KLX Energy Services Holdings Inc
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
KLXE$1.00+4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-08.
0001738827-24-000038
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (U.S. dollars in millions, except per unit data)Current report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001738827-25-000041
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 107 previous paragraphs and 117 current paragraphs.
62 unchanged; 34 reworded; 20 added; 10 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Results of Operations
Current report
Net (loss) income. Net loss for the year ended December 31, 2024 was $53.0, as compared to net income of $19.2 in the year ended December 31, 2023, primarily due to lower activity in the most recent year.
Current report
Refinancing
Current report
On March 7, 2025, the Company and certain of our subsidiaries party thereto entered into a Securities Purchase Agreement with certain holders (the “Investors”) of our 2025 Senior Notes, pursuant to which the Company agreed to issue and sell to the Investors (a) approximately $232.2 in aggregate principal amount of 2030 Senior Notes and (b) Warrants entitling the holders thereof to purchase, in the aggregate, up to 2,373,187 shares of Common Stock, at an exercise price of $0.01 per share, subject to adjustment in exchange for (i) approximately $78.4 in aggregate cash consideration and (ii) approximately $143.6 aggregate principal amount of the 2025 Senior Notes, which will be cancelled by the Company upon receipt thereof (collectively, the “Refinancing”). The Company consummated the Refinancing on March 12, 2025.
Current report
ABL Facilities
Current report
Prior ABL Facility
Current report
On March 12, 2025, in connection with the completion of the Refinancing, the Prior Credit Facility was repaid in full using borrowings under the New ABL Facility and the commitments thereunder terminated. In connection with the prepayment and termination of the Prior ABL Facility, the Company provided Prior Administrative Agent cash collateral in support of certain existing letters of credit and existing purchasing card program in an aggregate amount of approximately $8.1.
Current report
New ABL Facility
Current report
On March 7, 2025, the Company also entered into a Credit Agreement, dated as of March 7, 2025 (the “New ABL Facility”), with the Company, as borrower, Eclipse Business Capital LLC, as administrative agent, as collateral agent and as FILO administrative agent and the lenders party thereto. The New ABL Facility is comprised of an asset-based revolving credit facility with a $125.0 commitment (the “Revolving Facility”), a first-in-last-out asset-based credit facility with a $10.0 commitment (the “FILO Facility”), and a committed incremental loan option under the Revolving Facility with a $25.0 commitment (the “Incremental Revolving Loans”). The availability of the Incremental Revolving Loans are subject to usual and customary conditions to effectiveness, including, for example, the Company electing to utilize such Incremental Revolving Loans by a date certain and the payment of required fees. Borrowings under the Revolving Facility (including, to the extent incurred, the Incremental Revolving Loans) bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 4.625%. Borrowings under the FILO Facility bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 6.00%. The applicable margin under the Revolving Facility is subject to a 0.125% reduction and the applicable margin under the FILO Facility is subject to a 0.50% reduction, in each case upon the repayment in full of a $5.0 over-advance provided on the initial funding date under the Revolving Facility. The New ABL Facility is secured by, among other things, a first priority lien on accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants.
Current report
The initial funding under the New ABL Facility occurred on March 12, 2025, and the proceeds therefrom were used to repay the Prior ABL Facility in full. After giving effect to the foregoing, we had approximately $39,900,000.0 of available borrowing capacity under the New ABL Facility. The New ABL Facility includes a springing financial covenant which requires the Company’s consolidated fixed charge coverage ratio to be at least 1.0 to 1.0 if availability under the Revolving Facility falls below $7.0.
Current report
2025 Senior Notes
Current report
No 2025 Senior Notes were exchanged in 2023 and there were approximately $237.3 in aggregate principal amount of the 2025 Senior Notes outstanding as of December 31, 2023.
Current report
On March 12, 2025, approximately $143.6 aggregate principal amount of the 2025 Senior Notes were exchanged in connection with the Refinancing, and the Company deposited $97.1 in trust with the trustee for the 2025 Senior Notes and irrevocably instructed the trustee to apply such funds to effect the redemption of all of the remaining outstanding 2025 Senior Notes on March 30, 2025 at a redemption price of 100.000% of the principal amount thereof, plus accrued and unpaid interest. Upon deposit of such redemption amount, the indenture that governs the 2025 Senior Notes was satisfied and discharged in accordance with its terms and, as a result thereof, the Company has been released from its obligations under the 2025 Senior Notes except with respect to those provisions of the indenture that, by their terms, survive the satisfaction and discharge of thereof.
Current report
2030 Senior Notes
Current report
On March 12, 2025, as part of the Refinancing, the Company and certain of its subsidiaries entered into an indenture, dated as of March 12, 2025 (the “2030 Senior Notes Indenture”), with U.S. Bank Trust Company, National Association, as the trustee and notes collateral agent, pursuant to which $232.2 of the 2030 Senior Notes were issued. The 2030 Senior Notes will mature on March 12, 2030 and bear a floating rate of interest of Term SOFR plus the Applicable Margin (as defined in the 2030 Senior Notes Indenture) based on the Secured Net Leverage Ratio (as defined in the 2030 Senior Notes Indenture) payable on the last day of the applicable interest period in cash or, at the Company’s election, additional 2030 Senior Notes paid-in-kind on one-, three- or six-month interest periods, which shall include a 0 basis point premium for any period where interest is paid-in-kind. The 2030 Senior Notes are senior secured obligations of the Company and are guaranteed on a senior secured basis by each of the Company’s current domestic subsidiaries and by certain future subsidiaries, subject to agreed guaranty and security principles and certain exclusions.
Current report
The 2030 Senior Notes were initially fully and unconditionally guaranteed by each of the Company’s current subsidiaries. The 2030 Senior Notes will also be guaranteed by each of the Company’s future subsidiaries that guarantee the Company’s indebtedness or indebtedness of guarantors, including under the New ABL Facility and such subsidiaries that become guarantors in the future will also pledge their collateral in support of such guarantees. These guarantees are senior secured obligations of the guarantors secured by a first priority security interest on substantially all of the guarantors’ assets (other than collateral securing the New ABL Facility on a first priority basis) and a second priority security interest on the guarantors’ assets which secure the New ABL Facility on a first priority basis, subject in each case to certain excluded assets.
Current report
The Company will be required to redeem the 2030 Senior Notes in an amount equal to 2.00% per annum of all 2030 Senior Notes outstanding as of the prior applicable Interest Payment Date (as defined in the 2030 Senior Notes Indenture) on the last business day of each of March, June, September and December, commencing on March 31, 2025. Additionally, upon certain changes of control, consummation of certain asset sales and other events, the Company will be required to repurchase the 2030 Senior Notes at the applicable redemption prices.
Current report
The 2030 Senior Notes Indenture contains certain financial covenants that include (i) a maximum total net leverage ratio of not greater than 4.50 to 1.0 for the test periods ending March 31, 2025 through December 31, 2025, stepping down to 4.00 to 1.0 for the test periods ending March 31, 2026 through December 31, 2026, 3.50 to 1.0 for the test periods ending March 31, 2027 through December 31, 2027, 3.00 to 1.0 for the test periods ending March 31, 2028 through December 31, 2028, and 2.50 to 1.0 for each test period thereafter and (ii) restrictions on making net capital expenditures in any test period in excess of the greater of (x) $65.0 in the aggregate or (y) 7% of revenues during such test period.
Current report
Property and Equipment
Current report
Property and equipment is stated at cost and depreciated under the straight-line method over the estimated useful life of the asset. Equipment held under finance leases is stated at the present value of its future minimum lease payments and is depreciated under the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Estimated useful lives requires significant judgment which is influenced by our historical experience in operating property and equipment, technological developments, and expectations of future demand.
Removed paragraphs (10)
Previous report
Net income (loss). 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.
Previous report
Our ability to refinance our debt will depend on the condition of the public and private debt markets and our financial condition at such time, among other things. Any refinancing of our debt could be at higher interest rates and may require us to comply with covenants, which could further restrict our business operations. A rising interest rate environment could have an adverse impact on the price of our shares, or our ability to issue equity or incur debt to refinance our existing indebtedness, for acquisitions or other purposes. 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.
Previous report
Our ABL Facility matures on the ABL Maturity Date (as defined below) and we intend to work with our existing lenders or other sources of capital to refinance the ABL Facility as well as our Senior Notes. 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. The delivery of an audit opinion with such a qualification would result in an event of default under our ABL Facility. If an event of default occurs, the lenders under the ABL Facility would be entitled to accelerate any outstanding indebtedness, terminate all undrawn commitments and enforce liens securing our obligations under the ABL Facility. Further, the acceleration of indebtedness under our ABL Facility could cause an event of default under our Senior Notes, entitling the requisite holders of the Senior Notes to accelerate our indebtedness in respect thereof and enforce liens securing our obligations under the Senior Notes. If our lenders or noteholders accelerate our obligations under the affected debt agreements, we may not have sufficient liquidity to repay all of our outstanding indebtedness then due and payable.
Previous report
ABL Facility
Previous report
On 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”).
Previous report
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.
Previous report
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. 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.
Previous report
Net cash (used in) provided by financing activities
Previous report
Leases
Previous report
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.
Reworded paragraphs (34)
Previous wording
On March 8, 2023, the Company completed the acquisition of all of the equity interests of Greene’s, including $1.7 in cash remaining at Greene's, which was subsequently adjusted to $1.1 due to a $0.6 working capital adjustment. 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. The total consideration for the Greene’s
Current wording
On March 8, 2023, the Company completed the acquisition of all of the equity interests of Greene’s. 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. The total consideration for the Greene’s Acquisition under the Purchase Agreement consisted of the issuance of approximately 2.4 million shares of the
Previous wording
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. As of the date of this filing, the integration is complete. See Note 3 - Business Combinations to our audited consolidated financial statements included in Item 8 in this Form 10-K.
Current wording
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. As of the date of this filing, the integration is complete. See Note 3 - Business Combinations to our audited consolidated financial statements included in Item 8 in this Form 10-K.
Previous wording
We offer a variety of targeted services that are differentiated by the technical competence and experience of our field service engineers and their deployment of a broad portfolio of specialized tools and proprietary equipment. 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.
Current wording
We offer a variety of targeted services that are differentiated by the technical competence and experience of our field service engineers and their deployment of a broad portfolio of specialized tools and proprietary equipment. 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 36 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.
Previous wording
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility. The oil and gas industry experienced significant increases in activity in late 2021 and 2022 due to the recovery from the COVID-19 pandemic and increasing demand for oil and gas. Furthermore, sanctions and import bans on Russian oil have been implemented by various countries in response to the ongoing conflict in Ukraine, further impacting global oil supply. While oil prices declined in the first half of 2023 from their 2022 highs, oil prices rebounded in the third quarter of 2023 due to stronger than anticipated economic growth and sustained production cuts from Saudi Arabia and Russia, followed by oil price decreases in the fourth quarter of 2023 due to a decrease in demand as the overall economy declined. Natural gas prices also declined in the fourth quarter of 2023. Oil and natural gas prices have been, and may remain, volatile, which impacts demand for our business. 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.
Current wording
Demand for services in the oil and natural gas industry is cyclical and subject to sudden and significant volatility. The oil and gas industry experienced significant increases in activity in late 2021 and 2022 due to the recovery from the COVID-19 pandemic and increasing demand for oil and gas. Furthermore, sanctions and import bans on Russian oil have been implemented by various countries in response to the ongoing conflict in Ukraine, further impacting global oil supply. While oil prices declined in the first half of 2023 from their 2022 highs, oil prices rebounded in the third quarter of 2023 due to stronger than anticipated economic growth and sustained production cuts from Saudi Arabia and Russia, followed by oil price stabilization, through decreases, in the fourth quarter of 2023 due to a decrease in demand as the overall economy declined. Natural gas prices also declined since the fourth quarter of 2023, bottoming out in the first quarter of 2024 and remaining near historic lows for the remainder of the year, before increasing in early 2025 to a two-year high. Oil and natural gas prices have been, and may remain, volatile, which impacts demand for our business. WTI's average daily price per barrel decreased by approximately $0.95, or 1.2%, to $76.63 per Bbl during the year ended December 31, 2024, compared to the average daily price per barrel of $77.58 during the year ended December 31, 2023. As of December 31, 2024, U.S. rig count stood at 589, a decrease of 5.3% since December 31, 2023.
Previous wording
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. 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. Currently, global oil inventories supplied from OPEC and its allies (“OPEC+”) and other oil producing nations are expected to transition to inventory decreases throughout the majority of 2024 from inventory builds during the first half of 2023. This persisting demand and expectation of decreased inventory is balanced against weather-related challenges across the country as well as a cautious approach to drilling expansion, as evidenced by the U.S. rig count being flat through January 29, 2024.
Current wording
Looking ahead to the year ending December 31, 2025, assuming commodity prices remain volatile, we anticipate that our customers will continue to cautiously allocate capital and operating expense spending. So far in the year ending December 31, 2025, WTI prices have remained largely unchanged, while Organisation for Economic Co-operation and Development (“OECD”) crude inventories are expected to remain around the same level as at the end of 2024. Production from OPEC and its allies (“OPEC+”) and other oil producing nations is expected to increase in the low single digits over the next twelve months. This modest increase along with weather-related challenges across the country and a cautious approach to drilling expansion are expected to be some of the driving factors for activity in our industry through December 31, 2025.
Previous wording
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. 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. 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%. This increase was driven by the Greene's Acquisition, offset by activity declines in the base business, as well as modestly improved pricing. Northeast/Mid-Con segment revenue increased by $14.8 or 5.0%. This increase was driven entirely by an increase in weighted average volume.
Current wording
For the year ended December 31, 2024, revenues of $709.3 decreased by $179.1 or (20.2)% as compared with the year ended December 31, 2023. The overall decrease in revenues reflects decreased demand for our services during the year. Decreased weighted average price contributed to approximately 15% of the decrease in dollar amount, and decreased weighted average volume contributed to approximately 85%. On a segment basis, Rocky Mountains segment revenue decreased by $42.4 or (15.6)%. This decrease was driven entirely by a decrease in weighted average volume. Southwest segment revenue decreased by $35.6 or (11.7)%. This decrease was driven entirely by a decrease in weighted average volume. Northeast/Mid-Con segment revenue decreased by $101.1 or (32.4)%. Decreased weighted average price contributed to approximately 52% of the decrease in dollar amount, and decreased weighted average volume contributed to approximately 48%.
Previous wording
Cost of sales. 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 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. 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.
Current wording
Cost of sales. For the year ended December 31, 2024, cost of sales was $549.7, or 77.5% of revenues, as compared to $672.5, or 75.7% of revenues, in the year ended December 31, 2023. The decrease in dollar amount was primarily due to decreased activity. The increase in cost of sales as a percentage of revenues was generally consistent across our segments and a result of fixed costs leverage due to lower activity. The two largest components of cost of sales are labor and repair & maintenance. As cost of sales decreased, labor costs per employee decreased by (9.3)% as compared with the year ended December 31, 2023. Repair & maintenance costs as a percentage of revenues increased by 15.9% as compared to the year ended December 31, 2023.
Previous wording
Selling, general and administrative expenses ("SG&A"). 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. 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. 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.
Current wording
Selling, general and administrative expenses ("SG&A"). SG&A expenses during the twelve months ended December 31, 2024, were $79.6, or 11.2% of revenues, as compared with $86.7, or 9.8% of revenues, in the year ended December 31, 2023. SG&A decreased by $7.1 due to management of costs as activity decreased. SG&A as a percentage of revenues increased primarily due to certain fixed costs within SG&A. R&D costs were $1.4 during both the year ended December 31, 2024 and the year ended December 31, 2023, reflecting our continued focus on maintaining an in-house R&D function while scaling costs to adjust to current levels of customer demand.
Previous wording
Operating income. The following is a summary of operating income (loss) by segment:
Current wording
Operating income (loss). The following is a summary of operating income (loss) by segment:
Previous wording
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.
Current wording
For the year ended December 31, 2024, operating loss was $15.5, as compared to operating income of $56.9 in the year ended December 31, 2023, largely driven by a decrease in revenues due to lower activity.
Previous wording
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. 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. 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.
Current wording
For the year ended December 31, 2024, each of our segments demonstrated lower operating income compared to the year ended December 31, 2023, driven by the decrease in pricing and utilization outpacing decreases in operating costs and labor in the year ended December 31, 2024. Rocky Mountains segment operating income decreased by $22.3 or (48.4)% from $46.1 in the year ended December 31, 2023 to $23.8 in the year ended December 31, 2024. Southwest segment operating income decreased by $15.6 or (80.8)% from $19.3 in the year ended December 31, 2023 to $3.7 in the year ended December 31, 2024. Northeast/Mid-Con segment operating income decreased by $38.3 or (94.3)% from $40.6 in the year ended December 31, 2023 to $2.3 in the year ended December 31, 2024. The 7.7% decrease in operating loss in our Corporate and other in the year ended December 31, 2024 was primarily driven by higher one-off expenses in the year ended December 31, 2023.
Previous wording
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.
Current wording
Income tax expense. Income tax expense was $0.6 for the year ended December 31, 2024, as compared to income tax expense of $3.0 for the year ended December 31, 2023. The decrease in income tax expense was primarily due to the decrease in pre-tax income. Income tax expense was comprised of federal, state and local taxes for each year reported.
Previous wording
We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, debt service obligations, investments and acquisitions. Our primary sources of liquidity to date have been capital contributions from our equity and note holders, borrowings under the Company’s ABL Facility and cash flows from operations. At December 31, 2023, we had $112.5 of cash and cash equivalents and $41.9 available on the ABL Facility.
Current wording
We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, debt service obligations, investments and acquisitions. Our primary sources of liquidity to date have been capital contributions from our equity and note holders, borrowings under our Prior ABL Facility and New ABL Facility and cash flows from operations. At December 31, 2024, we had $91.6 of cash and cash equivalents and $20.4 of available capacity under the Prior ABL Facility.
Previous wording
In light of our substantial leverage position, as market conditions warrant and subject to our contractual restrictions, liquidity position and other factors, we may access the public or private debt and equity markets or seek to recapitalize, refinance or otherwise restructure our capital structure. Some of these alternatives may require the consent of current lenders, stockholders or noteholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all.
Current wording
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. Most recently, we completed a refinancing of our long-term indebtedness on March 12, 2025, as described in greater detail under “—Refinancing”, “—New ABL Facility” and “—2030 Senior Notes” below. As market conditions warrant and subject to our contractual restrictions, liquidity position and other factors, we may further access the public or private debt and equity markets or seek to recapitalize, refinance or otherwise restructure our capital structure.
Previous wording
We have substantial indebtedness. 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. Our ability to pay the principal and interest on our long-term debt and to satisfy our other liabilities will depend on our future operating performance and ability to refinance our debt as it becomes due. 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.
Current wording
Our ability to pay the principal and interest on our debt and to satisfy our other liabilities will depend on our future operating performance. Our future operating performance 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. 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.
Previous wording
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. We actively manage our capital spending and are focused primarily on required maintenance spending. Additionally, increasing oil prices have resulted in an increase in demand for our services and an improvement in our operating cash flow, which became positive in the third and fourth quarters of 2022. 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.
Current wording
We actively manage our capital spending and are focused primarily on required maintenance spending. For the past couple of years, due to increasing oil prices leading to an increase in demand for our services, our operating cash flow has been positive. Based on our current forecasts, we believe our cash on hand, availability under the New ABL Facility and our cash flows will provide us with the ability to fund our operations for at least the next twelve months.
Previous wording
We entered into a $100.0 ABL Facility on August 10, 2018. 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). The ABL Facility is tied to a borrowing base formula and has no maintenance financial covenants as long as the minimum level of borrowing availability is maintained. 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.
Current wording
On August 10, 2018, the Company entered into a Credit Agreement, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent (“Prior Administrative Agent”), as collateral agent and as issuing lender, and the lenders party thereto, which has been repaid in full and the commitments thereunder terminated (as amended, supplemented, or otherwise modified prior to the date hereof, the “Prior ABL Facility”). The Prior ABL Facility became effective on September 14, 2018 and was scheduled to mature in 2025. Borrowings under the Prior ABL Facility bore interest at a rate equal to Term SOFR (as defined in the Prior ABL Facility) plus the Applicable Margin (as defined in the Prior ABL Facility). The Prior ABL Facility was secured by, among other things, a first priority lien on the Company’s accounts receivable and inventory and contained customary conditions precedent to borrowing and affirmative and negative covenants. $50.0 was outstanding under the Prior ABL Facility as of December 31, 2024. The effective interest rate under the Prior ABL Facility was approximately 7.44% on December 31, 2024.
Previous wording
The ABL Facility includes financial, operating and negative covenants that limit our ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. It also includes a covenant to deliver annual audited financial statements that are not qualified by a “going concern” or like qualification or exception. A failure to comply with the obligations contained in the ABL Facility could result in an event of default, which could permit acceleration of the debt, termination of undrawn commitments and enforcement against any liens securing the debt.
Current wording
The New ABL Facility includes financial, operating and negative covenants that limit our ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. It also includes a covenant to deliver annual audited financial statements that are not qualified by a “going concern” or like qualification or exception. A failure to comply with the obligations contained in the New ABL Facility could result in an event of default, which could permit acceleration of the debt, termination of undrawn commitments and enforcement against any liens securing the debt. The New ABL Facility contains certain other covenants (including the ability to incur indebtedness for the purpose of consummating permitted acquisitions, subject to the terms of the New ABL Facility), events of default and other customary provisions. Our New ABL Facility matures in 2028.
Previous wording
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. 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.
Current wording
In conjunction with the acquisition of Motley Services, LLC (“Motley”) in 2018, we issued $250.0 principal amount of the 2025 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. On a net basis, after taking into consideration the debt issuance costs for the 2025 Senior Notes, total debt as of December 31, 2024 was $235.1. The 2025 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, 2024 was $4.5.
Previous wording
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.
Current wording
During the year ended December 31, 2024, we entered into the Exchange Agreement with a noteholder of our 2025 Senior Notes. Pursuant to the Exchange Agreement, the noteholder exchanged $1.0 in aggregate principal amount of the Company’s outstanding 2025 Senior Notes for an aggregate of 190,476 shares of our Common Stock through the Exchange.
Previous wording
The Company’s shares of Common Stock issued in connection with the Exchanges were not registered under the Securities Act, and were issued to existing holders of the Company’s securities without commission in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Current wording
The Company’s shares of Common Stock issued in connection with the debt-for-equity exchanges were not registered under the Securities Act, and were issued to existing holders of the Company’s securities without commission in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Previous wording
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.
Current wording
The 2025 Senior Notes exchanged in 2024 represent approximately 0.4% of the outstanding principal amount of outstanding 2025 Senior Notes prior to the Exchange. Following the Exchange, approximately $236.3 in aggregate principal amount of the 2025 Senior Notes remained outstanding.
Previous wording
The Indenture contains customary affirmative and negative covenants restricting, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or sell substantially all of the Company’s assets.
Current wording
The 2030 Senior Notes Indenture also restricts, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or convey, transfer or lease all or substantially all of the Company’s properties and assets to another person, which, in each case, is subject to certain limitations and exceptions. The 2030 Senior Notes Indenture also contains customary events of default including, among other things, the failure to pay interest for three business days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the 2030 Senior Notes Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $7.5, material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy. The 2030 Senior Notes Indenture permits the Company to incur additional pari passu indebtedness of up to $150.0 within twelve months of the Refinancing (including for the purpose of consummating permitted acquisitions and investments) subject to the terms and conditions contained in the 2030 Senior Notes Indenture and contains certain other covenants, events of default and other customary provisions.
Previous wording
Our capital expenditures were $57.1 during the year ended December 31, 2023, compared to $35.6 in the year ended December 31, 2022. 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. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and Company initiatives. Capital expenditures for growth and Company initiatives are discretionary. 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.
Current wording
Our capital expenditures were $65.1 during the year ended December 31, 2024, compared to $57.1 in the year ended December 31, 2023. Based on current industry conditions and our significant investments in capital expenditures over the past several years, we expect to incur between $45.0 and $55.0 in capital expenditures for the year ending December 31, 2025. The nature of our capital expenditures is comprised of a base level of investment required to support our current operations and amounts related to growth and Company initiatives. Capital expenditures for growth and Company initiatives are discretionary. 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.
Previous wording
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. 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.
Current wording
Shares of Common Stock offered and sold in the ATM Offering were 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. The Registration Statement expired on June 11, 2024 pursuant to Rule 415(a)(5) under the Securities Act. Sales under the ATM Offering program may restart when and if the Company files a prospectus supplement under a successor registration statement.
Previous wording
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.
Current wording
The Company used the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which included funding acquisitions, capital expenditures and working capital.
Previous wording
During the three and twelve months ended December 31, 2023, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.1 and $0.5, respectively. 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.
Current wording
During the three and twelve months ended December 31, 2024, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.3 and $0.5, respectively. During the three and twelve months ended December 31, 2023, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $0.1 and $0.5, respectively.
Previous wording
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. 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.
Current wording
At December 31, 2024, we had $91.6 of cash and cash equivalents. Cash on hand at December 31, 2024 decreased by $20.9 during the year then ended, due to $54.2 of cash flows provided by operating activities, partially offset by $24.0 of cash flows used in financing activities and $51.1 of cash flows used in investing activities. 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.
Previous wording
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, 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. 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.
Current wording
Net working capital as of December 31, 2024 was $25.7, a decrease of $21.5 as compared to net working capital of $47.2 as of December 31, 2023. 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, 2024, total current assets excluding cash decreased by $36.4 and total current liabilities excluding accrued interest, operating lease obligations and finance lease obligations decreased by $14.9. The decrease in net current assets was primarily related to a decrease of $30.1 in accounts receivable-trade, net and a decrease of $2.5 in inventory. The decrease in total current liabilities was due to a decrease of $13.5 in accounts payable and a decrease of $1.4 in accrued liabilities.
Previous wording
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 increase in operating cash flows was primarily attributable to the increase in revenues across all operating segments and most service and related product lines driven by a broader recovery in industry activity.
Current wording
Net cash provided by operating activities was $54.2 for the year ended December 31, 2024, as compared to net cash provided by operating activities of $115.6 for the year ended December 31, 2023. The decrease in operating cash flows was primarily attributable to the decrease in revenues across all operating segments.
Previous wording
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. The cash used in investing activities for the year ended December 31, 2023 was primarily driven by increased maintenance and growth capital spending to support our growing business operations.
Current wording
Net cash used in investing activities was $51.1 for the year ended December 31, 2024, as compared to net cash used in investing activities of $39.7 for the year ended December 31, 2023. The cash used in investing activities for the year ended December 31, 2024 was primarily driven by increased maintenance and growth capital spending to support our business operations.
Previous wording
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. During the year ended December 31, 2023, there were no additional borrowings under our ABL Facility and no sales under our ATM Offering program.
Current wording
Net cash used in financing activities was $24.0 for the year ended December 31, 2024, compared to net cash used in financing activities of $20.8 for the year ended December 31, 2023. During the year ended December 31, 2024, there were no additional borrowings under our Prior ABL Facility and no sales under our ATM Offering program.
Previous wording
Under the ASC 805 acquisition method of accounting, we allocate the fair value of purchase consideration transferred to the tangible assets and intangible assets acquired, if any, and liabilities assumed based on their estimated fair values on the date of the acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on assumptions and methodologies determined by management. Real property was valued using a market approach. Personal property was valued using a combination of market approach and replacement cost approach. The estimated fair value of the assets acquired, net of liabilities assumed, exceeds the purchase consideration, resulting in a bargain purchase gain.
Current wording
Under the FASB ASC Topic 805, Business Combinations acquisition method of accounting, we allocate the fair value of purchase consideration transferred to the tangible assets and intangible assets acquired, if any, and liabilities assumed based on their estimated fair values on the date of the acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on assumptions and methodologies determined by management. Real property was valued using a market approach. Personal property was valued using a combination of market approach and replacement cost approach. The estimated fair value of the assets acquired, net of liabilities assumed, exceeds the purchase consideration, resulting in a bargain purchase gain.
Previous wording
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. 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.
Current wording
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. 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, 2024 and December 31, 2023 was $4.2 and $5.5, respectively.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Net cash used in financing activities
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.