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 ~~June~~September 30, 2022


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

For the transition period from _____ to _____

Commission File 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 ~~July 22,~~October 21, 2022, the registrant had ~~244,141,163~~245,529,851 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.	Financial Statements	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	89
	Notes to the Unaudited Condensed Consolidated Financial Statements	1011

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2830

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4142

Item 4.	Controls and Procedures	4243

PART II.	OTHER INFORMATION	4344

Item 1.	Legal Proceedings	4344

Item 1A.	Risk Factors	4344

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4344

Item 3.	Defaults Upon Senior Securities	4344

Item 4.	Mine Safety Disclosures	4344

Item 5.	Other Information	4344

Item 6.	Exhibits	4445

	Signatures	4546

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" and "our" refer to NexTier Oilfield Solutions Inc. and its consolidated subsidiaries; (ii) the term "Keane Group" refers to Keane Group Holdings, LLC and its consolidated subsidiaries; (iii) the term "Keane Investor" refers to Keane Investor Holdings LLC; (iv) the term "Cerberus" refers to Cerberus Capital Management, L.P. and its controlled affiliates and investment funds; and (v) the term "Alamo" refers to Alamo Pressure Pumping, LLC and 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 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," "will," "should," "expect," "believe," "plan," "anticipate," "could," "intend," "target," "goal," "project," "contemplate," "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 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 by governments, private businesses or others to contain the spread of the virus and its variants or to treat its impact;

•changing regional, national or global economic conditions, including rising inflation and supply 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~~growth, 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;

•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, 2021 and in our subsequent filings with the Securities and Exchange Commission (the "SEC"). 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 I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 and in our subsequent filings with the SEC.

PART I

Item 1. Financial Statements

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except par value)


	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalents	$	250,207	$	110,695
Trade and other accounts receivable, net	479,669		301,740
Inventories, net	60,008		38,094
Assets held for sale	—		1,555
Prepaid and other current assets	53,533		55,625
Total current assets	843,417		507,709
Operating lease right-of-use assets	17,487		21,767
Finance lease right-of-use assets	45,262		41,537
Property and equipment (net of accumulated depreciation of $984,324 and $951,170)	636,951		620,865
Goodwill	192,780		192,780
Intangible assets (net of accumulated amortization of $78,920 and $62,678)	53,117		64,961
Other noncurrent assets	13,310		7,962
Total assets	$	1,802,324	$	1,457,581

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	288,293	$	190,963
Accrued expenses	287,980		213,923
Customer contract liabilities	23,538		23,729
Current maturities of long-term operating lease liabilities	5,324		7,452
Current maturities of long-term finance lease liabilities	18,261		11,906
Current maturities of long-term debt	13,849		13,384
Other current liabilities	11,277		10,346
Total current liabilities	648,522		471,703
Long-term operating lease liabilities, less current maturities	12,823		20,446
Long-term finance lease liabilities, less current maturities	17,335		26,873
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities	350,986		361,501
Other noncurrent liabilities	9,732		30,041
Total noncurrent liabilities	390,876		438,861
Total liabilities	1,039,398		910,564


Stockholders' equity

Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 245,519 and 242,019 shares, respectively)	2,455		2,420
Paid-in capital in excess of par value	1,113,380		1,094,020
Retained deficit	(359,180)		(541,164)
Accumulated other comprehensive loss	6,271		(8,259)
Total stockholders' equity	762,926		547,017
Total liabilities and stockholders' equity	$	1,802,324	$	1,457,581

June 30,
2022 December 31,
2021
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 158,136 $ 110,695
Trade and other accounts receivable, net 456,632 301,740
Inventories, net 57,229 38,094
Assets held for sale 8,727 1,555
Prepaid and other current assets 46,029 55,625
Total current assets 726,753 507,709
Operating lease right-of-use assets 17,369 21,767
Finance lease right-of-use assets 45,616 41,537
Property and equipment (net of accumulated depreciation of $959,202 and $951,170) 603,343 620,865
Goodwill 192,780 192,780
Intangible assets (net of accumulated amortization of $71,511 and $62,678) 57,441 64,961
Other noncurrent assets 10,904 7,962
Total assets $ 1,654,206 $ 1,457,581
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 260,217 $ 190,963
Accrued expenses 281,402 213,923
Customer contract liabilities 21,538 23,729
Current maturities of long-term operating lease liabilities 5,481 7,452
Current maturities of long-term finance lease liabilities 14,593 11,906
Current maturities of long-term debt 13,691 13,384
Other current liabilities 13,440 10,346
Total current liabilities 610,362 471,703
Long-term operating lease liabilities, less current maturities 12,456 20,446
Long-term finance lease liabilities, less current maturities 23,585 26,873
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities 354,503 361,501
Other noncurrent liabilities 9,217 30,041
Total noncurrent liabilities 399,761 438,861
Total liabilities 1,010,123 910,564
Stockholders' equity
Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 244,140 and 242,019 shares, respectively) 2,442 2,420
Paid-in capital in excess of par value 1,105,006 1,094,020
Retained deficit (463,914) (541,164)
Accumulated other comprehensive loss 549 (8,259)
Total stockholders' equity 644,083 547,017
Total liabilities and stockholders' equity $ 1,654,206 $ 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 Income (Loss)

(Amounts in thousands, except for per share amounts)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Revenue	Revenue	$	842,912	$	292,145	$	1,477,955	$	520,547	Revenue	$	896,010	$	393,164	$	2,373,965	$	913,711
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of services(1)	Cost of services(1)	649,866		269,260		1,174,522		487,037		Cost of services(1)	682,683		344,637		1,857,205		831,674
Depreciation and amortization	Depreciation and amortization	58,794		40,671		113,957		86,539		Depreciation and amortization	56,542		44,861		170,499		131,400
Selling, general and administrative expenses	Selling, general and administrative expenses	35,855		20,734		71,714		36,803		Selling, general and administrative expenses	37,415		37,453		109,129		74,256
Merger and integration	Merger and integration	23,682		178		32,914		178		Merger and integration	27,521		4,752		60,435		4,930
Gain on disposal of assets	Gain on disposal of assets	(866)		(2,017)		(1,689)		(6,609)		Gain on disposal of assets	(10,471)		(1,133)		(12,160)		(7,742)
Total operating costs and expenses	Total operating costs and expenses	767,331		328,826		1,391,418		603,948		Total operating costs and expenses	793,690		430,570		2,185,108		1,034,518
Operating income (loss)	Operating income (loss)	75,581		(36,681)		86,537		(83,401)		Operating income (loss)	102,320		(37,406)		188,857		(120,807)
Other income (expense):	Other income (expense):									Other income (expense):
Other income, net	Other income, net	1,461		11,247		6,831		8,528		Other income, net	11,124		585		17,955		9,113
Interest expense, net	Interest expense, net	(7,344)		(5,726)		(14,718)		(9,932)		Interest expense, net	(7,150)		(6,701)		(21,868)		(16,633)
Total other expense		(5,883)		5,521		(7,887)		(1,404)
Total other income (expense)										Total other income (expense)	3,974		(6,116)		(3,913)		(7,520)
Income (loss) before income taxes	Income (loss) before income taxes	69,698		(31,160)		78,650		(84,805)		Income (loss) before income taxes	106,294		(43,522)		184,944		(128,327)
Income tax expense	Income tax expense	(1,240)		(621)		(1,400)		(1,478)		Income tax expense	(1,560)		(472)		(2,960)		(1,950)
Net Income (loss)	Net Income (loss)	68,458		(31,781)		77,250		(86,283)		Net Income (loss)	104,734		(43,994)		181,984		(130,277)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	538		(435)		253		(98)		Foreign currency translation adjustments	1,037		531		1,290		433
Hedging activities	Hedging activities	1,565		(515)		7,177		831		Hedging activities	4,421		(46)		11,598		785
Total comprehensive income (loss)	Total comprehensive income (loss)	$	70,561	$	(32,731)	$	84,680	$	(85,550)	Total comprehensive income (loss)	$	110,192	$	(43,509)	$	194,872	$	(129,059)

Net income (loss) per share:	Net income (loss) per share:									Net income (loss) per share:
Basic net income (loss) per share	Basic net income (loss) per share	$	0.28	$	(0.15)	$	0.32	$	(0.40)	Basic net income (loss) per share	$	0.43	$	(0.20)	$	0.75	$	(0.60)
Diluted net income (loss) per share	Diluted net income (loss) per share	$	0.27	$	(0.15)	$	0.31	$	(0.40)	Diluted net income (loss) per share	$	0.42	$	(0.20)	$	0.73	$	(0.60)

Weighted-average shares outstanding: basic	Weighted-average shares outstanding: basic	243,969		215,443		243,621		215,278		Weighted-average shares outstanding: basic	244,686		224,481		243,980		218,499
Weighted-average shares outstanding: diluted	Weighted-average shares outstanding: diluted	250,775		215,443		249,462		215,278		Weighted-average shares outstanding: diluted	250,821		224,481		249,864		218,499

(1) Cost of services during the three and ~~six~~nine months ended ~~June~~September 30, 2022 excludes depreciation and amortization of ~~$54.3~~$52.1 million and ~~$105.2~~$157.3 million, respectively. Cost of services during the three and ~~six~~nine months ended ~~June~~September 30, 2021 excludes depreciation and amortization of ~~$36.3~~$40.5 million and ~~$77.6~~$118.1 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 income (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, 2021	Balance as of December 31, 2021	$	2,420	$	1,094,020	$	(541,164)	$	(8,259)	$	547,017	Balance as of December 31, 2021	$	2,420	$	1,094,020	$	(541,164)	$	(8,259)	$	547,017

Stock-based compensation	Stock-based compensation	19		7,796		—		—		7,815		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	—		(3,953)		—		—		(3,953)		Shares repurchased and retired related to stock-based compensation	—		(3,953)		—		—		(3,953)
Other comprehensive income	Other comprehensive income	—		—		—		6,014		6,014		Other comprehensive income	—		—		—		6,014		6,014
Net income	Net income	—		—		8,792		—		8,792		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	Balance as of March 31, 2022	$	2,439	$	1,097,863	$	(532,372)	$	(2,245)	$	565,685
Stock-based compensation	Stock-based compensation	7		7,540		—		—		7,547		Stock-based compensation	7		7,540		—		—		7,547
Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	(4)		(397)		—		—		(401)		Shares repurchased and retired related to stock-based compensation	(4)		(397)		—		—		(401)
Other comprehensive income	Other comprehensive income	—		—		—		2,794		2,794		Other comprehensive income	—		—		—		2,794		2,794
Net income	Net income	—		—		68,458		—		68,458		Net income	—		—		68,458		—		68,458
Balance as of June 30, 2022	Balance as of June 30, 2022	$	2,442	$	1,105,006	$	(463,914)	$	549	$	644,083	Balance as of June 30, 2022	$	2,442	$	1,105,006	$	(463,914)	$	549	$	644,083
Stock-based compensation												Stock-based compensation	8		7,111		—		—		7,119
Shares repurchased and retired related to stock-based compensation												Shares repurchased and retired related to stock-based compensation	—		(2,939)		—		—		(2,939)
Equity issued in connection with CIG Acquisition												Equity issued in connection with CIG Acquisition	5		4,202		—		—		4,207
Other comprehensive income												Other comprehensive income	—		—		—		5,722		5,722
Net income												Net income	—		—		104,734		—		104,734
Balance as of September 30, 2022												Balance as of September 30, 2022	$	2,455	$	1,113,380	$	(359,180)	$	6,271	$	762,926

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
Stock-based compensation 5 4,884 — — 4,889
Shares repurchased and retired related to stock repurchase program (1) (435) — — (436)
Other comprehensive loss — — — (267) (267)
Net loss — — (31,781) — (31,781)
Balance as of June 30, 2021 $ 2,157 $ 998,628 $ (508,024) $ (11,028) $ 481,733

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 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
Stock-based compensation	5		4,884		—		—		4,889
Shares repurchased and retired related to stock repurchase program	(1)		(435)		—		—		(436)
Other comprehensive loss	—		—		—		(267)		(267)
Net loss	—		—		(31,781)		—		(31,781)
Balance as of June 30, 2021	$	2,157	$	998,628	$	(508,024)	$	(11,028)	$	481,733
Stock-based compensation	4		7,346		—		—		7,350
Shares repurchased and retired related to stock repurchase program	(1)		(419)		—		—		(420)
Equity issued in connection with Alamo Acquisition	260		82,063		—		—		82,323
Other comprehensive loss	—		—		—		1,179		1,179
Net loss	—		—		(43,994)		—		(43,994)
Balance as of September 30, 2021	$	2,420	$	1,087,618	$	(552,018)	$	(9,849)	$	528,171

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)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	181,984	$	(130,277)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization	170,499		131,400
Amortization of deferred financing fees	1,634		1,528

Gain on disposal of assets	(12,160)		(7,742)





Unrealized gain on derivative recognized in other comprehensive loss	—		785
(Gain) loss on financial instrument and derivatives, net	(6,299)		4,142
Stock-based compensation	24,862		17,442
Gain on insurance proceeds recognized in other income	(11,044)		(10,409)


Changes in operating assets and liabilities:
Increase in trade and other accounts receivable, net	(177,955)		(92,184)


Increase in inventories	(26,523)		(9,046)
Decrease (increase) in prepaid and other current assets	27,625		(10,138)
Decrease in other assets	8,945		14,203
Increase in accounts payable	77,964		59,072
Increase in accrued expenses	76,600		42,951
Decrease in customer contract liabilities	(192)		(3,468)
Decrease in other liabilities	(25,619)		(27,579)
Net cash provided by (used in) operating activities	310,321		(19,320)
Cash flows from investing activities:


Purchase of property and equipment	(136,770)		(132,057)
Advances of deposit on equipment	(5,884)		(543)
Implementation of software	(2,986)		(2,532)
Proceeds from disposal of assets	36,098		24,470
Assets and business acquisition	(26,694)		(95,082)



Payment of consideration liability	—		(6,671)
Proceeds from settlement of WSS Notes and make-whole derivative	—		34,350
Proceeds from insurance recoveries	845		22,947

Net cash used in investing activities	(135,391)		(155,118)
Cash flows from financing activities:


Proceeds from asset-based revolver and equipment loan	—		39,428
Payments on the term loan facility and asset based revolver	(10,977)		(2,625)
Payments on finance leases	(10,056)		(1,146)
Payment of debt issuance costs	(110)		(251)




Payments for financing liabilities	(5,799)		—
Payments for contingent consideration	(2,473)		—
Shares repurchased and retired related to stock-based compensation	(7,293)		(1,866)


Net cash provided (used) in financing activities	(36,708)		33,540
Non-cash effect of foreign translation adjustments	1,290		433
Net increase (decrease) in cash, cash equivalents	139,512		(140,465)
Cash and cash equivalents, beginning	110,695		275,990
Cash and cash equivalents, ending	$	250,207	$	135,525

Six Months Ended
June 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ 77,250 $ (86,283)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization 113,957 86,539
Amortization of deferred financing fees 1,076 1,015
Gain on disposal of assets (1,689) (6,609)
Unrealized gain on derivative recognized in other comprehensive loss — 831
(Gain) loss on financial instrument and derivatives, net (6,302) 2,927
Stock-based compensation 16,995 10,092
Gain on insurance proceeds recognized in other income — (9,686)
Changes in operating assets and liabilities:
Increase in trade and other accounts receivable, net (154,898) (35,155)
Increase in inventories (19,780) (3,114)
Decrease (increase) in prepaid and other current assets 18,559 (6,593)
Decrease in other assets 7,113 11,419
Increase in accounts payable 51,940 32,494
Increase in accrued expenses 67,498 4,834
Increase (decrease) in customer contract liabilities (2,192) 2,280
Decrease in other liabilities (23,027) (13,590)
Net cash provided by (used in) operating activities 146,500 (8,599)
Cash flows from investing activities:
Purchase of property and equipment (81,290) (57,540)
Advances of deposit on equipment (3,416) (4,232)
Implementation of software (1,991) (1,814)
Proceeds from disposal of assets 9,223 18,376
Acquisition of business 482 (2,501)
Proceeds from settlement of WSS Notes and make-whole derivative — 34,350
Proceeds from insurance recoveries 20 —
Net cash used in investing activities (76,972) (13,361)
Cash flows from financing activities:
Payments on the term loan facility and equipment loan (7,259) (1,750)
Payments on finance leases (6,621) (300)
Payment of debt issuance costs (110) —
Payments for financing liabilities (3,996) —
Shares repurchased and retired related to stock-based compensation (4,354) (1,446)
Net cash used in financing activities (22,340) (3,496)
Non-cash effect of foreign translation adjustments 253 (98)
Net increase (decrease) in cash, cash equivalents 47,441 (25,554)
Cash and cash equivalents, beginning 110,695 275,990
Cash and cash equivalents, ending $ 158,136 $ 250,436
Supplemental disclosure of cash flow information:

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense, net	$	19,434	$	16,469
Income taxes	1,260		—
Non-cash investing and financing activities:
Change in accrued capital expenditures	$	(19,404)	$	(19,763)

Non-cash additions to finance right-of-use assets	7,115		35,813
Non-cash additions to finance lease liabilities, including current maturities	(6,874)		(35,813)
Non-cash additions to operating right-of-use assets	5,100		3,352
Non-cash additions to operating lease liabilities, including current maturities	$	(5,016)	$	(512)

500,000 shares of NexTier common stock issued for asset acquisition	$	(4,207)	$	—
26,000,000 shares of NexTier common stock issued in exchange for Alamo ownership	—		(82,323)
Total contingent consideration	—		(45,944)
Non contingent consideration	$	—	$	(7,370)

Cash paid during the period for:
Interest expense, net $ 13,366 $ 10,502
Income taxes 710 —
Non-cash investing and financing activities:
Change in accrued capital expenditures $ (17,318) $ (29,133)
Non-cash additions to finance right-of-use assets 6,222 —
Non-cash additions to finance lease liabilities, including current maturities (6,020) —
Non-cash additions to operating right-of-use assets 2,886 3,352
Non-cash additions to operating lease liabilities, including current maturities $ (2,848) $ (512)

See accompanying notes to unaudited condensed consolidated financial statements.

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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, 2021, filed with the SEC on February 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)~~(i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and ~~(2)~~(ii) 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; 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 ~~June~~September 30, 2022 and the results of its operations and cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. Such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated.

On August 31, 2021, the Company completed its acquisition (the “Alamo Acquisition”) of Alamo. Merger and integration related costs were recognized separately from the acquisition of assets and assumptions of liabilities in the Alamo Acquisition. Merger costs consist of legal and professional fees and pre-merger notification fees. Integration costs consist of expenses incurred to integrate Alamo’s operations, aligning accounting processes and procedures, integrating its enterprise resource planning system with those of the Company, and any earnout payments. All of these costs are recorded within merger and integration costs on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). For additional detailed information regarding the Alamo Acquisition, see Note (3) ~~Alamo Acquisition~~Acquisitions.

The consolidated financial statements prior to August 31, 2021 reflect only the historical results of the Company prior to the completion of the Alamo Acquisition. The financial statements have been prepared using the acquisition method of accounting under existing 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 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.

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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 values of the acquired assets and liabilities are 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 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 60 days of the invoice issuance.

A portion of the Company’s contracts contain variable 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 Company’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~~The Company has identified one contract with a remaining term of more than one year, for which the Company had approximately ~~$23.3~~$21.3 million of unsatisfied performance obligations as of ~~June~~September 30, 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

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 ~~June~~September 30, 2022, the majority of the ~~Company’s~~

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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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 60 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 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and net cash provided by operating activities in the Condensed Consolidated Statements of 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 (14) Business Segments.

Revenue from the Company’s (i) Completion Services and (ii) Well Construction and Intervention (“WC&I”) 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 its 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 Condensed Consolidated Statements of Operations and 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 Condensed Consolidated Statements of Operations and 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 services performed and the chemicals, proppant and compressed natural gas consumed during the course of service. The field ticket may also include charges for the mobilization of the 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.

WC&I

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~~On August 1, 2022, the Company ~~provides~~sold its coiled tubing assets to Gladiator Energy LLC ("Gladiator") for a cash purchase price of $21.6 million, which resulted in a gain on sale of assets of $11.6 million. Prior to the sale, the Company provided a range of coiled tubing services 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~~were typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue iswas recognized upon completion of each day’s work based upon a completed field ticket. The field ticket ~~includes~~included charges for the services performed and the consumables used during the course of service. The field ticket may have also ~~include~~included 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~~would charge the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates or pursuant to pricing agreements.

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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Disaggregation of Revenue

Revenue activities during the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 were as follows:


		Three Months Ended June 30, 2022						Six Months Ended June 30, 2022							Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
		(Thousands of Dollars)						(Thousands of Dollars)							(Thousands of Dollars)						(Thousands of Dollars)
		Completion Services		WC&I		Total		Completion Services		WC&I		Total			Completion Services		WC&I		Total		Completion Services		WC&I		Total
Geography	Geography													Geography
Northeast	Northeast	$	110,319	$	6,376	$	116,695	$	199,877	$	11,886	$	211,763	Northeast	$	110,246	$	8,505	$	118,751	$	310,123	$	20,391	$	330,514
Central	Central	159,995		—		159,995		273,091		—		273,091		Central	165,505		—		165,505		438,596		—		438,596
West Texas	West Texas	496,916		34,025		530,941		877,063		60,103		937,166		West Texas	514,316		28,250		542,566		1,391,379		88,353		1,479,732
West	West	30,399		1,462		31,861		49,023		2,297		51,320		West	64,961		1,504		66,465		113,984		3,801		117,785
International	International	3,420		—		3,420		4,615		—		4,615		International	2,723		—		2,723		7,338		—		7,338
		$	801,049	$	41,863	$	842,912	$	1,403,669	$	74,286	$	1,477,955		$	857,751	$	38,259	$	896,010	$	2,261,420	$	112,545	$	2,373,965


		Three Months Ended June 30, 2021						Six Months Ended June 30, 2021							Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
		(Thousands of Dollars)						(Thousands of Dollars)							(Thousands of Dollars)						(Thousands of Dollars)
		Completion Services		WC&I		Total		Completion Services		WC&I		Total			Completion Services		WC&I		Total		Completion Services		WC&I		Total
Geography	Geography													Geography
Northeast	Northeast	$	63,200	$	6,313	$	69,513	$	113,308	$	12,119	$	125,427	Northeast	$	64,140	$	4,859	$	68,999	$	177,448	$	16,978	$	194,426
Central	Central	54,649		—		54,649		89,549		—		89,549		Central	72,861		—		72,861		162,410		—		162,410
West Texas	West Texas	132,801		16,131		148,932		239,467		28,609		268,076		West Texas	168,176		20,902		189,078		407,643		49,511		457,154
West	West	5,395		862		6,257		10,283		1,999		12,282		West	50,511		1,336		51,847		60,794		3,335		64,129
International	International	12,794		—		12,794		25,213		—		25,213		International	10,379		—		10,379		35,592		—		35,592
		$	268,839	$	23,306	$	292,145	$	477,820	$	42,727	$	520,547		$	366,067	$	27,097	$	393,164	$	843,887	$	69,824	$	913,711

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

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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 – 25 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, or its expected period of use. Depreciation methods, useful lives and residual values are reviewed annually.

During the third quarter of 2022, one of the Company’s hydraulic frac fleets operating in the Permian Basin was involved in an accidental fire, which resulted in a loss of fracturing equipment; no parties were injured as a result of this incident. As of September 30, 2022, the Company recognized a $15.3 million receivable related to insurance proceeds in other current assets for replacement costs of the damaged equipment, which offsets the $4.3 million loss recognized on the damaged equipment and costs to remove the equipment. The resulting gain of $11.0 million was recognized in other income (expense), net in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Amortization on definite-lived intangible assets is calculated using 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~~annually or upon the occurrence of events or changes in circumstances, referred to as triggering events, that may indicate the carrying value of a Long-lived Asset may not be ~~recoverable, or upon the occurrence of a triggering event.~~recoverable. 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~~Following the sale of the Company's coiled tubing assets to Gladiator, the Company's asset groups consist of fracturing services, wireline ~~cementing~~ and ~~coiled tubing.~~cementing. 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.

The Company did not recognize any impairment charges related to the Company’s long-lived assets for the three and ~~six~~nine months ended ~~June~~September 30, 2022 or 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 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.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

For finance leases, the Company amortizes the ROU asset on a straight-line basis over the earlier of the useful life of the ROU asset or the end of the lease term and records this amortization in depreciation and amortization expense on the Condensed Consolidated Statements of Operations and 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 reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

incurred interest expense is recorded in interest expense on the Condensed Consolidated Statements of Operations and 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 Condensed Consolidated Statements of Operations and 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 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.

1516

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 awards (“PSUs”), 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 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 are 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 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 of 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. 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.

(3) Acquisitions

(a) Alamo Acquisition

On August 31, 2021 (the “Alamo Acquisition Date”), the Company completed the Alamo Acquisition in accordance with the terms of the Purchase Agreement, dated as of 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 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 $30.0 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 the fourth quarter of 2021 and was paid to the Company in the first quarter of 2022. The contingent consideration includes a Tier II upgrade payment and earnout payments, which are contingent upon the achievement of certain performance targets, as described in the Purchase Agreement.

The Company accounted for the Alamo Acquisition using the acquisition method of accounting. The aggregate purchase price 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 market and thus represent Level 3 inputs. The fair value of acquired property and equipment were based on both available market data and a cost approach.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

The following table summarizes the fair value of the consideration transferred in the Alamo Acquisition and the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the Alamo Acquisition Date:


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.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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 following combined pro forma information assumes the Alamo Acquisition occurred on January 1, 2020. The pro forma information presented below is for illustrative purposes only and does not reflect future events that occurred after ~~June~~September 30, 2021 or any operating efficiencies or inefficiencies that resulted from the Alamo Acquisition. The information is not necessarily indicative of results that would have been achieved had the Company controlled Alamo during the period presented. Pro forma adjustments related to the elimination of historical interest expense for debt paid off as part of the Alamo Acquisition were ~~$1.0~~$0.4 million and ~~$2.3~~$2.7 million during the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.


		(unaudited, amounts in Thousands of Dollars)					(unaudited, amounts in Thousands of Dollars)
		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021			Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Revenue	Revenue	$	374,126	$	670,023	Revenue	$	454,113	$	1,124,136
Net loss	Net loss	(24,160)		(71,899)		Net loss	(44,392)		(116,291)

Net loss per share (basic)	Net loss per share (basic)	$	(0.10)	$	(0.30)	Net loss per share (basic)	$	(0.18)	$	(0.48)
Net loss per share (diluted)	Net loss per share (diluted)	$	(0.10)	$	(0.30)	Net loss per share (diluted)	$	(0.18)	$	(0.48)

(b) Asset Acquisition from Continental Intermodal Group LP

On August 3, 2022 the Company entered into and closed a definitive agreement to purchase substantially all assets (and assume certain lease liabilities) of the sand hauling, wellsite storage and last mile logistics businesses of Continental Intermodal Group LP (“CIG”) and its subsidiaries (the “CIG Acquisition”) from CIG, Continental Intermodal Group – Trucking, LLC (“Trucking”) and CIG Logistics LLC (together with Trucking and CIG, “CIG Sellers”).

The CIG Acquisition was completed for a purchase price of $31.3 million. At the time of close, the Company paid a total of $32.1 million, which included: (i) approximately $27.9 million in cash paid at closing to the CIG Sellers plus (ii) 500,000 shares of common stock. The $32.1 million transferred to CIG at the time of close included a deposit of $0.8 million for a transition services agreement for costs of services to be provided during the transition period. Accordingly, the purchase price of $31.3 million does not include the deposit of $0.8 million. The Company accounted for this acquisition as an asset acquisition pursuant to ASC 805. The purchase price of the acquisition was allocated amongst the acquired assets as the fair value of the acquired machinery and equipment assets represented substantially all of the fair value of the gross assets acquired. Additionally, the Company established a right of use asset and an operating lease liability of $0.9 million for the assumed lease liability.

(4) Inventories, net

Inventories, net, consisted of the following as of September 30, 2022 and December 31, 2021:


	(Thousands of Dollars)
	September 30, 2022		December 31, 2021
Sand, including freight	$	18,183	$	9,674
Chemicals and consumables	7,128		4,204
Materials and supplies	34,697		24,216

Total inventory, net	$	60,008	$	38,094

Inventories are reported net of obsolescence reserves of $3.0 million and $6.3 million as of September 30, 2022 and December 31, 2021, respectively. The Company recognized $0.6 million and $1.0 million of obsolescence expense during the three and nine months ended September 30, 2021, respectively.

1719

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 June 30, 2022 and December 31, 2021:~~

(Thousands of Dollars)
June 30,
2022 December 31,
2021
Sand, including freight $ 20,830 $ 9,674
Chemicals and consumables 6,733 4,204
Materials and supplies 29,666 24,216
Total inventory, net $ 57,229 $ 38,094

Inventories are reported net of obsolescence reserves of $4.4 million and $6.3 million as of June 30, 2022 and December 31, 2021, respectively. The Company recognized $0.3 million and $0.4 million of obsolescence expense during the three and six months ended June 30, 2021, respectively.

(5) Long-Term Debt

Long-term debt at ~~June~~September 30, 2022 and December 31, 2021 consisted of the following:


		(Thousands of Dollars)					(Thousands of Dollars)
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
2018 Term Loan Facility	2018 Term Loan Facility	$	336,000	$	337,750	2018 Term Loan Facility	$	335,125	$	337,750
2021 Equipment Loan	2021 Equipment Loan	35,940		41,321		2021 Equipment Loan	33,162		41,321
Other long-term debt	Other long-term debt	404		533		Other long-term debt	339		533
Less: Unamortized debt discount and debt issuance costs	Less: Unamortized debt discount and debt issuance costs	(4,150)		(4,719)		Less: Unamortized debt discount and debt issuance costs	(3,791)		(4,719)
Total debt, net of unamortized debt discount and debt issuance costs	Total debt, net of unamortized debt discount and debt issuance costs	368,194		374,885		Total debt, net of unamortized debt discount and debt issuance costs	364,835		374,885
Less: Current portion	Less: Current portion	(13,691)		(13,384)		Less: Current portion	(13,849)		(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	$	354,503	$	361,501	Long-term debt, net of unamortized debt discount and debt issuance costs	$	350,986	$	361,501

Below is a summary of the Company’s credit facilities outstanding as of ~~June~~September 30, 2022:


		(Thousands of Dollars)								(Thousands of Dollars)
		2021 Equipment Loan			2019 ABL Facility		2018 Term Loan Facility			2021 Equipment Loan			2019 ABL Facility		2018 Term Loan Facility
Original facility size	Original facility size	$	46,500		$	450,000	$	350,000	Original facility size	$	46,500		$	450,000	$	350,000
Outstanding balance	Outstanding balance	$	35,940		$	—	$	336,000	Outstanding balance	$	33,162		$	—	$	335,125
Letters of credit issued	Letters of credit issued	$	—		$	23,201	$	—	Letters of credit issued	$	—		$	23,050	$	—
Available borrowing base commitment	Available borrowing base commitment	n/a			$	334,311	n/a		Available borrowing base commitment	n/a			$	371,468	n/a
Interest Rate(1)	Interest Rate(1)	5.25		%	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	June 1, 2025			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.

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

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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


(Thousands of Dollars)	(Thousands of Dollars)			(Thousands of Dollars)
Year-end December 31,	Year-end December 31,			Year-end December 31,
2022	2022	$	7,478	2022	$	3,760
2023	2023	15,430		2023	15,430
2024	2024	15,790		2024	15,790
2025	2025	333,646		2025	333,646
2026	2026	—		2026	—
		$	372,344		$	368,626

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.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(6) Significant Risks and Uncertainties

The Company operates in 2two reportable segments: Completion Services and WC&I, with significant concentration in the Completion Services segment. During the three months ended ~~June~~September 30, 2022 and 2021, sales to Completion Services customers represented ~~95%~~96% and~~92%~~ 93% of the Company's consolidated revenue, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, sales to Completion Services customers represented 95% and 92% of the Company's consolidated revenue.

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.

From the end of the fourth quarter of 2019 through mid-August 2020, the U.S. active rig count decreased by 70%, from 805 to 244 rigs before recovering to 351 rigs by the end of 2020, primarily driven by the impact from ~~COVID-19.~~the COVID-19 pandemic. 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 drastically impacted the demand for U.S. Completion Services and resulted in increased 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~~through 2022 and the Company continued to see disciplined increases in oil supply from the Organization of Petroleum Exporting Countries plus ("OPEC+") and U.S. shale operators through the ~~second~~third quarter of 2022. The Russian invasion of Ukraine ~~increased~~continues to increase uncertainty of global supply given the ~~supply of~~ crude oil and natural gas that is exported ~~from~~out of Russia.

The magnitude, cadence, and 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, 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. For the three months ended ~~June~~September 30, 2022, there were no customers that were considered significant. For the ~~six~~nine months ended ~~June~~September 30, 2022, ~~revenue from one customer in our completions services segment individually represented 10% or $142.1 million of the Company's consolidated revenue.~~there were no customers that were considered significant. For the three months ended ~~June~~September 30, 2021, the Company had one significant customer in our completions services segment that represented ~~11%~~15% or ~~$33.0~~$60.8 million of the Company's consolidated revenue. For the ~~six~~nine months ended ~~June~~September 30, 2021, the Company had one significant customer in our completions services segment that represented ~~10%~~12% or ~~$52.8~~$113.6 million of the Company's consolidated revenue.

For the three and nine months ~~and six~~ ended ~~June~~September 30, 2022, there were no suppliers that individually represented more than 5% of the Company's overall purchases. For the three months ended ~~June~~September 30, 2021, purchases from the Company's top ~~two~~ supplier ~~combined~~ represented ~~approximately 13%~~5% of the Company's overall purchases, while for the ~~six~~nine months ended ~~June~~September 30, 2021, the Company's top supplier represented approximately 7%6% 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.

1921

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 cash and $34.4 million of par value Senior Secured Notes (the "WSS Notes"), with 10.75% coupon rate, previously issued by Basic. 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 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 anniversary, the make-whole guarantee would accelerate the WSS Notes to par value of $34.4 million. 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 of the WSS Notes and the make-whole guarantee were remeasured at fair value at the end of each reporting period. 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. This gain is recorded 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"). The 2018 Term Loan Facility 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 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. 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 instrument on a gross and net basis as of the periods shown below:


		(Thousands of Dollars)											(Thousands of Dollars)
		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)			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 June 30, 2022:
As of September 30, 2022:												As of September 30, 2022:
Other current asset	Other current asset	$	794	$	—	$	794	$	—	$	794	Other current asset	$	2,928	$	—	$	2,928	$	—	$	2,928
Other noncurrent asset	Other noncurrent asset	1,269		—		1,269		—		1,269		Other noncurrent asset	3,747		—		3,747		—		3,747

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

Other current liability	Other current liability	(2,787)		—		(2,787)		—		(2,787)		Other current liability	(2,787)		—		(2,787)		—		(2,787)
Other noncurrent liability	Other noncurrent liability	$	(3,747)	$	—	$	(3,747)	$	—	$	(3,747)	Other noncurrent liability	$	(3,747)	$	—	$	(3,747)	$	—	$	(3,747)

(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.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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


		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021		Location		2022		2021		2022		2021		Location
Amount of gain recognized in total other comprehensive income (loss) on derivative	Amount of gain recognized in total other comprehensive income (loss) on derivative	$	1,565	$	(515)	$	7,177	$	831	OCI	Amount of gain recognized in total other comprehensive income (loss) on derivative	$	4,421	$	(46)	$	11,598	$	785	OCI
Amount of loss reclassified from accumulated other comprehensive income (loss) into earnings	Amount of loss reclassified from accumulated other comprehensive income (loss) into earnings	$	(691)	$	(683)	$	(1,378)	$	(1,349)	Interest Expense	Amount of loss reclassified from accumulated other comprehensive income (loss) into earnings	$	(264)	$	(694)	$	(1,642)	$	(2,043)	Interest Expense

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

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

There were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness. Based on recorded values as of ~~June~~September 30, 2022, ~~$0.2~~$2.2 million of net gains will be reclassified from accumulated other comprehensive income (loss) into earnings within the next 12 months.

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 ~~June~~September 30, 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 ~~June~~September 30, 2022 and December 31, 2021, the carrying values of the Company's financial instruments, included in its Condensed Consolidated Balance Sheets, approximated or equaled their fair values.

Recurring Fair Value Measurement

As of ~~June~~September 30, 2022, ~~and December 31, 2021,~~ the Company had 3two financial instruments measured at fair value on a recurring basis which are its interest rate derivative (see Note (7) Derivatives above)~~, the equity security investment,~~ and the earnout payments. ~~The~~Additionally, during the nine months ended September 30, 2022, the Company held an equity security investment ~~was~~ composed primarily of common equity shares and warrants in a publicly traded company, in addition to an immaterial balance related to contingent value rights ("CVRs"). As of ~~June~~September 30, 2022, the Company ~~has~~ sold all of its common equity shares and warrants and ~~only maintains an immaterial~~its investment in the ~~CVRs.~~CVRs has matured and no longer holds any value. The equity security investment iswas presented within other current assets, the interest rate derivative is presented within other current assets and other noncurrent assets, and the earnout payments are presented within ~~other current liabilities~~accrued expenses in the consolidated balance sheets.

The fair market value of the interest rate swap reflected on the consolidated balance sheets as of ~~June~~September 30, 2022 and December 31, 2021 was determined using industry-standard models that consider various assumptions, including current market and contractual rates for the underlying instruments, time value, implied volatilities, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace 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 ~~June~~September 30, 2022 and December 31, 2021 (in thousands of dollars):

Fair value measurements at reporting date using
June 30, 2022 Level 1 Level 2 Level 3
Assets:
Equity security investment $ 132 $ 132 $ — $ —
Interest rate derivative 2,063 — 2,063 —
Liabilities:
Earnout Payments $ (41,387) $ — $ (28,750) $ (12,637)


				Fair value measurements at reporting date using									Fair value measurements at reporting date using
		December 31, 2021		Level 1		Level 2		Level 3			September 30, 2022		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Equity security investment		$	7,743	$	7,743	$	—	$	—

Interest rate derivative										Interest rate derivative	$	6,675	$	—	$	6,675	$	—
Liabilities:	Liabilities:									Liabilities:
Earnout payments		(11,795)		—		—		(11,795)
Interest rate derivative		$	(6,534)	$	—	$	(6,534)	$	—

Earnout Payments										Earnout Payments	$	(68,492)	$	—	$	(30,582)	$	(37,910)

2123

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements


			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)	$	—

The fair value of the equity security investment is measured at the end of each reporting period. Gains and 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 the large majority of its investment, with a book value of $10.3 million during the ~~three~~nine months ended ~~June~~September 30, 2022 for $12.4 million, which resulted in a realized gain of $2.1 million. As of September 30, 2022, the remainder of the Company's investment, which consisted of the CVRs, had no carrying value.

The fair value of the earnout payments are measured at the end of each reporting period. Gains and losses recognized in relation to the change in fair value of the earnout payments are recognized in Merger and integration in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note (3) ~~Alamo Acquisition~~for further discussion. The total increase in fair value of the earnout payment was ~~$23.1~~$27.1 million and ~~$32.0~~$59.1 million during the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. As of ~~June~~September 30, 2022, ~~$28.7~~$30.6 million of the earnout payments were based on actual results achieved during the performance period ended ~~June~~September 30, 2022 and were therefore considered Level 2 fair value measurements. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company paid $2.5 million related to the performance period ended December 31, 2021.

Credit Risk

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

The Company's cash balances on deposit with financial institutions totaled $~~158.1~~250.2 million and $110.7 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively, which exceeded Federal Deposit Insurance Corporation insured limits. The Company regularly monitors these institutions' financial condition.

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

The majority of the Company's trade receivables have payment terms of 30 to 60 days. Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. As of ~~June~~September 30, 2022, there ~~were no customers~~was one customer that were considered ~~significant.~~significant that represented12% or $41.4 million of the Company's total trade receivables. As of December 31, 2021, trade receivables from the Company's one significant customer individually represented 17% or $42.2 million 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 60 days of aging. As of ~~June~~September 30, 2022, the Company had ~~$1.7~~$2.8 million in allowance for credit losses. As of December 31, 2021, the Company had $1.9 million in allowance for credit losses.

The Company ~~did 0t recognize any~~recognized $1.2 million and $1.0 million of bad debt expense, net of recoveries during the three and ~~six~~nine months ended ~~June~~September 30, 2022. During the three and ~~six~~nine months ended ~~June 30, 2022, the Company recovered $0.2 million of accounts receivable. During the three and six months ended June~~September 30, 2021, the Company recognized ~~$2.4~~$0.9 million and ~~$1.2~~$2.1 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)

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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 (collectively with the Equity and Incentive Award Plan, the “Equity Award Plans”).

As of ~~June~~September 30, 2022, the Company has 5five types of stock-based compensation outstanding under its Equity Award Plans: (i) RSAs issued to independent directors and certain executives and employees, (ii) 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 and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 (in thousands of dollars):

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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


		Three Months Ended June 30,			Six Months Ended June 30,						Three Months Ended September 30,		Nine Months Ended September 30,
			2022		2021		2022		2021					2022		2021		2022		2021
Liability-classified awards	Liability-classified awards											Liability-classified awards
Cash-settled awards	Cash-settled awards		$	972	$	—	$	1,633	$	—		Cash-settled awards		$	748	$	—	$	2,381	$	—
Equity-classified awards	Equity-classified awards											Equity-classified awards
Restricted stock awards	Restricted stock awards		317		430		628		765			Restricted stock awards		310		300		938		1,065
Restricted stock time-based unit awards	Restricted stock time-based unit awards		5,029		2,953		10,420		6,218			Restricted stock time-based unit awards		4,796		4,100		15,216		10,318
Non-qualified stock options	Non-qualified stock options		—		2		—		76			Non-qualified stock options		—		—		—		76
Restricted stock performance-based unit awards	Restricted stock performance-based unit awards		2,201		1,504		4,314		3,033			Restricted stock performance-based unit awards		2,013		2,950		6,327		5,983
Stock-based compensation cost	Stock-based compensation cost		8,519		4,889		16,995		10,092			Stock-based compensation cost		7,867		7,350		24,862		17,442
Tax Benefit(1)	Tax Benefit(1)		(1,220)		(1,173)		(2,559)		(2,422)			Tax Benefit(1)		(1,002)		(1,151)		(3,561)		(3,573)
Stock-based compensation cost, net of tax	Stock-based compensation cost, net of tax		$	7,299	$	3,716	$	14,436	$	7,670		Stock-based compensation cost, net of tax		$	6,865	$	6,199	$	21,301	$	13,869

(1) The Company is in a valuation allowance position and 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 Incentive Awards Plan. These PUs will be settled in cash at the end of the performance period, December 31, 2024, and are classified as liability awards, which are remeasured at fair value at each reporting period. The fair value of these awards as of ~~June~~September 30, 2022 was ~~$9.1~~$9.3 million. The Company recognizes compensation cost for the changes in fair value pro-rated for the portion of the requisite service period rendered. During the three and nine months ended ~~June~~September 30, 2022, the Company recognized ~~$1.0~~$0.7 million and $2.4 million in compensation costs related to these ~~awards.During the six months ended June 30, 2022, the Company recognized $1.6 million in compensation costs related to these awards.~~awards, respectively.

(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.

2325

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net Income (loss)	Net Income (loss)	$	68,458	$	(31,781)	$	77,250	$	(86,283)	Net Income (loss)	$	104,734	$	(43,994)	$	181,984	$	(130,277)

Denominator:	Denominator:									Denominator:
Basic weighted-average common shares outstanding(1)	Basic weighted-average common shares outstanding(1)	243,969		215,443		243,621		215,278		Basic weighted-average common shares outstanding(1)	244,686		224,481		243,980		218,499
Dilutive effect of restricted stock awards granted to Board of Directors	Dilutive effect of restricted stock awards granted to Board of Directors	195		13		180		6		Dilutive effect of restricted stock awards granted to Board of Directors	104		—		142		214
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	5,223		1,163		4,628		1,321		Dilutive effect of time-based restricted stock awards granted under the Equity Plan	4,654		1,166		4,596		957
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	1,388		1,480		1,033		1,351		Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	1,377		511		1,146		321

Diluted weighted-average common shares outstanding(1)	Diluted weighted-average common shares outstanding(1)	250,775		218,099		249,462		217,956		Diluted weighted-average common shares outstanding(1)	250,821		226,158		249,864		219,991

(1) As a result of the net loss incurred by the Company for the three and ~~six~~nine months ended ~~June~~ 2021, 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.

(11) Commitments and Contingencies

As of ~~June~~September 30, 2022 and December 31, 2021, the Company had $~~3.4~~5.9 million and $1.0 million of deposits on equipment, respectively. Outstanding purchase commitments on equipment were ~~$84.5~~$148.8 million and $54.1 million, as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

As of ~~June~~September 30, 2022, the Company had a letter of credit of ~~$23.2~~$23.1 million under the 2019 ABL Facility (as defined herein).

Aggregate minimum commitments under long-term raw material supply contracts for the next five years as of ~~June~~September 30, 2022 are listed below:


		(Thousands of Dollars)			(Thousands of Dollars)
2022	2022	$	24,585	2022	$	16,408
2023	2023	17,660		2023	19,500
2024	2024	1,190		2024	2,610
2025	2025	—		2025	1,000
2026	2026	—		2026	—
		$	43,435		$	39,518

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 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 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, results of operations or liquidity.

2426

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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

The Company is subject to routine audits by taxing 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. 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 of $2.8 million and $24.9 million during ~~2021, of which $13.3 million was recognized in~~ the three and nine months ended ~~March 31, 2021.~~September 30, 2021, respectively. This aggregate reduction was recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss of 2021.

As of ~~June~~September 30, 2022, the Company had recorded estimates of potential assessments, the majority of which is related to an estimate of $14.8 million of potential assessment and exposures for all taxing jurisdictions related to the Alamo Acquisition. As of ~~June~~September 30, 2022, the Company also has an offsetting indemnification receivable of $14.8 million from the former owner of Alamo, recorded pursuant to the Purchase Agreement, in prepaids and other current assets in the Condensed Consolidated Balance Sheet. Both the estimated liability and indemnification receivable of $14.8 million were recorded in the purchase price allocation at the time of the Alamo Acquisition in 2021. During the ~~second quarter of~~nine months ended September 30, 2022, the Company obtained additional information that resulted in a reduction of the Company's accrual and offsetting indemnification receivable related to this audit by $2.9 million. ~~Both~~There was no change to the ~~estimated liability and indemnification receivable were recorded in~~Company's accrual during the ~~purchase price allocation at the time of the Alamo Acquisition in 2021.~~three months ended September 30, 2022.

(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 ~~$0.2~~$0.1 million and $0.1 million during the three months ended ~~June~~September 30, 2022 and 2021 respectively for these services. The Company paid $~~0.4~~0.5 million and ~~$0.2~~$0.3 million during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively, for these services.

As part of the 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 ~~June~~September 30, 2022, the Company did not provide any services to Alamo Frac Holdings, LLC as part of the Purchase Agreement. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company provided $2.4 million of services to Alamo Frac Holdings, LLC. The Company has a remaining customer contract liability related to these services of $21.3 million as of ~~June~~September 30, 2022.

(13) Business Segments

In accordance with ASC 280, "Segment Reporting", the Company routinely evaluates whether its separate segments have changed. This determination is made based on the following factors: ~~(1)~~(i) 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)~~(ii) discrete financial information for each operating segment is available.

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.

2527

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

~~Well Construction and Intervention Services~~

The Company’s ~~WC&I~~Completion Services segment consists of the following businesses and service lines: ~~(1)~~(i) fracturing services; (ii) wireline and pumpdown services; and (iii) completion support services, which includes the Company's research and technology department.

Well Construction and Intervention Services

Following the sale of the Company's coiled tubing assets as described below, the Company’s WC&I Services segment consists of the cementing services ~~and (2)~~service line.

On August 1, 2022, the Company sold its coiled tubing ~~services.~~assets to Gladiator for a cash purchase price of $21.6 million, which resulted in a gain on sale of assets of $11.6 million. The divestiture of non-core assets is consistent with the Company’s strategy to repurpose capital towards the highest return projects that fit the Company’s strategy around wellsite integration, while also strengthening liquidity. For additional information, see Note (2) Summary of Significant Accounting Policies.

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)									(Thousands of Dollars)
		Three Months Ended June 30,				Six Months Ended June 30,					Three months ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Operations by business segment	Operations by business segment									Operations by business segment

Adjusted gross profit:	Adjusted gross profit:									Adjusted gross profit:
Completion Services(1)	Completion Services(1)	$	184,730	$	20,361	$	291,064	$	35,775	Completion Services(1)	$	205,730	$	46,184	$	496,794	$	81,959
WC&I(1)	WC&I(1)	8,316		2,756		12,369		4,432		WC&I(1)	7,597		2,905		19,966		7,337
Total adjusted gross profit	Total adjusted gross profit	$	193,046	$	23,117	$	303,433	$	40,207	Total adjusted gross profit	$	213,327	$	49,089	$	516,760	$	89,296

(1) Adjusted gross profit 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 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.


		(Thousands of Dollars)													(Thousands of Dollars)
		Three Months Ended June 30, 2022						Six Months Ended June 30, 2022							Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
		Completion Services		WC&I		Total		Completion Services		WC&I		Total			Completion Services		WC&I		Total		Completion Services		WC&I		Total
Revenue	Revenue	$	801,049	$	41,863	$	842,912	$	1,403,669	$	74,286	$	1,477,955	Revenue	$	857,751	$	38,259	$	896,010	$	2,261,420	$	112,545	$	2,373,965
Cost of Services	Cost of Services	616,319		33,547		649,866		1,112,605		61,917		1,174,522		Cost of Services	652,021		30,662		682,683		1,764,626		92,579		1,857,205
Gross profit excluding depreciation and amortization	Gross profit excluding depreciation and amortization	184,730		8,316		193,046		291,064		12,369		303,433		Gross profit excluding depreciation and amortization	205,730		7,597		213,327		496,794		19,966		516,760
Management adjustments associated with cost of services(1)		—		—		—		—		—		—

Adjusted gross profit	Adjusted gross profit	$	184,730	$	8,316	$	193,046	$	291,064	$	12,369	$	303,433	Adjusted gross profit	$	205,730	$	7,597	$	213,327	$	496,794	$	19,966	$	516,760

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements


	(Thousands of Dollars)
	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Completion Services		WC&I		Total		Completion Services		WC&I		Total
Revenue	$	366,067	$	27,097	$	393,164	$	843,887	$	69,824	$	913,711
Cost of Services	320,297		24,340		344,637		768,562		63,112		831,674
Gross profit excluding depreciation and amortization	45,770		2,757		48,527		75,325		6,712		82,037
Management adjustments associated with cost of services(1)	414		148		562		6,634		625		7,259
Adjusted gross profit	$	46,184	$	2,905	$	49,089	$	81,959	$	7,337	$	89,296

(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.~~oversupply of crude oil.


	(Thousands of Dollars)
	September 30, 2022		December 31, 2021
Total assets by segment:
Completion Services	$	1,409,518	$	1,201,265
WC&I	37,642		60,195
Corporate and Other	355,164		196,121
Total assets	$	1,802,324	$	1,457,581
Goodwill by segment:
Completion Services	$	192,780	$	192,780
WC&I	—		—
Corporate and Other	—		—
Total goodwill	$	192,780	$	192,780

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

(Thousands of Dollars)
Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Completion Services WC&I Total Completion Services WC&I Total
Revenue $ 268,839 $ 23,306 $ 292,145 $ 477,820 $ 42,727 $ 520,547
Cost of Services 248,585 20,675 269,260 448,265 38,772 487,037
Gross profit excluding depreciation and amortization 20,254 2,631 22,885 29,555 3,955 33,510
Management adjustments associated with cost of services(1)
107 125 232 6,220 477 6,697
Adjusted gross profit $ 20,361 $ 2,756 $ 23,117 $ 35,775 $ 4,432 $ 40,207

~~(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.

(Thousands of Dollars)
June 30, 2022 December 31, 2021
Total assets by segment:
Completion Services $ 1,369,679 $ 1,201,265
WC&I 62,535 60,195
Corporate and Other 221,992 196,121
Total assets $ 1,654,206 $ 1,457,581
Goodwill by segment:
Completion Services $ 192,780 $ 192,780
WC&I — —
Corporate and Other — —
Total goodwill $ 192,780 $ 192,780

2729

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 Financial Accounting Standards Board ("FASB") issued ASU 2021-05 "Leases (Topic 842) Lessors—Certain Leases with Variable Lease Payments" ("ASU 2021-05"). 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 iswas 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 FASB 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 GAAP. 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"). 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 for fiscal years beginning onafter 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 2021-01"). ASU 2021-01 expands on the GAAP guidance on contract modifications and hedge accounting related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates. This standard iswas 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~~does not expect ASU 2021-01 to have any impact ~~of this standard~~ on its consolidated financial ~~statements and related disclosures.~~statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates. This standard iswas 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~~does not expect ASU 2021-04 to have any impact ~~of this standard~~ on its consolidated financial ~~statements and related disclosures.~~statements.

(15) Subsequent Events

On ~~July~~October 19, 2022, the Company ~~entered into~~authorized a ~~definitive agreement~~shareholder return program, under which the Company may use a total of up to ~~sell the Company’s Coiled Tubing assets~~$250 million to ~~Gladiator Energy LLC for a cash purchase price of $21.6 million. The transaction is subject to customary closing conditions~~repurchase issued and is expected to close in the third quarter of 2022. As of June 30, 2022, the carrying values of the Company's Coiled Tubing assets are presented within assets held for sale in the consolidated balance sheets.outstanding shares through December 31, 2023.

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. Financial 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, 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 a predominately U.S. land oilfield service company, with a diverse set of well completion and production services across a variety of active and demanding basins. The Company is organized into two reportable segments:

•Completion Services, which consists of the following businesses and services lines: ~~(1)~~(i) hydraulic fracturing; ~~(2)~~(ii) wireline and pumpdown services; ~~(3)~~(iii) Power Solutions natural gas fueling business; and ~~(4)~~(iv) completion support services, which includes the Company's research and technology department.

•WC&I, which, following the sale of its coiled tubing assets during the third quarter of 2022, consists of the ~~following businesses and~~cementing services service ~~lines: (1) cementing services; and (2) coiled tubing services.~~line.

OPERATIONAL OVERVIEW

Market Trends and 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. The high density of our operations in the basins in which we are most active provides us the opportunity to leverage our fixed costs and to 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, rising interest rates, the availability of credit, government regulation and global stability, which together drive worldwide drilling activity.

According to the weekly Baker Hughes Incorporated rig count information, total North America rig count during the ~~second~~third quarter of 2022 averaged ~~713~~ 761 rigs, reflecting an increase of approximately ~~13%~~7% as compared to the ~~first~~second quarter 2022 average of ~~633~~713 rigs, but is still approximately 9%3% below the pre-COVID first quarter 2020 average of 785 rigs. North America rig count exited the ~~second~~third quarter of 2022 at ~~753~~765 rigs. The increase as compared to the ~~first~~second quarter 2022 average was driven by supportive commodity prices given global undersupply. ~~Further, the Russia invasion of Ukraine in 2022 continues to impact WTI prices.~~ WTI prices entered the ~~second~~third quarter of 2022 at ~~$100.28~~$105.76 and exited the quarter ~~5% higher~~25% lower at ~~$105.76, with an interquarter high of $122.11.~~$79.49. Henry Hub Natural gas prices were ~~down 4%~~up 25% from ~~$5.64 on March 31, 2022 to~~ $5.42 on June 30, 2022 to $6.77 on September 30, 2022.

In the second quarter of 2022, we continued to see disciplined increases in oil supply from OPEC+ and U.S. shale ~~operators.~~operators, however, in October 2022 OPEC+ indicated it would reduce oil production. The Russian invasion of Ukraine ~~increased~~continues to increase uncertainty of global supply given the supply of crude oil and natural gas that is exported from Russia.

U.S. onshore completion activity growth slowed during the quarter, a function of very high utilization of equipment. We deployed one additional frac fleet at the end of Q1 and ~~did~~have not ~~deploy~~deployed any additional ~~fleets during Q2.~~horsepower since then. Demand for our services was strong throughout the quarter, and efficiency improved ~~as our operations were less affected by winter weather and post-holiday startup compared to Q1~~. We expect ~~third~~fourth quarter activity will continue along a similar trend of activity given our expectation to operate a similar number of fleets in the third quarter relative to the second quarter, although seasonal factors are typically most favorable during the third quarter.be impacted by typical holiday related slowdowns. Continued strength in customer activity and utilization remains dependent on macro conditions, including commodity prices, 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 improvement in pricing across almost all of our services. Overall economic conditions in the market have continued 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 are constantly assessing our approach to ensure that our team and our equipment meets the evolving ~~demands.~~demands of our customers. 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 more than half 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. In addition, we plan to deploy our first electric fleet in 2023.

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 adjust pricing to pass the impact of inflation through to its customers. Additionally, we, our 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 respect to driver shortages, may negatively impact or increase the cost of our logistics service for our customers. The rate and scope of these various aspects of inflation may continue to impact our costs, which may not be readily recoverable in the prices of our services. At this time, we expect this trend to continue through the remainder of 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 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 availability to secure parts and 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~~as well as diesel substitution reduction technologies (such as ~~duel~~dual fuel and electric fleet ~~capabilities)~~capabilities and the sand haul trailers acquired from CIG), 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 isare Tier IV dual fuel capable. NexTier's best-in-class digital platform has been applied to the NexTier operating fleets. We have 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 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. Our acquisition of assets from CIG is in line with our commitment to significantly expand our last mile logistics capabilities.

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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 grow our 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. 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, 2021. While we saw continued recovery from the impacts of the COVID-19 pandemic ~~during~~through the first ~~quarter and second~~three quarters 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).

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RESULTS OF OPERATIONS IN 2022 COMPARED TO 2021

Three Months Ended ~~June~~September 30, 2022 Compared with Three Months Ended ~~June~~September 30, 2021

The following is a comparison of our results of operations for the three months ended ~~June~~September 30, 2022 compared to the three months ended ~~June~~September 30, 2021.


		Three Months Ended June 30,													Three Months Ended September 30,
(Thousands of Dollars)	(Thousands of Dollars)					As a % of Revenue				Variance				(Thousands of Dollars)					As a % of Revenue				Variance
Description	Description	2022		2021		2022		2021		$		%		Description	2022		2021		2022		2021		$		%
Completion Services	Completion Services	$	801,049	$	268,839	95	%	92	%	$	532,210	198	%	Completion Services	$	857,751	$	366,067	96	%	93	%	$	491,684	134	%
WC&I	WC&I	41,863		23,306		5	%	8	%	18,557		80	%	WC&I	38,259		27,097		4	%	7	%	11,162		41	%

Revenue	Revenue	842,912		292,145		100	%	100	%	550,767		189	%	Revenue	896,010		393,164		100	%	100	%	502,846		128	%
Completion Services	Completion Services	616,319		248,585		73	%	85	%	367,734		148	%	Completion Services	652,021		320,297		73	%	81	%	331,724		104	%
WC&I	WC&I	33,547		20,675		4	%	7	%	12,872		62	%	WC&I	30,662		24,340		3	%	6	%	6,322		26	%

Costs of services	Costs of services	649,866		269,260		77	%	92	%	380,606		141	%	Costs of services	682,683		344,637		76	%	88	%	338,046		98	%
Depreciation and amortization	Depreciation and amortization	58,794		40,671		7	%	14	%	18,123		45	%	Depreciation and amortization	56,542		44,861		6	%	11	%	11,681		26	%
Selling, general and administrative expenses	Selling, general and administrative expenses	35,855		20,734		4	%	7	%	15,121		73	%	Selling, general and administrative expenses	37,415		37,453		4	%	10	%	(38)		0	%
Merger and integration	Merger and integration	23,682		178		3	%	0	%	23,504		13,204	%	Merger and integration	27,521		4,752		3	%	1	%	22,769		479	%
Gain on disposal of assets	Gain on disposal of assets	(866)		(2,017)		0	%	(1	%)	1,151		(57	%)	Gain on disposal of assets	(10,471)		(1,133)		(1	%)	0	%	(9,338)		824	%

Operating income (loss)	Operating income (loss)	75,581		(36,681)		9	%	(13	%)	112,262		(306	%)	Operating income (loss)	102,320		(37,406)		11	%	(10	%)	139,726		(374	%)
Other income, net	Other income, net	1,461		11,247		0	%	4	%	(9,786)		(87	%)	Other income, net	11,124		585		1	%	0	%	10,539		1,802	%
Interest expense	Interest expense	(7,344)		(5,726)		(1	%)	(2	%)	(1,618)		28	%	Interest expense	(7,150)		(6,701)		(1	%)	(2	%)	(449)		7	%
Total other income (expense)	Total other income (expense)	(5,883)		5,521		(1	%)	2	%	(11,404)		(207	%)	Total other income (expense)	3,974		(6,116)		0	%	(2	%)	10,090		(165	%)
Income tax expense	Income tax expense	(1,240)		(621)		0	%	0	%	(619)		100	%	Income tax expense	(1,560)		(472)		0	%	0	%	(1,088)		231	%
Net income (loss)	Net income (loss)	$	68,458	$	(31,781)	8	%	(11	%)	$	100,239	(315	%)	Net income (loss)	$	104,734	$	(43,994)	12	%	(11	%)	$	148,728	(338	%)

Revenue: Total revenue is comprised of revenue from our Completion Services and WC&I segments. Revenue during the three months ended ~~June~~September 30, 2022 increased by ~~$550.8~~$502.8 million, or ~~189%~~128%, to ~~$842.9~~$896.0 million from ~~$292.1~~$393.2 million during the three months ended ~~June~~September 30, 2021. This change in revenue by reportable segment is discussed below.

Completion Services: Revenue for Completion Services during the three months ended ~~June~~September 30, 2022 increased by ~~$532.2~~$491.7 million, or ~~198%~~134%, to ~~$801.0~~$857.8 million from ~~$268.8~~$366.1 million during the three months ended ~~June~~September 30, 2021. The segment revenue increase is primarily attributable to a strong increase in the number of deployed hydraulic fracturing fleets, ~~the addition of~~additional well-site integration and commodities, including our Power Solutions natural gas fueling services, increases in wireline and pump down services, and the Alamo Acquisition on August 31, ~~2021. Fracturing services increased to 34 average deployed fleets during the three months ended June 30, 2022 from 18 average deployed fleets during the three months ended June 30,~~ 2021. Improved market conditions and higher global commodity prices drove increased customer activity across all basins, and we realized strong pricing recovery in all services lines.

Well Construction and Intervention Services: WC&I segment revenue increased ~~$18.6~~$11.2 million, or ~~80%~~41%, to ~~$41.9~~$38.3 million during the three months ended ~~June~~September 30, 2022 from ~~$23.3~~$27.1 million during the three months ended ~~June~~September 30, 2021. The increase in revenue is primarily due to higher customer activity, improved pricing, and increased utilization in our cementing and coil tubing services (prior to the sale of the coiled tubing assets to Gladiator) resulting from improved market conditions and higher global oil and gas commodity ~~prices.~~prices, offset by the reduction due to the sale of the coil tubing service line in the third quarter of 2022.

Cost of Services: Cost of services during the three months ended ~~June~~September 30, 2022 increased by ~~$380.6~~$338.0 million, or ~~141%~~98%, to ~~$649.9~~$682.7 million from ~~$269.3~~$344.6 million during the three months ended ~~June~~September 30, 2021. The increase is primarily due to significantly increased activity, utilization, and ~~utilization,~~commodity capture, as explained under the "Revenue" caption and its related segment sub-captions 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~~.increased.

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Equipment Utilization: Depreciation and amortization expense increased ~~$18.1~~$11.7 million, or ~~45%~~26%, to ~~$58.8~~$56.5 million during the three months ended ~~June~~September 30, 2022 from ~~$40.7~~$44.9 million during the three months ended ~~June~~September 30, 2021. The increase in depreciation and amortization is primarily due to additional equipment received in the Alamo Acquisition. Gain on disposal of assets ~~decreased~~increased by ~~$1.2~~$9.3 million, or ~~57%~~824%, to a gain of ~~$0.9~~$10.5 million during the three months ended ~~June~~September 30, 2022 from ~~$2.0~~$1.1 million during three months ended ~~June~~September 30, 2021.

Selling, general and administrative expense: Selling, general and administrative expense, which represents costs associated with managing and supporting our operations, ~~increased by $15.1 million, or 73%, to $35.86~~remained relatively flat at $37.4 million during three months ended ~~June~~September 30, 2022 ~~from $20.7~~compared to $37.5 million during the three months ended ~~June~~September 30, ~~2021, primarily due to a merit increase in 2022 and the non-recurring accrual reduction for our regulatory audit estimate during~~ 2021.

Merger and integration expense: Merger and integration expense increased by ~~$23.5~~$22.8 million during the three months ended ~~June~~September 30, 2022 to ~~$23.7~~$27.5 million from ~~$0.2~~$4.8 million during the three months ended ~~June~~September 30, 2021. The increase in merger and integration expense is primarily related to the Alamo Acquisition earnout, which was triggered by Alamo achieving certain EBITDA targets pursuant to the Purchase Agreement. The earnout performance period, which goes through December 31, 2022, is still ongoing and changes in the fair value of the earnout are based on actual and projected performance within the performance period, in accordance with the Purchase Agreement.

Effective tax rate: Our effective tax rate on continuing operations for the three months ended ~~June~~September 30, 2022 was ~~1.8%~~1.5% for ~~$1.2~~$1.6 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to state income taxes and change in valuation allowance. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. We continue to rigorously evaluate all available evidence to determine the likelihood of utilizing our net deferred tax assets.

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RESULTS OF OPERATIONS IN 2022 COMPARED TO 2021

~~Six~~Nine Months Ended ~~June~~September 30, 2022 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2021

The following is a comparison of our results of operations for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the ~~six~~nine months ended ~~June~~September 30, 2021.


		Six Months Ended June 30,													Nine Months Ended September 30,
(Thousands of Dollars)	(Thousands of Dollars)					As a % of Revenue				Variance				(Thousands of Dollars)					As a % of Revenue				Variance
Description	Description	2022		2021		2022		2021		$		%		Description	2022		2021		2022		2021		$		%
Completion Services	Completion Services	$	1,403,669	$	477,820	95	%	92	%	$	925,849	194	%	Completion Services	$	2,261,420	$	843,887	95	%	92	%	$	1,417,533	168	%
WC&I	WC&I	74,286		42,727		5	%	8	%	31,559		74	%	WC&I	112,545		69,824		5	%	8	%	42,721		61	%

Revenue	Revenue	1,477,955		520,547		100	%	100	%	957,408		184	%	Revenue	2,373,965		913,711		100	%	100	%	1,460,254		160	%
Completion Services	Completion Services	1,112,605		448,265		75	%	86	%	664,340		148	%	Completion Services	1,764,626		768,562		74	%	84	%	996,064		130	%
WC&I	WC&I	61,917		38,772		4	%	7	%	23,145		60	%	WC&I	92,579		63,112		4	%	7	%	29,467		47	%

Costs of services	Costs of services	1,174,522		487,037		79	%	94	%	687,485		141	%	Costs of services	1,857,205		831,674		78	%	91	%	1,025,531		123	%
Depreciation and amortization	Depreciation and amortization	113,957		86,539		8	%	17	%	27,418		32	%	Depreciation and amortization	170,499		131,400		7	%	14	%	39,099		30	%
Selling, general and administrative expenses	Selling, general and administrative expenses	71,714		36,803		5	%	7	%	34,911		95	%	Selling, general and administrative expenses	109,129		74,256		5	%	8	%	34,873		47	%
Merger and integration	Merger and integration	32,914		178		2	%	0	%	32,736		18,391	%	Merger and integration	60,435		4,930		3	%	1	%	55,505		1,126	%
Gain on disposal of assets	Gain on disposal of assets	(1,689)		(6,609)		0	%	(1	%)	4,920		(74	%)	Gain on disposal of assets	(12,160)		(7,742)		(1	%)	(1	%)	(4,418)		57	%

Operating income (loss)	Operating income (loss)	86,537		(83,401)		6	%	(16	%)	169,938		(204	%)	Operating income (loss)	188,857		(120,807)		8	%	(13	%)	309,664		(256	%)
Other income, net	Other income, net	6,831		8,528		0	%	2	%	(1,697)		(20	%)	Other income, net	17,955		9,113		1	%	1	%	8,842		97	%
Interest expense	Interest expense	(14,718)		(9,932)		(1	%)	(2	%)	(4,786)		48	%	Interest expense	(21,868)		(16,633)		(1	%)	(2	%)	(5,235)		31	%
Total other income (expense)	Total other income (expense)	(7,887)		(1,404)		(1	%)	0	%	(6,483)		462	%	Total other income (expense)	(3,913)		(7,520)		0	%	(1	%)	3,607		(48	%)
Income tax expense	Income tax expense	(1,400)		(1,478)		0	%	0	%	78		(5	%)	Income tax expense	(2,960)		(1,950)		0	%	0	%	(1,010)		52	%
Net income (loss)	Net income (loss)	$	77,250	$	(86,283)	5	%	(17	%)	$	163,533	(190	%)	Net income (loss)	$	181,984	$	(130,277)	8	%	(14	%)	$	312,261	(240	%)

Revenue: Total revenue is comprised of revenue from our Completion Services and WC&I segments. Revenue during the ~~six~~nine months ended ~~June~~September 30, 2022 increased by ~~$957.4 million,~~$1.5 billion, or ~~184%~~160%, to ~~$1.5~~$2.4 billion from ~~$520.5~~$913.7 million during the ~~six~~nine months ended ~~June~~September 30, 2021. This change in revenue by reportable segment is discussed below.

Completion Services: Revenue for Completion Services during the ~~six~~nine months ended ~~June~~September 30, 2022 increased by ~~$925.8 million,~~$1.4 billion, or ~~194%~~168%, to ~~$1.4~~$2.3 billion from ~~$477.8~~$843.9 million during the ~~six~~nine months ended ~~June~~September 30, 2021. The segment revenue increase is primarily attributable to a strong increase in the number of deployed hydraulic fracturing fleets, ~~the addition of~~additional well-site integration and commodities, including our Power Solutions natural gas fueling services, increases in wireline and pump down services, and the Alamo Acquisition on August 31, ~~2021. Fracturing services increased to 33 average deployed fleets during the six months ended June 30, 2022 from 18 average deployed fleets during the six months ended June 30,~~ 2021. Improved market conditions and higher global commodity prices drove increased customer activity across all basins, and we realized strong pricing recovery in all services lines.

Well Construction and Intervention Services: WC&I segment revenue increased ~~$31.6~~$42.7 million, or ~~74%~~61%, to ~~$74.3~~$112.5 million during the ~~six~~nine months ended ~~June~~September 30, 2022 from ~~$42.7~~$69.8 million during the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in revenue is primarily due to higher customer activity, improved pricing, and increased utilization in our cementing and coil tubing services (prior to the sale of the coiled tubing assets to Gladiator) resulting from improved market conditions and higher global oil and gas commodity ~~prices.~~prices, offset by the reduction due to the sale of the coil tubing service line in the third quarter of 2022.

Cost of Services: Cost of services during the ~~six~~nine months ended ~~June~~September 30, 2022 increased by ~~$687.5 million,~~$1.0 billion, or ~~141%~~123%, to ~~$1.2~~$1.9 billion from ~~$487.0~~$831.7 million during the ~~six~~nine months ended ~~June~~September 30, 2021. The increase is primarily due to significantly increased activity and utilization, as explained under the "Revenue" caption and its related segment sub-captions 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.

3536

Equipment Utilization: Depreciation and amortization expense increased ~~$27.4~~$39.1 million, or ~~32%~~30%, to ~~$114.0~~$170.5 million during the ~~six~~nine months ended ~~June~~September 30, 2022 from ~~$86.5~~$131.4 million, during the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in depreciation and amortization is primarily due to additional equipment received in the Alamo Acquisition. Gain on disposal of assets ~~decreased~~increased by ~~$4.9~~$4.4 million, or ~~74%~~57%, to a gain of ~~$1.7~~$12.2 million during the three months ended ~~June~~September 30, 2022 from ~~$6.6~~$7.7 million during the three months ended ~~June~~September 30, 2021.

Selling, general and administrative expense: Selling, general and administrative expense, which represents costs associated with managing and supporting our operations, increased by $34.9 million, or ~~95%~~47%, to ~~$71.7~~$109.1 million during the ~~six~~nine months ended ~~June~~September 30, 2022 from ~~$36.8~~$74.3 million during the ~~six~~nine months ended ~~June~~September 30, 2021. This increase is primarily related to non-recurring $22.1 million accrual reduction for our regulatory audit estimate in the six months ended June 30, 2021, which was ultimately settled in the third quarter of 2021, combined with increased stock compensation in first quarter of 2022 and increased activity as a result of the Alamo Acquisition in the third quarter of 2021.

Merger and integration expense: Merger and integration expense increased by ~~$32.7~~$55.5 million during the ~~six~~nine months ended ~~June~~September 30, 2022 to ~~$32.9~~$60.4 million from ~~$0.2~~$4.9 million during the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in merger and integration expense is primarily related to the Alamo Acquisition earnout, which was triggered by Alamo achieving certain EBITDA targets pursuant to the Purchase Agreement. The earnout performance period, which goes through December 31, 2022, is still ongoing and changes in the fair value of the earnout are based on actual and projected performance within the performance period, in accordance with the Purchase Agreement.

Effective tax rate: Our effective tax rate on continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~1.8%~~1.6% for ~~$1.4~~$3.0 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to state income taxes and change in valuation allowance. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. We continue to rigorously evaluate all available evidence to determine the likelihood of utilizing our net deferred tax assets.

3637

Material Changes to our Consolidated Balance Sheet

The following table presents the major indicators of our financial condition and liquidity.


		(Thousands of Dollars)					(Thousands of Dollars)
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	158,136	$	110,695	Cash and cash equivalents	$	250,207	$	110,695
Total current assets, excluding cash and cash equivalents	Total current assets, excluding cash and cash equivalents	568,617		397,014		Total current assets, excluding cash and cash equivalents	593,210		397,014
Total current liabilities, excluding current maturities of long-term debt and leases	Total current liabilities, excluding current maturities of long-term debt and leases	576,597		438,961		Total current liabilities, excluding current maturities of long-term debt and leases	611,088		438,961
Current maturities of long-term debt	Current maturities of long-term debt	13,691		13,384		Current maturities of long-term debt	13,849		13,384
Long-term debt, net of deferred financing costs and debt discount, less current maturities	Long-term debt, net of deferred financing costs and debt discount, less current maturities	$	354,503	$	361,501	Long-term debt, net of deferred financing costs and debt discount, less current maturities	$	350,986	$	361,501

Cash and cash equivalents was ~~$158.1~~$250.2 million as of ~~June~~September 30, 2022, an increase of ~~$47.4~~$139.5 million, or ~~43%~~126%, compared to $110.7 million as of December 31, 2021. The increase in cash and cash equivalents during the ~~six~~nine months ended ~~June~~September 30, 2022, was primarily driven by the improved profitability with discipline on capital allocation due to market conditions and higher global commodity prices that have increased customer activity across all basins and have enabled strong pricing recovery in all services lines.

Total current assets, excluding cash and cash equivalents was ~~$568.6~~$593.2 million as of ~~June~~September 30, 2022, an increase of ~~$171.6~~$196.2 million, or ~~43%~~49%, compared to $397.0 million as of December 31, 2021. Total current liabilities, excluding current maturities of long-term debt and leases was ~~$576.6~~$611.1 million as of ~~June~~September 30, 2022, an increase of ~~$137.6~~$172.1 million, or ~~31%~~39%, compared to $439.0 million as of December 31, 2021. The increase in both total current assets, excluding cash and cash equivalents and total current liabilities, excluding current maturities of long-term debt and leases was primarily driven by the increased activity in the Company’s Completion Services segment, mostly due to higher number of fully utilized fleets deployed, the acquisition of Alamo, and strong pricing recovery.

Debt, net of deferred financing costs and debt discount was ~~$354.5~~$351.0 million as of ~~June~~September 30, 2022, a decrease of ~~$7.0~~$10.5 million, or 2%3%, as compared to $361.5 million as of December 31, 2021. The decrease in debt, net of deferred financing costs and debt discount was primarily driven by the principal payments made throughout the period.

3738

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)
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	158,136	$	110,695	Cash and cash equivalents	$	250,207	$	110,695
Debt, net of unamortized deferred financing costs and unamortized debt discount	Debt, net of unamortized deferred financing costs and unamortized debt discount	368,194		374,885		Debt, net of unamortized deferred financing costs and unamortized debt discount	$	364,835	$	374,885

(Thousands of Dollars)
Six Months Ended June 30,
2022 2021
Net cash provided by (used in) operating activities $ 146,500 $ (8,599)
Net cash provided used in investing activities (76,972) (13,361)
Net cash used in financing activities (22,340) (3,496)


	(Thousands of Dollars)
	Nine Months Ended September 30,
	2022		2021
Net cash provided by (used in) operating activities	$	310,321	$	(19,320)
Net cash used in investing activities	$	(135,391)	$	(155,118)
Net cash provided by (used in) financing activities	$	(36,708)	$	33,540

Significant sources and uses of cash during the ~~six~~nine months ended ~~June~~September 30, 2022

Sources of cash:

•Operating activities:

–Net cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$146.5~~$310.3 million. This was primarily driven by improved profitability with discipline on capital allocation, 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 ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$77.0~~$135.4 million. The activity consists primarily of purchases of property and equipment of ~~$81.3~~$136.8 million, advances of deposit on equipment of ~~$3.4~~$5.9 million, acquisition of assets of $26.7 million and implementation of software of ~~$2.0~~$3.0 million, offset by proceeds from disposal of assets of ~~$9.2~~$36.1 million.

•Financing activities:

–Net cash used in financing activities during the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$22.3~~$36.7 million. The activity consists primarily of payments made related to repayment of the 2018 Term Loan Facility and the Equipment Loan of ~~$7.3~~$11.0 million, repayment of our finance leases of ~~$6.6~~$10.1 million, repayment of our financing liabilities was ~~$4.0~~$5.8 million, repurchase and retirement of shares related to stock-based compensation of ~~$4.4~~$7.3 million

Significant sources and uses of cash during the ~~six~~nine months ended ~~June~~September 30, 2021

Uses of cash:

•Operating activities:

–Net cash used in operating activities during the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$8.6~~$19.3 million. The ~~net cash usage was~~change is primarily due to a decrease in ~~our average number of deployed fleets during the period, combined with decreases in~~activity and pricing for our wireline and ~~pumpdown services.~~pump down services, an

3839

increase in commodity prices, additional maintenance expenses related to startup costs required for fleet re-deployments, and inflation.

•Investing activities:

–Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$13.4~~$155.1 million, consisting primarily of capital expenditures, $101.8 million related to acquisition of business and payment of consideration liability, net of $34.4 million in cash received from the WSS Notes and ~~$18.4~~$24.5 million in proceeds from disposal of assets.

•Financing activities:

–Net cash ~~used in~~provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$3.5~~$33.5 million. ~~The activity consists primarily of payments made related~~Proceeds from the Equipment Loan for the nine months ended September 30, 2021 totaled $39.4 million. Cash used to ~~repayment of~~repay our debt facilities, excluding leases and interest, of ~~$1.8~~$2.6 million, repayment of our finance leases of ~~$0.3~~$1.1 million, and the repurchase and retirement of shares related to stock-based compensation of ~~$1.4~~$1.9 million.

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 are for operating costs, capital expenditures, including acquisitions, and debt service.

Overall, capital expenditures for the first half of 2022 was slightly below our guidance for $90-100 million. This was driven primarily by supply chain delays with the conclusion of our dual fuel conversion program pushed into the third quarter of 2022. We anticipate an additional ~~$100~~$75 to $85 million in capital expenditures during the ~~second half~~fourth quarter of 2022. These capital expenditures include an approximate $18 million to replace the portion of a fracturing fleet that we lost in a fire during the third quarter, which will be largely covered by insurance proceeds.

Debt service for the year ended December 31, 2022 is projected to be ~~$53.0~~$54.2 million, of which ~~$13.6~~$13.0 million is related to finance leases, excluding buyout payments. We anticipate our debt service will be funded by cash flows from operations.

~~In addition, we~~We will be using cash to perform our obligations under the earnout related to the Alamo Acquisition. In addition, our board of directors has authorized a share repurchase program, under which the Company may use a total of up to $250 million between now and December 31, 2023. We anticipate that any payments due under the earnout and used for the share repurchase program will be funded by cash flows from operations.

Other factors affecting liquidity

Financial position in current market. As of ~~June~~September 30, 2022, we had ~~$158.1~~$250.2 million of cash and a total of ~~$334.3~~$371.5 million available under our 2019 ABL Facility. We currently believe that our cash on hand, cash flow generated from operations and availability under our 2019 ABL Facility will provide sufficient liquidity to cover our estimated short-term (i.e., the next 12 months) and long-term (i.e., beyond the next 12 months) funding needs, including for capital expenditures, debt service, and working capital investments.

Guarantee agreements. In the normal course of business, we have agreements with financial institutions as part of our 2019 ABL Facility under which ~~$23.2~~$23.1 million of letters of credit were outstanding as of ~~June~~September 30, 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 60 days. The economic impact of the COVID-19 resurgence and 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. Risk Factors." for additional information on the risks related to these purchase commitments.

Long-Term Debt Arrangements

2019 ABL Facility

We and certain of our subsidiaries as additional borrowers and guarantors, are parties to the 2019 ABL Facility that matures on October 31, 2024. This facility provides for, among other things, a $450.0 million revolving credit facility (with a $100.0 million sub-facility for letters of credit), subject to a borrowing base in accordance with the terms agreed between us and the lenders. As of ~~June~~September 30, 2022, we had no outstanding principal amounts under the 2019 ABL Facility. The 2019 ABL Facility contains 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 ~~June~~September 30, 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 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 ~~June~~September 30, 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 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 limitations on further encumbrance of the collateral subject to the applicable loans under the Master Agreement. As of ~~June~~September 30, 2022, the Company was in compliance with all covenants.

Critical Accounting 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. Financial 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. Financial 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 for the year ended December 31, 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. Financial Statements."

4041

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk. As of ~~June~~September 30, 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 Facility. As of ~~June~~September 30, 2022, we had ~~$336.0~~$335.1 million aggregate principal amount outstanding under the 2018 Term Loan Facility. The impact of a 1.0% increase in interest rates under the terms of the 2018 Term Loan Facility would have a $0.9 million and ~~$1.7~~$2.6 million impact on interest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2022, 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 and 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 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 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's Discussion and Analysis of Financial Condition and Results of 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. 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. Financial Statements"

4142

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 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 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 SEC's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and 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 ~~June~~September 30, 2022 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4243

PART II

Item 1. Legal Proceedings

The information in response to this item is incorporated herein by reference from Note (11) Commitments and Contingencies of Part I, “Item 1. Financial Statements” of this Quarterly Report on 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. There have been no material changes from the risk factors previously disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part II, “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

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

(a) Unregistered Sales of Equity Securities

~~None.~~On August 3, 2022, the Company entered into and closed the CIG Acquisition, as discussed above in Note 3 to the Financial Statements, Note (3) Acquisitions. The aggregate consideration for the purchase consisted of approximately $32.1 million, which includes: (i) approximately $27.9 million in cash paid at closing to the CIG Sellers plus (ii) 500,000 shares of common stock.The shares were issued to CIG without registration under the Securities Act in reliance on the private offering exemption provided by Section 4(a)(2) thereof, pursuant to CIG’s status as an “accredited investor,” as such term is defined in Rule 501 under the Securities Act.

(b) Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

4344

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						Registration Rights Agreement, dated August 3, 2022 between the Company and CIG (incorporate by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed August 3, 2022).
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						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.
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.

4445

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 ~~July 27,~~October 26, 2022.


			NexTier Oilfield Solutions Inc. (Registrant)

			By:			/s/ Dipo Iluyomade
						Dipo Iluyomade
						Chief Accounting Officer and Duly Authorized Officer

4546


Cash paid during the period for:
Interest expense, net	$	13,366	$	10,502
Income taxes	710		—
Non-cash investing and financing activities:
Change in accrued capital expenditures	$	(17,318)	$	(29,133)

Non-cash additions to finance right-of-use assets	6,222		—
Non-cash additions to finance lease liabilities, including current maturities	(6,020)		—
Non-cash additions to operating right-of-use assets	2,886		3,352
Non-cash additions to operating lease liabilities, including current maturities	$	(2,848)	$	(512)