in September 2021, issued a notice to disposal well operators in the Gardendale Seismic Response 24 Area near Midland, Texas to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18 month period.
In particular, the loss of the services of one or more members of our executive team, such as our Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer and General Counsel could disrupt our operations. We do not maintain " key person " life insurance policies on any of our employees.
In particular, the loss of the services of one or more members of our executive team, such as our Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer, Chief Commercial Officer and General Counsel could disrupt our operations. We do not maintain " key person " life insurance policies on any of our employees.
However, despite this general allocation of risk, we might not succeed in enforcing such contractual allocation, might incur an unforeseen liability falling outside the scope of such allocation or may be required to enter into an MSA with terms that vary from the above allocations of risk.
However, despite this general allocation of risk, we might not succeed in enforcing such contractual allocation, might incur an unforeseen liability falling outside the scope of such allocation or may be required to enter into an MSA with terms 16 that vary from the above allocations of risk.
Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, implement New Source Performance Standards directing the reduction of certain pollutants from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the Department of Transportation ( " DOT ") , implementing GHG emissions limits on vehicles manufactured for operation in the United States.
Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, implement New Source Performance Standards directing the reduction of certain pollutants from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implementing GHG emissions limits on vehicles manufactured for operation in the United States.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform 25 their investment and voting decisions.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions.
The market price of our common stock is subject to volatility. The market price of our common stock could be subject to wide fluctuations in response to, and the level of trading of our common stock may be affected by, numerous factors, many of which are beyond our control.
The market price of our common stock is subject to volatility. 28 The market price of our common stock could be subject to wide fluctuations in response to, and the level of trading of our common stock may be affected by, numerous factors, many of which are beyond our control.
The IRA 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations. In August 2022, President Biden signed the IRA 2022 into law.
The IRA 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations. In August 2022, the president signed the IRA 2022 into law.
Congress approved, and President Biden signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions to the methane standards, effectively reinstating the prior standards.
Congress approved, and the president signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions to the methane standards, effectively reinstating the prior standards.
Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have been proposed in recent sessions of Congress.
Further, legislation to amend the Safe Drinking Water Act to repeal the exemption for hydraulic fracturing (except when diesel fuels are used) from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have been proposed in previous sessions of Congress.
The executive order also suspends the issuance of new leases for oil and gas development on federal land; for more information, see our risk factor titled " Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.
The executive order also suspended the issuance of new leases for oil and gas development on federal land; for more information, see our risk factor titled " Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.
To the extent elevated inflation remains, 18 we may experience further cost increases for our operations, including labor costs and equipment.
To the extent elevated inflation remains, we may experience further cost increases for our operations, including labor costs and equipment.
Demand for our services is largely dependent on oil and natural gas prices, and our customers’ completion budgets and rig count.
Demand for our services is largely dependent on oil and natural gas prices, and our customers’ well completion budgets and rig count.
The occurrence of any of these events could result in substantial losses to us due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean‑up responsibilities, regulatory investigations and penalties or other damage resulting in curtailment or suspension of our operations or the loss of customers.
The occurrence of any of these events could result in substantial losses to us due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigations and penalties or other damage resulting in curtailment or suspension of our operations or the loss of customers.
For example, many E&P companies, including our customers, are transitioning to a lower emissions operating environment and may require us to invest in equipment with lower emissions profile.
For example, many E&P companies, including our customers, are transitioning to a lower emissions operating environment and may require us to invest in equipment with lower emissions profiles.
Risks Inherent in Our Business and Industry Our business and financial performance depends on the historically cyclical oil and natural gas industry and particularly on the level of capital spending and exploration and production activity within the United States and in the Permian Basin, and a decline in prices for oil and natural gas may cause fluctuation in operating results or otherwise have an adverse effect on our revenue, cash flows, profitability and growth.
Risks Inherent in Our Business and Industry Our business and financial performance depends on the historically cyclical oil and natural gas industry and particularly on the level of capital spending and E&P activity within the United States and in the Permian Basin, and a decline in prices for oil and natural gas may cause fluctuation in operating results or otherwise have an adverse effect on our revenue, cash flows, profitability and growth.
We also cannot predict how financial institutions and investors might consider any information disclosed under the final rule when making investment decisions, and as a result it is possible that we could face increases with respect to the costs of, or restrictions imposed on, our access to capital.
We also cannot predict how financial institutions and investors might consider any information disclosed under any such requirements when making investment decisions, and as a result it is possible that we could face increases with respect to the costs of, or restrictions imposed on, our access to capital.
The US also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
The U.S. also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
The proposal also revises requirements for fugitive emissions monitoring and repair as well as equipment leaks and the frequency of monitoring surveys, establishes a " super-emitter " response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, and provides additional options for the use of advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions.
The rule also revises requirements for fugitive emissions monitoring and repair as well as equipment leaks and the frequency of monitoring surveys, establishes a " super-emitter " response program to timely mitigate emissions events as detected by governmental agencies or qualified third parties, triggering certain investigation and repair requirements, and provides additional options for the use of advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions.
The IRA 2022 amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the offshore and onshore petroleum and natural gas production and gathering and boosting source categories.
The IRA 2022 amends the federal CAA to impose a fee on the emission of methane from sources required to report their GHG emissions to the EPA, including those sources in the offshore and onshore petroleum and natural gas production and gathering and boosting source categories.
In September 2020, the Trump Administration revised prior regulations to rescind certain methane standards and remove the transmission and storage segments from the source category for certain regulations. However, subsequently, the U.S.
In September 2020, the government revised prior regulations to rescind certain methane standards and remove the transmission and storage segments from the source category for certain regulations. However, subsequently, the U.S.
A prolonged economic slowdown or recession in the United States, adverse events relating to the energy industry or regional, national and global economic conditions and factors, particularly a further slowdown in the exploration and production industry, could negatively impact our operations and therefore adversely affect our results.
A prolonged economic slowdown or recession in the United States, adverse events relating to the energy industry or regional, national and global economic conditions and factors, particularly a further slowdown in the E&P industry, could negatively impact our operations and therefore adversely affect our results.
Federal Reserve and other central banks to increase interest rates multiple times in 2022 and the U.S.
Federal Reserve and other central banks to increase interest rates multiple times in 2023 and the U.S.
In January 2021, President Biden issued an executive order suspending new leasing activities, but not operations under existing leases, for oil and gas exploration and production on non-Indian federal lands pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices that take into consideration potential climate and other impacts associated with oil and gas activities on such lands and waters.
In January 2021, the president issued an executive order suspending new leasing activities, but not operations under existing leases, for oil and gas E&P on non-Indian federal lands pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices that take into consideration potential climate and other impacts associated with oil and gas activities on such lands and waters.
Although several of these rulemakings have been rescinded, modified or subjected to legal challenges, new or more stringent regulations may be promulgated by the Biden Administration.
Although several of these rulemakings have been rescinded, modified or subjected to legal challenges, new or more stringent regulations may be promulgated by the government.
As a result, our operations as well as the operations of our oil and natural gas exploration and production customers are subject to a series of regulatory, political, litigation, and financial risks associated with the production and processing of fossil fuels and emission of GHGs.
As a result, our 21 operations as well as the operations of our oil and natural gas E&P customers are subject to a series of regulatory, political, litigation, and financial risks associated with the production and processing of fossil fuels and emission of GHGs.
Due to the large percentage of our revenue historically derived from our hydraulic fracturing services with recurring customers and the limited availability of our fracturing units, we have had some degree of customer concentration. Our top ten customers represented approximately 91.2% , 91.4% and 97.3% of our consolidated revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Due to the large percentage of our revenue historically derived from our hydraulic fracturing services with recurring customers and the limited availability of our fracturing units, we have had some degree of customer concentration. Our top ten customers represented approximately 85.5% , 91.2% and 91.4% of our consolidated revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
Our or our customers’ inability to obtain water from local sources or to effectively utilize flowback water could have an adverse effect on our financial condition, results of operations and cash flows. Risks Related to our Tax Matters Our ability to use our net operating loss carryforwards may be limited.
Our or our customers’ inability to obtain water from local sources or to effectively utilize flowback water could have an adverse effect on our financial condition, results of operations and cash flows. Risks Related to our Tax Matters Our ability to use our NOLs may be limited.
Increased attention to environmental, social and governance ( " ESG " ) matters, conservation measures, commercial development and technological advances could reduce demand for oil and natural gas and our services.
Increased attention to ESG matters, conservation measures, commercial development and technological advances could reduce demand for oil and natural gas and our services.
If oil and natural gas prices trade at depressed price levels as experienced in the first half of 2020, and our equipment remains idle or under-utilized, the estimated fair value of such equipment may decline, which will result in additional impairment expense in the future.
If oil and natural gas prices trade at depressed price levels, and our equipment remains idle or under-utilized, the estimated fair value of such equipment may decline, which will result in additional impairment expense in the future.
We derive our revenues from companies in the oil and natural gas exploration and production industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.
We derive our revenues from companies in the oil and natural gas E&P industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.
" Other actions that the Biden Administration may take include the imposition of more restrictive requirements for the development of pipeline infrastructure or liquefied natural gas export facilities, or more restrictive GHG emissions limitations for oil and gas facilities.
" Other actions that the current government may take include the imposition of more restrictive requirements for the development of pipeline infrastructure or liquefied natural gas export facilities, or more restrictive GHG emissions limitations for oil and gas facilities.
Federal Reserve has indicated its intention to continue to raise benchmark interest rates into 2023 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.
Federal Reserve may continue to raise benchmark interest rates into 2024 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.
At COP27 in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.
At the 27th Conference of the Parties in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.
Changes to our operational activity levels or customer concentration levels have an impact on our total eligible accounts receivable, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Facility.
Changes to our operational activity levels or customer concentration levels have an impact on our total eligible accounts receivable, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Facility. If our customer activity declines in the future, our borrowing base could decline.
In addition, the IRA 2022 imposes the first ever federal fee on the emission of greenhouse gases through a methane emissions charge.
In addition, the IRA 2022 imposes the first ever federal fee on the emission of GHG through a methane emissions charge.
Concerns over global economic conditions, geopolitical issues (including the Russia-Ukraine war), public health crises (including the COVID-19 pandemic), interest rates, inflation, the availability and cost of credit in the United States and foreign financial markets have contributed to increased economic uncertainty and diminished expectations for the global economy.
Concerns over global economic conditions, geopolitical issues (including the Russia-Ukraine war and conflicts in the Israel-Gaza region), public health crises, interest rates, inflation, the availability and cost of credit in the United States and foreign financial markets have contributed to increased economic uncertainty and diminished expectations for the global economy.
Our operations are geographically concentrated in the Permian Basin. For the years ended December 31, 2022, 2021 and 2020, approximately 98.3%, 98.7% and 99.5%, respectively, of our revenues were attributable to our operations in the Permian Basin.
Our operations are geographically concentrated in the Permian Basin. For the years ended December 31, 2023, 2022 and 2021, approximately 98.1% , 98.3% and 98.7%, respectively, of our revenues were attributable to our operations in the Permian Basin.
Any subsequent replacement of our ABL Credit Facility or any new indebtedness could have similar or greater restrictions. Please read " Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facility and Other Financing Arrangements. " We may incur debt and our indebtedness could adversely affect our operations and financial condition.
Any subsequent replacement of our ABL Credit Facility or any new indebtedness could have similar or greater restrictions. Please read " Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facility and Other Financing Arrangements.
Any failure to manage acquisitions effectively or integrate acquired assets or businesses into our existing operations successfully, or to realize the expected benefits from an acquisition or minimize any unforeseen operational difficulties, could have a material adverse effect on our business, financial condition, prospects or results of operations. We may be adversely affected by the effects of inflation.
Any failure to manage acquisitions effectively or integrate acquired assets or businesses into our existing operations successfully, or to realize the expected benefits from an acquisition or minimize any unforeseen operational difficulties, could have a material adverse effect on our business, financial condition, prospects or results of operations.
This resulted in a significant decline in demand for oilfield services and adversely impacted the prices oilfield services companies can charge for their services. These factors have materially and adversely affected our business, results of operations and financial condition.
This could result in a significant decline in demand for oilfield services and could adversely impact the prices oilfield service companies can charge for their services. These factors have materially and adversely affected our business, results of operations and financial condition.
Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide. 21 The threat of climate change continues to attract considerable attention in the United States and in foreign countries.
Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide.
For example, in 2021 and 2022, we have seen significant disruption in supply chains around the world caused by the COVID-19 pandemic that have impacted our operations.
For example, in 2021 and 2022, there was significant disruption in supply chains around the world caused by the COVID-19 pandemic that impacted our operations.
The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased exploration and development spending by our customers, decreased demand for oil and natural gas and decreased prices for oil and natural gas.
The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased exploration and development spending by our customers, decreased demand for oil and natural gas and decreased prices for oil and natural gas. New technology may cause us to become less competitive.
The unpredictable nature of oil and gas prices in recent years and the economic disruption from the COVID-19 pandemic may have negatively impacted the financial condition and liquidity of some of our customers, and future declines or continued volatility could impact their ability to meet their financial obligations to us.
The unpredictable nature of oil and gas prices in recent years and other factors may have negatively impacted the financial condition and liquidity of some of our customers, and future declines or continued volatility could impact their ability to meet their financial obligations to us.
We may have liability in such cases if we are negligent or commit willful acts. 17 Generally, our customers also agree to indemnify us against claims arising from their employees’ personal injury or death to the extent that, in the case of our hydraulic fracturing operations, their employees are injured or their properties are damaged by such operations, unless resulting from our gross negligence or willful misconduct.
Generally, our customers also agree to indemnify us against claims arising from their employees’ personal injury or death to the extent that, in the case of our hydraulic fracturing operations, their employees are injured or their properties are damaged by such operations, unless resulting from our gross negligence or willful misconduct.
For example, in 2022, we consummated the Silvertip Acquisition, and we are in the process of fully integrating all parts of the acquired business into our operations. We must plan and manage any acquisitions effectively to achieve revenue growth and maintain profitability in our evolving market.
For example, in 2023, we acquired the assets and operations of Par Five, and we are in the process of fully integrating all parts of the acquired business into our operations. We must plan and manage any acquisitions effectively to achieve revenue growth and maintain profitability in our evolving market.
Disruption to the timely supply of raw materials, parts and finished goods or increases in the cost of transportation services, including due to general inflationary pressures, cost of fuel and labor, labor disputes, governmental regulation or governmental restrictions limiting specific forms of transportation, could have an adverse effect on our ability to provide our services, which would adversely affect our results of operations, cash flows and financial position 20 Risks Related to Employees We rely on a few key employees whose absence or loss could adversely affect our business.
Disruption to the timely supply of raw materials, parts and finished goods or increases in the cost of transportation services, including due to general inflationary pressures, cost of fuel and labor, labor disputes, governmental regulation or governmental restrictions limiting specific forms of transportation, could have an adverse effect on our ability to provide our services, which would adversely affect our results of operations, cash flows and financial position.
Our level of indebtedness may affect our operations in several ways, including the following: • increasing our vulnerability to general adverse economic and industry conditions; • the covenants that are contained in the agreements governing our indebtedness could limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments; • our debt covenants could also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • any failure to comply with the financial or other debt covenants, including covenants that impose requirements to maintain certain financial ratios, could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable; • our level of debt could impair our ability to obtain additional financing, or obtain additional financing on favorable terms in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; and • our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness.
Our level of indebtedness may affect our operations in several ways, including the following: • increasing our vulnerability to general adverse economic and industry conditions; • the covenants that are contained in the agreements governing our indebtedness could limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments; • our debt covenants could also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • any failure to comply with the financial or other debt covenants, including covenants that impose requirements to maintain certain financial ratios, could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable; • our level of debt could impair our ability to obtain additional financing, or obtain additional financing on favorable terms in the future for working capital, capital expenditures, research and development efforts, potential strategic acquisitions or other general corporate purposes; • placing us at a competitive disadvantage relative to competitors that have less debt; and • our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness. 14 Furthermore, interest rates on future indebtedness could be higher than current levels, causing our financing costs to increase accordingly.
Further, we may face competitive pressure to develop, implement or acquire and deploy certain technology improvements at a substantial cost, such as our DuraStim® fleets or the cost of implementing or purchasing a technology like DuraStim® may be substantially higher than anticipated, and we may not be able to successfully implement the DuraStim® fleets or other technologies we may purchase.
Further, we may face competitive pressure to develop, implement or acquire and deploy certain technology improvements at a substantial cost, such as our FORCE SM electric-powered hydraulic fracturing fleets deployed in 2023, or the cost of implementing or purchasing a technology like FORCE SM may be substantially higher than anticipated, and we may not be able to successfully implement the technologies we may purchase.
Terrorist activities, anti‑terrorist efforts, other armed conflicts and political or civil unrest could adversely affect the U.S. and global economies and could prevent us from meeting financial and other obligations.
Terrorist activities, anti‑terrorist efforts, other armed conflicts and political or civil unrest, including the Russia-Ukraine war and conflicts in the Israel-Gaza region, could adversely affect the U.S. and global economies and could prevent us from meeting financial and other obligations.
We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our business, results of operations and financial condition. We are subject to the risk of loss resulting from nonpayment or nonperformance by our customers.
We cannot assure that we will be able to maintain our competitive position. We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our business, results of operations and financial condition. We are subject to the risk of loss resulting from nonpayment or nonperformance by our customers.
In the last three years, the highly volatile and unpredictable nature of oil and natural gas prices caused a reduction in our customers’ spending and associated drilling and completion activities, which has had and may continue to have an adverse effect on our revenue and cash flows, if WTI oil prices remain highly volatile or decline in the future.
In 2023, the volatility and overall decline in oil and natural gas prices caused a reduction in our customers’ spending and associated drilling and completion activities, which has had and may continue to have an adverse effect on our revenue and cash flows, if the WTI oil price remains highly volatile or declines in the future.
If we violate any of the restrictions, covenants, ratios or tests in our ABL Credit Facility, a significant portion of our indebtedness may become immediately due and payable and our lenders’ commitment to make further loans to us may terminate. Further, our borrowing base, as redetermined monthly, is tied to 85.0% to 90.0% of eligible accounts receivable.
If we violate any of the restrictions, covenants, ratios or tests in our ABL Credit Facility, a significant portion of our indebtedness may become immediately due and payable and our lenders’ commitment to make further loans to us may terminate.
In addition, certain cyber incidents, such as unauthorized surveillance, may remain undetected for an extended period. Our systems and insurance coverage for protecting against cyber security risks, including cyberattacks, may not be sufficient and may not protect against or cover all of the losses (including potential reputational loss) we may experience as a result of the realization of such risks.
Our systems and insurance coverage (if any) for protecting against cyber security risks, including cyberattacks, may not be sufficient and may not protect against or cover all of the losses (including potential reputational loss) we may experience as a result of the realization of such risks.
Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate future GHG emissions.
The threat of climate change continues to attract considerable attention in the United States and in foreign countries. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate future GHG emissions.
Our indebtedness and liquidity needs could restrict our operations and make us more vulnerable to adverse economic conditions. Our existing and future indebtedness, whether incurred in connection with acquisitions, operations or otherwise, may adversely affect our operations and limit our growth, and we may have difficulty making debt service payments on such indebtedness as payments become due.
Our indebtedness and liquidity needs could restrict our operations and adversely affect our financial condition. Our business is capital intensive and our existing and future indebtedness, whether incurred in connection with acquisitions, operations or otherwise, may adversely affect our operations and limit our growth, and we may have difficulty making debt service payments on such indebtedness as payments become due.
Our customer assumes responsibility for, including control and removal of, all other pollution or contamination which may occur during operations, including that which may result from seepage or any other uncontrolled flow of drilling fluids.
Our customer assumes responsibility for, including control and removal of, all other pollution or contamination which may occur during operations, including that which may result from seepage or any other uncontrolled flow of drilling fluids. We may have liability in such cases if we are negligent or commit willful acts.
Any disruptions or volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availabil ity impacting our ability to finance our operations.
Any disruptions or volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availabil ity impacting our ability to finance our operations. Our borrowing base was $152.0 million as of December 31, 2023 .
Litigation risks are also increasing as a number of parties have sought to bring suit against certain oil and natural gas companies operating in the United States in state or federal court, alleging among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that such companies have been aware of the adverse effects of climate change but failed to adequately disclose those impacts to their investors or customers.
The pause is intended to provide time to integrate certain considerations, including potential energy cost increases for consumers and manufacturers and the latest assessment of the impact of GHG emissions, to ensure adequate guards against health risks are in place.Litigation risks are also increasing as a number of parties have sought to bring suit against certain oil and natural gas companies operating in the United States in state or federal court, alleging among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that such companies have been aware of the adverse effects of climate change but failed to adequately disclose those impacts to their investors or customers.
As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate the effects of cyber incidents. We may grow through acquisitions and our failure to properly plan and manage those acquisitions may adversely affect our performance.
As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate the effects of cyber incidents.
Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled workers.
Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled workers. As a result of the physical nature of our operations, we have experienced difficulties in attracting and retaining skilled workers.
The average WTI oil prices per barrel were approximately $94 , $68 and $39 for the years ended December 31, 2022, 2021 and 2020, respectively.
The average WTI oil price per barrel was approximately $78 , $94 and $68 for the years ended December 31, 2023, 2022 and 2021, respectively.
Many key responsibilities within our business have been assigned to a small number of employees. The loss of their services could adversely affect our business.
Risks Related to Employees We rely on a few key employees whose absence or loss could adversely affect our business. 20 Many key responsibilities within our business have been assigned to a small number of employees. The loss of their services could adversely affect our business.
This may cause us to restrict our operations, which might severely impact our financial position. Since hydraulic fracturing activities are part of our operations, they are covered by our insurance against claims made for bodily injury, property damage and clean‑up costs stemming from a sudden and accidental pollution event.
Since hydraulic fracturing activities are part of our operations, they are covered by our insurance against claims made for bodily injury, property damage and cleanup costs stemming from a sudden and accidental pollution event.
Our hydraulic fracturing operations are a significant component of our business, and it is an important and common practice that is used to stimulate production of hydrocarbons, particularly oil and natural gas, from tight formations, including shales.
Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. Our hydraulic fracturing operations are a significant component of our business, and it is an important and common practice that is used to stimulate production of hydrocarbons, particularly oil and natural gas, from tight formations, including shales.
Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. 27 The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or similar governing documents has been challenged in legal proceedings, and it is possible that a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable, including with respect to claims arising under the U.S. federal securities laws.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or similar governing documents has been challenged in legal proceedings, and it is possible that a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable, including with respect to claims arising under the U.S. federal securities laws.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located at 1706 S. Midkiff, Midland, Texas 79701. In addition to our headquarters, we also own and lease other properties that are used for field offices, yards or storage in the Permian Basin. We believe that our facilities are adequate for our current operations.
Biggest changeItem 2. Properties. Our corporate headquarters is located at 303 W. Wall Street, Suite 102, Midland, Texas 79701. In addition to our headquarters, we also own and lease other properties that are used for field offices, yards or storage in the Permian Basin. We believe that our facilities are adequate for our current operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Disclosure concerning legal proceedings is incorporated by reference to "Note 17. Commitments and Contingencies— Contingent Liabilities " o f our Consolidated Financial Statements contained in this Annual Report. From time to time, we may be subject to various other legal proceedings and claims incidental to or arising in the ordinary course of our business.
Biggest changeItem 3. Legal Proceedings. Disclosure concerning legal proceedings is incorporated by reference to " Note 18. Commitments and Contingencies— Contingent Liabilities " o f our Consolidated Financial Statements contained in this Annual Report. From time to time, we may be subject to various other legal proceedings and claims incidental to or arising in the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance on the following graph and table is not necessarily indicative of future stock price performance. 30 Date Peer Group Russell 2000 ProPetro Holding Corp. 12/31/2017 $ 100.0 $ 100.0 $ 100.0 12/31/2018 $ 45.5 $ 89.0 $ 61.1 12/31/2019 $ 32.8 $ 111.7 $ 55.8 12/31/2020 $ 20.0 $ 134.0 $ 36.7 12/31/2021 $ 24.2 $ 153.9 $ 40.2 12/31/2022 $ 48.6 $ 122.4 $ 51.4 31
Biggest changeThe stock price performance on the following graph and table is not necessarily indicative of future stock price performance. 32 Date Peer Group Russell 2000 ProPetro Holding Corp. 12/31/2018 $ 100.0 $ 100.0 $ 100.0 12/31/2019 $ 70.8 $ 125.5 $ 91.3 12/31/2020 $ 45.4 $ 150.6 $ 59.7 12/31/2021 $ 56.9 $ 172.9 $ 65.8 12/31/2022 $ 108.5 $ 137.6 $ 84.2 12/31/2023 $ 92.1 $ 160.9 $ 68.0
Performance Graph The annual changes for the periods shown in the following graph are based on the assumption that $100 had been invested in our common stock, the Russell 2000 Index ("Russell 2000") and a self-constructed peer group index of comparable companies ("Peer Group") on March 17, 2017 (the first trading date of our common stock), and that all dividends were reinvested at the closing prices of the dividend payment dates.
Performance Graph The annual changes for the periods shown in the following graph are based on the assumption that $100 had been invested in our common stock, the Russell 2000 Index ("Russell 2000") and a self-constructed peer group index of comparable companies ("Peer Group") on December 31, 2018, and that all dividends were reinvested at the closing prices of the dividend payment dates.
Our future dividend policy is within the discretion of our Board and will depend upon then‑existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other factors our Board may deem relevant. In addition, our ABL Credit Facility places certain restrictions on our ability to pay cash dividends.
Our future dividend policy is within the discretion of our Board and will depend upon then‑existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other factors our Board may deem relevant.
The relevant companies included in our Peer Group consists of Liberty Energy Inc., Nextier Oilfield Solutions Inc., RPC, Inc., Calfrac Well Services Ltd., Patterson-UTI Energy, Inc. and Mammoth Energy Services, Inc. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on the last trading date of 2022.
The relevant companies included in our Peer Group consists of Liberty Energy Inc., Patterson-UTI Energy, Inc., RPC, Inc., Calfrac Well Services Ltd., and Mammoth Energy Services, Inc. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on the last trading date of 2023. The calculations exclude trading commissions and taxes.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On March 22, 2017, we consummated our initial public offering ( " IPO " ) of our common stock at a price of $14.00 per share. Our common stock is traded on the New York Stock Exchange under the symbol " PUMP.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On March 22, 2017, we consummated our initial public offering of our common stock at a price of $14.00 per share.
" Holders As of December 31, 2022, there w ere 114,515,008 shares of common stock outstanding, held of record by six holders. The number of record holders of our common stock does not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
Our common stock is traded on the New York Stock Exchange under the symbol "PUMP." Holders As of December 31, 2023, there were 109,483,281 shares of common stock outstanding, held of record by twelve holders. The number of record holders of our common stock does not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
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In addition, our ABL Credit Facility places certain restrictions on our ability to pay cash dividends. 31 Share Repurchase Program The following sets forth information with respect to our repurchases of shares of common stock during the three months ended December 31, 2023: Period Total number of shares purchased Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar value of shares that may yet be purchased under the plans or programs (1) October 1, 2023 to October 31, 2023 894,300 $ 10.21 894,300 $ 54,611,997 November 1, 2023 to November 30, 2023 213,967 $ 9.75 213,967 $ 52,526,741 December 1, 2023 to December 31, 2023 505,455 $ 8.44 505,455 $ 48,261,638 Total 1,613,722 $ 9.59 1,613,722 $ 48,261,638 (1) On May 17, 2023, the Board authorized and the Company announced a share purchase program that allows the Company to repurchase up to $100 million of the Company's common stock beginning immediately and continuing through and including May 31, 2024.
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The shares may be repurchased from time to time in open market transactions, block trades, accelerated share repurchases, privately negotiated transactions, derivative transactions or otherwise, certain of which may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, as amended, in compliance with applicable state and federal securities laws.
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(2) The average price paid per share includes commissions.

Item 7. Management's Discussion & Analysis

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

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Biggest changeIn 2023, our equipment portfolio is expected to be comprised of approximately 65% lower emissions (electric and Tier IV DGB), and 35% conventional diesel equipment; • we entered into a contract with a customer for the use of one of our electric hydraulic fracturing fleets to provide committed services for a period of three years after we take delivery of the fleet; and • on November 1, 2022, we consummated the acquisition of all of the outstanding limited liability company interests of Silvertip Completion Services Operating, LLC, which provides wireline perforation and ancillary services solely in the Permian Basin. 2022 Financial Highlights Financial highlights for the year ended December 31, 2022: • revenue increased $405.2 million, or 46.3%, to $1,279.7 million, as compared to $874.5 million for the year ended December 31, 2021; • cost of services (exclusive of depreciation and amortization) increased $220.6 million or 33.3% to $882.8 million, as compared to $662.3 million for the year ended December 31, 2021; cost of services as a percentage of revenue decreased to 69.0% in 2022 compared to 75.7% for the year ended December 31, 2021; • general and administrative expenses, inclusive of stock-based compensation, increased $28.8 million, or 34.8% to $111.8 million, as compared to $82.9 million for the year ended December 31, 2021; • the total impairment expense recorded during the year December 31, 2022 was approximately $57.5 million related to our DuraStim® equipment, compared to no impairment expense recorded during the year ended December 31, 2021; • net income was $2.0 million, compared to a net loss of $54.2 million for the year ended December 31, 2021.
Biggest changeBy adding two additional electric fleets by the end of the first half of 2024, our available equipment portfolio is expected to be comprised of approximately 65% lower emissions (FORCE SM electric and Tier IV DGB dual-fuel), and 35% conventional diesel equipment; • published our inaugural sustainability report, which describes our commitment to building a sustainable business that supports the safe, reliable production of the energy the world needs by offering competitive, value-driving services to customers, while benefitting our shareholders, communities, and other stakeholders; and • on December 1, 2023, we consummated the purchase of the assets and operations of Par Five, which provides cementing services in the Delaware Basin. 2023 Financial Highlights Financial highlights for the year ended December 31, 2023: • revenue increased $350.7 million, or 27.4%, to $1,630.4 million, as compared to $1,279.7 million for the year ended December 31, 2022; • cost of services (exclusive of depreciation and amortization) increased $249.0 million or 28.2% to $1,131.8 million, as compared to $882.8 million for the year ended December 31, 2022; cost of services as a percentage of revenue increased to 69.4% in 2023 compared to 69.0% for the year ended December 31, 2022; • general and administrative expenses, inclusive of stock-based compensation, increased $2.6 million, or 2.3% to $114.4 million, as compared to $111.8 million for the year ended December 31, 2022; • no impairment expense was recorded during the year December 31, 2023, compared to $57.5 million impairment expense recorded during the year ended December 31, 2022 related to our DuraStim® electric-powered hydraulic fracturing equipment; • net income was $85.6 million, compared to $2.0 million for the year ended December 31, 2022.
We monitor the oil and natural gas prices and the Permian Basin rig count to enable us to more effectively plan our business and forecast the demand for our services.
We monitor oil and natural gas prices and the Permian Basin rig count to enable us to more effectively plan our business and forecast the demand for our services.
The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, political instability in oil producing countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.
The oil and gas industry is also impacted by general domestic and international economic conditions such as supply chain disruptions and inflation, war and political instability in oil producing countries, government regulations (both in the United States and internationally), levels of consumer demand, adverse weather conditions, and other factors that are beyond our control.
With the industry transition to lower emissions equipment and Simul-Frac, in addition to several other changes to our customers' job designs, we believe that our available capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.
With the industry transition to lower emissions equipment and Simul-Frac, in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites.
Primarily, our operational focus has been in the Permian Basin's Midland sub-basin, where our customers have operated. However, we have increased our operations in the Delaware sub-basin and are well-positioned to support further 33 increases to our activity in this area in response to demand from our customers.
Primarily, our operational focus has been in the Permian Basin's Midland sub-basin, where our customers have operated. However, we have increased our operations in the Delaware sub-basin and are well-positioned to support further increases to our activity in this area in response to demand from our customers.
We could incur significant additional capital expenditures if our projected activity levels increase during the course of the year, inflation and supply chain tightness continues to adversely impact on our operations or we invest in new or different lower emissions equipment.
We could incur significant additional capital expenditures if our projected activity levels increase during the course of the year, inflation and supply chain tightness continues to adversely impact our operations or we invest in new or different lower emissions equipment.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 45 We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.
The final determination of our income tax liabilities involves the interpretation of local tax laws and related authorities in each jurisdiction. Changes in the operating environments, including changes in tax law, could impact the determination of our income tax liabilities for a tax year. 46
The final determination of our income tax liabilities involves the interpretation of local tax laws and related authorities in each jurisdiction. Changes in the operating environments, including changes in tax law, could impact the determination of our income tax liabilities for a tax year.
On November 1, 2022, we consummated the acquisition of all of the outstanding limited liability company interests of Silvertip Completion Services Operating, LLC, which provides wireline perforation and ancillary services solely in the Permian Basin in exchange for 10.1 million shares of our common stock valued at $106.7 million, $30.0 million of cash, the payoff of $7.2 million of assumed debt, and the payment of certain other closing and transaction costs.
On November 1, 2022, we consummated the acquisition of all of the outstanding limited liability company interests of Silvertip Completion Services Operating, LLC (the “Silvertip Acquisition”), which provides wireline perforation and ancillary services solely in the Permian Basin in exchange for 10.1 million shares of our common stock valued at $106.7 million, $30.0 million of cash, the payoff of $7.2 million of assumed debt, and the payment of certain other closing and transaction costs.
Land Indefinite Buildings and property improvements 5 - 30 years Vehicles 1 ‑ 5 years Equipment 1 ‑ 22 years Leasehold improvements 5 ‑ 20 years 44 Impairment of Long-Lived Assets In accordance with the Financial Accounting Standards Board ( " FASB " ) Accounting Standards Codification ( " ASC " ) 360 regarding Accounting for the Impairment or Disposal of Long‑Lived Assets , we review the long‑lived assets including intangible assets to be held and used whenever events or circumstances indicate that the carrying value of those assets may not be recoverable.
Land Indefinite Buildings and property improvements 5 - 30 years Vehicles 1 ‑ 5 years Equipment 1 ‑ 22 years Leasehold improvements 5 ‑ 20 years Impairment of Long-Lived Assets In accordance with the Financial Accounting Standards Board Accounting Standards Codification ( " ASC " ) 360 regarding Accounting for the Impairment or Disposal of Long‑Lived Assets , we review the long‑lived assets including intangible assets to be held and used whenever events or circumstances indicate that the carrying value of those assets may not be recoverable.
We believe that the presentation of Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors in assessing our financial condition and results of operations because it allows them to compare our operating performance on a consistent basis across periods and our peer group by removing the effects of our capital structure, asset base, nonrecurring (income) expenses and items outside the control of the Company.
We believe that the presentation of Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors in assessing our financial condition and results of operations because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure, asset base, nonrecurring expenses (income) and items outside the control of the Company.
Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region’s increasingly high-intensity well completions (including Simul-Frac, which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.
Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region’s increasingly high-intensity well completions (including simultaneous hydraulic fracturing ("Simul-Frac"), which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well.
These completion services are provided through various contractual arrangements, including on a turnkey contract basis, in which we set a price to perform a particular job, or a daywork contract basis, in which we are paid a set price per day for our services. We are also sometimes paid by the hour for these complementary services.
They are provided through various contractual arrangements, including on a turnkey contract basis, in which we set a price to perform a particular job, or a daywork contract basis, in which we are paid a set price per day for our services. We are also sometimes paid by the hour for these complementary services.
Under this facility we are required to comply, subject to certain exceptions and materiality qualifiers, with certain customary affirmative and negative covenants, including, but not limited to, covenants pertaining to our ability to incur liens, indebtedness, changes in the nature of our business, mergers and other fundamental changes, disposal of assets, investments and restricted payments, amendments to our organizational documents or accounting policies, prepayments of certain debt, dividends, transactions with affiliates, and certain other activities.
Under the ABL Credit Facility we are required to comply, subject to certain exceptions and materiality qualifiers, with certain customary affirmative and negative covenants, including, but not limited to, covenants pertaining to our ability to incur liens or indebtedness, changes in the nature of our business, mergers and other fundamental changes, disposal of assets, investments and restricted payments, amendments to our organizational documents or accounting policies, prepayments of certain debt, dividends, transactions with affiliates, and certain other activities.
Capital expenditures for 2023 are projected to be primarily related to capital expenditures to extend the useful life of our existing completion services assets, costs to convert some existing equipment to lower emissions equipment, strategic purchases and other ancillary equipment purchases, subject to market conditions and customer demand.
Capital expenditures for 2024 are projected to be primarily related to capital expenditures to extend the useful life of our existing completion services assets, costs to convert some existing equipment to lower emissions equipment, strategic purchases and other ancillary equipment purchases, subject to market conditions and customer demand.
The percentage decrease in our expendables in 2022 was primarily attributable to certain customers electing to directly source sand and the associated logistics. 37 Other Direct Costs. We incur other direct expenses related to our service offerings, including the costs of fuel, repairs and maintenance, general supplies, equipment rental and other miscellaneous operating expenses.
The percentage decrease in our expendables in 2023 was primarily attributable to certain customers electing to directly source sand and the associated logistics. Other Direct Costs. We incur other direct expenses related to our service offerings, including the costs of fuel, repairs and maintenance, general supplies, equipment rental and other miscellaneous operating expenses.
Cash, Restricted Cash and Cash Flows The following table sets forth our net cash provided by (used in) operating, investing and financing activities during the years ended December 31, 2022 and 2021, respectively.
Cash, Restricted Cash and Cash Flows The following table sets forth our net cash provided by (used in) operating, investing and financing activities during the years ended December 31, 2023 and 2022, respectively.
However, if market conditions do not improve or decline in the future, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows.
If the rig count or market conditions do not improve or decline in the future, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows .
In determining our need for a valuation allowance as of December 31, 2022, we have considered and made judgments and estimates regarding estimated future taxable income.
In determining our need for a valuation allowance as of December 31, 2023, we have considered and made judgments and estimates regarding estimated future taxable income.
As such, our goodwill analysis incorporates inherent uncertainties that are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecast. The carrying value of goodwill in our balance sheet as of December 31, 2022 was $23.6 million.
As such, our goodwill analysis incorporates inherent uncertainties that are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecast. As of December 31, 2023 and 2022, our goodwill carrying value was $23.6 million and $23.6 million, respectively.
If the crude oil market declines or the demand for our services does n ot recover, and if our equipment remains idle or under‑utilized, the estimated fair value of such equipment may decline, which could result in future impairment charges.
If the crude oil market declines or the demand for our services does n ot recover, and if our equipment remains idle or underutilized, the estimated fair value of such equipment may decline, which could result in future impairment charges.
Our hydraulic fracturing fleets range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsites.
Our hydraulic fracturing fleets range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite.
Borrowings under the ABL Credit Facility accrue interest based on a three-tier pricing grid tied to availability, and we may elect for loans to be based on either the Secured Overnight Financing Rate ("SOFR") or the base rate, plus the applicable margin, which ranges from 1.50% to 2.00% for SOFR loans and 0.50% to 1.00% for base rate loans.
Borrowings under the ABL Credit Facility accrue interest based on a three-tier pricing grid tied to availability, and we may elect for loans to be based on either the Secured Overnight Financing Rate ("SOFR") or the base rate, plus the applicable margin, which ranges from 1.75% to 2.25% for SOFR loans and 0.75% to 1.25% for base rate loans.
The revolving credit facility included a springing fixed charge coverage ratio to apply when excess availability was less than the greater of (i) 10% of the lesser of the facility size or the borrowing base or (ii) $22.5 million.
The revolving credit facility included a springing fixed charge coverage ratio to apply when excess availability was less than the greater of (i) 10% of the lesser of the facility size or the borrowing base or (ii) $10.0 million.
Though the impacts of variations in any of these factors can have compounding or off‑setting impacts, a 10% decline in the estimated future cash flows of our existing asset groups will not indicate an impairment.
Though the impacts of variations in any of these factors can have compounding or offsetting impacts, a 10% decline in the estimated future cash flows of our existing asset groups will not indicate an impairment.
Basis of Presentation This discussion of our results omits our results of operations and cash flows for the year ended December 31, 2020 and the comparison of our results of operations for the years ended December 31, 2021 and 2020, which may be found in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.
Basis of Presentation This discussion of our results omits our results of operations and cash flows for the year ended December 31, 2021 and the comparison of our results of operations for the years ended December 31, 2022 and 2021, which may be found in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.
(2) Inclusive of stock‑based compensation. (3) For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read " How We Evaluate Our Operations.
(2) Exclusive of depreciation and amortization. (3) Inclusive of stock‑based compensation. (4) For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read " How We Evaluate Our Operations.
The loan origination costs relating to the ABL Credit Facility are classified as an asset in our balance sheet. As of December 31, 2022, we had borrowings of $30.0 million outstanding under our ABL Credit Facility. Off Balance Sheet Arrangements We had no material off balance sheet arrangements as of December 31, 2022.
The loan origination costs relating to the ABL Credit Facility are classified as an asset in our balance sheet. As of December 31, 2023 and 2022 , we had outstanding borrowings under our ABL Credit Facility of $45.0 million and $30.0 million, respectively. Off Balance Sheet Arrangements We had no material off balance sheet arrangements as of December 31, 2023.
Direct Labor Costs. Payroll and benefit expenses related to our crews and other employees that are directly or indirectly attributable to the effective delivery of services are included in our operating costs. Direct lab or costs amounted to 27.7% and 22.4% of total costs of service for the years ended December 31, 2022 and 2021, respectively.
Direct Labor Costs. Payroll and benefit expenses related to our crews and other employees that are directly or indirectly attributable to the effective delivery of services are included in our operating costs. Direct lab or costs amounted to 28.7% and 27.7% of total costs of service for the years ended December 31, 2023 and 2022, respectively.
We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) stock-based compensation, and (iii) other unusual or nonrecurring (income)/expenses, such as impairment charges, severance, costs related to asset acquisitions, insurance recoveries, costs related to nonrecurring legal settlement and one-time professional and advisory fees. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues.
We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) stock-based compensation, (iii) other expense/(income) and (iv) other unusual or nonrecurring (income)/expenses, such as impairment charges, retention bonuses, severance, costs related to asset acquisitions, insurance recoveries, one-time professional fees and legal settlements. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues.
These costs comprise a substantial variable component of our service costs, particularly with respect to the quantity and quality of sand and chemicals demanded when providing hydraulic fracturing services. Expendable product costs comprised approximately 33.6%, and 41.8% of total costs of service for the years ended December 31, 2022 and 2021, respectively.
These costs comprise a substantial variable component of our service costs, particularly with respect to the quantity and quality of sand and chemicals demanded when providing hydraulic fracturing services. Expendable product costs comprised approximately 32.9% and 33.6% of total costs of service for the years ended December 31, 2023 and 2022, respectively.
A 10% change in the useful lives of our property and equipment would have resulted in approximately $12.7 million impact on pre-tax loss during the year ended December 31, 2022. Depreciation of property and equipment is provided on the straight‑line method over estimated useful lives as shown in the table below.
A 10% change in the useful lives of our property and equipment would have resulted in approximately $17.0 million impact on pre-tax loss during the year ended December 31, 2023. Depreciation of property and equipment is provided on the straight‑line method over estimated useful lives as shown in the table below.
Intangible assets consist of customer relationships and trademark/trade name. In connection with the Silvertip Acquisition, we added intangible assets consisting of $46.5 million of customer relationships and $10.8 million of trademark/trade name. Intangible assets are amortized on a straight‑line basis with an estimated useful life of ten years.
Intangible assets consist of customer relationships and trademark/trade name. In connection with the Silvertip Acquisition, we added intangible assets consisting of $46.5 million of customer relationships and $10.8 million of trademark/trade name during the year ended December 31, 2022. Intangible assets are amortized on a straight‑line basis with an estimated useful life of ten years.
However, assuming a weighted average interest rate of 5.43% , and that our ABL Credit Facility debt balance remains the same, our estimated annual interest payment will be $1.6 million. (2) Operating leases exclude short-term leases and other commitments (see Note 16. Leases and Note 17. Commitments and Contingencies in the financial statements for additional disclosures).
However, assuming a weighted average interest rate of 6.69% , and that our ABL Credit Facility debt balance remains the same, our estimated annual interest payment will be $3.0 million. (2) Operating leases exclude short-term leases and other commitments (see Note 17. Leases and Note 18. Commitments and Contingencies in the financial statements for additional disclosures).
Overview Our Business We are a leading integrated oilfield services company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the E&P of North American oil and natural gas resources.
Overview Our Business We are a leading integrated oilfield service company, located in Midland, Texas, focused on providing innovative hydraulic fracturing, wireline and other complementary oilfield completion services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American oil and natural gas resources.
Our future capital expenditures depend on our projected operational activity, emission requirements and planned conversions to lower emissions equipment, among other factors, which could vary significantly throughout the year. Based on our current plan and projected activity levels for 2023, we expect our capital expenditures to range betwe en $250 million to $300 million.
Our future capital expenditures depend on our projected operational activity, emission requirements and planned conversions to lower emissions equipment, among other factors, which could vary significantly throughout the year. Based on our current plan and projected activity levels for 2024, we expect our capital expenditures to range between $200 million to $250 million.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the United States of America ( " GAAP " ).
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP.
The historical weekly average Permian Basin rig count based on the Baker Hughes Company rig count information was as follows: Year Ended December 31, Drilling Rig Type (Permian Basin) 2022 2021 2020 Directional 3 2 1 Horizontal 318 227 212 Vertical 14 11 8 Total 335 240 221 Average Permian Basin rig count to U.S rig count 46.3 % 50.5 % 51.0 % Costs of Conducting our Business The principal direct costs involved in operating our business are direct labor, expendables and other direct costs.
The historical weekly average Permian Basin rig count based on Baker Hughes rig count information was as follows: Year Ended December 31, Drilling Rig Type (Permian Basin) 2023 2022 2021 Directional 3 3 2 Horizontal 323 318 227 Vertical 9 14 11 Total 335 335 240 Average Permian Basin rig count to U.S. rig count 48.7 % 46.3 % 50.5 % Costs of Conducting our Business The principal direct costs involved in operating our business are direct labor, expendables and other direct costs.
I f the rig count and market conditions continue to improve, including improved customers' pricing and labor availability, and we are able to continue to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also continue to improve.
If the Permian Basin rig count and market conditions improve, including improved pricing for our services and labor availability, and we are able to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also continue to improve.
Goodwill is not amortized. We perform an annual impairment test of goodwill and intangible assets as of December 31, or more frequently if circumstances indicate that impairment may exist. In connection with the Silvertip Acquisition, we added $23.6 million of goodwill during the year ended December 31, 2022.
We perform an annual impairment test of goodwill and intangible assets as of December 31, or more frequently if circumstances indicate that impairment may exist. In connection with the Silvertip Acquisition, we added $23.6 million of goodwill during the year ended December 31, 2022. There were no additions to goodwill during the year ended December 31, 2023.
Capital Requirements, Future Sources and Use of Cash Capital expenditures incurred were $365.3 million during the year ended December 31, 2022, as compared to $165.2 million during the year ended December 31, 2021.
Capital Requirements, Future Sources and Use of Cash Capital expenditures incurred were $310.0 million during the year ended December 31, 2023, as compared to $365.3 million during the year ended December 31, 2022.
There was no write-off of goodwill during the year ended December 31, 2022. We performed our annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and Other , on December 31, 2022, at which time, we determined that the fair value of our wireline reporting unit was substantially in excess of its carrying value.
We performed our annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and Other , on December 31, 2023, at which time, we determined that the fair value of our wireline reporting unit was substantially in excess of its carrying value.
The ABL Credit Facility includes a springing fixed charge coverage ratio to apply when excess availability is less than the greater of (i) 10% of the lesser of the facility size or the Borrowing Base or (ii) $10.0 million.
The Borrowing Base as of December 31, 2023, was approximately $152.0 million. The ABL Credit Facility includes a springing fixed charge coverage ratio to apply when excess availability is less than the greater of (i) 10% of the lesser of the facility size or the Borrowing Base or (ii) $15.0 million.
In addition, in September 2021, August 2022 and December 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB, and purchase of new Tier IV DGB equipment.
In addition, in 2021 and 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB, and to purchase new Tier IV DGB dual-fuel equipment.
On October 31, 2022, we entered into the Fleet One Agreement and the Fleet Two Agreement with Pioneer, pursuant to which we will provide hydraulic fracturing services with two committed fleets, subject to certain termination and release rights. The Fleet One Agreement was effective as of January 1, 2023 and will terminate on August 31, 2023.
On October 31, 2022, we entered into two pressure pumping services agreements (the “Fleet One Agreement” and the “Fleet Two Agreement”) with Pioneer, pursuant to which we provided hydraulic fracturing services with two committed fleets, subject to certain termination and release rights. The Fleet One Agreement was effective as of January 1, 2023 and was terminated on August 31, 2023.
During the year ended December 31, 2022, we recorded $57.5 million in connection with the impairment of our DuraStim® assets, which is included in our Completion Services reportable segment. There was no impairment expense during the year ended December 31, 2021. Loss on Disposal of Assets.
There was no impairment expense during the year ended December 31, 2023. During the year ended December 31, 2022, we recorded $57.5 million in connection with the impairment of our DuraStim® electric powered hydraulic fracturing equipment, which is included in our Hydraulic Fracturing reportable segment. Loss on Disposal of Assets.
In such an event, we may be required to pay shortfall fees or other penalties under the purchase agreement, which could have a material adverse effect on our business, financial condition, or results of operations. In January 2023, we entered into an equipment lease (the " Power Equipment Lease " ) for certain power generation equipment.
In such an event, we may be required to pay shortfall fees or other penalties under the purchase agreement, which could have a material adverse effect on our business, financial condition, or results of operations.
The increase in our direct labor costs percentage is driven by wage adjustments and higher headcount to support current activity levels. Expendables. Expendables include the product and freight costs associated with proppant, chemicals and other consumables used in our completion services and other operations.
The increase in our direct labor costs percentage is driven by wage adjustments and higher headcount resulting from business acquisitions. Expendables. Expendables include the product and freight costs associated with proppant, chemicals and other consumables used in our completion services and other operations.
The increase in other income is primarily attributable to the net tax refund to the Company of $10.7 million of sales, excise and use taxes, $2.7 million of non-cash income from equipment parts inventory received from an equipment manufacturer as settlement of our warranty claims, partially offset by a $1.6 million unrealized loss on short-term investment. Income Taxes.
Other income during the year ended December 31, 2022 is comprised of a $10.7 million net tax refund of sales, excise and use taxes and $2.7 million of non-cash income from equipment parts inventory received from an equipment manufacturer as settlement of our warranty claims, partially offset by a $1.6 million unrealized loss on short-term investment. Income Taxes.
The wireline operating segment is the only segment which has goodwill at December 31, 2022. The quantitative impairment test we perform for goodwill utilizes certain assumptions, including forecasted equipment utilization, pricing and cost assumptions. Our discounted cash flow analysis includes significant assumptions regarding discount rates, utilization, expected profitability margin, forecasted maintenance capital expenditures, and the timing of expected cash flow.
The quantitative impairment test we perform for goodwill utilizes certain assumptions, including forecasted equipment utilization, pricing and cost assumptions. Our discounted cash flow analysis includes significant assumptions regarding discount rates, utilization, expected profitability margin, forecasted maintenance capital expenditures, and the timing of expected cash flow.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally acceptable in the United States of America.
Critical Accounting Policies and Estimates 44 The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
For additional financial information on our reportable segments presentation, please see reportable segment information in Part II - Item 8, "Financial Statements and Supplementary Data." Pioneer Pressure Pumping Acquisition On December 31, 2018, we consummated the purchase of pressure pumping and related assets of Pioneer and Pioneer Pumping Services, LLC in the Pioneer Pressure Pumping Acquisition.
For additional financial information on our reportable segments presentation, please see reportable segment information in Part II - Item 8, "Financial Statements and Supplementary Data." Pioneer Pressure Pumping Acquisition On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer Natural Resources USA, Inc.
With the significant increase in global crude oil prices, including WTI crude oil prices, there has been an increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of December 2022, according to Baker Hughes.
With the significant increase in global crude oil prices from 2021, including the WTI crude oil price, there was a significant increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 353 at the end of 2022, according to the Baker Hughes Company (“Baker Hughes”).
In addition to hydraulic fracturing services, we generate revenue through other completion services that we provide to our customers, including cementing, wireline and other related services.
In addition to hydraulic fracturing services, we generate revenue through other completion services that we provide to our customers, including cementing, wireline and other related services. These completion services are complementary to each other and are undertaken in unison with hydraulic fracturing services.
Prices are affected by many factors beyond our control. The average WTI oil prices per barrel were approximately $94 , $68 and $39 for the years ended December 31, 2022, 2021 and 2020, respectively. In February 2023, the W TI oil price was approximately $78 per barrel.
Prices are affected by many factors beyond our control. The average WTI oil price per barrel was approximately $78 , $94 and $68 for the years ended December 31, 2023, 2022 and 2021, respectively. In January 2024, the WTI oil price was approximately $74 p er barrel.
Diluted net income per common share was $0.02, compared to diluted net loss per common share of $0.53 for the year ended December 31, 2021.
Diluted net income per common share was $0.76, compared to $0.02 for the year ended December 31, 2022.
There can be no assurance that our operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures.
There can be no assurance that our operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures and to continue with our share repurchases under our share repurchase program or fund future business acquisitions.
" Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including the upstream and oilfield services companies. As a result, we are working with our customers and equipment manufacturers to transition our equipment to a lower emissions profile.
"Risk Factors—We may be adversely affected by the effects of inflation." Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including upstream and oilfield service companies. As a result, we are working with our customers and equipment manufacturers to transition our equipment to a lower emissions profile.
Federal Reserve and other central banks to increase interest rates, and to the extent elevated inflation remains, we may experience further cost increases for our operations, including labor costs and equipment.
Federal Reserve and other central banks to increase interest rates, and to the extent elevated inflation remains, we may experience further cost increases for our operations, including interest rates, labor costs and equipment. We cannot predict any future trends in the rate of inflation and crude oil prices.
Interest expense increased 161.4%, or $1.0 million, to $1.6 million for the yea r ended December 31, 2022, as compared to $0.6 million for t he year ended December 31, 2021.
Interest Expense. Interest expense increased to $5.3 million for the yea r ended December 31, 2023, as compared to $1.6 million for t he year ended December 31, 2022.
We define EBITDA as our earnings, before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization.
Adjusted EBITDA and Adjusted EBITDA Margin We view Adjusted EBITDA and Adjusted EBITDA margin as important indicators of performance. We define EBITDA as our earnings, before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization.
The geopolitical and macroeconomic consequences of this invasion and associated sanctions remain uncertain, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy and the oil and gas industry and may adversely affect our financial condition.
The geopolitical and macroeconomic consequences of this conflict remain uncertain, and such events, or any further hostilities in the Israel-Gaza region or elsewhere, could severely impact the world economy, the demand for and price of crude oil and the oil and gas industry generally and may adversely affect our financial condition.
Year Ended December 31, ($ in thousands) 2022 2021 Net cash provided by operating activities $ 300,429 $ 154,714 Net cash used in investing activities $ (349,745) $ (104,292) Net cash provided by (used in) financing activities $ 26,260 $ (7,276) Operating Activities Net cash provided by operating activities was $300.4 million for the year ended December 31, 2022, as compared to $154.7 million for the year ended December 31, 2021.
Year Ended December 31, (in thousands) 2023 2022 Net cash provided by operating activities $ 374,742 $ 300,429 Net cash used in investing activities $ (384,127) $ (349,745) Net cash (used in) provided by financing activities $ (46,123) $ 26,260 Operating Activities Net cash provided by operating activities was $374.7 million for the year ended December 31, 2023, as compared to $300.4 million for the year ended December 31, 2022.
Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are removed from the balance sheet and the net amount, less proceeds from disposal, is recognized as a gain or loss in earnings.
Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are removed from the balance sheet and the net amount, less proceeds from disposal, is recognized as a gain or loss in earnings. We primarily retire certain components of equipment such as fluid ends and power ends, rather than the entire pieces of equipment.
The Permian Basin is widely regarded as one of the most prolific oil‑producing areas in the United States, and we believe we are one of the leading providers of completion services in the region. Our hydraulic fracturing operations account for approximately 89.3% of our total revenues and operations.
The Permian Basin is widely regarded as one of the most prolific oil‑producing areas in the United States, and we believe we are one of the leading providers of completion services in the region. Our completion services includes our operating segments comprised of hydraulic fracturing, wireline and cementing operations.
The reduction in income tax benefit recorded during the year ended December 31, 2022 is primarily attributable to the Company recording pre-tax income in 2022 as compared to pre-tax loss in 2021. 43 Liquidity and Capital Resources Our liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows and (iii) borrowings under our ABL Credit Facility.
The change in income tax expense recorded during the year ended December 31, 2023, compared to the year ended December 31, 2022, is primarily attributable to the difference in the impact of nondeductible expenses on the pre-tax income for 2023, as compared to 2022. 43 Liquidity and Capital Resources Our liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows and (iii) borrowings under our ABL Credit Facility (as defined below).
We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to timely pass-through the cost increases to our customers, would negatively impact our business, financial condition and results of operations. See Part II, Item 1A.
A significant increase in or continued high levels of inflation, to the extent we are unable to timely pass-through the cost increases to our customers, or further declines in crude oil prices would negatively impact our business, financial condition and results of operations. See Part II, Item 1A.
The significant portion of our total capital expenditures in 2022 comprised of maintenance capital expenditures and conversion of our hydraulic fracturing equipment to lower emissions equipment. Our future material use of cash will be to fund our capital expenditures.
The significant portion of our total capital expenditures incurred during the year ended December 31, 2023 were maintenance capital expenditures and conversion of our hydraulic fracturing equipment to lower emissions equipment. Our future material use of cash will be to fund our capital expenditures.
The net increase of $145.7 million was primarily due to the improvement in our net income, resulting from the significant increase in our existing and new customers' activity levels, resulting in higher demand for completion services and improved pricing.
The net increase of $74.3 million was primarily due to the improvement in our net income, resulting from the increase in our existing and new customers' activity levels, resulting in higher demand for completion services, increased operational efficiencies and the addition of wireline operations .
The total estimated contractual commitment in connection with the Power Equipment Lease is approximately $59.6 million. Recent Accounting Pronouncements Disclosure concerning recently issued accounting standards is incorporated by reference to " Note 2- Significant Accounting Policies " of our Consolidated Financial Statements contained in this Annual Report.
Recent Accounting Pronouncements Disclosure concerning recently issued accounting standards is incorporated by reference to " Note 2- Significant Accounting Policies " of our Consolidated Financial Statements contained in this Annual Report.
Excluding idle fees revenue of $27.0 million and $9.5 million for the years ended December 31, 2022 and 2021, respectively, our Completion Services cost of services as a percentage of Completion Services revenues for the years ended December 31, 2022 and 2021 was approximately 70.1% and 76.4%, respectively.
Excluding reservation fees revenue of $0 and $27.0 million for the years ended December 31, 2023 and 2022, respectively, our hydraulic fracturing cost of services as a percentage of hydraulic fracturing revenues for the years ended December 31, 2023 and 2022 was approximately 69.2% and 69.5%, respectively.
Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB, electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future. We are continually evaluating these technologies and other investment and acquisition opportunities that would support our existing and new customer relationships.
Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB dual-fuel , FORCESM electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future.
The transition to lower emissions equipment is quickly evolving and will be capital intensive. Over time, we may be required to convert substantially all of our conventional Tier II equipment to lower emissions equipment.
We are continually evaluating these technologies and other investment and acquisition opportunities that would support our existing and new customer relationships. The transition to lower emissions equipment is quickly evolving and will be capital intensive. Over time, we may be required to convert substantially all of our conventional Tier II equipment to lower emissions equipment.
We primarily retired certain components of equipment such as fluid ends and power ends, rather than the entire pieces of equipment, and the associated loss is recorded in our statement of operations as part of net loss on disposal of assets, which was $102.1 million , $64.6 million and $58.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The associated loss is recorded in our statement of operations as part of net loss on disposal of assets, which was $73.0 million , $102.1 million and $64.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Over time, we expect the Permian Basin's Midland and Delaware sub-basins to continue to command a disproportionate share of future North American E&P spending.
Over time, we expect the Permian Basin's Midland and Delaware sub-basins to continue to command a disproportionate share of future North American E&P spending. We have historically conducted our business through four operating segments: hydraulic fracturing, wireline, cementing and coiled tubing.
As such, we entered into conversion and purchase arrangements with our equipment manufacturers for a total of 362,500 HHP of Tier IV DGB equipment and as of December 31, 2022, we have received 192,500 HHP of the converted and new Tier IV DGB equipment and expect to receive the remaining 170,000 HHP by the second quarter of 2023.
As such, we entered into conversion and purchase agreements with our equipment manufacturers for a total of 452,500 HHP of Tier IV DGB dual-fuel equipment and as of December 31, 2023, we have received all of the converted and new Tier IV DGB dual-fuel equipment.
As a result, we typically experience declines in our operating and financial results in November and December, even in a stable commodity price and operations environment. 35 2022 Operational Highlights Over the course of the year ended December 31, 2022: • improved pricing and increased operational efficiency at wellsites ; • our average effectively utilized fleet count was approximately 15 active fleets, a 25% increase from approximately 12 active fleets in 2021; • we entered into a lease agreement for four electric fleets with 60,000 HHP per fleet, and we transitioned 162,500 HHP of our equipment portfolio to lower emissions, Tier IV DGB equipment.
As a result, we typically experience declines in our operating and financial results in November and December, even in a stable commodity price and operations environment. 2023 Operational Highlights Over the course of the year ended December 31, 2023: • improved pricing and increased operational efficiency at wellsites ; • our average effectively utilized hydraulic fracturing fleet count was approximately 15 active fleets, consistent with 15 active fleets in 2022; • successfully integrated our wireline business with our existing hydraulic fracturing and cementing businesses; 36 • deployed two FORCE SM electric-powered hydraulic fracturing fleets with a total capacity of 120,000 HHP, and transitioned 452,500 HHP of our equipment portfolio to lower emissions, Tier IV DGB dual-fuel equipment.
On March 31, 2022, we entered into an amended and restated A&R Pressure Pumping Services Agreement in place of the Pioneer Services Agreement.
On March 31, 2022, we entered into an amended and restated pressure pumping services agreement (the “A&R Pressure Pumping Services Agreement”) to replace the Pioneer Services Agreement that was entered into in connection with the Pioneer Pressure Pumping Acquisition.
The ABL Credit Facility has a borrowing base of 85% to 90%, depending on the credit ratings of our accounts receivable counterparties, of monthly eligible accounts receivable less customary reserves (the "Borrowing Base"), as redetermined monthly. The Borrowing Base as of December 31, 2022, was approximately $102.3 million.
The revolving credit facility had a borrowing base of 85% to 90%, depending on the credit ratings of our accounts receivable counterparties, of monthly eligible accounts receivable less customary reserves.
Our cash is primarily used to fund our operations, support growth opportunities and satisfy future debt payments. Our restricted cash, which was received from a customer will be used solely for the construction or operation of certain electric hydraulic fracturing equipment. Our Borrowing Base (as defined below), as redetermined monthly, is tied to 85.0% to 90.0% of eligible accounts receivable.
Our cash is primarily used to fund our operations, support growth opportunities, fund share repurchases under our share repurchase program and satisfy future debt payments. Our restricted cash, which was received from a customer will be used solely for the construction or operation of FORCE SM electric-powered hydraulic fracturing equipment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe impact of a 1% increase in interest rates on our variable rate debt would have resulted in an increase in interest expense and corresponding decrease/(increase) in pre‑tax income/(loss) of approximately $0.1 million , $0 and $0.4 million , for the years ended December 31, 2022, 2021 and 2020, respectively.
Biggest changeThe impact of a 1% increase in interest rates on our variable rate debt would have resulted in an increase in interest expense and corresponding decrease/(increase) in pre‑tax income/(loss) of approximately $0.5 million , $0.1 million and $0 , for the years ended December 31, 2023, 2022 and 2021, respectively.
Item 7A. Quantitative and Qualitative Disclosure of Market Risks Foreign Currency Exchange Risk Our operations are currently conducted entirely within the U.S; therefore, we had no significant exposure to foreign currency exchange risk in 2022. Commodity Price Risk Our materials and fuel purchases expose us to commodity price risk.
Item 7A. Quantitative and Qualitative Disclosure of Market Risks Foreign Currency Exchange Risk Our operations are currently conducted entirely within the U.S.; therefore, we had no significant exposure to foreign currency exchange risk in 2023. Commodity Price Risk Our materials and fuel purchases expose us to commodity price risk.

Other PUMP 10-K year-over-year comparisons