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, ~~2021~~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 Number 001-37988

NexTier Oilfield Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			38-4016639
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

3990 Rogerdale Rd.	Houston	Texas	77042
(Address of Principal Executive Offices)			(Zip Code)

(713) 325-6000

(Registrant's Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange On Which Registered
Common Stock, $0.01, par value	NEX	New York Stock Exchange

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

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

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 ☒

As of ~~May 3, 2021,~~April 25, 2022, the registrant had ~~215,527,369~~244,035,932 shares of common stock outstanding.

Auditor Name: KPMG LLP Auditor Location: Houston, Texas Auditor Firm ID: 185

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	3

Item 1.	~~Condensed Consolidated~~ Financial Statements ~~(Unaudited)~~	4

	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to the Unaudited Condensed Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2827

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION	38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	3839

Item 4.	Mine Safety Disclosures	3839

Item 5.	Other Information	39

Item 6.	Exhibits	40

	Signatures	41

REFERENCES WITHIN THIS QUARTERLY REPORT

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to (i) the terms ~~“Company,” “NexTier,” “we,” “us”~~"Company," "NexTier," "we," "us" and ~~“our”~~"our" refer to NexTier Oilfield Solutions Inc. and its consolidated subsidiaries; (ii) the term ~~“Keane Group”~~"Keane Group" refers to Keane Group Holdings, LLC and its consolidated subsidiaries; (iii) the term ~~“Keane Investor”~~"Keane Investor" refers to Keane Investor Holdings LLC; (iv) the term ~~“Cerberus”~~"Cerberus" refers to Cerberus Capital Management, L.P. and its controlled affiliates and investment funds; and (v) the term ~~“C&J”~~"Alamo" refers to ~~C&J Energy Services, Inc.; (vi) the term “C&J Merger” refers to the consummation of the transactions described in that certain Agreement~~Alamo Pressure Pumping, LLC and ~~Plan of Merger, dated as of June 16, 2019 (the “Merger Agreement”), by and among the C&J, us and King Merger Sub Corp., one of our wholly owned~~its consolidated subsidiaries. As used in this Quarterly Report on Form 10-Q, capacity in the hydraulic fracturing business refers to the total number of hydraulic horsepower, regardless of whether such hydraulic horsepower is active and deployed, active and not deployed or inactive. While the equipment and amount of hydraulic horsepower required for a customer project varies, we calculate our total number of fleets, as used in this Quarterly Report on Form 10-Q, by dividing our total hydraulic horsepower by approximately 63,000 ~~48,000~~ hydraulic horsepower.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Our forward-looking statements are generally accompanied by words such as "may," "should," "expect," "believe," "plan," "anticipate," "could," "intend," "target," "goal," "project," "contemplate," ~~"believe,"~~ "estimate," "predict," "potential," "outlook," "reflect," "forecast," "future," or "continue," or the negative of these terms or other similar expressions. Any forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date on which we make them and are based upon our historical performance and on current plans, estimates and expectations. Except as required by law, we have no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the continued impact of the ~~current~~ COVID-19 pandemic (including as a result of the emergence of new variants and strains of the virus, such as Delta and Omicron) and the evolving response thereto ~~including the impact of social distancing, shelter-in-place, shutdowns of non-essential businesses and similar measures imposed or undertaken~~ by governments, private businesses or ~~others;~~others to contain the spread of the virus and its variants or to treat its impact;

•changing regional, national or global economic conditions, including ~~oil~~rising inflation and ~~gas~~ supply ~~and demand;~~chain issues;

•the ongoing impact of geopolitical conflicts;

•our business strategy;

•our plans, objectives, expectations and intentions;

•the competitive nature of the industry in which we conduct our business, including pricing pressures;

•our future operating results;

•crude oil and natural gas demand and production growth;

•crude oil and natural gas commodity prices;

•demand for services in our industry;

•the impact of pipeline and storage capacity constraints;

•the impact of adverse weather conditions;

•the effects of government ~~regulation and administrative or political policies;~~regulation;

•changes in tax laws;

•legal proceedings, liability claims and effect of external investigations;

•the effect of a loss of, or the financial distress of, one or more customers;

•our ability to obtain or renew customer contracts;

•the effect of a loss of, or interruption in operations of, one or more key suppliers;

•our ability to maintain the right level of commitments under our supply agreements;

•the market price and availability of materials or equipment;

•the impact of new technology;

•our ability to employ a sufficient number of skilled and qualified workers;

•our ability to obtain permits, approvals and authorizations from governmental and third parties;

•planned acquisitions, divestitures and future capital expenditures;

•our ability to maintain secure and effective information technology systems;

•our ability to maintain an effective system of internal controls over financial reporting;

•our ability to service our debt obligations;

•financial strategy, liquidity or capital required for our ongoing operations and acquisitions, and our ability to raise additional capital;

•the market volatility of our stock;

•our ability or intention to pay dividends or to effectuate repurchases of our common stock;

•the impact of ownership by Cerberus (through Keane Investor); and

•the impact of our corporate governance structure.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2020, and in the section entitled Part II, "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q.~~2021. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, circumstances, plans, intentions or expectations reflected in any forward-looking statements will be achieved or occur. Actual results, events or circumstances could differ materially from those described in such forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make, except as specifically set forth herein. We undertake no obligation to revise or update any forward-looking statements for any reasons, expect as required by law.

This Quarterly Report on Form 10-Q includes market and industry data and certain other statistical information based on third-party sources including independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, we have not independently verified the accuracy or completeness of this information. Some data is also based on our own good faith estimates, which are supported by our management's knowledge of and experience in the markets and businesses in which we operate.

While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed above and in Part ~~II,~~I, "Item 1A. Risk Factors" in ~~this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K for the year ended December 31, 2021.

PART I

Item 1. ~~Condensed Consolidated~~ Financial Statements ~~(Unaudited)~~

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in ~~thousands)~~thousands, except par value)

March 31,
2021 December 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 271,639 $ 275,990
Trade and other accounts receivable, net 163,540 122,584
Inventories, net 31,621 30,068
Assets held for sale 0 126
Prepaid and other current assets 21,220 58,011
Total current assets 488,020 486,779
Operating lease right-of-use assets 29,273 37,157
Finance lease right-of-use assets 772 1,132
Property and equipment (net of accumulated depreciation of $947,755 and $929,290) 456,712 470,711
Goodwill 104,198 104,198
Intangible assets (net of accumulated amortization of $50,021 and $46,496) 47,779 51,182
Other noncurrent assets 6,274 6,729
Total assets $ 1,133,028 $ 1,157,888
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 88,464 $ 61,259
Accrued expenses 125,266 134,230
Customer contract liabilities 12,000 266
Current maturities of long-term operating lease liabilities 14,637 18,551
Current maturities of long-term finance lease liabilities 441 606
Current maturities of long-term debt 2,310 2,252
Other current liabilities 2,710 2,993
Total current liabilities 245,828 220,157
Long-term operating lease liabilities, less current maturities 24,351 24,232
Long-term finance lease liabilities, less current maturities 293 504
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities 332,779 333,288
Other noncurrent liabilities 20,449 22,419
Total noncurrent liabilities 377,872 380,443
Total liabilities 623,700 600,600
Stockholders' equity
Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 215,344 and 214,440 shares, respectively)
2,153 2,144
Paid-in capital in excess of par value 994,179 989,995
Retained deficit (476,243) (421,741)
Accumulated other comprehensive loss (10,761) (13,110)
Total stockholders' equity 509,328 557,288
Total liabilities and stockholders' equity $ 1,133,028 $ 1,157,888


	March 31, 2022		December 31, 2021
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalents	$	99,788	$	110,695
Trade and other accounts receivable, net	391,682		301,740
Inventories, net	50,948		38,094
Assets held for sale	910		1,555
Prepaid and other current assets	47,414		55,625
Total current assets	590,742		507,709
Operating lease right-of-use assets	20,541		21,767
Finance lease right-of-use assets	41,875		41,537
Property and equipment (net of accumulated depreciation of $968,439 and $951,170)	613,163		620,865
Goodwill	192,780		192,780
Intangible assets (net of accumulated amortization of $64,906 and $62,678)	62,146		64,961
Other noncurrent assets	11,131		7,962
Total assets	$	1,532,378	$	1,457,581

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	239,769	$	190,963
Accrued expenses	238,657		213,923
Customer contract liabilities	21,288		23,729
Current maturities of long-term operating lease liabilities	6,440		7,452
Current maturities of long-term finance lease liabilities	12,035		11,906
Current maturities of long-term debt	13,602		13,384
Other current liabilities	8,801		10,346
Total current liabilities	540,592		471,703
Long-term operating lease liabilities, less current maturities	19,480		20,446
Long-term finance lease liabilities, less current maturities	24,749		26,873
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities	358,034		361,501
Other noncurrent liabilities	23,838		30,041
Total noncurrent liabilities	426,101		438,861
Total liabilities	966,693		910,564


Stockholders' equity

Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 243,904 and 242,019 shares, respectively)	2,439		2,420
Paid-in capital in excess of par value	1,097,863		1,094,020
Retained deficit	(532,372)		(541,164)
Accumulated other comprehensive loss	(2,245)		(8,259)
Total stockholders' equity	565,685		547,017
Total liabilities and stockholders' equity	$	1,532,378	$	1,457,581

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

(Amounts in thousands, except for per share amounts)

(Unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Revenue	Revenue	$	228,402	$	627,625		Revenue	$	635,043	$	228,402
Operating costs and expenses:	Operating costs and expenses:						Operating costs and expenses:
Cost of services(1)	Cost of services(1)	217,777		512,226			Cost of services(1)	524,656		217,777
Depreciation and amortization	Depreciation and amortization	45,868		85,821			Depreciation and amortization	55,163		45,868
Selling, general and administrative expenses	Selling, general and administrative expenses	16,069		56,884			Selling, general and administrative expenses	35,859		16,069
Merger and integration	Merger and integration	0		12,182			Merger and integration	9,232		—
Gain on disposal of assets	Gain on disposal of assets	(4,592)		(7,962)			Gain on disposal of assets	(823)		(4,592)
Impairment expense		0		34,327

Total operating costs and expenses	Total operating costs and expenses	275,122		693,478			Total operating costs and expenses	624,087		275,122
Operating loss		(46,720)		(65,853)
Operating income (loss)							Operating income (loss)	10,956		(46,720)
Other income (expense):	Other income (expense):						Other income (expense):
Other income (expense), net	Other income (expense), net	(2,719)		416			Other income (expense), net	5,370		(2,719)
Interest expense, net	Interest expense, net	(4,206)		(6,066)			Interest expense, net	(7,374)		(4,206)
Total other expense	Total other expense	(6,925)		(5,650)			Total other expense	(2,004)		(6,925)
Loss before income taxes		(53,645)		(71,503)
Income (loss) before income taxes							Income (loss) before income taxes	8,952		(53,645)
Income tax expense	Income tax expense	(857)		(253)			Income tax expense	(160)		(857)
Net loss		(54,502)		(71,756)
Other comprehensive loss, net of tax:
Net Income (loss)							Net Income (loss)	8,792		(54,502)
Other comprehensive income (loss), net of tax:							Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	337		1,107			Foreign currency translation adjustments	(285)		337
Hedging activities	Hedging activities	1,346		(2,961)			Hedging activities	5,612		1,346
Total comprehensive loss		$	(52,819)	$	(73,610)
Total comprehensive income (loss)							Total comprehensive income (loss)	$	14,119	$	(52,819)

Net loss per share:
Basic net loss per share		$	(0.25)	$	(0.34)
Diluted net loss per share		(0.25)		(0.34)
Net income (loss) per share:							Net income (loss) per share:
Basic net income (loss) per share							Basic net income (loss) per share	$	0.04	$	(0.25)
Diluted net income (loss) per share							Diluted net income (loss) per share	$	0.04	$	(0.25)

Weighted-average shares outstanding: basic	Weighted-average shares outstanding: basic	215,110		212,842			Weighted-average shares outstanding: basic	243,269		215,110
Weighted-average shares outstanding: diluted	Weighted-average shares outstanding: diluted	215,110		212,842			Weighted-average shares outstanding: diluted	247,705		215,110

(1) Cost of services during the three months ended March 31, ~~2021~~2022 and March 31, ~~2020~~2021 exclude depreciation of ~~$41.3~~$50.9 million and ~~$81.3~~$41.3 million, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Amounts in thousands)

(Unaudited)


		Common stock		Paid-in capital in excess of par value		Retained deficit		Accumulated other comprehensive loss		Total			Common stock		Paid-in capital in excess of par value		Retained deficit		Accumulated other comprehensive income (loss)		Total
Balance as of December 31, 2020		$	2,144	$	989,995	$	(421,741)	$	(13,110)	$	557,288
Balance as of December 31, 2021												Balance as of December 31, 2021	$	2,420	$	1,094,020	$	(541,164)	$	(8,259)	$	547,017

Stock-based compensation	Stock-based compensation	10		5,193		—		—		5,203		Stock-based compensation	19		7,796		—		—		7,815
Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	(1)		(1,009)		—		—		(1,010)		Shares repurchased and retired related to stock-based compensation	—		(3,953)		—		—		(3,953)
Other comprehensive income	Other comprehensive income	—		—		—		2,349		2,349		Other comprehensive income	—		—		—		6,014		6,014
Net loss		—		—		(54,502)		—		(54,502)
Balance as of March 31, 2021		$	2,153	$	994,179	$	(476,243)	$	(10,761)	$	509,328
Net income												Net income	—		—		8,792		—		8,792
Balance as of March 31, 2022												Balance as of March 31, 2022	$	2,439	$	1,097,863	$	(532,372)	$	(2,245)	$	565,685

Common stock Paid-in capital in excess of par value Retained deficit Accumulated other comprehensive loss Total
Balance as of December 31, 2019 $ 2,124 $ 966,762 $ (73,333) $ (8,781) $ 886,772
Stock-based compensation(1)
11 6,869 — — 6,880
Shares repurchased and retired related to stock-based compensation (2) (1,149) — — (1,151)
Other comprehensive loss — — — (1,513) (1,513)
Credit losses standard implementation — — (1,525) — (1,525)
Net loss — — (71,756) — (71,756)
Balance as of March 31, 2020 $ 2,133 $ 972,482 $ (146,614) $ (10,294) $ 817,707


	Common stock		Paid-in capital in excess of par value		Retained deficit		Accumulated other comprehensive income (loss)		Total
Balance as of December 31, 2020	$	2,144	$	989,995	$	(421,741)	$	(13,110)	$	557,288

Stock-based compensation	10		5,193		—		—		5,203
Shares repurchased and retired related to stock-based compensation	(1)		(1,009)		—		—		(1,010)
Other comprehensive income	—		—		—		2,349		2,349
Net loss	—		—		(54,502)		—		(54,502)
Balance as of March 31, 2021	$	2,153	$	994,179	$	(476,243)	$	(10,761)	$	509,328

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(54,502)	$	(71,756)
Adjustments to reconcile net loss to net cash provided by operating activities
Net income (loss)						Net income (loss)	$	8,792	$	(54,502)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization	Depreciation and amortization	45,868		85,821		Depreciation and amortization	55,163		45,868
Amortization of deferred financing fees	Amortization of deferred financing fees	624		551		Amortization of deferred financing fees	528		624

Gain on disposal of assets	Gain on disposal of assets	(4,592)		(7,962)		Gain on disposal of assets	(823)		(4,592)

Loss on impairment of assets		0		34,327
Unrealized (gain) loss on derivative recognized in other comprehensive loss		1,346		(2,961)
Loss on financial instrument and derivatives, net		3,575		341

Unrealized gain on derivative recognized in other comprehensive loss						Unrealized gain on derivative recognized in other comprehensive loss	—		1,346
(Gain) loss on financial instrument and derivatives, net						(Gain) loss on financial instrument and derivatives, net	(4,919)		3,575
Stock-based compensation	Stock-based compensation	5,203		6,880		Stock-based compensation	8,476		5,203

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Increase in trade and other accounts receivable, net	Increase in trade and other accounts receivable, net	(40,955)		(30,833)		Increase in trade and other accounts receivable, net	(89,937)		(40,955)

Decrease (increase) in inventories		(2,364)		5,647
Increase in inventories						Increase in inventories	(14,262)		(2,364)
Decrease (increase) in prepaid and other current assets	Decrease (increase) in prepaid and other current assets	(467)		4,888		Decrease (increase) in prepaid and other current assets	13,970		(467)
Decrease in other assets	Decrease in other assets	8,652		4,958		Decrease in other assets	1,204		8,652
Increase in accounts payable	Increase in accounts payable	18,188		27,694		Increase in accounts payable	32,787		18,188
Decrease in accrued expenses		(8,972)		(8,478)
Increase in customer contract liabilities		11,734		2,940
Increase (decrease) in accrued expenses						Increase (decrease) in accrued expenses	24,723		(8,972)
Increase (decrease) in customer contract liabilities						Increase (decrease) in customer contract liabilities	(2,442)		11,734
Decrease in other liabilities	Decrease in other liabilities	(6,564)		(3,570)		Decrease in other liabilities	(4,594)		(6,564)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(23,226)		48,487		Net cash provided by (used in) operating activities	28,666		(23,226)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Proceeds from sale of business		0		53,259

Purchase of property and equipment	Purchase of property and equipment	(22,462)		(40,798)		Purchase of property and equipment	(26,704)		(22,462)
Advances of deposit on equipment	Advances of deposit on equipment	(662)		(1,775)		Advances of deposit on equipment	(1,742)		(662)
Implementation of software	Implementation of software	(166)		(2,600)		Implementation of software	(1,392)		(166)
Proceeds from disposal of assets	Proceeds from disposal of assets	9,528		5,973		Proceeds from disposal of assets	2,822		9,528
Acquisition of business						Acquisition of business	482		—

Proceeds from settlement of WSS Notes and make-whole derivative	Proceeds from settlement of WSS Notes and make-whole derivative	34,350		0		Proceeds from settlement of WSS Notes and make-whole derivative	—		34,350
Proceeds from insurance recoveries	Proceeds from insurance recoveries	0		58		Proceeds from insurance recoveries	20		—

Net cash provided by investing activities		20,588		14,117
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	(26,514)		20,588
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from asset-based revolver		0		175,000
Payments on the term loan facility and asset-based revolver		(875)		(875)

Payments on the term loan facility and equipment loan						Payments on the term loan facility and equipment loan	(3,579)		(875)
Payments on finance leases	Payments on finance leases	(165)		(2,278)		Payments on finance leases	(2,847)		(165)

Payments for financing liabilities						Payments for financing liabilities	(2,395)		—
Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	(1,010)		(1,151)		Shares repurchased and retired related to stock-based compensation	(3,953)		(1,010)

Net cash provided by (used in) financing activities		(2,050)		170,696

Net cash used in financing activities						Net cash used in financing activities	(12,774)		(2,050)
Non-cash effect of foreign translation adjustments	Non-cash effect of foreign translation adjustments	337		1,107		Non-cash effect of foreign translation adjustments	(285)		337
Net increase (decrease) in cash, cash equivalents	Net increase (decrease) in cash, cash equivalents	(4,351)		234,407		Net increase (decrease) in cash, cash equivalents	(10,907)		(4,351)
Cash and cash equivalents, beginning	Cash and cash equivalents, beginning	275,990		255,015		Cash and cash equivalents, beginning	110,695		275,990
Cash and cash equivalents, ending	Cash and cash equivalents, ending	$	271,639	$	489,422	Cash and cash equivalents, ending	$	99,788	$	271,639

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest expense, net	Interest expense, net	$	5,041	$	5,724	Interest expense, net	$	6,991	$	5,041

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


Income taxes	Income taxes	0		2		Income taxes	—		—
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Change in accrued capital expenditures	Change in accrued capital expenditures	$	(9,017)	$	(29,900)	Change in accrued capital expenditures	$	(16,661)	$	(9,017)

Non-cash additions to finance right-of-use assets						Non-cash additions to finance right-of-use assets	1,084		—
Non-cash additions to finance lease liabilities, including current maturities						Non-cash additions to finance lease liabilities, including current maturities	(852)		—
Non-cash additions to operating right-of-use assets						Non-cash additions to operating right-of-use assets	1,117		822
Non-cash additions to operating lease liabilities, including current maturities						Non-cash additions to operating lease liabilities, including current maturities	$	(1,089)	$	(512)

Non-cash additions to operating right-of-use assets		822		1,970
Non-cash additions to operating lease liabilities, including current maturities		(512)		(1,970)

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(1) Basis of Presentation and Nature of Operations

The accompanying unaudited condensed consolidated financial statements were prepared using United States Generally Accepted Accounting Principles ("GAAP") and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the Securities and Exchange Commission (the "SEC") on February ~~24, 2021.~~23, 2022.

The Company’s accounting policies are in accordance with GAAP. The preparation of financial statements in conformity with these accounting principles requires the Company to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (2) the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from the Company’s estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment and intangible assets; ~~allowances for doubtful accounts;~~ inventory reserves; acquisition accounting; contingent liabilities; and the valuation of property and equipment, intangible assets, equity issued as consideration in an acquisition, income taxes, stock-based incentive plan awards and derivatives.

Management believes the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company's financial position as of March 31, ~~2021~~2022 and the results of its operations and cash flows for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. Such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated.

On ~~October~~August 31, ~~2019,~~2021, the Company completed its ~~merger~~acquisition (the ~~“C&J Merger”~~“Alamo Acquisition”) ~~with C&J Energy Services, Inc. (“C&J”)~~of Alamo Pressure Pumping, LLC and ~~changed~~ its ~~name to "NexTier Oilfield Solutions Inc."~~wholly owned subsidiaries ("Alamo"). Merger and integration related costs were recognized separately from the acquisition of assets and assumptions of liabilities in the ~~C&J Merger.~~Alamo Acquisition. Merger costs consist of legal and professional fees and pre-merger notification fees. Integration costs consist of expenses incurred to integrate ~~C&J’s~~Alamo’s operations, aligning accounting processes and procedures, and integrating its enterprise resource planning system with those of the Company. All of these costs are recorded within merger and integration costs on the Company’s ~~unaudited~~ Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). ~~See~~For additional detailed information regarding the Alamo Acquisition, see Note (3) ~~Mergers and Acquisitions~~Alamo Acquisition ~~in Part I, "Item 8. Financial Statements and Supplementary" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for further information.~~.

~~In addition, on March 9, 2020,~~The consolidated financial statements prior to August 31, 2021 reflect only the historical results of the Company ~~completed~~prior to the ~~divestiture~~completion of ~~its Well Support Services Segment ("WSS Sale"). For more details regarding~~ the ~~WSS Sale, refer~~Alamo Acquisition. The financial statements have been prepared using the acquisition method of accounting under existing U.S. GAAP, which requires that one of the two companies in the Alamo Acquisition be designated as the acquirer for accounting purposes. The Company and Alamo determined that the Company was the accounting acquirer. Accordingly, consideration given by the Company to ~~Note~~ complete the Alamo Acquisition was allocated to the underlying tangible and intangible assets and liabilities acquired based on their estimated fair values as of the date of completion of the Alamo Acquisition, with any excess purchase price allocated to goodwill.

~~(13) Business Segments.~~

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(2) Summary of Significant Accounting Policies

(a) Business Combinations and Asset Acquisitions

Business combinations are accounted for using the acquisition method of accounting in accordance with the Accounting Standards Codification (“ASC”) 805, “Business Combinations”, as amended by Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business.” The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, using discounted cash flows and other applicable valuation techniques. Every reporting period, the Company reassess the value of any contingent consideration assumed as part of a business acquisition. Any acquisition-related costs incurred by the Company are expensed as incurred. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill if the definition of a business is met. Operating results of an acquired business are included in the Company’s results of operations from the date of acquisition.

Asset acquisitions are measured based on their cost to the Company, including transaction costs. Asset acquisition costs, or the consideration transferred by the Company, are assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash the Company paid to the seller, as well as transaction costs incurred. Consideration given in the form of non-monetary assets, liabilities incurred or equity interests issued is measured based on either the cost to the Company or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated relative fair values. Goodwill is not recognized in an asset acquisition.

(b) Revenue Recognition

The majority of the Company’s performance obligations are satisfied over time. The Company has determined this best represents the transfer of value from its services to the customer as performance by the Company helps to enhance a customer controlled asset (e.g., unplugging a well, enabling a well to produce oil or natural gas). Measurement of the satisfaction of the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

performance obligation is measured using the output method, which is typically evidenced by a field ticket. A field ticket includes items such as services performed, consumables used, and man hours incurred to complete the job for the customer. Each field ticket is used to invoice customers. Payment terms for invoices issued are in accordance with a master services agreement with each customer, which typically require payment within 30 to 4560 days of the invoice issuance.

A portion of the Company’s contracts contain variable ~~consideration; however,~~consideration. However, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved. Examples of variable consideration include the number of hours that will be incurred and the amount of consumables (such as chemicals and proppants) that will be used to complete a job.

Remaining Performance Obligations

The Company invoices its customers for the services provided at contractual rates multiplied by the applicable unit of measurement, including volume of consumables used and hours incurred. In accordance with ASC 606, the Company has elected the “Right to Invoice” practical expedient for all contracts, which allows the Company to invoice its customers in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. With this election, the Company is not required to disclose information about the variable consideration related to its remaining performance obligations. The Company has also elected the practical expedient to expense immediately mobilization costs, as the amortization period would always be less than one year. For those contracts with a term of more than one year, the Company had approximately ~~$20.1~~$25.6 million of unsatisfied performance obligations as of March 31, ~~2021,~~2022, which will be recognized as services are performed over the remaining contractual terms.

The Company’s obligations for refunds as well as the warranties and related obligations stated in its contracts with its customers are standard to the industry and are related to the correction of any defectiveness in the execution of its performance obligations.

Contract Balances

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

In line with industry practice, the Company bills its customers for its services in arrears, typically when the stage or well is completed or at month-end. The majority of the Company’s jobs are completed in less than 30 days. Furthermore, it is currently not standard practice for the Company to execute contracts with prepayment features. As of March 31, 2022, the Company’s customer contract liability balance is related to the post close service agreement as a result of the Alamo Acquisition. Payment terms after invoicing are typically 30 to 4560 days.

The Company does not have any significant contract costs to obtain or fulfill contracts with customers; as such, no amounts are recognized on the consolidated balance sheet. Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income (loss)~~Comprehensive Income (Loss) and net cash provided by operating activities in the ~~consolidated statements~~Condensed Consolidated Statements of ~~cash flows.~~Cash Flows.

The following is a description of the Company’s core service lines separated by reportable segments from which the Company generates its revenue. For additional detailed information regarding reportable segments, see Note ~~(13)~~(14) Business Segments.

Revenue from the Company’s Completion Services and Well Construction and Intervention (“WC&I”)~~, and Well Support Services~~ segments are recognized as follows:

Completion Services

The Company provides hydraulic fracturing, wireline and pumpdown services pursuant to contractual arrangements, such as term contracts and pricing agreements. In late 2020, the Company began evolving its completion service offerings to develop an integrated natural gas treatment and delivery solution. In 2021, the Company launched its new Power Solutions business, which focuses on gas sourcing, compression, transport, decompression, treatment and related services for our fracturing operations. Revenue from these services are earned as services are rendered, which is generally on a per stage or fixed monthly rate. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied over time, the amount to which the Company has the right to invoice has been determined and collectability of amounts subject to invoice is probable. Contract fulfillment costs, such as mobilization costs and shipping and handling costs, are expensed as incurred and are recorded in cost of services in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income (loss)~~Comprehensive Income (Loss). To the extent fulfillment costs are considered separate performance obligations that are billable to the customer, the amounts billed are recorded as revenue in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income (loss)~~Comprehensive Income (Loss).

Once a stage has been completed or products and services have been provided, a field ticket is created that includes charges for the service performed and the chemicals, proppant, and ~~proppant~~compressed natural gas consumed during the course of the service. The field ticket may also include charges for the mobilization of the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

equipment to the location, any additional equipment used on the job and other miscellaneous items. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.

Well Construction and Intervention

The Company provides cementing services pursuant to contractual arrangements, such as term contracts, or on a spot market basis. Revenue is recognized upon the completion of each performance obligation, which for cementing services, represents the portion of the well cemented: surface casing, intermediate casing or production liner. The performance obligations are satisfied over time. Jobs for these services are typically short term in nature, with most jobs completed in a day. Once the well has been cemented, a field ticket is created that includes charges for the services performed and the consumables used during the course of service. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.

The Company provides a range of coiled tubing services primarily used for fracturing plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue is recognized upon completion of each day’s work based upon a completed field ticket. The field ticket includes charges for the services performed and the consumables used during the course of service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates, at times, or pursuant to pricing agreements.

~~Historical Segment: Well Support Services Segment~~

~~On March 9, 2020, the Company completed the divestiture of its Well Support Services Segment. For additional information, see Note~~ ~~(13) Business Segments.~~ Through its rig services line, the Company had provided workover and well servicing rigs that were primarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plug and abandonment operations. These services were provided on an hourly basis at prices that approximate spot market rates. A field ticket was generated and revenue is recognized upon the earliest of the completion of a job or at the end of each day. A rig services job can last anywhere from a few hours to multiple days depending on the type of work being performed. The field ticket includes the base hourly rate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate. The field ticket may also include charges for the mobilization and set-up of equipment.

Through its fluids management service line, the Company used to provide storage, transportation and disposal services for fluids used in the drilling, completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour, or per load basis, or on the basis of quantities sold or disposed. Revenue is recognized upon the completion of each job or load, or delivered product, based on a completed field ticket.

Through its other special well site service line, the Company used to provide fishing, contract labor and tool rental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis of rental days per month. Revenue is recognized based on a field ticket issued upon the completion of each job or on a monthly billing for rental services provided.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Disaggregation of Revenue

Revenue activities during the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended March 31, 2021								Three Months Ended March 31, 2022
		(Thousands of Dollars)								(Thousands of Dollars)
		Completion Services		WC&I		Well Support Services		Total				Completion Services		WC&I		Total
Geography	Geography										Geography
Northeast	Northeast	$	50,108	$	5,806	$	0	$	55,914		Northeast	$	89,558	$	5,510	$	95,068
Central	Central	34,900		0		0		34,900			Central	113,096		—		113,096
West Texas	West Texas	106,666		12,478		0		119,144			West Texas	380,147		26,078		406,225
West	West	4,888		1,137		0		6,025			West	18,624		835		19,459
International	International	12,419		0		0		12,419			International	1,195		—		1,195
		$	208,981	$	19,421	$	0	$	228,402			$	602,620	$	32,423	$	635,043


		Three Months Ended March 31, 2020								Three Months Ended March 31, 2021
		(Thousands of Dollars)								(Thousands of Dollars)
		Completion Services		WC&I		Well Support Services		Total				Completion Services		WC&I		Total
Geography	Geography										Geography
Northeast	Northeast	$	77,425	$	7,630	$	0	$	85,055		Northeast	$	50,108	$	5,806	$	55,914
Central	Central	76,831		6,900		0		83,731			Central	34,900		—		34,900
West Texas	West Texas	264,499		33,632		8,373		306,504			West Texas	106,666		12,478		119,144
West	West	83,687		8,663		49,556		141,906			West	4,888		1,137		6,025

International	International	10,429		0		0		10,429			International	12,419		—		12,419
		$	512,871	$	56,825	$	57,929	$	627,625			$	208,981	$	19,421	$	228,402

Property and equipment, inclusive of equipment under finance lease, are generally stated at cost.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 13 months to 40 years. Management determines the estimate of the useful lives and salvage values of property and equipment on expected utilization, technological change and effectiveness of its maintenance programs. Depreciation methods, useful lives and residual values are reviewed annually or as needed based on activities related to specific assets. When components of an item of property and equipment are identifiable and have different useful lives, they are accounted for separately as major components of property and equipment.

Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized net within operating costs and expenses in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income (loss)~~Comprehensive Income (Loss).

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Major classifications of property and equipment and their respective useful lives are as follows:


Land			Indefinite life
Building and leasehold improvements			13 months – 40 years
Machinery and equipment			13 months – 1025 years
Office furniture, fixtures and equipment			3 years – 5 years

Leasehold improvements are assigned a useful life equal to the term of the related ~~lease.~~lease, or its expected period of use. Depreciation methods, useful lives and residual values are reviewed annually.

~~Leasehold improvements are assigned a useful life equal to the term of the related lease, or its expected period of use.~~

In the first quarter of 2021, the Company reassessed the estimated useful lives of select machinery and equipment, concluding that due to a decrease in service intensity for select machinery and equipment driven by operational parameters required to maximize natural gas substitution and longer major component lives attributable to equipment health monitoring and predictive maintenance from our proprietary digital NexHub platform and data science efforts, the useful lives of select machinery and equipment should be increased by 1-2 years depending on the specific asset class. In accordance with ASC 250, “Accounting Changes and Error Corrections,” the change in the estimated useful lives of the Company’s property and equipment was accounted for as a change in accounting estimate, on a prospective basis, effective January 1, 2021. This change resulted in a decrease in depreciation expense and decrease in net loss during the quarter ended March 31, 2021 of $12.1 million in the consolidated statement of operations and comprehensive income (loss).

Amortization on definite-lived intangible assets is calculated on the straight-line method over the estimated useful lives of the assets, which range from 2 to 15 years. The majority of the Company's definite lived intangible assets include customer contracts and technology.

Property and equipment and definite-lived intangible assets (“Long-lived Assets”) are evaluated on a quarterly basis to identify events or changes in circumstances, referred to as triggering events that indicate the carrying value of ~~certain property and equipment~~a Long-lived Asset may not be recoverable or upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of a Long-lived Asset is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. The Company's asset groups consist of fracturing services, wireline, cementing, and coiled tubing, except for an entity level asset group for Long-lived Assets that do not have identifiable independent cash flows. Estimates of undiscounted future net cash flows of assets groups are projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows take into account known market conditions as of the assessment date, and management’s anticipated business outlook. A terminal period is used to reflect an estimate of stable, perpetual growth. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the asset groups, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related asset groups. The impairment loss is then allocated across the asset group's major classifications.

During the first quarter of 2020, management determined the reductions in commodity prices driven by the potential impact of the novel COVID-19 pandemic and global supply and demand dynamics coupled with the sustained decrease in the Company’s share price were deemed triggering events. As a result of the triggering event, recoverability testing was performed and it was determined that the estimated undiscounted future net cash flow for all asset groups was greater than the carrying amount of their related assets and no impairment loss was recorded.

The Company did 0tnot recognize any impairment charges related to the Company’s long-lived assets for the three months ended March 31, ~~2021~~2022 or ~~2020.~~2021.

(d) Leases

In accordance with ASU 2016-02, the Company considers any contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration to be a lease. The Company determines whether the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

contract into which it has entered is a lease at the lease commencement date. Rental arrangements with term lengths of one month or less are expensed as incurred, but not recognized as qualifying leases.

For lessees, leases can be classified as finance leases or operating leases, while for lessors, leases can be classified as sales-type leases, direct financing leases or operating leases. As lessee, all leases, with the exception of short-term leases, are capitalized on the balance sheet by recording a lease liability, which represents the Company's obligation to make lease payments arising from the lease and a right-of-use ("ROU") asset, which represents the Company's right to use the underlying asset being leased.

For leases in which the Company is the lessee, the Company uses a collateralized incremental borrowing rate to calculate the lease liability, as for most leases, the implicit rate in the lease is unknown. The collateralized incremental borrowing rate is based on a yield curve over various term lengths that approximates the borrowing rate the Company would receive if it collateralized its lease arrangements with all of its assets. For leases in which the Company is the lessor, the Company uses the rate implicit in the lease.

For finance leases, the Company amortizes the ~~right-of-use~~ROU asset on a straight-line basis over the earlier of the useful life of the ~~right-of-use~~ROU asset or the end of the lease term and records this amortization in ~~rent~~depreciation and amortization expense on the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss.~~Comprehensive Income (Loss). For finance leases where the Company has determined it is reasonably certain to exercise a purchase option to acquire the underlying asset, the lessee amortizes the ROU asset to the later of the end of the underlying asset’s useful life or lease term and records this amortization in depreciation and amortization expense on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Company adjusts the lease liability to

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The incurred interest expense is recorded in interest expense on the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss.~~Comprehensive Income (Loss). For operating leases, the Company recognizes one single lease cost, comprised of the lease payments and amortization of any associated initial direct costs, within rent expense on the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss.~~Comprehensive Income (Loss). Variable lease costs not included in the determination of the lease liability at the commencement of a lease are recognized in the period when the specified target that triggers the variable lease payments becomes probable.

In accordance with ASC 842, the Company has made the following elections for its lease accounting:

•all short-term leases with term lengths of 12 months or less will not be capitalized; the underlying class of assets to which the Company has applied this expedient is primarily its apartment leases;

•for non-revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one lease component and accounted for under ASC 842; and

•for revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one component and accounted for under ASC 606.

(e) Derivative Instruments and Hedging Activities

The Company utilizes interest rate derivatives to manage interest rate risk associated with its floating-rate borrowings. The Company recognizes all derivative instruments as either assets or liabilities on the consolidated balance sheets at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income (loss) until the hedged item affects earnings.

The Company only enters into derivative contracts that it intends to designate as hedges for the variability of cash flows to be received or paid related to a recognized asset or liability (i.e. cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

The Company discontinues hedge accounting prospectively, when it determines that the derivative is no longer highly effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the originally forecasted transaction is no longer probable of occurring or if management decides to remove the designation of the cash flow hedge. The net derivative instrument gain or loss related to a discontinued cash flow hedge shall continue to be reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the originally hedged transaction affects earnings, unless it is probable that the forecasted transaction will not occur by the end of the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

originally specified time period. When it is probable that the originally forecasted transaction will not occur by the end of the originally specified time period, the Company recognizes immediately, in earnings, any gains and losses related to the hedging relationship that were recognized in accumulated other comprehensive income (loss). In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the consolidated balance sheets and recognizes any subsequent changes in the derivative’s fair value in earnings.

In addition, we evaluate the terms of our operating agreements and other contracts, if any, to determine whether they contain embedded components that are required to be bifurcated and accounted for separately as derivative financial instruments. For additional detailed information regarding derivatives, see Note (7) Derivatives~~Derivatives.~~.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(f) Stock-based compensation

The Company recognizes compensation expense for restricted stock awards ("RSAs"), restricted stock units to be settled in common stock (“RSUs”), performance-based RSU award (“PSUs”), ~~and~~ non-qualified stock options (“stock options”), and performance unit awards (“PUs”) based on the fair value of the awards at the date of grant. The fair value of ~~restricted stock awards~~RSAs and RSUs is determined based on the number of shares or RSUs granted and the closing price of the Company’s common stock on the date of grant. The fair value of stock options is determined by applying the Black-Scholes model to the grant-date market value of the underlying common shares of the Company. The fair value of PSUs and PUs with market conditions isare determined using a Monte Carlo simulation method. The Company has elected to recognize forfeiture credits for these awards as they are incurred, as this method best reflects actual stock-based compensation expense.

Compensation expense from time-based ~~restricted stock awards,~~RSAs, RSUs, PSUs, PUs, and stock options is amortized on a straight-line basis over the requisite service period, which is generally the vesting period.

The PUs are settled in cash and therefore are recorded as liability-classified awards. The PUs are remeasured at fair value every reporting period and the Company recognizes compensation cost for the changes in fair value pro-rated for the portion of the requisite service period rendered.

Tax deductions on the stock-based compensation awards are not realized until the awards are vested or exercised. The Company recognizes deferred tax assets for stock-based compensation awards that will result in future deductions on its income tax returns, based on the amount of tax deduction for stock-based compensation recognized at the statutory tax rate in the jurisdiction in which the Company will receive a tax deduction. If the tax deduction for a stock-based award is greater than the cumulative GAAP compensation expense for that award upon realization of a tax deduction, an excess tax benefit will be recognized and recorded as a favorable impact on the effective tax rate. If the tax deduction for an award is less than the cumulative GAAP compensation expense for that award upon realization of the tax deduction, a tax shortfall will be recognized and recorded as an unfavorable impact on the effective tax rate. Any excess tax benefits or shortfalls will be recorded as discrete, adjustments in the period in which they occur. The cash flows resulting from any excess tax benefit will be classified as financing cash flows in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows.~~Cash Flows.

The Company provides its employees with the option to settle income tax obligations arising from the vesting of their restricted or deferred stock-based compensation awards by withholding shares equal to such income tax obligations. Shares acquired from employees in connection with the settlement of the employees’ income tax obligations are accounted for as treasury shares that are subsequently retired. ~~Restricted stock awards,~~RSAs, RSUs, and PSUs are not considered issued and outstanding for purposes of earnings per share calculations until vested.

For additional information, see Note (9) Stock-Based ~~Compensation.~~Compensation.

(3) ~~Goodwill~~Alamo Acquisition

~~Goodwill is allocated across 3 reporting units: Completion Services, Well Construction and Intervention Services and Well Support Services reporting units. At the reporting unit level,~~On August 31, 2021 (the “Alamo Acquisition Date”), the Company ~~tests goodwill for impairment on an annual basis~~completed the Alamo Acquisition in accordance with the terms of the Purchase Agreement, dated as of ~~October 31~~August 4, 2021 (the “Purchase Agreement”), by and among the Company, NexTier Completion Solutions Inc., Alamo Frac Holdings, LLC, Alamo and the “owner group” identified therein. The Company acquired 100% of ~~each year, or when events or changes~~Alamo.

The Alamo Acquisition was completed for cash consideration of $100.0 million, equity consideration of 26 million shares of the Company’s common stock valued at $82.3 million, post-closing services valued at $30 million, an estimated $15.9 million of contingent consideration, $7.4 million of non-contingent consideration, and a net working capital settlement of $0.5 million that was finalized in ~~circumstances, referred~~the fourth quarter of 2021 and was paid to ~~as triggering events, indicate~~ the ~~carrying value of goodwill may not be recoverable and that a potential impairment exists.~~

~~Judgment is used~~Company in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes, and other external events may require more frequent assessments.

~~During~~ the first quarter of ~~2020,~~2022. The contingent consideration includes a ~~significant decline~~Tier II upgrade payment and earnout payments, which are contingent upon the achievement of certain performance targets, as described in the ~~Company's share~~Purchase Agreement.

The Company accounted for the Alamo Acquisition using the acquisition method of accounting. The aggregate purchase price ~~which resulted~~noted above was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition. The measurements of some assets acquired and liabilities assumed, such as intangible assets and the earnout were based on inputs that are not observable in the ~~Company's~~ market ~~capitalization dropping below the book~~and thus represent Level 3 inputs. The fair value of ~~equity, as well as reductions in commodity prices driven by~~acquired property and equipment were based on both available market data and a cost approach.

The following table summarizes the ~~potential impact~~fair value of the ~~COVID-19 pandemic~~consideration transferred in the Alamo Acquisition and ~~global supply~~the allocation of the purchase price to the fair values of the assets acquired and ~~demand dynamics were deemed triggering events that led to a test for goodwill impairment. The impairment testing methodologies for~~liabilities assumed at the ~~first quarter 2020 are discussed below.~~Alamo Acquisition Date:

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

~~Income approach~~


Total Purchase Consideration (Thousands of Dollars)	Preliminary Purchase Price Allocation		Adjustments		Final Purchase Price Allocation
Cash consideration(1)	$	100,000	$	—	$	100,000
Equity consideration	82,323		—		82,323
Post close services	30,000		—		30,000
Contingent consideration	15,944		—		15,944
Non contingent consideration	7,370		—		7,370
Net working capital adjustment	—		(482)		(482)
Total purchase consideration	$	235,637	$	(482)	$	235,155

Cash	$	7,419	$	—	$	7,419
Trade and accounts receivable	50,619		—		50,619
Inventories	1,726		—		1,726
Prepaid and other current assets	19,654		—		19,654
Assets held for sale	3,282		—		3,282
Property and equipment	114,705		(816)		113,889
Intangible assets	27,113		—		27,113
Finance lease right-of-use assets	35,813		(468)		35,345
Other noncurrent assets	1,676		—		1,676
Total identifiable assets acquired	262,007		(1,284)		260,723
Accounts payable	39,101		—		39,101
Accrued expenses	38,000		—		38,000
Current maturities of long-term finance lease liabilities	10,125		—		10,125
Long-term finance lease liabilities	25,688		(468)		25,220
Non-current liabilities	971		—		971
Total liabilities assumed	113,885		(468)		113,417
Goodwill	87,515		334		87,849
Total purchase consideration	$	235,637	$	(482)	$	235,155

(1)Includes $32.3 million of payments for indebtedness on behalf of Alamo.

The ~~income approach impairment testing methodology~~following combined pro forma information assumes the Alamo Acquisition occurred on January 1, 2020. The pro forma information presented below is ~~based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the Completions~~for illustrative purposes only and ~~Well Construction and Intervention reporting units, the~~does not reflect future cash flows were projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows took into account known market conditions as ofevents that occurred after March 31, ~~2020, and management’s anticipated business outlook. A terminal period was used to reflect an estimate~~2021 or any operating efficiencies or inefficiencies that resulted from the Alamo Acquisition. The information is not necessarily indicative of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5%. The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 19.9% forresults that would have been achieved had the Completions reporting unit and 22.4% for the Well Construction and Intervention reporting unit. These assumptions were derived from both observable and unobservable inputs and combined reflect management’s judgments and assumptions.

~~Market approach~~

T~~he market approach impairment testing methodology is based upon the guideline public~~ company method and the guideline transaction method. The application of the guideline public company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparable competitor data, operational multiples were derived for the reporting units weighted based on management’s assessment of reliability. The selected market multiples for the guideline public company method were forward-looking enterprise value to revenue and enterprise value to EBITDA multiples, with multiples ranging from 0.5x to 0.6x for revenues and from 3.3x to 6.2x for EBITDA. The application of the guideline transaction method was based upon valuation multiples derived from actual control transactions for comparable companies. Based on this, valuation multiples are derived from historical data of selected transactions, then evaluated and adjusted, if necessary, based on the strengths and weaknesses of the subject reporting unit relative to each acquired guideline company. The selected market multiples for the guideline transaction method were enterprise value to revenue and enterprise value to book value of invested capital, with multiples ranging from 0.7x to 2.1x for revenues and from 0.6x to 1.3x for book value of invested capital.

The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce the estimated fair value of the reporting unit below its carrying value. Earnings estimates were derived from unobservable inputs that require significant estimates, judgments and assumptions as described in the income approach.

~~Reconciliation of value and goodwill impairment conclusion~~

The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the market approach. The concluded fair value for both reporting units consisted of a weighted average, with a 40.0% weighted under the income approach and 60.0% weight under the market approach. Market data in support of the implied control premium were used in this reconciliation to corroborate the estimated reporting unit fair values with the Company's overall market-indicated value. The results of the Step 1 impairment testing for goodwill resulted in the Company recognizing an impairment expense of $32.6 millioncontrolled Alamo during the ~~first quarter of 2020, consisting of $32.2 million~~period presented. Pro forma adjustments related to the ~~Completions Services reporting unit and $0.4 million representing the entire balance~~elimination of ~~goodwill~~historical interest expense for ~~the Well Construction and Intervention reporting unit.~~

~~During the first quarter of 2021, the Company assessed and determined there were no triggering events.~~

~~(4) Inventories, net~~

~~Inventories, net, consisted~~debt paid off as part of the ~~following as of March 31, 2021 and December 31, 2020:~~

(Thousands of Dollars)
March 31,
2021 December 31,
2020
Sand, including freight $ 6,054 $ 5,096
Chemicals and consumables 2,889 2,993
Materials and supplies 22,678 21,979
Total inventory, net $ 31,621 $ 30,068

~~Inventories are reported net of obsolescence reserves of $4.5~~Alamo Acquisition were $1.3 million ~~and $4.4 million as of March 31, 2021 and December 31, 2020, respectively. The Company recognized $0.1 million and $1.2 million of obsolescence expense during the three months~~quarter ended March 31, ~~2021 and 2020, respectively.~~2021.


	(unaudited, amounts in Thousands of Dollars)
	Three Months Ended March 31, 2021
Revenue	$	295,897
Net loss	(47,739)

Net loss per share (basic)	0.20
Net loss per share (diluted)	$	0.20

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(4) Inventories, net

Inventories, net, consisted of the following as of March 31, 2022 and December 31, 2021:


	(Thousands of Dollars)
	March 31, 2022		December 31, 2021
Sand, including freight	$	19,082	$	9,674
Chemicals and consumables	4,586		4,204
Materials and supplies	27,280		24,216

Total inventory, net	$	50,948	$	38,094

Inventories are reported net of obsolescence reserves of $6.1 million and $6.3 million as of March 31, 2022 and December 31, 2021, respectively. The Company reduced the reserves by $0.2 million during the three months ended March 31, 2022 and recognized $0.1 million of obsolescence expense during the three months ended March 31, 2021.

(5) Long-Term Debt

Long-term debt at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:


		(Thousands of Dollars)					(Thousands of Dollars)
		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
2018 Term Loan Facility	2018 Term Loan Facility	$	340,375	$	341,250	2018 Term Loan Facility	$	336,875	$	337,750

2021 Equipment Loan						2021 Equipment Loan	38,681		41,321
Other long-term debt						Other long-term debt	469		533
Less: Unamortized debt discount and debt issuance costs	Less: Unamortized debt discount and debt issuance costs	(5,286)		(5,710)		Less: Unamortized debt discount and debt issuance costs	(4,389)		(4,719)
Total debt, net of unamortized debt discount and debt issuance costs	Total debt, net of unamortized debt discount and debt issuance costs	335,089		335,540		Total debt, net of unamortized debt discount and debt issuance costs	371,636		374,885
Less: Current portion	Less: Current portion	(2,310)		(2,252)		Less: Current portion	(13,602)		(13,384)
Long-term debt, net of unamortized debt discount and debt issuance costs	Long-term debt, net of unamortized debt discount and debt issuance costs	$	332,779	$	333,288	Long-term debt, net of unamortized debt discount and debt issuance costs	$	358,034	$	361,501

Below is a summary of the Company’s credit facilities outstanding as of March 31, ~~2021:~~2022:


		(Thousands of Dollars)								(Thousands of Dollars)
		2019 ABL Facility		2018 Term Loan Facility			2021 Equipment Loan			2019 ABL Facility		2018 Term Loan Facility
Original facility size	Original facility size	$	450,000	$	350,000	Original facility size	$	46,500		$	450,000	$	350,000
Outstanding balance	Outstanding balance	$	0	$	340,375	Outstanding balance	$	38,681		$	—	$	336,875
Letters of credit issued	Letters of credit issued	$	28,490	$	0	Letters of credit issued	$	—		$	23,275	$	—
Available borrowing base commitment	Available borrowing base commitment	$	81,436	n/a		Available borrowing base commitment	n/a			$	249,103	n/a
Interest Rate(1)	Interest Rate(1)	LIBOR or base rate plus applicable margin		LIBOR or base rate plus applicable margin		Interest Rate(1)	5.25		%	LIBOR or base rate plus applicable margin		LIBOR or base rate plus applicable margin
Maturity Date	Maturity Date	October 31, 2024		May 25, 2025		Maturity Date	June 1, 2025			October 31, 2024		May 25, 2025

(1) London Interbank Offer Rate (“LIBOR”) is subject to a 1.00% ~~floor~~floor.

Maturities of the 2018 Term Loan Facility and the 2021 Equipment Loan (each as defined herein) for the next five years are presented below:

(Thousands of Dollars)
Year-end December 31,
2021 $ 2,625
2022 3,500
2023 3,500
2024 3,500
2025 327,250
$ 340,375

~~ABL Revolving Credit Facility~~

On October 31, 2019, the Company entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (“2019 ABL Facility”), modifying the Company’s pre-existing asset-based revolving credit facility (“2017 ABL Facility”). Deferred charges associated with the 2019 ABL Facility were capitalized and totaled $1.2 million. In connection with the modification of the 2017 ABL Facility, the Company wrote off $0.5 million of deferred financing costs. The remaining deferred financing costs related to the 2017 ABL Facility will be amortized over the life of the 2019 ABL Facility. Unamortized deferred charges associated with the 2019 and 2017 ABL Facilities were $2.9 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively, and are recorded in other noncurrent assets on the consolidated balance sheets. During the first quarter of 2020, the Company provided notice to the lenders to borrow a total of $175 million under the 2019 ABL Facility. The interest rates for the $150.0 million LIBOR borrowing and $25.0 million Base Rate borrowing were 2.125% and 3.75%, respectively. During the second quarter of 2020, the Company repaid the $150.0 million LIBOR borrowing and the $25.0 million Base Rate borrowing and did not incur any penalties.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements


(Thousands of Dollars)
Year-end December 31,
2022	$	11,159
2023	15,430
2024	15,790
2025	333,646
2026	—
	$	376,025

For additional information regarding the terms of our credit facilities, see Note (8) Long-Term Debt to the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2021.

(6) Significant Risks and Uncertainties

~~Subsequent to the sale of the Well Support Services segment, the~~The Company operates in 2 reportable segments: Completion Services and ~~Well Construction and Intervention~~WC&I, with significant concentration in the Completion Services segment. During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, sales to Completion Services customers represented 95% and91% ~~and 82%~~ of the Company's consolidated revenue, respectively.

The Company depends on its customers' willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas onshore in the U.S. This activity is driven by many factors, including current and expected crude oil and natural gas prices. The U.S. energy industry experienced a significant downturn in the second half of 2014 through early 2016, driven primarily by global oversupply and a decline in commodity prices. From early 2016 through late 2018, the U.S. generally experienced some recovery in commodity prices and drilling and completion activity. Over this time frame, the U.S. active rig count increased from a trough of 404 rigs in May 2016 to a peak of 1,083 rigs in December 2018, driving significant demand for the Company's completion services.

In late 2019 and early 2020, and in response to the oversupply of hydraulic fracturing equipment, an increasing number of horsepower retirements were announced, removing a significant base of equipment from the market. Despite some of these announcements, the oversupply of hydraulic fracturing equipment persisted, resulting in a continuation of highly competitive market conditions into 2020.

In late first quarter of 2020, the industry faced sudden and unprecedented circumstances, including major shocks to both supply and demand. COVID-19 ~~has~~ resulted in significant demand destruction for oil products, driven by a significant slowdown in economic activity throughout the U.S. and abroad.

This resulted in a rapid and significant decline in crude oil prices and an increasingly utilized storage network, limiting distribution outlets and optionality for production and further exacerbating price declines. U.S. exploration and production companies responded with drastic reductions in budgets and outright completion stoppages. ~~As a result, from~~From the ~~first~~end of the fourth quarter of 2019 through mid-August 2020, to the ~~first quarter of 2021, the average~~ U.S. active rig count decreased by ~~approximately 50%~~70%, from 805 to ~~393 rigs.~~244 rigs before recovering to 351 rigs by the end of 2020. In 2021, the U.S. active rig count recovery continued, increasing 67% from 351 rigs at the end of 2020 to 586 rigs by the end of 2021.

This backdrop ~~has~~ drastically impacted the demand for U.S. completions services and resulted in increased ~~uncertainty. U.S. rig count activity as of~~demand for our services throughout 2021 relative to 2020. By the end of 2021, we started to see signs of improving supply/demand dynamics for U.S. onshore completion services, which resulted in improved pricing and margins relative to earlier in 2021. These improvements accelerated early in 2022. In the first quarter of ~~2021 has~~2022, the Company continued to see disciplined increases in oil supply from the Organization of Petroleum Exporting Countries plus ("OPEC+") and U.S. shale operators. The Russian invasion of Ukraine increased ~~approximately 71% versus~~uncertainty of global supply given the ~~trough in U.S. rig count activity realized in August 2020. Completions activity has improved relative to the trough in activity experienced around late May~~supply of crude oil and ~~early June 2020, supply and demand dynamics are improving, and the market remains highly competitive.~~ natural gas that is exported from Russia. The magnitude, cadence, and ~~lasting power~~resilience of activity and margin improvement is uncertain and dependent on a range of factors, including supply chain disruptions, inflationary pressures, COVID-19 demand ~~resolution.~~resolution, and the ongoing impact of geopolitical tensions on the global economy.

Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. ~~The Company had one significant customer during both~~For the three months endedMarch 31, ~~2021~~2022, revenue fromone customer individually represented more than 10% of the Company's consolidated revenue. This customer was in our completions services segment and ~~three months ended March 31, 2020.~~represented11% or $68.6 million of our consolidated revenue. For the three months ended March 31, 2021, ~~and 2020,~~ revenue from ~~the Company's significant customers accounted for~~one customer individually represented more 10% ~~and 17%~~or more of the Company's consolidated ~~revenue, respectively.~~revenue. This customer represented 10% or $23.2 million of our consolidated revenue.

For the three months ended March 31, 2022, purchases from the Company's top supplier represented approximately 5% of the Company's overall purchases. For the three months ended March 31, 2021, purchases from the Company's top supplier represented approximately 7% ~~of the Company's overall purchases. For the three months ended March 31, 2020, purchases from the Company's top supplier represented approximately 5%~~ of the Company's overall purchases.

(7) Derivatives

The Company uses interest-rate-related derivative instruments to manage its variability of cash flows associated with changes in interest rates on its variable-rate debt.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

On March 9, 2020, the Company sold its Well Support Services ("WSS") segment to Basic Energy Services, Inc. (“Basic”) for $93.7 million of total proceeds, including ~~$59.4 million in~~ cash ~~before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close,~~ and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, ~~(“WSS Notes”)~~ previously issued by Basic. ~~On July 29, 2020, the Company agreed to use the escrowed amount in the final settlement of the working capital reconciliation.~~ Under the terms of the agreement, ~~the WSS Notes~~(the "WSS Notes") were accompanied by a make-whole guarantee at par value, which guaranteed the payment of $34.4 million to ~~NexTier~~the Company after the WSS Notes were held to the one-year anniversary of March 9, 2021. The cash equivalent make-whole was issued under a fund guarantee by Ascribe III Investments LLC ("Ascribe"), a private equity investment firm with approximately $1.0 billion in assets under management. In the event of a Basic restructuring or a credit rating downgrade in conjunction with a change in control prior to the ~~one-year~~one year anniversary, the ~~make-~~

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~whole~~make-whole guarantee ~~accelerates~~would accelerate the WSS Notes to par value of $34.4 million. ~~NexTier~~The Company was entitled to semi-annual interest payments on the WSS Notes based on the 10.75% annual coupon throughout the holding period. The Company identified the make-whole guarantee as an embedded derivative and bifurcated the valuation of the WSS Note and the make-whole guarantee. The Company elected the fair value option for the WSS Notes at the inception of the transaction. The fair value ~~on the date of the transaction for the make-whole derivative and WSS Notes was $12.2 million and $22.2 million, respectively, and resulted in a gain on divestiture of $8.7 million. The fair value~~ of the WSS Notes and the make-whole guarantee ~~are measured~~were remeasured at fair value at the end of each reporting period. ~~Gains and losses recognized in relation to these instruments are recognized in net income. The fair value of the WSS Notes and make-whole guarantee were recorded in Other Current Assets. See Note~~ ~~(13)~~ ~~Business Segments for further discussion.~~

On March 31, 2021, the Company received a $34.4 million cash payment from Ascribe in full settlement of the WSS Notes and the make-whole guarantee. At the time of the cash payment, the WSS Notes and make-whole guarantee had a fair value of $33.6 million, resulting in a realized gain on settlement of $0.8 ~~million~~million. This gain is recorded ~~in Other Income.~~within other income (expense) on the Consolidated Statements of Operations and Comprehensive Income (Loss).

On May 25, 2018, the Company and certain subsidiaries of the Company as guarantors, entered into a term loan facility (the "2018 Term Loan Facility") ~~with each lender from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent.~~. The 2018 Term Loan Facility ~~has~~had an initial aggregate principal amount of $350.0 million and proceeds were used to repay the Company's pre-existing 2017 term loan facility. The 2018 Term Loan Facility has a variable interest rate based on ~~the London Interbank Offer Rate ("LIBOR"),~~LIBOR, subject to a 1.0% floor. In June 2018, the Company executed a new off-market interest rate swap effective through March 31, 2025 to hedge 50% of its expected LIBOR exposure matching the swap to the 1-month LIBOR, 1% floor, of the 2018 Term Loan Facility, and terminated the pre-existing interest rate swaps. ~~After completing all appropriate accounting treatment, including the $3.5 million of deferred gains in accumulated other comprehensive loss for the pre-existing interest rate, the~~The new interest rate swap was designated in a new cash flow hedge relationship.

The following tables present the fair value of the Company's derivative ~~instruments~~instrument on a gross and net basis as of the periods shown below:


		(Thousands of Dollars)											(Thousands of Dollars)
		Derivatives designated as hedging instruments		Derivatives not designated as hedging instruments		Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet(2)			Derivative designated as hedging instruments		Derivative not designated as hedging instruments		Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet(2)
As of March 31, 2021:
As of March 31, 2022:												As of March 31, 2022:
Other noncurrent asset												Other noncurrent asset	$	1,111	$	—	$	1,111	$	—	$	1,111
Other current liability												Other current liability	(1,323)		—		(1,323)		—		(1,323)

As of December 31, 2021:												As of December 31, 2021:

Other current liability	Other current liability	$	(2,856)	$	0	$	(2,856)	$	0	$	(2,856)	Other current liability	(2,787)		—		(2,787)		—		(2,787)
Other noncurrent liability	Other noncurrent liability	(6,208)		0		(6,208)		0		(6,208)		Other noncurrent liability	$	(3,747)	$	—	$	(3,747)	$	—	$	(3,747)
As of December 31, 2020:

Other current asset		$	0	$	27,243	$	27,243	$	0	$	27,243
Other current liability		(2,861)		0		(2,861)		0		(2,861)
Other noncurrent liability		(8,260)		0		(8,260)		0		(8,260)

(1) Agreements are in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

(2) There are no amounts subject to an enforceable master netting arrangement that are not netted in these amounts. There are no amounts of related financial collateral received or pledged.

The following table presents gains and losses for the Company's interest rate ~~derivatives~~derivative designated as cash flow hedges (in thousands of dollars):

Three Months Ended
March 31,
2021 2020 Location
Amount of gain (loss) recognized in total other comprehensive loss on derivative $ 1,346 $ (2,961) OCI
Amount of loss reclassified from accumulated other comprehensive loss into earnings (666) (341) Interest Expense


	Three Months Ended March 31,
	2022		2021		Location
Amount of gain recognized in total other comprehensive income (loss) on derivative	$	5,612	$	1,346	OCI
Amount of loss reclassified from accumulated other comprehensive income (loss) into earnings	$	(687)	$	(666)	Interest Expense

The gain (loss) recognized in other comprehensive ~~loss~~income (loss) for the derivative instrument is presented within hedging activities in the ~~unaudited condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss.~~Comprehensive Income (Loss).

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

There were 0no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness. Based on recorded values as of March 31, ~~2021, $2.7~~2022, $1.7 million of net losses will be reclassified from accumulated other comprehensive ~~loss~~income (loss) into earnings within the next 12 months.

The Company realized a gain on the final cash settlement of the WSS Notes and make-whole derivative of $0.8 million for the three months ended March 31, 2021, while recognizing a gain on the change in fair market value of the WSS Notes and make-whole derivative of $0.1 million for the three months ended March 31, 2020. These gains are recorded within other income (expense) on the consolidated statements of operations and comprehensive income (loss).

See Note (8) Fair Value Measurements and Financial Information for discussion on fair value measurements related to the Company's derivative instruments.

(8) Fair Value Measurements and Financial Information

The Company discloses the required fair values of financial instruments in its assets and liabilities under the hierarchy guidelines, in accordance with GAAP. As of March 31, ~~2021,~~2022, the Company's financial instruments consisted of cash and cash equivalents, accounts receivable, equity security investments, accounts payable, accrued expenses, derivative instruments, long-term debt and lease obligations. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the carrying values of the Company's financial instruments, included in its ~~condensed consolidated balance sheets,~~Condensed Consolidated Balance Sheets, approximated or equaled their fair values.

Recurring Fair Value Measurement

As of March 31, 2022, and December 31, 2021, the Company ~~has 2~~had 3 financial instruments measured at fair value on a recurring basis which are its interest rate derivative ~~see~~(see Note (7)Derivatives ~~above, and its~~above), the equity security ~~investment.~~investment, and the earnout payments. The equity security investment is composed primarily of common equity shares and warrants in a publicly traded ~~company, acquired at a fair value of $5.3 million. During the three months ended March 31, 2021, the Company recognized an unrealized loss of$4.0 million on its~~company. The equity security investment ~~which~~ is ~~recorded~~presented within other ~~income (expense) on~~current assets, the ~~consolidated statements of operations and comprehensive income (loss).~~

~~As of December 31, 2020, the Company had 4 financial instrument measured on a recurring basis which was its~~ interest rate derivative ~~make-whole derivative, WSS Notes, see Note (7) Derivatives above,~~is presented within other noncurrent assets and ~~equity security investment. The interest rate derivative, make-whole derivative, WSS Notes,~~other current liabilities, and the ~~equity security investment~~earnout payments are presented within other current ~~assets~~liabilities and other non-current liabilities in the ~~condensed~~ consolidated balance sheets.

The fair market value of the ~~financial instruments~~interest rate swap reflected on the ~~condensed~~ consolidated balance sheets as of March 31, ~~2021~~2022 and December 31, ~~2020 were~~2021 was determined using industry-standard models that consider various assumptions, including current market and contractual rates for the underlying ~~instrument,~~instruments, time value, implied volatilities, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace ~~throughout~~through the full term of the instrument and can be supported by observable data.

The following tables present the placement in the fair value hierarchy of assets and liabilities that were measured at fair value on a recurring basis at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands of dollars):


				Fair value measurements at reporting date using									Fair value measurements at reporting date using
		March 31, 2021		Level 1		Level 2		Level 3			March 31, 2022		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Equity security investment	Equity security investment	$	3,892	$	3,892	$	0	$	0	Equity security investment	$	10,426	$	10,426	$	—	$	—
Liabilities:	Liabilities:									Liabilities:

Earnout Payments										Earnout Payments	(18,240)		—		—		(18,240)

Interest rate derivative	Interest rate derivative	$	(9,064)	$	0	$	(9,064)	$	0	Interest rate derivative	$	(212)	$	—	$	(212)	$	—


			Fair value measurements at reporting date using
	December 31, 2021		Level 1		Level 2		Level 3
Assets:
Equity security investment	$	7,743	$	7,743	$	—	$	—
Liabilities:
Earnout payments	(11,795)		—		—		(11,795)
Interest rate derivative	$	(6,534)	$	—	$	(6,534)	$	—

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Fair value measurements at reporting date using
December 31, 2020 Level 1 Level 2 Level 3
Assets:
Make-whole derivative $ 27,243 $ 0 $ 27,243 $ 0
WSS Note 6,322 0 6,322 0
Equity security investment 11,263 11,263 0 0
Liabilities:
Interest rate derivative $ (11,121) $ 0 $ (11,121) $ 0

~~Non-Recurring Fair Value Measurement~~

In the first quarter of 2020, the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics represented triggering events that may indicate that the carryingThe fair value of the ~~Company's indefinite-lived assets~~equity security investment is measured at the end of each reporting period. Gains and ~~long-lived assets may not be recoverable~~losses recognized in relation to the change in fair value of the equity security investment are recognized in other income (expense), net in the condensed consolidated statements of operations and comprehensive income (loss). The Company sold part of its investment, with a book value of $2.1 million during the three months ended March 31, 2022, which resulted in a gain of $0.8 million. Additionally, based on the fair value of the equity security investment as of March 31, ~~2020. During the third quarter of 2020,~~2022, the Company ~~assessed~~recognized an unrealized gain of $4.8 million.

The fair value of the earnout payments are measured at the end of each reporting period. Gains and ~~determined~~losses recognized in relation to the ~~sustained reductions~~change in ~~commodity prices~~fair value of the earnout payments are recognized in Merger and ~~continuing market economic disruptions as a triggering event.~~integration in the condensed consolidated statements of operations and comprehensive income (loss). See Note (3) ~~Goodwill.~~Alamo Acquisition

~~During~~ for further discussion. The change in fair value of the ~~first quarter of 2021,~~Earnout payment was $8.9 million during the ~~Company assessed and determined there were no triggering events.~~three months ended March 31, 2022.

Credit Risk

The Company's financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, the derivative ~~contracts~~contract and trade receivables.

The Company's cash balances on deposit with financial institutions totaled ~~$271.6~~$99.8 millionand ~~$276.0~~ $110.7million as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which exceeded Federal Deposit Insurance Corporation insured limits. The Company regularly monitors these institutions' financial condition.

The credit risk from the derivative ~~contracts~~contract derives from the potential failure of the counterparty to perform under the terms of the derivative ~~contracts.~~contract. The Company minimizes counterparty credit risk in the derivative ~~instruments~~instrument by entering into ~~transactions~~the transaction with a high-quality ~~counterparties,~~counterparty, whose Standard & Poor's credit rating is higher than BBB. The derivative ~~instruments~~instrument entered into by the Company dodoes not contain credit-risk-related contingent features.

The majority of the Company's trade receivables have payment terms of 30 to 4560 days. Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. As of March 31, ~~2021,~~2022, trade receivables from ~~two customers~~onecustomer individually represented ~~10% or more and collectively represented 24%~~ 18%of the Company's total trade receivables. As of December 31, ~~2020,~~2021, trade receivables from the Company's ~~top~~one significant customer individually represented 17% of the Company's total trade receivables.

The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers. The Company has a process in place to collect substantially all receivables within 30 to 4560 days of aging. As of March 31, ~~2021,~~2022, the Company had ~~$1.7~~$1.8 million in allowance for credit losses. As of December 31, ~~2020,~~2021, the Company had ~~$2.7~~$1.9 million in allowance for credit ~~losses, including the increase of $1.5 million from the adoption of ASU 2016-13.~~ losses.

The Company ~~wrote-off $1.2 million and $1.6 million of~~did 0t recognize any bad ~~debts~~debt expense during the three months ended March 31, ~~2021 and~~2022. During the three months ended March 31, ~~2020, respectively.~~2021, the Company recognized $1.2 million of bad debt expense, net of recoveries.

(9) Stock-Based Compensation

Effective as of October 31, 2019, the Company (i) amended and restated the Keane Group, Inc. Equity and Incentive Award Plan under the name NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (“Equity and Incentive Award Plan”), and (ii) assumed and amended and restated the C&J Energy Services, Inc. 2017 Management Incentive Plan under the name NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan ~~( “Management Incentive Plan”, and collectively~~(collectively with the Equity and Incentive Award Plan, the “Equity Award Plans”). ~~As part of the C&J Merger, the Company assumed the award agreements outstanding under the Management Incentive Plan on the terms set forth in the Merger agreement.~~

As of March 31, ~~2021,~~2022, the Company has 45 types of stock-based compensation outstanding under its Equity Award Plans: (i) ~~restricted stock awards~~RSAs issued to independent directors and certain executives and employees, (ii) ~~restricted stock units~~RSUs issued to executive officers and key management employees, (iii) non-qualified stock options issued to executive officers, (iv) PSUs issued to executive officers and key management employees, (v) and PUs issued to executive officers and key management employees.

The following table summarizes stock-based compensation costs for the three months ended March 31, 2022 and 2021 (in thousands of dollars):

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

~~officers~~


	Three Months Ended March 31,
		2022		2021
Liability-classified awards
Cash-settled awards		$	661	$	—
Equity-classified awards
Restricted stock awards		311		335
Restricted stock time-based unit awards		5,391		3,265
Non-qualified stock options		—		74
Restricted stock performance-based unit awards		2,113		1,529
Stock-based compensation cost		8,476		5,203
Tax Benefit(1)		(1,339)		(1,249)
Stock-based compensation cost, net of tax		$	7,137	$	3,954

(1) The Company is in a valuation allowance position and ~~key management employees, (iii) non-qualified stock options~~any tax benefit for stock-based compensation will be offset by the change in valuation allowance.

Cash-settled awards

During the first quarter of 2022, the Company issued 1,009,737 PUs to executive officers under its Equity and ~~(iv) performance-based stock units issued to executive officers~~Incentive Awards Plan. These PUs will be settled in cash at the end of the performance period, December 31, 2024, and ~~key management employees.~~

are classified as liability awards, which are remeasured at fair value at each reporting period. The ~~following table summarizes stock-based~~fair value of these awards as of March 31, 2022 was $8.3 million. The Company recognizes compensation ~~costs~~cost for the changes in fair value pro-rated for the portion of the requisite service period rendered. During the three months ended March 31, ~~2021 and 2020 (in thousands of dollars):~~

Three Months Ended March 31,
2021 2020
Restricted stock awards $ 335 $ 425
Restricted stock time-based unit awards 3,265 5,160
Non-qualified stock options 74 236
Restricted stock performance-based unit awards 1,529 1,059
Equity-based compensation cost 5,203 6,880
Tax Benefit (1,249) (1,651)
Equity-based compensation cost, net of tax $ 3,954 $ 5,229

~~Performance-based RSU awards~~

~~During the first quarter of 2021,~~2022, the Company ~~issued 550,889 of performance based RSUs to executive officers under its Equity Award Plans, with an estimated value of 3.2~~recognized $0.7 million based on a 100% target value. The performance RSUs issued by the Company have service and performance conditions. The number of shares that may be earned at the end of the vesting period ranges from 0% to 200% of the target award amount, if the performance criteria is met. These performance-based RSUs will be settled in ~~the Company's common stock and are classified as equity awards. The~~ compensation ~~expense associated with these performance-based RSUs will be amortized into earnings on a straight-line basis. As of March 31, 2021, total unamortized compensation cost~~costs related to ~~unvested performance-based RSUs was $3.0 million, which the Company expects to recognize over the weighted-average period of 2.75 years.~~these awards.

(10) Earnings per Share

Basic income or (loss) per share is based on the weighted average number of common shares outstanding during the period. Diluted income or (loss) per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect, such as stock awards from the Equity Awards Plans, had been issued. Anti-dilutive securities represent potentially dilutive securities which are excluded from the computation of diluted income or (loss) per share as their impact would be anti-dilutive.

A reconciliation of the numerators and denominators used for the basic and diluted net income (loss) per share computations is as ~~follows:~~follows (in thousands of dollars):


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Numerator:	Numerator:						Numerator:
Net loss		$	(54,502)	$	(71,756)
Net Income (loss)							Net Income (loss)	$	8,792	$	(54,502)

Denominator:	Denominator:						Denominator:
Basic weighted-average common shares outstanding(1)	Basic weighted-average common shares outstanding(1)	215,110		212,842			Basic weighted-average common shares outstanding(1)	243,269		215,110
Dilutive effect of restricted stock awards granted to Board of Directors	Dilutive effect of restricted stock awards granted to Board of Directors	274		114			Dilutive effect of restricted stock awards granted to Board of Directors	160		274
Dilutive effect of time-based restricted stock awards granted under the Equity Plan	Dilutive effect of time-based restricted stock awards granted under the Equity Plan	740		871			Dilutive effect of time-based restricted stock awards granted under the Equity Plan	3,697		740
Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	1,221		1,034			Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	579		1,221

Diluted weighted-average common shares outstanding(1)	Diluted weighted-average common shares outstanding(1)	$	217,345	$	214,861		Diluted weighted-average common shares outstanding(1)	247,705		217,345

(1) As a result of the net loss incurred by the Company for the three months ended March ~~31,~~ 2021, ~~and 2020,~~ the calculation of diluted net loss per share gives no consideration to the potentially anti-dilutive securities shown in the above reconciliation, and as such is the same as basic net loss per share.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(11) Commitments and Contingencies

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$5.5~~$2.4 million and ~~$4.9~~$1.0 million of deposits on equipment, ~~including deposits acquired through the C&J Merger,~~ respectively. Outstanding purchase commitments on equipment were ~~$71.5~~$82.0 million and ~~$23.4~~$54.1 million, as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

As of March 31, 2022, the Company had a letter of credit of $23.3 million under the 2019 ABL Facility.

Aggregate minimum commitments under long-term raw material supply contracts for the next five years as of March 31, ~~2021~~2022 are listed below:


		(Thousands of Dollars)			(Thousands of Dollars)
2021		$	22,429
2022	2022	17,718		2022	$	33,475
2023	2023	7,500		2023	17,660
2024	2024	1,190		2024	1,190
2025	2025	0		2025	—
2026				2026	—
		$	48,837		$	52,325

Litigation

From time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions, as is typical of the industry. These claims include, but are not limited to, contract claims, environmental claims, employment related claims, claims alleging injury or claims related to operational ~~issues.~~issues and motor vehicle accidents. The Company's assessment of the likely outcome of litigation matters is based on its judgment of a number of factors, including experience with similar matters, past history, precedents, relevant financial information and other evidence and facts specific to the matter. In accordance with GAAP, the Company accrues for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on the Company's best estimate of the expected ~~liability.~~liability and the Company may record an offsetting receivable to the extent such liability is recoverable from insurance. The Company may increase or decrease its legal accruals in the future, on a matter-by-matter basis, to account for developments in such matters. Notwithstanding the uncertainty as to the final outcome and based upon the information currently available to it, the Company does not currently believe these matters in aggregate will have a material adverse effect on its financial position, or results of ~~operations.~~operations or liquidity.

Environmental

The Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. The Company cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. The Company continues to monitor the status of these laws and regulations. Currently, the Company has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management does recognize that by the very nature of the Company's business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company's liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or through indemnification.

Regulatory Audits

~~Prior~~

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the ~~consummation of the C&J Merger, the~~Unaudited Condensed Consolidated Financial Statements

The Company ~~and C&J had been notified~~is subject to routine audits by ~~certain state~~ taxing authorities that these taxing authorities would be conducting routine sales and use tax audits of certain wholly owned operating subsidiaries of the Company for tax periods ranging from January 2011 through December 2019.authorities. As of December 31, 2020, the Company had recorded estimates of potential assessments for each audit totaling in the aggregate approximately $33.0 million. For one audit, in particular, the Company disagreed with many aspects of the state’s assessment and began to contest the state’s position through administrative procedures. ~~During~~The Company received a final settlement offer from Texas Attorney General Office on September 8, 2021 for $3.7 million, which resulted in an aggregate reduction to the accrual by $24.9 million during 2021, of which $13.3 million was recognized in the three months ended March 31, ~~2021, the Company obtained additional information that resulted in a~~2021. This aggregate reduction ~~of the Company's accrual related to this tax audit by $13.3 million, which~~ was recorded in selling, general and administrative expenses in the ~~condensed~~ consolidated statements of operations and comprehensive ~~loss. In addition, this accrual does not take into account~~loss of 2021. As of March 31, 2022, the Company had recorded estimates of potential assessments, the majority of which is related to an estimate of $17.7 million of potential assessment and exposures for ~~refund claims relating~~all taxing jurisdictions related to ~~such periods that are~~the Alamo Acquisition. As of March 31, 2022, the Company also ~~pending disposition. The Company will continue~~has an offsetting indemnification receivable of $17.7 million from the former owner of Alamo, recorded pursuant to ~~defend its position vigorously through all available procedures including litigation, if necessary.~~the Alamo Purchase Agreement, in prepaids and other current assets in the Condensed Consolidated Balance Sheet. Both the estimated liability and indemnification receivable were recorded in the purchase price allocation at the time of the acquisition in 2021.

(12) Related Party Transactions

Cerberus Operations and Advisory Company, Cerberus Capital Management, L.P., and Cerberus Technology Solutions LLC, affiliates of the Company's principal equity holder, provide certain consulting services to the Company. The Company paid ~~$0.1~~$0.2 million and ~~$0.7~~$0.1 million during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, for these services.

As part of the Alamo Purchase Agreement, the Company agreed to provide certain post-closing services to Alamo Frac Holdings, LLC valued at $30.0 million in the aggregate. During the three months ended March 31, 2022, the Company provided services to Alamo Frac Holdings, LLC of $2.4 million as part of the Purchase Agreement. The Company has a remaining customer contract liability related to these services of $21.3 million as of March 31, 2022.

(13) Business Segments

In accordance with ~~Accounting Standard Codification (“ASC”) No.~~ASC 280, ~~Segment Reporting~~ ~~(“ASC 280”)~~"Segment Reporting", the Company routinely evaluates whether its separate segments have changed. This determination is made based on the following factors: (1) the Company’s chief operating decision maker (“CODM”) is currently managing each operating segment as a separate business and evaluating the performance of each segment and making resource allocation decisions distinctly and expects to do so for the foreseeable future, and (2) discrete financial information for each operating segment is available.

In 2019, due to the transformative nature of the C&J Merger, the CODM changed the way in which the Company is managed, including the level at which to make performance evaluation and resource allocation decisions. Discrete financial information was created to provide the segment information necessary for the CODM to manage the Company under the revised operating segment structure. On March 9, 2020, the Company announced it had completed the divestiture of its Well Support Services segment. As a result of the changes to operating segments, the Company revised its reportable segments subsequent to the completion of the C&J Merger and Well Support Services segment divestiture. For the period from after the C&J merger and prior to the WSS divestiture, the Company’s revised reportable segments were: (i) Completion Services, (ii) Well Construction and Intervention (“WC&I”) and (iii) Well Support Services. Subsequent to the WSS divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services. This segment structure reflects the financial information and reports used by the Company’s management, specifically including its CODM, to make decisions regarding the Company’s business, including performance evaluation and resource allocation decisions. As a result of the revised reportable segment structure subsequent to the C&J merger, the Company has restated the corresponding items of segment information for all periods presented.

The following is a description of each reportable segment:

Completion Services

The Company’s Completion Services segment consists of the following businesses and service lines: (1) fracturing services; (2) wireline and pumpdown services; and (3) completion support services, which includes the Company's research and technology department.

Well Construction and Intervention Services

The Company’s WC&I Services segment consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.

~~Historical Segment:Well Support Services~~

The Company’s Well Support Services segment consisted of the following businesses and service lines: (1) rig services; (2) fluids management services; and (3) other specialty well site services. On March 9, 2020, the Company completed the divestiture of its Well Support Services segment for $93.7 million of total proceeds, including $59.4 million in cash, before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close, and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, ("WSS Notes") previously issued by Basic. This resulted in a gain on divestiture of $8.7 million. The gain is recorded within (Gain) Loss on Disposal of Assets on the ~~Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).~~ Income per share for the three months ended March 31, 2020 attributable to the divested Well Support Services segment was less than $0.01. On July 29, 2020, the Company received the escrowed cash amount in final settlement for working capital reconciliation.

On March 31, 2021 the Company received a $34.4 million cash payment from Ascribe in full settlement of the WSS Notes and the make-whole guarantee. At the time of the cash payment, the WSS Notes and make-whole guarantee had a fair value of $33.6 million, resulting in a realized gain on settlement of $0.8 million recorded in other income (expense) on the consolidated statements of operations and comprehensive income (loss).

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

The following tables present financial information with respect to the Company’s segments. Corporate and Other represents costs not directly associated with a segment, such as interest expense, income taxes and corporate overhead. Corporate assets include cash, deferred financing costs, derivatives and entity-level machinery equipment.

(Thousands of Dollars)
Three Months Ended March 31,
2021 2020
Operations by business segment
Revenue:
Completion Services $ 208,981 $ 512,871
WC&I 19,421 56,825
Well Support Services 0 57,929
Total revenue $ 228,402 $ 627,625
Adjusted gross profit:
Completion Services(1)
$ 15,414 $ 97,876
WC&I(1)
1,676 8,784
Well Support Services(1)
0 12,338
Total adjusted gross profit $ 17,090 $ 118,998
Operating income (loss):
Completion Services $ (25,107) $ (13,102)
WC&I (879) 3,011
Well Support Services 0 10,940
Corporate and Other (20,734) (66,702)
Total operating income (loss) $ (46,720) $ (65,853)
Depreciation and amortization:
Completion Services $ 37,579 $ 75,540
WC&I 3,672 4,273
Well Support Services 0 1,527
Corporate and Other 4,617 4,481
Total depreciation and amortization $ 45,868 $ 85,821
Net income (loss):
Completion Services $ (25,107) $ (13,102)
WC&I (879) 3,011
Well Support Services 0 10,940
Corporate and Other (28,516) (72,605)
Total net income (loss) $ (54,502) $ (71,756)

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements


	(Thousands of Dollars)
	Three Months Ended March 31,
	2022		2021
Operations by business segment





Adjusted gross profit:
Completion Services(1)	$	106,334	$	15,414
WC&I(1)	4,053		1,676
Total adjusted gross profit	$	110,387	$	17,090

(1) Adjusted gross profit ~~(loss)~~ at the segment level is not considered to be a non-GAAP financial measure as it is the Company's segment measure of profitability and is required to be disclosed under GAAP pursuant to ASC 280. Adjusted gross profit ~~(loss)~~ is defined as revenue less cost of services, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~


												(Thousands of Dollars)
		Three Months Ended March 31, 2021								Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
		Completion Services		WC&I		Well Support Services		Total				Completion Services		WC&I		Total		Completion Services		WC&I		Total
Revenue	Revenue	$	208,981	$	19,421	$	0	$	228,402		Revenue	$	602,620	$	32,423	$	635,043	208,981		19,421		$	228,402
Cost of Services	Cost of Services	199,680		18,097		0		217,777			Cost of Services	496,286		28,370		524,656		199,680		18,097		217,777
Gross profit excluding depreciation and amortization	Gross profit excluding depreciation and amortization	9,301		1,324		0		10,625			Gross profit excluding depreciation and amortization	106,334		4,053		110,387		9,301		1,324		10,625
Management adjustments associated with cost of services(1)	Management adjustments associated with cost of services(1)	6,113		352		0		6,465			Management adjustments associated with cost of services(1)	—		—		—		6,113		352		6,465
Adjusted gross profit	Adjusted gross profit	$	15,414	$	1,676	$	0	$	17,090		Adjusted gross profit	$	106,334	$	4,053	$	110,387	$	15,414	$	1,676	$	17,090

(1) Adjustments relate to market-driven severance, leased facility closures, and restructuring costs incurred as a result of significant declines in crude oil prices resulting from demand destruction from the COVID-19 pandemic and global oversupply.

Three Months Ended March 31, 2020
Completion Services WC&I Well Support Services Total
Revenue $ 512,871 $ 56,825 $ 57,929 $ 627,625
Cost of Services 417,382 49,253 45,591 512,226
Gross profit excluding depreciation and amortization 95,489 7,572 12,338 115,399
Management adjustments associated with cost of services(2)
2,387 1,212 0 3,599
Adjusted gross profit $ 97,876 $ 8,784 $ 12,338 $ 118,998

~~(2)~~ Adjustments relate to market-driven severance and restructuring costs incurred as a result of significant declines in crude oil prices resulting from demand destruction from the COVID-19 pandemic and global oversupply.


		(Thousands of Dollars)					(Thousands of Dollars)
		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Total assets by segment:	Total assets by segment:					Total assets by segment:
Completion Services	Completion Services	$	699,782	$	689,814	Completion Services	$	1,287,883	$	1,201,265
WC&I	WC&I	63,751		62,959		WC&I	59,504		60,195
Well Support Services		0		0
Corporate and Other	Corporate and Other	369,495		405,115		Corporate and Other	184,991		196,121
Total assets	Total assets	$	1,133,028	$	1,157,888	Total assets	$	1,532,378	$	1,457,581
Goodwill by segment:	Goodwill by segment:					Goodwill by segment:
Completion Services	Completion Services	$	104,198	$	104,198	Completion Services	$	192,780	$	192,780
WC&I	WC&I	0		0		WC&I	—		—
Well Support Services		0		0
Corporate and Other	Corporate and Other	0		0		Corporate and Other	—		—
Total goodwill	Total goodwill	$	104,198	$	104,198	Total goodwill	$	192,780	$	192,780

2726

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(14) New Accounting Pronouncements

(a) Recently Adopted Accounting Standards

In July 2021, the FASB issued ASU 2021-05 "Leases (Topic 842) Lessors—Certain Leases with Variable Lease Payments". ASU 2021-05 allows a lessor to classify and account for a lease with variable lease payments that doesn't depend on an index or rate as an operating lease if both: A) The lease would’ve been classified as a sales-type lease or a direct-financing lease in accordance with the lease classification guidance in Topic 842 ,and B) The lessor would’ve otherwise recognized a day-one loss. This standard is effective for fiscal years beginning after December 15, 2021. The Company adopted this standard on January 1, 2022, and there was no material impact on the financial statements.

In August 2020, the FASB issued ASU 2020-06 “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU 2020-06 simplifies the guidance on the issuer's accounting for convertible debt instruments and convertible preferred stock. The Company adopted this standard on January 1, 2022, and there was no material impact on the financial statements.

In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)”, which clarifies the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. This standard is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. The Company adopted this standard on January 1, 2022, and there was no material impact on the financial statements.

In December 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard on January 1, 2021, and there was no impact on the financial statements.

(b) Recently Issued Accounting Standards

In October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805) Accounting for Contract Assets and Contact Liabilities from Contracts with Customers”. ASU 2021-08 requires acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. This standard is effective beginning on December 15, 2022. The Company does not expect ASU 2021-08 to have any impact on its consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU ~~2021-10~~2021-01 expands on the US GAAP guidance on contract modifications and hedge accounting related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This standard is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-10 ‘Codification Improvements”. ASU 2020-10 improves the clarity and consistency of various provisions in the Codification. The Company does not expect ASU 2020-10 to have any impact on the its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06 "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06"). ASU 2020-06 simplifies the guidance on the issuer's accounting for convertible debt instruments and convertible preferred stock. The Company does not expect ASU 2020-06 to have any impact on the Company's consolidated financial statements.

In June 2020, the FASB issued ASU 2020-05, "Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities," which provides a limited deferral of the effective dates of "Revenue from Contracts with Customers (ASC 606)" and "Leases (ASC 842)" to provide immediate, near-term relief for certain entities for whom these updates are either currently effective or imminently effective. The Company does not expect ASU 2020-05 to have any impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, ~~"Reference~~“Reference Rate Reform (Topic 848)”," which is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This standard is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)," which clarifies the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. This standard is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This standard is effective for fiscal years beginning after December 15, 2021 and the adoption is not expected to have any impact on the Company's consolidated financial statements.

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

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related condensed footnotes included within Part I, ~~"Item 1. Condensed Consolidated~~"Item 1. Financial ~~Statements (Unaudited)"~~Statements" in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.For additional information related to forward looking statements, please see “Cautionary Statement Regarding Forward-Looking Statements and Information,” which immediately follows the table of contents of this Quarterly Report on Form 10-Q.

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ORGANIZATIONAL OVERVIEW

NexTier Oilfield Solutions Inc. is ~~an industry-leading~~a predominately U.S. land oilfield ~~focused~~ service company, with a diverse set of well completion and production services across a variety of active and demanding basins. ~~We have a history of growth through acquisition, including the October 31, 2019 C&J Merger. After this business combination, we were~~The Company is organized into ~~three~~two reportable segments:

•Completion Services, which consists of the following businesses and services lines: (1) hydraulic fracturing; (2) wireline and pumpdown services; and (3) completion support services, which includes ~~our innovation centers~~the Company's research and ~~activities.~~technology department.

•~~Well Construction and Intervention Services,~~WC&I, which consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.

•~~Well Support Services, which consists of the following businesses~~OPERATIONAL OVERVIEW

Market Trends and ~~service lines: (1) rig services; (2) fluids management; and (3) other special well site services.~~

Our Well Support Services segment was divested in a transaction that closed on March 9, 2020. It focused on post-completion activities at the well site, including rig services, such as workover and plug and abandonment, fluids management services, and other specialty well site services. Subsequent to the Well Support Services divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services.

~~This history impacts the comparability of our operational results from year to year. Additional information on these transactions can be found in Note~~ ~~(13)Business Segments~~.

~~OPERATIONAL OVERVIEW~~Influences

We provide our services in several of the most active basins in the United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford, Mid-Continental, Haynseville, and the Bakken/Rockies.

~~Total North America rig count during the first quarter~~ The high density of 2021 averaged 393 rigs, reflecting an increase of approximately 27% as compared to the fourth quarter 2020 average of 311 rigs and a decrease of approximately 50% as compared to the first quarter 2020 average of 785 rigs. The increase as compared to the fourth quarter 2020 average was driven by an improvement in economic activity, supportive commodity prices, and modest continued improvements in completions supply/demand dynamics. The decrease as compared to the first quarter of 2020 was primarily driven by impacts associated with the COVID-19 demand destruction and the associated significant decline in crude oil prices. North America rig count exited the first quarter of 2021 at 417 rigs.

The decrease in North America rig count experienced throughout 2020 reflects E&P companies significantly reducing 2020 capital budgets in response to increasing macro uncertainty related to the COVID-19 pandemic and significantly lower crude oil prices. We estimate the market reached a trough of 50 or fewer fully-utilized completions crews in late-May or early-June 2020. Beginning in June 2020, conditions began to improve, as shut-in production was brought back on-line.

~~A majority of the Company's activity is~~our operations in the ~~Permian Basin~~basins in which ~~outperformed~~we are most active provides us the ~~total North American rig count during the first quarter of 2021 as compared~~opportunity to ~~the fourth quarter of 2020, where the average rig count increase was 32% as compared~~leverage our fixed costs and to ~~the total North America average rig count increase of 27%.~~quickly respond with what we believe are highly efficient, integrated solutions that are best suited to address customer requirements.

Activity within our business segments is significantly influenced by spending on upstream exploration, development and production programs by our customers. Thus, our financial performance is affected by rig and well counts in North America, as well as oil and natural gas prices, which are discussed in more detail below. Also driving our activity is the status of the global economy, which is a major factor on oil and natural gas demand. Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, global oil supply and demand, supply chain disruptions, the world economy, the availability of credit, government regulation and global stability, which together drive worldwide drilling activity.

Continued discipline from the Organization of Petroleum Exporting Countries plus (OPEC+) combined with accelerating vaccine rollouts around the world gives us cautious optimism for global economy and oil demand recovery in 2021. PriorAccording to the ~~weather-related events~~weekly Baker Hughes Incorporated rig count information, total North America rig count during the first quarter of 2022 averaged 633 rigs, reflecting an increase of approximately 13% as compared to the fourth quarter 2021 average of 559 rigs, but is still approximately 19% below the pre-COVID first quarter 2020 average of 785 rigs. North America rig count exited the first quarter of 2022 at 670 rigs. The increase as compared to the fourth quarter 2021 average was driven by an improvement in economic activity and supportive commodity prices. Further, the Russia invasion of Ukraine impacted WTI prices during the quarter. WTI prices entered the first quarter of 2022 at $75.99 and exited the quarter 32% higher at $100.57, with an interquarter high of $123.64. Henry Hub Natural gas prices were up 46% from $3.73 on December 31, 2021 to $5.46 on March 31, 2022.

In the first quarter of 2022, we continued to see disciplined increases in oil supply from OPEC+ and U.S. ~~Gulf Coast discussed below, we saw a modest increase in overall demand, as commodity prices remained constructive. In response, we began responsibly ramping up our operations, including~~shale operators. The Russian invasion of Ukraine increased uncertainty of global supply given the ~~addition~~supply of ~~one hydraulic fracturing fleet early~~crude oil and natural gas that is exported from Russia.

U.S. onshore completion activity growth continued to trend higher in the first quarter, ~~of 2021.~~

~~Beginning in mid-February 2021, Winter Storm Uri had a broad impact on~~and we deployed one additional frac fleet during the ~~U.S. Gulf Coast and in particular across~~quarter. While demand for our services was strong throughout the ~~entire state of Texas, resulting in widespread utility disruptions. Approximately two-thirds of~~quarter, we did see some post-holiday startup inefficiencies, which impacted our operations were shut down for nearly 10 days. However, we successfully returned to pre-storm operation levels in late February. After the storm, and once our customers were up and running, we have seen modest activity growthresults, particularly early in the ~~final weeks~~quarter. Winter weather also impacted our results in February. We expect second quarter activity will continue along a similar trend of ~~the quarter that appears~~activity given our expectation to ~~be continuing into~~operate a similar number of fleets in the second ~~quarter.~~

quarter relative to the first quarter, although seasonal factors should be more favorable. C

~~Continued improvement~~ontinued strength in customer activity isand utilization remains dependent on macro conditions, including commodity prices, ~~continued resolution of~~changing political climate, response to the COVID-19 pandemic (including any resurgences in the U.S. and abroad), continued focus on capital discipline, seasonality and potential lasting changes that a prolonged or resurging pandemic may have on supply and demand worldwide.

In addition, we have started to see some improvement in pricing across most of our services. Overall economic conditions in the market have started to improve the profitability of the fleet.

Furthermore, as operators are looking for opportunities to improve well performance and lower costs through innovative techniques, we are seeing a rise in operator initiatives such as simulfrac techniques (we generally refer to these types of initiatives as increasing “frac intensity”). Simulfrac is a process of fracking two or more wells at the same time instead of a single well, for the purpose of increasing operational efficiencies and contributing to well cost savings. These techniques require multi-well pads and advanced complex completion designs, resulting in, among other things, adaption costs, an increase in the amount of equipment related to a particular job, an increase in commodities (such as proppant, logistics, and chemicals), and enhanced maintenance practices and procedures. The increasing complexity and resources required by evolving frac intensity, such as simulfrac, results in the need to fine-tune our approach in the related commercial agreements, especially around sharing the value

created and the commercial risks of these enhanced operations. We're continuing to work with our customers to utilize experiences on these operations, including Simulfrac, to hone our commercial agreements going forward.

We ~~believe that there is competitive value in providing integrated solutions that align the incentives of operators and service providers. We~~ are ~~pursuing opportunities to leverage~~constantly assessing our investment in our digital program and diesel substitution technologies (such as duel fuel capabilities), to provide a service strategy targeted at achieving emissions reductions, both for us and our customers. NexTier has been developing and building its digital program for some time, and our digital platform has been applied to all of our operating fleets. We are also working toward a natural gas treatment and delivery solution, including natural gas sourcing, compression, transport, decompression, and treatment services, that will power NexTier’s fleet with field gas or compressed natural gas. This service solution seeks to address wellsites where there is not a reliable nearby gas supply, and thus, the full benefit and value of dual fuel or other lower emissions technologies may not otherwise be fully realized. Our integrated natural gas treatment and delivery solution is expected to become operational in the second half of 2021. This integrated strategy will provide our customers with a streamlined approach to ~~driving more sustainable, cost effective operations at the wellsite.~~

~~We believe~~ensure that our integrated approach and proven capabilities enable us to deliver cost-effective solutions for increasingly complex and technically demanding well completion requirements, which include longer lateral segments, higher pressure rates and proppant intensity and multiple fracturing stages in challenging high-pressure formations. In addition, our technical team and our ~~innovation centers, provide us~~equipment meets the evolving demands. Customers are increasingly looking for ways to lower their carbon footprint by lower emissions associated with their drilling and completion activity. We have invested to upgrade a significant portion of our fleet to be able to operate using natural gas as a primary fuel source. These dual fuel fleets can be powered using both diesel and natural gas as a fuel source. In addition to lowering emissions, at current diesel and natural gas prices, using natural gas can lower the cost to operate a dual fuel fleet relative to a conventional diesel fleet.

As indicated previously, macro-economic factors are resulting in inflation of materials and other costs, such as employee compensation, contract services, commodity prices and communications expenses. While inflation increases our operating costs, the impact of commodity inflation on the Company to date has been significantly mitigated by the Company's ability to ~~supplement~~adjust pricing to pass the impact of inflation through to its customers. Additionally, we, our ~~service offerings~~suppliers and contractors are facing a highly competitive domestic labor market. These labor market dynamics create wage inflation, increase recruiting costs due to elevated employee attrition and, with ~~engineered solutions specifically tailored~~respect to ~~address customers’ completion requirements and unique challenges.~~

~~We believe that~~driver shortages, may negatively impact or increase the ~~safety, quality and efficiency~~cost of our logistics service ~~execution~~for our customers. The rate and scope of these various aspects of inflation may continue to impact our ~~alignment with customers who recognize~~costs, which may not be readily recoverable in the ~~value that~~prices of our services. At this time, we ~~provide~~expect this trend to continue through 2022. As such, its full financial impact on our business is impractical to quantify at this time.

Global market supply chain and logistics constraints have also impacted our suppliers. We have begun to see a more pronounced delay in lead times for certain components used in equipment, parts and supplies. Additionally, some shipments from overseas suppliers are ~~central~~experiencing transportation delays due to a lack of available containers and a backlog at incoming ports of entry. These delays in shipments could impact our ~~efforts~~availability to ~~support utilization~~secure parts and ~~grow our business.~~ inventory, although the ultimate impact is impractical to quantify at this time.

Utilization Tendencies

Historically, our utilization levels have been highly correlated to U.S. onshore spending by our customers, which is heavily driven by the price of oil and natural gas. Generally, as capital spending by our customers increases, drilling, completion and production activity also increases, resulting in increased demand for our services, and therefore more days or hours worked (as the case may be). Conversely, when drilling, completion and production activity levels decline due to lower spending by our customers, we generally provide fewer services, which results in fewer days or hours worked (as the case may be).

Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle. Additionally, during periods of decreased spending by our customers and/or high competition, we may be required to discount our rates or provide other pricing concessions to remain competitive and support deployed equipment utilization, which negatively impacts our revenue and operating margins. During periods of pricing weakness for our services, we may not be able to reduce our costs accordingly, and our ability to achieve any cost reductions from our suppliers typically lags behind the decline in pricing for our services, which could further adversely affect our results. Furthermore, when demand for our services increases following a period of low demand, our ability to capitalize on such increased demand may be delayed while we reengage and redeploy equipment and crews that have been idled during a downturn. The mix of customers that we are working for, as well as limited periods of exposure to the spot market, also impacts our deployed equipment utilization. Some smaller operators may not have sufficient programs to support continuous operations or dedicated fleets. To the extent we have a significant percentage of our operations servicing such smaller operators, we may experience lower utilization.

Strategic Direction

We believe that there is competitive value in providing integrated solutions that align the incentives of operators and service providers. We are pursuing opportunities to leverage our investment in our digital program and diesel substitution technologies (such as duel fuel capabilities), to provide a service strategy targeted at achieving emissions reductions, both for us and our customers. Our recent acquisition of Alamo added 9 hydraulic fracturing fleets, approximately 92% of which is Tier IV dual fuel capable. NexTier's best-in-class digital platform has been applied to the NexTier operating fleets, with the opportunity to add the digital platform to the Alamo fleets. We have ~~begun~~launched our natural gas treatment and delivery (Power Solutions), including natural gas sourcing, compression, transport, decompression, and treatment services, that will power NexTier’s fleet with field gas or compressed natural gas. This service solution seeks to ~~see some improvement~~address wellsites where there is not a reliable nearby gas supply, and thus, the full benefit and value of dual fuel or other lower emissions technologies may not otherwise be fully realized. Our integrated natural gas treatment and delivery solution became operational in the second half of 2021. This integrated strategy is designed to provide our customers with a streamlined approach to driving more sustainable, cost effective operations at the wellsite. Given the positive market response, we have continued to invest and grow the Power Solutions footprint.

We believe our integrated approach and proven capabilities enable us to deliver cost-effective solutions for increasingly complex and technically demanding well completion requirements, which include longer lateral segments, higher pressure rates and proppant intensity and multiple fracturing stages in challenging high-pressure formations. In addition, our technical team and our innovation centers, provide us with the ability to supplement our service offerings with engineered solutions specifically tailored to address customers’ completion requirements and unique challenges. For example, utilizing a lateral science technique resulting in simulfrac stage pairing can reduce the operator’s cost per barrel by taking existing drilling data, analyzing the downhole rock properties, and matching the four or six wells across a simulfrac pad to create an optimized pair for every simulfrac stage. We believe utilization of this technique will ultimately improve injectivity of the frac treatments, improve the long-term production of the treated wells, and lower the equipment costs for each operation. Simulfrac stage pairing can help connect our simulfrac operational experience to real reservoir properties, thereby providing opportunity to deploy a more cost-effective solution that delivers higher production to the operator.

We believe that the safety, quality and efficiency of our service execution and our alignment with customers who recognize the value that we provide are central to our efforts to support utilization and ~~pricing, especially with~~grow our ~~duel fuel equipment.~~

business.

Operating Effectively Through the COVID-19 Pandemic

We have continued our measures focused on the safety of our partners, employees, and the communities in which we operate, while at the same time seeking to mitigate the impact on our financial position and operations. ~~We continue to encourage our workforce to practice safe behaviors in the workplace and while away from work to help prevent community spread of COVID-19.~~

We recognize that the COVID-19 pandemic and related disruptions also impact our suppliers. To date, we have generally been able to obtain the equipment, parts and supplies necessary to support our operations on a timely basis. Contingency plans remain in place in the event of significant impacts from COVID-19 infection resurgences, but there are no guarantees that such plans will be sufficient.~~Additional~~For additional information regarding the actions we've taken since the onset of the COVID-19 pandemic and the increased risks to our business related to the COVID-19 pandemic can be found in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. While we saw continued recovery from the COVID-19 pandemic during the first quarter of 2022, contingency plans remain in place to address the impact of resurgences of the virus (including as a result of the emergence of new variants and strains of the virus, such as Delta and Omicron).

RESULTS OF OPERATIONS IN ~~2021~~2022 COMPARED TO ~~2020~~2021

The following is a comparison of our results of operations for the three months ended March 31, ~~2021~~2022 compared to the three months ended March 31, ~~2020. Results for the three months ended March 31, 2020 include the financial and operating results of Well Support Services segment through March 8, 2020.~~2021.

Three Months Ended March 31, ~~2021~~2022 Compared with Three Months Ended March 31, ~~2020~~2021


		Three Months Ended March 31,													Three Months Ended March 31,
(Thousands of Dollars)	(Thousands of Dollars)					As a % of Revenue				Variance				(Thousands of Dollars)					As a % of Revenue				Variance
Description	Description	2021		2020		2021		2020		$		%		Description	2022		2021		2022		2021		$		%
Completion Services	Completion Services	$	208,981	$	512,871	91	%	82	%	$	(303,890)	(59	%)	Completion Services	$	602,620	$	208,981	95	%	91	%	$	393,639	188	%
WC&I	WC&I	19,421		56,825		9	%	9	%	(37,404)		(66	%)	WC&I	32,423		19,421		5	%	9	%	13,002		67	%
Well Support Services		—		57,929		0	%	9	%	(57,929)		(100	%)

Revenue	Revenue	228,402		627,625		100	%	100	%	(399,223)		(64	%)	Revenue	635,043		228,402		100	%	100	%	406,641		178	%
Completion Services	Completion Services	199,680		417,382		87	%	67	%	(217,702)		(52	%)	Completion Services	496,286		199,680		78	%	87	%	296,606		149	%
WC&I	WC&I	18,097		49,253		8	%	8	%	(31,156)		(63	%)	WC&I	28,370		18,097		4	%	8	%	10,273		57	%
Well Support Services		—		45,591		0	%	7	%	(45,591)		(100	%)

Costs of services	Costs of services	217,777		512,226		95	%	82	%	(294,449)		(57	%)	Costs of services	524,656		217,777		83	%	95	%	306,879		141	%
Depreciation and amortization	Depreciation and amortization	45,868		85,821		20	%	14	%	(39,953)		(47	%)	Depreciation and amortization	55,163		45,868		9	%	20	%	9,295		20	%
Selling, general and administrative expenses	Selling, general and administrative expenses	16,069		56,884		7	%	9	%	(40,815)		(72	%)	Selling, general and administrative expenses	35,859		16,069		6	%	7	%	19,790		123	%
Merger and integration	Merger and integration	—		12,182		0	%	2	%	(12,182)		(100	%)	Merger and integration	9,232		—		1	%	0	%	9,232		0	%
(Gain) loss on disposal of assets		(4,592)		(7,962)		(2	%)	(1	%)	3,370		(42	%)
Impairment		—		34,327		0	%	5	%	(34,327)		(100	%)
Gain on disposal of assets														Gain on disposal of assets	(823)		(4,592)		0	%	(2	%)	3,769		(82	%)

Operating income (loss)	Operating income (loss)	(46,720)		(65,853)		(20	%)	(10	%)	19,133		(29	%)	Operating income (loss)	10,956		(46,720)		2	%	(20	%)	57,676		(123	%)
Other income (expense), net	Other income (expense), net	(2,719)		416		(1	%)	0	%	(3,135)		(754	%)	Other income (expense), net	5,370		(2,719)		1	%	(1	%)	8,089		(297	%)
Interest expense	Interest expense	(4,206)		(6,066)		(2	%)	(1	%)	1,860		31	%	Interest expense	(7,374)		(4,206)		(1	%)	(2	%)	(3,168)		75	%
Total other income (expense)	Total other income (expense)	(6,925)		(5,650)		(3	%)	(1	%)	(1,275)		23	%	Total other income (expense)	(2,004)		(6,925)		0	%	(3	%)	4,921		(71	%)
Income tax expense	Income tax expense	(857)		(253)		0	%	0	%	(604)		239	%	Income tax expense	(160)		(857)		0	%	0	%	697		(81	%)
Net income (loss)	Net income (loss)	$	(54,502)	$	(71,756)	(24	%)	(11	%)	$	17,254	(24	%)	Net income (loss)	$	8,792	$	(54,502)	1	%	(24	%)	$	63,294	(116	%)

Revenue:Total revenue is comprised of revenue from our Completion Services ~~Well Construction~~ and ~~Intervention Services, and Well Support Services~~WC&I segments. Revenue during the three months ended March 31, ~~2021 decreased~~2022 increased by ~~$399.2~~$406.6 million,, or ~~64%~~178%, to ~~$228.4~~$635.0 million from ~~$627.6~~$228.4 million during the three months ended March 31, ~~2020.~~2021. This change in revenue by reportable segment is discussed below.

CompletionServices: Revenue for Completion Services during the three months ended March 31, ~~2021 decreased~~2022 increased by ~~$303.9~~$393.6 million,, or ~~59%~~188%, to ~~$209.0 million~~$602.6 from ~~$512.9~~$209.0 million during the three months ended March 31, ~~2020.~~2021. The segment revenue ~~decrease~~increase is primarily attributable to ~~a 44% decrease in fully utilized~~more than doubling the number of deployed hydraulic fracturing fleets, ~~decreases~~the addition of our Power Solutions natural gas fueling services, increases in ~~our~~ wireline and pump down services, ~~activity, and price reductions in all operating basins resulting from lower commodity prices~~ and the ~~continued impacts of the COVID-19 pandemic reducing global oil demand.~~Alamo Acquisition on August 31, 2021. Fracturing ~~Services decreased~~services increased to ~~15 fully utilized~~33 average deployed fleets during the three months ended March 31, ~~2021~~2022 from ~~27 fully utilized~~15 deployed fleets during the three months ended March 31, ~~2020. Despite gaps in our fracturing calendar and continued suppressed~~2021. Improved market conditions and higher global commodity prices drove increased customer activity across all basins, and we realized strong ~~operational performance resulted~~pricing recovery in ~~high stage efficiencies to partially offset lower pricing.~~all services lines.

WellConstruction and Intervention Services:~~Well Construction and Intervention Services~~ WC&I segment revenue ~~decreased~~ ~~$37.4~~increased $13.0 million,, or ~~66%~~67%, to ~~$19.4~~$32.4 million during the three months ended March 31, ~~2021~~2022 from ~~$56.8~~$19.4 million during

the three months ended March 31, ~~2020.~~2021. The ~~decrease~~increase in revenue is ~~mostly attributable~~primarily due to ~~price reductions~~higher customer activity, improved pricing, and ~~less activity~~increased utilization in ~~both~~ our cementing and coil tubing services resulting from ~~lower~~improved market ~~activity~~conditions and ~~customer demand.~~

~~Well Support Services:~~ ~~Well Support Services segment revenue was $57.9 million during the three months ended March 31, 2020, with no comparison for the same period during the three months ended March 31, 2021.~~higher global oil and gas commodity prices.

Costof Services:Cost of services during the three months ended March 31, ~~2021 decreased~~2022 increased by ~~$294.4~~$306.9 million, or ~~57%~~141%, to ~~$217.8~~$524.7 million from ~~$512.2~~$217.8 million during the three months ended March 31, ~~2020.~~2021. The ~~reduction~~increase is primarily due to significantly ~~less~~increased activity and ~~lower~~ utilization, as explained ~~in Revenue~~under the "Revenue" caption above. Pricing improvements coupled with operational efficiencies and process improvements to permanently drive costs out of the organization more than offset the impact of cost inflation, and led to overall costs increasing at a lower rate than revenue increased.

Equipment Utilization: Depreciation and amortization expense ~~decreased $40.0~~increased $9.3 million, or ~~47%~~20%, to $55 million during the three months ended March 31, 2022 from $45.9 million, during the three months ended March 31, ~~2021 from $85.8~~2021. The increase in depreciation and amortization is primarily due to additional equipment received in the Alamo Acquisition. Gain on disposal of assets decreased by $3.8 million, or 82%, to a gain of $0.8 million during the three months ended March 31, ~~2020~~. The decrease in depreciation and amortization is due to more equipment nearing the end of its useful lives in addition to the change in estimated useful life of equipment, which consisted mostly of increases to the expected life of our fracturing equipment. ~~Gain (loss) on disposal of assets had a variance of~~ ~~$3.4 million, or~~ ~~42%, to a gain of~~2022 from $4.6 million during the three months ended March 31, ~~2021 from~~ ~~a gain~~ ~~of $8.0 million during the three months ended March 31, 2020~~2021.

Selling, general and administrative expense: Selling, general and administrative ~~(“SG&A”)~~ expense, which represents costs associated with managing and supporting our operations, ~~decreased~~increased by ~~$40.8~~$19.8 million, or ~~72%~~123%, to $35.9 million during the three months ended March 31, 2022 from $16.1 million during the three months ended March 31, ~~2021 from $56.9 million during the three months ended March 31, 2020,~~2021. This increase is primarily ~~due~~related to ~~the~~non-recurring $13.3 million accrual reduction for our regulatory audit estimate in the three months ended March 31, 2021, which was ultimately settled in the third quarter of 2021, combined with increased stock compensation in first quarter of 2022 and ~~our business transformation results to structurally drive out costs and increase efficiencies~~increased activity as a result of the Alamo Acquisition in ~~our support function processes.~~the third quarter of 2021.

Merger and integration expense:Merger and integration expense ~~decreased~~increased by ~~$12.2 million, or (100%), to $0.0~~$9.2 million during the three months ended March 31, ~~2021~~2022 from ~~$12.2 million~~nil during the three months ended March 31, ~~2020 primarily due to the completion of our~~2021. The increase in merger and integration expense is primarily related ~~expenses~~to the Alamo Acquisition earnout, which was triggered by Alamo achieving certain EBITDA targets pursuant to the Purchase Agreement. The earnout period is still ongoing and ~~full capture~~changes in the fair value of ~~our targeted run-rate cost synergies~~the earnout are based on actual and projected performance within the performance period, in ~~2020.~~accordance with the Purchase Agreement.

Effective tax rate: Our effective tax rate on continuing operations for the three months ended March 31, ~~2021~~2022 was ~~(1.6)%~~1.8% for ~~$0.9~~$0.2 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to ~~foreign withholding~~state income taxes and change in valuation ~~allowance and discrete tax effect related to indefinite-lived assets.~~allowance. After considering all available positive and negative evidence, we determined that it is unlikely that we will utilize our net deferred tax assets in the foreseeable future and continued to maintain a full valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity represents a company's ability to adjust its future cash flows to meet its needs and opportunities, both expected and unexpected.


		(Thousands of Dollars)					(Thousands of Dollars)
		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	271,639	$	275,990	Cash and cash equivalents	$	99,788	$	110,695
Debt, net of unamortized deferred financing costs and unamortized debt discount	Debt, net of unamortized deferred financing costs and unamortized debt discount	335,089		335,540		Debt, net of unamortized deferred financing costs and unamortized debt discount	371,636		374,885

(Thousands of Dollars)
Three Months Ended March 31,
2021 2020
Net cash provided by (used in) operating activities $ (23,226) $ 48,487
Net cash provided by investing activities 20,588 14,117
Net cash provided by (used in) financing activities (2,050) 170,696


	(Thousands of Dollars)
	Three Months Ended March 31,
	2022		2021
Net cash provided by (used in) operating activities	$	28,666	$	(23,226)
Net cash provided by (used in) investing activities	(26,514)		20,588
Net cash used in financing activities	(12,774)		(2,050)

Significant sources and uses of cash during the three months ended March 31, 2022

Sources of cash:

•Operating activities:

–Net cash provided by operating activities during the three months ended March 31, 2022 was $28.7 million. This was primarily driven by improved market conditions and higher global commodity prices, which drove increased customer activity across all basins, as well as realized strong pricing recovery in all services lines. Pricing improvements, coupled with operational efficiencies and process improvements to permanently drive costs out of the organization more than offset the impact of cost inflation, and led to overall costs increasing at a lower rate than revenue increased.

Uses of cash:

•Investing activities:

–Net cash used in investing activities during the three months ended March 31, 2022 was $26.5 million. The activity consists primarily of purchases of property and equipment of $26.7 million, advances of deposit on equipment of$1.7 million, and implementation of software of $1.4 million, offset by proceeds from disposal of assets of $2.8 million.

•Financing activities:

–Net cash used in financing activities during the three months ended March 31, 2022 was $12.8 million. The activity consists primarily of payments made related to:

–Cash used to repay the 2018 Term Loan Facility and the Equipment Loan (as defined herein) was $3.6 million

–Cash used to repay our finance leases was $2.8 million

–Cash used to repay our financing liabilities was $2.4 million

–Share repurchased and retired related to stock-based compensation was $4.0 million

Significant sources and uses of cash during the three months ended March 31, 2021

Sources of cash:

•Investing activities:

–Net cash provided by investing activities for the three months ended March 31, 2021 of $20.6 million, consisted primarily of $34.4 million in cash received from the WSS ~~notes,~~Notes which the Company received as part of the sale of WSS segment to Basic, partially offset by capital expenditures.

Uses of cash:

•Operating activities:

–Net cash used in operating activities during the three months ended March 31, 2021 of $23.2 million. ~~We continue~~The net cash usage was primarily due to ~~closely monitor~~a decrease in our ~~discretionary spending to focus on working capital~~average number of deployed fleets, combined with decreases in our wireline and ~~net operating cash to support our capital expenditures and other investing activities.~~pumpdown services. For further discussion of these drivers, see “Results of Operations”.

•Financing activities:

–Cash used to repay our debt facilities, excluding leases and interest, during the three months ended March 31, 2021 was $0.9 million.

–Cash used to repay our finance leases during the three months ended March 31, 2021 was $0.2 million.

–Shares repurchased and retired related to payroll tax withholdings on our share-based compensation for the three months ended March 31, 2021 totaled $1.0 million.

~~Significant~~Future sources and use of cash

Our primary sources of liquidity have historically included, and we have funded our capital expenditures with, cash flows from operations, proceeds from public offerings of our common stock and borrowings under debt facilities. Our ability to generate future cash flows is subject to a number of variables, many of which are outside of our control, including the drilling, completion and production activity by our customers, which is highly dependent on oil and gas prices. See the information under the caption “Market Trends and Influences” above for additional discussion of certain factors that impact our results and the market challenges within our industry.

Our primary uses of cash ~~during the three months ended March 31, 2020~~

~~Sources of cash:~~

•~~Operating activities:~~

–~~Net cash generated by~~are for operating activities during the three months ended March 31, 2020 of $48.5 million was the result of our thoroughness in receiving collections from our customers and controlling costs. We continue to focus on maintaining operational and spend efficiencies resulting in positive working capital and net operating cash to support ourcosts, capital expenditures, including acquisitions, and ~~other investing activities.~~

•~~Investing activities:~~

–Net cash provided in investing activities for the three months ended March 31, 2020 of $14.1 million, consisting primarily of the cash received as part of the sale of the Well Support Services business segment, net of capital expenditures.

•~~Financing activities:~~

–Cash provided by the 2019 ABL Facility (defined below) in the amount of $175 million. This increase in cash is due to the proceeds received when the Company drew down $175 million from its 2019 ABL Facility. This action was a proactive measure to increase the Company's cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

~~Uses of cash:~~

–~~Cash used to repay our~~ debt ~~facilities, excluding leases and interest, during the three months ended March 31, 2020 was $0.9 million.~~

–~~Cash used to repay our finance leases during the three months ended March 31, 2020 was $2.3 million.~~

–~~Shares repurchased and retired related to payroll tax withholdings on our share-based compensation for the three months ended March 31, 2020 totaled 1.2 million.~~service.

~~Future sources and use of cash~~

~~We currently estimate that our capital expenditures for the~~Our first half 2022 capital expenditure budget remains $90-100 million, with a reduction in the second half of ~~2021 range between $55 million~~2022. We will continue to invest in our existing deployed capacity to ensure we are operating a well-maintained fleet for 2022 and ~~$65 million~~.beyond.

Debt service for the year ended December 31, ~~2021~~2022 is projected to be ~~$23.1~~$53.2 million, of which ~~$0.6~~$13.0 million is related to finance leases, excluding buyout payments. We anticipate our debt service will be funded by cash flows from operations. ~~Our leverage ratio, as calculated pursuant~~

In addition, depending upon Alamo's performance during the performance period, we may be using cash to perform our obligations under the earnout related to the ~~terms of our debt agreement, is 8.49x for the twelve rolling months ended March 31, 2021.~~Alamo Acquisition. We anticipate ~~our debt service~~that any payments due under the earnout will be funded by cash flows from operations.

Other factors affecting liquidity

Financial position in current market. As of March 31, ~~2021,~~2022, we had ~~$271.6~~$99.8 million of cash and a total of ~~$81.4~~$249.1 million available under our revolving credit facility. As of March 31, 2021, we were compliant with all financial and non-financial covenants in our bank agreements. Furthermore, our debt maturities extend over a long period of time. Despite the current uncertainty in global markets resulting from the COVID-19 pandemic, we2019 ABL Facility. We currently believe that our cash on hand, cash flow generated from operations and availability under our ~~revolving credit facility~~2019 ABL Facility will provide sufficient liquidity ~~for at least~~to cover our estimated short-term (i.e., the next 12 ~~months,~~months) and long-term (i.e., beyond the next 12 months) funding needs, including for capital expenditures, debt service, and working capital ~~investments, and contingent liabilities.~~investments.

Guarantee agreements. In the normal course of business, we have agreements with financial institutions as part of our 2019 ABL Facility under which ~~$28.5~~$23.3 million of letters of credit were outstanding as of March 31, ~~2021.~~2022.

Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. The majority of our trade receivables have payment terms of 30 to 4560 days. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers' cash flow from operations and their access to the credit markets. The economic impact of the COVID-19 ~~pandemic~~resurgence and ~~the resulting~~potential actions, which would be taken to control the further spread of the virus may exacerbate these delays or failures to pay in the future. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have an adverse effect on our liquidity, consolidated results of operations and consolidated financial condition.

Purchase Commitments. In the normal course of business, we enter into various contractual obligations that impact or could impact our liquidity. The Company has a number of purchase commitments that primarily relate to our agreements with vendors for sand purchases, other commodities/services and deposits on equipment. The purchase commitments to these vendors include obligations to purchase a minimum amount of product/services; provided that,, if the minimum purchase requirement is not met, the shortfall at the end of the applicable period is settled in cash or, in some cases, carried forward to the next period. We also have a variety of operating lease obligations related to our real estate, rail cars, and light duty vehicles. See Part II, ~~"Item 1A.~~"Item 1A. Risk Factors." for additional information on the risks related to these purchase commitments.

~~Principal~~Long-Term Debt ~~Agreements~~Arrangements

2019 ABL Facility

We and certain of our ~~other~~ subsidiaries as additional borrowers and guarantors, are parties to ~~a Second Amended and Restated Asset-Based Revolving Credit Agreement (the “2019~~the 2019 ABL ~~Facility”)~~Facility that matures on October 31, 2024. This facility provides for, among other things, a ~~$450.0~~$450 million revolving credit facility (with a ~~$100.0~~$100 million ~~subfacility~~sub-facility for letters of credit), subject to a borrowing base in accordance with the terms agreed between us and the lenders. As of March 31, ~~2021,~~2022, we had no outstanding principal amounts under the 2019 ABL Facility.

The 2019 ABL Facility iscontains various affirmative and negative covenants (in each case, subject to customary exceptions as set forth in the definitive documentation for the ABL Facility), and we were in compliance with those covenants as of March 31, 2022.

2018 Term Loan Facility

On May 25, 2018, we and certain of our subsidiaries as guarantors entered into the 2018 Term Loan Facility with each lender from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent. The proceeds of the 2018 Term Loan Facility were used to refinance Keane Group’s then-existing term loan facility and to repay related fees ~~guarantees~~and expenses, with the excess proceeds to fund general corporate purposes. The 2018 Term Loan Facility contains various affirmative and negative covenants (in each case, subject to customary exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility), and we were in compliance with those covenants as of ~~subsidiaries, events~~March 31, 2022.

Equipment Loan

On August 20, 2021, the Company entered into the Master Loan and Security Agreement (the “Master Agreement”) with Caterpillar Financial Services Corporation. The Master Agreement provides the backdrop for the Company to enter into secured equipment financing term loans from time to time in an aggregate amount of ~~default, restrictions~~up to $46.5 million (the “Equipment Loans”). The Equipment Loans may be drawn in multiple tranches, with each loan evidenced by a separate promissory note. On September 3, 2021, we entered into a term note for $39.4 million for an equipment financing loan. On December 30, 2021 the Company entered into a term note for $3.4 million for additional equipment financing. The term notes will bear interest at a rate of 5.25% per annum and will mature no later than June 1, 2025. The Master Agreement and the term notes contain customary affirmative and negative covenants, including ~~certain restricted payments and a consolidated fixed charge coverage ratio test.~~limitations on further encumbrance of the collateral subject to the applicable loans under the Master Agreement. As of March 31, ~~2021,~~2022, the Company was in compliance with all covenants.

~~2018 Term Loan Facility~~Critical Accounting Estimates

~~We are party to a term loan facility and certain of our subsidiaries are guarantors (the "2018 Term Loan Facility") that matures on~~ ~~May 25, 2025.~~ As of March 31, 2021, there was $340.4 million principal amount of term loans outstanding (the "2018 Term Loans") at an interest rate of LIBOR plus an applicable margin, which is currently at 4.00%. The 2018 Term Loan Facility is subject to customary fees, guarantees of subsidiaries, events of default, restrictions and covenants, including certain restricted payments. As of March 31, 2021, the Company was in compliance with all covenants.

~~Off-Balance Sheet Arrangements~~

~~We do not have any material off-balance sheet financing arrangements, transactions or special purpose entities.~~

~~Significant Accounting Policies and Estimates~~

The preparation of our unaudited condensed consolidated financial statements and related notes to the unaudited condensed consolidated financial statements included within Part I, ~~"Item 1. Condensed Consolidated~~"Item 1. Financial ~~Statements (Unaudited)"~~Statements" requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

A critical accounting estimate is one that requires a high level of subjective judgment by management and has a material impact to our financial condition or results of operations. This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included within Part I, ~~"Item 1. Condensed Consolidated~~"Item 1. Financial ~~Statements (Unaudited)"~~Statements" of this Quarterly Report on Form 10-Q, as well as our consolidated and combined financial statements and related notes included in Part II, "Item 8. Financial Statements and Supplementary Data" and Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K ~~Report on Form 10-K~~ for the year ended December 31, ~~2020.~~2021.

New Accounting Pronouncements

For discussion on the potential impact of new accounting pronouncements issued but not yet adopted, see Note (14) New Accounting Pronouncements of Part I, ~~"Item 1. Condensed Consolidated~~"Item 1. Financial ~~Statements (Unaudited).~~Statements."

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk. As of March 31, ~~2021,~~2022, we had variable-rate debt outstanding, the exposure to which we manage with our interest-rate-related derivative instrument. We held no derivative instruments that increased our exposure to market risks for foreign currency rates, commodity prices or other market price risks. We are exposed to changes in interest rates on our floating rate borrowings under our 2019 ABL Facility and 2018 Term ~~Loan.~~Loan Facility. As of March 31, ~~2021,~~2022, we had ~~$340.4~~$336.9 million aggregate principal amount outstanding under the 2018 Term ~~Loan.~~Loan Facility. The impact of a 1.0% increase in interest rates under the terms of the 2018 Term Loan Facility would have a $0.8 million and $0.9 million impact on interest expense for the three months ~~ending~~ended March 31, ~~2021.~~2022 and 2021, respectively.

Commodity Price Risk. Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our stimulation services such as proppant ~~chemicals~~ and ~~guar.~~chemicals. Our fuel costs consist primarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials ~~(particularly guar and proppant)~~ in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Depending on market conditions, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We generally do not engage in commodity price hedging activities. However, we have purchase commitments with certain vendors to ~~supply~~purchase a majority of the proppant used in our operations. Some of these agreements are take-or-pay agreements with minimum purchase obligations. As a result of future decreases in the market price of proppants, we could be required to purchase goods and pay prices in excess of market prices at the time of purchase. For further quantitative disclosure about our market risk related to our variable-rate debt, interest-rate-related derivative instrument and purchase commitments, see Part I, "Item 2. ~~Management~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations".~~Operations.

Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. As a result of the COVID-19 pandemic, we have seen an increase in collection time related to trade receivables. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts. For certain additional information regarding credit risk related to derivative instruments we hold, see Note (7) Derivatives of Part I, ~~"Item 1. Condensed Consolidated~~"Item 1. Financial ~~Statements (Unaudited)."~~Statements"

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and ~~Principal~~Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and ~~Principal~~Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission's (the "SEC")~~SEC's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and ~~Principal~~Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, ~~2021~~2022 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

As The information in response to this item is ~~typical~~ incorporated herein by reference from Note (11) Commitments and Contingencies of ~~the industry, the Company is, from time to time and in the ordinary course~~Part I, “Item 1. Financial Statements” of business, involved in routine litigation or subject to disputes or claims related to its business activities. It is the Company's opinion that although the amount of liability with respect to certain of these known legal proceedings and claims cannot be ascertained at this ~~time, any resulting liability will not have a material adverse effect individually or in the aggregate~~Quarterly Report on ~~the Company's financial condition, cash flows or results of operations; however, there can be no assurance as to the ultimate outcome of these matters.~~Form 10-Q.

Item 1A. Risk Factors

The statements in this section describe the known material risks to our business and should be considered carefully. The risk factors below are in addition to the risk factors set forth in the Annual Report. There have been no other material changes from the risk factors previously disclosed in Part I, ~~"Item 1A.~~"Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021, except as described below:

The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations.

In February of 2022, Russian military forces invaded Ukraine. Although the length, impact, and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, higher inflation, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. As a result, governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries have enacted additional sanctions against Russia and Russian interests. Such sanctions, and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, supply chain disruptions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations.

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

(a) Unregistered Sales of Equity Securities

None.

(b) Use of Proceeds

None.


Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities					Issuer Purchases of Equity Securities
Settlement Period	Settlement Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)	Settlement Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
January 1, 2021 through January 31, 2021		250,166	$3.45	—	$—
February 1, 2021 through February 28, 2021		57,629	$3.78	—	$—
March 1, 2021 through March 31, 2021		14,550	$4.88	—	$—
January 1, 2022, through January 31, 2022						January 1, 2022, through January 31, 2022	759,261	$4.42	—	—
February 1, 2022, through February 28, 2022						February 1, 2022, through February 28, 2022	61,138	6.96	—	—
March 1, 2022, through March 31, 2022						March 1, 2022, through March 31, 2022	17,249	7.36	—	—
Total	Total	322,345	$3.57	—	$—	Total	837,648	$4.67	—	—

(1) Consists of shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. The value of such shares is based on the closing price of our common shares on the vesting date.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).



Exhibit Number						Exhibit Description
10.1*
~~Amended~~ 10.2†						Form of ~~Restricted Stock Unit~~RSU Award Agreement ~~for R. Drummond.~~2022 (incorporated by reference to Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2022).
31.1*10.3†						Form of PSU Award Agreement 2022 (incorporated by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2022).
10.4†						Form of Performance Award Agreement 2022 (incorporated by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2022).
10.5†						Continuing Award Program for Qualified Retirees (incorporated by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2022).
10.6†						Leadership Severance Program (incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2022).
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
31.231.2						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
32.132.1						Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..
101.INS*						XBRL Instance Document - The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						XBRL Taxonomy Extension Schema Document.
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

* Filed herewith.

** Furnished herewith.

† Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~May 5, 2021.~~April 28, 2022.


			NexTier Oilfield Solutions Inc. (Registrant)

			By:			/s/ ~~Phung Ngo-Burns~~Dipo Iluyomade
						~~Phung Ngo-Burns~~Dipo Iluyomade
						~~Principal~~Chief Accounting Officer and Duly Authorized Officer