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What changed in KLX Energy Services Holdings, Inc.'s 10-K — 2022 vs 2023

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

+346 added−352 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-09)

Top changes in KLX Energy Services Holdings, Inc.'s 2023 10-K

346 paragraphs added · 352 removed · 279 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

81 edited+29 added−20 removed127 unchanged
Biggest changeLitigation risks are also increasing as a number of states, municipalities and other plaintiffs have sought to bring suit against the largest oil and natural gas exploration and production companies in state or federal court alleging, among other things, that such energy companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore, are responsible for roadway and infrastructure damages as a result, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.
Biggest changeSeparately, these and other enhanced climate related disclosure requirements could lead to reputational or other harm with customers, regulators, investors or other stakeholders and could also increase our litigation risks relating to alleged climate-related damages resulting from our operations, statements alleged to have been made by us or others in our industry regarding climate change risks, or in connection with any future disclosures we may make regarding reported emissions, particularly given the inherent uncertainties and estimations with respect to calculating and reporting GHG emissions. 20 Litigation risks are also increasing as a number of states, municipalities and other plaintiffs have sought to bring suit against the largest oil and natural gas E&P companies in state or federal court alleging, among other things, that such energy companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore, are responsible for roadway and infrastructure damages as a result, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.
For more information, see “Risk Factors” in Item 1A of Part I and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Trends and Outlook” in Item 7 of Part II of this Annual Report.
For more information, see “Risk Factors” in Item 1A of Part I and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Trends and Outlook” in Item 7 of Part II of this Annual Report.
Additional technologies that we currently deploy on behalf of our customers include our (i) patented flotation collar, which assists customers in getting completion casing to the bottom of extended reach wells when friction prevents getting casing to depth, (ii) proprietary internal pressure actuated ("IPA") toe sleeve, which allows customers a consistent and reliable hydraulic fracturing initiation sleeve at the toe of the completion, (iii) composite hydraulic fracturing plug, a flow control device that is set in the wellbore at given intervals to divert fluid into the formation, and (iv) dissolvable plugs.
Additional technologies that we currently deploy on behalf of our customers include our (i) patented flotation collar, which assists customers in getting completion casing to the bottom of extended reach wells when friction prevents getting casing to depth, (ii) proprietary internal pressure actuated toe sleeve, which allows customers a consistent and reliable hydraulic fracturing initiation sleeve at the toe of the completion, (iii) composite hydraulic fracturing plug, a flow control device that is set in the wellbore at given intervals to divert fluid into the formation, and (iv) dissolvable plugs.
The SEC has also proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks; material climate-related impacts on strategy, outlook and business model; climate risk management; Scope 1 and 2 21 GHG emissions and Scope 3 GHG emissions under certain circumstances; and if the registrant has set them, climate-related targets and goals.
The SEC has also proposed a rule that would require registrants to make certain climate-related disclosures in registration statements and annual reports, including their governance of climate-related risks; material climate-related impacts on strategy, outlook and business model; climate risk management; Scope 1 and 2 GHG emissions and Scope 3 GHG emissions under certain circumstances; and if the registrant has set them, climate-related targets and goals.
We own a large, young line of valves serving the North American onshore oil and gas market. We have enhanced our hydraulic fracturing valve fleet line through the internal development of next generation technology, including our proprietary, patent pending hydraulic fracturing relief valve (“FRV”). Introduced in 2016, the FRV was built and designed to replace older “pop-off” systems.
We own a large line of valves serving the North American onshore oil and gas market. We have enhanced our hydraulic fracturing valve fleet line through the internal development of next generation technology, including our proprietary, patent pending hydraulic fracturing relief valve (“FRV”). Introduced in 2016, the FRV was built and designed to replace older “pop-off” systems.
While we cannot predict what policies may result from these announcements, a material reduction in the capital available to us or our fossil fuel-related customers could make it more difficult to secure funding for exploration, development, production, transportation, and processing activities, which could reduce the demand for our products and services.
While we cannot predict what additional policies may result from these announcements, a material reduction in the capital available to us or our fossil fuel-related customers could make it more difficult to secure funding for exploration, development, production, transportation, and processing activities, which could reduce the demand for our products and services.
These climatic developments have the potential to cause physical damage to our and our customers’ assets or disrupt operations and thus could have an adverse effect on each of our operations. Additionally, changing meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or its production.
These climatic developments have the potential to cause physical damage to our and our customers’ assets or disrupt operations and thus could have an adverse effect on each of our operations. Additionally, changing 21 meteorological conditions, particularly temperature, may result in changes to the amount, timing, or location of demand for energy or its production.
We maintain a risk management program that covers operating hazards, including products and completed operations, property damage and personal injury claims as well as certain limited environmental claims. Our risk management program includes primary, umbrella and excess umbrella liability policies in excess of $75.0 14 million per occurrence, including sudden and accidental pollution claims.
We maintain a risk management program that covers operating hazards, including products and completed operations, property damage and personal injury claims as well as certain limited environmental claims. Our risk management program includes primary, umbrella and excess umbrella liability policies in excess of $75.0 million per occurrence, including sudden and accidental pollution claims.
Additionally, climate change policies may impact the Company or our customers’ access to capital. Certain shareholders and bondholders currently invested in fossil-fuel energy companies are concerned about the potential effects of climate change and may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors.
Additionally, climate change and ESG policies may impact the Company or our customers’ access to capital. Certain shareholders and bondholders currently invested in fossil-fuel energy companies are concerned about the potential effects of climate change and may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors.
Given the unique geology and operating characteristics of each well, no two complications are the same, yet each complication our customers experience results in substantial disruption to their well operation and economics. As a result, resolution is “mission critical” to our customers and superior outcomes can support premium pricing.
Given the unique geology and operating characteristics of each well, no two complications are the same, yet each complication our customers experience results in substantial disruption to their well operation and economics. As a result, 10 resolution is “mission critical” to our customers and superior outcomes can support premium pricing.
Those outcomes rely principally on the skill and experience of the technicians dedicated to resolving the issues and the availability of exactly the right tools for every eventuality. We believe we have one of the leading teams of 10 intervention specialists in the industry, supported by a comprehensive portfolio of intervention tools and equipment.
Those outcomes rely principally on the skill and experience of the technicians dedicated to resolving the issues and the availability of exactly the right tools for every eventuality. We believe we have one of the leading teams of intervention specialists in the industry, supported by a comprehensive portfolio of intervention tools and equipment.
The Federal Motor Carrier Safety Administration regulates and provides safety oversight of commercial motor vehicles, the EPA establishes requirements to protect human health and the environment, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") establishes requirements for the safe use and storage of explosives, and the federal Nuclear Regulatory Commission establishes requirements for the protection against ionizing radiation.
The Federal Motor Carrier Safety Administration regulates and provides safety oversight of commercial motor vehicles, the EPA establishes requirements to protect human health and the environment, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") establishes requirements for the 16 safe use and storage of explosives, and the federal Nuclear Regulatory Commission establishes requirements for the protection against ionizing radiation.
It should be noted that references to the Company's website in this Annual Report are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Annual Report. 23
It should be noted that references to the Company's website in this Annual Report are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Annual Report.
We also maintain a full line of radial cement bond tools, compensated neutron porosity tools and casing evaluation tools to provide well 9 evaluation services to our clients. We also utilize greaseless line and quiet truck wireline technology to meet the environmental concerns of our customers.
We also maintain a full line of radial cement bond tools, compensated neutron porosity tools and casing evaluation tools to provide well evaluation services to our clients. We also utilize greaseless line and quiet truck wireline technology to meet the environmental concerns of our customers.
Customers are identified as targets based on their drilling and completion activity, geographic location and economic viability. Direction of the sales team is conducted through weekly meetings and daily communication. Our marketing activities are performed internally.
Customers are identified as targets based on their drilling and completion activity, geographic location and economic viability. Direction of the sales team is conducted through weekly meetings and daily 11 communication. Our marketing activities are performed internally.
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 such future emissions. The U.S.
Numerous proposals have been made and could continue to be made at the international, national, 18 regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions. The U.S.
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 as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions.
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 as GHG cap and trade programs, 19 carbon taxes, reporting and tracking programs, and restriction of emissions.
We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in all of the most active onshore basins in the 8 United States and provide premium perforating services for both wireline and tubing-conveyed applications.
We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in all of the most active onshore basins in the United States and provide premium perforating services for both wireline and tubing-conveyed applications.
These incentives could accelerate the transition of the U.S. economy 19 away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, reduce demand for our customers’ products, and thereby reduce demand for our services.
These incentives could accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, reduce demand for our customers’ products, and thereby reduce demand for our services.
In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of 18 facilities.
In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities.
For example, Texas and Oklahoma have issued rules for wastewater disposal wells that impose certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.
For example, Texas 22 and Oklahoma have issued rules for wastewater disposal wells that impose certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults.
Drilling: We provide directional drilling and associated drilling support services, including accommodations packages, to exploration and production ("E&P") companies in many of the most active areas of onshore oil and natural gas developments in the United States, including all active U.S. oil and natural gas basins with level 1 facilities in Appalachian Mountain, Gulf Coast, Mid-Continent, West Texas and Rocky Mountain regions.
Drilling: We provide directional drilling and associated drilling support services, including accommodations packages, to E&P companies in many of the most active areas of onshore oil and natural gas developments in the United States, including all active U.S. oil and natural gas basins with level 1 facilities in Appalachian Mountain, Gulf Coast, Mid-Continent, West Texas and Rocky Mountain regions.
No single customer accounted for more than 5% of our revenues during the year. Our sales activities are conducted through a network of sales representatives and business development personnel, which provide coverage on a product-line and geographical basis. Sales representatives work closely with local operations managers to target potential opportunities through strategic focus and planning.
No single customer accounted for more than 10% of our revenues during the year. Our sales activities are conducted through a network of sales representatives and business development personnel, which provide coverage on a product-line and geographical basis. Sales representatives work closely with local operations managers to target potential opportunities through strategic focus and planning.
HAVOK PDC Bearing Section— The patented Havok bearing pack is an extremely reliable and robust thru-tubing motor that deploys the industry’s only all PDC (Polycrystalline Diamond Compact) bearing design - meaning no ball bearings. The elegant design greatly reduces the operating cost of our thru-tubing motors and provides us with a significant differentiator in the thru-tubing space.
SpectrA PDC Bearing Section— The patented SpectrA PDC bearing pack is an extremely reliable and robust thru-tubing motor that deploys the industry’s only all PDC (Polycrystalline Diamond Compact) bearing design - meaning no ball bearings. The elegant design greatly reduces the operating cost of our thru-tubing motors and provides us with a significant differentiator in the thru-tubing space.
In particular, in recent years many of our large customers have placed an increased emphasis on the safety records of their service providers.
In particular, in recent years many of our large customers have placed 13 an increased emphasis on the safety records of their service providers.
Over time, when the industry recovers, we anticipate that our investments in large diameter coil tubing spreads will allow us to increase our share of spend as the large diameter coil tubing pulls through asset light services such as flowback and testing services, thru-tubing and pressure control services, while leveraging our enhanced cost structure.
Over time, when the industry recovers, we anticipate that our investments in large diameter coil tubing spreads will allow us to increase our share of spend as the large diameter coil tubing pulls through asset light services such as thru-tubing and pressure control services, while leveraging our enhanced cost structure.
Our strategy is to sell our services using data to demonstrate safety and service quality. We accomplish this 11 through communication across sales regions and operations departments to share best practices and leverage existing customer relationships. 12 Competition The markets in which we operate are highly competitive.
Our strategy is to sell our services using data to demonstrate safety and service quality. We accomplish this through communication across sales regions and operations departments to share best practices and leverage existing customer relationships. Competition The markets in which we operate are highly competitive.
Recent innovations currently deployed in the field include our: (i) DXD Venturi Tool; (ii) HAVOK PDC Bearing Section; (iii) Hydraulic By-Pass Tool; and (iv) Drill Mate (Mechanical By-Pass Valve). These tools were designed to improve upon conventional technology used by our competitors.
Recent innovations currently deployed in the field include our: (i) DXD Venturi Tool; (ii) SpectrA PDC Bearing Section; (iii) Hydraulic By-Pass Tool; and (iv) Drill Mate (Mechanical By-Pass Valve). These tools were designed to improve upon conventional technology used by our competitors.
Water Discharges The Federal Water Pollution Control Act (the “Clean Water Act” or "CWA") and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States.
Water Discharges The Federal Water Pollution Control Act (the “Clean Water Act” or “CWA”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States.
Concerns over silicosis and other potential adverse health effects, as well as concerns regarding potential liability from the use of hydraulic fracturing sand, may have the effect of discouraging our customers' use of hydraulic fracturing sand. 17 Transportation Safety and Compliance Operating a fleet of over 1,700 vehicles, we are subject to regulation as a motor carrier by the U.S.
Concerns over silicosis and other potential adverse health effects, as well as concerns regarding potential liability from the use of hydraulic fracturing sand, may have the effect of discouraging our customers' use of hydraulic fracturing sand. Transportation Safety and Compliance Operating a fleet of over 1,800 vehicles, we are subject to regulation as a motor carrier by the U.S.
In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. Endangered Species Act and Migratory Bird Treaty Act The federal Endangered Species Act (“ESA”) and comparable state laws were established to protect endangered and threatened species.
In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. Endangered Species Act and Migratory Bird Treaty Act The ESA and comparable state laws were established to protect endangered and threatened species.
In November 2022 the federal Bureau of Land Management (“BLM”) proposed a rule that would limit flaring from well sites on federal and Tribal lands, as well as allow the delay or denial of permits if BLM finds that an operator’s methane waste minimization plan is insufficient.
In November 2022 the federal Bureau of Land Management (“BLM”) proposed a rule that would limit flaring from well sites on federal and Tribal lands, as well as allow the delay or denial of permits if BLM finds that an operator’s methane waste minimization plan is insufficient. The final rule is expected in 2024.
Our competition includes many large and small oilfield service companies, including the largest integrated oilfield services companies. Our major competitors include Schlumberger, Baker Hughes, Halliburton, RPC, Nine Energy Services, Phoenix Technology Services, Scientific Drilling International, NexTier, Liberty Oilfield Services, Ranger Energy Services, ProPetro Holding Corp., STEP Energy Services, and other private competitors.
Our competition includes many large and small oilfield service companies, including the largest integrated oilfield services companies. Our major competitors include Schlumberger, Halliburton, Baker Hughes, Patterson-UTI Energy, Liberty Oilfield Services, RPC, ProPetro Holding Corp., Phoenix Technology Services, STEP Energy Services, Ranger Energy Services, Nine Energy Services, Scientific Drilling International and other private competitors.
We intend to continue to re-deploy additional directional drilling capacity into 2023, as market conditions warrant. Completion: Our completions activities are focused on services that help our customers complete and stimulate extended reach horizontal laterals and more technical wellbores.
We intend to continue to re-deploy additional directional drilling capacity into 2024, as market conditions warrant. 8 Completion: Our completions activities are focused on services that help our customers complete and stimulate extended reach horizontal laterals and more technical wellbores.
KLX Energy Services is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout the United States. KLXE was initially formed from the combination and integration of seven private oilfield service companies acquired during 2013 and 2014.
KLX Energy Services is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas E&P companies operating in both conventional and unconventional plays in all of the active major basins throughout the United States. KLXE was initially formed from the combination and integration of seven private oilfield service companies acquired during 2013 and 2014.
Our plugs dissolve quickly and reliably, resulting in faster time to production, are effective in a wide range of operating temperatures and salinity, including temperatures ranging from 80 to 300 degrees Fahrenheit, and do not require mill out, thus saving time and cost.
Our PhantM™ plugs dissolve quickly and reliably, resulting in faster time to production, are effective in a wide range of operating temperatures and salinity, including temperatures ranging from 80 to 350 degrees Fahrenheit, and do not require mill out, thus saving time and cost.
Available Information Our filings with the SEC, including this Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Proxy Statement, Current Reports on Form 8-K and amendments to any of those reports are available free of charge on our website, http://www.klxenergy.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
Available Information Our filings with the SEC, including this Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Proxy Statement, Current Reports on Form 8-K and amendments to any of those reports are available free of charge on our website, https://www.klx.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
Company Overview Except as otherwise indicated or unless the context otherwise requires, “KLX Energy Services,” “KLXE,” “Company,” “we,” “us” and “our” refer to KLX Energy Services Holdings, Inc. and its consolidated subsidiaries.
ITEM 1. BUSINESS Company Overview Except as otherwise indicated or unless the context otherwise requires, “KLX Energy Services,” “KLXE,” “Company,” “we,” “us” and “our” refer to KLX Energy Services Holdings, Inc. and its consolidated subsidiaries.
In addition to the reports filed or furnished with the SEC and provided on our website, we publicly disclose material information from time to time in our press releases, at annual meetings of Shareholders and in publicly accessible conferences and Investor presentations primarily through our Investor Relations pages (https://investor.klxenergy.com).
In addition to the reports filed or furnished with the SEC and provided on our website, we publicly disclose material information from time to time in our press releases, at annual meetings of stockholders and in publicly accessible conferences and Investor presentations primarily through our Investor Relations pages (https://investor.klx.com).
Our customers' access to water to be used in these processes may be adversely affected due to reasons such as periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.
Our customers' access to water to be used in these processes may be adversely affected due to reasons such as changes in weather patterns due to climate change, periods of extended drought, private, third-party competition for water in localized areas or the implementation of local or state governmental programs to monitor or restrict the beneficial use of water subject to their jurisdiction for hydraulic fracturing to assure adequate local water supplies.
Employees As of December 31, 2022, we had approximately 1,779 employees. Approximately 89% of our employees are engaged in operations, quality and purchasing, 4% in sales and marketing and 7% in finance, human resources, IT, management and general administration. Our employees are not unionized, and we consider our employee relations to be good.
Employees As of December 31, 2023, we had approximately 1,919 employees. Approximately 89% of our employees are engaged in operations, quality and purchasing, 4% in sales and marketing and 7% in finance, human resources, IT, management and general administration. Our employees are not unionized, and we consider our employee relations to be good.
We are not dependent on any single source of supply for those parts, supplies, materials or equipment and, as of December 31, 2022, no single supplier accounted for more than 4% of our total supply and procurement costs.
We are not dependent on any single source of supply for those parts, supplies, materials or equipment and, as of December 31, 2023, no single supplier accounted for more than 5% of our total supply and procurement costs.
Most of our sales are to major, large independent and regional oil and natural gas companies, and these sales have resulted in a diversified and geographically balanced portfolio of more than 740 customers within North America. Revenues from our five largest customers collectively represented approximately 21% of our revenues for the year ended December 31, 2022.
Most of our sales are to major, large independent and regional oil and natural gas companies, and these sales have resulted in a diversified and geographically balanced portfolio of more than 680 customers within North America. Revenues from our five largest customers collectively represented approximately 26% of our revenues for the year ended December 31, 2023.
The Company has 77 wireline units in the fleet and 37, or 48%, are configured to run pump down or plug-and-perf operations. Our R&D organization also enables our operations to support our customers with cutting edge pump down operations that include greaseless wireline, addressable gun systems and addressable release tools, to provide our customers with high quality pump down services.
The Company has 68 wireline units in the fleet and 31, or 46%, are configured to run pump down or plug-and-perf operations. Our R&D organization also enables our operations to support our customers with cutting edge pump down operations that include greaseless wireline, addressable gun systems and addressable release tools, to provide our customers with high quality pump down services.
As of December 31, 2022, our market share of the U.S. onshore drilling market was 7.4%, as compared to 8.4% as of December 31, 2021, as measured by the number of rigs we have worked on during the year as a proportion of the total number of rigs published by Baker Hughes.
As of December 31, 2023, our market share of the U.S. onshore drilling market was 6.0%, as compared to 7.4% as of December 31, 2022, as measured by the number of rigs we have worked on during the year as a proportion of the total number of rigs published by Baker Hughes.
To the extent the Biden Administration rule goes into effect and expands the scope of the Clean Water Act's jurisdiction in areas where we or our customers conduct operations, such developments could delay, restrict or halt the development of projects, result in longer permitting timelines, or increased compliance expenditures or mitigation costs for our customers’ operations, which may reduce our customers’ rate of production of oil and gas and reduce the demand for our products and services.
To the extent the scope of the Clean Water Act's jurisdiction continues to change and expand in areas where we or our customers conduct operations, such developments could delay, restrict or halt the development of projects, result in longer permitting timelines, or increased compliance expenditures or mitigation costs for our customers’ operations, which may reduce our customers’ rate of production of oil and gas and reduce the demand for our products and services.
The designation of previously unidentified endangered or threatened species, or other agency actions aimed at species conservation could indirectly cause us to incur additional costs, cause our or our oil and natural gas exploration and production customers' operations to become subject to operating restrictions or bans, result in 16 new difficulties obtaining permits or other authorizations, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.
While we cannot predict the outcome of these or any other future proposed or finalized listings, designation of previously unidentified endangered or threatened species, or other agency actions aimed at species conservation could indirectly cause us to incur additional costs, cause our or our oil and natural gas E&P customers' operations to become subject to operating restrictions or bans, result in new difficulties obtaining permits or other authorizations, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.
Some states where we operate, such as New Mexico and Colorado, have also imposed new or more stringent methane emission regulations, which could also increase operating or compliance costs for our customers in these states and impact demand for our services.
Some states where we operate, such as New Mexico and Colorado, have also imposed new or more stringent methane emission regulations. The requirements of the EPA’s final methane rules and state methane emissions regulations could increase operating or compliance costs for our customers in these states and impact demand for our services.
While the EPA and Corps under the Trump Administration issued a final rule in January 2021 narrowing federal jurisdictional reach over waters of the United States, the EPA and Corps under President Biden issued a new rule at the end of 2022 that again broadens federal jurisdiction over these waters.
While the EPA and Corps under the Trump Administration issued a final rule in January 2021 17 narrowing federal jurisdictional reach over waters of the United States, the EPA and Corps under President Biden issued a new rule in January 2023, the EPA and the Corps released a final revised definition of “waters of the United States” that again broadened federal jurisdiction over these waters.
The methane emissions charge would start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year after. Calculation of the fee is based on certain thresholds established in the IRA.
While we will not be required to pay this fee, some of our customers may. The methane emissions charge, starting in calendar year 2024 at $900 per ton of methane, will increase to $1,200 in 2025 and be set at $1,500 for 2026 and each year after. Calculation of the fee is based on certain thresholds established in the IRA.
We cannot predict the impact that any rule, if finalized, would have on our operations. To the extent that requirements or enforcement initiatives impose significant additional costs on us or our customers, we could be negatively impacted by the SEC’s regulatory or enforcement actions.
To the extent that requirements or enforcement initiatives impose significant additional costs on us or our customers, we could be negatively impacted by the SEC’s regulatory or enforcement actions.
Although in the aggregate our patents and licenses are important to us, we do not regard any single patent, license or strategic relationship as critical or essential to our business as a whole.
Our sales and earnings are influenced by our ability to successfully introduce new or improved products and services to the market. Although in the aggregate our patents and licenses are important to us, we do not regard any single patent, license or strategic relationship as critical or essential to our business as a whole.
This increase in fluid rate does not affect the life of the motor as the additional fluid is by-passed through the Drill Mate tool. Customers and Marketing Substantially all of our customers are engaged in the energy industry.
At this point, a customer can increase the amount of fluid being pumped through the BHA to assist in debris removal. This increase in fluid rate does not affect the life of the motor as the additional fluid is by-passed through the Drill Mate tool. Customers and Marketing Substantially all of our customers are engaged in the energy industry.
The key elements include: • 24-hours a day, seven days a week operations; • recognized industry leading technicians in our principal service and product lines; • responsiveness to our customers’ requirements for ready-to-deploy American Petroleum Institute certified equipment and a “can do” philosophy; • technical interface with customers via product line management personnel; and • client relationship building. 13 Technology and Intellectual Property Our engineering and technology efforts are focused on providing efficient and cost-effective solutions to maximize production for our customers across major North American onshore basins.
The key elements include: 12 • 24 hours a day, seven days a week operations; • recognized industry leading technicians in our principal service and product lines; • responsiveness to our customers’ requirements for ready-to-deploy American Petroleum Institute certified equipment and a “can do” philosophy; • technical interface with customers via product line management personnel; and • client relationship building.
Approvals necessary for our customers to operate on federal or Tribal land are subject to NEPA. The NEPA review process has the potential to delay the permitting and subsequent development of oil and natural gas projects.
NEPA requires federal agencies, including the Department of the Interior, to evaluate major agency actions that have the potential to significantly impact the environment. Approvals necessary for our customers to operate on federal or Tribal land are subject to NEPA. The NEPA review process has the potential to delay the permitting and subsequent development of oil and natural gas projects.
Some of our customers may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit our ability to operate in protected areas. Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures.
Some of our customers may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit our ability to operate in protected areas.
Hydraulic Fracturing Protect Rod Hang Off Tool —This tool is developed to give customers the ability to “hang off” a rod string rather than tripping it out of the hole and laying it down.
The alternative is to “hot-tap” the tubing, which is a high-risk operation that most operators are not willing to employ. Hydraulic Fracturing Protect Rod Hang Off Tool —This tool is developed to give customers the ability to “hang off” a rod string rather than tripping it out of the hole and laying it down.
All of these indicators are driven by commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. natural gas prices are correlated with global oil price movements, they are also affected by local weather, transportation and consumption patterns.
Our customers’ spending plans are generally based on their outlook for near-term and long-term commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. natural gas prices are correlated with global oil price movements, they are also affected by local weather, transportation and consumption patterns.
The final rule is expected in 2023 and may be subject to legal challenge. Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that an issuer's existing climate disclosures were misleading or deficient.
Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that an issuer's existing climate disclosures were misleading or deficient. We cannot predict the impact that any rule, if finalized, would have on our operations.
This allows us to offer our customers in all of our geographic regions discrete, comprehensive and differentiated services that leverage both the technical expertise of our skilled engineers and our in-house R&D team. 7 Industry Overview The oil and gas industry has historically been both cyclical and seasonal.
This allows us to offer our customers in all of our geographic regions discrete, comprehensive and differentiated services that leverage both the technical expertise of our skilled engineers and our in-house R&D team. 7 Industry Overview Demand for our services and products is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers’ willingness to spend capital on the exploration for and development of oil and natural gas.
At the international level, the United Nations-sponsored Paris Agreement is a non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020. President Biden announced in April 2021 a new, more rigorous nationally determined emissions reduction level of 50 percent to 52 percent from 2005 levels in economy-wide net GHG emissions by 2030.
President Biden recommitted the United States to the Paris Agreement in January 2021 and announced in April 2021 a new, more rigorous nationally determined emissions reduction level of 50 percent to 52 percent from 2005 levels in economy-wide net GHG emissions by 2030.
The principal services and equipment we provide across the production lifecycle of the well include (i) production blow out preventers, (ii) mechanical wireline services, (iii) slick line services, (iv) hydro-testing, (v) premium tubulars and (vi) other specialized production tools. We believe our proprietary production tool portfolio creates a distinct competitive advantage for us in selling our production services.
As with our completion and intervention service offerings, we have developed a portfolio of proprietary tools that we believe differentiates our production solutions service offering. The principal services and equipment we provide across the production lifecycle of the well include (i) production blow out preventers, (ii) mechanical wireline services, (iii) hydro-testing, (iv) premium tubulars and (v) other specialized production tools.
The discharge of pollutants into regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. There continues to be uncertainty on the federal government's applicable jurisdictional reach under the CWA over waters of the United States, including wetlands, as the EPA and the U.S.
The discharge of pollutants into regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or U.S. Army Corps of Engineers ("Corps") or an analogous state agency.
Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in federal political risks in the United States. President Biden has issued several executive orders calling for more expansive action to address climate change and suspend new oil and gas operations on federal lands and waters.
President Biden has issued several executive orders calling for more expansive action to address climate change and suspend new oil and gas operations on federal lands and waters.
"Management Discussion and Analysis of Financial Condition and Results of Operations" for more details of our acquisitions since becoming a publicly traded company, including our 2020 acquisition of QES.
"Management Discussion and Analysis of Financial Condition and Results of Operations" for more details of our acquisitions since becoming a publicly traded company, including our 2020 acquisition of Quintana Energy Services Inc. (“QES,” and such acquisition the “QES Merger”) and our 2023 acquisition of Greene's Energy Group, LLC (“Greene's,” and such acquisition the “Greene's Acquisition”).
These or similar federal actions, if taken in the future, could impose additional hydraulic fracturing limitations on our customers that could ultimately result in decreased demand for our products and services. 22 At the state level, many states have adopted legal requirements that have imposed new or more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities, including states where our customers operate.
At the state level, many states have adopted legal requirements that have imposed new or more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities, including states where our customers operate.
Our nitrogen pumping units provide a non-combustible environment downhole and are used in support of other pressure control or well-servicing applications.
Our nitrogen pumping units provide a non-combustible environment downhole and are used in support of other pressure control or well-servicing applications. As of December 31, 2023, we had a fleet of 39 coiled tubing units, 23 of which are large diameter coiled tubing units, across our geographical regions.
As weight is removed from the mill or bit either by milling through the obstruction or picking up off bottom, the tool strokes open, thereby exposing by-pass ports that divert fluid through them. At this point, a customer can increase the amount of fluid being pumped through the BHA to assist in debris removal.
During bottom milling with the tool, the tool is in the closed position, putting 100% of the flow through the motor bottomhole assembly ("BHA"). As weight is removed from the mill or bit either by milling through the obstruction or picking up off bottom, the tool strokes open, thereby exposing by-pass ports that divert fluid through them.
Key downhole production tools that we have developed and deployed with strong customer adoption include: Punch Ram Tool —The punch ram tool gives customers the ability to safely and repeatedly release trapped pressure inside production tubulars during pulling operations. The alternative is to “hot-tap” the tubing, which is a high-risk operation that most operators are not willing to employ.
We believe our proprietary production tool portfolio creates a distinct competitive advantage for us in selling our production services. Key downhole production tools that we have developed and deployed with strong customer adoption include: Punch Ram Tool —The punch ram tool gives customers the ability to safely and repeatedly release trapped pressure inside production tubulars during pulling operations.
For example, FWS recently published a rule listing two distinct population segments of the Lesser Prairie Chicken under the ESA, a species found in some states where we operate. FWS has also considered taking additional measures related to species such as the Dunes Sagebrush Lizard and Greater Sage Grouse, which can be found in some areas where we operate.
For example, FWS recently published a rule listing two distinct population segments of the Lesser Prairie Chicken under the ESA, a species found in some states where we operate. Further, in July 2023, FWS issued a notice of proposed rulemaking to list the Dunes Sagebrush Lizard as an endangered species under 15 the ESA.
KLXE dissolvable plugs have been deployed successfully across all major U.S. oil and natural gas basins in now more than 910 wells by more than 60 customers.
Our latest generation dissolvable frac plug, the PhantM™, has been deployed successfully across major U.S. oil and natural gas basins in now more than 1,000 wells by more than 70 customers.
Army Corps of Engineers ("Corps") under the Obama, Trump and Biden Administrations have pursued multiple rulemakings since 2015 in an attempt to define the scope of such reach.
There continues to be uncertainty on the federal government's applicable jurisdictional reach under the CWA over “waters of the United States”, including wetlands, as the EPA and the Corps under the Obama, Trump and Biden Administrations have pursued multiple rulemakings since 2015 in an attempt to define the scope of such reach.
The following is a summary of some of the existing laws, rules and regulations, as amended from time to time, to which we or our customers are subject. 15 Hazardous Substances and Waste Handling The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes.
Hazardous Substances and Waste Handling The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes.
Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations to prevent future contamination. The EPA has the power to make additional substances subject to CERCLA and is considering doing so at this time, which could result in additional remediation costs at certain properties in the future.
Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations to prevent future contamination.
The additional fluid being pumped and by-passed optimizes the downhole hydraulics for the operation and assists with proper debris removal. Drill Mate (Mechanical By-Pass Valve) —The patented Drill Mate is a downhole tool that was developed to give customers a way to mechanically by-pass fluid during drill out or clean out operations.
Drill Mate (Mechanical By-Pass Valve) —The patented Drill Mate is a downhole tool that was developed to give customers a way to mechanically by-pass fluid during drill out or clean out operations. The tool is a two-piece system that opens and closes based upon the amount of weight being set on the mill or bit.
These goals were reaffirmed at the 27th Conference of the Parties (“COP27”) in November 2022. The impacts of 20 these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States' commitments under the Paris Agreement, COP26, COP27 or other international conventions cannot be predicted at this time.
The impacts of these orders, pledges, agreements and any legislation or regulation promulgated to fulfill the United States' commitments under the Paris Agreement, COP26, COP28 or other international conventions cannot be predicted at this time. Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in federal political risks in the United States.
In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability relating to our facilities or operations.
In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability relating to our facilities or operations. 14 The following is a summary of some of the existing laws, rules and regulations, as amended from time to time, to which we or our customers are subject.
Since being deployed, Havok has proven to be one of the most robust bearing packs available on the market. Hydraulic By-Pass Tool— The patented hydraulic by-pass tool allows us to run our conventional motor assemblies and achieve substantially higher circulation rates without reducing the expected life of our conventional power section.
Hydraulic By-Pass Tool— The patented hydraulic by-pass tool allows us to run our conventional motor assemblies and achieve substantially higher circulation rates without reducing the expected life of our conventional power section. The additional fluid being pumped and by-passed optimizes the downhole hydraulics for the operation and assists with proper debris removal.
We have dedicated resources focused on the internal development of new technology and equipment, as well as resources focused on sourcing and commercializing new technologies through strategic relationships. Our sales and earnings are influenced by our ability to successfully introduce new or improved products and services to the market.
Technology and Intellectual Property Our engineering and technology efforts are focused on providing efficient and cost-effective solutions to maximize production for our customers across major North American onshore basins. We have dedicated resources focused on the internal development of new technology and equipment, as well as resources focused on sourcing and commercializing new technologies through strategic relationships.
Most recently, in January 2023 the CEQ issued new guidance on consideration of greenhouse gas ("GHG") emissions and climate change in NEPA environmental reviews. At this time, we cannot predict the outcome of such changes on our operations or the operations of our customers.
Most recently, in January 2023 the CEQ issued new guidance on consideration of greenhouse gas ("GHG") emissions and climate change in NEPA environmental reviews. The guidance followed the publication of a final rule in April 2022 revoking some modifications made to the regulations under the Trump Administration and reincorporating consideration of direct, indirect, and cumulative effects of major federal actions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe have previously been named as defendants in these lawsuits, and we do not maintain insurance for alleged wage and hour-related litigation. The frequency and significance of wage or other employment-related claims may affect expenses, costs and relationships with employees and regulators.
Biggest changeIn recent years, oilfield services companies have been the subject of a significant volume of wage and hour-related litigation, including claims brought under the Fair Labor Standards Act, in which employee pay practices have been challenged. We have previously been named as defendants in these lawsuits, and we do 30 not maintain insurance for alleged wage and hour-related litigation.
We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights is uncertain. We may become involved in claims, litigation or dispute resolution proceedings from time to time to maintain, protect and enforce our intellectual property rights against potential third-party infringers, which could be costly and time-consuming.
We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights is uncertain. We may become involved in claims, litigation or dispute resolution proceedings from time to time to maintain, protect or enforce our intellectual property rights against potential third-party infringers, which could be costly and time-consuming.
Moreover, in these dispute resolution proceedings, a defendant or opposing third party may assert claims, defenses, counterclaims and countersuits that attack the validity and enforceability of our intellectual property rights, and/or allege that that our business, services, or products infringe, impair, misappropriate, dilute or otherwise violate their intellectual property rights.
Moreover, in these dispute resolution proceedings, a defendant or opposing third party may assert claims, defenses, counterclaims and countersuits that attack the validity or enforceability of our intellectual property rights, and/or allege that that our business, services, or products infringe, impair, misappropriate, dilute or otherwise violate their intellectual property rights.
Any failure or perceived failure by us or our third-party service providers to comply with such data privacy laws, rules and regulations, or any security compromise that results in the unauthorized access, improper disclosure, or misappropriation of personal data or other customer data, could result in significant liabilities, negative publicity and reputational harm.
Any failure or perceived failure by us or our third-party service providers to comply with such data privacy laws, rules and regulations, or any security compromise that results in the unauthorized access, improper disclosure, or misappropriation of personal data or other customer data, could result in significant liabilities, negative publicity or reputational harm.
In addition, (i) certain former members of our management are entitled to registration rights with respect to their shares of restricted stock, and (ii) certain former QES stockholders are entitled to registration rights with respect to the shares of common stock they received in the Merger.
In addition, (i) certain former members of our management are entitled to registration rights with respect to their shares of restricted stock, and (ii) certain former QES stockholders are entitled to registration rights with respect to the shares of Common Stock they received in the QES Merger.
Significant factors that are likely to affect commodity prices in current and future periods include, but are not limited to, price reductions or increased production by OPEC members and other oil exporting nations, the effect of U.S. energy, monetary and trade policies, U.S. and global economic conditions, U.S. and global political and economic developments, including initiatives introduced by the Biden Administration and resulting energy and environmental policies, war or other military conflict, including the continuing conflict between Russia and Ukraine, the impact of the ongoing COVID-19 pandemic, and conditions in the U.S. oil and gas industry and the resulting demand for domestic land oilfield services.
Significant factors that are likely to affect commodity prices in current and future periods include, but are not limited to, price reductions or increased production by OPEC members and other oil exporting nations, the effect of U.S. energy, monetary and trade policies, U.S. and global economic conditions, U.S. and global political and economic developments, including initiatives introduced by the Biden Administration and resulting energy and environmental policies, war or other military conflict, including the continuing conflict between Russia and Ukraine, the impact of the COVID-19 pandemic, and conditions in the U.S. oil and gas industry and the resulting demand for domestic land oilfield services.
Our customers may elect not to purchase our services if they view our safety record as unacceptable or otherwise experience material defects in our products or performance problems, which could cause us to lose customers and substantial revenue, and any litigation or claims, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public and make it more difficult for us to compete effectively or obtain adequate insurance 29 in the future.
Our customers may elect not to purchase our services if they view our safety record as unacceptable or otherwise experience material defects in our products or performance problems, which could cause us to lose customers and substantial revenue, and any litigation or claims, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public and make it more difficult for us to compete effectively or obtain adequate insurance in the future.
If we cannot service our debt or repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (1) reducing financing in the future for working capital, capital expenditures and other general corporate purposes or (2) dedicating an unsustainable level of 34 our cash flow from operations to the payment of principal and interest on our indebtedness.
If we cannot service our debt or repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (1) reducing financing in the future for working capital, capital expenditures and other general corporate purposes or (2) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness.
The indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.
The indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the Indenture subject to grace periods, cross- 34 acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.
Any common stock offered and sold in the Offering will be issued pursuant to our shelf registration statement on Form S-3 (Registration No. 333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the Offering that form a part of the Registration Statement.
Any Common Stock offered and sold in the ATM Offering will be issued pursuant to our shelf registration statement on Form S-3 (Registration No. 333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement.
Additionally, competition or advances in technology within our 33 industry may require us to update our products and services. Such demands on our capital or reductions in demand and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, financial condition and results of operations.
Additionally, competition or advances in technology within our industry may require us to update our products and services. Such demands on our capital or reductions in demand and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, financial condition and results of operations.
The federal ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species habitat. Similar protections are offered to migratory birds under MBTA. See Part I, Item 1.
The federal ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species' habitat. Similar protections are offered to migratory birds under MBTA. See Part I, Item 1.
The costs of components and labor have increased in the past and may increase in the future with increases in demand, which will require us to incur additional costs to upgrade any equipment we may acquire in the future. Our equipment typically does not generate revenue while it is undergoing maintenance, refurbishment or upgrades.
The costs of components and labor have increased in the past and may increase in the 32 future with increases in demand, which will require us to incur additional costs to upgrade any equipment we may acquire in the future. Our equipment typically does not generate revenue while it is undergoing maintenance, refurbishment or upgrades.
In the past, our industry faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which 37 adversely impacted the operating results of several competitors. We may not be able to mitigate any future shortages of materials, including proppant, and our results of operations, prospects and financial condition could be adversely affected.
In the past, our industry faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several competitors. We may not be able to mitigate any future shortages of materials, including proppant, and our results of operations, prospects and financial condition could be adversely affected.
Sales of or other transactions relating to shares of our common stock by our significant stockholders, directors, officers or employees could cause a perception in the marketplace that adverse events or trends 46 have occurred or may be occurring at our company or that it is otherwise an advantageous time to sell shares of our common stock.
Sales of or other transactions relating to shares of our Common Stock by our significant stockholders, directors, officers or employees could cause a perception in the marketplace that adverse events or trends have occurred or may be occurring at our company or that it is otherwise an advantageous time to sell shares of our Common Stock.
Risks Relating to Our Business Our business depends on domestic capital spending by the oil and natural gas industry, and reductions in capital spending could have a material adverse effect on our business, financial condition and results of operations. Our revenues are generated primarily from customers who are engaged in drilling for and production of oil and natural gas.
Risks Relating to Our Business 23 Our business depends on domestic capital spending by the oil and natural gas industry, and reductions in capital spending could have a material adverse effect on our business, financial condition and results of operations. Our revenues are generated primarily from customers who are engaged in drilling for and production of oil and natural gas.
Adverse weather conditions, including rain, tropical storms, hurricanes, tornadoes and severe cold weather, have in the past and may in the future interrupt or curtail operations, our customers’ operations, 31 cause supply disruptions and result in a loss of revenue and damage to our equipment and facilities, which may or may not be insured.
Adverse weather conditions, including rain, tropical storms, hurricanes, tornadoes and severe cold weather, have in the past and may in the future interrupt or curtail operations, our customers’ operations, cause supply disruptions and result in a loss of revenue and damage to our equipment and facilities, which may or may not be insured.
A failure to comply with the obligations contained in any such agreement governing our indebtedness could result in an event of default under such agreement, which could permit acceleration of the related debt, enforcement against any liens securing the related debt and acceleration of debt under other 35 instruments that may contain cross acceleration or cross default provisions.
A failure to comply with the obligations contained in any such agreement governing our indebtedness could result in an event of default under such agreement, which could permit acceleration of the related debt, enforcement against any liens securing the related debt and acceleration of debt under other instruments that may contain cross acceleration or cross default provisions.
Further, with respect to exclusive third-party intellectual property arrangements, existing arrangements could be terminated and future arrangements may not be available on commercially acceptable terms, if at all, which could result in a material adverse effect on our financial condition, business, and results of operations.
Further, with respect to exclusive third-party intellectual property arrangements, existing arrangements could be terminated and future arrangements may not be available on commercially acceptable terms, if at all, which could result in a material adverse effect on our financial condition, business or results of operations.
All of these indicators are generally driven by commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. oil and natural gas prices are correlated with global oil price movements, they are also affected by local markets, weather and consumption patterns.
All of these indicators are generally 25 driven by commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. oil and natural gas prices are correlated with global oil price movements, they are also affected by local markets, weather and consumption patterns.
Risks Relating to Our Common Stock Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership interest. We may sell shares of common stock in the future.
Risks Relating to Our Common Stock Future sales of our Common Stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership interest. 44 We may sell shares of Common Stock in the future.
Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition or shares held by stockholders with registration rights), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.
Sales of substantial amounts of our Common Stock (including shares 45 issued in connection with an acquisition or shares held by stockholders with registration rights), or the perception that such sales could occur, may adversely affect prevailing market prices of our Common Stock.
Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual capital spending budgets towards year end.
Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual 31 capital spending budgets towards year end.
While we believe that we will be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers, we may not always be able to make alternative arrangements.
While we believe that we will be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials 36 and/or products by one of our suppliers, we may not always be able to make alternative arrangements.
Any dispute resolution proceeding concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, financial condition and results of operations, regardless of its outcome. 39 Additionally, if we discover or a legal authority finds that our technologies infringe intellectual property rights of third parties, we may need to obtain licenses from these parties or substantially re-engineer our technologies in order to avoid infringement.
Any dispute resolution proceeding concerning intellectual property could be protracted and costly, is inherently unpredictable and could have an adverse effect on our business, financial condition or results of operations, regardless of its outcome. 38 Additionally, if we discover or a legal authority finds that our technologies infringe intellectual property rights of third parties, we may need to obtain licenses from these parties or substantially re-engineer our technologies in order to avoid infringement.
Moreover, some of our customers’ drilling and completion activities may take place on federal land or Tribal lands, requiring leases and other approvals from the federal government or Tribes to conduct such drilling and completion activities.
Moreover, some of our customers’ drilling and completion activities 42 may take place on federal land or Tribal lands, requiring leases and other approvals from the federal government or Tribes to conduct such drilling and completion activities.
Pursuant to the Exchange Agreements, the noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our common stock.
Pursuant to the Exchange Agreements, the Noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our Common Stock (the "Exchanges").
Additionally, with concerns about seismic activity resulting from injection of produced wastewaters into underground disposal wells, certain regulators could impose additional requirements related to seismic safety. Our customers’ inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could also adversely impact their operations. See Part I, Item 1.
Additionally, with concerns about seismic activity resulting from injection of produced wastewaters into underground disposal wells, certain regulators have and could continue to impose additional requirements related to seismic safety. Our customers’ inability to locate or contractually acquire and sustain the receipt of sufficient amounts of water could also adversely impact their operations. See Part I, Item 1.
The requirements for such permits 43 vary depending on the type of operations, including the location where our customers’ drilling and completion activities will be conducted.
The requirements for such permits vary depending on the type of operations, including the location where our customers’ drilling and completion activities will be conducted.
Factors over which we have no control that could affect our customers’ willingness to undertake drilling, completion, production, and intervention spending activities include: • the level of prices, and expectations about prices, for oil and natural gas; • the level of domestic and global oil and natural gas production; • the level of domestic and global oil and natural gas inventories; • the availability, pricing and perceived safety of pipeline, trucking, train storage and other transportation capacity; • the supply of and demand for oilfield services and equipment; • lead times associated with acquiring equipment and availability of qualified personnel; • the cost of exploring for, developing, producing and delivering oil and natural gas; • the expected rates of decline in production from existing and prospective wells; • the discovery rates of new oil and natural gas reserves; • any prolonged reduction in the overall level of oil and natural gas E&P activities, whether resulting from changes in oil and natural gas prices or otherwise; • uncertainty in capital and commodities markets and the ability of oil and natural gas E&P companies to raise equity capital and debt financing; • federal, state and local regulation of hydraulic fracturing and other oilfield service activities, as well as E&P activities, including public pressure on governmental bodies and regulatory agencies to regulate the oil and gas industry; • moratoriums on drilling activity resulting in a cessation of operation or a failure to expand operations; • adverse weather conditions, including rain, tropical storms, hurricanes and severe cold weather, that can affect oil and natural gas operations over a wide area; • oil refining capacity; • merger and divestiture activity among oil and gas producers; 24 • the availability of water resources and suitable proppants in sufficient quantities and on acceptable terms for use in hydraulic fracturing operations; • the availability, capacity and cost of disposal and recycling services for used hydraulic fracturing fluids; • the political environment in oil and natural gas producing regions, including uncertainty or instability resulting from civil disorder, terrorism or war, such as the continuing conflict between Russia and Ukraine; • worldwide political, military and economic conditions; • global or national health pandemics, epidemics or concerns, such as the COVID-19 pandemic, which reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity; • actions of OPEC, its members and other state-controlled oil companies relating to oil and natural gas price and production levels, including announcements of potential changes to such levels; • advances in exploration, development and production technologies or in technologies affecting energy consumption; • stockholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas; • the potential acceleration of the energy transition and development of alternative fuels; and • the price and availability of alternative fuels and energy sources.
Additional factors over which we have no control that could affect our customers’ willingness to undertake drilling, completion, production, and intervention spending activities include: • the level of prices, and expectations about prices, for oil and natural gas; • the level of domestic and global oil and natural gas production; • the level of domestic and global oil and natural gas inventories; • the availability, pricing and perceived safety of pipeline, trucking, train storage and other transportation capacity; • the supply of and demand for oilfield services and equipment; • lead times associated with acquiring equipment and availability of qualified personnel; • the cost of exploring for, developing, producing and delivering oil and natural gas; • the expected rates of decline in production from existing and prospective wells; • the discovery rates of new oil and natural gas reserves; • any prolonged reduction in the overall level of oil and natural gas E&P activities, whether resulting from changes in oil and natural gas prices or otherwise; • uncertainty in capital and commodities markets and the ability of oil and natural gas E&P companies to raise equity capital and debt financing; • federal, state and local regulation of hydraulic fracturing and other oilfield service activities, as well as E&P activities, including public pressure on governmental bodies and regulatory agencies to regulate the oil and gas industry; • moratoriums on drilling activity resulting in a cessation of operation or a failure to expand operations; • adverse weather conditions, including rain, tropical storms, hurricanes and severe cold weather, that can affect oil and natural gas operations over a wide area; • oil refining capacity; • merger and divestiture activity among oil and gas producers; • the availability of water resources and suitable proppants in sufficient quantities and on acceptable terms for use in hydraulic fracturing operations; • the availability, capacity and cost of disposal and recycling services for used hydraulic fracturing fluids; • the political environment in oil and natural gas producing regions, including uncertainty or instability resulting from civil disorder, terrorism or war, such as the continuing conflicts in Ukraine and Israel; • worldwide political, military and economic conditions; 24 • global or national health pandemics, epidemics or concerns, such as the COVID-19 pandemic, which reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity; • actions of the Organization of the Petroleum Exporting Countries ("OPEC"), its members and other state-controlled oil companies relating to oil and natural gas price and production levels, including announcements of potential changes to such levels; • advances in exploration, development and production technologies or in technologies affecting energy consumption; • stockholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas; • the potential acceleration of the energy transition and development of alternative fuels; and • the price and availability of alternative fuels and energy sources.
The results or costs of any such dispute resolution proceedings may have an adverse effect on our business, financial condition and results of operations.
The results or costs of any such dispute resolution proceedings may have an adverse effect on our business, financial condition or results of operations.
Any failure to adequately protect or enforce our intellectual property rights could have a material adverse effect to our business, financial condition and results of operations. Moreover, our rights in our confidential information, trade secrets and confidential know-how cannot prevent third parties from independently developing similar technologies or duplicating such technologies.
Any failure to adequately protect or enforce our intellectual property rights could have a material adverse effect to our business, financial condition or results of operations. Moreover, our rights in our confidential information, trade secrets and confidential know-how cannot prevent third parties from independently developing similar technologies.
At the same time, cyber incidents have increased in frequency and severity. A cyber incident could be caused by malicious insiders or third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other cyber security defenses, including hacking, fraud, trickery, or other forms of deception.
At the same time, cyber incidents have increased in frequency and severity. A cyber incident could be caused by malicious insiders or third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other cybersecurity defenses, including hacking, fraud, trickery, or other forms of deception.
Moreover, we may not be able to anticipate, detect or prevent cyberattacks or security breaches, particularly because the methodologies used by attackers change frequently or may not be recognized until such attack is underway, and because attackers are increasingly using technologies specifically designed to circumvent cyber security measures and avoid detection.
Moreover, we may not be able to anticipate, detect or prevent cyberattacks or security breaches, particularly because the methodologies used by attackers change frequently or may not be recognized until such attack is underway, and because attackers are increasingly using technologies specifically designed to circumvent cybersecurity measures and avoid detection.
Despite our security measures, our information technology systems may become the target of cyberattacks or security breaches (including employee error, malfeasance or other breaches), which could result in the theft or loss of sensitive data, misappropriation of assets, disruption of transactions and reporting functions, our ability to protect confidential information and our financial reporting.
Despite our security measures, our IT systems may become the target of cyberattacks or security breaches (including employee error, malfeasance or other breaches), which could result in the theft or loss of sensitive data, misappropriation of assets, disruption of transactions and reporting functions, our ability to protect confidential information and our financial reporting.
These data privacy laws are not uniform and as the privacy legal landscape 40 continues to develop, we will likely be required to expend significant resources to continue to modify or enhance our compliance measures to comply with such laws, rules and regulations.
These data privacy laws are not uniform and as the privacy legal landscape continues to develop, we will likely be required to expend significant resources to continue to modify or 39 enhance our compliance measures to comply with such laws, rules and regulations.
One or more of these developments could decrease completion of our customers’ oil and gas wells, 41 increase our and our customers’ compliance costs and reduce demand for our products and services, which could have a material adverse effect on our business, results of operations, and financial condition.
One or more of these developments could decrease completion of our customers’ oil and gas wells, increase our and our customers’ compliance costs and reduce demand for our products and 40 services, which could have a material adverse effect on our business, results of operations, and financial condition.
If we are unable to refinance the ABL Facility over the next twelve months and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2023.
If we are unable to refinance the ABL Facility as planned over the next twelve months and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2024.
Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the continuation of the COVID-19 pandemic, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.
Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.
Moreover, the FWS may make determinations on the listing of numerous species as endangered or threatened under the ESA, which listings could cause our customers to incur additional costs, become subject to operating restrictions or bans, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.
Moreover, the FWS may make determinations on the listing of numerous species as endangered or threatened under the ESA and designate areas as critical habitat, which listings and designations could cause our customers to incur additional costs, become subject to operating restrictions or bans, and limit future development activity in affected areas, which could reduce demand for our products and services to those customers.
If our customers delay or fail to pay a significant amount of outstanding receivables, it could reduce our availability under our revolving credit facility or otherwise have a material adverse effect on our liquidity, financial condition, results of operations and cash flows.
If our customers delay or fail to pay a significant amount of outstanding receivables, it could reduce our availability under our ABL Facility or otherwise have a material adverse effect on our liquidity, financial condition, results of operations and cash flows.
In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. Sustained levels of high inflation caused the U.S.
In addition, the existence of inflation in the economy has resulted in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. Sustained levels of high inflation caused the U.S.
Our systems and insurance coverage for cyber incidents, including deliberate attacks, may not be sufficient to cover all of the losses we may experience as a result of such cyberattacks. These risks could have a material adverse effect on our business, financial condition, reputation, and results of operations.
Our systems and insurance coverage for cyber incidents, including deliberate attacks, may not be sufficient to cover all of the losses we may experience as a result of such cyberattacks. These risks could have a material adverse effect on our business, financial condition, reputation or results of operations. See “Item 1C.
There also can be no assurance that patents will be issued from our currently pending or future applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us.
There is also no assurance that patents will be issued from our currently pending or future applications or that, if patents are issued, they will be of sufficient scope to provide meaningful protection or any commercial advantage to us.
We are subject to various laws related to cyber security requirements, which are continuing to develop and evolve at a rapid pace. We may not be able to monitor and react to all legal developments in a timely manner.
We are subject to various laws related to cybersecurity requirements, which are continuing to develop and evolve at a rapid pace. We may not be able to monitor and react to all legal developments in a timely manner.
We are also at risk that we may be required to refund amounts collected from a customer during the period immediately prior to that customer’s bankruptcy filing, and the amount we ultimately collect from the customer’s bankruptcy estate may be significantly less. Customer bankruptcies may also reduce our availability under our revolving credit facility.
We are also at risk that we may be required to refund amounts collected from a customer during the period immediately prior to that customer’s bankruptcy filing, and the amount we ultimately collect from the customer’s bankruptcy estate may be significantly less. 35 Customer bankruptcies may also reduce our availability under our ABL Facility.
If our information technology systems for protecting against cyber security risks are inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, or customer data; interruption of business operations; reputational harm; or additional costs to prevent, respond to, or mitigate cyber security attacks.
If our IT systems for protecting against cybersecurity risks are inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary information, or customer data; interruption of business operations; reputational harm; or additional costs to prevent, respond to, or mitigate cybersecurity attacks.
We cannot assure you that our competitors or other third parties will not infringe upon, misappropriate, violate or challenge our intellectual property rights in the future. Further, we cannot assure you that our intellectual property rights will deter or prevent competitors from creating similar purpose products for our customers.
We cannot assure you that our competitors or other third parties will not infringe upon, misappropriate, violate or challenge our intellectual property rights in the future. Further, we cannot assure you that our intellectual property rights will deter or prevent competitors from creating similar products or services.
As of December 31, 2022, we had total outstanding long-term indebtedness of $283.4 under our ABL Facility and Senior Notes. Our leverage and the current and future restrictions contained in the agreements governing our indebtedness may reduce our ability to incur additional indebtedness, engage in certain transactions or capitalize on acquisition or other business opportunities.
As of December 31, 2023, we had total outstanding long-term indebtedness of $284.3 under our ABL Facility and Senior Notes. Our leverage and the current and future restrictions contained in the agreements governing our indebtedness may reduce our ability to incur additional indebtedness, engage in certain transactions or capitalize on acquisition or other business opportunities.
Sales of common stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).
Sales of Common Stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act.
The increase in companies and individuals working remotely has increased the risk of cyberattacks and potential cyber security incidents, both deliberate attacks and unintentional events.
The increase in companies and individuals working remotely has increased the risk of cyberattacks and potential cybersecurity incidents, both deliberate attacks and unintentional events.
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility, and we depend on our customers’ willingness to make capital and operating expenditures to explore for, develop and produce oil and natural gas in the United States. In recent years, the oil and gas industry has experienced significant downturns and volatility.
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility, and we depend on our customers’ willingness to make capital and operating expenditures to explore for, develop and produce oil and natural gas in the United States.
The U.S. government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats. Our information technology systems, and networks, and those of our vendors, suppliers and other business partners, are subject to possible breaches and other threats that could cause us harm.
The U.S. government has issued public warnings that indicate that energy assets might be specific targets of cybersecurity threats. Our IT systems, and networks, and those of our vendors, suppliers and other business partners, are subject to possible breaches and other threats that could cause us harm.
We do not have long-term contracts with third-party suppliers of many of the goods and services used in large volumes in our operations, including manufacturers of technical services equipment and fishing tools, chargers and other tools and equipment used in our operations.
We do not have long-term contracts with third-party suppliers of many of the goods and services used in large volumes in our operations, including manufacturers of technical services equipment and fishing tools, wireline perforating guns and charges and other tools and equipment used in our operations.
During the year ended December 31, 2022, based on total purchase cost, our ten largest suppliers of goods and services represented approximately 27% of all such purchases.
During the year ended December 31, 2023, based on total purchase cost, our ten largest suppliers of goods and services represented approximately 25% of all such purchases.
To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors.
To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors. See Part I, Item 1.
Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures.
Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas, require the implementation of expensive mitigation measures, or limit the availability of frac sand.
Our operations rely on an extensive network of information technology resources and a failure to maintain, upgrade and protect such systems could adversely impact our business, financial condition and results of operations. Our operations are subject to cyber security risks that could have a material adverse effect on our business, financial condition and results of operations.
Our operations rely on an extensive network of IT resources and a failure to maintain, upgrade and protect such systems could adversely impact our business, financial condition and results of operations. Our operations are subject to cybersecurity risks that could have a material adverse effect on our business, financial condition and results of operations.
Our dividend policy will be established by our Board based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant.
Our dividend policy will be established by our board of directors (the “Board” or “Board of Directors”) based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant.
For example, during the year ended December 31, 2022, we entered into debt for equity exchange agreements (the “Exchange Agreements” and each, an “Exchange Agreement”) with certain holders (the “Noteholders”) of our Senior Notes.
For example, during the year ended December 31, 2022, we entered into debt for equity exchange agreements (the 33 “Exchange Agreements”) with certain holders (the “Noteholders”) of our Senior Notes.
As of December 31, 2022, we had total outstanding long-term indebtedness of $283.4 under our ABL Facility and Senior Notes as described in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
As of December 31, 2023, we had total outstanding long-term indebtedness of $284.3 under our ABL Facility and Senior Notes as described in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. 47 Our amended and restated bylaws designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a different judicial forum for intra-corporate disputes with us or our directors, officers, employees or agents.
Our amended and restated bylaws designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a different judicial forum for intra-corporate disputes with us or our directors, officers, employees or agents.
Availability under the ABL Facility is determined primarily by a borrowing base formula calculated based on a percentage of our accounts receivable and inventory. As of December 31, 2022, availability under the ABL Facility was $44.4.
Availability under the ABL Facility is determined primarily by a borrowing base formula calculated based on a percentage of our accounts receivable and inventory. As of December 31, 2023, availability under the ABL Facility was $41.9.
A reduction in purchases of our products and services by, or the loss of, one of our larger customers for any reason, such as the current industry conditions and economic downturn, insolvency of a customer, decreased production, changes in drilling practices, loss of a customer as a result of the acquisition of such customer by a purchaser who uses a competitor, in-sourcing by customers, a transfer of business to a competitor, or failure to adequately service our clients, could have a material adverse effect on our business, financial condition and results of operations. 27 We may be unable to effectively and efficiently manage our equipment fleet as we expand our business, which could have an adverse effect on our business, financial condition and results of operations.
A reduction in purchases of our products and services by, or the loss of, one of our larger customers for any reason, such as the current industry conditions and economic downturn, insolvency of a customer, decreased production, changes in drilling practices, loss of a customer as a result of the acquisition of such customer by a purchaser who uses a competitor, in-sourcing by customers, a transfer of business to a competitor, or failure to adequately service our clients, could have a material adverse effect on our business, financial condition and results of operations.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or effectively prevent an acquisition that our Board determines is not in the best interests of our company and our stockholders.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or effectively prevent an acquisition that our Board determines is not in the best interests of our 46 company and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
We recently entered into a Registration Rights and Lock-Up Agreement with Greene’s Holding Corporation in connection with the Greene’s Acquisition.
On March 8, 2023, we entered into a Registration Rights and Lock-Up Agreement with Greene’s Holding Corporation in connection with the Greene’s Acquisition.
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. We may be unable to maintain existing prices or implement price increases on our services.
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.
Although in the first half of 2022, oil prices experienced a significant increase, the industry still has not fully recovered, and is currently still at a lower rig count than before the COVID-19 pandemic. We cannot assure you these conditions will not continue to exist throughout 2023.
Although oil prices were higher in 2022 and 2023, compared to 2021, the industry still has not fully recovered, and is currently still at a lower rig count than before the COVID-19 pandemic. We cannot assure you these conditions will not continue to exist throughout 2024.
For the year ended December 31, 2022, no single customer accounted for more than 5% of our revenues. Our top five customers for the year ended December 31, 2022 together accounted for approximately 21% of our revenues.
For the year ended December 31, 2023, no single customer accounted for more than 10% of our revenues. Our top five customers for the year ended December 31, 2023 together accounted for approximately 26% of our revenues.
The borrowing base of our ABL Facility is dependent upon our receivables, which may be significantly lower in the future due to reduced activity levels or decreases in pricing for our services.
The borrowing base of our ABL Facility is dependent upon our receivables, which may be significantly lower in the future due to reduced activity levels or decreases in pricing for our services. The industry in which we operate has undergone and may continue to undergo consolidation.
Of those shares initially registered and reserved for issuance, as of December 31, 2022, approximately 1,170,398 restricted shares of common stock were granted in connection with equity awards to management, directors and employees and approximately 106,653 shares remain available for future issuance.
Of those shares initially registered and reserved for issuance, as of December 31, 2023, approximately 1,296,553 restricted shares of Common Stock were granted in connection with equity awards to management, directors and employees and approximately 1,180,498 shares remain available for future issuance.
The inability to effectively and efficiently manage our assets to meet the current and future needs of our customers, which may vary widely from what is originally forecast due to a number of factors beyond our control, including periods of adverse weather, difficult market conditions or slowdowns in oil and natural gas exploration in the various regions in which we operate, could have an adverse effect on our business, financial condition and results of operations.
The inability to effectively and efficiently manage our assets to meet the current and future needs of our customers, which may vary widely from what is originally forecast due to a number of factors beyond our control, including periods of adverse weather, difficult market conditions or slowdowns in oil and natural gas exploration in the various regions in which we operate, could have an adverse effect on our business, financial condition and results of operations. 27 Possible decreased revenues, difficulty in obtaining access to financing and increased funding costs we experience may be exacerbated by the geographic concentrations of our completion and production operations.
Information technology plays a crucial role in all of our operations.
IT plays a crucial role in all of our operations.
Federal Reserve has indicated its intention to continue to raise benchmark interest rates in 2023 in an effort to curb inflationary pressure on the costs of goods and services across the United States, which could have the effects of raising 26 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 and other central banks to increase interest rates several times in 2022 and 2023 in an effort to curb inflationary pressure on the costs of goods and services across the United States, 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.
We may be required to assume responsibility for environmental and other liabilities of companies we have acquired or will acquire. 42 We may incur liabilities in connection with environmental conditions currently unknown to us relating to our existing, prior or future operations or those of predecessor companies whose liabilities we may have assumed or acquired.
We may incur liabilities in connection with environmental conditions currently unknown to us relating to our existing, prior or future operations or those of predecessor companies whose liabilities we may have assumed or acquired.
This has resulted in, and may continue to result in, lower capital expenditures, project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us. These effects have had, and may continue to have, a material adverse effect on our financial condition, results of operations and cash flows.
However, an unexpected slowdown in economic activity may result in lower capital expenditures, project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us, which could have a material adverse effect on our financial condition, results of operations and cash flows.
Although we believe other alternate sources of supply for our proprietary products exist, we would need to establish 38 relationships with new manufacturers, which could potentially involve significant expense, delay, and potential changes to certain product components.
Termination of the manufacturing relationship with any of these manufacturers could affect our ability to provide such products and services to our customers. Although we believe other alternate sources of supply for our proprietary products exist, we would need to establish relationships with new manufacturers, which could potentially involve significant expense, delay or potential changes to certain product components.
If one or more of these analysts ceases to cover us 48 or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and its trading volume to decline.
If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our Common Stock and its trading volume to decline. General Risks We may be unable to attract or retain personnel who are key to our operations.
We have received patents and have filed patent applications with respect to certain aspects of our technology in the U.S. and international jurisdictions, as well as a combination of trade secrets, employee and third-party non-disclosure agreements and other protective measures to protect intellectual property rights pertaining to our products and technologies.
We have received patents and have filed patent applications with respect to certain aspects of our technology in the U.S. and international jurisdictions. In addition to seeking patent protection, we also protect our proprietary technology with other protective measures, including through a combination of trade secrets and employee and third-party non-disclosure agreements.
Increasing attention to environmental, social and governance ("ESG") matters may impact our business.
Increasing attention to ESG matters may impact our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe currently own or lease the following additional material facilities: Leased or Owned Expiration of Lease Rocky Mountains Casper, WY Lease 7/31/2025 Dickinson, ND Lease 6/30/2024 Dickinson, ND Lease 6/30/2024 Gillette, WY Lease 11/30/2026 Gillette, WY Own N/A Johnstown, CO Own N/A LaSalle, CO Lease 11/30/2027 Mills, WY Lease 10/31/2026 Nunn, CO Lease 10/1/2025 Platteville, CO Own N/A Riverton, WY Own N/A Rock Springs, WY Lease 5/31/2024 Williston, ND Own N/A Williston, ND Own N/A Southwest Cresson, TX Own N/A Hobbs, NM Lease 7/31/2026 Midland, TX Lease 9/30/2027 Midland, TX Lease 8/31/2023 Midland, TX Lease 9/30/2023 Odessa, TX Lease 6/30/2028 Pleasanton, TX Lease 6/30/2027 Rosharon, TX Lease 3/31/2026 Victoria, TX Own N/A Willis, TX Own N/A Northeast/Mid-Con Bossier City, LA Lease 5/31/2024 Bossier City, LA Lease 12/31/2024 Bridgeport, WV Lease 8/31/2024 Bridgeport, WV Lease 8/31/2024 Elk City, OK Own N/A Longview, TX Own N/A Oklahoma City, OK Lease 12/13/2026 Oklahoma City, OK Lease 6/30/2026 Towanda, PA Lease Month-to-Month Tioga, PA Lease Month-to-Month Union City, OK Own N/A We believe that our facilities are adequate for our current operations and allow us to efficiently serve our customers.
Biggest changeWe currently own or lease over 50 service facilities, including the following material facilities: Leased or Owned Expiration of Lease Rocky Mountains LaSalle, CO Lease 11/1/2027 Mills, WY Lease 10/31/2026 Nunn, CO Lease 11/30/2027 Platteville, CO Own N/A Williston, ND Own N/A Southwest Odessa, TX Lease 6/30/2027 Odessa, TX Lease 6/30/2028 Willis, TX Own N/A Northeast/Mid-Con Bossier City, LA Lease 5/31/2024 Bridgeport, WV Lease 8/31/2028 Oklahoma City, OK Lease 6/30/2026 Union City, OK Own N/A We believe that our facilities are adequate for our current operations and allow us to efficiently serve our customers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest change“Commitments, Contingencies and Off-Balance Sheet Arrangements” to our audited consolidated financial statements included elsewhere in this Form 10-K.
Biggest change“Commitments, Contingencies and Off-Balance Sheet Arrangements” to our audited consolidated financial statements included in Item 8 in this Form 10-K.
LEGAL PROCEEDINGS (U.S. dollars in millions) 50 The Company is at times either a plaintiff or a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on the Company’s consolidated financial statements, except as noted herein.
LEGAL PROCEEDINGS (U.S. dollars in millions) The Company is at times either a plaintiff or a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on the Company’s consolidated financial statements, except as noted herein.
On March 30, 2021, Magellan filed for bankruptcy pursuant to Chapter 7 of the U.S. bankruptcy code. The bankruptcy proceedings are ongoing. During the fiscal year ended January 31, 2021, the Company reserved the full amount of its invoices totaling $4.6 as a prudent action in light of the Chapter 7 filing. See Note 9.
On March 30, 2021, Magellan filed for bankruptcy pursuant to Chapter 7 of the U.S. bankruptcy code. The bankruptcy proceedings are ongoing. During the fiscal year ended January 31, 2021, the Company reserved the full amount of its invoices totaling $4.6 as a prudent action in light of the Chapter 7 filing. See Note 10.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents the total number of shares of our common stock that we repurchased during the three months ended December 31, 2022: 51 Period Total number of shares purchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (3) Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2022 - October 31, 2022 0 $ — — $ 48,859,603 November 1, 2022 - November 30, 2022 0 $ — — $ 48,859,603 December 1, 2022 - December 31, 2022 17 $ 12.95 — $ 48,859,603 Total 17 — (1) Solely related to shares purchased from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting of restricted stock grants under the Company’s Long-Term Incentive Plan.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents the total number of shares of our Common Stock that we repurchased during the three months ended December 31, 2023: Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (2) Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2023 - October 31, 2023 0 $ — — $ 48,859,603 November 1, 2023 - November 30, 2023 0 $ — — $ 48,859,603 December 1, 2023 - December 31, 2023 0 $ — — $ 48,859,603 Total — — (1) The average price paid per share of Common Stock repurchased under the share repurchase program includes commissions paid to the brokers.
As of such date, based on information provided to us by Computershare, our transfer agent, we had 704 registered holders, and because many of these shares are held by brokers and other institutions on behalf of the beneficial holders, we are unable to estimate the number of beneficial stockholders represented by these holders of record.
As of such date, based on information provided to us by Computershare, our transfer agent, we had 660 registered holders, and because many of these shares are held by brokers and other institutions on behalf of the beneficial holders, we are unable to estimate the number of beneficial stockholders represented by these holders of record.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on the Nasdaq Global Select Market under the symbol “KLXE”. On March 3, 2023, the last reported sale price of our common stock as reported by Nasdaq was $14.46 per share.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Common Stock is quoted on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “KLXE”. On February 29, 2024, the last reported sale price of our Common Stock as reported by Nasdaq was $8.12 per share.
(2) The average price paid per share of common stock repurchased under the share repurchase program includes commissions paid to the brokers. (3) In August 2019, our board of directors authorized a share repurchase program for the repurchase of outstanding shares of the Company’s common stock having an aggregate purchase price up to $50.
(2) In August 2019, our Board of Directors authorized a share repurchase program for the repurchase of outstanding shares of the Company’s Common Stock having an aggregate purchase price up to $50.0 million.
Recent Sales of Unregistered Equity Securities None in the three months ended December 31, 2022, other than previously reported on Current Report Form 8-K.
Recent Sales of Unregistered Equity Securities None in the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOn September 22, 2022, the Company entered into a Third Amendment to the ABL Facility, with certain of its subsidiaries party thereto, as guarantors, with JPMorgan Chase Bank, N.A., as administrative agent and an issuing lender, and the other lenders and issuing lenders party thereto from time to time (the “Amendment”).
Biggest changeOn June 20, 2023, the Company entered into a Fourth Amendment to the ABL Facility, with certain of its subsidiaries party thereto, as guarantors, with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing lender, and the other lenders and issuing lenders party thereto from time to time (the “ABL Amendment”). 58 The ABL Amendment, among other things, (i) extended the maturity date of the ABL Facility from September 15, 2024 to the earlier of (A) September 15, 2025 or (B) August 1, 2025, if the Company's Senior Notes are still outstanding as of such date (the earlier of the foregoing item (A) or item (B), the “ABL Maturity Date”) and (ii) increased the revolving credit commitment from $100.0 to $120.0.
The Merger of KLXE and QES provided increased scale to serve a blue-chip customer base across the onshore oil and gas basins in the United States. The Merger combined two strong company cultures comprised of highly talented teams with shared commitments to safety, performance, customer service and profitability.
The merger of KLXE and QES provided increased scale to serve a blue-chip customer base across the onshore oil and gas basins in the United States. The QES Merger combined two strong company cultures comprised of highly talented teams with shared commitments to safety, performance, customer service and profitability.
The total consideration for the Greene’s Acquisition under the Purchase Agreement consisted of the issuance of approximately 2.4 million shares of the Company's common stock, par value $0.01 per share, subject to customary post-closing adjustments, representing 14.7% of the fully diluted common stock of the Company with an implied enterprise value of approximately $30.3 million based on a 30-day volume weighted average price as of March 7, 2023 less acquired cash.
The total consideration for the Greene’s 52 Acquisition under the Purchase Agreement consisted of the issuance of approximately 2.4 million shares of the Company's Common Stock, par value $0.01 per share, subject to customary post-closing adjustments, representing 14.7% of the fully diluted Common Stock of the Company with an implied enterprise value of approximately $30.3 based on a 30-day volume weighted average price as of March 7, 2023 less acquired cash.
We focused on generating additional cost savings from the Merger and to date have realized such savings through eliminating KLXE's legacy corporate headquarters in Wellington, Florida, rationalizing associated corporate functions to Houston, and capturing operational synergies in the areas of personnel, facilities and rolling stock. The Merger also enhanced the Company’s ability to effect further industry consolidation.
We focused on generating additional cost savings from the QES Merger and to date have realized such savings through eliminating KLXE's legacy corporate headquarters in Wellington, Florida, rationalizing associated corporate functions to Houston, and capturing operational synergies in the areas of personnel, facilities and rolling stock. The QES Merger also enhanced the Company’s ability to effect further industry consolidation.
Our liquidity requirements consist of working capital needs, debt service obligations and ongoing capital expenditure requirements. Our primary requirements for working capital are directly related to the activity level of our operations. This Annual Report includes net working capital, which is a “non-GAAP financial measure” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Our liquidity requirements consist of working capital needs, debt service obligations and ongoing capital expenditure requirements. Our primary requirements for working capital are directly related to the activity level of our operations. 60 This Annual Report includes net working capital, which is a “non-GAAP financial measure” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These services and related products are modest in cost to the customer relative to other well construction expenditures but have a high cost of failure and are, therefore, mission critical to our customers’ outcomes. We believe our customers 54 have come to depend on our decades of field experience to execute on some of the most challenging problems they face.
These services and related products are modest in cost to the customer relative to other well construction expenditures but have a high cost of failure and are, therefore, mission critical to our customers’ outcomes. We believe our customers have come to depend on our decades of field experience to execute on some of the most challenging problems they face.
We believe we are well positioned as a company to service customers when they are drilling and completing complex wells, and remediating both newer and older legacy wells. We invest in innovative technology and equipment designed for modern production techniques that increase efficiencies and production for our customers.
We believe we are well positioned as a company to service customers when they are drilling and completing complex wells, and remediating both newer and older legacy wells. 53 We invest in innovative technology and equipment designed for modern production techniques that increase efficiencies and production for our customers.
We remain focused on serving the needs of our customers by providing a broad portfolio of product service lines across all major basins, while preserving a solid balance sheet, maintaining sufficient operating liquidity and prudently managing our capital expenditures.
We remain focused on serving the needs of our customers by providing a broad portfolio of product service lines across all of the active major basins, while preserving a solid balance sheet, maintaining sufficient operating liquidity and prudently managing our capital expenditures.
We believe based on our current forecasts, our cash on hand, the ABL Facility availability, together with our cash flows, will provide us with the ability to fund our operations, including planned capital expenditures, for at least the next twelve months. We have substantial indebtedness.
We believe based on our current forecasts, our cash on hand, the ABL Facility availability, together with our cash flows, will provide us with the ability to fund our operations, including planned capital expenditures, for at least the next twelve months. 57 We have substantial indebtedness.
We believe Adjusted EBITDA is useful because it allows us to supplement the GAAP measures in order to evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
We believe Adjusted EBITDA is useful because it allows us to supplement the GAAP measures in order to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
After closing the Merger, the Company integrated personnel, facilities, processes and systems across all functional areas of the organization.
After closing the QES Merger, the Company integrated personnel, facilities, processes and systems across all functional areas of the organization.
On July 26, 2020, the Company’s Board approved a 1-for-5 reverse stock split to stockholders that became effective at 12:01 a.m. on July 28, 2020 (the “Reverse Stock Split”). On July 28, 2020, we successfully completed the all-stock Merger with QES.
On July 26, 2020, the Company’s Board approved a 1-for-5 reverse stock split to stockholders that became effective at 12:01 a.m. on July 28, 2020. On July 28, 2020, we successfully completed the all-stock merger with QES.
The measures we believe most effective to achieve the above stated goals include: • Revenue 66 • Adjusted Earnings before interest, taxes, depreciation and amortization ("EBITDA") : Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
The measures we believe most effective to achieve the above stated goals include: • Revenue • Operating Income • Adjusted Earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") : Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, typically upon delivery in accordance with the terms of the field ticket or work order. Recent Accounting Pronouncements See Note 2 “Recent Accounting Pronouncements” to our consolidated financial statements for a discussion of recently issued accounting pronouncements.
Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, typically upon delivery in accordance with the terms of the field ticket or work order. 63 Recent Accounting Pronouncements See Note 2 - Recent Accounting Pronouncements to our consolidated financial statements for a discussion of recently issued accounting pronouncements.
Our innovative and adaptive approach to proprietary tool design has been employed by our in-house R&D organization and, in selected instances, by our technology partners to develop tools covered by 30 patents and 8 pending patent applications, which we believe differentiates us from our regional competitors and also allows us to deliver more focused service and better outcomes in our specialized services than larger national competitors that do not discretely dedicate their resources to the services we provide.
Our innovative and adaptive approach to proprietary tool design has been employed by our in-house R&D organization and, in selected instances, by our technology partners to develop tools covered by 38 patents and 9 pending patent applications, which we believe differentiates us from our regional competitors and also allows us to deliver more focused service and better outcomes in our specialized services than larger national competitors that do not discretely dedicate their resources to the services we provide.
Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the continuation of the COVID-19 pandemic, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.
Our future operating performance and ability to refinance such indebtedness will be affected by prevailing economic and political conditions, the level of drilling, completion, production and intervention services activity for North American onshore oil and natural gas resources, the willingness of capital providers to lend to our industry and other financial and business factors, many of which are beyond our control.
We continuously monitor collections and payments from our customers and maintain an allowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. The allowance for doubtful accounts at December 31, 2022 and December 31, 2021 was $5.7 and $6.4, respectively.
We continuously monitor collections and payments from our customers and maintain an allowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. The allowance for doubtful accounts at December 31, 2023 and December 31, 2022 was $5.5 and $5.7, respectively.
The ABL Facility is secured by, among other things, 59 a first priority lien on the Company’s accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants. $50.0 was outstanding under the ABL Facility as of December 31, 2022. The effective interest rate under the ABL Facility was approximately 7.42% on December 31, 2022.
The ABL Facility is secured by, among other things, a first priority lien on the Company’s accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants. $50.0 was outstanding under the ABL Facility as of December 31, 2023. The effective interest rate under the ABL Facility was approximately 7.96% on December 31, 2023.
On a net basis, after taking into consideration the debt issuance costs for the Senior Notes, total debt as of December 31, 2022 was $233.4. The Senior Notes bear interest at an annual rate of 11.5%, payable semi-annually in arrears on May 1 and November 1. Accrued interest as of December 31, 2022 was $4.6.
On a net basis, after taking into consideration the debt issuance costs for the Senior Notes, total debt as of December 31, 2023 was $234.4. The Senior Notes bear interest at an annual rate of 11.5%, payable semi-annually in arrears on May 1 and November 1. Accrued interest as of December 31, 2023 was $4.5.
Revenue is recognized in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Service revenues are recorded over time throughout and for the duration of the service period pursuant to a master services agreement (“MSA”) combined with a completed field ticket or a work order.
Revenue is recognized in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Service revenues are recorded over time throughout and for the duration of the service period pursuant to a MSA combined with a completed field ticket or a work order.
The ABL Facility became effective on September 14, 2018 and is scheduled to mature in September 2024. Borrowings under the ABL Facility bear interest at a rate equal to Term SOFR (as defined in the ABL Facility) plus the applicable margin (as defined).
The ABL Facility became effective on September 14, 2018 and is scheduled to mature on the ABL Maturity Date in 2025. Borrowings under the ABL Facility bear interest at a rate equal to Term SOFR (as defined in the ABL Facility) plus the Applicable Margin (as defined in the ABL Facility).
If we are unable to refinance the ABL Facility over the next twelve months and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2023.
If we are unable to refinance the ABL Facility as planned and uncertainty around our ability to refinance our existing long-term debt still exists, that could result in our auditors issuing a “going concern” or like qualification or exception as early as our audit opinion with respect to the year ending December 31, 2024.
Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” The following discussion and analysis addresses the results of our operations for the twelve months ended December 31, 2022, as compared to the eleven months ended December 31, 2021. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.
Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” The following discussion and analysis addresses the results of our operations for the year ended December 31, 2023, as compared to the year ended December 31, 2022. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.
Our required maintenance capital expenditures tend to be lower than other oilfield service providers due to the generally asset-light nature of our services, the lower average age of our assets and our ability to charge back a portion of asset maintenance to customers for a number of our assets. 56 Results of Operations Twelve Months Ended December 31, 2022 Compared to Eleven Months Ended December 31, 2021 Revenue .
Our required maintenance capital expenditures tend to be lower than other oilfield service providers due to the generally asset-light nature of our services, the lower average age of our assets and our ability to charge back a portion of asset maintenance to customers for a number of our assets. 55 Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue .
Senior Notes In conjunction with the acquisition of Motley in 2018, we issued $250.0 principal amount of 11.5% senior secured notes due 2025 (the "Senior Notes") offered pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act.
Senior Notes In conjunction with the acquisition of Motley Services, LLC (“Motley”) in 2018, we issued $250.0 principal amount of the Senior Notes offered pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act.
Based on current industry conditions and our significant investments in capital expenditures over the past several years, we expect to incur between $60.0 and $70.0 in capital expenditures for the year ending December 31, 2023, out of which $45.0 to $50.0 for maintenance capital spending.
Based on current industry conditions and our significant investments in capital expenditures over the past several years, we expect to incur between $50.0 and $60.0 in capital expenditures for the year ending December 31, 2024, out of which approximately 75% is earmarked for maintenance capital spending.
As of December 31, 2022, we had total outstanding long-term indebtedness of $283.4 under our ABL Facility and Senior Notes as described in greater detail under “— ABL Facility” and “—Senior Notes” below.
As of December 31, 2023, we had total outstanding long-term indebtedness of $284.3 under our ABL Facility and Senior Notes as described in greater detail under “—ABL Facility” and “—Senior Notes” below.
The cash used in investing activities for the twelve months ended December 31, 2022 was primarily driven by increased maintenance and growth capital spending to support our growing business operations.
The cash used in investing 61 activities for the year ended December 31, 2023 was primarily driven by increased maintenance and growth capital spending to support our growing business operations.
For the twelve months ended December 31, 2022, each of our segments demonstrated significant improvement in operating income (loss) compared to the eleven months ended December 31, 2021, driven by the increase in pricing and utilization outpacing increases in operating costs and labor in the twelve months ended December 31, 2022.
For the year ended December 31, 2023, each of our segments demonstrated improvement in operating income (loss) compared to the year ended December 31, 2022, driven by the increase in pricing and utilization outpacing increases in operating costs and labor in the year ended December 31, 2023.
We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and Company initiatives. Equity Distribution Agreement On June 14, 2021, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. as sales agent (the “Agent”).
We continually evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including expected industry activity levels and Company initiatives. Equity Distribution Agreement On June 14, 2021, the Company entered into the Equity Distribution Agreement with the Agent.
The Senior Notes exchanged represent approximately 5.1% of the outstanding principal amount of outstanding Senior Notes prior to the Exchanges. Following the Exchanges, approximately $237.3 in aggregate principal amount of Senior Notes remained outstanding. Capital Expenditures Our capital expenditures were $35.6 during the twelve months ended December 31, 2022, compared to $11.0 in the eleven months ended December 31, 2021.
The Senior Notes exchanged represent approximately 5.1% of the outstanding principal amount of outstanding Senior Notes prior to the Exchanges. Following the Exchanges, approximately $237.3 in aggregate principal amount of Senior Notes remained outstanding. 59 Capital Expenditures Our capital expenditures were $57.1 during the year ended December 31, 2023, compared to $35.6 in the year ended December 31, 2022.
R&D costs during the twelve months ended December 31, 2022 were $0.6, as compared to $0.6 in the eleven months ended December 31, 2021, 57 reflecting our continued focus on maintaining an in-house R&D function while scaling costs to adjust to current levels of customer demand. Operating income (loss) .
R&D costs during the year ended December 31, 2023 were $1.4, as compared to $0.6 in the year ended December 31, 2022, reflecting our continued focus on maintaining an in-house R&D function while scaling costs to adjust to current levels of customer demand. 56 Operating income .
Despite the market headwinds experienced in the fiscal year ended December 31, 2021, the Company remained focused on building a leaner and more profitable set of service offerings, which allowed us to make meaningful positive impacts to our revenue, operating margins, cash flows and Adjusted EBITDA.
Despite the decrease in commodity prices during the fiscal year ended December 31, 2023, the Company remained focused on building a leaner and more profitable set of service offerings, which allowed us to make meaningful positive impacts to our revenue, operating margins, cash flows and Adjusted EBITDA (as defined below).
Any Common Stock offered and sold in the ATM Offering will be issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement.
Any Common Stock offered and sold in the ATM Offering will be issued pursuant to the Company’s Registration Statement, the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement.
Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees. 64 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP").
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP").
Although cost of sales as a percentage of revenues decreased, labor costs per employee increased by 26.9% as compared with the eleven months ended December 31, 2021. Repair & maintenance costs as a percentage of revenues increased by 9.3% as compared to the eleven months ended December 31, 2021. Selling, general and administrative expenses ("SG&A") .
Although cost of sales as a percentage of revenues decreased, labor costs per employee increased by 1.7% as compared with the year ended December 31, 2022. Repair & maintenance costs as a percentage of revenues increased by 2.2% as compared to the year ended December 31, 2022. Selling, general and administrative expenses ("SG&A") .
Our management believes that any liability for these indemnities, commitments and guarantees would not be material to our financial statements.
Our management believes that any liability for these indemnities, commitments and guarantees would not be material to our financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.
SG&A expenses during the twelve months ended December 31, 2022, were $70.4, or 9.0% of revenues, as compared with $54.6, or 12.5% of revenues, in the eleven months ended December 31, 2021. SG&A increased by $15.8 due to increased labor costs and professional fees.
SG&A expenses during the twelve months ended December 31, 2023, were $86.7, or 9.8% of revenues, as compared with $70.4, or 9.0% of revenues, in the year ended December 31, 2022. SG&A increased by $16.3 due to increased labor costs and professional fees.
The following table sets forth the reconciliation of current assets and current liabilities to net working capital: As of December 31, 2022 December 31, 2021 Current assets $ 254.7 $ 164.7 Less: Cash 57.4 28.0 Net current assets 197.3 136.7 Current liabilities 154.4 122.7 Less: Accrued interest 4.8 5.0 Less: Operating lease obligations 14.2 15.9 Less: Finance lease obligations 10.2 5.6 Net current liabilities 125.2 96.2 Net Working Capital $ 72.1 $ 40.5 Net working capital as of December 31, 2022 was $72.1, an increase of $31.6 as compared to net working capital of $40.5 as of December 31, 2021.
The following table sets forth the reconciliation of current assets and current liabilities to net working capital: As of December 31, 2023 December 31, 2022 Current assets $ 290.3 $ 254.7 Less: Cash 112.5 57.4 Net current assets 177.8 197.3 Current liabilities 164.1 154.4 Less: Accrued interest 4.6 4.8 Less: Operating lease obligations 6.9 14.2 Less: Finance lease obligations 22.0 10.2 Net current liabilities 130.6 125.2 Net Working Capital $ 47.2 $ 72.1 Net working capital as of December 31, 2023 was $47.2, a decrease of $24.9 as compared to net working capital of $72.1 as of December 31, 2022.
Net working capital is calculated as current assets, excluding cash, less current liabilities, excluding accrued interest, operating lease obligations and finance lease obligations. As of December 31, 2022, total current assets excluding cash increased by $60.6 and total current liabilities excluding accrued interest, operating lease obligations and finance lease obligations increased by $29.0.
Net working capital is calculated as current assets, excluding cash, less current liabilities, excluding accrued interest, operating lease obligations and finance lease obligations. As of December 31, 2023, total current assets excluding cash decreased by $19.5 and total current liabilities excluding accrued interest, operating lease obligations and finance lease obligations increased by $5.4.
Income tax expense was $0.6 for the twelve months ended December 31, 2022, as compared to income tax expense of $0.3 in the eleven months ended December 31, 2021, and was comprised primarily of state and local taxes.
Income tax expense . Income tax expense was $3.0 for the year ended December 31, 2023, and was comprised of federal, state and local taxes, as compared to income tax expense of $0.6 in the year ended December 31, 2022, which was comprised primarily of state and local taxes. Net income (loss) .
Net loss for the twelve months ended December 31, 2022 was $3.1, as compared to net loss of $93.8 in the eleven months ended December 31, 2021, primarily due to increased pricing and improved margins for our services.
Net income for the year ended December 31, 2023 was $19.2, as compared to net loss of $3.1 in the year ended December 31, 2022, primarily due to increased pricing and improved margins for our services.
The increase in dollar amount was primarily due to increased activity and to a lesser degree, increased pricing due to inflation. The decrease in cost of sales as a percentage of revenues was generally consistent across our segments. The two largest components of cost of sales are labor and repair & maintenance.
The decrease in cost of sales as a percentage of revenues was generally consistent across our segments and a result of better leverage of fixed costs due to increased activity. The two largest components of cost of sales are labor and repair & maintenance.
We carried forward the historical lease classifications and assessment of initial direct costs, account for lease and non-lease components as a single component, and exclude leases with an initial term of less than 12 months in the lease assets and liabilities.
Leases The Company has elected the practical expedients for all asset classes to carry forward the historical lease classifications and assessment of initial direct costs, account for lease and non-lease components as a single component, and exclude leases with an initial term of less than twelve months in the lease assets and liabilities.
The Indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy. 60 During the year ended December 31, 2022, we entered into debt for equity exchange agreements (the “Exchange Agreements” and each, an “Exchange Agreement”) with certain holders (the “Noteholders”) of our Senior Notes.
The Indenture also contains customary events of default including, among other things, the failure to pay interest for 30 days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $50.0, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.
Looking ahead to the year ending December 31, 2023, as economic activity continues to increase and commodity prices remain strong but volatile, we anticipate that our customers will continue to cautiously increase capital and operating expense spending.
Looking ahead to the year ending December 31, 2024, assuming economic activity holds at the recent level and commodity prices remain volatile, we anticipate that our customers will continue to cautiously allocate capital and operating expense spending.
Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results.
Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended December 31, 2023 and December 31, 2022, there were no impairments of long-lived assets.
This allows us to offer our customers in all of our geographic regions discrete, comprehensive and differentiated services that leverage both the technical expertise of our skilled engineers and our in-house R&D team.
This allows us to offer our customers in all of our geographic regions discrete, comprehensive and differentiated services that leverage both the technical expertise of our skilled engineers and our in-house R&D team. Recent Trends and Outlook Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility.
Pursuant to the Exchange Agreements, the Noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our common stock (the "Exchanges" and each, an “Exchange”).
During the year ended December 31, 2022, we entered into the Exchange Agreements with the Noteholders of our Senior Notes. Pursuant to the Exchange Agreements, the Noteholders exchanged $12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our Common Stock through the Exchanges.
Company Overview We serve many of the leading companies engaged in the exploration and development of onshore conventional and unconventional oil and natural gas reserves in the United States. Our customers are primarily large independent and major oil and gas companies. We currently support these customer operations from over 50 service facilities located in the key major shale basins.
Our customers are primarily large independent and major oil and gas companies. We currently support these customer operations from over 50 service facilities located in the key major shale basins.
Net cash (used in) provided by investing activities Net cash used in investing activities was $18.7 for the twelve months ended December 31, 2022, as compared to net cash provided by investing activities of $4.5 for the eleven months ended December 31, 2021.
Net cash used in investing activities Net cash used in investing activities was $39.7 for the year ended December 31, 2023, as compared to net cash used in investing activities of $18.7 for the year ended December 31, 2022.
Cash Flows At December 31, 2022, we had $57.4 of cash and cash equivalents. Cash on hand at December 31, 2022 increased by $29.4 during the year then ended, mainly due to $15.7 of cash flows provided by operating activities and $32.4 of cash flows provided by financing activities, partially offset by $18.7 of cash flows used in investing activities.
Cash Flows At December 31, 2023, we had $112.5 of cash and cash equivalents. Cash on hand at December 31, 2023 increased by $55.1 during the year then ended, due to $115.6 of cash flows provided by operating activities, partially offset by $20.8 of cash flows used in financing activities and $39.7 of cash flows used in investing activities.
In addition, incurring additional debt in excess of our existing outstanding indebtedness would result in increased interest expense and financial leverage, and issuing common stock may result in dilution to our current stockholders. Our ABL Facility matures in September 2024 and we intend to work with our existing lenders or other sources of capital to refinance the ABL Facility.
In addition, incurring additional debt in excess of our existing outstanding indebtedness would result in increased interest expense and financial leverage, and issuing Common Stock may result in dilution to our current stockholders.
Increased weighted average price contributed to approximately 49% of the $345.5 increase, and increased weighted average volume contributed to the remaining approximately 51%. On a segment basis, Rocky Mountains segment revenue increased by $110.8 or 93.7%. Increased weighted average price contributed to approximately 32% of the dollar increase, and increased weighted average volume contributed to approximately 68%.
On a segment basis, Rocky Mountains segment revenue increased by $42.3 or 18.5%. Increased weighted average price contributed to approximately 83% of the dollar increase, and increased weighted average volume contributed to approximately 17%. Southwest segment revenue increased by $49.7 or 19.5%.
During the two and eleven months ended December 31, 2021, the Company sold 250,289 and 1,380,505 shares of Common Stock, respectively, in exchange for gross proceeds of approximately $1.1 and $6.6, respectively, and paid fees to the sales agent and other legal and accounting fees of $0.1 and $0.8, respectively, to establish the ATM Offering.
During the three and twelve months ended December 31, 2022, the Company sold 976,808 and 2,803,007 shares of Common Stock, respectively, in exchange for gross proceeds of approximately $15.0 and $25.1, respectively, and paid fees to the sales agent and other legal and accounting fees of $0.1 and $0.3, respectively, to establish the ATM Offering.
For the twelve months ended December 31, 2022 and eleven months ended December 31, 2021, there were $0.0 and $0.8 impairments of long-lived assets. Revenue Recognition Revenue is recognized upon the customer obtaining control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services.
Revenue Recognition Revenue is recognized upon the customer obtaining control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services.
Net cash provided by financing activities Net cash provided by financing activities was $32.4 for the twelve months ended December 31, 2022, compared to net cash provided by financing activities of $32.0 for the eleven months ended December 31, 2021.
Net cash (used in) provided by financing activities Net cash used in financing activities was $20.8 for the year ended December 31, 2023, compared to net cash provided by financing activities of $32.4 for the year ended December 31, 2022.
Off-Balance Sheet Arrangements Indemnities, Commitments and Guarantees In the normal course of our business, we make certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions.
During the year ended December 31, 2023, there were no additional borrowings under our ABL Facility and no sales under our ATM Offering program. Off-Balance Sheet Arrangements Indemnities, Commitments and Guarantees In the normal course of our business, we make certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions.
The increase in total current liabilities was due to a $12.1 increase in accounts payable and a $16.9 increase in accrued liabilities. 62 63 The following table sets forth our cash flows for the periods presented below: Year Ended Eleven-month Transition Period Ended December 31, 2022 December 31, 2021 Net cash provided by (used in) operating activities $ 15.7 $ (55.6) Net cash (used in) provided by investing activities (18.7) 4.5 Net cash provided by financing activities 32.4 32.0 Net change in cash 29.4 (19.1) Cash balance end of period $ 57.4 $ 28.0 Net cash provided by (used in) operating activities Net cash provided by operating activities was $15.7 for the twelve months ended December 31, 2022, as compared to net cash used in operating activities of $55.6 for the eleven months ended December 31, 2021.
The following table sets forth our cash flows for the periods presented below: Year Ended December 31, 2023 December 31, 2022 Net cash provided by operating activities $ 115.6 $ 15.7 Net cash used in investing activities (39.7) (18.7) Net cash (used in) provided by financing activities (20.8) 32.4 Net change in cash 55.1 29.4 Cash balance end of period $ 112.5 $ 57.4 Net cash provided by operating activities Net cash provided by operating activities was $115.6 for the year ended December 31, 2023, as compared to net cash provided by operating activities of $15.7 for the year ended December 31, 2022.
The following table provides revenues by segment and product line for the periods indicated: Year Ended Eleven-month Transition Period Ended December 31, 2022 December 31, 2021 % Change Revenue: Rocky Mountains $ 229.0 $ 118.2 93.7 % Southwest 255.2 160.9 58.6 % Northeast/Mid-Con 297.4 157.0 89.4 % Total revenue $ 781.6 $ 436.1 79.2 % Year Ended Eleven-month Transition Period Ended December 31, 2022 December 31, 2021 % Change Revenue: Drilling $ 218.7 $ 123.2 77.5 % Completion 393.3 210.3 87.0 % Production 94.2 59.7 57.8 % Intervention 75.4 42.9 75.8 % Total revenue $ 781.6 $ 436.1 79.2 % For the twelve months ended December 31, 2022, revenues of $781.6 increased by $345.5 or 79.2% as compared with the eleven months ended December 31, 2021.
The following table provides revenues by segment and product line for the periods indicated: Year Ended December 31, 2023 December 31, 2022 % Change Revenue: Rocky Mountains $ 271.3 $ 229.0 18.5 % Southwest 304.9 255.2 19.5 % Northeast/Mid-Con 312.2 297.4 5.0 % Total revenue $ 888.4 $ 781.6 13.7 % Year Ended December 31, 2023 December 31, 2022 % Change Revenue: Drilling $ 220.2 $ 218.7 0.7 % Completion 468.5 393.3 19.1 % Production 117.8 94.2 25.1 % Intervention 81.9 75.4 8.6 % Total revenue $ 888.4 $ 781.6 13.7 % For the year ended December 31, 2023, revenues of $888.4 increased by $106.8 or 13.7% as compared with the year ended December 31, 2022.
Company History KLX Energy Services was initially formed from the combination of seven private oilfield service companies acquired during 2013 and 2014. Each of the acquired businesses was regional in nature and brought one or two specific service capabilities to KLX Energy Services.
Company History KLX Energy Services was initially formed from the combination of seven private oilfield service companies acquired during 2013 and 2014. The Company continued to selectively acquire regional and product line specific businesses through 2019 to expand our service capabilities and broaden our geographic presence.
Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Agent (the “ATM Offering”) the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $50.0 (the “Common Stock”).
Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Agent, in the ATM Offering, the Company’s Common Stock, having an aggregate offering price of up to $50.0. On November 16, 2022, the Company entered into the EDA Amendment.
The increase in current assets was primarily related to accounts receivable-trade, net increase of $51.1, a $6.2 increase in prepaid expenses and other current assets and an increase of $3.3 in inventory.
The decrease in net current assets was primarily related to a decrease of $27.3 in accounts receivable-trade, net and an increase of $7.8 in inventory. The increase in total current liabilities was due to an increase of $3.7 in accounts payable and an increase of $1.7 in accrued liabilities.
The ABL Facility includes a springing financial covenant which requires the Company’s FCCR to be at least 1.0 to 1.0 if availability falls below the greater of $15.0 or 20% of the borrowing base. At all times during the year ended December 31, 2022, availability exceeded this threshold, and the Company was not subject to this financial covenant.
The ABL Facility includes a springing financial covenant which requires the Company’s fixed-charge coverage ratio (“FCCR”) to be at least 1.0 to 1.0 if availability falls below the greater of $15.0 or 20% of the borrowing base.
The Company plans to use the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which may include, among other things, paying or refinancing all or a portion of the Company’s then-outstanding indebtedness, and funding acquisitions, capital expenditures and working capital. 61 During the three and twelve months ended December 31, 2022, the Company sold 976,808 and 2,803,007 shares of Common Stock, respectively, in exchange for gross proceeds of approximately $15.0 and $25.1, respectively, through its at-the-market offering and paid legal and administrative fees of $0.1 and $0.3, respectively.
The Company plans to use the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which may include, among other things, paying or refinancing all or a portion of the Company’s then-outstanding indebtedness, and funding acquisitions, capital expenditures and working capital.
The 82.0% increase in operating loss in our Corporate and other segment in the twelve months ended December 31, 2022 was primarily driven by higher professional service fees and incentive bonus costs. Income tax expense .
Northeast/Mid-Con segment operating income improved by $1.5 or 3.8% from $39.1 in the year ended December 31, 2022 to $40.6 in the year ended December 31, 2023. The 1.4% increase in operating loss in our Corporate and other segment in the year ended December 31, 2023 was primarily driven by higher professional service fees and incentive bonus costs.
As of December 31, 2022, the FCCR was above 1.0 to 1.0. The Company was in full compliance with its credit facility as of December 31, 2022.
At all times during the year ended December 31, 2023, availability exceeded this threshold, and the Company was not subject to this financial covenant. As of December 31, 2023, the FCCR was above 1.0 to 1.0. The Company was in full compliance with its ABL Facility as of December 31, 2023.
We have taken several actions to continue to improve our liquidity position, including closing our Florida legacy corporate headquarters and relocating all key functions to Houston, elimination of redundancies and 58 duplicative functions throughout our operations following the merger with QES, equity issuances under our ATM program, debt for equity exchanges that have reduced interest burden and monetized non-core and obsolete assets.
At December 31, 2023, we had $112.5 of cash and cash equivalents and $41.9 available on the ABL Facility. We have taken several actions to continue to improve our liquidity position, including efficiencies gained from the QES Merger, equity issuances under our ATM Offering program, debt for equity exchanges that have reduced interest burden and monetized non-core and obsolete assets.
WTI's average daily price per barrel increased by approximately $25.49, or 36.7%, to $94.90 per Bbl during the twelve months ended December 31, 2022, compared to the eleven months ended December 31, 2021's average daily price per barrel of $69.41. As of December 31, 2022, U.S. rig count had reached 779, an increase of 32.9% since December 31, 2021.
WTI's average daily price per barrel decreased by approximately $17.32, or 18.3%, to $77.58 per Bbl during the year ended December 31, 2023, compared to the average daily price per barrel of $94.90 during the year ended December 31, 2022. As of December 31, 2023, U.S. rig count stood at 622, a decrease of 20.2% since December 31, 2022.
The following is a summary of operating income (loss) by segment: Year Ended Eleven-month Transition Period Ended December 31, 2022 December 31, 2021 % Change Operating income (loss): Rocky Mountains $ 27.3 $ (13.4) 303.7 % Southwest 14.5 (15.4) 194.2 % Northeast/Mid-Con 39.1 (8.7) 549.4 % Corporate and other (48.4) (26.6) (82.0) % Total operating income (loss) (1) $ 32.5 $ (64.1) 150.7 % (1) Includes reduction to bargain purchase gain of $0.5 during the eleven months ended December 31, 2021.
The following is a summary of operating income (loss) by segment: Year Ended December 31, 2023 December 31, 2022 % Change Operating income (loss): Rocky Mountains $ 46.1 $ 27.3 68.9 % Southwest 19.3 14.5 33.1 % Northeast/Mid-Con 40.6 39.1 3.8 % Corporate and other (49.1) (48.4) (1.4) % Total operating income $ 56.9 $ 32.5 75.1 % For the year ended December 31, 2023, operating income was $56.9, as compared to operating income of $32.5 in the year ended December 31, 2022, largely driven by an improvement in revenues due to increased activity .
Rocky Mountains segment operating income (loss) improved by $40.7 or 303.7% from a loss of $(13.4) in the eleven months ended December 31, 2021 to income of $27.3 in the twelve months ended December 31, 2022.
Rocky Mountains segment operating income improved by $18.8 or 68.9% from $27.3 in the year ended December 31, 2022 to $46.1 in the year ended December 31, 2023. Southwest segment operating income improved by $4.8 or 33.1% from $14.5 in the year ended December 31, 2022 to $19.3 in the year ended December 31, 2023.
Looking ahead, the Company continues to pursue strategic, accretive consolidation opportunities that further strengthen the Company’s competitive positioning and capital structure and drive efficiencies, accelerate growth and create long‑term stockholder value. 53 Greene’s Acquisition On March 8, 2023, the Company completed the acquisition of all of the equity interests of Greene’s Energy Group, LLC (“Greene’s”), including $1.7 million in cash remaining at Greene's (the “Greene’s Acquisition”), pursuant to that certain purchase and sale agreement dated March 8, 2023, between the Company and Greene’s Holding Corporation (the “Purchase Agreement”).
Looking ahead, the Company continues to pursue strategic, accretive consolidation opportunities that further strengthen the Company’s competitive positioning and capital structure and drive efficiencies, accelerate growth and create long‑term stockholder value.
If we were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable. Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by our review of their current credit information.
After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred. Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by our review of their current credit information.
Increased weighted average price contributed to approximately 61% of the dollar increase, and increased weighted average volume contributed to the remaining 39%. Cost of sales . For the twelve months ended December 31, 2022, cost of sales was $621.3, or 79.5% of sales, as compared to $389.9, or 89.4% of sales, in the eleven months ended December 31, 2021.
For the year ended December 31, 2023, cost of sales was $672.5, or 75.7% of revenues, as compared to $621.3, or 79.5% of revenues, in the year ended December 31, 2022. The increase in dollar amount was primarily due to increased activity and to a lesser degree, increased pricing due to inflation.
The overall increase in revenues reflects the recovery in economic activity and increase in WTI prices during the year, leading to increased demand for our services and a positive pricing environment, as well as one additional month of revenues.
The overall increase in revenues reflects increased demand for our services and a positive pricing environment in the first half of 2023, even as activity fell and then stabilized in the second half of the year. This increase was driven entirely by an increase in weighted average price.
So far in the year ending December 31, 2023, WTI prices have remained flat, as increased demand for oil and gas products is balanced against expectations of an 55 upcoming recession. As of February 3, 2023, U.S. rig count was 759, a decrease of (2.6%) since December 31, 2022.
So far in the year ending December 31, 2024, WTI prices have noted a slight increase of 10%, as demand for oil and gas products persists.
SG&A as a percentage of revenues decreased primarily due to better leverage of fixed costs against higher revenues in the current period.
SG&A as a percentage of revenues increased primarily due to an increase in insurance costs along with certain costs related to the acquisition and integration of Greene's.
Greene's is a provider of wellhead protection, flowback and well testing services.
The acquisition was made pursuant to that certain purchase and sale agreement dated March 8, 2023, between the Company and Greene’s Holding Corporation (the “Purchase Agreement”). Greene's is a provider of wellhead protection, flowback and well testing services.
Actual results may differ from these estimates and assumptions used in preparation of our financial statements. Emerging Growth Company Status We are an “emerging growth company” and are entitled to take advantage of certain relaxed disclosure requirements.
Actual results may differ from these estimates and assumptions used in preparation of our financial statements. Business Combinations We completed our acquisition of Greene's on March 8, 2023. Greene's results of operations have been included in our financial results for the period subsequent to the acquisition date.
Removed
In November 2018, we expanded our completion and intervention service offerings through the acquisition of Motley Services, LLC (“Motley”), a premier provider of large diameter coiled tubing services, further enhancing our completions business. We successfully completed the integration of the Motley business during Fiscal 2018.

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