EDGAR 10-K Filing

Company CIK: 1529463
Filing Year: 2021
Filename: 1529463_10-K_2021_0001558370-21-002464.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
General
Certain prior year financial statements are not comparable to our current year financial statements due to the adoption of fresh start accounting. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the reorganized Company subsequent to November 19, 2020. References to “Predecessor” or “Predecessor Company” relate to the financial position and results of operations of the Company prior to, and including, November 19, 2020.
FTS International, Inc. (the “Company”, “we”, “our”) is one of the largest providers of hydraulic fracturing services in North America. We have 1.4 million total hydraulic horsepower across 28 fleets, with 13 fleets active as of January 1, 2021. Our customers include leading oil and natural gas E&P companies in North America. We operate in some of the most active oil and gas basins in the United States.
We provide the equipment, personnel, expertise, and certain materials needed to stimulate our customers’ wells safely, effectively, and efficiently. In addition, we manufacture many of the components used by our fleets, including fabrication of pumps and certain consumables used in pumps, such as fluid-ends. We also perform substantially all the maintenance, repair, and refurbishment of our fleets, including the rebuilding of engines and transmissions. We believe the cost to manufacture components and refurbish fleets is significantly less than the cost of utilizing third-party suppliers. In addition, we believe our in-house manufacturing capabilities allow us to reactivate equipment quicker and at a lower cost than utilizing third-party suppliers.
We have a uniform fleet of high-horsepower hydraulic fracturing equipment, designed for completions work in areas requiring high levels of pressure, flow rate and sand intensity. We designed and assembled all of our existing fleets
using internal resources. The standardized, “plug and play” nature of our fleet provides us with several advantages, including reduced repair and maintenance costs, reduced inventory costs, reduced training, the ability to redeploy equipment among operating basins and reduced complexity in our operations, which improves our safety and operational performance.
Recent Developments
Bankruptcy Update
On September 22, 2020, FTS International, Inc., FTS International Services, LLC, and FTS International Manufacturing, LLC filed petitions for voluntary relief (the “Chapter 11 Cases”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). On September 22, 2020, FTSI International, Inc., FTS International Services, LLC, and FTS International Manufacturing, LLC filed the Joint Prepackaged Chapter 11 Plan of Reorganization of FTS International, Inc. and its Debtor Affiliates (as amended, modified or supplemented, the “Plan”) and the related disclosure statement (the “Disclosure Statement”). On November 4, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Plan, as modified by the Confirmation Order, and approving the Disclosure Statement.
On November 19, 2020 (the “Effective Date”), the Plan became effective in accordance with its terms and FTS International, Inc., FTS International Services, LLC and FTS International Manufacturing, LLC emerged from Chapter 11. Pursuant to the Plan, on the Effective Date, all agreements, instruments, and other documents evidencing, relating to or otherwise in connection with any of our common stock or other equity interests outstanding prior to the Effective Date (collectively, the “legacy equity interests”) were cancelled and such legacy equity interests have no further force or effect after the Effective Date. Holders of our legacy equity interests received (i) a number of shares of Class A common stock equal to their proportionate distribution of approximately 9.4% of our common stock under the Plan (subject to dilution by the warrants issued pursuant to the Plan and the Amended and Restated Equity and Incentive Compensation Plan (the “MIP”)), (ii) their proportionate distribution of 1,555,521 Tranche 1 Warrants to acquire Class A common stock and (iii) their proportionate distribution of 3,888,849 Tranche 2 Warrants to acquire Class A common stock.
In addition, pursuant to the Plan, on the Effective Date, all outstanding obligations under the 6.25% senior secured notes due May 1, 2022 (the “Notes”) and were cancelled and the indenture governing such obligations was cancelled, and the credit agreement, dated as of April 16, 2014, by and among FTS International, Inc., the lenders party thereto, and Wilmington Savings Fund Society, FSB, as successor administrative agent (the “Term Loan Agreement”), was cancelled, in each case except to the limited extent expressly set forth in the Plan. On the Effective Date, all liens and security interests granted to secure such obligations were automatically terminated and are of no further force and effect. The holders of Notes and holders of the claims under the Term Loan Agreement received their proportionate distribution of approximately 90.1% of our common stock (subject to dilution by the warrants issued pursuant to the Plan and the MIP) plus their pro rata share of $30.7 million cash distribution. The holders of claims in connection with the termination of the supply agreement between the Predecessor and Covia Holding Corporation received, in exchange for their claims, a $12.5 million cash distribution and 0.5% of our common stock (subject to dilution by the warrants issued pursuant to the Plan and the MIP).
Shares of Class A common stock were also issued to a holder of certain termination claims under the Plan.
Our Services
Hydraulic Fracturing
Our primary business is providing hydraulic fracturing services, also known as pressure pumping, to E&P companies. These services enhance hydrocarbon flow in oil and natural gas wells, thus increasing the amount of hydrocarbons recovered.
Oil and natural gas wells are typically divided into one or more “stages,” which are isolated zones that focus the high-pressure fluid and proppant from the hydraulic fracturing fleet into distinct portions of the well and surrounding reservoir. The number of stages that will divide a well is determined by the customer’s proposed job design. Our customers typically measure our operational performance in terms of the number of stages fractured or the number of hours pumped in a day, which is an indicator of how well we minimize non-productive time on our jobs. As a result, we believe the average number of stages completed per active fleet in a given period of time is an important operating metric.
Hydraulic fracturing represents the largest cost of completing an oil or natural gas well. The process consists of pumping a fracturing fluid into a well casing or tubing at sufficient pressure to fracture, or prop open, the formation. The fracturing fluid consists of water and sand, also known as proppant, mixed with a small amount of chemicals. Once the pressure opens the fractures, the proppants act as a wedge that keep the fractures open, allowing the trapped hydrocarbons to flow more freely. As a result of a successful fracturing process, hydrocarbon recovery rates are substantially enhanced, increasing the return on investment for our customer. The amount of hydrocarbons produced from a typical oil or natural gas well generally declines quickly. As a result, E&P companies must continually complete new wells to maintain production levels.
Each of our fleets typically consists of approximately 20 hydraulic fracturing units along with ancillary equipment. Our hydraulic fracturing units consist primarily of a high-pressure pump, a diesel or combined diesel and natural gas engine, a transmission and various other supporting equipment mounted on a trailer. The high pressure pump consists of two key assemblies: the fluid-end and the power-end. Although the power-end of our pumps generally lasts several years, the fluid-end, which is the part of the pump where fluid is converted from low pressure to high pressure, is a shorter-lasting consumable, typically lasting less than one year. We refer to the group of hydraulic fracturing units, auxiliary equipment and vehicles necessary to perform a typical fracturing job as a “fleet” and the personnel assigned to each fleet as a “crew.” Our fleets operate on a 24-hour-per-day basis, in which we typically staff three crews per fleet, including one crew with the day off.
Each hydraulic fracturing fleet includes a mobile, on-site control center that is used to control the equipment and monitor job data including pressures, rates and volumes. Each control center is equipped with high bandwidth communication that provides continuous upload and download of data. The data is delivered on a real-time basis to on-site job personnel, the customer and our National Operations Center.
We prefer to enter into service agreements with our customers for one or more “dedicated” fleets, rather than providing our fleets for “spot work.” Under a typical dedicated fleet agreement, we deploy one or more of our hydraulic fracturing fleets exclusively to the customer to follow the customer’s completion schedule until the agreement expires or is terminated in accordance with its terms. By contrast, under a typical spot work agreement, the fleet moves between customers as work becomes available. We believe that our strategy of pursuing dedicated fleet agreements leads to higher fleet utilization, as measured by the number of days each fleet is working per month, which we believe improves our revenue and profitability.
Our Strategy
Our primary business objective is to deliver best in class pressure pumping services to our customers while providing a safe working environment for our employees and maintaining a competitive cost structure. We intend to achieve this objective through the following strategies:
Deepen and expand relationships with customers that value our completions efficiency
We prefer to dedicate one or more of our fleets exclusively to the customer for a period of time, allowing for those fleets to be integrated into the customer’s drilling and completion schedule. As a result, we are able to achieve higher levels of utilization, as measured by the number of days each fleet is working per month and the number of hours each fleet is working each day, which increases our profitability. Accordingly, we seek to partner with customers that have a large number of wells needing completion and that value efficiency in the performance of our service. Specifically, we target customers whose completions activity typically involves minimal time between stages, a high
number of stages per well, multiple wells per pad and a short distance from one well pad site to the next. This strategy aligns with the strategy of many of our customers, who are trying to achieve a manufacturing-style model of drilling and completing wells at a competitive cost. We plan to leverage this strategy to expand our relationships with our existing and prospective customers.
Capitalize on our uniform fleet and in-house manufacturing to provide superior performance with reduced operating costs
Our uniform fleet allows us to cost-effectively redeploy fleets to capture the best pricing and activity trends. The uniform fleet is easier to operate and maintain, resulting in reduced non-productive time as well as lower training costs and inventory stocking requirements.
Our in-house manufacturing allows us to maintain and refurbish our fleets, with lower operating expenses and capital expenditures compared to utilizing third-party suppliers. We also believe this capability allows us to reactivate equipment quicker and at a lower cost than competitors, which we believe at times is a competitive advantage.
Maintain high safety standards
Safety is at the core of our operations and defines who we are and how we operate as a company. Our safety record for 2020 was the best in our history and we believe significantly better than our peer group, based on data provided by the U.S. Bureau of Labor Statistics from 2011 through 2018. Our 2020 Total Recordable Incident Rate (“TRIR”) was 0.20 and Lost Time Incident Rate (“LTIR”) was 0.00 for a total of 2,035,023 man hours worked. Our outstanding Experience Modification Rate for 2020 was 0.58. We believe that our TRIR is about one-fourth the industry average and our LTIR has averaged several times lower than the industry average for the past decade. We believe continually searching for ways to make our operations safer is the right thing to do for our employees, our customers, our suppliers, and our Company.
Rapidly adopt new technologies in a capital efficient manner
Our large scale and culture of innovation allow us to take advantage of leading technological solutions. We have been a fast adopter of new technologies focused on: increasing fracturing effectiveness for our customers, reducing non-productive time on our equipment, reducing the operating costs of our equipment, and enhancing the health, safety and environmental (“HSE”) conditions at our well sites.
Recent examples of initiatives aimed at reducing our operating costs include: vibration sensors with predictive maintenance analytics on our equipment; automated greasing systems; remote start capabilities; the ability to automate certain portions of our operations using technology; and adoption of hardened alloys for our consumables. Recent examples of initiatives aimed at improving our HSE conditions include: dual fuel engines that can run on both natural gas and diesel fuel; electronic pressure relief systems; spill prevention and containment solutions; electronic logging devices; containerized proppant delivery solutions; and advanced fire suppression systems.
Maintain a focus on cost effectiveness and capital efficiency
All levels of our organization focus on providing the safest work environment for our employees and on generating the highest level of cash generation as possible, within the limitations of industry conditions.
We focus on operating our equipment at the highest level of efficiency to maximize billing activity for each of our fleets, which is often measured in terms of stages completed per active fleet. In turn, we strive to charge a competitive rate to our customers and to be compensated for the high level of efficiency that we provide. This ultimately leads to lower costs for our customers.
In addition, we embrace innovation to continually find ways to lower the costs of doing business. This is enabled by our culture and our in-house manufacturing capabilities, which allow us to continuously identify and execute improvements in the design and operation of our equipment.
Customers
The customers we serve are primarily large, independent E&P companies in North America. For the Successor period of November 20, 2020 to December 31, 2020 we had 6 customers make up over 10% of our consolidated revenue. These six customers represented 81% of our consolidated revenue; this level of customer concentration is partially due to the short time period included in the Successor period and may not be representative of customer concentration levels over a longer time period, such as a full fiscal year. For the Predecessor period of January 1, 2020 through November 19, 2020 we had one customer make up over 10% of our consolidated revenue. This customer represented 12% of our consolidated revenue. For the year ended December 31, 2019 we had two customers make up over 10% of our consolidated revenue. These two customers represented 26% of our consolidated revenue. For the year ended December 31, 2018 we had two customers make up over 10% of our consolidated revenue. These two customers represented 24% of our consolidated revenue. The loss of any of our largest existing customers could have a material adverse effect on our results of operations. While we view revenue as an important metric in assessing customer concentration, we also compare and manage our customer portfolio based on the number of fleets we place with each customer.
Suppliers
We purchase parts used in the refurbishment, repair and manufacturing of major fleet components such as fluid-ends, power-ends, engines, transmissions, radiators and trailers. We do not expect significant interruptions in the supply of any of these materials. While we believe that we will be able to make alternative arrangements in the event of any interruption in the supply of these items, there can be no assurance that there will be no associated price or supply issues.
When requested by the customer, we also purchase the proppants and chemicals we use in our operations and the diesel fuel for our equipment from a variety of suppliers throughout the United States. To date, we have generally been able to obtain the supplies necessary to support our operations on a timely basis at competitive prices. In the past, we have experienced some delays in obtaining these materials during periods of high demand.
Competition
The market in which we operate is highly competitive and highly fragmented. Our competition includes multi-national oilfield service companies as well as national and regional competitors. Our major multi-national competitors is Halliburton Company, which has significantly greater financial resources than we do. Our major domestic competitors are NextTier Oilfield Solutions, Inc., ProPetro Holding Corp, Liberty Oilfield Services, Inc., RPC, Inc., Patterson-UTI Energy, Inc., and Pro Frac Services. Certain of these competitors provide a number of oilfield services and products in addition to hydraulic fracturing. We also face competition from smaller regional service providers in some of the geographies in which we operate.
Competition in our industry is based on a number of factors, including price, service quality, safety, and in some cases, breadth of products. We believe we consistently deliver exceptional service quality, based in part on the durability of our equipment. Our durable equipment reduces non-productive time due to equipment failure and allows our customers to avoid costs associated with delays in completing their wells. By being able to meet the most demanding pressure and flow rate requirements, our equipment also enables us to operate efficiently in challenging geological environments in which some of our competitors cannot operate effectively.
Cyclical Nature of Industry
We operate in a highly cyclical industry driven mainly by the level of horizontal drilling activity in the United States, which in turn depends largely on current and anticipated future crude oil and natural gas prices and production decline rates. A critical factor in assessing the outlook for the industry is the supply and demand for both oil and natural gas. Demand for oil and natural gas is subject to large and rapid fluctuations. These fluctuations are driven by commodity demand and corresponding price increases. When oil and natural gas prices increase, producers could increase their capital expenditures, which generally results in greater revenues and profits for oilfield service companies. However, increased capital expenditures also ultimately result in greater production, which historically, has resulted in
increased supplies and reduced prices that, in turn, tend to reduce demand for oilfield services such as hydraulic fracturing services.
The pricing for our services is also driven by the industry capacity of hydraulic fracturing equipment. Historically, the industry has built additional equipment to supply the increased demand. When the demand declines, the industry has more equipment than what is needed by customers. This often leads to a decline in the price for our services until equipment is de-activated and the supply and demand fundamentals are closer to balanced.
For these reasons, our results of operations may fluctuate from quarter to quarter and from year to year, and these fluctuations may distort period-to-period comparisons of our results of operations.
Seasonality
Seasonality has not significantly affected our overall operations. However, toward the end of some years, we experience slower activity in our pressure pumping operations in connection with the holidays and as customers’ capital expenditure budgets are depleted. Similarly, the beginning of some years has a slow start as customers are starting a new capital budget cycle and our operations are more prone to experience winter weather. Occasionally, our operations have been negatively impacted by severe weather conditions that cause disruption to our supply chain or our ability to transport materials and equipment to the job site.
Employees
At December 31, 2020, we had approximately 890 total employees, primarily all were full-time. Our employees are not covered by collective bargaining agreements, nor are they members of labor unions. We consider our relationship with our employees to be good.
Insurance
Our operations are subject to hazards inherent in the oil and natural gas industry, including accidents, blowouts, explosions, fires, oil spills and hazardous materials spills. These conditions can cause personal injury or loss of life, damage to or destruction of property, equipment, the environment and wildlife and interruption or suspension of operations, among other adverse effects. If a serious accident were to occur at a location where our equipment and services are being used, it could result in us being named as a defendant to a lawsuit asserting significant claims.
Despite our high safety standards, we from time to time have suffered accidents in the past and we anticipate that we could experience accidents in the future. In addition to the property and personal losses from these accidents, the frequency and severity of these incidents affect our operating costs and insurability, as well as our relationships with customers, employees and regulatory agencies. Any significant increase in the frequency or severity of these incidents, or the general level of compensation awards, could adversely affect the cost of, and our ability to obtain, workers’ compensation and other forms of insurance and could have other adverse effects on our financial condition and results of operations.
We carry a variety of insurance coverages for our operations, and we are partially self-insured for certain claims, in types and amounts that we believe to be customary and reasonable for our industry. These coverages and retentions address certain risks relating to commercial general liability, workers’ compensation, business auto, property and equipment, directors and officers, environment, pollution and other risks. Although we maintain insurance coverage in types and amounts that we believe to be customary in our industry, we are not fully insured against all risks, either because insurance is not available or because of the high premium or deductible costs relative to perceived risk.
Safety and Health Regulation
We are subject to the requirements of the federal Occupational Safety and Health Act, which is administered and enforced by the Occupational Safety and Health Administration (“OSHA”), and comparable state laws that regulate the health and safety of workers. In addition, the OSHA hazard communication standard requires that information about
the identities and hazards of the chemicals used or produced in operations be maintained and provided to employees, state and local government authorities and the public. We believe that our operations are in substantial compliance with the OSHA requirements, including general industry standards, record keeping requirements, labeling requirements, training requirements and monitoring of occupational exposure to regulated substances. OSHA continues to evaluate worker safety and to propose new regulations, such as but not limited to, Respirable Crystalline Silica Standard, which requires hydraulic fracturing operations in the oil and gas industry to implement engineering controls to limit exposure to respirable silica sand by June 23, 2021. Although it is not possible to estimate the financial and compliance impact of this rule or any other proposed rule, the imposition of more stringent requirements could have a material adverse effect on our business, financial condition and results of operations.
Intellectual Property Rights
Our research and development efforts are focused on providing specific solutions to the challenges our customers face when fracturing and stimulating wells. In addition to the design and manufacture of innovative equipment, we have also developed proprietary blends of chemicals that we use in connection with our hydraulic fracturing services. We have three U.S. patents relating to fracturing methods, the technology used in fluid-ends, hydraulic pumps and other equipment. We believe the information regarding our customer and supplier relationships are also valuable proprietary assets. We have registered trademarks and pending trademark applications for various names under which our entities do or intend to conduct business and offer products. Except for the foregoing, we do not own or license any patents, trademarks or other intellectual property that we believe to be material to the success of our business.
Governmental Regulation
Our operations are subject to stringent laws and regulations relating to protection of the environment, natural resources, clean air, drinking water, wetlands and endangered species, as well as chemical use and storage, waste management, and transportation of hazardous and non-hazardous materials. Numerous federal, state and local governmental agencies, such as the U.S. Environmental Protection Agency (the “EPA”), issue regulations that often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties and may result in injunctive obligations for non-compliance. In addition, some laws and regulations relating to protection of the environment may impose strict liability, joint and several liability or both for environmental contamination. Strict liability means we could be liable for environmental damages and cleanup costs without regard to negligence or fault. Strict adherence with these regulatory requirements increases our cost of doing business and consequently affects our profitability. However, environmental laws and regulations have been subject to frequent changes over the years, and the imposition of more stringent requirements, including as a result of the recent presidential and congressional elections, could have a material adverse effect on our business, financial condition and results of operations.
Hydraulic Fracturing Activities. Environmental aspects of hydraulic fracturing practices, including its potential impacts on drinking water sources, have become the subject of increasing scrutiny by governmental authorities. This scrutiny, including ongoing or proposed studies of hydraulic fracturing like these could spur initiatives to further regulate the practice under the federal Safe Drinking Water Act (“SDWA”) or other regulatory mechanisms. For example, on November 29, 2018, EPA and the State Review of Oil and Natural Gas Environmental Regulation (“STRONGER”) entered into a Memorandum of Understanding pursuant to which EPA and STRONGER will collaborate on oil and natural gas exploration and development regulatory programs.
In addition, public concerns have been raised recently regarding the disposal of hydraulic fluid in injection wells. Partly in response to public concerns, the Railroad Commission of Texas (“RRC”), amended its existing oil and gas disposal well regulations to require seismic activity data in permit applications and provisions to authorize the imposition of certain limitations on existing wells if seismic activity increases in the area of an injection well, including a temporary injection ban. Regulations in the states in which we operate may require our customers to obtain a permit from the applicable regulatory agencies to operate saltwater disposal wells. These regulatory agencies have the general authority to suspend or modify one or more of these permits if continued operation of an underground injection well is likely to result in pollution of freshwater, substantial violation of permit conditions or applicable rules, leaks to the environment or other conditions such as earthquakes. Although we are not involved in the injection process of wells that
we provide services on for our customers, any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in cancellation of operations of a well, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third parties for property damages and personal injuries.
Further, several states have adopted or are considering legal requirements that could impose more stringent permitting, disclosure and well construction requirements on hydraulic fracturing activities. For example, in May 2013, the RRC issued a “well integrity rule,” which updates the requirements for drilling, putting pipe down and cementing wells. The well integrity rule took effect in January 2014. Other states, including Colorado, Pennsylvania and Ohio, as well as regional authorities such as the Delaware River Basin Commission and local governments, have adopted or are considering adopting regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids, while certain other states have issued bans on the practice. If new or more stringent state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we operate, we could incur potentially significant added costs to comply with such requirements, experience delays or curtailment in the pursuit of development activities and perhaps even be precluded from drilling wells. See “Risk Factors-Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays” in Item 1A of this annual report
Remediation of Hazardous Substances. The Comprehensive Environmental Response, Compensation and Liability Act, as amended, referred to as “CERCLA” or the “Superfund law,” and comparable state laws generally impose liability, without regard to fault or legality of the conduct at the time it occurred, on certain classes of persons that are considered to be responsible for the release of hazardous substances into the environment. These persons include the current owner or operator of a contaminated facility, a former owner or operator of the facility at the time a release of hazardous substances occurred and those persons that disposed or arranged for the disposal of the hazardous substances to an offsite facility, and liability under these laws can be imposed on a joint and several basis without regard to fault and can extend to damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released into the environment.
Water Discharges. The Federal Water Pollution Control Act of 1972, as amended, also known as the “Clean Water Act,” the Safe Drinking Water Act, the Oil Pollution Act and analogous state laws and regulations issued thereunder impose restrictions and strict controls regarding the unauthorized discharge of pollutants, including produced waters and other natural gas and oil wastes, into navigable waters of the United States, as well as state waters. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or the state. Under the Clean Water Act, the EPA has adopted regulations concerning discharges of storm water, which require covered facilities to obtain permits, maintain storm water plans and implement practices to minimize risks related to storm water. In June 2016, EPA published a final rule prohibiting the discharge of wastewater from onshore unconventional oil and natural gas extraction facilities to publicly owned wastewater treatment plants.
These laws and regulations also prohibit certain other activity in wetlands unless authorized by a permit issued by the U.S. Army Corps of Engineers, which we refer to as the “Corps.” In September 2015, a new rule became effective which was issued by the EPA and the Corps defining the scope of the jurisdiction of the EPA and the Corps over wetlands and other waters of the United States. After extensive litigation and rulemaking, on January 23, 2020, the EPA and Corps replaced this rule with the Navigable Waters Protection Rule to define “Waters of the United States,” a rule that streamlines the definition of “Water of the United States” that are federally regulated under the Clean Water Act to four categories. Litigation challenging the rule is ongoing, which may also be subject to revision by the current Presidential administration. The rapidly changing landscape of federal regulation creates uncertainty in our and our customers’ business. Under the Clean Water Act, we are also subject to Spill Prevention, Control and Countermeasure plan requirements that require appropriate containment berms and similar structures to help prevent the contamination of navigable waters. Noncompliance with these requirements may result in substantial administrative, civil and criminal penalties, as well as injunctive obligations.
Underground injection operations are also subject to SDWA as well as analogous state and local laws and regulations including the Underground Injection Control (“UIC”) program, which includes requirements for permitting, testing, monitoring, record keeping and reporting of injection well activities. The federal Energy Policy Act of 2005 amended the UIC provisions to exclude certain hydraulic fracturing activities from the definition of “underground injection” under certain circumstances. However, the repeal of this exclusion has been advocated by certain advocacy organizations and others in the public. Legislation regulating underground injection has been introduced at the state level. For example, at the state level, several states in which we operate, including Wyoming, Texas, Colorado and Oklahoma, have adopted regulations requiring operators to disclose certain information regarding hydraulic fracturing fluids.
Waste Handling. Wastes from certain of our operations (such as equipment maintenance and past chemical development, blending, and distribution operations) are subject to the federal Resource Conservation and Recovery Act of 1976 (“RCRA”), and comparable state statutes and regulations promulgated thereunder, which impose requirements regarding the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. With federal approval, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Although certain oil production wastes are exempt from regulation as hazardous wastes under RCRA, such wastes may constitute “solid wastes” that are subject to the less stringent requirements of non-hazardous waste provisions.
However, legislation has been proposed from time to time in Congress to re-categorize certain oil and natural gas exploration, development and production wastes as “hazardous wastes.” Several environmental organizations have also petitioned the EPA to modify existing regulations to recategorize certain oil and natural gas exploration, development and production wastes as “hazardous.” Any such changes in the laws and regulations could have a material adverse effect on our capital expenditures and operating expenses.
From time to time, releases of materials or wastes have occurred at locations we own, owned previously or at which we have operations. These properties and the materials or wastes released thereon may be subject to CERCLA, RCRA, the Clean Water Act, and analogous state laws. Under such laws and related regulations, we have been and may be required to investigate, remove or remediate these materials or wastes and make expenditures associated with personal injury or property damage. At this time, with respect to any properties where materials or wastes may have been released, but of which we have not been made aware, it is not possible to estimate the potential costs that may arise from unknown, latent liability risks.
Air Emissions. The federal Clean Air Act, as amended, and comparable state laws and regulations, regulate emissions of various air pollutants, including through the issuance of permits. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants from specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the Clean Air Act and associated state laws and regulations. We are required to obtain air permits in connection with some activities under applicable laws. These permits impose certain conditions and restrictions on our operations, some of which require significant expenditures for compliance. Changes in these requirements, or in the permits we operate under, could increase our costs or limit operations.
Additionally, the EPA’s Tier IV regulations apply to certain off-road diesel engines used by us to power equipment in the field. Under these regulations, we are required to retrofit or retire certain engines and we are limited in the number of non-compliant off-road diesel engines we can purchase. Tier IV engines are costlier, and until Tier IV-compliant engines that meet our needs are more widely available, these regulations could limit our ability to acquire a sufficient number of diesel engines to expand our fleet and to replace existing engines as they are taken out of service.
Other Environmental Considerations. E&P activities on federal lands may be subject to the National Environmental Policy Act, also known as NEPA. NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions that have the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an environmental assessment that assesses the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed environmental impact statement that may be made available for public review and comment. E&P activities, as well as proposed exploration and
development plans, on federal lands require governmental permits that are subject to the requirements of NEPA. This process has the potential to delay the development of oil and natural gas projects.
Various state and federal statutes prohibit certain actions that adversely affect endangered or threatened species and their habitat, migratory birds, wetlands, and natural resources. These statutes include the Endangered Species Act, the Migratory Bird Treaty Act, the Bald and Golden Eagle Protection Act, the Clean Water Act and CERCLA. Where takings of or harm to species or damages to habitat, jurisdictional waters or natural resources occur or may occur, government entities or private parties may act to prevent oil and natural gas exploration activities. Permanent restrictions imposed to protect endangered species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures. Government entities may require permits and may also seek damages for harm to species, habitat, or natural resources or resulting from filling of jurisdictional streams or wetlands or releases of oil, wastes, hazardous substances or other regulated materials.
In 2015, the Federal Bureau of Land Management (“BLM”) enacted a new rule imposing a variety of regulatory mandates for hydraulic fracturing on federal land, which was rescinded by the U.S. Department of the Interior in December 2017. In 2016, BLM promulgated regulations aimed at curbing air pollution, including greenhouse gases, for oil and natural gas produced on federal and Indian lands, but a number of waste prevention requirements were rescinded in 2018. On July 15, 2020, the U.S. District Court for the Northern District of California vacated the U.S. Department of the Interior’s rescission of the 2015 rule. The outcome of ongoing litigation relating to the BLM rules, as well as any efforts to reissue them, or impose other limitations on oil and gas operations on federal lands, including any such efforts by the presidential administration, cannot be predicted. In addition, the new Presidential administration has taken steps to restrict oil and gas exploration on federal lands. On January 20, 2021, the Department of the Interior placed a 60-day moratorium on new oil and gas leases and drilling permits on federal lands. President Biden issued executive order on January 27, 2021, which, among other things, halts indefinitely new oil and natural gas leases on federal lands and offshore waters pending completion of a review by the Secretary of the Interior of federal oil and gas permitting and leasing practices in light of the administration's concerns regarding the impact of these activities on the environment and climate. These restrictions and similar restrictions that may be issued in the future may limit our operations and adversely impact our future financial results.
Climate Change. Responding to scientific studies that emissions of gases, commonly referred to as “greenhouse gases,” including gases associated with the oil and gas sector such as carbon dioxide, methane, and nitrous oxide among others, may be contributing to global warming and other environmental effects, the EPA has begun to adopt regulations to report and reduce emissions of greenhouse gases. Any such regulations could affect our business, customers or the energy sector generally. In addition, the U.S. signed an international accord in December 2015, the so-called Paris Agreement, with the objective of limiting greenhouse gas emissions from oil and gas exploration and production operation as well as the power sector. However, in November 2019, the U.S. submitted a formal notice of its withdrawal to the United Nations. On January 20, 2021, President Biden issued a statement formally accepting the Paris Agreement on behalf of the U.S., which triggers a 30 day process for rejoining the accord.
In 2016, the EPA finalized new regulations in 2016 that would set volatile organic compound (“VOC”) and methane emission standards for new and modified oil and gas production and natural gas processing and transmission facilities. Those standards regulate GHGs through limitations on emissions of methane. However, in September 2020, the EPA published a final rule amending the 2016 regulations by removing sources in the transmission and storage segment from the oil and natural gas source category and rescinding the new source performance standards (including VOC and methane requirements) applicable to these sources, and separately rescinding the methane-specific requirements applicable to sources in the production and processing segments of the industry. These final rules have become subject legal challenges and the outcome of these challenges is uncertain. In addition, these standards may be subject to reconsideration pursuant to an executive order issued by President Biden on January 20, 2021, which specifically calls for a proposal to suspend, revise or rescind the September 2020 final rule making technical amendments to the 2016 Standards by September 2021. The executive order also calls on EPA to consider new regulations governing methane and volatile organic compound emissions from existing onshore oil and gas operations by September 2021.
Notwithstanding these federal standards, state regulations with respect to emissions of GHGs could continue to become more restrictive regardless of the decreased burdens under federal regulations. For example, in June 2018 the Pennsylvania Department of Environmental Protection (“PDEP”) adopted heightened permitting conditions for all newly permitted or modified natural gas compressor stations, processing plants and transmission stations constructed, modified, or operated in Pennsylvania in an effort to regulate emissions of the GHG methane at such sites. Then, in December 2019, the PDEP proposed a plan to regulate emissions of VOCs (including methane) at existing well sites and compressor stations. If these or any other actions to address GHG emissions become implemented in the future, they could result in increased costs associated with our operations, a decline in oil and natural gas exploration and production activities of our customers and affect the demand for natural gas.
In addition, the U.S. Congress occasionally attempts to adopt legislation to reduce emissions of greenhouse gases, and many states have taken legal measures to reduce emissions primarily through the planned development of greenhouse gas emission inventories, carbon pricing policies or regional cap and trade programs. Although the U.S. Congress has not yet adopted such legislation, it may do so in the future. Several states continue to pursue related regulations as well. At this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our customers’ business and consequently our own.
In addition, claims have been made against certain energy companies alleging that greenhouse gas emissions from oil and natural gas operations constitute a public nuisance under federal or state common law. Private parties, as well as local governments, have also filed lawsuits against certain energy companies seeking compensation for climate change related damages, including personal injury or property damages. Future climate change litigation could increase our operating costs or negatively impact demand for our services.
NORM. In the course of our operations, some of our equipment may be exposed to naturally occurring radioactive materials (“NORM”) associated with oil and natural gas deposits and, accordingly may result in the generation of wastes and other materials containing NORM. NORM exhibiting levels of naturally occurring radiation in excess of established state standards are subject to special handling and disposal requirements, and any storage vessels, piping and work area affected by NORM may be subject to remediation or restoration requirements. Because certain of the properties presently or previously owned, operated or occupied by us may have been used for oil and natural gas production operations, it is possible that we may incur costs or liabilities associated with NORM.
Pollution Risk Management. We seek to minimize the possibility of a pollution event through equipment and job design, as well as through employee training. We also maintain a pollution risk management program if a pollution event occurs. This program includes an internal emergency response plan that provides specific procedures for our employees to follow in the event of a chemical or hazardous substance release or spill. In addition, we have contracted with several third-party emergency responders in our various operating areas that are available on a 24-hour basis to handle the remediation and clean-up of any chemical or hazardous substance release or spill. We carry insurance designed to respond to foreseeable environmental exposures. This insurance portfolio has been structured in an effort to address incidents that result in bodily injury or property damage and any ensuing investigation and clean up needed at our owned and leased facilities as a result of the mobilization and utilization of our fleet, as well as any claims resulting from our operations.
We also seek to manage environmental liability risks through provisions in our contracts with our customers that allocate risks relating to surface activities associated with the fracturing process, other than water disposal, to us and risks relating to “downhole” liabilities to our customers. Our customers are responsible for the disposal of the fracturing fluid that flows back out of the well as waste water. The customers remove the water from the well using a controlled flow-back process, and we are not involved in that process or the disposal of the fluid. Our contracts generally require our customers to indemnify us against pollution and environmental damages originating below the surface of the ground or arising out of water disposal, or otherwise caused by the customer, other contractors or other third parties. In turn, we indemnify our customers for pollution and environmental damages originating at or above the surface caused solely by us. We seek to maintain consistent risk-allocation and indemnification provisions in our customer agreements to the greatest extent possible. Some of our contracts, however, contain less explicit indemnification provisions, which typically provide that each party will indemnify the other against liabilities to third parties resulting from the
indemnifying party’s actions, except to the extent such liability results from the indemnified party’s gross negligence, willful misconduct or intentional act.
Company Information
Our principal executive office is located at 777 Main Street, Suite 2900, Fort Worth, Texas, 76102 and our telephone number is 817-862-2000. Our website address is www.ftsi.com. The information on our website is not incorporated by reference into this report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. In addition, copies of our annual report will be made available, free of charge, on written request.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
There are several risks related to our business. Among these important risks are the following:
● Our business depends on domestic spending by the onshore oil and natural gas industry, which is cyclical and has significantly declined in past periods;
● Oil and natural gas prices are volatile and have declined significantly in past periods, which has adversely affected, and may again adversely affect, our financial condition, results of operations and cash flows;
● Our customers may not be able to maintain or increase their reserve levels going forward;
● Competition in our industry has intensified during the current industry downturn and may intensify during future industry downturns, and we have not and may not be able to provide services that meet the specific needs of our customers at competitive prices;
● We are dependent on a few customers operating in a single industry. The loss of one or more significant customers could adversely affect our financial condition and results of operations;
● We have experienced a reduction in demand and there may be a continued reduction in demand for our future services due to the ongoing COVID-19 pandemic and competition from alternative energy sources;
● Changes in laws and regulations could prohibit, restrict or limit our operations, increase our operating costs, adversely affect our results or result in the disclosure of proprietary information resulting in competitive harm;
● Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs, liabilities, fines, penalties and other sanctions and additional operating restrictions or delays and can adversely impact our customers;
● Existing or future laws and regulations related to greenhouse gases and climate change could have a negative impact on our business and may result in additional compliance obligations with respect to the release, capture, and use of carbon dioxide that could have a material adverse effect on our business, results of operations, and financial condition; and
● We recently emerged from bankruptcy, which may adversely affect our business and relationships.
The following are important factors that could affect our financial performance and could cause actual results for future periods to differ materially from our anticipated results or other expectations. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition and results of operations.
Risks Relating to Our Business and Industry
Our business depends on domestic spending by the onshore oil and natural gas industry, which is cyclical and has significantly declined in past periods.
Our business is cyclical and depends on the willingness of our customers to make operating and capital expenditures to explore for, develop and produce oil and natural gas in the United States. The willingness of our customers to undertake these activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as:
● prices, and expectations about future prices, for oil and natural gas;
● domestic and foreign supply of, and demand for, oil and natural gas and related products;
● the level of global and domestic oil and natural gas inventories;
● the supply of and demand for hydraulic fracturing and other oilfield services and equipment in the United States;
● the cost of exploring for, developing, producing and delivering oil and natural gas;
● available pipeline, storage and other transportation capacity;
● lead times associated with acquiring equipment and products and availability of qualified personnel;
● the discovery rates of new oil and natural gas reserves;
● federal, state and local regulation of hydraulic fracturing and other oilfield service activities, as well as E&P activities, including public pressure on governmental bodies and regulatory agencies to regulate our industry;
● the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids;
● geopolitical developments and political instability in oil and natural gas producing countries;
● actions of OPEC, its members and other state-controlled oil companies relating to oil price and production controls;
● advances in exploration, development and production technologies or in technologies affecting energy consumption;
● the price and availability of alternative fuels and energy sources;
● weather conditions, natural disasters and global pandemics;
● uncertainty in capital and commodities markets and the ability of oil and natural gas producers to raise equity capital and debt financing; and
● U.S. federal, state and local and non-U.S. governmental regulations and taxes.
Volatility or weakness in oil and natural gas prices (or the perception that oil and natural gas prices will decrease or remain depressed) generally leads to decreased spending by our customers, which in turn negatively impacts drilling, completion and production activity. In particular, the demand for new or existing drilling, completion and production work is driven by available investment capital for such work. When these capital investments decline, our customers’ demand for our services declines. Because these types of services can be easily “started” and “stopped,” and oil and natural gas producers generally tend to be risk averse when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services compared with demand for other types of energy services. Any negative impact on the spending patterns of our customers may cause lower pricing and utilization for our services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Oil and natural gas prices are volatile and have declined significantly in past periods, which has adversely affected, and may again adversely affect, our financial condition, results of operations and cash flows.
The demand for our services depends on the level of spending by oil and natural gas companies for drilling, completion and production activities, which are affected by short-term and long-term trends in oil and natural gas prices, including current and anticipated oil and natural gas prices. Oil and natural gas prices, as well as the level of drilling, completion and production activities, historically have been extremely volatile and are expected to continue to be highly volatile. When oil prices have declined significantly in past periods, we have correspondingly experienced a decline in pressure pumping activity levels across our customer base during these periods. The volatile oil and natural gas prices adversely affected, and could continue to adversely affect, our financial condition, results of operations and cash flows.
Our customers may not be able to maintain or increase their reserve levels going forward.
In addition to the impact of future oil and natural gas prices on our financial performance over time, our ability to grow future revenues and increase profitability will depend largely upon our customers’ ability to find, develop or acquire additional shale oil and natural gas reserves that are economically recoverable to replace the reserves they produce. Hydraulic fractured wells are generally more short-lived than conventional wells. Our customers own or have access to a finite amount of shale oil and natural gas reserves in the United States that will be depleted over time. The production rate from shale oil and natural gas properties generally declines as reserves are depleted, while related per-unit production costs generally increase as a result of decreasing reservoir pressures and other factors. If our customers are unable to replace the shale oil reserves they own or have access to at the rate they produce such reserves, their proved reserves and production will decline over time. Reductions in production levels by our customers over time may reduce the future demand for our services and adversely affect our business, financial condition, results of operations and cash flows.
Our business has been and may continue to be adversely affected by a deterioration in general economic conditions or a weakening of the broader energy industry.
Our results of operations have been adversely affected by the slowdown in the E&P industry. A continued or prolonged slowdown in the E&P industry could continue to adversely affect our results of operations. Additionally, a prolonged economic slowdown or recession in the United States or adverse events relating to the energy industry or regional, national and global economic conditions and factors could negatively impact our operations and therefore adversely affect our results. The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased exploration and development spending by our customers, decreased demand for oil and natural gas and decreased prices for oil and natural gas.
Competition in our industry has intensified during the current industry downturn and may intensify during future industry downturns, and we have not and may not be able to provide services that meet the specific needs of our customers at competitive prices.
The markets in which we operate are generally highly competitive and have relatively few barriers to entry. The principal competitive factors in our markets are price, service quality, safety, and in some cases, breadth of products. We compete with large national and multi-national companies that have longer operating histories, greater financial, technical and other resources and greater name recognition than we do. Several of our competitors provide a broader array of services and have a stronger presence in more geographic markets. In addition, we compete with several smaller companies capable of competing effectively on a regional or local basis. Our competitors may be able to respond more quickly to new or emerging technologies and services and changes in customer requirements. Some contracts are awarded on a bid basis, which further increases competition based on price. Pricing is often the primary factor in determining which qualified contractor is awarded a job. The competitive environment may be further intensified by mergers and acquisitions among oil and natural gas companies or other events that have the effect of reducing the number of available customers. As a result of a combination of continued pressure from increased competition which began during the second half of 2018 and 2019 and decreased demand for our services in 2020 due to the COVID-19 pandemic, we had to lower the prices for our services, which adversely affected our results of operations. If competition remains the same or increases as a result of a continued industry downturn or future industry downturns, we may be
required to lower our prices, which would adversely affect our results of operations. In the future, we may lose market share or be unable to maintain or increase prices for our present services or to acquire additional business opportunities, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Pressure on pricing for our services resulting from increased competition and lack of demand for our services has impacted, and in the future may impact, our ability to maintain utilization and pricing for our services or implement price increases, which may also be impacted in future downturns. During any future periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results of operations. Also, we may not be able to successfully increase prices without adversely affecting our utilization levels. The inability to maintain our utilization and pricing levels, or to increase our prices as costs increase, could have a material adverse effect on our business, financial condition and results of operations.
Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are challenging, and a failure to appropriately allocate capital and resources among our strategic opportunities may adversely affect our business, financial condition, results of operations or cash flows.
In developing our business plan, we consider allocating capital and other resources to various aspects of our business including maintenance, upgrades and refurbishment of our equipment, corporate items and other alternatives. We also consider our likely sources of capital, including cash generated from operations and borrowings and borrowing availability under our Credit Agreement, dated as of November 19, 2020 (the “Credit Facility”). Notwithstanding the determinations made in the development of our business plan, new business opportunities periodically come to our attention, including possible acquisitions and dispositions. If we fail to identify optimal business strategies or fail to optimize our capital investment and capital raising opportunities and the use of our other resources in furtherance of our business strategies, our financial condition and future growth may be adversely affected. Moreover, economic or other circumstances may change from those contemplated by our business plan and our failure to recognize or respond to those changes may limit our ability to achieve our objectives.
A negative shift in investor sentiment of the oil and gas industry has had and will continue to have adverse effects on our customers’ operations and ability to raise debt and equity capital.
Certain segments of the investor community have developed negative sentiment towards investing in our industry. Recent equity returns in the sector versus other industry sectors have led to lower oil and gas and related services representation in certain key equity market indices. In addition, some investors, including investment advisors and certain sovereign wealth funds, pension funds, university endowments and family foundations, have stated policies to disinvest in the oil and gas sector based on their social and environmental considerations. Certain other stakeholders have also pressured commercial and investment banks and other lenders and investors to stop financing oil and gas production and related infrastructure projects, which adversely affects our customers. Such developments, including environmental activism and initiatives aimed at limiting climate change and reducing air pollution, could result in downward pressure on the stock prices of oilfield service companies, including ours. This may also potentially result in a reduction of available capital funding for potential transactions, impacting our future financial results.
Additionally, negative public perception regarding our industry may lead to increased regulatory scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines or enforcement interpretations. Additionally, environmental groups, landowners, local groups and other advocates may oppose our customers’ operations through organized protests, attempts to block or sabotage our customers’ operations, intervene in regulatory or administrative proceedings involving our customers’ assets, or file lawsuits or other actions designed to prevent, disrupt or delay the development or operation of our customers’ assets. These actions may cause operational delays or restrictions, increased operating costs, additional regulatory burdens and increased risk of litigation for our customers, which could reduce our customers’ production levels over time and, as a result, may reduce demand for our services. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits that our customers require to conduct their operations to be withheld, delayed or burdened by requirements that restrict our customers’ ability to profitably conduct their businesses, which would also reduce demand for our services. Ultimately, this could make it more difficult to secure funding for our operations.
We are dependent on a few customers operating in a single industry. The loss of one or more significant customers could adversely affect our financial condition and results of operations.
Our customers are engaged in the E&P business in the United States. Historically, we have been dependent upon a few customers for a significant portion of our revenues. Our four largest customers generated approximately
35%, 45% and 40% of our total revenue in 2020, 2019 and 2018, respectively. For a discussion of our customers that make up 10% or more of our revenues, see “Business-Customers” in Item 1 of this annual report.
Our business, financial condition and results of operations could be materially adversely affected if one or more of our significant customers ceases to engage us for our services on favorable terms or at all or fails to pay or delays in paying us significant amounts of our outstanding receivables. Although we do have contracts for multiple projects with certain of our customers, most of our services are provided on a project-by-project basis.
Additionally, the E&P industry is characterized by frequent consolidation activity. Changes in ownership of our customers may result in the loss of, or reduction in, business from those customers, which could materially and adversely affect our financial condition.
We extend credit to our customers, which presents a risk of nonpayment of our accounts receivable.
We extend credit to all our customers. During industry downturns in past periods, many of our customers experienced financial and operational challenges, and some of our customers filed for bankruptcy protection or delayed payment for our services. Given the cyclical nature of the E&P industry, our customers may continue to experience similar challenges in the future. As a result, we may have difficulty collecting outstanding accounts receivable from, or experience longer collection cycles with, some of our customers, which could have an adverse effect on our financial condition and cash flows.
We may be unable to employ a sufficient number of key employees, technical personnel and other skilled or qualified workers.
The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work. As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment with our competitors or in fields that offer a more desirable work environment. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to further expand our operations according to geographic demand for our services depends in part on our ability to relocate or increase the size of our skilled labor force. The demand for skilled workers in our areas of operations can be high, the supply may be limited and we may be unable to relocate our employees from areas of lower utilization to areas of higher demand. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. Furthermore, a significant decrease in the wages paid by us or our competitors as a result of reduced industry demand could result in a reduction of the available skilled labor force, and there is no assurance that the availability of skilled labor will improve following a subsequent increase in demand for our services or an increase in wage rates. If any of these events were to occur, our capacity and profitability could be diminished and our growth potential could be impaired.
We depend heavily on the efforts of executive officers, managers and other key employees to manage our operations. The unexpected loss or unavailability of key members of management or technical personnel may have a material adverse effect on our business, financial condition, prospects or results of operations.
Our operations are subject to inherent risks, including operational hazards. These risks may not be fully covered under our insurance policies.
Our operations are subject to hazards inherent in the oil and natural gas industry, such as accidents, blowouts, explosions, craters, fires and oil spills. These hazards may lead to property damage, personal injury, death or the discharge of hazardous materials into the environment. The occurrence of a significant event or adverse claim in excess
of the insurance coverage that we maintain or that is not covered by insurance could have a material adverse effect on our financial condition and results of operations.
As is customary in our industry, our service contracts generally provide that we will indemnify and hold harmless our customers from any claims arising from personal injury or death of our employees and employees of our vendors, damage to or loss of our equipment, and pollution emanating from our equipment and services. Similarly, our customers agree to indemnify and hold us harmless from any claims arising from personal injury or death of their employees, damage to or loss of their equipment, and pollution caused from their equipment or the well reservoir. Our indemnification arrangements may not protect us in every case. In addition, our indemnification rights may not fully protect us if the customer is insolvent or becomes bankrupt, does not maintain adequate insurance or otherwise does not possess sufficient resources to indemnify us. Furthermore, our indemnification rights may be held unenforceable in some jurisdictions. Our inability to fully realize the benefits of our contractual indemnification protections could result in significant liabilities and could adversely affect our financial condition, results of operations and cash flows.
We maintain customary insurance coverage against these types of hazards. We are self-insured up to retention limits with regard to, among other things, workers’ compensation and general liability. We maintain accruals in our consolidated balance sheets related to self-insurance retentions by using third-party data and historical claims history. The occurrence of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result in substantial losses. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable. Insurance may not be available to cover any or all of the risks to which we are subject, or, even if available, it may be inadequate.
Conservation measures and technological advances could reduce demand for oil and natural gas and our services.
Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil and natural gas, resulting in reduced demand for oilfield services. The impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have experienced a reduction in demand and there may be a continued reduction in demand for our future services due to the ongoing COVID-19 pandemic and competition from alternative energy sources.
Oil and natural gas competes with other sources of energy for consumer demand. There are significant governmental incentives and consumer pressures to increase the use of alternative energy sources in the United States and abroad. A number of automotive, industrial and power generation manufacturers are developing more fuel efficient engines, hybrid engines and alternative clean power systems using fuel cells, clean burning fuels and batteries. In 2020, we continued to experience a reduction in demand of our services as a result of alternative energy sources, including natural gas and electric fleets. Greater use of these alternatives as a result of governmental incentives or regulations, technological advances, consumer demand, improved pricing or otherwise over time will reduce the demand for our products and services and adversely affect our business, financial condition, results of operations and cash flows going forward.
Limitations on construction of new natural gas pipelines or increases in federal or state regulation of natural gas pipelines could decrease demand for our services.
There has been increasing public controversy regarding construction of new natural gas pipelines and the stringency of current regulation of natural gas pipelines. Delays in construction of new pipelines, cancellation of the pipeline construction by the new administration or increased stringency of regulation of existing natural gas pipelines at either the state or federal level could reduce the demand for our services and materially and adversely affect our revenues and results of operations.
Our existing fleets require significant amounts of capital for maintenance, upgrades and refurbishment and any new fleets we build or acquire may require significant capital expenditures.
Our fleets require significant capital investment in maintenance, upgrades and refurbishment to maintain their effectiveness. While we manufacture many of the components necessary to maintain, upgrade and refurbish our fleets, labor costs have increased in the past and may increase in the future with increases in demand, which will require us to incur additional costs to upgrade any of our existing fleets or build any new fleets.
Additionally, competition or advances in technology within our industry may require us to update or replace existing fleets or build or acquire new fleets. Such demands on our capital or reductions in demand for our existing fleets and the increase in cost of labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations require substantial capital and we may be unable to obtain needed capital or financing on satisfactory terms or at all, which could limit our ability to grow.
The oilfield services industry is capital intensive. In conducting our business and operations, we have made, and expect to continue to make, substantial capital expenditures. Our total capital expenditures were $21.1 million, $54.4 million, and $100.5 million, respectively, in 2020, 2019 and 2018. Since 2015, we have financed capital expenditures primarily with funding from cash on hand. We may be unable to generate sufficient cash from operations and other capital resources to maintain planned or future levels of capital expenditures which, among other things, may prevent us from properly maintaining our existing equipment or acquiring new equipment. Furthermore, any disruptions or continuing volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availability impacting our ability to finance our operations. This circumstance could put us at a competitive disadvantage or interfere with our growth plans. Furthermore, our actual capital expenditures for future years could exceed our capital expenditure budgets. In the event our capital expenditure requirements at any time are greater than the amount we have available, we could be required to seek additional sources of capital, which may include debt financing, joint venture partnerships, sales of assets, offerings of debt or equity securities or other means. We may not be able to obtain any such alternative source of capital. We may be required to curtail or eliminate contemplated activities. If we can obtain alternative sources of capital, the terms of such alternative may not be favorable to us. In particular, the terms of any debt financing may include covenants that significantly restrict our operations. Our inability to grow as planned may reduce our chances of maintaining and improving profitability.
A third party may claim we infringed upon its intellectual property rights, and we may be subjected to costly litigation.
Our operations, including equipment, manufacturing and fluid and chemical operations may unintentionally infringe upon the patents or trade secrets of a competitor or other company that uses proprietary components or processes in its operations, and that company may have legal recourse against our use of its protected information. If this were to happen, these claims could result in legal and other costs associated with litigation. If found to have infringed upon protected information, we may have to pay damages or make royalty payments in order to continue using that information, which could substantially increase the costs previously associated with certain products or services, or we may have to discontinue use of the information or product altogether. Any of these could materially and adversely affect our business, financial condition or results of operations.
New technology may cause us to become less competitive.
The oilfield services industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent or other intellectual property protections. Although we believe our equipment and processes currently give us a competitive advantage, as competitors and others use or develop new or comparable technologies in the future, we may lose market share or be placed at a competitive disadvantage. Furthermore, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources that may allow them to enjoy technological advantages and implement new technologies before we can. We cannot be certain that we will be
able to implement all new technologies or products on a timely basis or at an acceptable cost. Thus, limits on our ability to effectively use and implement new and emerging technologies may have a material adverse effect on our business, financial condition or results of operations.
Loss or corruption of our information or a cyberattack on our computer systems could adversely affect our business.
We are heavily dependent on our information systems and computer-based programs, including our well operations information and accounting data. If any of such programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, whether due to cyberattack or otherwise, possible consequences include our loss of communication links and inability to automatically process commercial transactions or engage in similar automated or computerized business activities. Any such consequence could have a material adverse effect on our business.
The oil and natural gas industry has become increasingly dependent on digital technologies to conduct certain activities. At the same time, cyberattacks have increased. The U.S. government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats. Our technologies, systems and networks may become the target of cyberattacks or information security breaches. These could result in the unauthorized access, misuse, loss or destruction of our proprietary and other information or other disruption of our business operations. Any access or surveillance could remain undetected for an extended period. Our systems for protecting against cyber security risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. Additionally, our insurance coverage for cyberattacks may not be sufficient to cover all the losses we may experience as a result of such cyberattacks. Any additional costs could materially adversely affect our results of operations.
Adverse weather conditions could impact demand for our services or impact our costs.
Our business could be adversely affected by adverse weather conditions. For example, unusually warm winters could adversely affect the demand for our services by decreasing the demand for natural gas or unusually cold winters could adversely affect our capability to perform our services, for example, due to delays in the delivery of equipment, personnel and products that we need in order to provide our services and weather-related damage to facilities and equipment, resulting in delays in operations. Our operations in arid regions can be affected by droughts and limited access to water used in our hydraulic fracturing operations. These constraints could adversely affect the costs and results of operations.
A terrorist attack, armed conflict or health threat could harm our business.
Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States, or global or national health concerns, including the outbreak of a pandemic or contagious disease could adversely affect the U.S. and global economies and could prevent us from meeting financial and other obligations. We could experience loss of business, delays or defaults in payments from payors or disruptions of fuel supplies and markets if wells, operations sites or other related facilities are direct targets or indirect casualties of an act of terror or war or if such facilities, their workforce or supply chains are affected by a global or national health concern. Such activities or events could reduce the overall demand for oil and natural gas, which, in turn, could also reduce the demand for our products and services. Terrorist activities, the threat of potential terrorist activities and global or national health concerns and any resulting economic downturn could adversely affect our results of operations, impair our ability to raise capital or otherwise adversely impact our ability to realize certain business strategies.
The global spread of COVID-19 and the ongoing efforts to contain it have created significant volatility, uncertainty and economic disruption. In an effort to contain or slow the spread of COVID-19, national and local governments around the world instituted certain containment measures. As a result, the demand for our services nearly diminished in the second quarter of 2020. We were forced to alter certain aspects of our business and operations, which
adversely affected our financial condition in 2020 and may continue to adversely affect our financial condition in future periods. The duration of these measures is unknown, may be extended and additional measures may be imposed.
The impact of the COVID-19 pandemic on our financial condition, results of operations and cash flows include, but are not limited to, the following:
● Reduced customer demand and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending, which adversely affected our financial condition, results of operations and cash flows by reducing our revenues, margins and net income due to a decline in the demand and price for our services. In addition, volatility in the financial markets has increased the cost of capital and limited its availability.
● Economic uncertainty and disruption have made it difficult for us, our customers and suppliers to accurately forecast and plan future business activities.
● Deterioration in the financial position of our customers has impacted their ability or willingness to pay for our services and, as a result, negatively affected our operating results and, if it continues to a significant degree, could have a material adverse effect on our financial condition, results of operations and cash flows.
● Disruptions to our supply chain in connection with the sourcing of materials from geographic areas that have been impacted by COVID-19 and by efforts to contain its spread.
The full extent to which the COVID-19 pandemic and the various responses to it impacts our financial condition, results of operations and cash flows will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; the effectiveness of governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect on our customers and customer demand for and ability to pay for our services; and disruptions or restrictions on our employees’ ability to work and travel.
We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers and stockholders. It is not clear what the potential effects any such actions may have on our business, including the effects on our customers or suppliers, or on our financial condition, results of operations and cash flows.
To the extent the COVID-19 pandemic adversely affects our financial condition, results of operations and cash flows, it may also heighten many of the other risks described herein and in the “Risk Factors” section of this annual report.
We and certain of our former directors, current executive officers and stockholders are currently subject to securities class action litigation in connection with our IPO, and other litigation and legal proceedings that are expensive and time consuming, and if resolved adversely, could harm our business, financial condition or results or operation.
A purported securities class action was filed against us and certain of our former directors, current executive officers and stockholders alleging violation of federal securities laws. We have negotiated a settlement of this lawsuit, which is pending final court approval. In the unlikely event that the court does not grant final approval of the settlement, there can be no assurances that a favorable final outcome will be obtained. In connection with this litigation, we could incur substantial costs and such costs and any related settlements or judgments may not be covered by insurance, which could adversely affect our business, financial condition and results of operations. Additionally, several of our co-defendants have requested and we have agreed to indemnify them in connection with this lawsuit. These costs are not covered by insurance and could have an adverse effect on our business, financial condition and results of operations. We could also suffer an adverse impact on our reputation and a diversion of management’s attention and resources, which could have a material adverse effect on our business.
In addition to the class action lawsuit, we are involved in other lawsuits and legal proceedings, including arbitration, in the ordinary course of our business. Any litigation or other legal proceedings, including arbitration, could result in an onerous or unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, either of which could adversely affect our business, financial conditions, or results of operations.
Our ability to utilize our net operating loss carryforwards and certain tax amortization deductions post Bankruptcy are severely limited and could be further limited with additional ownership changes.
As of December 31, 2019, we had gross federal and state net operating loss carryforwards (“NOLs”) significantly in excess of $1,700 million, which if not utilized would have begun to expire starting in 2032 for federal purposes and 2020 for state purposes. Additionally, we would have been allowed to deduct approximately $190 million of amortization expense on our federal and state tax returns per year for tax years 2020 through 2025. However, Section 382 of the Internal Revenue Code of 1986, as amended, reduces the amount of the NOLs we may use or tax amortization we may deduct for U.S. federal income tax purposes in the event of certain changes in ownership of our Company. As a result of the Plan, we experienced such a Section 382 “ownership change” and thus the amount of pre-Chapter 11 federal NOLs that we can use to reduce our taxable income were significantly reduced to approximately $312.5 million, our pre-Chapter 11 state NOLs were significantly reduced to approximately $54 million, and the amount of tax amortization we may deduct for federal income tax purposes was reduced to approximately $86 million. This may negatively affect our results of operations for future periods by requiring us to pay U.S. federal and state income taxes that we would not have been required to pay had the pre-Chapter 11 NOLs been available to us. Further, future issuances or sales of our stock, including by our large stockholders or certain other transactions involving our stock that are outside of our control, could cause additional “ownership changes” that limit our ability to use our remaining NOLs. Any such limitation could result in our retaining less cash after payment of U.S. federal and state income taxes during any year in which we have taxable income than we would be entitled to retain if such NOLs were not reduced as an offset against such income for U.S. federal and state income tax reporting purposes, which could adversely impact our operating results.
Risks Related to Government Regulation
Changes in laws and regulations could prohibit, restrict or limit our operations, increase our operating costs, adversely affect our results or result in the disclosure of proprietary information resulting in competitive harm.
Various legislative and regulatory initiatives have been undertaken or are being discussed that could result in additional requirements or restrictions being imposed on our operations, ban hydraulic fracturing or end new fossil fuel leases and/or hydraulic fracturing on public lands. If any of these initiatives are implemented our business, financial condition and results of operations would be materially adversely affected. Legislation and/or regulations are being considered at the federal, state and local levels that could impose chemical disclosure requirements (such as restrictions on the use of certain types of chemicals or prohibitions on hydraulic fracturing operations in certain areas) and prior approval requirements. If they become effective, these regulations would establish additional levels of regulation that could lead to operational delays and increased operating costs. Disclosure of our proprietary chemical information to third parties or to the public, even if inadvertent, could diminish the value of our trade secrets and could result in competitive harm to us, which could have an adverse impact on our financial condition and results of operations.
Additionally, some jurisdictions are or have considered zoning and other ordinances that could impose a de facto ban on drilling and/or hydraulic fracturing operations, and are closely examining permit and disposal options for processed water, which if imposed could have a material adverse impact on our operating costs. Moreover, any moratorium or increased regulation of our raw materials vendors, such as our proppant suppliers, could increase the cost of those materials and adversely affect the results of our operations.
We are subject to the requirements of OSHA’s Respirable Crystalline Silica Standard, which requires employers to limit worker exposures to respirable crystalline silica and to take other steps to protect workers, such as medical surveillance, providing employee training, and implementing a written exposure control plan. These requirements became applicable to hydraulic fracturing operations in the oil and gas industry on June 23, 2018. The rule also requires hydraulic fracturing operations in the oil and gas industry to implement engineering controls to limit
exposures to the respirable silica by June 23, 2021. The Respirable Crystalline Silica Standard has and will continue to impose increased operating costs on our and our customers’ business. Employee exposure to silica presents a source of potential liability to our and our customers’ business, which if realized could increase our costs or otherwise adversely affect our business or operations.
We are also subject to various transportation regulations that include certain permit requirements of highway and vehicle and hazardous material safety authorities. These regulations govern such matters as the authorization to engage in motor carrier operations, safety, equipment testing, driver requirements and specifications and insurance requirements. As these regulations develop and any new regulations are proposed, we have experienced and may continue to experience an increase in related costs. We receive a portion of the proppant used in our operations by rail. Any delay or failure in rail services due to changes in transportation regulations, work stoppages or labor strikes, could adversely affect the availability of proppant. We cannot predict whether, or in what form, any legislative or regulatory changes or municipal ordinances applicable to our logistics operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our business or operations.
Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs, liabilities, fines, penalties and other sanctions and additional operating restrictions or delays and can adversely impact our customers.
Our operations and those of our customers are subject to stringent federal, state, local and tribal laws and regulations relating to, among other things, protection of natural resources, clean air and drinking water, wetlands, endangered species, greenhouse gasses, areas that are not in attainment with air quality standards, the environment, health and safety, chemical use and storage, waste management, waste disposal and transportation of waste and other hazardous and nonhazardous materials. Compliance with such laws and regulations can increase our cost of doing business, delay our operations, decrease our profitability and adversely impact the demand for our services. If we fail to comply with these laws and regulations or if environmental incidents occur in connection with our operations, we could be subject to the shutdown of our operations, administrative, civil or criminal fines and penalties, revocations of or restrictions in permits to conduct business, expenditures for remediation or other corrective measures and claims for liability for property damage, exposure to hazardous materials, exposure to hazardous waste, nuisance or personal injuries, which could cause us to incur substantial costs or losses and could have a material adverse effect on our business, financial condition, prospects and results of operations. Some environmental laws and regulations may impose strict liability, joint and several liability or both. Strict liability means that we could be exposed to liability as a result of our conduct that was lawful at the time it occurred, or the conduct of or conditions caused by third parties without regard to whether we caused or contributed to the conditions. Additionally, an increase in regulatory requirements, limitations, restrictions or moratoria on oil and natural gas exploration and completion activities at a federal, state or local level could significantly delay or interrupt our operations, limit the amount of work we can perform, increase our costs of compliance, or increase the cost of our services, and could have a material adverse impact on our financial condition.
Our business is dependent on our ability to conduct hydraulic fracturing and horizontal drilling activities. Hydraulic fracturing is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations, including shales. The process, which involves the injection of water, sand and chemicals, or proppants, under pressure into formations to fracture the surrounding rock and stimulate production, is typically regulated by state oil and natural gas commissions. Federal agencies have asserted regulatory authority over certain aspects of the process as well. Examples include the June 2016 final rule published by EPA prohibiting the discharge of wastewater from onshore unconventional oil and natural gas extraction facilities to publicly owned wastewater treatment plants, the May 2014 prepublication of EPA’s Advance Notice of Proposed Rulemaking regarding Toxic Substances Control Act reporting of the chemical substances and mixtures used in hydraulic fracturing, which, to date, has not been the subject of further rulemaking, and the 2012 rule published by EPA under the Clean Air Act governing performance standards, including standards for the capture of air emissions released during hydraulic fracturing. In addition, although the SDWA exempts hydraulic fracturing from the definition of “underground injection,” EPA has asserted regulatory authority over certain hydraulic fracturing activities involving diesel fuel and published proposed guidance relating to such practices. Legislation to amend the SDWA, to repeal the exemption for hydraulic fracturing from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to
require disclosure of the chemical constituents of the fluids used in the fracturing process, has been proposed from time to time in Congress.
In 2015, the BLM enacted a new rule imposing a variety of regulatory mandates for hydraulic fracturing on federal land, which was rescinded by the U.S. Department of the Interior in December 2017. In 2016, BLM promulgated regulations aimed at curbing air pollution, including greenhouse gases, for oil and natural gas produced on federal and Indian lands, but a number of waste prevention requirements were rescinded in 2018. On July 15, 2020, the U.S. District Court for the Northern District of California vacated the U.S. Department of the Interior’s rescission of the 2015 rule. The outcome of ongoing litigation relating to the BLM rules, as well as any efforts to reissue them, or impose other limitations on oil and gas operations on federal lands, including any such efforts by the presidential administration, cannot be predicted.
Environmental aspects of hydraulic fracturing practices, including its potential impacts on drinking water sources, have become the subject of increasing scrutiny by governmental authorities. This scrutiny, including ongoing or proposed studies of hydraulic fracturing could spur initiatives to further regulate the practice, and could ultimately make it more difficult or costly to perform fracturing and increase the costs of compliance and doing business for our customers.
In addition, certain states have issued bans on hydraulic fracturing activities, including Maryland, New York and Vermont and several states, including Texas, Colorado, Pennsylvania and Ohio, as well as regional authorities like the Delaware River Basin Commission and local jurisdictions, have adopted or are considering adopting regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids. Any increased regulation of hydraulic fracturing, in these or other states, could reduce the demand for our services and materially and adversely affect our revenues and results of operations.
There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water and the potential for impacts to surface water, groundwater and the environment generally. A number of lawsuits and enforcement actions have been initiated across the country implicating hydraulic fracturing practices. If new laws or regulations are adopted that significantly restrict hydraulic fracturing, such laws could make it more difficult or costly for us to perform fracturing to stimulate production from tight formations as well as make it easier for third parties opposing the hydraulic fracturing process to initiate legal proceedings based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. In addition, if hydraulic fracturing is further regulated at the federal, state or local level, including by the presidential administration, our customers’ fracturing activities could become subject to additional permitting and financial assurance requirements, more stringent construction specifications, increased monitoring, reporting and recordkeeping obligations, plugging and abandonment requirements and also to attendant permitting delays and potential increases in costs. Such legislative or regulatory changes could cause us or our customers to incur substantial compliance costs, and compliance or the consequences of any failure to comply by us could have a material adverse effect on our financial condition and results of operations. At this time, it is not possible to estimate the impact on our business of newly enacted or potential federal, state or local laws governing hydraulic fracturing.
Existing or future laws and regulations related to greenhouse gases and climate change could have a negative impact on our business and may result in additional compliance obligations with respect to the release, capture, and use of carbon dioxide that could have a material adverse effect on our business, results of operations, and financial condition.
Changes in environmental requirements related to greenhouse gases and climate change may negatively impact demand for our services. For example, oil and natural gas exploration and production may decline as a result of environmental requirements, including land use policies responsive to environmental concerns. Local, state, and federal agencies have been evaluating climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases in areas in which we conduct business. Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business
if such laws or regulations reduce demand for oil and natural gas. Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, sequestration, and use of carbon dioxide or other gases that could have a material adverse effect on our business, results of operations, and financial condition.
Congress has from time to time considered legislation to reduce emissions of GHGs and there have been a number of federal regulatory initiatives to address GHG emissions in recent years. These include the establishing of Title V operating and Prevention of Significant Deterioration construction permitting reviews for GHG emissions from certain large stationary sources that are already major potential sources of certain principal, or criteria, pollutant emissions, establishing GHG emissions standards on fossil fuel fired power plants, and the implementation of a GHG monitoring and reporting program for certain sectors of the natural gas and oil industry, including onshore production, which includes certain of our operations. Additionally, a number of state and regional efforts have emerged that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs, in which major sources of GHG emissions acquire and surrender emission allowances in return for emitting those GHGs.
In 2016, the EPA finalized new regulations in 2016 that would set volatile organic compound (“VOC”) and methane emission standards for new and modified oil and gas production and natural gas processing and transmission facilities. Those standards regulate GHGs through limitations on emissions of methane. However, in September 2020, the EPA published a final rule amending the 2016 regulations by removing sources in the transmission and storage segment from the oil and natural gas source category and rescinding the new source performance standards (including VOC and methane requirements) applicable to these sources, and separately rescinding the methane-specific requirements applicable to sources in the production and processing segments of the industry. These final rules have become subject to legal challenges and the outcome of these challenges is uncertain. In addition, these standards may be subject to reconsideration pursuant to an executive order issued by President Biden on January 20, 2021, which specifically calls for a proposal to suspend, revise or rescind the September 2020 final rule making technical amendments to the 2016 Standards by September 2021. The executive order also calls on the EPA to consider new regulations governing methane and volatile organic compound emissions from existing onshore oil and gas operations by September 2021.
Notwithstanding these federal standards, state regulations with respect to emissions of GHGs could continue to become more restrictive regardless of the decreased burdens under federal regulations. For example, in June 2018 the Pennsylvania Department of Environmental Protection (“PDEP”) adopted heightened permitting conditions for all newly permitted or modified natural gas compressor stations, processing plants and transmission stations constructed, modified, or operated in Pennsylvania in an effort to regulate emissions of the GHG methane at such sites. Then, in December 2019, the PDEP proposed a plan to regulate emissions of VOCs (including methane) at existing well sites and compressor stations. If these or any other actions to address GHG emissions become implemented in the future, they could result in increased costs associated with our operations, a decline in oil and natural gas exploration and production activities of our customers and affect the demand for natural gas.
Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change-related policies announced by the presidential administration, including regulations on hydraulic fracturing of oil and natural gas wells and limitations on new leases for production of minerals on federal properties, including onshore lands and offshore waters. Other actions that could be pursued by the presidential administration include restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquefied natural gas export facilities. Litigation risks are also increasing, as a number of cities, local governments and other plaintiffs have sought to bring suit against the largest oil and natural gas exploration and production companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore are responsible for roadway and infrastructure damages as a result. Such suits have also alleged that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.
Adoption of additional federal, regional or state requirements mandating a reduction in GHG emissions or the use of alternative energy could have far-reaching and significant impacts on the fossil fuel energy industry and the U.S. economy. Additionally, GHG emissions-related political, litigation and financial risks may result in our reduction or
halting of oil and gas production activities, incurrence of liability for infrastructure damage as a result of climate changes, or impairment of our ability to continue to operate in an economic manner. We cannot predict the potential impact of such laws, regulations, and international compacts, or any such political, litigation and financial risks, on our future consolidated financial condition, results of operations or cash flows.
Delays in obtaining, or inability to obtain or renew, permits or authorizations by our customers for their operations or by us for our operations could impair our business.
In most states, our customers are required to obtain permits or authorizations from one or more governmental agencies or other third parties to perform drilling and completion activities, including hydraulic fracturing. Such permits or approvals are typically required by state agencies, but can also be required by federal and local governmental agencies or other third parties. The requirements for such permits or authorizations vary depending on the location where such drilling and completion activities will be conducted. As with most permitting and authorization processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit or approval to be issued and the conditions which may be imposed in connection with the granting of the permit. In some jurisdictions, certain regulatory authorities have delayed or suspended the issuance of permits or authorizations while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated. In Texas, rural water districts have imposed restrictions on water use and may require permits for water used in drilling and completion activities. Additionally, in Utah, we work on Indian lands that require permits for drilling and completion activities. Permitting, authorization or renewal delays, the inability to obtain new permits or the revocation of current permits could cause a loss of revenue and potentially have a materially adverse effect on our business, financial condition, prospects or results of operations.
Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in some of the areas where we operate.
Oil and natural gas operations in our operating areas can be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife, which may limit our ability to operate in protected areas. Permanent restrictions imposed to protect endangered species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures. Additionally, the designation of previously unprotected species as threatened or endangered in areas where we operate could result in increased costs arising from species protection measures. Restrictions on oil and natural gas operations to protect wildlife could reduce demand for our services.
Risks Related to Our Emergence from Chapter 11
We recently emerged from bankruptcy, which may adversely affect our business and relationships.
On September 22, 2020, we filed petitions for voluntary relief under the Bankruptcy Code. On the Effective Date, the Plan became effective in accordance with its terms and we emerged from Chapter 11.
As a result of our bankruptcy filing and recent emergence:
● key suppliers, vendors or other contract counterparties may terminate their relationships with us or require additional financial assurances or enhanced performance from us;
● our ability to renew existing contracts and compete for new business may be adversely affected;
● our ability to attract, motivate and retain key executives and employees may be adversely affected;
● our competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted;
● our employees may be distracted from performance of their duties or more easily attracted to other employment opportunities; and
● we may have difficulty obtaining the capital we need to operate and grow our business.
The occurrence of one or more of these events could have a material adverse effect on our business, financial condition, results of operations and reputation.
Upon our emergence from Chapter 11, the composition of our stockholder base changed significantly.
As a result of the concentration of our equity ownership, our future strategy and plans may differ materially from those in the past. Upon our emergence from Chapter 11, holders of the Notes and holders of claims under the Term Loan Agreement (such holders, the “Significant Stockholders”) collectively held over 90% of our common stock, while holders of our legacy equity interests held approximately 9.4% of our common stock. Therefore, the Significant Stockholders have significant control on the outcome of matters submitted to a vote of stockholders, including, but not limited to, electing directors and approving corporate transactions. As a result, our future strategy and plans may differ materially from those of the past. Circumstances may occur in which the interests of the Significant Stockholders could be in conflict with the interests of other stockholders, and the Significant Stockholders would have substantial influence to cause us to take actions that align with their interests. Should conflicts arise, there can be no assurance that the Significant Stockholders would act in the best interests of other stockholders or that any conflicts of interest would be resolved in a manner favorable to our other stockholders.
Upon our emergence from Chapter 11, the composition of our board of directors changed significantly.
Pursuant to the Plan, the composition of our board of directors changed significantly. Upon our emergence from Chapter 11, our board of directors consisted of five directors, only one of whom, our Chief Executive Officer, Michael J. Doss, had served on our board of directors prior to the Effective Date. The new directors have different backgrounds, experiences and perspectives from those who previously served on our board of directors and thus may have different views on the issues that will determine our future. There can be no assurance that our new board of directors will pursue, or will pursue in the same manner, our previous strategy and business plans.
Certain information contained in our historical financial statements are not comparable to the information contained in our financial statements after the adoption of fresh start accounting.
Upon our emergence from Chapter 11, we adopted fresh start accounting in accordance with ASC Topic 852 and became a new entity for financial reporting purposes. As a result, we revalued our assets and liabilities based on our estimate of our enterprise value and the fair value of each of our assets and liabilities. These estimates, projections and enterprise valuation were prepared solely for the purpose of the bankruptcy proceedings and should not be relied upon by investors for any other purpose. At the time they were prepared, the determination of these values reflected numerous estimates and assumptions, and the fair values recorded based on these estimates may not be fully realized in periods subsequent to our emergence from Chapter 11.
The consolidated financial statements after the Effective Date are not comparable to the consolidated financial statements on or before that date as indicated by the “black line” division in the financial statements and footnote tables, which emphasizes the lack of comparability between amounts presented. This will make it difficult for stockholders to assess our performance in relation to prior periods.
Risks Relating to Our Securities
Our stock price has been and may continue to be volatile.
The market price of our Class A common stock has varied significantly and could continue to vary significantly in the future as a result of a number of factors, some of which are beyond our control. In the event of a sustained drop in the market price of our Class A common stock, our investors could lose a substantial part or all of their investment in our Class A common stock. Consequently, our investors may not be able to sell shares of our Class A common stock at prices equal to or greater than the price they paid.
The following factors, among others, could affect our stock price:
● our operating and financial performance;
● quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;
● actual or anticipated changes in revenue or earnings estimates or publication of reports by equity research analysts;
● speculation in the press or investment community or the dissemination of information through social media platforms;
● sales of our Class A common stock by us or our stockholders, or the perception that such sales may occur;
● litigation involving us or that may be perceived as having an adverse effect on our business;
● general market conditions, including fluctuations in actual and anticipated future commodity prices;
● domestic and international economic, legal and regulatory factors unrelated to our performance, including the COVID-19 pandemic and Saudi-Russia price war; and
● domestic and international economic, legal and regulatory factors unrelated to our performance.
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A common stock.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), may increase our costs. We may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company with listed equity securities, we have to comply with numerous laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, related regulations of the SEC and the requirements of NYSE American. Complying with these statutes, regulations and requirements require time and attention from our board of directors and management and increase our costs and expenses. We are required to:
● maintain a more comprehensive compliance function;
● expand, evaluate and maintain our system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board (United States);
● maintain internal policies, such as those relating to disclosure controls and procedures and insider trading;
● comply with corporate governance and other rules promulgated by the national stock exchange on which our securities are listed;
● prepare and file annual, quarterly and other periodic public reports in compliance with the federal securities laws;
● prepare proxy statements and solicit proxies in connection with annual meetings of our stockholders;
● involve and retain to a greater degree outside counsel and accountants in the above activities; and
● maintain a public company investor relations function.
In addition, being a public company subject to these rules and regulations requires us to obtain sufficient director and officer liability insurance coverage and we incur substantial costs to obtain and renew such coverage.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws:
● provide that certain transactions between us and any stockholder that, together with any of its affiliates, owns 20% or more of our voting stock must be approved by a majority (or a higher threshold as set forth in our amended and restated certificate of incorporation) of the disinterested stockholders;
● provide that the authorized number of directors may be changed only by resolution of the board of directors;
● provide that all vacancies, including newly created directorships, may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
● provide that our stockholders may not take action by written consent, and may only take action at annual or special meetings of our stockholders;
● provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;
● restrict the forum for certain litigation against us to Delaware;
● not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election);
● provide that special meetings of our stockholders may be called only by the board of directors, the Chairman of the board of directors, our Secretary or stockholders with at least 25% of the voting power of our outstanding capital stock entitled to vote on the matter or matters to be brought before the proposed special meeting;
● provide that our amended and restated bylaws may be amended or repealed or new bylaws may be adopted by the stockholders entitled to vote thereon only at any annual or special meeting thereof or by our board of directors; and
● provide that certain provisions of our amended and restated certificate of incorporation may only be amended upon receiving at least 66 2/3% of the voting power of our outstanding capital stock entitled to vote in the election of directors.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
We are subject to certain requirements of Section 404 of the Sarbanes-Oxley Act. If we are unable to timely comply with Section 404 or if the costs related to compliance are significant, our profitability, stock price, results of operations and financial condition could be materially adversely affected.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act. Section 404 requires that we document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting. This section also requires that our independent registered public accounting firm opine on those internal controls upon becoming an accelerated filer, as defined in the SEC rules. During the course
of our ongoing evaluation, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review. For example, we anticipate the need to hire, or contract with, additional administrative and accounting personnel to enable us to comply with these provisions while maintaining sound financial reporting practices. We believe that the out-of-pocket costs, the diversion of management’s attention from running the day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act could be significant. If the time and costs associated with such compliance exceed our current expectations and our results of operations could be adversely affected.
If we fail to comply with the requirements of Section 404 or if we or our auditors identify and report such material weaknesses, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Class A common stock. In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.
We may not pay dividends on our common stock and, consequently, investors would achieve a return on investment only if the price of our stock appreciates.
We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. Therefore, we do not currently expect to pay any cash dividends on our capital stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, restrictions in our debt agreements, terms of any preferred equity securities and other factors that our board of directors deems relevant. If we do not make cash distributions to stockholders or otherwise return cash to stockholders, a return on investment in us will only be achieved if the market price of our securities appreciates, which may not occur, and our investors sell their securities at a profit. There is no guarantee that the price of our securities in the market will exceed the price that our investors pay.
If securities analysts do not publish research or reports about our business, publish inaccurate or unfavorable research or if they downgrade our stock or our sector, our Class A common stock price and trading volume could decline.
The trading market for our Class A common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
We may issue preferred stock whose terms could adversely affect the voting power or value of our Class A common stock.
Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our Class A common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Class A common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our Class A common stock.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of claims, which may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable.
Our amended and restated certificate of incorporation specifies that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware does not have jurisdiction, a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware)) shall, to the fullest extent permitted by law, be the sole and exclusive forum, for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed by of our director, officer or other employee to us or our stockholders, creditors or other constituents, or a claim of aiding and abetting any such breach of fiduciary duty, (c) any action asserting a claim arising pursuant to any provision of the DGCL, or our amended and restated certificate of incorporation or amended and restated bylaws, (d) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws, (e) any action asserting a claim governed by the internal affairs doctrine or (f) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law.
The foregoing choice of forum provision does not apply to any actions arising under the Securities Act, the Exchange Act or any claim for which the U.S. federal courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternative forum, the federal district court for the District of Delaware shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against us or our directors and officers. Our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in our capital stock shall be deemed to have notice of and consented to these exclusive forum provisions. The exclusive forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes against us and our directors, officers and other employees, which may discourage such lawsuits, or may require increased costs to bring a claim. Further, in the event a court finds either exclusive forum provision contained in our amended and restated certificate of incorporation to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our principal properties include our district offices and manufacturing facilities. We believe our facilities are in good condition and suitable for the purposes for which they are used. Below is information detailing our properties as of December 31, 2020.
Hydraulic Fracturing District Offices
Currently, we have five district offices out of which we conduct hydraulic fracturing services. We own the land and facilities at each of these locations. The following table provides certain information about our district offices as of December 31, 2020.
Facilities
Size (Sq.Ft.)
Acres
District Office
Primary Area of Service
Formation
(approx.)
(approx.)
Odessa, Texas
Southeast New Mexico and West Texas
Permian Basin
82,800
Elk City, Oklahoma
Oklahoma
SCOOP/STACK
42,330
Washington County, Pennsylvania
Pennsylvania, West Virginia and Ohio
Marcellus/Utica Shale
41,660
Pleasanton, Texas
South Texas
Eagle Ford Shale
62,950
Longview, Texas
East Texas and West Louisiana
Haynesville Shale
36,000
We also lease a 22-acre, 250,000 square foot facility in Williamsport, Pennsylvania that we used as a district office until August 2015. We currently sublease this facility. We also lease a 5.86 acre, 18,827 square foot facility in Vernal, Utah that we plan to use as a district office.
Manufacturing and Maintenance Facilities
We manufacture the proprietary, high-pressure pumps, including the fluid-ends and power-ends, as well as certain other equipment that we use in our hydraulic fracturing operations in an 89,522 square foot facility owned by us in Fort Worth, Texas.
We own a 94,050 square foot facility in Aledo, Texas that is used for equipment repair, maintenance and electronics installation. We also manufacture, refurbish and assemble certain components of our hydraulic fracturing units and other service equipment at this facility.
We also own a 55,000 square foot maintenance facility in Shreveport, Louisiana and lease a 12,000 square foot maintenance facility in Hobbs, New Mexico and a 33,700 square foot maintenance facility in Seminole, Texas.
Principal Executive Offices
We maintain principal executive offices in Fort Worth, Texas. As of December 31, 2020, we leased approximately 33,000 square feet. We signed an agreement with our landlord to reduce this commitment to approximately 22,600 square feet, beginning on January 1, 2021.
Sales Offices
We have five sales offices, which we lease in Houston and Midland, Texas, Oklahoma City, Oklahoma, Canonsburg, Pennsylvania, and Denver, Colorado.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are involved in various legal proceedings from time to time in the ordinary course of our business. For additional information regarding our pending legal proceedings, see Note 13 - “Commitments and Contingencies” in Notes to our Consolidated Financial Statements included elsewhere in this annual report.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stockholder Information
On February 26, 2021, we had 13,677,664 shares of Class A common stock outstanding and 312,306 shares of Class B common stock outstanding held by a total of approximately 66 and 25 record holders, respectively. The number of record holders is based on the records of American Stock Transfer & Trust Company, LLC, who serves as our transfer agent. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one record holder.
Market Information
Our Class A common stock trades on the NYSE American under the ticker symbol “FTSI.” There is no established public trading market for our Class B common stock.
Dividends
We have not paid any cash dividends on our common stock in the past three fiscal years. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. Therefore, we do not currently expect to pay any cash dividends on our capital stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, restrictions in our debt agreements, terms of any preferred equity securities and other factors that our board of directors deems relevant.
Issuer Purchases of Equity Securities
There were no purchases of any equity securities made by or on behalf of us or any affiliate purchaser during the three months ended December 31, 2020.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this annual report on Form 10-K. The Company applied fresh start accounting effective November 19, 2020, the Effective Date. As a result of the application of fresh start accounting and the effects of the implementation of the Plan, the financial statements for the period after November 19, 2020 will not be comparable with the financial statements prior to and including November 19, 2020.
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
December 31,
November 19,
Year Ended December 31,
(Dollars in millions)
Statements of Operations Data:
Revenue
$
22.6
$
240.3
$
776.6
$
1,543.3
$
1,466.1
$
532.2
Costs of revenue, excluding depreciation,
depletion, and amortization
24.1
197.2
573.9
1,033.2
1,009.8
510.5
Selling, general and administrative
4.7
47.8
89.1
87.9
81.0
64.4
Depreciation and amortization
4.8
68.5
90.0
84.7
86.6
112.6
Impairments and other charges
0.3
34.1
74.6
19.2
1.8
12.3
Loss (gain) on disposal of assets, net
-
0.1
(1.4)
(0.1)
(1.4)
1.0
Gain on insurance recoveries
-
-
-
-
(2.9)
(15.1)
Operating (loss) income
(11.3)
(107.4)
(49.6)
318.4
291.2
(153.5)
Interest expense, net
-
22.1
30.7
49.3
86.7
87.5
(Gain) loss on extinguishment of debt, net
-
(2.0)
(1.2)
9.8
1.4
(53.7)
Equity in net loss (income) of joint venture affiliate
-
-
(0.6)
(1.1)
0.8
2.8
Gain on sale of equity interest in joint venture affiliate
-
-
(7.0)
-
-
-
Reorganization items, net
2.1
(103.3)
-
-
-
-
(Loss) income before income taxes
(13.4)
(24.2)
(71.5)
260.4
202.3
(190.1)
Income tax expense (benefit) (1)
-
0.2
1.4
2.0
1.6
(1.6)
Net (loss) income
$
(13.4)
$
(24.4)
$
(72.9)
$
258.4
$
200.7
$
(188.5)
Other Data:
Adjusted EBITDA (1)
$
(5.8)
$
6.2
$
129.6
$
438.5
$
373.9
$
(48.3)
Capital expenditures
$
1.5
$
19.6
$
54.4
$
100.5
$
64.0
$
10.3
Total fracturing stages (2)
2,290
14,552
27,366
30,537
30,920
16,185
Successor
Predecessor
(Dollars in millions)
Balance Sheet Data (at end of period):
Cash and cash equivalents
$
94.0
$
223.0
$
177.8
$
208.1
$
160.3
Total assets
$
315.0
$
639.3
$
743.7
$
831.0
$
616.8
Total debt
$
-
$
456.9
$
503.2
$
1,116.4
$
1,188.7
Total stockholders’ equity (deficit)
$
266.6
$
37.7
$
106.9
$
(818.3)
$
(1,019.0)
(1) Adjusted EBITDA is a non-GAAP financial measure that we define as earnings before interest, income taxes, and depreciation and amortization; as well as, the following items, if applicable: gain or loss on disposal of assets; debt extinguishment gains or losses; inventory write-downs, asset and goodwill impairments; gain on insurance recoveries; acquisition earn-out adjustments; stock-based compensation; supply commitment charges; acquisition or disposition transaction costs; and gain on sale of equity interest in joint venture affiliate; employee severance cost related to corporate-wide cost reduction initiatives; transaction costs; reorganization items; and loss on contract termination. The most comparable financial measure to Adjusted EBITDA under GAAP is net income or loss. Adjusted EBITDA is used by management to evaluate the operating performance of our business for comparable periods and it is a metric used for management incentive compensation. Adjusted EBITDA should not be used by investors or others as the sole basis for formulating investment decisions, as it excludes a number of important items. We believe Adjusted EBITDA is an important indicator of operating performance because it excludes the effects of our capital structure and certain non-cash items from our operating results. Adjusted EBITDA is also commonly used by investors in the oilfield services industry to measure a company’s operating performance, although our definition of Adjusted EBITDA may differ from other industry peer companies.
The following table reconciles our net income (loss) to Adjusted EBITDA:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
December 31,
November 19,
Year Ended December 31,
(In millions)
Net (loss) income
$
(13.4)
$
(24.4)
$
(72.9)
$
258.4
$
200.7
$
(188.5)
Interest expense, net
-
22.1
30.7
49.3
86.7
87.5
Income tax expense (benefit)
-
0.2
1.4
2.0
1.6
(1.6)
Depreciation and amortization
4.8
68.5
90.0
84.7
86.6
112.6
Stock-based compensation
0.4
10.9
15.4
15.2
-
-
Loss (gain) on disposal of assets, net
-
0.1
(1.4)
(0.1)
(1.4)
1.0
(Gain) loss on extinguishment of debt, net
-
(2.0)
(1.2)
9.8
1.4
(53.7)
Inventory write-down
-
5.1
6.4
-
-
-
Impairment of assets and goodwill
-
-
9.7
-
-
7.0
Non-cash provision for supply commitment charges
-
9.1
58.5
19.2
1.2
2.5
Gain on insurance recoveries
-
-
-
-
(2.9)
(15.1)
Employee severance costs
-
1.0
-
-
-
-
Transaction costs
-
18.5
-
-
-
-
Reorganization items, net
2.1
(103.3)
-
-
-
-
Loss on contract termination
0.3
0.4
-
-
-
-
Gain on sale of equity interest in joint venture affiliate
-
-
(7.0)
-
-
-
Adjusted EBITDA
$
(5.8)
$
6.2
$
129.6
$
438.5
$
373.9
$
(48.3)
(2) See “Business - Our Services - Hydraulic Fracturing” in Item 1 of this annual report regarding fracturing stages and the types of service agreements we use to provide hydraulic fracturing services.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this annual report on Form 10-K. Certain prior year financial statements are not comparable to our current year financial statements due to the adoption of fresh start accounting. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the reorganized Company subsequent to November 19, 2020. References to “Predecessor” or “Predecessor Company” relate to the financial position and results of operations of the Company prior to, and including, November 19, 2020.
In addition to presenting Successor and Predecessor results of operations in the tables and discussion below, we have presented discussion on the Company’s operating results for the fiscal year ended December 31, 2020 on a combined basis (i.e., by combining the results of the applicable Predecessor and Successor periods). We believe that describing certain year-over-year variances and trends in our activity levels, revenue and expenses for the year ended December 31, 2020 as compared to December 31, 2019 without regard to the concept of Successor and Predecessor (i.e., on a combined basis) facilitates a meaningful analysis of our results of operations and is useful in identifying current business trends. The combined results represent the sum of the reported amounts for the Predecessor period from January 1, 2020 through November 19, 2020 and the Successor period from November 20, 2020 through December 31, 2020. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results under applicable regulations. The combined operating results may not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.
In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, or beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report on Form 10-K, particularly in “Risk Factors.”
Overview
We are one of the largest providers of hydraulic fracturing services in North America. Our services stimulate hydrocarbon flow from oil and natural gas wells drilled by E&P companies. We had 1.4 million total hydraulic horsepower across 28 fleets, with 12 fleets active as of December 31, 2020. We operate in five major basins in the United States.
Recent Developments
On September 22, 2020, FTS International, Inc., FTS International Services, LLC, and FTS International Manufacturing, LLC filed petitions for voluntary relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. On September 22, 2020, FTSI International, Inc., FTS International Services, LLC, and FTS International Manufacturing, LLC filed the Joint Prepackaged Chapter 11 Plan of Reorganization of FTS International, Inc. and its Debtor Affiliates and the related disclosure statement. On November 4, 2020, the Bankruptcy Court entered an order confirming the Plan, as modified by the Confirmation Order, and approving the Disclosure Statement.
On November 19, 2020, the Plan became effective in accordance with its terms and FTS International, Inc., FTS International Services, LLC and FTS International Manufacturing, LLC emerged from Chapter 11. Pursuant to the Plan, on the Effective Date, all agreements, instruments, and other documents evidencing, relating to or otherwise in connection with any of our common stock or other equity interests outstanding prior to the Effective Date were cancelled and such legacy equity interests have no further force or effect after the Effective Date. Holders of our legacy equity interests received (i) a number of shares of Class A common stock equal to their proportionate distribution of approximately 9.4% of our common stock under the Plan (subject to dilution by the warrants issued pursuant to the Plan and the Amended and Restated Equity and Incentive Compensation Plan), (ii) their proportionate distribution of 1,555,521 Tranche 1 Warrants to acquire Class A common stock and (iii) their proportionate distribution of 3,888,849 Tranche 2 Warrants to acquire Class A common stock.
In addition, pursuant to the Plan, on the Effective Date, all outstanding obligations under the 6.25% senior secured notes due May 1, 2022 and were cancelled and the indenture governing such obligations was cancelled, and the credit agreement, dated as of April 16, 2014, by and among FTS International, Inc., the lenders party thereto, and Wilmington Savings Fund Society, FSB, as successor administrative agent, was cancelled, in each case except to the limited extent expressly set forth in the Plan. On the Effective Date, all liens and security interests granted to secure such obligations were automatically terminated and are of no further force and effect. The holders of Notes and holders of the claims under the Term Loan Agreement received their proportionate distribution of approximately 90.1% of our common stock (subject to dilution by the warrants issued pursuant to the Plan and the MIP) plus their pro rata share of $30.7 million cash distribution. The holders of claims in connection with the termination of the supply agreement between the Predecessor and Covia Holding Corporation received, in exchange for their claims, a $12.5 million cash distribution and 0.5% of our common stock (subject to dilution by the warrants issued pursuant to the Plan and the MIP).
Shares of Class A common stock were also issued to a holder of certain termination claims under the Plan.
Summary Financial Results
● Total revenue for January 1 through November 19, 2020 (Predecessor) was $240.3 million and for November 20 through December 31, 2020 (Successor) was $22.6 million for a combined total of $262.9 million for 2020, which represented a decrease of $513.7 million from 2019.
● Net loss for January 1 through November 19, 2020 (Predecessor) was $24.4 million and for November 20 through December 31, 2020 (Successor) was $13.4 million for a combined total of $37.8 million for 2020, compared to net loss of $72.9 million in 2019.
● Adjusted EBITDA for January 1 through November 19, 2020 (Predecessor) was $6.2 million and for November 20 through December 31, 2020 (Successor) was a loss of $5.8 million for a combined total of $0.4 million in 2020, which represented a decrease of $129.2 million from 2019.
● Cash used by operating activities for January 1 through November 19, 2020 (Predecessor) was $46.5 million and cash provided by operating activities for November 20 through December 31, 2020 (Successor) was $2.9 million for a combined cash used total of $43.6 million in 2020, which represented a decrease of $167.5 million from 2019.
Industry trends and business outlook
Our business depends on the willingness of E&P companies to make expenditures to explore for, develop, and produce oil and natural gas in the United States. The willingness of E&P companies to undertake these activities is predominantly influenced by current and expected future prices for oil and natural gas. A widely watched indicator of E&P companies’ aggregate activity levels is the drilling rig count, or rig count. The active horizontal rig count is a subset of the total rig count and is the most strongly correlated with the aggregate industry demand for hydraulic fracturing services. The average horizontal rig count was approximately 385, 825, and 900 in 2020, 2019, and 2018, respectively, according to a report by Baker Hughes.
The prices that we are able to charge for our services is affected by the supply of hydraulic fracturing equipment that is available in the market to meet customer demand. Since the middle of 2018, the supply of hydraulic fracturing equipment has exceeded the demand for equipment, and as a result, the pricing for our services declined during this period. In 2020, the supply of equipment further exceeded demand as the demand for our services dropped significantly. In response to this competitive market environment, we remain disciplined with respect to our number of active fleets, and we remain focused on optimizing our utilization and cash flow. We reduce our active fleet count when certain fleets do not meet our utilization and profitability targets.
We plan to focus on expanding our commercial strategy, further advancing our technology initiatives, and maintaining our industry leading safety performance. With this strategy, we strive to provide the best service quality for our customers while maintaining a low-cost structure. We believe that these efforts will generate free cash flow in 2021 and position us for a longer-term recovery.
Results of Operations
Revenue
The Company contracts with its customers to perform hydraulic fracturing services and, prior to May 2019, wireline services, on one or more oil or natural gas wells. Under these arrangements, we satisfy our performance obligations as services are rendered, which is generally upon the completion of a fracturing stage. We typically complete multiple stages per day. The price for our services typically includes an equipment charge and, if applicable, product charges for proppant, chemicals and other products consumed during the course of providing our services. The following table includes certain operating statistics that affect our revenue:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
Years Ended
December 31,
November 19,
December 31,
(Dollars in millions)
Revenue
$
22.6
$
239.6
$
775.7
$
1,450.4
Revenue from related parties
-
0.7
0.9
92.9
Total revenue
$
22.6
$
240.3
$
776.6
$
1,543.3
Total fracturing stages
2,290
14,552
27,366
30,537
Active fleets (1)
12.0
9.5
19.3
24.2
Total fleets (2)
28.0
28.0
28.0
34.0
(1) Active fleets is the average number of fleets operating during the period. We had 12, 16 and 19 active fleets at December 31, 2020, 2019 and 2018, respectively.
(2) Total fleets is the total number of fleets owned during the period.
Total revenue for January 1 through November 19, 2020 (Predecessor) was $240.3 million and for November 20 through December 31, 2020 (Successor) was $22.6 million for a combined total of $262.9 million for 2020 which decreased by $513.7 million from 2019. This decrease was due to lower average pricing of our services and a lower number of average active fleets.
At December 31, 2020, we evaluated all of our idle fleets and concluded that each of these fleets is available to return to service after our maintenance personnel make any necessary repairs and confirm that the equipment is in operating condition.
Total revenue in 2019 decreased by $766.7 million from 2018. This decrease was due to an increase in the portion of customers who provided their own proppant and fuel, lower average pricing of our services, a lower number of average active fleets, a decrease in wireline services, which were discontinued in May 2019, and a decrease in the prices for materials used in the fracturing process. These decreases were partially offset by improved efficiencies in the number of fracturing stages completed per average active fleet in 2019, which increased by 12% due to operational improvements and customer job designs.
The decrease in revenue from related parties in 2019 compared to 2018 was due to a decrease in the services performed for Chesapeake.
Costs of revenue
The primary costs involved in conducting our hydraulic fracturing services are costs for materials used in the fracturing process and costs to operate, maintain, and repair our fracturing equipment. Costs related to the materials used in the fracturing process typically include costs for sand and other proppants, costs for chemicals added to the fracturing fluid, and freight costs to transport these materials to the well location. Costs to operate our fracturing equipment primarily consist of labor and fuel costs. While we exclude certain amounts of depreciation and amortization from our
costs of revenue line item, we have included the amounts of depreciation that specifically relate to our revenue generating assets in our discussion below to provide further information regarding the total costs of generating our revenues. Costs of revenue as a percentage of total revenue is as follows:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
December 31,
November 19,
Year Ended December 31,
Percent
Percent
Percent
Percent
(Dollars in millions)
Dollars
of Revenue
Dollars
of Revenue
Dollars
of Revenue
Dollars
of Revenue
Costs of revenue, excluding depreciation
$
24.1
106.6
%
$
197.2
82.1
%
$
573.9
73.9
%
$
1,033.2
66.9
%
Depreciation - costs of revenue
4.6
20.4
%
65.2
27.1
%
82.5
10.6
%
75.9
5.0
%
Total costs of revenue
$
28.7
127.0
%
$
262.4
109.2
%
$
656.4
84.5
%
$
1,109.1
71.9
%
Total costs of revenue for January 1 through November 19, 2020 (Predecessor) was $262.4 million and for November 20 through December 31, 2020 (Successor) was $28.7 million for a combined total of $291.1 million in 2020 which decreased by $365.3 million from 2019. This decrease was primarily due to a decrease in our costs of revenue, excluding depreciation.
Costs of revenue, excluding depreciation, for January 1 through November 19, 2020 (Predecessor) was $197.2 million and for November 20 through December 31, 2020 (Successor) was $24.1 million for a combined total of $221.3 million in 2020 which decreased by $352.6 million from 2019. This decrease was primarily due to a decrease in our fracturing stages completed and lower number of average active fleets when compared to the same period in 2019. In addition, we saw a reduction in the cost of our materials.
Depreciation for our service equipment for January 1 through November 19, 2020 (Predecessor) was $65.2 million and for November 20 through December 31, 2020 (Successor) was $4.6 million for a combined total of $69.8 million in 2020 which decreased by $12.7 million from 2019. This decrease was primarily due to reduced capital expenditures in 2020 and the fresh start revaluation related to our emergence from bankruptcy.
Total combined 2020 costs of revenue as a percentage of total revenue increased by 26.2 percentage points from 84.5% in 2019 to 110.7% in 2020. This increase was due to a decrease in pricing for our services in 2020.
Total costs of revenue in 2019 decreased by $452.7 million from 2018. This decrease was primarily due to a decrease in our costs of revenue, excluding depreciation.
Costs of revenue, excluding depreciation, in 2019 decreased by $459.3 million from 2018. This decrease was partly due to an increase in the portion of customers who provided their own proppant and fuel, a decrease in, and the discontinuation of, our wireline services, and a decrease in the costs for materials used in the fracturing process. This decrease was also due to a decrease in our fracturing stages completed and lower number of average active fleets in the first half of the year when compared to the same period in 2018.
Total costs of revenue as a percentage of total revenue increased by 12.6 percentage points from 71.9% in 2018 to 84.5% in 2019. This increase was due to a decrease in pricing for our services in 2019.
Selling, general and administrative expense
Selling, general and administrative (“SG&A”) expense for January 1 through November 19, 2020 (Predecessor) was $47.8 million and for November 20 through December 31, 2020 (Successor) was $4.7 million for a combined total of $52.5 million in 2020 which decreased by $36.6 million from 2019. This decrease was primarily due to lower compensation and benefits expense due to lower headcount and wage reductions across the company in 2020.
Selling, general and administrative expense in 2019 increased by $1.2 million from 2018. This increase was primarily due to $2.4 million of bad debt expense, which was partially offset by decreased compensation and benefits expense due to our lower average headcount in 2019.
Depreciation and amortization
The following table summarizes our depreciation and amortization:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
Years Ended
December 31,
November 19,
December 31,
(In millions)
Depreciation - costs of revenue (1)
$
4.6
$
65.2
$
82.5
$
75.9
Depreciation - other (2)
0.1
3.3
7.5
8.8
Amortization (3)
0.1
-
-
-
Total depreciation and amortization
$
4.8
$
68.5
$
90.0
$
84.7
(1) Related to service equipment included in “Property, plant, and equipment, net” on our consolidated balance sheets discussed under the “Costs of revenue” heading of this discussion and analysis.
(2) Related to all long-lived assets other than service equipment included in “Property, plant, and equipment, net” on our consolidated balance sheet.
(3) Related to our Developed Technology intangible asset amortized over 36 months.
Depreciation and amortization for January 1 through November 19, 2020 (Predecessor) was $68.5 million and for November 20 through December 31, 2020 (Successor) was $4.8 million for a combined total of $73.3 million for 2020 which decreased by $16.7 million from 2019. This decrease was primarily due to reduced capital expenditures in 2020 and the fresh start revaluation related to our emergence from bankruptcy.
Depreciation and amortization in 2019 increased by $5.3 million from 2018. This increase was primarily due to elevated capital expenditures from the fourth quarter of 2017 through the second quarter of 2018.
Impairments and other charges
The following table summarizes our impairments and other charges:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
Years Ended
December 31,
November 19,
December 31,
(In millions)
Supply commitment charges
$
-
$
9.1
$
58.5
$
19.2
Impairment of assets
-
-
9.7
-
Inventory write-down
-
5.1
6.4
-
Transaction costs
-
18.5
-
-
Employee severance costs
-
1.0
-
-
Loss on contract termination
0.3
0.4
-
-
Total impairments and other charges
$
0.3
$
34.1
$
74.6
$
19.2
Transaction Costs: In 2020, in preparation for, and prior to filing, our Chapter 11 Cases, the Predecessor Company incurred and paid $7.0 million in legal and professional fees and $11.5 million to certain holders of our Term Loan Agreement and Secured Notes pursuant to the Restructuring Support Agreement.
Inventory Write Down: In 2020 and 2019 we recorded $5.1 million and 6.4 million, respectively, of inventory write-downs to reduce excess, obsolete, and slow-moving inventory to its estimated net realizable value.
Supply Commitment Charges: The Predecessor Company incurred supply commitment charges when our purchases of sand from certain suppliers are less than the minimum purchase commitments in our supply contracts. According to the accounting guidance for firm purchase commitments, future losses that are considered likely are also required to be recorded in the current period.
The Predecessor Company recorded aggregate charges under these supply contracts of $9.1 million, $58.5 million and $19.2 million in 2020, 2019 and 2018, respectively. These charges relate to actual purchase shortfalls incurred, as well as forecasted losses expected to be incurred and settled in future periods. These purchase shortfalls are largely due to our customers choosing to procure their own sand, often from sand mines closer to their operating areas.
In May 2019, the Predecessor Company restructured and amended our largest sand supply contract to reduce the total remaining commitment through 2024 by approximately $162 million. This reduced our annual commitment from $47.9 million to $21.0 million from 2019 through 2024. Due to the terms of the amended agreement and our estimated future purchases under this contract, we determined that we would not be able to satisfy $11.0 million of the $21.0 million annual commitment with sand purchases for the last five years of the contract. Therefore, in connection with this amendment, we recorded a supply commitment charge of $55.0 million in the first quarter of 2019 to accelerate these purchase shortfalls. After recording the $55.0 million supply commitment charge in the first quarter of 2019, the amount of accrued supply commitment charges for future periods that was recognized on our consolidated balance sheet at March 31, 2019 was $66.0 million. We paid $11.0 million of this amount in the second quarter of 2019 and we expected to pay the remaining $55.0 million in annual installments of $11.0 million from January 2020 through January 2024. The remaining amount of the 2019 charges represent revised estimates of our purchase shortfalls under this contract for 2019.
The Company terminated all sand supply contracts upon emergence from bankruptcy. Any amounts due as outlined in the Plan were paid upon emergence and the Company does not expect any future commitment related to these Predecessor contracts.
Fleet Capacity Reduction: In the fourth quarter of 2019, the Predecessor Company disposed of certain idle equipment where we believed there was no expectation of future use. The equipment we selected for disposal was comprised primarily of hydraulic fracturing pumps that were substantially depreciated. Certain hydraulic fracturing components, such as engines and transmissions that we believe to have remaining useful lives, will be removed prior to disposing of the equipment and used in our maintenance and repair activities for our remaining fleets. These disposals reduced our capacity of equipment from 34 total fleets to 28 total fleets. The amount of proceeds we received from these disposals was not significant. We recorded an asset impairment of $4.2 million in the third quarter of 2019 in connection with these disposals.
Discontinued Wireline Operations: In May 2019, the Predecessor Company discontinued our wireline operations due to financial underperformance resulting from market conditions. As a result of this decision, we recorded an asset impairment of $2.8 million and an inventory write-down of $1.4 million in the first quarter of 2019 to adjust these assets to their estimated fair market values and net realizable values, respectively. We sold substantially all of these assets in 2019 and received net proceeds of approximately $3.7 million.
Other Impairments: In the second quarter of 2019, the Predecessor Company recorded $2.7 million of impairments for certain land and buildings that we no longer use. We are closely monitoring current industry conditions and future expectations. If industry conditions decline, we may be subject to impairments of long-lived assets or intangible assets in future periods.
Interest expense, net
Interest expense, net of interest income, amortization for January 1 through November 19, 2020 (Predecessor) was $22.1 million and for November 20 through December 31, 2020 (Successor) was zero for a combined total of $22.1
million in 2020 which decreased by $8.6 million from 2019. This decreased as a result of the bankruptcy filing, which ceased interest charges on our debt and a reduction of indebtedness in accordance with the Plan. These decreases were partially offset by increased interest expense due to the derecognition of deferred issuance costs related to an amendment of our terminated revolving credit facility and lower interest received on our money market accounts in 2020.
Interest expense, net of interest income, in 2019 decreased by $18.6 million from 2018. This decrease was due to a lower average debt balance and higher interest income in 2019.
Gain (loss) on extinguishment of debt, net
In 2020, the Predecessor Company repaid $22.6 million of aggregate principal amount of Term Loan and recognized a gain on debt extinguishment of $2.0 million.
In 2019, the Predecessor Company repaid $31.0 million of aggregate principal amount of Term Loan. We recognized a loss on debt extinguishment of $0.2 million. In 2019, we repurchased $17.0 million of aggregate principal amount of 2022 Senior Notes in the qualified institutional market. We recognized a gain on debt extinguishment of $1.4 million.
In 2018, the Predecessor Company repaid $310.0 million of aggregate principal amount of Term Loan. We recognized a loss on debt extinguishment of $2.7 million. In 2018, we repaid all $290.0 million remaining principal amount of our floating rate senior notes due in 2020 using cash on hand and proceeds received from our IPO. We recognized a loss on this debt extinguishment of $8.3 million. In 2018, we repurchased $22.1 million of aggregate principal amount of 2022 Senior Notes in the qualified institutional market. We recognized a gain on debt extinguishment of $1.2 million.
Income tax expense
Income tax expense for January 1 through November 19, 2020 (Predecessor) was $0.2 million and for November 20 through December 31, 2020 (Successor) was zero for a combined total of $0.2 million in 2020 and was $1.4 million, and $2.0 million in 2019, and 2018, respectively. These amounts consisted of state margin taxes accounted for as income taxes, income taxes for states that limit the deduction of net operating loss carryforwards, and foreign income taxes. We provide a valuation allowance against all deferred tax assets in excess of our deferred tax liabilities. As a result, we did not record any U.S. federal or other state income tax expense or benefit related to our income or losses in 2020, 2019 or 2018. See Note 12 - “Income Taxes” in Notes to our Consolidated Financial Statements included elsewhere in this annual report on Form 10-K for more information regarding our income taxes and valuation allowance.
Liquidity and Capital Resources
Sources of Liquidity
At December 31, 2020, the Successor Company had $94.0 million of cash and cash equivalents and $13.2 million available for borrowings under our revolving credit facility which resulted in a total liquidity position of $107.2 million. We believe that our cash and cash equivalents, cash provided by operations, and the availability under our revolving credit facility will be sufficient to fund our operations and capital expenditures for at least the next 12 months.
In November 2020, the Successor Company entered into a $40 million asset-based revolving credit facility. The maximum availability of credit under the credit facility is limited at any time to the lesser of $40 million or the borrowing base. The borrowing base is based on percentages of eligible accounts receivable and is subject to certain reserves. As of December 31, 2020, our borrowing base was $17.2 million and therefore our maximum availability under the credit facility was $17.2 million. As of December 31, 2020, there were no borrowings outstanding under the credit facility, and letters of credit totaling $4.0 million were issued, resulting in $13.2 million of availability under the credit facility.
In an event of default or if the amount available under our credit facility is less than either 12.5% of our maximum availability or $5.0 million, we will be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0. If at any time borrowings and letters of credit issued under the credit facility exceed the borrowing base, we will be required to repay an amount equal to such excess. See Note 6 - “Indebtedness and Borrowing Facility” in notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K for more information on our credit facility.
Cash Flows
The following table summarizes our cash flows:
Successor
Predecessor
Period from
Period from
November 20,
January 1,
through
through
Years Ended
December 31,
November 19,
December 31,
(In millions)
Net (loss) income adjusted for non-cash items
$
(8.2)
$
(48.5)
$
104.0
$
388.1
Changes in operating assets and liabilities
11.1
33.3
37.5
2.0
Cash paid to settle supply commitment charges
-
(31.3)
(17.6)
(5.3)
Net cash provided by (used in) operating activities
2.9
(46.5)
123.9
384.8
Net cash used in investing activities
(1.5)
(19.4)
(20.4)
(98.6)
Net cash used in financing activities
-
(51.8)
(58.3)
(325.6)
Net increase (decrease) in cash, cash equivalents, and restricted cash
1.4
(117.7)
45.2
(39.4)
Cash, cash equivalents, and restricted cash at beginning of period
105.3
223.0
177.8
217.2
Cash, cash equivalents, and restricted cash at end of period
$
106.7
$
105.3
$
223.0
$
177.8
Cash flows from operating activities have historically been a significant source of liquidity we use to fund capital expenditures and repay our debt. Changes in cash flows from operating activities are primarily affected by the same factors that affect our net income, excluding non-cash items such as depreciation and amortization, stock-based compensation, and impairments of assets.
Cash flows from operating activities: Net cash used by operating activities for January 1 through November 19, 2020 (Predecessor) was $46.5 million and for November 20 through December 31, 2020 (Successor) net cash provided was $2.9 for a combined net cash used total of $43.6 million for 2020 compared to net cash provided of $123.9 million in 2019. Cash flows from operating activities consists of net income or loss adjusted for non-cash items, changes in operating assets and liabilities and cash paid to settle supply commitment charges. Net income or loss adjusted for non-cash items resulted in cash decreases of $8.2 million (Successor) and $48.5 million (Predecessor) in 2020 and a cash increase of $104.0 million 2019. This change was primarily due to lower earnings in 2020. The net change in operating assets and liabilities resulted in a cash increase of $11.1 million (Successor) and $33.3 million (Predecessor) in 2020 and a cash increase of $37.5 million in 2019. The net change in operating assets and liabilities for 2020 was primarily due to a release of working capital resulting from our decreased activity levels and pricing levels in 2020 when compared to the same period in 2019.
Net cash provided by operating activities was $123.9 million and $384.8 million in 2019 and 2018, respectively. Cash flows from operating activities consists of net income or loss adjusted for non-cash items, changes in operating assets and liabilities and cash paid to settle supply commitment charges. Net income or loss adjusted for non-cash items resulted in cash increases of $104.0 million and $388.1 million in 2019 and 2018, respectively. This change was primarily due to lower earnings in 2019. The net change in operating assets and liabilities resulted in a cash increase of $37.5 million and a cash increase of $2.0 million in 2019 and 2018, respectively. The net change in operating assets and liabilities for 2019 was primarily due to a release of working capital resulting from our decreased activity levels and pricing levels in 2019 when compared to the same period in 2018.
Cash flows from investing activities: Net cash used in investing activities for January 1 through November 19, 2020 (Predecessor) was $19.4 million and for November 20 through December 31, 2020 (Successor) was $1.5 million for a combined total of $20.9 million in 2020 compared to $20.4 million in 2019. This change was primarily due to decreased capital expenditures in 2020 compared to 2019 and the proceeds received from the sale of our equity interest in our China joint venture in the third quarter of 2019.
Net cash used in investing activities was $20.4 million and $98.6 million in 2019 and 2018, respectively. This change was primarily due to decreased capital expenditures in 2019 compared to 2018 and the proceeds received from the sale of our equity interest in our China joint venture in the third quarter of 2019.
Cash flows from financing activities: Net cash used in financing activities for January 1 through November 19, 2020 (Predecessor) was $51.8 million and for November 20 through December 31, 2020 (Successor) was zero for a combined total of $51.8 million in 2020. The Predecessor company used $20.6 million of cash to repay principal amount of long-term debt prior to bankruptcy and $30.7 million of cash upon emergence.
Net cash used in financing activities was $58.3 million in 2019. We used $46.4 million of cash to repay $48.4 million of aggregate principal amount of long-term debt and $9.9 million to repurchase stock.
Net cash used in financing activities was $325.6 million in 2018. We used $625.1 million of cash to repay $622.1 million of aggregate principal amount of long-term debt, which we partially funded with $303.0 million of net proceeds received from our IPO.
Cash Requirements
Contractual Commitments and Obligation
The following table summarizes the Successor Company’s contractual commitments and obligations at December 31, 2020:
Payments Due by Period
Less Than
More than
(In millions)
Total
1 Year
1-3 Years
3-5 Years
5 Years
Operating lease obligations
$
6.8
$
3.2
$
2.5
$
1.1
$
-
Purchase obligations
1.0
0.3
0.6
0.1
-
Total
$
7.8
$
3.5
$
3.1
$
1.2
$
-
Capital Expenditures
The nature of our capital expenditures consists of a base level of investment required to support our current operations and amounts related to growth and company initiatives. Our capital expenditures for 2020 represented the amount necessary to support our current operations.
Our cash, cash equivalents, and cash provided by operations will be used to fund our capital expenditure needs, which we believe will be sufficient to support our operations. We continuously evaluate our capital expenditures and the amount we ultimately spend will primarily depend on industry conditions.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements, transactions, or special purpose entities.
Critical Accounting Estimates
The preparation of our consolidated financial statements and related notes requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.
In the notes accompanying the consolidated financial statements included elsewhere in this annual report on Form 10-K, we describe the significant accounting policies used in the preparation of our consolidated financial statements. We believe that the following represent the most significant estimates and management judgments used in preparing the consolidated financial statements.
Fresh Start Accounting
Upon emergence from bankruptcy, we met the criteria and were required to adopt fresh start accounting in accordance with ASC Topic 852, Reorganizations, which on the emergence date resulted in a new entity, the Successor, for financial reporting purposes, with no beginning retained earnings or deficit as of the fresh start reporting date. The criteria requiring fresh start accounting are: (i) the holders of then-existing voting shares of the Predecessor received less than 50 percent of the new voting shares of the Successor outstanding upon emergence from bankruptcy, and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. The Company applied fresh start accounting effective November 19, 2020, the Effective Date. Under the principles of fresh start accounting, a new reporting entity was considered to have been created, and, as a result, the Company allocated the reorganization value to its individual assets based on their estimated fair values. To facilitate discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized Company as the Successor for periods subsequent to November 19, 2020 and as the Predecessor for periods on or prior to, and including, November 19, 2020. As a result of the adoption of fresh start accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to November 19, 2020 are not comparable to our consolidated financial statements on or prior to November 19, 2020, and as such, “black-line” financial statements are presented to distinguish between the Predecessor and Successor Periods.
Income Taxes
Income taxes are accounted for using the asset and liability method. Deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. We recognize future tax benefits to the extent that such benefits are more likely than not to be realized.
We record a valuation allowance to reduce the value of a deferred tax asset if based on the consideration of all available evidence, it is more likely than not that all or some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. We evaluate our deferred income taxes at each reporting date to determine if a valuation allowance is required by considering all available evidence, including historical and projected taxable income and tax planning strategies. We will adjust a previously established valuation allowance if we change our assessment of the amount of deferred income tax asset that is more likely than not to be realized.
An estimate of whether a valuation allowance is necessary and the related amount of the valuation allowance contain uncertainties because it requires us to apply judgment to all positive and negative evidence available to us. When considering the likelihood of whether a deferred tax asset will be available to offset future taxable income, we assess, among other things, our historical and projected income or loss. When performing this assessment, we must consider the cyclical nature of our business. Our business is heavily influenced by current and expected prices for oil and natural gas. These prices are outside of our control and a downturn in the market can result in periods of significant losses for us, which could prevent the realization of a deferred tax asset. We therefore must consider the future possibility of an industry downturn and the severity of its effect on our business when considering all positive and negative evidence related to the realization of our deferred tax assets. Although we believe that our judgments and estimates are reasonable,
an adjustment to a valuation allowance in a given period may require a material adjustment in a future period if our assumptions regarding our future taxable income are proven inaccurate due to an industry downturn.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Recent Accounting Pronouncements
See Note 4 - “Summary of Significant Accounting Policies” in Notes to our Consolidated Financial Statements included elsewhere in this annual report on Form 10-K for more information.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 2020, we held no derivative instruments that materially increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks.
During 2020, substantially all of our operations were conducted within the United States; therefore, we had no significant exposure to foreign currency exchange rate risk.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The information required by this Item 8 is included in our Consolidated Financial Statements and the notes thereto beginning on page 51 in this annual report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of December 31, 2020, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There has been no change in internal control over financial reporting that occurred during the Predecessor period from January 1 through November 19, 2020 or the Successor period from November 20 through December 31,
2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the criteria in Internal Control - Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
Attestation Report of the Independent Registered Public Accounting Firm
Until we are an accelerated filer or a large accelerated filer (as defined in Exchange Act Rule 12b-2), we will not be required to comply with the auditor attestation requirements related to internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements. See Index to Consolidated Financial Statements of FTS International, Inc. on page 51 of this Report.
2. Financial Statement Schedules. Schedules are omitted because they are not required or applicable, or the required information is included in the Financial Statement or related notes thereto.
3. Exhibits. The exhibits filed with or incorporated by reference as part of this Report are set forth in the Exhibit Index.
(b) The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein.
EXHIBIT INDEX
Exhibit
Number
Description
Form
File
Number
Exhibit
Number
Filing Date
2.1
Joint Prepackaged Chapter 11 Plan of Reorganization of FTS International, Inc., and its Debtor Affiliates
10-Q
001-38382
99.1
November 6, 2020
3.1
Amended and Restated Certificate of Incorporation of FTS International, Inc.
8-K
001-38382
3.1
November 19, 2020
3.2
Amended and Restated Bylaws of FTS International, Inc.
8-K
001-38382
3.2
November 19, 2020
3.3
Certificate of Designations of Series A Participating Cumulative Preferred Stock of FTS International, Inc.
8-K
001-38382
3.3
November 19, 2020
Exhibit
Number
Description
Form
File
Number
Exhibit
Number
Filing Date
4.1
Specimen Class A Common Stock Certificate
8-K
001-38382
4.1
November 19, 2020
4.2
*
Description of Securities Registered under Section 12 of the Exchange Act
10.1
#
Credit Agreement, dated as of November 19, 2020, by and among FTS International, Inc., FTS International Services, LLC, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent
8-K
001-38382
10.1
November 19, 2020
10.2
#
Guaranty and Security Agreement, dated as of November 19, 2020, among FTS International, Inc. and Wells Fargo Bank, National Association
8-K
001-38382
10.2
November 19, 2020
10.3
Master Service Agreement, dated as of July 9, 2012, by and between Chesapeake Operating, Inc. and FTS International Services, LLC
S-1
333-215998
10.13
February 28, 2017
10.4
Master Commercial Agreement, dated as of December 24, 2016, by and between Chesapeake Operating, LLC and FTS International Services, LLC
S-1
333-215998
10.14
February 28, 2017
10.5
Tranche 1 Warrant Agreement dated as of November 19, 2020, by and among FTS International, Inc. and American Stock Transfer & Trust Company, LLC
8-K
001-38382
10.3
November 19, 2020
10.6
Tranche 2 Warrant Agreement dated as of November 19, 2020, by and among FTS International, Inc. and American Stock Transfer & Trust Company, LLC
8-K
001-38382
10.4
November 19, 2020
10.7
Registration Rights Agreement, dated November 19, 2020, between FTS International, Inc. and certain holders party thereto
8-K
001-38382
10.5
November 19, 2020
10.8
†
Form of Indemnification Agreement
8-K
001-38382
10.6
November 19, 2020
10.9
†
Form of Amended Severance Agreement
8-K
001-38382
10.7
November 19, 2020
10.10
†
Amended and Restated Equity and Incentive Compensation Plan
8-K
001-38382
10.8
November 19, 2020
21.1
*
List of Subsidiaries
23.1
*
Consent of Grant Thornton LLP
31.1
*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit
Number
Description
Form
File
Number
Exhibit
Number
Filing Date
31.2
*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
*
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document (the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith
#
Certain schedules and similar attachments have been omitted. The Company agrees to furnish a supplemental copy of any omitted schedule or attachment to the Commission upon request.
†
Management contract, compensatory plan or arrangement.