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 May 1, 2023, was 115,231,367.

•changes in general economic and geopolitical conditions, including increasing interest rates, the rate of inflation and potential economic recession;

•central bank policy actions, bank failures and associated liquidity risks and other factors;

•the severity and duration of any world events and armed conflict, including 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;

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

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

•competitive conditions in our industry;

•our ability to attract and retain employees;

•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, including integrating the recently acquired wireline business from the Silvertip Acquisition (as defined herein) and execution of other potential mergers and acquisitions;

•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 increasing interest rates) for the Company and our customers;

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

•increases in tax rates or types of taxes enacted that specifically impact E&P and related operations resulting in changes in the amount of taxes owed by us;

•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 and electric hydraulic fracturing 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, such as fires, which risks may be self-insured, or may not be fully covered under our insurance programs;

•exposure to cyber-security events which could cause operational disruptions or reputational harm;

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

•the effects of current and future litigation.

			Three Months Ended March 31,
			2023						2022
Summary of cash, cash equivalents and restricted cash
Cash and cash equivalents			$	26,498					$	70,768
Restricted cash			18,295						—
Total cash, cash equivalents and restricted cash — End of period			$	44,793					$	70,768

We added $23.6 million of goodwill during the year ended December 31, 2022. There were no additions to goodwill during the three months ended March 31, 2023 and 2022. The wireline operating segment is the only segment with goodwill at March 31, 2023 and December 31, 2022. We conducted our annual impairment test of goodwill in accordance with ASC 850, Intangibles—Goodwill and Other, as of December 31, 2022 and determined that no impairment to the carrying value of goodwill for our reporting unit (wireline operating segment) was required. There were no goodwill impairment losses during the three months ended March 31, 2023 and 2022.

The total stock-based compensation expense for the three months ended March 31, 2023 and 2022 for all stock awards was $3.5 million and $11.4 million, respectively. The total unrecognized stock-based compensation expense as of March 31, 2023 was approximately $27.6 million, and is expected to be recognized over a weighted average period of approximately 2.0 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, 2023 and 2022 our short-term lease expense was approximately $0.3 million and $0.2 million, respectively.

Our completion services segment includes hydraulic fracturing, wireline and cement operations. Our hydraulic fracturing operations account for the significant portion of our operations, and our hydraulic fracturing operations revenue is approximately 79.0% of our total revenues, while wireline and cement accounts for our remaining revenues. Our total available hydraulic horsepower ("HHP") in our hydraulic fracturing operations as of March 31, 2023, was 1,355,000 HHP, which was comprised of 340,000 HHP of our Tier IV Dynamic Gas Blending ("DGB") equipment and 1,015,000 HHP of conventional Tier II equipment. Our hydraulic fracturing fleets range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite. Our equipment has been designed to handle the operating conditions commonly encountered in the Permian Basin and the region’s increasingly high-intensity well completions (including simultaneous hydraulic fracturing ("Simul-Frac"), which involves fracturing multiple wellbores at the same time), which are characterized by longer horizontal wellbores, more stages per lateral and increasing amounts of proppant per well. With the industry transition to lower emissions equipment and Simul-Frac, in addition to several other changes to our customers' job designs, we believe that our available capacity could decline if we decide to reconfigure our fleets to increase active HHP and backup HHP at wellsites. In addition, in September 2021, August 2022 and December 2022, we committed to additional conversions of our Tier II equipment to Tier IV DGB, and purchase of new Tier IV DGB equipment. As such, we entered into conversion and purchase arrangements with our equipment manufacturers for a total 362,500 HHP of Tier IV DGB equipment and as of March 31, 2023, we have received 250,000 HHP of the converted and new Tier IV DGB equipment and expect to receive the remaining 112,500 HHP by the second quarter of 2023. In August 2022 and December 2022, we entered into a three-year electric fleet leases for a total of four fleets with 60,000 HHP per fleet. We expect to take delivery of the electric fleets at different times during the second half of 2023. We currently have 23 wireline units and 26 cement units.

Effective September 1, 2022, we disposed of our coiled tubing assets to STEP Energy Services Ltd. ("STEP") and shut down our coiled tubing operations. We received cash of approximately $2.8 million and 2.6 million common shares of STEP valued at $11.9 million as consideration. Upon the sale of our coiled tubing assets, we recorded a loss on sale of $13.8 million.

On November 1, 2022, we consummated the acquisition of all of the outstanding limited liability company interests of Silvertip, which provides wireline perforation and ancillary services solely in the Permian Basin in exchange for 10.1 million shares of our common stock valued at $106.7 million, $30.0 million of cash, the payoff of $7.2 million of assumed debt, and the payment of certain other closing and transaction costs. At March 31, 2023, we had 23 wireline units available to provide wireline perforation and ancillary services. The Silvertip Acquisition positions the Company as a more resilient and diversified completions-focused oilfield services provider headquartered in the Permian Basin.

Our competitors include many large and small oilfield services companies, including Halliburton Company, Liberty Energy Inc., ProFrac Holding Corp., Nextier Oilfield Solutions Inc., Patterson-UTI Energy Inc., RPC, Inc., and a number of private and locally-oriented businesses. 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 oilfield service industry because of the capital requirements. 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, equipment portfolio and quality, reliability, ability to manage multifaceted logistics challenges, commitment to safety and the ability of our people to handle the most complex Permian Basin well completions.

Through our Completion Services segment, which includes our hydraulic fracturing, cementing and wireline operations, we primarily provide hydraulic fracturing services to E&P companies in the Permian Basin. During the three months ended March 31, 2023, our hydraulic fracturing, cementing and wireline operations accounting for 79.0%, 6.3% and 14.7% of our total revenue, respectively. Our equipment has been designed to handle Permian Basin specific operating conditions and the region's increasingly high-intensity well completions, which are characterized by longer horizontal wellbores, more frac stages per lateral and increasing amounts of proppant per well. We plan to continually reinvest in our equipment to ensure optimal performance and reliability.

The geopolitical and macroeconomic consequences of the Russian invasion of Ukraine, including the associated sanctions, and the adverse impacts of the COVID-19 pandemic in recent years have resulted in volatility in supply and demand dynamics for crude oil and associated volatility in crude oil pricing. As the global response to the COVID-19 pandemic continues to wane, the demand and prices for crude oil have increased from the lows experienced in 2020, with the WTI average crude oil price reaching approximately $94 per barrel in 2022, the highest average price in the last nine years. We believe the improved crude oil pricing conditions have also been partly driven by declines in crude oil supplies, concerns over sanctions resulting from the Russia invasion of Ukraine and slower crude oil production growth due to the lack of reinvestment in the oil and gas industry in the last two years. However, in the wake of uncertainty in the banking sector following the failure of two regional U.S. banks and the growing risk of a global recession, which raised concerns over future crude oil demand destruction, and expanding commodity inventories, the WTI average crude oil price dropped to approximately $73 in March 2023, before rebounding to approximately $80 per barrel in April 2023 following the announcement by OPEC+ of further production cuts of approximately 1.16 million barrels per day.

With the significant increase in global crude oil prices from 2021, including the WTI crude oil price, there has been an increase in the Permian Basin rig count from approximately 179 at the beginning of 2021 to approximately 352 at the end of March 2023, according to Baker Hughes. Following the increase in rig count and the WTI crude oil price, the oilfield service industry has experienced increased demand for its completion services, and improved pricing. As a result of the growing demand for completion services and significant cost inflation across the industry, we negotiated pricing increases with certain of our customers for our completion services, depending on job design.

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. If market conditions do not improve or decline in the future, and we are unable to increase our pricing or pass-through future cost increases to our customers, there could be a material adverse impact on our business, results of operations and cash flows.

How We Evaluate Our Operations