UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


	FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~March 31,~~ June 30, 2022

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File No. 001-34037

Commission Company Name: SUPERIOR ENERGY SERVICES, INC

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)



	Delaware		75-2379388
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	1001 Louisiana Street, Suite 2900 Houston, TX (Address of principal executive offices)		77002 (Zip Code)

Registrant’s telephone number, including area code: (713) 654-2200

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
None	N/A	None

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☐
		Emerging growth company ☐

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No 

The number of shares of the registrant’s Class A common stock outstanding on ~~April 30,~~July 31, 2022 was 19,998,695.

The number of shares of the registrant’s Class B common stock outstanding on ~~April 30,~~July 31, 2022 was 76,269.

TABLE OF CONTENTS




		Page
	Information Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION

Item 1.	~~Unaudited Condensed Consolidated~~ Financial Statements ~~and Notes~~
	Unaudited Condensed Consolidated Balance Sheets	54
	Unaudited Condensed Consolidated Statements of Operations	65
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Unaudited Consolidated Statements of Changes in Stockholders' Equity (Deficit)	8
	Unaudited Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2024
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	2429
Item 4.	Controls and Procedures	2530

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2631
Item 1A.	Risk Factors	2631
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2631
Item 3.	Defaults Upon Senior Securities	2631
Item 4.	Mine Safety Disclosures	2631
Item 5.	Other Information	2631
Item 6.	Exhibits	2732

SIGNATURES		2833

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Form 10-Q”) and other documents filed by us with the Securities and Exchange Commission (the “SEC”) contain, and future oral or written statements or press releases by us and our management may contain, forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking ~~statements, although not all forward-looking statements contain these identifying words.~~statements. All statements, other than statements of historical fact, included in this Form 10-Q ~~or such other materials~~ regarding our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of their experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to:

•

risks and uncertainties regarding the continuing effects of residual bankruptcy proceedings on us and our various constituents; attendant risks associated with restrictions on our ability to pursue our business strategies; ~~uncertainty and continuing risks associated with our ability to achieve our stated goals;~~

•

~~the likelihood that our historical financial information may no longer be indicative of our future performance due to our implementation of fresh start accounting;~~

•

the difficulty to predict our long-term liquidity requirements and the adequacy of our capital resources;

•

restrictive covenants in the Credit Facility (as defined below) could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests;

•

the conditions in the oil and gas industry;

•

U.S. and global market and economic conditions, including impacts relating to inflation and supply chain disruptions;

•

the effects of public health threats, pandemics and epidemics, and the adverse impact thereof on ~~our business, financial condition, results of operations and liquidity, including, but not limited to,~~ our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand and industry demand generally, margins, utilization, cash position, taxes, the price of our securities, and our ability to access capital markets, including the macroeconomic effects from the continuing COVID-19 pandemic;

•

the ability of the members of Organization of Petroleum Exporting Countries (“OPEC+”) to agree on and to maintain crude oil price and production controls;

•

operating hazards, including the significant possibility of accidents resulting in personal injury or death, or property damage for which we may have limited or no insurance coverage or indemnification rights;

•

the possibility of not being fully indemnified against losses incurred due to catastrophic events;

•

claims, litigation or other proceedings that require cash payments or could impair financial condition;

•

credit risk associated with our customer base;

•

the effect of regulatory programs and environmental matters on our operations or prospects;

•

the impact that unfavorable or unusual weather conditions could have on our operations;

•

the potential inability to retain key employees and skilled workers;

•

political, legal, economic and other ~~risks and~~ uncertainties associated with our international ~~operations;~~

•

~~laws, regulations or practices in foreign countries~~operations could materially restrict our operations or expose us to additional risks;

•

potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results;

•

changes in competitive and technological factors affecting our operations;

•

risks associated with the uncertainty of macroeconomic and business conditions worldwide;

•

risks to our operations ~~may be subject to~~from potential cyber-attacks;

•

counterparty risks associated with reliance on key suppliers;

•

challenges with estimating our potential liabilities related to our oil and natural gas property;

•

risks associated with potential changes of Bureau of Ocean Energy Management (“BOEM”) security and bonding requirements for offshore platforms;

•

the likelihood that the interests of our significant stockholders may conflict with the interests of our other stockholders;

•

the risks associated with owning our Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”), for which there is no public market; and

•

the likelihood that our stockholders agreement may prevent certain transactions that could otherwise be beneficial to our stockholders.

These risks and other uncertainties related to our business are described in detail in our Annual Report on Form ~~10-K. Although we believe that~~10-K for the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements.year ended December 31, 2021. We undertake no obligation to update any of our forward-looking statements ~~for any reason, notwithstanding any changes~~ in ~~our assumptions, changes in our business plans, our actual experience, or other changes.~~this discussion. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements and Notes

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

March 31, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$
359,511

$
314,974

Accounts receivable, net

197,602

182,432

Income taxes receivable

5,578

5,099

Prepaid expenses

16,037

15,861

Inventory

59,830

60,603

Investment in equity securities

26,605

25,735

Other current assets

5,748

6,701

Assets held for sale

28,491

37,528

Total current assets

699,402

648,933

Property, plant and equipment, net

331,499

356,274

Notes receivable

61,566

60,588

Restricted cash

79,561

79,561

Other long-term assets, net

52,331

54,152

Total assets

$
1,224,359

$
1,199,508

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$
43,573

$
43,080

Accrued expenses

107,027

108,610

Income taxes payable

12,990

8,272

Liabilities held for sale

3,678

5,607

Total current liabilities

167,268

165,569

Decommissioning liabilities

193,041

190,380

Deferred income taxes

9,725

12,441

Other long-term liabilities

86,281

89,385

Total liabilities

456,315

457,775

Stockholders’ equity (deficit):

Class A common stock $0.01 par value; 50,000,000 shares authorized;
    19,998,695 shares issued and outstanding
    at March 31, 2022 and December 31, 2021

200

200

Class B common stock $0.01 par value; 2,000,000 shares authorized;
    113,840 shares issued and 76,269 shares outstanding
    at March 31, 2022 and December 31, 2021

1

1

Class A Additional paid-in capital

902,486

902,486

Class B Additional paid-in capital

1,809

1,224

Accumulated deficit

(136,452
)

(162,178
)
Total stockholders’ equity

768,044

741,733

Total liabilities and stockholders’ equity

$
1,224,359

$
1,199,508


	June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	391,219		$	314,974
Accounts receivable, net		211,014			182,432
Income taxes receivable		5,091			5,099
Prepaid expenses		18,513			15,861
Inventory		67,201			60,603
Investment in equity securities		16,524			25,735
Other current assets		5,349			6,701
Assets held for sale		25,629			37,528
Total current assets		740,540			648,933
Property, plant and equipment, net		286,927			356,274
Note receivable		65,140			60,588
Restricted cash		79,595			79,561
Other long-term assets, net		50,374			54,152
Total assets	$	1,222,576		$	1,199,508

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	44,334		$	43,080
Accrued expenses		111,839			108,610
Income taxes payable		10,449			8,272
Liabilities held for sale		4,200			5,607
Total current liabilities		170,822			165,569
Decommissioning liability		142,740			190,380
Deferred income taxes		16,225			12,441
Other long-term liabilities		82,169			89,385
Total liabilities		411,956			457,775

Stockholders’ equity (deficit):
Class A common stock $0.01 par value; 50,000 shares authorized; 19,999��shares issued and outstanding at June 30, 2022 and December 31, 2021		200			200
Class B common stock $0.01 par value; 2,000 shares authorized; 114 shares issued and 76 shares outstanding at June 30, 2022 and December 31, 2021		1			1
Class A Additional paid-in capital		902,486			902,486
Class B Additional paid-in capital		2,767			1,224
Accumulated deficit		(94,834	)		(162,178	)
Total stockholders’ equity		810,620			741,733
Total liabilities and stockholders’ equity	$	1,222,576		$	1,199,508

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Successor

Predecessor

For the Three Months Ended March 31, 2022

For the Period
February 3, 2021
through
March 31, 2021

For the Period
January 1, 2021
through
February 2, 2021

Revenues:

Services

$
91,439

$
43,679

$
19,234

Rentals

67,162

31,314

14,434

Product sales

39,329

30,850

12,260

Total revenues

197,930

105,843

45,928

Cost of revenues:

Services

62,216

41,471

15,080

Rentals

24,613

10,199

5,876

Product sales

25,551

16,367

8,817

Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

112,380

68,037

29,773

Depreciation, depletion, amortization and accretion:

Services

13,666

16,364

3,500

Rentals

10,037

11,901

2,627

Product sales

10,382

11,765

2,231

Total depreciation, depletion, amortization and accretion

34,085

40,030

8,358

General and administrative expenses

32,018

18,438

11,052

Restructuring expenses

1,555

8,383

1,270

Other (gains) and losses, net

1,147

(169
)

-

Income (loss) from operations

16,745

(28,876
)

(4,525
)
Other income (expense):

Interest income, net

1,179

212

202

Reorganization items, net

-

-

335,560

Other income (expense)

13,947

(2,845
)

(2,105
)
Income (loss) from continuing operations before income taxes

31,871

(31,509
)

329,132

Income tax (expense) benefit

(7,884
)

4,285

(60,003
)
Net income (loss) from continuing operations

23,987

(27,224
)

269,129

Income (loss) from discontinued operations, net of income tax

1,739

(9,406
)

(352
)
Net income (loss)

$
25,726

$
(36,630
)

$
268,777

Income (loss) per share -basic

Net income (loss) from continuing operations

$
1.20

$
(1.36
)

$
18.13

Income (loss) from discontinued operations, net of income tax

0.09

(0.47
)

(0.02
)
Net income (loss)

$
1.29

$
(1.83
)

$
18.11

Income (loss) per share - diluted:

Net income (loss) from continuing operations

$
1.20

$
(1.36
)

$
18.06

Income (loss) from discontinued operations, net of income tax

0.08

(0.47
)

(0.03
)
Net income (loss)

$
1.28

$
(1.83
)

$
18.03

Weighted-average shares outstanding - basic

19,999

19,996

14,845

Weighted-average shares outstanding - diluted

20,056

19,996

14,905


	For the Three Months Ended June 30,
	2022			2021
Revenues:
Services	$	100,066		$	79,787
Rentals		76,993			53,238
Product sales		47,581			32,867
Total revenues		224,640			165,892
Cost of revenues:
Services		73,530			53,642
Rentals		24,235			24,750
Product sales		23,203			24,653
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		120,968			103,045
Depreciation, depletion, amortization and accretion:
Services		8,292			28,384
Rentals		6,492			18,940
Product sales		8,562			11,694
Total depreciation, depletion, amortization and accretion		23,346			59,018
General and administrative expenses		30,231			32,308
Restructuring expenses		1,663			7,438
Other (gains) and losses, net		(18,013	)		534
Income (loss) from operations		66,445			(36,451	)
Other income (expense):
Interest income, net		1,459			535
Other income (expense)		(13,471	)		2,570
Income (loss) from continuing operations before income taxes		54,433			(33,346	)
Income tax (expense) benefit		(10,871	)		1,747
Net income (loss) from continuing operations		43,562			(31,599	)
Income (loss) from discontinued operations, net of income tax		(1,944	)		(19,400	)
Net income (loss)	$	41,618		$	(50,999	)

Income (loss) per share - basic:
Net income (loss) from continuing operations	$	2.18		$	(1.58	)
Income (loss) from discontinued operations, net of income tax		(0.10	)		(0.97	)
Net income (loss)	$	2.08		$	(2.55	)

Income (loss) per share - diluted:
Net income (loss) from continuing operations	$	2.17		$	(1.58	)
Income (loss) from discontinued operations, net of income tax		(0.10	)		(0.97	)
Net income (loss)	$	2.07		$	(2.55	)

Weighted-average shares outstanding - basic		20,024			19,999
Weighted-average shares outstanding - diluted		20,076			19,999

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Successor						Predecessor
	For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021
Revenues:
Services	$	191,505		$	123,466		$	19,234
Rentals		144,155			84,552			14,434
Product sales		86,910			63,717			12,260
Total revenues		422,570			271,735			45,928
Cost of revenues:
Services		133,698			95,113			15,080
Rentals		48,848			34,949			5,876
Product sales		50,802			41,020			8,817
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		233,348			171,082			29,773
Depreciation, depletion, amortization and accretion:
Services		21,958			44,748			3,500
Rentals		16,529			30,841			2,627
Product sales		18,944			23,459			2,231
Total depreciation, depletion, amortization and accretion		57,431			99,048			8,358
General and administrative expenses		62,249			50,746			11,052
Restructuring expenses		3,218			15,821			1,270
Other (gains) and losses, net		(16,866	)		365			-
Income (loss) from operations		83,190			(65,327	)		(4,525	)
Other income (expense):
Interest income, net		2,638			747			202
Reorganization items, net		-			-			335,560
Other income (expense)		476			(275	)		(2,105	)
Income (loss) from continuing operations before income taxes		86,304			(64,855	)		329,132
Income tax (expense) benefit		(18,755	)		6,032			(60,003	)
Net income (loss) from continuing operations		67,549			(58,823	)		269,129
Income (loss) from discontinued operations, net of income tax		(205	)		(28,806	)		(352	)
Net income (loss)	$	67,344		$	(87,629	)	$	268,777

Income (loss) per share - basic:
Net income (loss) from continuing operations	$	3.38		$	(2.94	)	$	18.13
Income (loss) from discontinued operations, net of income tax		(0.01	)		(1.44	)		(0.02	)
Net income (loss)	$	3.37		$	(4.38	)	$	18.11

Income (loss) per share - diluted:
Net income (loss) from continuing operations	$	3.37		$	(2.94	)	$	18.06
Income (loss) from discontinued operations, net of income tax		(0.01	)		(1.44	)		(0.03	)
Net income (loss)	$	3.36		$	(4.38	)	$	18.03

Weighted-average shares outstanding - basic		20,011			19,997			14,845
Weighted-average shares outstanding - diluted		20,065			19,997			14,905

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

Successor

Predecessor

For the Three Months Ended March 31, 2022

For the Period
February 3, 2021
through
March 31, 2021

For the Period
January 1, 2021
through
February 2, 2021

Net income (loss)

$
25,726

$
(36,630
)

$
268,777

Change in cumulative translation adjustment, net of tax

0

0

67,947

Comprehensive income (loss)

$
25,726

$
(36,630
)

$
336,724


	For the Three Months Ended June 30,
	2022		2021
Net income (loss)	$	41,618	$	(50,999	)
Change in cumulative translation adjustment, net of tax		0		0
Comprehensive income (loss)	$	41,618	$	(50,999	)


	Successor					Predecessor
	For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021
Net income (loss)	$	67,344	$	(87,629	)	$	268,777
Change in cumulative translation adjustment, net of tax		-		-			67,947
Comprehensive income (loss)	$	67,344	$	(87,629	)	$	336,724

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)

(in thousands)

(unaudited)

Common Stock

Class A

Class B

Additional paid-in capital

Shares

Amount

Shares

Amount

Class A

Class B

Treasury stock

Accumulated other comprehensive loss, net

Accumulated deficit

Total

Balances, December 31, 2020 (Predecessor)

15,799

16

-

-

2,756,889

-

(4,290
)

(67,947
)

(3,023,315
)

(338,647
)
Net income

-

-

-

-

-

-

-

-

268,777

268,777

Foreign currency translation adjustment

-

-

-

-

-

-

-

67,947

-

67,947

Extinguishment of unrecognized compensation expense

-

-

-

-

988

-

-

-

-

988

Stock-based compensation expense, net

-

-

-

935

-

935

Restricted stock units vested

49

-

-

-

-

-

-

-

-

-

Shares withheld and retired

(15
)

-

-

-

-

-

-

Cancellation of Predecessor equity

(15,833
)

(16
)

-

-

(2,758,812
)

-

4,290

-

2,754,538

-

Issuance of Successor Class A common stock

19,996

200

-

-

902,486

-

-

-

-

902,686

Balances, February 2, 2021 (Predecessor)

19,996

$
200

-

$
-

$
902,486

$
-

$
-

$
-

$
-

$
902,686

Balances, February 3, 2021 (Successor)

19,996

$
200

-

$
-

$
902,486

$
-

$
-

$
-

$
-

$
902,686

Net loss

-

-

-

-

-

-

-

-

(36,630
)

(36,630
)
Balances, March 31, 2021 (Successor)

19,996

$
200

-

$
-

$
902,486

$
-

$
-

$
-

$
(36,630
)

$
866,056

Balances, December 31, 2021 (Successor)

19,999

$
200

76

$
1

$
902,486

$
1,224

$
-

$
-

$
(162,178
)

$
741,733

Net income

-

-

-

-

-

-

-

-

25,726

25,726

Stock-based compensation expense, net

-

-

-

-

-

585

-

-

-

585

Balances, March 31, 2022 (Successor)

19,999

$
200

76

$
1

$
902,486

$
1,809

$
-

$
-

$
(136,452
)

$
768,044


												Additional									Accumulated
	Common Stock											paid-in									other
	Class A						Class B					capital						Treasury			comprehensive			Accumulated
	Shares			Amount			Shares			Amount		Class A			Class B			stock			loss, net			deficit			Total

Balances, December 31, 2020 (Predecessor)		15,799		$	16			-		$	-	$	2,756,889		$	-		$	(4,290	)	$	(67,947	)	$	(3,023,315	)	$	(338,647	)
Net income		-			-			-			-		-			-			-			-			268,777			268,777
Foreign currency translation adjustment		-			-			-			-		-			-			-			67,947			-			67,947
Extinguishment of unrecognized compensation expense		-			-			-			-		988			-			-			-			-			988
Stock-based compensation expense, net		-						-			-		935			-												935
Restricted stock units vested		49			-			-			-		-			-			-			-			-			-
Shares withheld and retired		(15	)		-			-			-		-			-												-
Cancellation of Predecessor equity		(15,833	)		(16	)		-			-		(2,758,812	)		-			4,290			-			2,754,538			-
Issuance of Successor Class A common stock		19,996			200			-			-		902,486			-			-			-			-			902,686
Balances, February 2, 2021 (Predecessor)		19,996		$	200			-		$	-	$	902,486		$	-		$	-		$	-		$	-		$	902,686


Balances, February 3, 2021 (Successor)		19,996		$	200			-		$	-	$	902,486		$	-		$	-		$	-		$	-		$	902,686
Net loss		-			-			-			-		-			-			-			-			(36,630	)		(36,630	)
Balances, March 31, 2021 (Successor)		19,996			200			-			-		902,486			-			-			-			(36,630	)		866,056
Net income		-			-			-			-		-			-			-			-			(50,999	)		(50,999	)
Stock-based compensation expense, net		-						-			-		-			1,570												1,570
Common stock issued		3			-			114			1		-			(1	)		-			-			-			-
Share withheld and retired		-			-			(38	)		-		-			(1,485	)											(1,485	)
Balances, June 30, 2021 (Successor)		19,999		$	200			76		$	1	$	902,486		$	84		$	-		$	-		$	(87,629	)	$	815,142


Balances, December 31, 2021 (Successor)		19,999		$	200			76		$	1	$	902,486		$	1,224		$	-		$	-		$	(162,178	)	$	741,733
Net income		-			-			-			-		-			-			-			-			25,726			25,726
Stock-based compensation expense, net		-			-			-			-		-			585			-			-			-			585
Balances, March 31, 2022 (Successor)		19,999			200			76			1		902,486			1,809			-			-			(136,452	)		768,044
Net income		-			-			-			-		-			-			-			-			41,618			41,618
Stock-based compensation expense, net		-			-			-			-		-			958			-			-			-			958
Balances, June 30 2022 (Successor)		19,999		$	200			76		$	1	$	902,486		$	2,767		$	-		$	-		$	(94,834	)	$	810,620

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Successor						Predecessor			Successor						Predecessor
	For the Three Months Ended March 31, 2022			For the Period February 3, 2021 through March 31, 2021			For the Period January 1, 2021 through February 2, 2021			For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021
Cash flows from operating activities:
Net income (loss)	$	25,726		$	(36,630	)	$	268,777		$	67,344		$	(87,629	)	$	268,777
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation, depletion, amortization and accretion		34,085			52,805			10,499			57,431			130,404			10,499
Deferred income taxes		(2,769	)		(5,051	)		54,322			1,687			(16,295	)		54,322
Amortization of credit facility costs		127			82			0			254			0			0
Stock based compensation expense		585			0			935			1,543			1,570			935
Reorganization items, net		0			0			(354,279	)		0			0			(354,279	)
Bad debt		(1,203	)		(4,398	)		(210	)		(920	)		(5,433	)		(210	)
Gain on sale of assets and businesses		0			0			58			0			0			58
Gain on sale of equity securities		(1,761	)		0			0			(3,611	)		0			0
Unrealized gain on investment in equity securities		(6,474	)		0			0			(544	)		0			0
Other (gains) and losses, net		(5,755	)		(2,669	)		0			(23,296	)		7,883			0
Other reconciling items, net		(1	)		(246	)		1,017			2,529			(1,886	)		1,017
Changes in operating assets and liabilities:
Accounts receivable		(13,359	)		2,414			3,602			(26,362	)		(12,518	)		3,602
Prepaid expenses		(176	)		(4,625	)		(340	)		(2,652	)		(2,910	)		(340	)
Inventory and other current assets		1,562			2,496			(221	)		(5,358	)		7,314			(221	)
Accounts payable		3,888			4,592			(2,365	)		(1,986	)		9,619			(2,365	)
Accrued expenses		(3,673	)		9,857			23,489			144			(25,604	)		23,489
Income taxes		4,239			5,134			340			2,185			13,805			340
Other, net		49			(2,360	)		(241	)		(144	)		(5,817	)		(241	)
Net cash from operating activities		35,090			21,401			5,383			68,244			12,503			5,383
Cash flows from investing activities:
Payments for capital expenditures		(11,297	)		(4,119	)		(3,035	)		(20,514	)		(10,995	)		(3,035	)
Proceeds from sales of assets		13,379			7,148			775			15,183			16,200			775
Proceeds from sales of equity securities		7,365			0			0			13,366			0			0
Net cash from investing activities		9,447			3,029			(2,260	)		8,035			5,205			(2,260	)
Cash flows from financing activities:
Credit facility costs		0			(14	)		(1,920	)		0			(14	)		(1,920	)
Tax withholdings for vested restricted stock units											0			(1,485	)		0
Net cash from financing activities		0			(14	)		(1,920	)		0			(1,499	)		(1,920	)
Effect of exchange rate changes on cash		0			0			311			0			0			311
Net change in cash, cash equivalents, and restricted cash		44,537			24,416			1,514			76,279			16,209			1,514
Cash, cash equivalents, and restricted cash at beginning of period		394,535			269,698			268,184			394,535			269,698			268,184
Cash, cash equivalents, and restricted cash at end of period	$	439,072		$	294,114		$	269,698		$	470,814		$	285,907		$	269,698

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); however, management believes the disclosures that are made are adequate to make the information presented not misleading.

As used herein, “we,” “us” and similar terms refer to (i) prior to the Emergence Date (as defined below), SESI Holdings, Inc. (formerly known as Superior Energy Services, Inc.) and its subsidiaries (“Predecessor”) and (ii) after the Emergence Date, Superior Energy Services, Inc. (formerly known as Superior Newco, Inc.) and its subsidiaries (“Successor”). Due to our adoption of fresh start accounting, discussed below, our operations for the ~~three~~six months ended ~~March 31,~~June 30, 2021 are separated by the operations which occurred from January 1, 2021 through February 2, 2021 (the “Predecessor Period”) and the operations that occurred from February 3, 2021 through ~~March 31,~~June 30, 2021 (the “Successor Period”).

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. As described below, as a result of the application of fresh start accounting and the effects of the implementation of the Plan (as defined below), the financial statements after the Emergence Date are not comparable with the consolidated financial statements on or before that date.

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary for a fair statement of our financial position as of ~~March 31,~~June 30, 2022, and our results of operations and cash flows for the three months ended ~~March 31,~~June 30, 2022 and 2021. The balance sheet as of December 31, 2021, was derived from our audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

Emergence from Voluntary Reorganization under Chapter 11

On December 7, 2020, certain of our direct and indirect wholly-owned domestic subsidiaries (the “Affiliate Debtors”) filed petitions for reorganization under the provisions of Chapter 11 of the Bankruptcy Code and, in connection therewith, filed the proposed Joint Prepackaged Plan of Reorganization (as amended, modified or supplemented from time to time, the “Plan”). On February 2, 2021 (the “Emergence Date”), the conditions to the effectiveness of the Plan were satisfied and we emerged from Chapter 11.

On the Emergence Date, we qualified for and adopted fresh start accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 – Reorganizations, which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. The application of fresh start accounting resulted in a new basis of accounting and we became a new entity for financial reporting purposes. As a result of the implementation of the Plan and the application of fresh start accounting, our historical financial statements on or before the Emergence Date are not a reliable indicator of our results of operations for any period after our adoption of fresh start accounting.

Use of Estimates

In preparing the accompanying financial statements, we make various estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities reported as of the dates of the balance sheets and the amounts of revenues and expenses reported for the periods shown in the income statements and statements of cash flows. All estimates, assumptions, valuations and financial projections related to fresh start accounting, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control.

(2) Revenue

Disaggregation of Revenue

The following table presents our revenues by segment disaggregated by geography (in thousands):


	Successor				Predecessor		For the Three Months Ended June 30,
	For the Three Months Ended March 31, 2022		For the Period February 3, 2021 through March 31, 2021		For the Period January 1, 2021 through February 2, 2021		2022		2021
U.S. land
Rentals	$	33,962	$	11,109	$	4,917	$	43,791	$	20,789
Well Services		4,548		2,126		3,379		4,151		6,781
Total U.S. land		38,510		13,235		8,296		47,942		27,570

U.S. offshore
Rentals		32,753		20,403		8,196		36,331		26,890
Well Services		28,321		19,421		7,371		32,569		26,574
Total U.S. offshore		61,074		39,824		15,567		68,900		53,464

International
Rentals		22,041		10,936		5,226		23,607		19,558
Well Services		76,305		41,848		16,839		84,191		65,300
Total International		98,346		52,784		22,065		107,798		84,858
Total Revenues	$	197,930	$	105,843	$	45,928	$	224,640	$	165,892


	Successor				Predecessor
	For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
U.S. land
Rentals	$	77,753	$	31,898	$	4,917
Well Services		8,699		8,907		3,379
Total U.S. land		86,452		40,805		8,296

U.S. offshore
Rentals		69,084		47,293		8,196
Well Services		60,890		45,995		7,371
Total U.S. offshore		129,974		93,288		15,567

International
Rentals		45,648		30,494		5,226
Well Services		160,496		107,148		16,839
Total International		206,144		137,642		22,065
Total Revenues	$	422,570	$	271,735	$	45,928

The following table presents our revenues by segment disaggregated by type (in thousands):


	Successor				Predecessor		For the Three Months Ended June 30,
	For the Three Months Ended March 31, 2022		For the Period February 3, 2021 through March 31, 2021		For the Period January 1, 2021 through February 2, 2021		2022		2021
Services
Rentals	$	11,158	$	6,264	$	2,005	$	12,654	$	9,592
Well Services		80,281		37,415		17,229		87,412		70,195
Total Services		91,439		43,679		19,234		100,066		79,787

Rentals
Rentals		65,247		28,593		14,082		73,563		47,895
Well Services		1,915		2,721		352		3,430		5,343
Total Rentals		67,162		31,314		14,434		76,993		53,238

Product Sales
Rentals		12,351		7,591		2,252		17,512		9,750
Well Services		26,978		23,259		10,008		30,069		23,117
Total Product Sales		39,329		30,850		12,260		47,581		32,867
Total Revenues	$	197,930	$	105,843	$	45,928	$	224,640	$	165,892


	Successor				Predecessor
	For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
Services
Rentals	$	23,812	$	15,856	$	2,005
Well Services		167,693		107,610		17,229
Total Services		191,505		123,466		19,234

Rentals
Rentals		138,810		76,488		14,082
Well Services		5,345		8,064		352
Total Rentals		144,155		84,552		14,434

Product Sales
Rentals		29,863		17,341		2,252
Well Services		57,047		46,376		10,008
Total Product Sales		86,910		63,717		12,260
Total Revenues	$	422,570	$	271,735	$	45,928

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount or the earned amount but not yet invoiced and do not bear interest. We maintain our allowance for doubtful accounts at net realizable value. The allowance for doubtful accounts is based on our best estimate of probable uncollectible amounts in existing accounts receivable. We assess individual customers and overall receivables balances to identify amounts that are believed to be uncertain of collection. The aging of the receivable balance as well as economic factors concerning the customer factor into the judgment and estimation of allowances, which often involve significant dollar amounts. Adjustments to the allowance in future periods may be made based on changing customer conditions. Our allowance for doubtful accounts as of ~~March 31,~~June 30, 2022 and December 31, 2021 was approximately $~~3.7~~5.2 million and $2.2 million, respectively.

(3) Inventory

Inventories are stated at the lower of cost or net realizable value. We apply net realizable value and obsolescence to the gross value of inventory. Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and work-in-process. Supplies and consumables consist principally of products used in the services provided to our customers. The components of inventory balances are as follows (in thousands):


	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Finished goods	$	23,816	$	26,187	$	31,046	$	26,187
Raw materials		10,044		9,753		9,397		9,753
Work-in-process		4,182		4,253		3,520		4,253
Supplies and consumables		21,788		20,410		23,238		20,410
Total	$	59,830	$	60,603	$	67,201	$	60,603

(4) ~~Notes~~Decommissioning Liability

We account for our decommissioning liability under ASC 410 – Asset Retirement Obligations. Our decommissioning liability is associated with our oil and gas property and includes costs related to the plugging of wells, decommissioning of the related platform and equipment and site restoration. We review the adequacy of our decommissioning liability whenever indicators suggest that the estimated cash flows and/or relating timing needed to satisfy the liability have changed materially.

During the second quarter of 2022, we undertook an initiative to alter our decommissioning program, whereby we intend to convert the platform into an artificial reef (“reef-in-place”) and no longer expect to fully decommission the platform. The reef-in-place program would involve severing the top portion of the structure at a permitted navigation depth and placing the severed structure on the sea floor next to the base of the remaining structure.

In connection with the changes in the decommissioning program, we have revised the timing and estimates for the plugging and abandonment of the associated wells, as well as the timing to complete the decommissioning of the platform under a reef-in-place program such that we now expect all decommissioning activities to be completed by the second quarter of 2031.

The changes in estimates under a reef-in-place program resulted in a reduction in the carrying value of our decommissioning liability and related note receivable, as well as impacted the carrying value of our oil and gas producing assets. Due to the reduction in both costs and timing, our decommissioning liability was reduced by $53.0 million and the related note receivable was increased by $2.6 million. Additionally, in accordance with ASC 410, the carrying value of our oil and gas producing assets, which included capitalized oil and gas reserves and capitalized asset retirement costs, was reduced by$38.2 million, which represented the net book value of all of our oil and gas assets at the time of the reduction. In connection with these changes, we recognized a gain of approximately $17.4 million which is included in other (gains) and losses, net in our statement of operations.

The following table presents our decommissioning liability as of the periods indicated:


	June 30, 2022			December 31, 2021
Wells	$	81,995		$	97,810
Platform		60,745			92,570
Decommissioning Liability		142,740			190,380
Less: Note Receivable		(65,140	)		(60,588	)
Decommissioning Liability, net of Note Receivable	$	77,600		$	129,792

Accretion expense for the three and six months ended June 30, 2022 was $2.7 million and $5.4 million respectively. Accretion expense for the three months ended June 30, 2021, the Successor Period and Predecessor Period was $1.2 million, $2.2 million and $0.5 million, respectively.

(5) Note Receivable

We have a decommissioning ~~liabilities~~liability related to the acquisition of a single oil and gas property. Our ~~notes~~note receivable ~~consist of~~arises from a commitment from the seller of the oil and gas property for costs associated with the abandonment of the property. Pursuant to an agreement with the seller, we invoice the seller an agreed upon amount at the completion of certain decommissioning activities. ~~The~~

During the second quarter of 2022, changes in estimates regarding the timing and the cost of decommissioning our oil and gas property under a reef-in-place program resulted in a reduction in the carrying value of our decommissioning liability and related note receivable, as well as impacted the carrying value of our oil and gas producing assets. Due to the reduction in both costs and timing, our decommissioning liability was reduced by $53.0 million and the related note receivable was increased by $2.6 million. Additionally, in accordance with ASC 410-20, the carrying value of our oil and gas producing assets, which included capitalized oil and gas reserves and capitalized asset retirement costs, was reduced by $38.2 million, which represented the net book value of all of our oil and gas assets at the time of the reduction. In connection with these changes, we recognized a gain of approximately $17.4 million which is included in other (gains) and losses, net in our statement of operations.

Due to the reduction in estimated costs under the reef-in-place program, the gross amount of the seller’s obligation was reduced to ~~us totals~~ $~~115.0~~106.9 million as of June 30, 2022 and iswas recorded at its present value, which totaled $~~61.6~~65.1 ~~million as of March 31, 2022.~~million.

The discount on the ~~notes~~note receivable, which is currently based on an effective interest rate of ~~6.6~~5.6%, is amortized to interest income over the expected timing of the completion of the decommissioning ~~activities.~~activities, which are now expected to be completed during the second quarter of 2031. Interest receivable is considered paid in kind and is compounded into the carrying amount of the note.

~~During~~Non-cash interest income for the three and six months ended June 30, 2022 was $1.0 million and $2.0 million respectively. Non-cash interest income for the three months ended ~~March 31, 2022, we recorded non-cash interest income of $1.0~~ ~~million. During~~June 30, 2021, the Successor Period and ~~the~~ Predecessor Period ~~we recorded non-cash interest income of~~was $~~0.7~~1.2 million, $1.9 million and $0.4 million, ~~respectively, which~~respectively. As the interest income on the note receivable is non-cash, it is included in other reconciling items, net in the condensed consolidated statements of cash flows.

~~(5)~~(6) Property, Plant and Equipment, Net

A summary of property, plant and equipment, net is as follows (in thousands):


	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Machinery and equipment	$	363,397		$	360,353		$	368,220		$	360,353
Buildings, improvements and leasehold improvements		76,749			75,374			77,529			75,374
Automobiles, trucks, tractors and trailers		6,416			6,450			6,550			6,450
Furniture and fixtures		19,714			19,668			19,707			19,668
Construction-in-progress		4,943			6,700			5,078			6,700
Land		28,446			28,671			28,446			28,671
Oil and gas producing assets		44,780			44,700			0			44,700
Total		544,445			541,916			505,530			541,916
Accumulated depreciation and depletion		(212,946	)		(185,642	)		(218,603	)		(185,642	)
Property, plant and equipment, net	$	331,499		$	356,274		$	286,927		$	356,274

Depreciation and depletion expense associated with our property, plant and equipment for the three and six months ended ~~March 31,~~June 30, 2022 was $~~31.2~~20.4 ~~million. During the Successor Period~~million and ~~Predecessor Period, we recognized depreciation~~$51.6 million respectively. Depreciation and depletion expense, excluding depreciation and depletion related to assets held for sale, offor the three months ended June 30, 2021, the Successor Period and Predecessor Period was $~~39.0~~57.6 million, $96.5 million and $7.8 million, respectively. Gains and losses on disposals of assets are recognized within other (gains) and losses, net in our statement of operations.

During the second quarter of 2022, changes in estimates regarding the timing and the cost of decommissioning our oil and gas property under a reef-in-place program resulted in a reduction in the carrying value of our decommissioning liability and related note receivable, as well as impacted the carrying value of our oil and gas producing assets. Due to the reduction in both costs and timing, our decommissioning liability was reduced by $53.0 million and the related note receivable was increased by $2.6 million. Additionally, in accordance with ASC 410, the carrying value of our oil and gas producing assets, which included capitalized oil and gas reserves and capitalized asset retirement costs, was reduced by $38.2 million, which represented the net book value of all of our oil and gas assets at the time of the reduction. In connection with these changes, we recognized a gain of approximately $17.4 million which is included in other (gains) and losses, net in our statement of operations.

~~(6)~~(7) Debt

On the Emergence Date, pursuant to the Plan, we entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and letter of credit issuers named therein providing for a $120.0 million asset-based secured revolving Credit Facility, all of which is available for the issuance of letters of credit (the “Credit Facility”). The issuance of letters of credit reduces availability under the Credit Facility on a dollar-for-dollar basis. The Credit Facility will mature on December 9, 2024.

As of ~~March 31,~~June 30, 2022, our borrowing base, as defined in the Credit Agreement, was approximately $120.0 million, and we had $~~35.5~~34.3 million of letters of credit outstanding that reduced the borrowing availability. We had no outstanding borrowings under the Credit Facility as of ~~March 31,~~June 30, 2022.

Unless all loans are paid off and letters of credit outstanding are cash collateralized and the Credit Facility terminated, the Credit Facility requires, subject to permitted exceptions, compliance with various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility also requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if (a) an event of default has occurred and is continuing or (b) availability under the Credit Facility is less than the greater of $20.0 million or 15% of the lesser of the aggregate commitments and the borrowing base. We were in compliance with all required covenants as of ~~March 31,~~June 30, 2022.

~~(7) Decommissioning Liabilities~~

~~We had decommissioning liabilities of $193.0~~ ~~million and $190.4~~ million as of March 31, 2022 and December 31, 2021, respectively. We account for our decommissioning liabilities under ASC 410 – Asset Retirement Obligations. Our decommissioning liabilities are associated with our oil and gas property and include liabilities related to the plugging of wells, removal of the related platform and equipment and site restoration. We review the adequacy of our decommissioning liabilities whenever indicators suggest that the estimated cash flows and/or relating timing needed to satisfy the liability have changed materially.

~~Accretion expense associated with our decommissioning liabilities for the three months ended March 31, 2022 was $2.7~~ ~~million. During the Successor Period and Predecessor Period, we recognized accretion expense of $1.0~~ ~~million and $0.5~~ ~~million, respectively.~~

(8) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. The three input levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2: Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; or model-derived valuations or other inputs that can be corroborated by observable market data.

Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following tables provide a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	March 31, 2022								June 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Non-qualified deferred compensation assets and liabilities
Intangible and other long-term assets, net	$	0	$	15,446	$	-	$	15,446	$	0	$	15,361	$	-	$	15,361
Accounts payable		-		1,342		-		1,342		-		1,758		-		1,758
Other long-term liabilities		-		17,135		-		17,135		-		15,513		-		15,513

Investment in equity securities	$	26,605	$	-	$	-	$	26,605	$	16,524	$	-	$	-	$	16,524

	December 31, 2021								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Non-qualified deferred compensation assets and liabilities
Intangible and other long-term assets, net	$	-	$	15,896	$	-	$	15,896	$	-	$	15,896	$	-	$	15,896
Accounts payable		-		2,250		-		2,250		-		2,250		-		2,250
Other long-term liabilities		-		19,218		-		19,218		-		19,218		-		19,218

Investment in equity securities	$	25,735	$	-	$	-	$	25,735	$	25,735	$	-	$	-	$	25,735

Our non-qualified deferred compensation plans investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent a Level 2 in the fair value hierarchy.

Investment in equity securities relates to our ownership of common stock of Select Energy Services, Inc. (“Select”) ~~which we acquired in connection with asset disposals during the second half of 2021. This investment~~and is reported at fair value based on unadjusted quoted prices which are readily determinable, which represents a Level 1 in the fair value hierarchy.

~~Unrealized gains on our investment in equity securities for the three months ended March 31, 2022 was $6.5~~ ~~million. During the quarter ended March 31, 2022, we disposed of~~ ~~1.0~~ ~~million shares of Select for $7.4~~ ~~million, and recognized gains totaling $1.8~~ million in connection with these transactions. Realized and unrealized gains and losses on our investment in equity securities are included in other income (expense) in the condensed consolidated statements of operations.

The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued expenses, as reflected in the consolidated balance sheets, approximates fair value due to the short maturities.

(9) Other income (expense)

Other income (expense) primarily relate to re-measurement gains and losses associated with our foreign currencies and realized and unrealized gains and losses on our investment in equity securities.

As of June 30, 2022, we held 2.4 million shares of Select common stock. During the three and six months ended June 30, 2022, we recognized unrealized losses of $5.9 million and unrealized gains of $0.5 million, respectively from our investment in equity securities. During the six months ended June 30, 2022, we disposed of 1.7 million shares of Select for $13.4 million, of which 0.7 million shares were disposed of for $6.0 million during the three months ended June 30, 2022. During the three and six months ended June 30, 2022, we recognized gains totaling $1.9 million and $3.6 million, respectively, in connection with these transactions.

Losses on foreign currencies during the three and six months ended June 30, 2022 were $10.5 million and $4.9 million, respectively. Gain on foreign currencies for the three months ended June 30, 2021 and the Successor Period were $2.9 million and $0.3 million, respectively. Losses on foreign currencies during the three and six months ended June 30, 2022 include an expense of $2.7 million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy. During the Predecessor Period, losses on foreign currencies were $2.1 million. Gains and losses on foreign currencies are primarily related to our operations in Brazil.

(10) Segment Information

Business Segments

The products and service offerings of our Rentals segment are comprised of value-added engineering and design services, rental of premium drill strings, tubing, landing strings, completion tubulars and handling accessories, manufacturing and rental of bottom hole assemblies, and rentals of accommodation units.

The products and service offerings of our Well Services segment are comprised of risk management, well control and training solutions, hydraulic workover and snubbing services, engineering and manufacturing of premium sand control tools, and onshore international production services. The Well Services segment also includes the operations of our offshore oil and gas property.

We evaluate the performance of our reportable segments based on income or loss from operations. The segment measure is calculated as segment revenues less segment operating expenses, including general and administrative expenses, depreciation, depletion, amortization and accretion expense, restructuring expenses and other gains and losses. We use this segment measure to evaluate our reportable segments as it is the measure that is most consistent with how we organize and manage our business operations. Corporate and other costs primarily include expenses related to support functions, including salaries and benefits for corporate employees.

Summarized financial information for our segments is as follows (in thousands):


For the three months ended June 30, 2022				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	103,729		$	120,911		$	-		$	224,640
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		35,860			85,108			-			120,968
Depreciation, depletion, amortization and accretion		12,556			9,662			1,128			23,346
General and administrative expenses		6,559			11,202			12,470			30,231
Restructuring expenses		-			-			1,663			1,663
Other (gains) and losses, net		195			(18,208	)		-			(18,013	)
Income (loss) from operations	$	48,559		$	33,147		$	(15,261	)	$	66,445

For the three months ended June 30, 2021				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	67,237		$	98,655		$	-		$	165,892
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		27,309			75,736						103,045
Depreciation, depletion, amortization and accretion		42,083			15,213			1,722			59,018
General and administrative expenses		6,352			13,123			12,833			32,308
Restructuring expenses		-			-			7,438			7,438
Other (gains) and losses, net		725			(191	)					534
Income (loss) from operations	$	(9,232	)	$	(5,226	)	$	(21,993	)	$	(36,451	)

For the three months ended March 31, 2022 (Successor)

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
88,756

$
109,174

$
-

$
197,930

Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

31,752

80,628

-

112,380

Depreciation, depletion, amortization and accretion

20,989

11,728

1,368

34,085

General and administrative expenses

7,365

11,401

13,252

32,018

Restructuring expenses

-

-

1,555

1,555

Other (gains) and losses, net

(135
)

1,282

-

1,147

Income (loss) from operations

$
28,785

$
4,135

$
(16,175
)

$
16,745

For the Period February 3, 2021 through March 31, 2021 (Successor)

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
42,448

$
63,395

$
-

$
105,843

Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

15,486

52,551

-

68,037

Depreciation, depletion, amortization and accretion

28,058

11,163

809

40,030

General and administrative expenses

3,451

8,461

6,526

18,438

Restructuring expenses

-

-

8,383

8,383

Other (gains) and losses, net

(165
)

(4
)

-

(169
)
Income (loss) from operations

$
(4,382
)

$
(8,776
)

$
(15,718
)

$
(28,876
)

For the Period January 1, 2021 through February 2, 2021 (Predecessor)

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
18,339

$
27,589

$
-

$
45,928

Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

7,839

21,934

-

29,773

Depreciation, depletion, amortization and accretion

4,271

3,666

421

8,358

General and administrative expenses

2,027

4,111

4,914

11,052

Restructuring expenses

-

-

1,270

1,270

Income (loss) from operations

$
4,202

$
(2,122
)

$
(6,605
)

$
(4,525
)


For the six months ended June 30, 2022 (Successor)				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	192,485		$	230,085		$	-		$	422,570
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		67,612			165,736			-			233,348
Depreciation, depletion, amortization and accretion		33,545			21,390			2,496			57,431
General and administrative expenses		13,924			22,603			25,722			62,249
Restructuring expenses		-			-			3,218			3,218
Other (gains) and losses, net		60			(16,926	)		-			(16,866	)
Income (loss) from operations	$	77,344		$	37,282		$	(31,436	)	$	83,190

For the Period February 3, 2021 through June 30, 2021 (Successor)				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	109,685		$	162,050		$	-		$	271,735
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		42,795			128,287			-			171,082
Depreciation, depletion, amortization and accretion		70,141			26,376			2,531			99,048
General and administrative expenses		9,803			21,584			19,359			50,746
Restructuring expenses		-			-			15,821			15,821
Other (gains) and losses, net		560			(195	)		-			365
Income (loss) from operations	$	(13,614	)	$	(14,002	)	$	(37,711	)	$	(65,327	)

For the Period January 1, 2021 through February 2, 2021 (Predecessor)				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	18,339		$	27,589		$	-		$	45,928
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		7,839			21,934			-			29,773
Depreciation, depletion, amortization and accretion		4,271			3,666			421			8,358
General and administrative expenses		2,027			4,111			4,914			11,052
Restructuring expenses		-			-			1,270			1,270
Income (loss) from operations	$	4,202		$	(2,122	)	$	(6,605	)	$	(4,525	)

Identifiable Assets


			Well		Corporate		Consolidated				Well		Corporate		Consolidated
	Rentals		Services		and Other		Total		Rentals		Services		and Other		Total
March 31, 2022	$	421,865	$	628,863	$	173,631	$	1,224,359
June 30, 2022									$	456,309	$	605,804	$	160,463	$	1,222,576
December 31, 2021		379,453		636,256		183,799		1,199,508		379,453		636,256		183,799		1,199,508

Geographic Segments

We operate in the U.S. and in various other countries throughout the world. Our international operations are primarily focused in Latin America, Asia-Pacific and the Middle East and North Africa regions. We attribute revenue to various countries based on the location where services are performed or the destination of the drilling products or equipment sold or rented. Long-lived assets consist ~~primarily~~ of property, plant and equipment and are attributed to various countries based on the physical location of the asset at the end of a period.

Our revenue attributed to the U.S. and to other countries and the value of our long-lived assets by those locations are as follows (in thousands):

Revenues


	Successor				Predecessor		For the Three Months Ended June 30,
	For the Three Months Ended March 31, 2022		For the Period February 3, 2021 through March 31, 2021		For the Period January 1, 2021 through February 2, 2021		2022		2021
United States	$	99,584	$	53,059	$	23,863	$	116,842	$	81,034
Other countries		98,346		52,784		22,065		107,798		84,858
Total	$	197,930	$	105,843	$	45,928	$	224,640	$	165,892


	Successor				Predecessor
	For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
United States	$	216,426	$	134,093	$	23,863
Other countries		206,144		137,642		22,065
Total	$	422,570	$	271,735	$	45,928

Long-Lived Assets


	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
United States	$	230,292	$	231,388	$	190,891	$	231,388
Other countries		101,207		124,886		96,036		124,886
Total	$	331,499	$	356,274	$	286,927	$	356,274

~~(10)~~(11) Stock-Based Compensation Plans

~~On June 1, 2021, our Board of Directors (the “Board”) and the Compensation Committee of the Board (the “Compensation Committee”) approved and adopted our~~Our Management Incentive Plan (“MIP”)~~, which~~ provides ~~for the grant of share-based and cash-based awards and, in connection therewith,~~ the issuance ~~from time to time~~ of up to 1,999,869 shares of our Class B common stock, par value $0.01 per ~~share.~~share (the “Class B Common Stock”) for the grant of share-based and cash-based awards.

Approval of Forms of Award Agreement and Equity Awards

On March 28, 2022, the Board and the Compensation Committee approved new forms of restricted stock unit (“RSU”) award agreements and forms of performance stock unit (“PSU”) award agreements (collectively, the “Award Agreements”) under the MIP, and approved ~~the~~a special grant of 72,050 RSUs and 288,199 ~~PSUs.~~PSUs which was intended to satisfy stock awards for the next three years. Additional grants will be issued for new hires and promotions.

Awards made under the forms of RSU award agreements for our employees generally vest in three equal annual installments over the three-year period, subject to terms and conditions set forth in the forms of RSU award agreements. Awards made under the forms PSU award agreements may be earned between 25% and 100% of the target award based on achievement of share price goals set forth in the forms of PSU award agreements and will vest to the extent that share price goals are achieved based on the terms and conditions set forth in the forms of PSU award agreements.

During the three and six months ended ~~March 31,~~June 30, 2022, we recognized $~~0.6~~1.0 million and $1.5 million, respectively, in compensation expense associated with grants of restricted stock awards and RSUs. During both the three months ended June 30, 2021 and the Successor Period, we recognized $1.6 million in compensation cost associated with grants of restricted stock and RSUs.

As a result of the consummation of the Plan, restricted stock units issued prior to the Emergence Date were cancelled for zero consideration. We recognized $0.9 million in compensation costs during the Predecessor Period prior to cancellation of the pre-Emergence outstanding restricted stock units.

~~(11)~~(12) Income Taxes

The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2022 was ~~24.7~~20.0% and 21.7%, respectively, on income from continuing operations. The effective tax rate is different from the U.S. federal statutory rate of 21% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which 0 tax benefit is being recorded.

In recording deferred income tax assets, we consider whether it is more likely than not some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income of the appropriate character during the periods in which those deferred income tax assets would be deductible. Our annualized effective tax rate for the six months ended June 30, 2022 includes a tax benefit of $18.8 million related to the release of a valuation allowance previously recorded against U.S. foreign tax credit carryforwards. We previously considered these credit carryforwards to be unrealizable primarily due to our cumulative history of losses in the U.S. in recent years and tax attribute utilization limits under Section 382 resulting from bankruptcy. This was significant negative evidence that outweighed positive evidence from forecasts of future taxable income. However, based on recognized built in gains that have increased our limit under Section 382, year to date income in the U.S., and certain attributes promoting use of the foreign tax credit carryovers, when combined with our view on the remaining 2022 outlook, we determined there is now significant positive evidence for our ability to utilize available U.S. foreign tax credit carryforwards in 2022. The amount of valuation allowance released in the U.S. recognizes foreign tax credit deferred tax assets that we estimate will offset U.S. taxes payable in 2022. After the valuation allowance release, we have $37.1 million of U.S. foreign tax credit deferred tax assets that continue to have a valuation allowance against them. We will continue to evaluate the realizability of our U.S. foreign tax credit carryforwards and may have additional valuation allowance releases in future periods if we achieve positive cumulative U.S. income results of appropriate character and timing to do so.

The effective tax rate for the three months ended June 30, 2021, the Successor Period and the Predecessor Period was ~~13.6~~5.2%, 9.3% and 18.2%, respectively, on income from
continuing operations. The tax rate induring the three months ended June 30, 2021 and the Successor Period is different from the U.S. federal statutory rate of 21% primarily from

non-deductible items and foreign losses for which no tax benefit is being recorded. The tax rate in the Predecessor Period is different from the U.S. federal statutory rate of 21% primarily due the adoption of fresh start accounting during the period.

We had $~~15.1~~15.7 million and $15.0 million of unrecognized tax benefits as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, all of which would impact our effective tax rate if recognized except for $1.6 million offset in deferred income taxes. It is reasonably possible $~~2.9~~3.4 million of unrecognized tax benefits could be settled in the next twelve months due to the conclusion of tax audits or statutes of limitations expiration. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

~~(12)~~(13) Earnings per Share

Our common equity consists of Class A Common Stock ~~par value $0.01~~ ~~per share (the “Class A Common Stock”)~~ and Class B ~~common stock, par value $0.01~~ ~~per share (“Class B~~ Common Stock (the “Common Stock”).

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of shares of ~~common stock~~Common Stock outstanding during the period. Diluted earnings per share is computed inusing the ~~same manner as basic earnings per share except that the denominator is increased to include the~~weighted average number of ~~additional shares of common stock that could have been~~Common Stock outstanding ~~assuming~~during the ~~exercise of stock options and conversion of restricted stock units.~~

~~Diluted earnings per share is computed in the same manner~~period plus any potentially dilutive Common Stock, such as ~~basic earnings per share, except that the denominator is increased to include the number of additional shares of common stock that could have been outstanding assuming the conversion of~~ restricted stock awards, ~~and units. For the three months ended March 31, 2022, incremental shares associated with~~ restricted stock ~~awards~~units, and performance-based units ~~was not material. During~~calculated using the ~~Successor Period, we incurred a loss from continuing operations,~~treasury stock method.

The following table presents the reconciliation between the weighted average number of shares for basic and ~~therefore, the impact of any incremental shares would be anti-dilutive. Diluted~~diluted earnings per ~~share for the Predecessor Period includes the impact of approximately~~ ~~0.1~~ ~~million dilutive securities.~~share.


	Successor								Predecessor
	For the Three Months Ended June 30, 2022		For the Three Months Ended June 30, 2021		For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
Weighted-average shares outstanding - basic		20,024		19,999		20,011		19,997		14,845
Potentially dilutive stock awards and units		52		0		54		0		60
Weighted-average shares outstanding - diluted		20,076		19,999		20,065		19,997		14,905

~~(13)~~(14) Contingencies

Due to the nature of our business, we are involved, from time to time, in various routine litigation or subject to disputes or claims or actions, including those commercial in nature, regarding our business activities in the ordinary course of business. Legal costs related to these matters are expensed as incurred. Management is of the opinion that none of the claims and actions will have a material adverse impact on our financial position, results of operations or cash flows. Commencement of the Chapter 11 Cases automatically stayed certain proceedings and actions, and these cases have continued after the Emergence Date.

A subsidiary of ours is involved in legal proceedings with 2 former employees regarding the payment of royalties for a patentable product paid for by the subsidiary and developed while they worked for the subsidiary. On April 2, 2018, the former employees and their corporation filed a lawsuit (the “First Case”) in the Harris County District Court (the “District Court”) alleging that the royalty payments they had invoiced at 25% and for which they received payments since 2010, should have been paid at a rate of 50%. In May 2019, the jury issued a verdict in favor of the plaintiffs. On October 25, 2019, the court issued a final judgment against us, which we have fully secured with a bond. Oral arguments in front of the Court of Appeals took place in April 2022. We strongly disagree with the verdict and believe the District Court committed several legal errors that should result in a reversal or remand of the case by the Court of Appeals.

A second case (the “Second Case”) was filed in District Court against the same subsidiary of ours bringing the same claims and seeking damages post judgment from the First Case until discontinuation of the sale of the product at issue by the subsidiary. In December 2020, the Court entered a final judgement for the ~~Plaintiffs’~~plaintiffs’ and the Second Case was stayed for the duration of our bankruptcy. We have filed an appeal and a Motion to Abate the Second Case pending the appeal of the First Case. The Motion to Abate the Second Case was granted on October 26, 2021 by the Court of Appeals. As of ~~March 31,~~June 30, 2022, we have reserved $7.0 million for the judgements in the First Case and Second Case.

Our Indian subsidiary, SES Energy Services India Pvt. Ltd, entered into a contract with an Indian oil and gas company to provide an off shore vessel for well stimulation. A dispute arose over the performability of the terms of the contract. The contract was terminated by the customer. The maximum liability under the contract is capped at approximately $7.3 million, of which approximately $3.5 million has been claimed via revocation of performance bank guarantees.

~~(14)~~(15) Discontinued Operations

The following table summarizes the components of discontinued operations, net of tax (in thousands):


	Successor						Predecessor			For the Three Months Ended June 30,
	For the Three Months Ended March 31, 2022			For the Period February 3, 2021 through March 31, 2021			For the Period January 1, 2021 through February 2, 2021			2022			2021
Revenues	$	0		$	23,252		$	10,719		$	0		$	45,114
Cost of services		0			22,522			10,398			0			37,871
Depreciation, depletion, amortization and accretion		0			12,775			2,141			0			18,581
General and administrative expenses		3,742			2,595			1,119			1,711			3,623
Other (gains) and losses, net		(5,943	)		(2,500	)		0			750			10,018
Loss from operations		2,201			(12,140	)		(2,939	)		(2,461	)		(24,979	)
Other income (expense)		0			3			2,485			0			(53	)
Loss from discontinued operations before tax		2,201			(12,137	)		(454	)		(2,461	)		(25,032	)
Income tax benefit (expense)		(462	)		2,731			102			517			5,632
Income (loss) from discontinued operations, net of income tax	$	1,739		$	(9,406	)	$	(352	)	$	(1,944	)	$	(19,400	)


	Successor						Predecessor
	For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021
Revenues	$	0		$	68,366		$	10,719
Cost of services		0			60,393			10,398
Depreciation, depletion, amortization and accretion		0			31,356			2,141
General and administrative expenses		5,453			6,218			1,119
Other (gains) and losses, net		(5,193	)		7,518			0
Loss from operations		(260	)		(37,119	)		(2,939	)
Other income (expense)		0			(50	)		2,485
Loss from discontinued operations before tax		(260	)		(37,169	)		(454	)
Income tax benefit (expense)		55			8,363			102
Income (loss) from discontinued operations, net of income tax	$	(205	)	$	(28,806	)	$	(352	)

The following summarizes the assets and liabilities related to discontinued operations (in thousands):


	March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Assets:
Accounts receivable, net	$	6,254	$	7,469	$	4,809	$	7,469
Property, plant and equipment, net		22,076		29,328		20,659		29,328
Other assets		161		731		161		731
Total assets held for sale	$	28,491	$	37,528	$	25,629	$	37,528

Liabilities:
Accounts payable	$	473	$	652	$	544	$	652
Accrued expenses		2,982		4,268		3,433		4,268
Other liabilities		223		687		223		687
Total liabilities	$	3,678	$	5,607
Total liabilities held for sale					$	4,200	$	5,607

Significant operating non-cash items and cash flows from investing activities for our discontinued operations were as follows (in thousands):

Successor

Predecessor

For the Three Months Ended March 31, 2022

For the Period
February 3, 2021
through
March 31, 2021

For the Period
January 1, 2021
through
February 2, 2021

Cash flows from discontinued operating activities:

(Gain)/loss on sale of assets

$
0

$
0

$
(43
)
Other (gains) and losses, net

(5,943
)

(2,500
)

0

Depreciation, depletion, amortization and accretion

0

12,775

2,141

Cash flows from discontinued investing activities:

Proceeds from sales of assets

13,194

5,024

486


	Successor					Predecessor
	For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
Cash flows from discontinued operating activities:
(Gain)/loss on sale of assets	$	0		$	0	$	(43	)
Other (gains) and losses, net		(5,193	)		7,518		0
Depreciation, depletion, amortization and accretion		0			31,356		2,141
Cash flows from discontinued investing activities:
Proceeds from sales of assets		13,861			14,894		486

~~(15)~~(16) Supplemental Cash Flow Information

The table below is a reconciliation of cash, cash equivalents and restricted cash for the beginning and the end of the period for all periods presented:


	Successor				Predecessor		Successor				Predecessor
	For the Three Months Ended March 31, 2022		For the Period February 3, 2021 through March 31, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
Cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents	$	314,974	$	172,768	$	188,006	$	314,974	$	172,768	$	188,006
Restricted cash-current		0		16,751		0		0		16,751		0
Restricted cash-non-current		79,561		80,179		80,178		79,561		80,179		80,178
Cash, cash equivalents, and restricted cash, beginning of period	$	394,535	$	269,698	$	268,184	$	394,535	$	269,698	$	268,184

Cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	$	359,511	$	197,307	$	172,768	$	391,219	$	205,748	$	172,768
Restricted cash-current		0		16,751		16,751		0		0		16,751
Restricted cash-non-current		79,561		80,056		80,179		79,595		80,159		80,179
Cash, cash equivalents, and restricted cash, end of period	$	439,072	$	294,114	$	269,698	$	470,814	$	285,907	$	269,698

~~(16)~~(17) New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update improves financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope by using the Current Expected Credit Losses (the “CECL”) model. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses on financial instruments at the time the asset is originated or acquired. This update will apply to receivables arising from revenue transactions. The new standard is effective for us beginning on January 1, 2023. We have concluded that the adoption of ASU 2016-13 will not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This update provides an optional expedient and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, which clarifies that certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. As our credit agreement allows for alternative benchmark rates to be applied to any borrowings, we do not expect the cessation of LIBOR to have a material impact on our financial position, results of operations, cash flows or disclosures.

~~(17)~~(18) Subsequent Events

On July 18, 2022, our Board and Compensation Committee (the “Committee”) approved an executive chairman agreement for Michael Y. McGovern, our Executive Chairman (the “Executive Chairman Agreement”).

~~We evaluate events~~

Executive Chairman Agreement for Mr. McGovern

Mr. McGovern’s Executive Chairman Agreement provides for an annual base salary of $750,000, with an initial one-year term that ~~occur after the balance sheet date but before the financial statements are issued~~automatically extends for ~~potential recognition or disclosure. Based~~an additional one-year term on the ~~evaluation,~~first anniversary of the effective date of the Agreement (the “Extension Date”) unless either party gives 60 days’ prior written notice of non-renewal before expiration of the then-current term. Mr. McGovern’s annual base salary is subject to adjustment (upward or downward) if Mr. McGovern’s duties or commitments change during the term of the Executive Chairman Agreement. Further, in connection with his Executive Chairman Agreement, we ~~determined that there were no material subsequent events that~~will grant Mr. McGovern RSUs under the MIP and accelerate the vesting of Mr. McGovern’s restricted shares of Class B common stock granted under the MIP (in each case, as discussed below). In addition, Mr. McGovern’s Executive Chairman Agreement provides for a cash lump sum payment to be made within thirty (30) days of the Effective Date (as defined in the Executive Chairman Agreement) in an amount equal to $288,306.45 to account for the annual base salary Mr. McGovern would have been paid since assuming the position of Executive Chairman until the Effective Date less any payments received from us since assuming the position of Executive Chairman until the Effective Date.

If Mr. McGovern’s employment is terminated by Mr. McGovern for good reason (as defined in the Executive Chairman Agreement) or by us for any reason other than: (a) Mr. McGovern’s death or incapacity; (b) for cause (as defined in the Executive Chairman Agreement); (c) upon any non-renewal of the term of the Executive Chairman Agreement; or (d) the occurrence of a change in control (as defined in the Plan), we will pay or provide to Mr. McGovern, in addition to his base salary through the date of termination and any rights under the term of equity awards and any medical or other welfare benefits required ~~disclosure~~by law (the “Accrued Amounts”):

•

A lump-sum payment equal to the base salary Mr. McGovern would have been paid from the date of termination through the next Extension Date of the Executive Chairman Agreement; and

•

Healthcare continuation benefits for the period between the date of termination and the next Extension Date of the Executive Chairman Agreement.

The payments and benefits described above (other than the Accrued Amounts) are subject to Mr. McGovern’s timely execution of a release of claims in our favor.

If Mr. McGovern’s employment is terminated by us for cause, by Mr. McGovern other than for good reason, due to Mr. McGovern’s death or ~~recognition~~disability, or upon the occurrence of a change in ~~these condensed consolidated financial statements.~~control, then we will only be required to pay to Mr. McGovern or to Mr. McGovern’s estate, as applicable, the Accrued Amounts.

Mr. McGovern will also be bound by, among other typical restrictive covenants, a 12-month post-termination non-compete covenant (unless his employment is terminated by us without cause or Mr. McGovern terminates his employment for good reason) and a 12-month post-termination non-solicitation covenant with respect to customers and employees.

Equity Awards

On July 18, 2022, the Board and the Committee approved a RSU award agreement (the “Award Agreement”) under the MIP for Mr. McGovern for 79,375 RSUs (and a number of corresponding shares of our Class B common stock).

The RSUs under the Award Agreement generally vest in three equal annual installments over a three-year period commencing on the first anniversary of January 20, 2022, subject to earlier vesting upon a change in control (as defined in the Plan) and, generally, Mr. McGovern’s continued employment through the applicable vesting date, and forfeiture on terms and conditions set forth in the Award Agreement. Notwithstanding the foregoing, in the event that Mr. McGovern’s employment is terminated by us without cause (excluding due to death or disability (as defined in the Executive Chairman Agreement)) or by Mr. McGovern for good reason, subject to subject to Mr. McGovern’s timely execution of a release of claims in our favor and continued compliance with his restrictive covenants, the tranche of RSUs due to vest on the next scheduled vesting date following the date of termination (i.e., one-third (1/3rd)) will vest.

Acceleration of Restricted Stock Grant

On July 18, 2022, the Board and the Committee approved accelerated vesting with respect to 15,642 outstanding restricted shares of our Class B common stock granted by us to Mr. McGovern on June 1, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this ~~quarterly report~~Quarterly Report on Form 10-Q. In addition, the following discussion and analysis and information contains forward-looking statements about ~~the~~our business, operations and financial performance ~~of the Company~~ based on our current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. including, but not limited to, those identified below and those discussed in the sections titled “Risk Factors” and under the heading “Information Regarding Forward-Looking Statements” in this ~~quarterly report~~Quarterly Report on Form 10-Q.

Executive Summary

General

We serve major, national and independent oil and natural gas exploration and production companies around the world and offer products and services with respect to the various phases of a well’s economic life cycle.

Historically, we provided a wide variety of services and products to many markets within the energy industry. ~~During 2021, we realigned our~~Our core businesses to focus on products and services that we believe meet the criteria of:

•

being critical to our customers’ oil and gas operations,

•

limits competition from the three largest global oilfield service companies,

•

requires deep technical expertise through the design or use of our products or services, such as premium drill pipe and drilling bottom hole assembly accessory rentals,

•

unlikely to become a commoditized product or service to our customers, and

•

provide strong cash flow generation capacity and opportunities.

The result of this approach is a portfolio of business lines grounded in our core mission of providing high quality products and services while maintaining the trust and serving the needs of our customers, with an emphasis on free cash flow generation and capital efficiency.

Industry Trends

The oil and gas industry is both cyclical and seasonal. The level of spending by oil and gas companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies. Our financial performance is significantly affected by the rig count in the U.S. land and offshore market areas as well as oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.


	Three months ended							Three months ended					Six months ended
	March 31, 2022		December 31, 2021		% Change			June 30, 2022		March 31, 2022		% Change	June 30, 2022		June 30, 2021		% Change
Worldwide Rig Count (1)
U.S.:
Land		621		545		14	%		704		621	13.4%		663		409	62.1%
Offshore		15		14		0.07			15		15	0.0%		15		14	7.1%
Total		636		559		14	%		719		636	13.1%		678		423	60.3%
International (2)		823		817		1	%		816		823	(0.9%)		819		716	14.4%
Worldwide Total		1,459		1,376		6	%		1,535		1,459	5.2%		1,497		1,139	31.4%

Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	95.18	$	77.33		23	%	$	108.83	$	95.18	14.3%	$	102.01	$	62.24	63.9%
Natural Gas (Henry Hub)	$	4.66	$	4.77		(2	)%	$	7.48	$	4.66	60.5%	$	6.07	$	3.25	86.8%

(1)

Estimate of drilling activity as measure by the average active drilling rigs based on Baker Hughes Co. rig count information

(2)

Excludes Canadian rig count

Comparison of the Results of Operations for the Three Months Ended June 30, 2022 and March 31, 2022

We reported net income from continuing operations for the three months ended June 30, 2022 (the “Current Quarter”) of $43.6 million on revenue of $224.6 million. This compares to a net income from continuing operations for the three months ended March 31, 2022 (the ~~“Current~~“Prior Quarter”) of $24.0 million on ~~revenue~~revenues of $197.9 ~~million. This compares to a net loss from continuing operations for the three months ended December 31, 2021 (the “Prior Quarter”) of $23.2 million on revenues of $198.4~~ million. Net income from continuing operations for the Current Quarter includes ~~$13.9~~an $17.4 million gain from revisions to estimates related to our decommissioning liability and $13.5 million of ~~“Other income”~~expense primarily related to ~~favorable~~ foreign ~~exchange rate changes~~currency losses during the quarter totaling ~~$5.6~~$10.5 million and both realized and unrealized ~~gains~~losses, net of ~~$8.2~~$4.1 million on our investment in equity securities of Select Energy Services, ~~Inc.~~Inc (“Select”).


	Three months ended						Change
	June 30, 2022			March 31, 2022			$			%
Revenues:
Rentals	$	103,729		$	88,756		$	14,973		16.9%
Well Services		120,911			109,174			11,737		10.8%
Total revenues		224,640			197,930			26,710
Cost of revenues:
Rentals		35,860			31,752			4,108		12.9%
Well Services		85,108			80,628			4,480		5.6%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		120,968			112,380			8,588
Depreciation, depletion, amortization and accretion		23,346			34,085			(10,739	)	(31.5%)
General and administrative expenses		30,231			32,018			(1,787	)	(5.6%)
Restructuring expenses		1,663			1,555			108		6.9%
Other (gains) and losses, net		(18,013	)		1,147			(19,160	)	**
Income (loss) from operations		66,445			16,745			49,700
Other income (expense):
Interest income, net		1,459			1,179			280		23.7%
Other income (expense)		(13,471	)		13,947			(27,418	)	**
Income (loss) from continuing operations before income taxes		54,433			31,871			22,562
Income tax (expense) benefit		(10,871	)		(7,884	)		(2,987	)	37.9%
Net income (loss) from continuing operations		43,562			23,987			19,575
Income (loss) from discontinued operations, net of income tax		(1,944	)		1,739			(3,683	)	(211.8%)
Net income (loss)	$	41,618		$	25,726		$	15,892

** Not a meaningful percentage

~~The following table sets forth consolidated results of operations for the periods indicated.~~

Three months ended

Change

March 31,
2022

December 31,
2021

$

%
Revenues:

Rentals

$
88,756

$
82,793

$
5,963

7.2%
Well Services

109,174

115,643

(6,469
)

(5.6%)
Total revenues

197,930

198,436

(506
)

Cost of revenues:

Rentals

31,752

29,942

1,810

6.0%
Well Services

80,628

95,157

(14,529
)

(15.3%)
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

112,380

125,099

(12,719
)

Depreciation, depletion, amortization and accretion

34,085

61,603

(27,518
)

(44.7%)
General and administrative expenses

32,018

33,158

(1,140
)

(3.4%)
Restructuring expenses

1,555

2,419

(864
)

(35.7%)
Other (gains) and losses, net

1,147

17,459

(16,312
)

(93.4%)
Income (loss) from operations

16,745

(41,302
)

58,047

Other income (expense):

Interest income, net

1,179

937

242

25.8%
Other income (expense)

13,947

(629
)

14,576

**
Income (loss) from continuing operations before income taxes

31,871

(40,994
)

72,865

Income tax (expense) benefit

(7,884
)

17,748

(25,632
)

(144.4%)
Net income (loss) from continuing operations

23,987

(23,246
)

47,233

Income (loss) from discontinued operations, net of income tax

1,739

(6,102
)

7,841

(128.5%)
Net income (loss)

$
25,726

$
(29,348
)

$
55,074

** Not a meaningful percentage

Revenues and Cost of Revenues

Revenues from our Rentals segment increased ~~$6.0~~$15.0 million, or ~~7.2%~~16.9%, in the Current Quarter as compared to the Prior Quarter. ~~This~~Cost of revenues increased $4.1 million, or 12.9%, in the Current Quarter as compared to the Prior Quarter. The increase in revenues was due to an increase in both average rig count and commodity prices when compared to the Prior ~~Quarter. During the Current~~ Quarter, ~~we experienced~~which drove increases in utilization and pricing of both premium drill pipe and bottom hole assembly accessories. These ~~increases were partially offset by a decline~~factors contributed to slight increase in ~~accommodation rentals resulting from our disposal of our land rental business~~gross margin which was 65.4% for the Current Quarter as compared to 64.2% in the Prior Quarter.

Revenues from our Well Services segment ~~decreased $6.5~~increased $11.7 million, or 10.8%, in the Current Quarter as compared to the Prior Quarter. Cost of revenues increased $4.5 million, or 5.6%, in the Current Quarter as compared to the Prior Quarter. ~~The decrease in revenues was due to lower levels of activity in our operations in Latin American and Middle Eastern markets partially offset by increases in the Asian Pacific markets.~~

~~Cost of Revenues~~

Cost of revenues from our Rentals segment increased $1.8 million, or 6.0%, in the Current Quarter as compared to the Prior Quarter. This increase was due to the increase in demand and utilization during the Current Quarter as we experienced a slight increase in gross margin which was 64.2% for the Current Quarter as compared to 63.8% in the Prior Quarter.

Cost of revenues from our Well Services segment decreased $14.5 million, or 15.3%, in the Current Quarter as compared to the Prior Quarter. The decrease in cost of revenues was driven by the decline in overall segment revenues, however grossGross margin for the Current Quarter increased to ~~26.1%~~29.6% as compared to ~~17.7%~~26.1% for the Prior Quarter due to changes in revenue mix in our ~~hydraulic workover and snubbing business,~~completions applications, increases in service revenues with higher margins and a reduction in pass through and mobilization projects with lower margins. Additionally, the strategic shift of our more labor-intensive service businesses to U.S. offshore and international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.

Both segments are experiencing supply chain tightness and inflation, particularly for raw materials associated with downhole completion and drilling bottom hole accessory components. This primarily impacts our ability to bring new tools to market in late 2022 and beyond as we experience long delivery lead times and increased pricing for capital expenditures.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion expense for the Current Quarter ~~was $34.1~~decreased $10.7 million, ~~a decrease of $27.5 million~~or 31.5%, as compared to the Prior Quarter. Depreciation expense for the Prior Quarter was impacted by the valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. Depreciation, depletion, amortization and accretion expense for 2022 is expected to be approximately $102.8 million as compared to $228.2 million for the full year 2021.

General and Administrative Expenses

General and administrative expenses for the Current Quarter ~~were $32.0~~decreased $1.8 million, ~~a decrease of $1.1 million~~or 5.6%, as compared to the Prior Quarter. The decrease is primarily related to professional fees for accounting and consulting services as well as declines in employee related costs, including benefits and incentive compensation.

~~Restructuring Expenses~~

Restructuring expenses for the Current Quarter were $1.6 million, a decrease of $0.9 million as compared to the Prior Quarter, and primarily relate to costs associated with our efforts to reconfigure our organization both operationally and financially (the “Transformation Project”).

Other gains and losses

Other gains ~~and losses~~ for the Current Quarter were ~~$1.1~~$18.0 million compared to ~~$17.5~~$1.1 million in losses for the Prior Quarter. Other gains and losses in the Prior Quarter comprised $15.2 million related to our Wells Services segment, which includes approximately $11.7 million from exit activities related to SES Energy Services India Pvt. Ltd, and $2.3 million related to our Rentals segment. Other gains and losses primarily relate to charges recorded as part of our strategic disposal of low margin assets in line with our ~~Transformation Project~~efforts to reconfigure our organization both operationally and financially (the “Transformation Project”) and includes gains/losses on asset sales, as well as impairments primarily related to long-lived assets. Other gains and losses for the Current Quarter include a gain of $17.4 million from revisions in estimates related to our decommissioning liability.

Other Income (Expense)

Other income (expense) primarily relate to re-measurement gains and losses associated with our foreign currencies and realized and unrealized gains and losses on our investment in equity securities. ~~Gains~~Losses on foreign currencies during the Current Quarter were ~~$5.6~~$10.5 million and primarily related to ~~gains associated with~~ our operations in Brazil. ~~Other income (expense) in~~Losses on foreign currencies during the Current Quarter include an expense of $2.7 million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy. Gain on foreign currencies during the Prior Quarter ~~was not material.~~were $5.6 million primarily related to our operations in Brazil.

Unrealized losses on our investment in equity securities for the Current Quarter were $5.9 million. Unrealized gains on our investment in equity securities for the Prior Quarter were $6.5 million. During the Current Quarter, ~~was $6.5 million. Additionally, during~~we disposed of 0.7 million shares for $6.0 million, and recognized gains totaling $1.9 million in connection with these transactions. During the ~~Current~~Prior Quarter, we disposed of 1.0 million shares for $7.4 million, and recognized gains totaling $1.8 million in connection with these transactions.

Income Taxes

The effective tax rate for the Current Quarter and Prior Quarter was ~~24.7%~~20.0% and ~~43.3%~~24.7%, respectively, on income from continuing operations. The effective tax rate for ~~both periods~~the Current Quarter is different from the U.S. federal statutory rate of 21% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which no tax benefit is being recorded. The tax rate for the Prior Quarter is

different from the U.S. federal statutory rate of 21% primarily from non-deductible items and foreign losses for which no tax benefit was recorded.

Unrecognized tax benefit as of the Current Quarter and Prior Quarter was ~~$15.1~~$15.7 million and ~~$15.0~~$15.1 million, respectively, all of which would impact our effective tax rate if recognized except for $1.6 million offset in ~~deferre~~ddeferred income taxes. It is reasonably possible ~~$2.9~~$3.4million of unrecognized tax benefits could be settled in the next twelve months due to the conclusion of tax audits or statutes of limitations expiration. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

Comparison of the Results of Operations for the Six Months Ended June 30, 2022 and 2021

The period from February 3, 2021 through June 30, 2021 (the “Successor Period”) and the period from January 1, 2021 through February 2, 2021 (the “Predecessor Period”) are distinct reporting periods as a result of our emergence from bankruptcy. References in these results of operations to changes in comparison to the six months ended June 30, 2022 (the “Current Period)” combine the Successor Period and Predecessor Period results for the six months ended June 30, 2021 (the “Combined Period”) in order to provide some comparability of such information. While this combined presentation is not presented according to generally accepted accounting principles in the United States of America (“GAAP”) and no comparable GAAP measures are presented, management believes that providing this financial information is the most relevant and useful method for making comparisons to the Current Period as reviewing the Successor Period results in isolation would not be useful in identifying trends in or reaching conclusions regarding our overall operating performance.

We reported net income from continuing operations for the Current Period of $67.5 million on revenue of $422.6 million. This compares to net income from continuing operations for the Combined Period of $210.3 million on revenues of $317.7 million.


	Successor						Predecessor			Non-GAAP			Change
	For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021			For the Combined Six Months Ended June 30, 2021			$			%
Revenues:
Rentals	$	192,485		$	109,685		$	18,339		$	128,024		$	64,461		50.4%
Well Services		230,085			162,050			27,589			189,639			40,446		21.3%
Total revenues		422,570			271,735			45,928			317,663			104,907
Cost of revenues:
Rentals		67,612			42,795			7,839			50,634			16,978		33.5%
Well Services		165,736			128,287			21,934			150,221			15,515		10.3%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		233,348			171,082			29,773			200,855			32,493
Depreciation, depletion, amortization and accretion		57,431			99,048			8,358			107,406			(49,975	)	(46.5%)
General and administrative expenses		62,249			50,746			11,052			61,798			451		0.7%
Restructuring expenses		3,218			15,821			1,270			17,091			(13,873	)	(81.2%)
Other (gains) and losses, net		(16,866	)		365			-			365			(17,231	)	**
Income (loss) from operations		83,190			(65,327	)		(4,525	)		(69,852	)		153,042
Other income (expense):
Interest income, net		2,638			747			202			949			1,689		178.0%
Reorganization items, net		-			-			335,560			335,560			(335,560	)	(100.0%)
Other income (expense)		476			(275	)		(2,105	)		(2,380	)		2,856		**
Income (loss) from continuing operations before income taxes		86,304			(64,855	)		329,132			264,277			(177,973	)
Income tax (expense) benefit		(18,755	)		6,032			(60,003	)		(53,971	)		35,216		(65.2%)
Net income (loss) from continuing operations		67,549			(58,823	)		269,129			210,306			(142,757	)
Income (loss) from discontinued operations, net of income tax		(205	)		(28,806	)		(352	)		(29,158	)		28,953		(99.3%)
Net income (loss)	$	67,344		$	(87,629	)	$	268,777		$	181,148		$	(113,804	)

** Not a meaningful percentage

Revenues and Cost of Revenues

Revenues from our Rentals segment increased $64.5 million, or 50.4%, in the Current Period as compared to the Combined Period. Cost of revenues increased $17.0 million, or 33.5%, in the Current Period as compared to the Combined Period. This increase was due to an increase in both average rig count and commodity prices when compared to the Combined Period. During the Current Period, we experienced increases in utilization and pricing of both premium drill pipe and bottom hole assembly accessories, which contributed to an increase in gross margin which was 64.9% for the Current Period as compared to 60.4% in the Combined Period.

Revenues from our Well Services segment increased $40.4 million, or 21.3%, in the Current Period as compared to the Combined Period. Cost of revenues increased $15.5 million, or 10.3%, in the Current Period as compared to the Combined Period. The increase in cost of revenues was driven by the increase in overall segment revenues, and gross margin for the Current Period increased to 28.0% as compared to 20.8% for the Combined Period due to changes in revenue mix in our completions applications, increases in service revenues with higher margins and a reduction in pass through and mobilization projects with lower margins. Additionally, the strategic shift of our more labor-intensive service businesses to U.S. offshore and international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion expense for the Current Period decreased $50.0 million, or 46.5%, as compared to the Combined Period. Depreciation expense for the Combined Period was impacted by the valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. Depreciation, depletion, amortization and accretion expense for 2022 is expected to be approximately $102.8 million as compared to $228.2 million for the full year 2021.

Restructuring Expenses

Restructuring expenses for the Current Period decreased of $13.9 million, or 81.2%, as compared to the Combined Period, and primarily relate to costs associated with the Transformation Project.

Other gains and losses

Other gains and losses for the Current Period include a gain of $17.4 million from revisions in estimates related to our decommissioning liability.

Other Income (Expense)

Losses on foreign currencies during the Current Period and Combined Period were $4.9 million and $1.8 million, respectively. Losses on foreign currencies during the Current Period include an expense of $2.7 million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy. Realized and unrealized gains on our investment in equity securities for the Current Period were $4.2 million. During the Current Period, we disposed of 1.7 million shares for $13.4 million.

Income Taxes

The effective tax rate for the Current Period and Combined Period was 21.7% and 20.4%, respectively, on income from continuing operations. The effective tax rate for the Current Period is different from the U.S. federal statutory rate of 21% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which no tax benefit is being recorded. The tax rate for the Combined Period is different from the U.S. federal statutory rate of 21% primarily from non-deductible items, foreign losses for which no tax benefit was recorded and the adoption of fresh start accounting during the period.

Unrecognized tax benefit as of June 30, 2022 was $15.7 million, all of which would impact our effective tax rate if recognized except for $1.6 million offset in deferred income taxes. It is reasonably possible $3.4 million of unrecognized tax benefits could be settled in the next twelve months due to the conclusion of tax audits or statutes of limitations expiration. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

Liquidity and Capital Resources

Cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Certain sources and uses of cash, such as our level of discretionary capital expenditures and divestitures of non-core assets, are within our control and are adjusted as necessary based on market conditions.

Financial Condition and Liquidity

Our primary sources of liquidity have been cash and cash equivalents, cash generated from our operations and from asset sales, and availability under our Credit Facility. As of ~~March 31,~~June 30, 2022, we had cash, cash equivalents and restricted cash of ~~$439.1~~$470.8 million. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2022 net cash provided by operating activities was ~~$35.1~~$68.2 million, and we received ~~$20.7~~$28.5 million in cash proceeds from the sale of assets and equity securities in which we are invested. The primary uses of liquidity are to provide support for operating activities, restructuring activities and capital expenditures. We spent ~~$11.3~~$20.5 million of cash on capital expenditures during the ~~quarter~~six months ended ~~March 31,~~June 30, 2022.

The energy industry faces growing negative sentiment in the market which may affect our ability to access capital on terms favorable to us. While we have confidence in the level of support from our lenders, this negative sentiment in the energy industry has not only impacted our customers in North America, but also affected the availability and pricing for most credit lines extended to participants in the energy industry. From time to time, we may enter into transactions to dispose of businesses or capital assets that no longer fit our long-term strategy.

Debt Instruments

As of ~~March 31,~~June 30, 2022, our borrowing base, as defined in the Credit Agreement, was approximately $120.0 million and we had ~~$35.5~~$34.3 million of letters of credit outstanding that reduced the borrowing availability. We had no outstanding borrowings under the Credit Facility as of ~~March 31,~~June 30, 2022.

Other Matters

New Accounting Pronouncements

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 17 – “New Accounting Pronouncements.”

Critical Accounting Policies and Estimates

There have been no changes to the critical accounting policies reported in our Annual Report on Form 10-K for the period ended December 31, 2021 (the “Form 10-K”) that affect our significant judgments and estimates used in the preparation of our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in ~~our Annual Report on~~the Form ~~10-K for the year ended December 31, 2021 for more information.~~10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks associated with foreign currency fluctuations and changes in interest rates. As of ~~March 31,~~June 30, 2022, we did not hold financial instruments for trading purposes.

Foreign Currency Exchange Rates Risk

We do not hold derivatives for trading purposes or use derivatives with complex features. When we believe it is prudent, we may enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. We do not enter into forward foreign exchange contracts for trading purposes, and at ~~March 31,~~June 30, 2022, we did not have any outstanding foreign currency forward contracts.

Interest Rate Risk

We are exposed to changes in interest rates on borrowings under our Credit Facility. Any borrowings under the Credit Facility will bear interest, at our option, at either an adjusted LIBOR rate plus an applicable margin ranging from 3.00% to 3.50% per annum, or an alternate base rate plus an applicable margin ranging from 2.00% to 2.50% per annum, in each case on the basis of the consolidated fixed charge coverage ratio. In addition, we are required to pay (i) a letter of credit fee, (ii) to the issuing lender of each letter of credit, a fronting fee and (iii) commitment fees. Upon the cessation of LIBOR, the Credit Facility provides for the use of alternative benchmark rates for the determination of the borrowing rate, and the cessation of LIBOR will not have a material impact on us. However, as of ~~March 31,~~June 30, 2022, we had no outstanding borrowings under the Credit Facility.

Commodity Price Risk

Our revenues, profitability and future rate of growth significantly depend upon the market prices of oil and natural gas. Lower prices may also reduce the amount of oil and gas that can economically be produced.

Inflation Risk

Based on our analysis of the period presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, ~~(as amended)~~as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, the disclosure controls and procedures provide reasonable assurance that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. An evaluation was carried out, under the supervision and with the participation of our management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures as of ~~March 31,~~June 30, 2022 were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended ~~March 31.~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal actions incidental to our business. However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings after considering available defenses and any insurance coverage or indemnification rights will have a material adverse effect on our financial position, results of operations or cash flows. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes – Note 13 – Contingencies.”

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the Risk Factors which we previously disclosed in our ~~Annual Report on~~ Form ~~10-K for the year ended December 31, 2021.~~10-K.

Our business may be materially and adversely impacted by U.S. and global market and economic conditions, including impacts relating to inflation and supply chain disruptions.

Our revenue is derived from the services and products that we offer to major, national and independent oil and natural gas exploration and production companies around the world for the various phases of their respective well’s economic life cycles. Given the concentration of our business activities in the oil and gas industry, we will be particularly exposed to certain economic downturns. United States and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including the ongoing COVID-19 pandemic, component shortages and related supply chain challenges, geopolitical developments such as the conflict between Ukraine and Russia, and increasing inflation rates and the responses by central banking authorities to control such inflation, among others.

General business and economic conditions that could affect us and our customers include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we and our customers operate. A weak economic environment could result in significant decreases in demand for our products and services, including the delay or cancellation of current or anticipated projects. In particular, rising inflation rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, equipment, parts, consumables and shipping. A high inflationary environment may also cause customers to defer or decrease their expenditures on the services and products that we provide. In addition, supply chain disruptions and delays, could adversely affect our ability to provide our services and deliver our products in a timely manner, which could impair our ability to meet customer demand and result in lost sales, increased supply chain costs or damage to our reputation. Any of foregoing these economic conditions could have a material adverse effect on our business, financial condition, and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

None.

~~There have been no defaults upon senior securities during the three months ended March 31, 2022.~~

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None to report.

Item 6. Exhibits


Exhibit No.	Description
2.1	First Amended Joint Prepackaged Plan of Reorganization for Superior Energy Services, Inc. and its Affiliate Debtors Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on January 20, 2021(File No. 001-34037)).
2.2	Agreement and Plan of Merger, dated as of February 2, 2021, by and among Superior Energy Services, Inc., Superior BottomCo Inc. and Superior NewCo, Inc. (incorporated herein by reference to Exhibit 10.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021 (File No. 001-34037)).
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
~~10.1~~10.1^	~~Fourth Amendment and Waiver to Credit~~Executive Chairman Restricted Stock Unit Award Agreement by and among SESI, L.L.C., SESI Holdings, Inc., the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent and lender, and certain other financial institutions and other parties thereto as lenders (incorporated by reference to Exhibit 10.1 ofto Superior Energy Services, Inc.'s’s Current Report on Form 8-K filed on ~~March 14, 2022 (File~~July 18, 2022(File No. 001-34037)).
~~10.2*^~~10.2^	~~Employment~~Executive Chairman Agreement ~~dated as of March 28, 2022, between Superior Energy Services, Inc. and James W. Spexarth.~~
~~10.3*^~~	~~Employment Agreement, dated as of March 28, 2022, between Superior Energy Services, Inc. and Brian K. Moore.~~
~~10.4*^~~	~~Employment Agreement, dated as of March 28, 2022 between Superior Energy Services, Inc. and Mike Delahoussaye.~~
~~10.5*^~~	~~Employment Agreement, dated as of March 28, 2022, between Superior Energy Services, Inc. and Deidre Toups.~~
~~10.6^~~	~~Form of Employee Restricted Stock Unit Award Agreement (Applicable Corporate Transaction)~~ (incorporated by reference to Exhibit ~~10.1 of~~10.2 to Superior Energy Services, Inc.'s’s Current Report on Form 8-K filed on ~~March 31, 2022 (File~~July 18, 2022(File No. 001-34037)).
~~10.7^~~	Form of Employee Performance Stock Unit Award Agreement (Applicable Corporate Transaction) (incorporated by reference to Exhibit 10.2 of Superior Energy Services, Inc.'s Current Report on Form 8-K, filed on March 31, 2022 (File No. 001-34037)).
~~10.8^~~	Form of Employee Restricted Stock Unit Award Agreement (Applicable Corporate Transaction) (incorporated by reference to Exhibit 10.3 of Superior Energy Services, Inc.'s Current Report on Form 8-K, filed on March 31, 2022 (File No. 001-34037)).
~~10.9^~~	Form of Employee Performance Stock Unit Award Agreement (Applicable Corporate Transaction) (incorporated by reference to Exhibit 10.4 of Superior Energy Services, Inc.'s Current Report on Form 8-K, filed on March 31, 2022 (File No. 001-34037)).
31.1*	Officer’s certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Officer’s certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1*#	Officer’s certification pursuant to Section 1350 of Title 18 of the U.S. Code.
32.2*#	Officer’s certification pursuant to Section 1350 of Title 18 of the U.S. Code.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

^ Management contract or compensatory plan or arrangement

# This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SUPERIOR ENERGY SERVICES, INC.

(Registrant)


Date:	~~May~~August 4, 2022	By:	/s/ Brian K. Moore
			Brian K. Moore
			President and Chief Executive Officer
			(Principal Executive Officer)

		By:	/s/ James W. Spexarth
			James W. Spexarth
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

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