For the transition period from                      to                     

(Registrant’s telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒  No  ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of the registrant’s common shares, par value $0.001 per share, outstanding at April 30, 2022, was 104,240,512.

•the severity and duration of current world health events and armed conflict, including the coronavirus ("COVID-19") pandemic and the Russian-Ukraine war and associated repercussions to supply and demand for oil and gas and the economy generally;

•the actions taken by the members of the Organization of the Petroleum Exporting Countries ("OPEC") and Russia (together with OPEC and other allied producing countries, "OPEC+") with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;

•actions taken by the Biden Administration, such as executive orders or new regulations, that may negatively impact the future production of oil and natural gas in the United States and may adversely affect our future operations;

•the level of production and resulting market prices for crude oil, natural gas and other hydrocarbons;

•changes in general economic and geopolitical conditions, including the rate of inflation;

•the effects of existing and future laws and governmental regulations (or the interpretation thereof) on us and our customers;

•cost increases and supply chain constraints related to our services;

•competitive conditions in our industry;

•changes in the long-term supply of, and demand for, oil and natural gas;

•actions taken by our customers, suppliers, competitors and third-party operators and the possible loss of customers or work to our competitors;

•technological changes, including lower emissions oilfield services equipment and similar advancements;

•changes in the availability and cost of capital;

•our ability to successfully implement our business plan;

•large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

•the effects of consolidation on our customers or competitors;

•the price and availability of debt and equity financing (including changes in interest rates) for the Company and our customers;

•our ability to complete growth projects on time and on budget;

•operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;

•changes in our tax status;

•regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services;

•new or expanded regulations that materially limit our customers’ access to federal and state lands for oil and gas development, thereby reducing demand for our services in the affected areas;

•growing demand for electric vehicles that result in reduced demand for gasoline and therefore the demand for our services;

•our ability to successfully implement technological developments and enhancements, including our new Tier IV DGB equipment and other lower-emissions equipment we may acquire or that may be sought by our customers;

•operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, which risks may be self-insured, or may not be fully covered under our insurance programs;

•acts of terrorism, war or political or civil unrest in the United States or elsewhere;

•the effects of current and future litigation, including the Logan Lawsuit; and

•the potential impact on our business and stock price of any announcements regarding the Logan Lawsuit.

            In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate ("LIBOR"). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. Effective January 1, 2022, we adopted this guidance, and the adoption did not materially affect the Company’s condensed consolidated financial statements.

          The total stock-based compensation expense for the three months ended March 31, 2022 and 2021 for all stock awards was $11.4 million and $2.5 million, respectively. The total unrecognized stock-based compensation expense as of March 31, 2022 was approximately $24.9 million, and is expected to be recognized over a weighted average period of approximately 2.2 years.

          We elected the practical expedient, consistent with ASC 842, to exclude leases with an initial term of twelve months or less ("short-term lease") from our balance sheet and continue to record short-term leases as a period expense. For the three months ended March 31, 2022 and 2021 our short-term lease expense was approximately $0.2 million and $0.2 million, respectively.

          Our total available HHP as of March 31, 2022, was 1,423,000 HHP, which was comprised of 140,000 HHP of our Tier IV Dynamic Gas Blending ("DGB") equipment, 1,175,000 HHP of conventional Tier II equipment and 108,000 HHP of our DuraStim® electric hydraulic fracturing equipment. Our fleet could range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite. With the industry transition to lower emissions equipment and simultaneous hydraulic fracturing ("Simul-Frac"), in addition to several other changes to our customers' job designs, we believe that our available capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at the wellsites. In addition, in September 2021, we committed to additional conversions of our Tier II equipment to Tier IV DGB. As such, we entered into a conversion arrangement with our equipment manufacturers for 125,000 HHP of Tier IV DGB equipment and during the period ended March 31, 2022, we received 50,000 HHP of the converted Tier IV DGB equipment and expect to receive the remaining 75,000 HHP at different times through the second quarter of 2022.

          In 2019, we entered into a purchase commitment for 108,000 HHP of DuraStim® electric powered hydraulic fracturing equipment. Our DuraStim® equipment is yet to be commercialized. Given current market conditions, including continued supply chain disruptions and inflation, and other factors impacting further development of DuraStim®, we do not currently anticipate deploying our DuraStim® equipment in its current configuration for additional field trials during 2022. If we are not able to successfully commercialize the DuraStim® equipment, or deploy the equipment for alternative uses, which we are currently evaluating, we will incur impairment losses on the carrying value of the DuraStim® equipment. As of March 31, 2022, the carrying value of our DuraStim® equipment is approximately $88 million. In addition to DuraStim® fleets, we are also evaluating other electric and alternative pressure pumping solutions.

          On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer Natural Resources USA, Inc. ("Pioneer") and Pioneer Pumping Services (the "Pioneer Pressure Pumping Acquisition"). In connection with the Pioneer Pressure Pumping Acquisition, Pioneer received 16.6 million shares of our common stock and approximately $110.0 million in cash. On March 31, 2022, we entered into an amended and restated pressure pumping services agreement (the "A&R Pressure Pumping Services Agreement"), which was initially entered into in connection with the Pioneer Pressure Pumping Acquisition. The A&R Pressure Pumping Services Agreement was effective January 1, 2022 and continues through December 31, 2022. The A&R Pressure Pumping Services Agreement reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, and replaced the idle fees arrangement with equipment reservation fees (the "Reservation fees"). As part of the Reservation fees arrangement, the Company will be entitled to receive compensation for all eligible contracted fleets that are made available to Pioneer at the beginning of every quarter in 2022 through the term of the A&R Pressure Pumping Services Agreement.

          Our competitors include many large and small oilfield services companies, including Halliburton Company, Liberty Energy Inc., Nextier Oilfield Solutions Inc., Patterson-UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses. The markets in which we operate are highly competitive. To be successful, an oilfield services company must provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices. Competitive factors impacting sales of our services are price, reputation, technical expertise, emissions profile, service and equipment design and quality, and health and safety standards. Although we believe our customers consider all of these factors, we believe price is a key factor in an E&P company's criteria in choosing a service provider. However, we have recently observed the energy industry and our customers shift to lower emissions equipment, which we believe will be an increasingly important factor in an E&P company's selection of a service provider. The transition to lower emissions equipment has been challenging for companies in the service industry because of the significant capital investment required for next generation equipment and the current pricing environment with the service industry, which remains in recovery phase. While we seek to price our services competitively, we believe many of our customers elect to work with us based on our operational efficiencies, productivity,

        The Russia-Ukraine war, and the adverse impacts of the COVID-19 pandemic in recent years, have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing. In 2022, global crude oil prices have exceeded $100 per barrel, which is the highest prices have been in the last ten years. We believe that the recent surge in global crude oil prices is partly due to the lack of reinvestment in the oil and gas industry in the last two years, coupled with adverse impact of the Russia-Ukraine war, which has led to various sanctions in Russian crude oil supply and businesses. With the significant increase in global crude oil prices, including WTI crude oil prices, there has been an increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 323 at the end of March 2022, according to Baker Hughes. Following the increase in rig count and WTI crude oil price, the oilfield service industry has experienced increased demand for its pressure pumping services, and improved pricing. As a result of the growing demand for pressure pumping services and significant cost inflation across the industry, we negotiated pricing increases with certain of our customers and effective as of January 1, 2022, we increased pricing for most of our pressure pumping services, depending on job design. Although we are currently operating in an improved pricing environment, the rapid increase in cost inflation and supply chain tightness could adversely impact our future profitability, if we are unable to timely pass-through the cost increases to our customers.

          Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including the upstream and oilfield service companies. As a result, we are working with our customers and equipment manufacturers to transition to a lower emissions profile. Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB, electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future. We are continually evaluating these technologies and other investment and acquisition opportunities that would support our existing and new customer relationships. The transition to lower emissions equipment is quickly evolving and will be capital intensive. Over time, we may be required to convert substantially all of our conventional Tier II equipment to lower emissions equipment. If we are unable to quickly transition to lower emissions equipment and meet our and our customers’ emissions goals, the demand for our services could be adversely impacted.

          The Permian Basin rig count increase, WTI crude oil price increase and costs inflation could be indicative of an energy market recovery. If the rig count and market conditions continue to improve, including improved customers' pricing and labor availability, and we are able to meet our customers' lower emissions equipment demands, we believe our operational and financial results will also continue to improve. However, if market conditions do not improve, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows.

How We Evaluate Our Operations 

(1)Other general and administrative expense, (net of reimbursement from insurance carriers) primarily relates to nonrecurring professional fees paid to external consultants in connection with our audit committee review, SEC investigation and shareholder litigation, net of insurance recoveries. During the three months ended March 31, 2022 and 2021, we received reimbursement of approximately $1.0 million and $1.6 million, respectively, from our insurance carriers in connection with the SEC investigation and shareholder litigation.

(2)Includes $10.7 million of net tax refund (net of advisory fees) received from the Texas Comptroller of Public Accounts in connection with limited sales, excise, and use tax beginning July 1, 2015 through December 31, 2018.

          We conducted our business through three operating segments: hydraulic fracturing, cementing and coiled tubing. For reporting purposes, the hydraulic fracturing and cementing operating segments are aggregated into our one reportable segment—pressure pumping. The coiled tubing operating segment and corporate administrative expenses (inclusive of our total income tax expense (benefit), other (income) and expense and interest expense) are included in the "all other" category. Total corporate administrative expense for the three months ended March 31, 2022 and 2021 was $17.3 million and $5.0 million, respectively.

          Our hydraulic fracturing operating segment revenue approximated 93.6% and 93.3% of our pressure pumping revenue during the three months ended March 31, 2022 and 2021, respectively.

(1)Exclusive of depreciation and amortization.

(2)Inclusive of stock-based compensation.

(3)For definitions of the non-GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read "How We Evaluate Our Operations". Included in our Adjusted EBITDA is reservation and idle fees of $6.8 million and $4.3 million for the three months ended March 31, 2022 and 2021, respectively.

(4)The non-GAAP financial measure of Adjusted EBITDA margin for the pressure pumping segment is calculated by taking Adjusted EBITDA for the pressure pumping segment as a percentage of our revenue for the pressure pumping segment.

          Revenues.    Revenues increased 75.1%, or $121.2 million, to $282.7 million during the three months ended March 31, 2022, as compared to $161.5 million during the three months ended March 31, 2021. Our pressure pumping segment revenues increased 75.2%, or $118.9 million, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increases were primarily attributable to the significant increase in our existing and new customers' activity levels, resulting in higher demand for pressure pumping services and improved pricing. As a result of our customers' increased activity levels, our effectively utilized fleet count rose to approximately 13.7 active fleets during the three months ended March 31, 2022, from approximately 10.3 active fleets for the three months ended March 31, 2021. Included in our revenue for the three months ended March 31, 2022 and 2021 was revenue generated from reservation and idle fees charged to our customer of approximately $6.8 million and $4.3 million, respectively.

          Cost of Services.    Cost of services increased 59.9%, or $73.9 million, to $197.3 million for the three months ended March 31, 2022, as compared to $123.4 million during the three months ended March 31, 2021. Cost of services in our pressure pumping segment increased $72.9 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. These increases were primarily attributable to the significantly increased activity levels resulting from the increased demand for our services. As a percentage of pressure pumping segment revenues (including reservation and idle fees), pressure pumping cost of services was 69.5% for the three months ended March 31, 2022, as compared to 75.7% for the three months ended March 31, 2021. Excluding reservation and idle fees revenue of $6.8 million and $4.3 million recorded during the three months ended March 31, 2022 and 2021, respectively, our pressure pumping cost of services as a percentage of pressure pumping revenues decreased to 71.2% during the three months ended March 31, 2022, as compared to 77.8% for the three months ended March 31, 2021. The decrease in the percentages was a result of increased operational efficiencies, reduction in operational downtime and improved pricing across our customer base.

          General and Administrative Expenses.   General and administrative expenses increased 57.0%, or $11.5 million, to $31.7 million for the three months ended March 31, 2022, as compared to $20.2 million for the three months ended March 31, 2021. The net increase was primarily attributable to an increase during 2022 in (i) stock-based compensation expense of $8.9 million, which was primarily attributable to the non-recurring incremental stock-based compensation associated with the acceleration of stock awards upon resignation of a former executive, (ii) non-recurring legal fees, incurred in connection with pending shareholder litigation, of approximately $2.4 million, and (iii) consulting and professional fees of approximately $1.0 million, which was partially offset by a net decrease of approximately $0.8 million in other general administrative expenses.

          Depreciation and Amortization.    Depreciation and amortization decreased 4.9%, or $1.6 million, to $31.9 million for the three months ended March 31, 2022, as compared to $33.5 million for the three months ended March 31, 2021. The decrease was primarily attributable to the decrease in our fixed asset base, partly attributable to the disposal of certain fixed assets during the period.

          Loss on Disposal of Assets.    Loss on the disposal of assets increased 23.5%, or $3.1 million, to $16.1 million for the three months ended March 31, 2022, as compared to $13.1 million for the three months ended March 31, 2021. The increase was primarily attributable to the significant increase in our utilization levels, resulting in an increase in the operational intensity on our pressure pumping equipment. Upon sale or retirement of property and equipment, including replaced fluid and power ends, the cost and related accumulated depreciation of such assets or components are removed from the balance sheet and the net amount is recognized as loss on disposal of assets.

          Interest Expense.    There was no significant change in interest expense. Interest expense was relatively flat at $0.1 million for the three months ended March 31, 2022, as compared to $0.2 million for the three months ended March 31, 2021. During the three months ended March 31, 2022 and three months ended March 31, 2021, the Company had a zero debt balance, and the interest expense in the three months ended March 31, 2022, and 2021, primarily relates to the amortization of our capitalized loan origination cost.

          Other Income.  Other income increased 478.9%, or $8.6 million, to $10.4 million for the three months ended March 31, 2022, as compared to $1.8 million for the three months ended March 31, 2021. The increase was primarily attributable to the net refund to the Company of $10.7 million from sales, excise and use taxes and partially offset by other expense relating to our lender's commitment fees.

          Income Taxes.    Total income tax expense was $4.1 million resulting in an effective tax rate of 25.9% for the three months ended March 31, 2022, as compared to income tax benefit of $6.7 million or an effective tax rate of 24.6% for the three months ended March 31, 2021. The change to an income tax expense recorded during the three months ended March 31, 2022, compared to an income tax benefit during the three months ended March 31, 2021, is primarily attributable to the Company projecting a pre-tax income in 2022, as compared to a pre-tax loss in 2021.

          Effective April 13, 2022, the Company entered into an amendment of its revolving credit facility (as amended and restated, "ABL Credit Facility"). The ABL Credit Facility decreased the borrowing capacity to $150.0 million (subject to the Borrowing Base limit), with a maturity date extended to April 13, 2027. The ABL Credit Facility has a borrowing base of 85% to 90%, depending on the credit ratings of our accounts receivable counterparties, of monthly eligible accounts receivable less customary reserves (the "Borrowing Base"), as redetermined monthly. The Borrowing Base as of April 30, 2022, was approximately $86.6 million. The ABL Credit Facility includes a springing fixed charge coverage ratio to apply when excess availability is less than the greater of (i) 10% of the lesser of the facility size or the Borrowing Base or (ii) $10.0 million. Under this facility we are required to comply, subject to certain exceptions and materiality qualifiers, with certain customary affirmative and negative covenants, including, but not limited to, covenants pertaining to our ability to incur liens, indebtedness, changes in the nature of our business, mergers and other fundamental changes, disposal of assets, investments and restricted payments, amendments to our organizational documents or accounting policies, prepayments of certain debt, dividends,

transactions with affiliates, and certain other activities. Borrowings under the ABL Credit Facility are secured by a first priority lien and security interest in substantially all assets of the Company. Borrowings under the ABL Credit Facility accrue interest based on a three-tier pricing grid tied to availability, and we may elect for loans to be based on either the Secured Overnight Financing Rate ("SOFR") or the base rate, plus the applicable margin, which ranges from 1.50% to 2.00% for SOFR loans and 0.50% to 1.00% for base rate loans.

          The loan origination costs relating to the ABL Credit Facility are classified as an asset in our balance sheet. There were no borrowings under the revolving credit facility as of March 31, 2022, and December 31, 2021.

         Capital expenditures incurred were $71.7 million during the three months ended March 31, 2022, as compared to $32.3 million during the three months ended March 31, 2021. The significant portion of our total capital expenditures incurred were comprised of primarily maintenance and conversion capital expenditures.

         Our future material use of cash will be to fund our capital expenditures. Capital expenditures for 2022 are projected to be primarily related to maintenance capital expenditures to support our existing pressure pumping assets, costs to convert some existing equipment to lower emissions pressure pumping equipment, strategic purchases and other ancillary equipment purchases, subject to market conditions and customer demand. Our future capital expenditures depend on our projected operational activity, emission requirements and planned conversions to lower emissions equipment, among other factors, which could vary significantly throughout the year. We could incur significant additional capital expenditures if our projected activity levels increase during the course of the year, inflation and supply chain tightness continues to adversely impact our operations or we invest in new or different lower emissions equipment. The Company will continue to evaluate the emissions profile of its fleet over the coming years and may, depending on market conditions, convert or retire additional conventional Tier II equipment in favor of lower emissions equipment. The Company’s decisions regarding the retirement or conversion of equipment or the addition of lower emissions equipment will be subject to a number of factors, including (among other factors) the availability of equipment, including parts and major components, supply chain disruptions, prevailing and expected commodity prices, customer demand and requirements and the Company’s evaluation of projected returns on conversion or other capital expenditures. Depending on the impacts of these factors, the Company may decide to retain conventional equipment for a longer period of time or accelerate the retirement, replacement or conversion of that equipment.

         We anticipate our capital expenditures will be funded by existing cash, cash flows from operations, and if needed, borrowings under our ABL Credit Facility. Our cash flows from operations will be generated from services we provide to our customers.

          Net cash used in investing activities increased to $64.0 million for the three months ended March 31, 2022, from $22.3 million for the three months ended March 31, 2021. The increase was primarily attributable to our investment in lower emissions Tier IV DGB equipment.

          Disclosure concerning recently issued accounting standards is incorporated by reference to Note 2 of our Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.