UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



	FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

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

For the Transition Period from to

Commission File No. 001-34037

Commission Company Name: SUPERIOR ENERGY SERVICES INC

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)


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

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

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

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


Title of each class	Trading symbol ~~(1)~~	Name of each exchange on which registered ~~(1)~~
~~Common Stock, $.001 par value~~None	~~SPNX~~N/A	~~NONE~~None

(1) On September 17, 2020, our common stock was suspended from trading on the New York Stock Exchange (the NYSE). On September 18, 2020, our common stock began trading on the OTCQX Marketplace maintained by the OTC Markets Group, Inc. under the symbol “SPNX.” On October 2, 2020, the NYSE filed a Form 25 with the Securities and Exchange Commission (the SEC) to delist our common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The delisting became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of our common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

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 x¨ No ¨x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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~~filer x¨
Non-accelerated filer ¨x		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 x

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

The number of shares of the registrant’s Class A common stock outstanding on ~~November 3, 2020~~October 28, 2021 was 19,998,695.

~~14,826,906~~The number of shares of the registrant’s Class B common stock outstanding on October 28, 2021 was 76,269..

‎

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for

the Quarterly Period Ended ~~September~~June 30, ~~2020~~2021

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements and Notes
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Operations	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Unaudited Consolidated Statements of Changes in Stockholders' Equity (Deficit)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2438
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3246
Item 4.	Controls and Procedures	3346

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3448
Item 1A.	Risk Factors	3448
Item 2.	Unregistered Sales of Equity Securities	39
~~Item 3.~~	~~Defaults Upon Senior Securities~~	39
~~Item 4.~~	~~Mine Safety Disclosures~~	39
~~Item 5.~~	~~Other Information~~	3948
Item 6.	Exhibits	4049

SIGNATURES		50

‎

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements and Notes

~~and Notes~~


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES	SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES				SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets				Condensed Consolidated Balance Sheets
(in thousands, except share data)	(in thousands, except share data)				(in thousands, except share data)
(unaudited)	(unaudited)				(unaudited)
	September 30, 2020		December 31, 2019		Successor		Predecessor
ASSETS					June 30, 2021		December 31, 2020
Current assets:
Cash and cash equivalents	$	207,781	$	272,624	$	205,748	$	188,006
Accounts receivable, net of allowance for doubtful accounts of $18,414 and $12,156 at ‎September 30, 2020 and December 31, 2019, respectively		181,666		332,047
Accounts receivable, net of allowance for doubtful accounts of $515 and $24,629 at ‎June 30, 2021 and December 31, 2020, respectively						171,480		158,516
Income taxes receivable		4,119		740		-		8,891
Prepaid expenses		42,465		49,132		34,540		31,793
Inventory and other current assets		108,639		117,629
Inventory						86,064		77,027
Other current assets						7,762		9,171
Assets held for sale		51,748		216,197		170,194		242,104
Total current assets		596,418		988,369		675,788		715,508

Property, plant and equipment, net of accumulated depreciation and depletion of ‎$2,184,340 and $2,214,116 at September 30, 2020 and December 31, 2019, respectively		574,588		664,949
Property, plant and equipment, net						455,079		408,107
Operating lease right-of-use assets		56,198		80,906		30,755		33,317
Goodwill		137,142		137,695		-		138,677
Notes receivable		71,472		68,092		74,370		72,129
Restricted cash		80,175		2,764		80,159		80,179
Intangible and other long-term assets, net of accumulated amortization of $24,675 ‎and $23,199 at September 30, 2020 and December 31, 2019, respectively		58,253		50,455
Intangible and other long-term assets, net						24,436		53,162
Total assets	$	1,574,246	$	1,993,230	$	1,340,587	$	1,501,079

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	60,042	$	92,966	$	60,735	$	50,330
Accrued expenses		159,395		182,934		115,069		114,777
Current portion of decommissioning liabilities		3,735		3,649
Income taxes payable						4,829		-
Liabilities held for sale		5,760		44,938		35,730		46,376
Total current liabilities		228,932		324,487		216,363		211,483

Long-term debt, net		1,289,288		1,286,629
Decommissioning liabilities		137,315		132,632		171,744		134,436
Operating lease liabilities		38,649		62,354		21,353		29,464
Deferred income taxes		3,599		3,247		43,227		5,288
Other long-term liabilities		126,199		134,308		72,758		123,261
Total non-current liabilities						309,082		292,449
Liabilities Subject to Compromise						-		1,335,794
Total liabilities						525,445		1,839,726

Stockholders’ equity (deficit):
Preferred stock of $0.01 par value. Authorized - 5,000,000 shares; NaN issued		-		-
Common stock of $0.001 par value
Authorized - 25,000,000, Issued - 15,799,318, Outstanding - 14,826,906 at September 30, 2020		16		16
Authorized - 25,000,000, Issued - 15,689,463, Outstanding - 14,717,051 at December 31, 2019
Additional paid-in capital		2,756,031		2,752,859
Treasury stock at cost, 972,412 shares at September 30, 2020 and December 31, 2019, respectively		(4,290)		(4,290)
Predecessor common stock $0.001 par value; Authorized - 25,000,000, Issued - 15,799,318, Outstanding - 14,826,906 at December 31, 2020						-		16
Successor Class A common stock $0.01 par value; Authorized - 50,000,000 shares 19,998,695 shares issued and outstanding at June 30, 2021						200		-
Successor Class B common stock $0.01 par value; Authorized - 2,000,000 shares 113,840 shares issued and 76,269 shares outstanding at June 30, 2021						1		-
Class A Additional paid-in capital						902,486		2,756,889
Class B Additional paid-in capital						84		-
Predecessor Treasury stock at cost, 972,412 shares at December 31, 2020						-		(4,290)
Accumulated other comprehensive loss, net		(72,534)		(71,927)		-		(67,947)
Accumulated deficit		(2,928,959)		(2,627,085)		(87,629)		(3,023,315)
Total stockholders’ equity (deficit)		(249,736)		49,573		815,142		(338,647)
Total liabilities and stockholders’ equity (deficit)	$	1,574,246	$	1,993,230	$	1,340,587	$	1,501,079

See accompanying notes to condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.					See accompanying notes to unaudited condensed consolidated financial statements.

‎

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Revenues:
Services
$
97,001
$
211,540
$
367,846
$
689,248
Rentals
42,562
99,771
196,006
282,819
Product sales
27,365
45,274
108,426
117,230
Total revenues
166,928
356,585
672,278
1,089,297
Costs and expenses:
Cost of services
81,535
162,469
303,134
510,075
Cost of rentals
22,879
39,119
83,904
119,656
Cost of sales
11,819
30,339
69,684
71,781
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)
116,233
231,927
456,722
701,512
Depreciation, depletion, amortization and accretion - services
20,400
26,646
61,584
96,594
Depreciation, depletion, amortization and accretion - rentals
9,145
15,500
32,633
46,958
Depreciation, depletion, amortization and accretion - sales
5,627
3,016
19,096
9,224
General and administrative expenses
54,966
60,866
178,543
203,015
Restructuring expense
25,746
-
27,033
-
Reduction in value of assets
2,929
9,571
19,451
17,128
Income (loss) from operations
(68,118)
9,059
(122,784)
14,866
Other income (expense):
Interest expense, net
(24,794)
(24,505)
(74,677)
(74,275)
Other income (expense):
(1,399)
(3,353)
(4,810)
(4,476)
Loss from continuing operations before income taxes
(94,311)
(18,799)
(202,271)
(63,885)
Income taxes
4,990
1,708
(11,772)
7,707
Net loss from continuing operations
(99,301)
(20,507)
(190,499)
(71,592)
Loss from discontinued operations, net of income tax
(58,003)
(17,934)
(111,375)
(85,604)
Net loss
$
(157,304)
$
(38,441)
$
(301,874)
$
(157,196)
Basic and diluted loss per share:
Net loss from continuing operations
$
(6.70)
$
(1.31)
$
(12.87)
$
(4.60)
Loss from discontinued operations
(3.91)
(1.15)
(7.53)
(5.49)
Net loss
$
(10.61)
$
(2.46)
$
(20.40)
$
(10.09)
Weighted average shares outstanding
14,827
15,657
14,795
15,581



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES	SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES								SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
Condensed Consolidated Statements of Operations									Condensed Consolidated Statements of Operations
(in thousands, except per share data)									(in thousands, except per share data)
(unaudited)									(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,				Successor		Predecessor
	2020		2019		2020		2019		For the Three Months Ended June 30, 2021		For the Three Months Ended June 30, 2020
Revenues:
Services									$	79,787	$	59,919
Rentals										53,238		51,758
Product sales										32,867		39,905
Total revenues										165,892		151,582
Costs and expenses:
Cost of services										54,176		47,685
Cost of rentals										24,750		19,307
Cost of sales										24,653		26,434
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)										103,579		93,426
Depreciation, depletion, amortization and accretion - services										28,384		11,483
Depreciation, depletion, amortization and accretion - rentals										18,940		9,761
Depreciation, depletion, amortization and accretion - sales										11,694		7,464
General and administrative expenses										32,308		55,528
Restructuring and other expense										7,438		-
Loss from operations										(36,451)		(26,080)

Other income (expense):
Interest income (expense), net										535		(24,757)
Other income:										2,570		821
Loss from continuing operations before income taxes										(33,346)		(50,016)
Income tax (expense) benefit										1,747		4,324
Net loss from continuing operations										(31,599)		(45,692)
Loss from discontinued operations, net of income tax										(19,400)		(19,414)
Net loss		(157,304)		(38,441)		(301,874)		(157,196)	$	(50,999)	$	(65,106)
Change in cumulative translation adjustment, net of tax		4,216		(2,967)		(607)		(3,810)
Comprehensive loss	$	(153,088)	$	(41,408)	$	(302,481)	$	(161,006)

Loss per share -basic and diluted
Loss from continuing operations									$	(1.58)	$	(3.08)
Loss from discontinued operations, net of income tax										(0.97)		(1.31)
Net loss									$	(2.55)	$	(4.39)

Weighted-average shares outstanding - basic and diluted										19,999		14,826

See accompanying notes to condensed consolidated financial statements.	See accompanying notes to condensed consolidated financial statements.								See accompanying notes to condensed consolidated financial statements.

‎



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020

Revenues:
Services	$	123,466	$	19,234	$	163,722
Rentals		84,552		14,434		141,085
Product sales		63,717		12,260		81,014
Total revenues		271,735		45,928		385,821
Costs and expenses:
Cost of services		95,478		15,080		122,867
Cost of rentals		34,949		5,876		50,234
Cost of sales		41,020		8,817		57,838
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		171,447		29,773		230,939
Depreciation, depletion, amortization and accretion - services		44,748		3,500		25,831
Depreciation, depletion, amortization and accretion - rentals		30,841		2,627		22,266
Depreciation, depletion, amortization and accretion - sales		23,459		2,231		12,792
General and administrative expenses		50,746		11,052		114,804
Restructuring and other expenses		15,821		1,270		-
Reduction in value of assets		-		-		16,522
Loss from operations		(65,327)		(4,525)		(37,333)

Other income (expense):
Interest income (expense), net		747		202		(49,898)
Reorganization items, net		-		335,560		-
Other expense		(275)		(2,105)		(3,411)
Income (loss) from continuing operations before income taxes		(64,855)		329,132		(90,642)
Income tax (expense) benefit		6,032		(60,003)		14,160
Net income (loss) from continuing operations		(58,823)		269,129		(76,482)
Loss from discontinued operations, net of income tax		(28,806)		(352)		(68,088)
Net income (loss)	$	(87,629)	$	268,777	$	(144,570)

Income (loss) per share -basic
Net income (loss) from continuing operations	$	(2.94)	$	18.13	$	(5.18)
Loss from discontinued operations, net of income tax		(1.44)		(0.02)		(4.61)
Net income (loss)	$	(4.38)	$	18.11	$	(9.79)

Income (loss) per share - diluted:
Net income (loss) from continuing operations	$	(2.94)	$	18.05	$	(5.18)
Loss from discontinued operations, net of income tax		(1.44)		(0.02)		(4.61)
Net income (loss)	$	(4.38)	$	18.03	$	(9.79)

Weighted-average shares outstanding - basic		19,997		14,845		14,767
Weighted-average shares outstanding - diluted		19,997		14,905		14,767

See accompanying notes to condensed consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
2020
2019
Cash flows from operating activities:
Net loss
$
(301,874)
$
(157,196)
Adjustments to reconcile net loss to net cash provided by operating
‎ activities:
Depreciation, depletion, amortization and accretion
113,313
225,044
Deferred income taxes
352
-
Reduction in value of assets
19,451
40,952
Reduction in value of assets held for sale
109,591
-
Right-of-use assets amortization
14,738
16,341
Stock-based compensation expense
6,074
14,155
Other reconciling items, net
(3,537)
(9,340)
Changes in operating assets and liabilities:
Accounts receivable
126,439
68,239
Prepaid expenses
352
(20,012)
Inventory and other current assets
15,380
(19,966)
Accounts payable
(35,828)
(8,221)
Accrued expenses
(26,409)
(25,054)
Income taxes
(3,114)
3,314
Other, net
(16,331)
(11,752)
Net cash provided by operating activities
18,597
116,504
Cash flows from investing activities:
Payments for capital expenditures
(37,408)
(105,393)
Proceeds from sales of assets
44,097
90,696
Net cash provided by (used in) investing activities
6,689
(14,697)
Cash flows from financing activities:
Delayed draw term loan commitment fee
(11,700)
-
Tax withholdings for vested restricted stock units
(208)
(1,677)
Other
(432)
621
Net cash used in financing activities
(12,340)
(1,056)
Effect of exchange rate changes on cash
(378)
(1,857)
Net change in cash, cash equivalents, and restricted cash
12,568
98,894
Cash, cash equivalents, and restricted cash at beginning of period
275,388
163,748
Cash, cash equivalents, and restricted cash at end of period
$
287,956
$
262,642
See accompanying notes to condensed consolidated financial statements.



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)

	Successor		Predecessor
	For the Three Months Ended June 30, 2021		For the Three Months Ended June 30, 2020
Net loss	$	(50,999)	$	(65,106)
Change in cumulative translation adjustment, net of tax		-		(285)
Comprehensive loss	$	(50,999)	$	(65,391)

See accompanying notes to unaudited condensed consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
Nine Months Ended September 30, 2020
(in thousands, except share data)
(unaudited)
Accumulated
Common
Additional
other
stock
Common
paid-in
Treasury
comprehensive
Accumulated
shares
stock
capital
stock
loss, net
deficit
Total
Balances, December 31, 2019
15,689,463
$
16
$
2,752,859
$
(4,290)
$
(71,927)
$
(2,627,085)
$
49,573
Net loss
-
-
-
-
-
(79,464)
(79,464)
Foreign currency translation adjustment
-
-
-
-
(4,538)
-
(4,538)
Stock-based compensation expense,
net of forfeitures
-
-
2,527
-
-
-
2,527
Transactions under stock plans
108,965
-
(208)
-
-
-
(208)
Balances, March 31, 2020
15,798,428
$
16
$
2,755,178
$
(4,290)
$
(76,465)
$
(2,706,549)
$
(32,110)
Net loss
-
-
-
-
-
(65,106)
(65,106)
Foreign currency translation adjustment
-
-
-
-
(285)
-
(285)
Stock-based compensation expense,
net of forfeitures
-
-
2,374
-
-
-
2,374
Transactions under stock plans
611
-
-
-
-
-
-
Balances, June 30, 2020
15,799,039
$
16
$
2,757,552
$
(4,290)
$
(76,750)
$
(2,771,655)
$
(95,127)
Net loss
-
-
-
-
-
(157,304)
(157,304)
Foreign currency translation adjustment
-
-
-
-
4,216
-
4,216
Stock-based compensation expense,
net of forfeitures
-
-
(1,521)
-
-
-
(1,521)
Transactions under stock plans
279
-
-
-
-
-
-
Balances, September 30, 2020
15,799,318
$
16
$
2,756,031
$
(4,290)
$
(72,534)
$
(2,928,959)
$
(249,736)
See accompanying notes to condensed consolidated financial statements.


	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
Net income (loss)	$	(87,629)	$	268,777	$	(144,570)
Change in cumulative translation adjustment, net of tax		-		67,947		(4,823)
Comprehensive income (loss)	$	(87,629)	$	336,724	$	(149,393)

See accompanying notes to unaudited condensed consolidated financial statements.

‎

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Nine Months Ended September 30, 2019
(in thousands, except share data)
(unaudited)
Accumulated
Common
Additional
other
stock
Common
paid-in
comprehensive
Accumulated
shares
stock
capital
loss, net
deficit
Total
Balances, December 31, 2018
15,488,542
$
155
$
2,735,125
$
(73,177)
$
(2,371,364)
$
290,739
Net loss
-
-
-
-
(47,705)
(47,705)
Foreign currency translation adjustment
-
-
-
1,073
-
1,073
Stock-based compensation expense,
net of forfeitures
-
-
5,625
-
-
5,625
Transactions under stock plans
107,118
1
(1,667)
-
-
(1,666)
Balances, March 31, 2019
15,595,660
$
156
$
2,739,083
$
(72,104)
$
(2,419,069)
$
248,066
Net loss
-
-
-
-
(71,050)
(71,050)
Foreign currency translation adjustment
-
-
-
(1,916)
-
(1,916)
Stock-based compensation expense,
net of forfeitures
-
-
4,650
-
-
4,650
Transactions under stock plans
11,637
-
(10)
-
-
(10)
Shares issued under Employee Stock Purchase Plan
50,019
1
650
-
-
651
Balances, June 30, 2019
15,657,316
$
157
$
2,744,373
$
(74,020)
$
(2,490,119)
$
180,391
Net loss
-
-
-
-
(38,441)
(38,441)
Foreign currency translation adjustment
-
-
-
(2,967)
-
(2,967)
Stock-based compensation expense,
net of forfeitures
-
-
4,104
-
-
4,104
Transactions under stock plans
41
-
-
-
-
-
Balances, September 30, 2019
15,657,357
$
157
$
2,748,477
$
(76,987)
$
(2,528,560)
$
143,087
See accompanying notes to condensed consolidated financial statements.


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
Cash flows from operating activities:
Net income (loss)	$	(87,629)	$	268,777	$	(144,570)
		-
Adjustments to reconcile net loss to net cash provided by ‎ operating activities:
Depreciation, depletion, amortization and accretion		130,404		10,498		78,141
Deferred income taxes		(16,295)		54,322		(716)
Reduction in value of assets		-		-		16,522
Reduction in value of assets held for sale		12,430		(2,654)		49,361
Right-of-use assets amortization		6,309		1,372		9,943
Stock based compensation expense		1,570		-		7,293
Reorganization items, net		-		(354,279)		-
Retirement and deferred compensation plans expense, net		(1,885)		260		-
Bad debt		(5,433)		(210)		-
Gain on sale of assets and businesses		(4,513)		58		-
Other reconciling items, net		(1,886)		(307)		(1,906)
Changes in operating assets and liabilities:		-				-
Accounts receivable		(12,518)		3,602		88,182
Prepaid expenses		(2,910)		(340)		(8)
Inventory and other current assets		7,314		(221)		5,668
Accounts payable		9,619		(2,365)		(27,250)
Accrued expenses		(25,604)		24,425		(38,137)
Income taxes		13,805		340		(31,677)
Operating lease liabilities and other, net		(10,275)		2,105	(11,419)
Net cash provided by (used in) operating activities		12,503		5,383		(573)

Cash flows from investing activities:
Payments for capital expenditures		(10,995)		(3,035)		(30,518)
Proceeds from sales of assets		16,200		775	39,445
Net cash provided by (used in) investing activities		5,205		(2,260)		8,927

Cash flows from financing activities:
Credit facility costs		(14)		(1,920)		-
Tax withholdings for vested restricted stock units		(1,485)		-		(208)
Net cash used in financing activities		(1,499)		(1,920)		(208)
Effect of exchange rate changes on cash		-		311	(2,351)
Net change in cash, cash equivalents, and restricted cash		16,209		1,514		5,795
Cash, cash equivalents, and restricted cash at beginning of period		269,698		268,184		275,388
Cash, cash equivalents, and restricted cash at end of period	$	285,907	$	269,698	$	281,183


See accompanying notes to unaudited condensed consolidated financial statements.

‎



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)

										Class A		Class B	Accumulated
	Class A			Class B						Additional		Additional	other
	Common Stock			Common Stock			Treasury			paid-in		paid-in	comprehensive		Accumulated
	Shares	Amount		Shares	Amount		stock			capital		capital	loss, net		deficit		Total
Balances, December 31, 2020 (Predecessor)	15,799,318	$	16	-	$	-	$	(4,290)	$	2,756,889	$	-	$	(67,947)	$	(3,023,315)	$	(338,647)
Net income	-		-	-		-		-		-		-		-		268,777		268,777
Foreign currency translation adjustment	-		-	-		-		-		-		-		67,947		-		67,947
Extinguishment of unrecognized compensation expense	-		-	-		-		-		988		-		-		-		988
Stock-based compensation expense,	-			-		-						-						-
net of forfeitures	-		-	-		-		-		935		-		-		-		935
Restricted stock units vested	48,903		-	-		-		-		-		-		-		-		-
Shares withheld and retired	(14,701)		-	-		-				-		-						-
Cancellation of Predecessor equity	(15,833,520)		(16)	-		-		4,290		(2,758,812)		-		-		2,754,538		-
Issuance of Successor Class A common stock	19,995,581		200	-		-		-		902,486		-		-		-		902,686
Balances, February 2, 2021 (Predecessor)	19,995,581		200	-		-		-		902,486		-		-		-		902,686

Balances, February 3, 2021 (Successor)	19,995,581		200	-		-		-		902,486		-		-		-		902,686
Net loss	-		-	-		-		-		-		-		-		(36,630)		(36,630)
Balances, March 31, 2021 (Successor)	19,995,581	$	200	-	$	-	$	-	$	902,486	$	-	$	-	$	(36,630)	$	866,056
Net loss	-		-	-		-		-		-		-		-		(50,999)		(50,999)
Stock-based compensation expense,	-		-	-		-		-		-		-		-		-		-
net of forfeitures	-		-	-		-		-		-		1,570		-		-		1,570
Common stock issued	3,114		-	113,840		1		-		-		(1)		-		-		-
Shares withheld and retired	-		-	(37,571)		-		-		-		(1,485)		-		-		(1,485)
Balances, June 30, 2021 (Successor)	19,998,695	$	200	76,269	$	1	$	-	$	902,486	$	84	$	-	$	(87,629)	$	815,142


Balances, December 31, 2019 (Predecessor)	15,689,463		16					(4,290)		2,752,859		-		(71,927)		(2,627,085)		49,573
Net loss	-		-	-		-		-		-		-		-		(79,464)		(79,464)
Foreign currency translation adjustment	-		-	-		-		-		-		-		(4,538)		-		(4,538)
Stock-based compensation expense,																		-
net of forfeitures	-		-	-		-		-		2,527		-		-		-		2,527
Transactions under stock plans	108,965		-			-		-		(208)		-		-		-		(208)
Balances, March 31, 2020 (Predecessor)	15,798,428	$	16	-	$	-	$	(4,290)	$	2,755,178	$	-	$	(76,465)	$	(2,706,549)	$	(32,110)
Net loss																(65,106)		(65,106)
Foreign currency translation adjustment	-		-	-		-		-		-		-		(285)		-		(285)
Purchases of treasury stock	-		-	-		-		-		-								-
Stock-based compensation expense,												-		-		-		-
net of forfeitures	-		-	-		-		-		2,374		-		-		-		2,374
Transactions under stock plans	611		-	-		-		-		-		-		-		-		-
Balances, June 30, 2020 (Predecessor)	15,799,039	$	16	-	$	-	$	(4,290)	$	2,757,552	$	-	$	(76,750)	$	(2,771,655)	$	(95,127)

See accompanying notes to unaudited condensed consolidated financial statements.

‎

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

~~Nine Months Ended September 30, 2020~~

(1)Basis of Presentation

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

As used herein, the “Company,” “we,” “us”, “our” and similar terms refer to (i) prior to the Emergence Date (as defined below), SESI Holdings, Inc. (formerly known as Superior Energy Services, Inc.) (the “Former Parent”) and its subsidiaries and (ii) after the Emergence Date, Superior Energy Services, Inc. (formerly known as Superior Newco, Inc.) and its subsidiaries.

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Superior Energy Services, Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020. As described below, as a result of the application of fresh start accounting and ~~Management’s Discussion and Analysis~~the effects of ~~Financial Condition and Results~~the implementation of ~~Operations herein.~~our Plan (as defined below), the financial statements after the Emergence Date are not comparable with the consolidated financial statements on or before that date. Refer to Note 3 – “Fresh Start Accounting” below for additional information.

~~The~~In our opinion, the accompanying unaudited condensed financial information of Superior Energy Services, Inc. and its subsidiaries (the Company) for the three and nine months ended September 30, 2020 and 2019 has not been audited. However, in the opinion of management,statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary ~~to present fairly the~~for a fair statement of our financial position as of June 30, 2021, 2021, and our results of operations for the ~~periods presented have been included therein. Certain previously reported amounts have been reclassified to conform to the~~three months ended June 30, 2021 and 2020, ~~presentation. The results of operations~~and cash flows for the ~~first nine~~periods January 1, 2021 through February 2, 2021 and February 3, 2021 through June 30, 2021 and six months ofended June 30, 2020. The condensed balance sheet at December 31, 2020, was derived from audited annual financial statements but does not contain all the ~~year are not necessarily indicative of~~footnote disclosures from the ~~results of operations that might be expected~~annual financial statements. See “Changes in Accounting Policies” below for further information. The year-end condensed consolidated balance sheet for the ~~entire year.~~Predecessor (as defined below) was derived from audited financial statements but does not include all disclosures required by GAAP.

~~The Company evaluates~~Effective as of February 2, 2021 (the “Emergence Date”), the entity now known as Superior Energy Services, Inc. (formerly known as Superior Newco, Inc.) became the successor reporting company to the Former Parent pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Between December 7, 2020 (the “Petition Date”) and the Emergence Date, we operated as a debtor-in-possession under the supervision of the United States Bankruptcy Court for the Southern District of Texas Houston Division (the “Bankruptcy Court”). For financial reporting purposes, the close of business on February 2, 2021 represents the date of our emergence from bankruptcy. As used herein, the following terms refer to us and our operations:


"Predecessor"	The Company, prior to the Emergence Date
"Current Predecessor Period"	The Company's operations, January 1, 2021 - February 2, 2021
"Prior Predecessor Quarter"	The Company's operations, April 1, 2020 - June 30, 2020
"Prior Predecessor Period"	The Company's operations January 1, 2020 - June 30, 2020
"Successor"	The Company, after the Emergence Date
"Successor Quarter"	The Company's operations, April 1, 2021 - June 30, 2021
"Successor Period"	The Company's operations, February 3, 2021 - June 30, 2021

We evaluate events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure.

Recent Developments

Voluntary Reorganization Under Chapter 11 of the ~~U.S.~~ Bankruptcy Code

~~Superior Energy Services, Inc.~~On December 4, 2020, the Former Parent and certain of its direct and indirect wholly-owned domestic subsidiaries ~~(collectively,~~(together with the ~~Debtors) plan~~Former Parent, the “Affiliate Debtors”) entered into an Amended and Restated Restructuring Support Agreement (the “Amended RSA”) that amended and restated in its entirety the Restructuring Support Agreement, dated September 29, 2020, with certain holders of SESI, L.L.C.’s (“SESI”) outstanding (i) 7.125% senior unsecured notes due 2021 (the “7.125% Notes”) and (ii) 7.750% senior unsecured notes due 2024 (the “7.750% Notes”). The parties to ~~file~~the Amended RSA agreed to the principal terms of a proposed financial restructuring of the Affiliate Debtors, which was implemented through the Plan (as defined below).

On December 7, 2020, the Affiliate Debtors filed voluntary petitions ~~(the Chapter 11 Cases)~~ for relief (the ~~Bankruptcy Filing)~~“Chapter 11 Cases”) under Chapter 11 of Title 11 of the United States Code (the ~~Bankruptcy Code)~~“Bankruptcy Code”) in the ~~United States~~ Bankruptcy Court, and, in connection therewith, the Affiliate Debtors filed with the Bankruptcy Court the proposed Joint Prepackaged Plan of Reorganization under the Bankruptcy Code (as amended, modified or supplemented from time to time, the “Plan”).

On January 19, 2021, the Bankruptcy Court entered an order, Docket No. 289, confirming and approving the Plan. On the Emergence Date, the conditions to effectiveness of the Plan were satisfied or waived and we emerged from Chapter 11.

On the Emergence Date, we qualified for and adopted fresh start accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 – Reorganizations (ASC 852), which specifies the ~~Southern District~~accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. The application of ~~Texas (the Bankruptcy Court). The Debtors plan to commence~~fresh start accounting resulted in a ~~solicitation~~new basis of accounting and we became a new entity for ~~acceptance~~financial reporting purposes. As a result of ~~their prepackaged plan~~the implementation of ~~reorganization (the Plan) by causing~~ the Plan and the ~~corresponding disclosure statement~~application of fresh start accounting, these unaudited condensed consolidated financial statements after the Emergence Date are not comparable to ~~be distributed~~the consolidated financial statements before that date and the historical financial statements on or before the Emergence Date are not a reliable indicator of our financial condition and results of operations for any period after our adoption of fresh start accounting.

The accompanying unaudited condensed consolidated financial statements have been prepared as if we are a going concern and in accordance with ASC 852.

During the Current Predecessor Period, the Predecessor applied ASC 852 in preparing the unaudited condensed consolidated financial statements, which requires distinguishing transactions associated with the reorganization separate from activities related to ~~certain creditors~~the ongoing operations of the ~~Company shortly before~~business. Accordingly, pre-petition liabilities that could have been impacted by the Chapter 11 Cases were classified as liabilities subject to compromise. Additionally, certain expenses, realized gains and losses and provisions for losses that were realized or incurred during and directly related to the Chapter 11 Cases, including fresh start valuation adjustments and gains on liabilities subject to compromise were recorded as reorganization items, net in the condensed consolidated statements of operations in the Current Predecessor Period. See Note 2 – “Emergence from Voluntary Reorganization under Chapter 11” for more information on the events of the Chapter 11 Cases as well as the accounting and reporting impacts of the reorganization during the Current Predecessor Period.

Use of Estimates — In preparing the accompanying financial statements, we make various estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities reported as of the dates of the balance sheets and the amounts of revenues and expenses reported for the periods shown in the income statements and statements of cash flows. All estimates, assumptions, valuations and financial projections related to fresh start accounting, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially. For information about the use of estimates relating to fresh start accounting, see – Note 3 – “Fresh Start Accounting” below.

Due to the lack of comparability with historical financials, our unaudited consolidated condensed financial statements and related footnotes are presented with a “black line” division to emphasize the lack of comparability between amounts presented as of and after February 2, 2021 and amounts presented for all prior periods. The Successor’s financial results for future periods following the application of fresh start accounting will be different from historical trends and the differences may be material.

Changes in Accounting Policies

Accounting policies are disclosed in the Predecessor Company’s Annual Report on Form 10-K. As of the Emergence Date, the amounts for these accounts have been recorded at fair value. After the Emergence Date, we will continue to follow the accounting policies within the Predecessor Company’s Annual Report on Form 10-K except for the policies discussed below. As part of the adoption of fresh start accounting and effective upon emergence from bankruptcy, we have adopted new presentations for certain items within our condensed consolidated balance sheets and statement of operations. The presentation changes are described below:

The functional currency of certain international subsidiaries changed from the local currency to US dollars. This brings alignment so that our functional currency is US dollars. Management considered the economic factors outlined in FASB ASC Topic No. 830 - Foreign Currency Matters in the determination of the functional currency. Management concluded that the predominance of factors support the use of the Successor parent’s currency as the functional currency and resulted in a change in functional currency to US dollars for all international subsidiaries.

In connection with our Transformation Project, which is discussed further below, and our pending disposition activities, during the second quarter of 2021, our reportable segments were changed to Rentals, Well Services and Corporate and other. The reportable segments were changed to Rentals and Well Services for the Successor Quarter, Successor Period and Current Predecessor Period. Reportable segments in the Predecessor Company’s Annual Report on Form 10-K were, and remain, Drilling Products and Services, Onshore Completion and Workover Services, Production Services and Technical Solutions.

The Predecessor recognized bad debt expense and gains/losses on sales of assets within general and administrative expenses. The Successor recognizes these expenses within cost of revenues. See Note 3 – “Fresh Start Accounting” for additional information.

Additional Detail of Account Balances

Restricted Cash —Restricted cash as of June 30, 2021 primarily represents cash of $77.5 million held in a collateral account for the payment and performance of secured obligations including the reimbursement of letters of credit, and $2.7 million relates to cash held in escrow to secure the future decommissioning obligations related to the sole oil and gas property.

(2)Emergence from Voluntary Reorganization under Chapter 11

Plan of Reorganization under Chapter 11 of the Bankruptcy ~~Filing. During~~Code

On December 7, 2020, the Affiliate Debtors commenced the Chapter 11 Cases as described in Note 1 – “Basis of Presentation” above. After commencement of the Chapter 11 Cases, the Affiliate Debtors ~~will continue~~continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Upon filing the Chapter 11 Cases, the Debtors will request that the Bankruptcy Court grant certain relief to ensure a seamless transition of operations through the Chapter 11 Cases. As a result, the Debtors expect to be able to conduct their business operations in the ordinary course of business. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business will require the prior approval of the Bankruptcy Court.

~~Automatic Stay~~

Subject to specific exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases will automatically stay all judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to claims arising prior to the Bankruptcy Filing. Absent an order from the Bankruptcy Court, if the Bankruptcy Filing is made, substantially all of the Debtors’ liabilities prior to the Bankruptcy Filing will be subject to settlement under the Bankruptcy Code.

Executory Contracts

Subject to certain exceptions, under the Bankruptcy Code, the Affiliate Debtors ~~may, upon filing of the Chapter 11 Cases,~~could assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the ~~Debtors~~debtors from performing their future obligations under such executory contract or unexpired ~~lease. However, such rejection~~lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. ~~Counterparties to rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the Debtors estate for such damages.~~ Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors, including, where applicable, a quantification of the Debtors’ obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Debtors expect to have under the Bankruptcy Code.

~~Restructuring Support Agreement~~Bankruptcy Claims

During the Chapter 11 Cases, the Affiliate Debtors filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Affiliate Debtors, subject to the assumptions filed in connection therewith. Certain holders of pre-petition claims that were not governmental units were required to file proofs of claim by the bar date of January 7, 2021. As ~~previously disclosed~~of October 13, 2021, the Affiliate Debtors’ have received approximately 646proofs of claim, primarily representing general unsecured claims, for an amount of approximately $1.7 billion. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. Approximately 570 claims totaling approximately $1.4 billion have been withdrawn, disallowed or are pending approval to be disallowed. Differences in amounts recorded and claims filed by creditors are currently being investigated and resolved, including through filing objections with the Bankruptcy Court, where appropriate. We may ask the Bankruptcy Court to disallow claims that we believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In light of the substantial number of claims filed, the claims resolution process may take considerable time to complete and is continuing even after the Affiliate Debtors emerged from bankruptcy. As a result of the ongoing claims resolution process post-emergence, the Affiliate Debtors agreed to allow certain claims in the ~~Company’s Current Reports on Form 8-K filed on September 30, 2020~~amount of $232.0 million classified per the Plan of Reorganization as Class 6 General Unsecured Claims against the Parent. Each holder of a Class 6 claim receives their pro rata share of the $125,000 general unsecured claim cash pool described below. Per ASC 852-10, liabilities are measured at their allowed claim amount, and ~~October 28, 2020, on September 29, 2020,~~ the ~~Company entered into that certain restructuring support agreement (as amended, modified, or supplemented~~result of allowing these claims increased liabilities subject to compromise prior to emergence. The resolution of these Class 6 claims is considered in the $125,000 cash pool as part of the emergence transaction.

811

~~date,~~

On the ~~RSA) with certain holders (collectively,~~Emergence Date, the ~~Ad Hoc Noteholders Group)~~conditions to effectiveness of ~~7.125% senior unsecured notes due 2021 (the 2021 Notes)~~the Plan were satisfied or waived and ~~7.750% senior unsecured notes due 2024 (together with the 2021 Notes, the Prepetition Notes), both issued by SESI, L.L.C.~~we emerged from Chapter 11.

~~Under~~On the ~~terms of the RSA, the Debtors~~Emergence Date and the Ad Hoc Noteholder Group agreed to a series of deleveraging transactions (the Restructuring) that will eliminate approximately $1.30 billion of funded debt obligations of the Debtors through the Plan. Specifically, the Restructuring contemplates, among other things, the equitization of all amounts outstanding under the Debtors’ Prepetition Notes. In exchange for equitizing all of their funded debt, holders of Prepetition Notes (the Prepetition Noteholders) will receive 98% of the new common stock to be issued by the reorganized Company (the New Common Stock). Holders of existing prepetition equity will receive 2% of the New Common Stock and five-year warrants to purchase 10.0% of the New Common Stock (the New Warrants), subject to and in accordance with the terms set forth in the RSA. General unsecured creditors will remain unimpaired and be paid in the ordinary course of business.

~~The RSA further provides, in pertinent part, as follows:~~

All holders of Prepetition Notes that are accredited investors or qualified institutional buyers, will have the opportunity, but not the obligation, to exercise the subscription rights to purchase New Common Stock. The proceeds of the Equity Rights Offering will be used exclusively to fund the Cash Payout provided to Prepetition Noteholders electing the Cash Payout, in full and final satisfaction of such Holders’ Prepetition Notes Claims, which will be released and discharged pursuant to the ~~Plan. Consummation of the Equity Rights Offering is contingent upon the consent of the Required Consenting Noteholders under the RSA;~~

Eligible holders of the Prepetition Notes Claims that do not elect to participate in the Equity Rights Offering may receive a cash distribution of an amount yet to be determined (the Cash Payout). The proceeds from the Equity Rights Offering will be used to fund the cash distributions under the Cash Payout, provided that the total Cash Payout distribution amount will not exceed the total amount of the proceeds of the Equity Rights Offering. Any remaining portion of such holder’s Prepetition Notes Claims that is not satisfied through the Cash Payout will receive the treatment such holder would receive if such holder elected to participate in the Equity Rights Offering. The Cash Payout is contingent upon the consent of the Required Consenting Noteholders under the RSA;

The board of directors of the reorganized Company (the New Board) will be authorized to implement a management incentive plan (the New Management Incentive Plan) that provides for the issuance of equity-based compensation to the management and directors of the Company and its subsidiaries. Up to 10% of the New Common Stock, on a fully diluted basis, will be reserved for issuance in connection with the New Management Incentive Plan, with the actual amount to be reserved as determined by the New Board; and

In consideration for entry into the RSA, each Prepetition Noteholder that became a party to the RSA (a Consenting Noteholder) prior to a deadline set forth in the RSA was paid a premium payable in cash equal to the accrued interest outstanding as of the RSA effective date under the Notes held by each Consenting Noteholder. These expenses, as well as various advisory and professional fees related to the restructuring of the Company, ~~are recorded under the caption “Restructuring expense” on the condensed consolidated statements of operations. Restructuring expenses totaled approximately~~ $25.7 million and $27.0 million for the three and nine months ended September 30, 2020, respectively. Also included in this line item is $15.6 million related to the RSA premium paid to certain Consenting Noteholders pursuant to the RSA.

~~Under the Plan, certain classes of claims are expected to receive the following treatment:~~Plan:

Administrative expense claims, priority tax claims, other priority claims and other secured claims were paid or will be paid in full in the ordinary course (or receive such other treatment rendering such claims unimpaired);

Claims on account of the Company’s asset-based revolving credit facility (the Prepetition Credit Agreement), other than those claims related to any outstanding letters of credit, will be paid in full in cash;

Contingent claims arising from outstanding letters of credit under the Prepetition Credit Agreement that remain undrawn upon consummation of the Chapter 11 Cases will either (i) be 105% cash collateralized, (ii) be deemed outstanding under an asset-based revolving exit credit facility, if any, or (iii) receive such other treatment as may be acceptable to the Debtors, the agent and lenders under the Prepetition Credit Agreement, and at least three unaffiliated Consenting Noteholders holding at least 66.6% of the aggregate principal amount of the Prepetition Notes;

General unsecured creditors ~~will remain~~for the Affiliate Debtors remained unimpaired and ~~are to receive~~received payment in cash, in full, in the ordinary course;

General unsecured creditors for the Former Parent receive their pro rata share of a cash pool in the amount of $125,000;

Eligible holders of the claims arising as a result of holding either the 7.125% Notes or the 7.750% Notes against the Affiliate Debtors received their pro rata share of:

A payment equal to 2% of the principal amount of 7.125% Notes or 7.750% Notes held by all holders who did not opt out of receiving a cash payout; or

Solely to the extent that such a holder timely and validly elected to opt out of receiving the cash payout, (A) 100% of the Class A common stock issued and outstanding on the Emergence Date, subject to dilution, and (B), to the extent such holder was an “accredited investor” or “qualified institutional buyer” within the meaning of the SEC’s rules, subscription rights to participate in an equity rights offering (the “Equity Rights Offering”);

The ~~Company’s existing~~Affiliate Debtors conducted the Equity Rights Offering through an offering of subscription rights for the purchase of Class A common stock on a pro rata basis; and

Prior parent equity ~~will be~~interests and common stock of the Affiliate Debtors were cancelled and ~~exchanged for (i) 2.0%~~new Class A common stock was issued to settle claims arising as a result of holding either the 7.125% Notes or the 7.750% Notes, as noted above.

The costs of efforts to restructure our capital, prior to and during the Chapter 11 Cases, along with all other costs incurred in connection with the Chapter 11 Cases, have been material.

On the Emergence Date, pursuant to the terms of the ~~New Common Stock (subject to dilution on account~~Plan, we filed an amended and restated certificate of ~~(x) New Common Stock issued upon exercise~~incorporation (the “Certificate of Incorporation”) and a certificate of amendment of the ~~New Warrants~~amended and ~~(y) New Common Stock issued under the New Management Incentive Plan) and (ii) the New Warrants;~~restated certificate of incorporation (the “Certificate of Amendment”).

Also, on the Emergence Date, and pursuant to the terms of the Plan, we adopted amended and restated bylaws (the “Bylaws”). The descriptions of the Certificate of Incorporation and the Bylaws are qualified in their entirety by reference to the full texts of the Certificate of Incorporation, Bylaws, and Certificate of Amendment.

(3)Fresh Start Accounting

Fresh Start Accounting

In connection with the emergence from bankruptcy and in accordance with ASC 852, we qualified for and adopted fresh start accounting on the Emergence Date because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Predecessor’s assets immediately prior to confirmation of the Plan of $1,456.8 million was less than the total of all post-petition liabilities and allowed claims of $2,076.1 million.

In accordance with ASC 852, upon adoption of fresh start accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to our assets and liabilities based on their fair values (except for deferred income taxes) in accordance with FASB ASC Topic No. 805 - Business Combinations (ASC 805) and FASB ASC Topic No. 820 - Fair Value Measurements (ASC 820). The reorganization value represents the fair value of the Successor’s assets before considering certain liabilities and is intended to represent the approximate amount a willing buyer would pay for our assets immediately after reorganization. The amount of deferred income taxes recorded due to the fair value adjustments to assets and liabilities was determined in accordance with FASB ASC Topic No. 740 - Income Taxes.

Reorganization Value

The reorganization value represents the fair value of the Successor’s total assets before considering certain liabilities and is intended to approximate the amount a willing buyer would pay for the Successor’s assets immediately after restructuring. The Plan confirmed by the Bankruptcy Court estimated a range of enterprise values between $710.0 million and $880.0 million.

912



~~Eligible holders~~The following table reconciles the enterprise value to the reorganization value of Successor’s assets that has been allocated to our individual assets as of the Prepetition Notes who elect to participate in the Equity Rights Offering will receive their pro rata share of (i) 98% of New Common Stock (subject to dilution on account of (x) New Common Stock issued upon exercise of the New Warrants and (y) New Common Stock issued to management of the Reorganized Debtors under the New Management Incentive Plan) and (ii) rights to participate in the Equity Rights Offering; andEmergence Date (in thousands):



~~Eligible holders~~



	Emergence Date
Selected Enterprise Value within Bankruptcy Court Range	$	729,918
Plus: Cash and cash equivalents		172,768
Plus: Liabilities excluding the decommissioning liabilities		380,496
Plus: Decommissioning liabilities, including decommissioning liabilities classified as held for sale		173,622
Reorganization Value		1,456,804

Management determined the enterprise and corresponding equity value of the ~~Prepetition Notes who elect~~Successor using various valuation methods, including (i) discounted cash ~~instead~~flow analysis (“DCF”), (ii) comparable company analysis and (iii) precedent transaction analysis. The use of ~~participating in~~each approach provides corroboration for the ~~Equity Rights Offering will receive their pro rata share~~other approaches.

In order to estimate the enterprise value using the DCF analysis approach, management’s estimated future cash flow projections, plus a terminal value which was calculated by applying a multiple based on our internal rate of return (“IRR”) of 17.6% and a perpetuity growth rate of 3.0% to the terminal year’s projected earnings before interest, tax, depreciation and amortization (“EBITDA”). These estimated future cash inflows were then discounted to an ~~aggregate amount equal to a percentage~~assumed present value using our estimated weighted-average cost of ~~the amount due under the Prepetition Notes to all such holders.~~capital, which is represented by our IRR.

The ~~RSA contains certain covenants binding the Company~~comparable company analysis provides an estimate of our value relative to other publicly traded companies with similar operating and ~~the Consenting Noteholders, including limitations on the parties’ ability to pursue alternative transactions, commitments~~financial characteristics, by ~~the Consenting Noteholders to vote in favor~~which a range of EBITDA multiples of the ~~Plan, and commitments~~comparable companies was then applied to management’s projected EBITDA to derive an estimated enterprise value.

Precedent transaction analysis provides an estimate of enterprise value based on recent sale transactions of similar companies, by deriving the ~~Company and the Consenting Noteholders~~implied EBITDA multiple of those transactions, based on sales prices, which was then applied to ~~cooperate in good faith to finalize the documents and agreements contemplated by the RSA and the associated term sheet.~~management’s projected EBITDA.

The ~~RSA also sets~~enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain ~~milestones~~other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to ~~ensure~~significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the ~~Company emerges from bankruptcy as swiftly as practicable.~~estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.

Although the Company intends to pursue the Chapter 11 Cases in accordance with the terms set forth in the RSA, there can be no assurance that the Company will be successful in completing the transactions outlined in the RSA, whether on the same or different terms.

~~Delayed-Draw Term Loan Commitment Letter~~

As previously disclosed in the Company’s Current Report on Form 8-K filed on September 30, 2020, on September 29, 2020, the Company entered into a Commitment Letter (the Delayed-Draw Term Loan Commitment Letter) with certain of the Consenting Noteholders (such Consenting Noteholders, the Backstop Commitment Parties). Pursuant to the terms of the RSA, in connection with confirmation of the Plan, the Company will use reasonable efforts to obtain ABL Financing Commitments (as defined in the RSA). In the event that all or a portion of the ABL Financing Commitments is not obtained, the Backstop Commitment Parties have committed to provide a delayed draw term loan facility (the Delayed-Draw Term Loan Facility) in an aggregate principal amount not to exceed $200 million, upon the Company’s emergence from bankruptcy on the terms and subject to the conditions of the Delayed-Draw Term Loan Commitment Letter.

As consideration for the commitment to provide the Delayed-Draw Term Loan Facility, the Company paid $11.7 million to the Backstop Commitment Parties. The transactions contemplated by the Delayed-Draw Term Loan Commitment Letter are conditioned upon the satisfaction or waiver of customary conditions for transactions of this nature.

~~Going Concern~~

Recent developments discussed above have negatively impacted the Company's financial condition and the Company's current forecast gives doubt to the Company's available liquidity to repay its outstanding debt or meet its obligations. The Company’s bond and share price declines, as well as the Company’s credit rating, have over time increased the level of uncertainty in the Company’s business and impacted various key stakeholders, including the Company’s employees, customers, suppliers and key lenders. These conditions and events indicate that there is substantial doubt about the Company's ability to continue as a going concern.

~~As noted above, in response to these developments, the~~ ~~Debtors expect to make~~ the Bankruptcy Filing. Although the Company anticipates that the Chapter 11 Cases, if commenced, will help address its liquidity concerns, there are a number of risks and uncertainties surrounding the Chapter 11 Cases, including the uncertainty remaining over the Bankruptcy Court's approval of the Plan, which are not within the Company's control. Therefore, management has concluded that management’s current actions and plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

As of September 30, 2020, the Company’s unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. In addition, the Company’s unaudited condensed consolidated financial statements do not reflect any adjustments related to bankruptcy or liquidation accounting.

~~COVID-19 Pandemic and Market Conditions~~Valuation Process

The ~~Company’s operations continue to be disrupted due~~reorganization value was allocated to the ~~circumstances surrounding~~Successor’s reporting segments using the ~~COVID-19 pandemic.~~discounted cash flow approach. The ~~significant business disruption resulting from~~reorganization value was then allocated to the ~~COVID-19 pandemic has impacted customers, vendors~~Successor’s identifiable assets and ~~suppliers~~liabilities using the fair value principle as contemplated in ~~all geographical areas where~~ASC 820. The specific approach, or approaches, used to allocate reorganization value by asset class are noted below.

Inventory

The fair value of the ~~Company operates. The closure~~inventory was determined by using both a cost approach and income approach. Inventory was segregated into raw materials, spare parts, work in process (“WIP”), and finished goods. Fair value of ~~non-essential business facilities~~raw materials and ~~restrictions on travel put in place by governments around the world have significantly reduced economic activity. Also, the~~ COVID-19 pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increasesspare parts inventory were determined using the cost approach. Fair value of ~~capital~~finished goods and ~~adversely impacts access~~WIP inventory were determined by using the net realizable value approach. The fair value of finished goods was measured using an estimate of the costs to ~~capital.~~ ~~Additionally, recognized health risks associated with~~sell or dispose of the ~~COVID-19 pandemic have altered~~inventory plus a reasonable profit allowance on those efforts adjusted for holding costs. The fair value of WIP was measured using an estimate of the ~~policies~~costs to complete and sell or consume the inventory plus a reasonable profit allowance on those efforts adjusted for holding costs.

Property, Plant and Equipment

Real Property

The fair values of ~~companies operating around~~real property locations were estimated using the ~~world, resulting in these companies instituting safety programs similar to what both domestic~~sales comparison (market) approach and ~~international governmental agencies have~~cost approach. As part of the valuation process, information was obtained on the Successor’s current usage, building type, year built, and cost history for all properties valued. In determining the fair value and remaining useful life for real property assets, functional and economic obsolescence was considered and taken as an adjustment at the asset level.

1013

~~implemented, including stay at home orders, social distancing mandates,~~

Tangible Assets Excluding Real Property and ~~other community oriented health objectives.~~ Oil and Gas Assets

The ~~Company is complying with all such ordinances in its operations across~~fair values of our tangible assets were calculated using either the ~~globe. Management~~cost or market approach. For most tangible asset categories, a cost approach was utilized relying on purchase year, historic costs, and industry/equipment based trend factors to determine replacement cost new of the ~~Company believes it has proactively addressed many~~assets. Readily available market transaction data was used and adjusted for current market conditions for asset categories with active secondary markets such as heavy trucks and computer equipment. In both approaches, consideration was made for the effects of physical deterioration as well as functional and economic obsolescence in determining both estimates of fair value and the remaining useful lives of the ~~known operational impacts of the COVID-19 pandemic to the extent possible and will strive to continue to do so, but there can be no guarantee the measures will be fully effective.~~assets.

~~Furthermore, the~~Oil and Gas Assets

The oil and gas ~~industry has experienced unprecedented price disruptions during 2020, due in part to significantly decreased demand~~assets were valued as ~~a result~~of January 31, 2021, for the purposes of the COVID-19 pandemic, as activity declined in the face of depressed crude oil pricing. The U.S. oil and gas rig count fell by more than 60% in the second quarter of 2020 and by more than 30% in the third quarter of 2020. The number of oil and gas rigs outsideFebruary 2, 2021 condensed consolidated balance sheet, using estimates of the ~~U.S.~~reserve volumes and Canada fell by more than 10% in the third quarter of 2020 to an average of 731 rigs from 834 rigs in the second quarter of 2020. These market conditions have significantly impacted the Company’s business, with third quarter 2020 revenue decreasing to $166.9 million, as compared to $356.6 million in the third quarter of 2019, or 53%. As customers continue to revise their capital budgets in order to adjust spending levels in response to lower commodity prices, the Company has experienced significant pricing pressure for its productsassociated income data based on escalated price and ~~services.~~cost parameters.

~~Low~~Decommissioning Liabilities

In accordance with FASB ASC Topic No. 410 – Asset Retirement and Environmental Obligations (“ASC 410”), the asset retirement obligations associated with the Successor’s oil ~~prices~~ and ~~industry volatility are likely~~gas assets were valued using the income approach. Estimates were used for future retirement costs and the expected time to ~~continue through~~retirement, then adjusted for an estimated inflation rate over the ~~near~~time period prior to retirement and ~~long-term.~~ discounted future cash outflows by a credit adjusted risk-free rate of 5.6%. As such, the ~~global outbreak~~Successor changed its presentation to consolidate the fair value of the ~~COVID-19 pandemic continues~~Predecessor’s decommissioning liabilities previously recorded to ~~rapidly evolve, management expects it to continue to materially and adversely affect~~other long-term liabilities into the ~~Company’s revenue, financial condition, profitability, and cash flow for an indeterminate period of time.~~Successor’s decommissioning liabilities.

Internally-Developed Software

~~New York Stock Exchange Delisting~~Internally-developed software was valued using the cost approach in which a replacement cost was estimated based on the software developer time, materials, and other supporting services required to replicate the software.

On September 17, 2020, the Company was notified by the New York Stock Exchange (the NYSE) that the Company is no longer in compliance with the NYSE continued listing standards set forth in Section 802.01B of the NYSE Listed Company Manual due to the Company’s failure to maintain an average global market capitalization over a consecutive 30-day trading period of at least $15 million and accordingly, the NYSE had determined to commence proceedings to delist the Company’s common stock from the NYSE.Intangible Assets

~~Trading of~~Intangible assets were identified apart from goodwill using the ~~Company’s common stock on~~guidance provided in ASC 805. Intangible assets that were identified as either separable or arose from contract or other legal rights were valued using either the ~~NYSE was suspended effective as of approximately 4:00 p.m. Eastern Time on September 17, 2020. On September 18, 2020,~~cost or income approaches. The principal intangible assets identified were trademarks and patents. Trademarks and patents were valued using the ~~Company’s common stock commenced trading on~~relief from royalty method in which the ~~OTCQX marketplace under the trading symbol “SPNX.” On October 2, 2020, the NYSE applied~~subject intangible asset is valued by reference to the ~~SEC~~amount of royalty income it could generate if it was licensed in an arm’s length transaction to delist the Company’s common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The delisting became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of the Company’s common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

a third party.

~~(2)~~Lease Liabilities and Right of Use Assets

The fair value of lease liabilities was measured as the present value of the remaining lease payments, as if the lease were a new lease as of the Emergence Date. The Successor used its incremental borrowing rate of 5.3% commensurate with the Successor's capital structure as the discount rate in determining the present value of the remaining lease payments.

Consolidated Successor Balance Sheet

The adjustments included in the following fresh start consolidated condensed balance sheet as of February 2, 2021 reflect the effects of the transactions contemplated by the Plan and executed by the Successor on the Emergence Date (reflected in the column Reorganization Adjustments), and fair value and other required accounting adjustments resulting from the adoption of fresh start accounting (reflected in the column Fresh Start Adjustments). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.

The consolidated condensed balance sheet as of the Emergence Date was as follows (in thousands):



	As of February 2, 2021
	Predecessor		Reorganization Adjustments			Fresh Start Adjustments			Successor
ASSETS
Current assets:
Cash and cash equivalents	$	194,671	$	(21,903)	⁽¹⁾	$	-		$	172,768
Restricted cash - current		-		16,751	⁽²⁾		-			16,751
Accounts receivable, net of allowance for doubtful accounts		153,518		11	⁽³⁾		-			153,529
Income taxes receivable		9,146		-			(170)	⁽¹⁶⁾		8,976
Prepaid expenses		31,630		-			-			31,630
Inventory and other current assets		90,073		-			11,067	⁽¹⁷⁾		101,140
Assets held for sale		240,761		-			(20,402)	⁽¹⁸⁾		220,359
Total current assets		719,799		(5,141)			(9,505)			705,153

Property, plant and equipment, net of accumulated depreciation and depletion		401,263		-			139,587	⁽¹⁹⁾		540,850
Operating lease right-of-use assets		32,488		-			1,430	⁽²⁰⁾		33,918
Goodwill		138,934		-			(138,934)	⁽²¹⁾		-
Notes receivable		72,484		-			-			72,484
Restricted cash - non-current		80,179		-			-			80,179
Intangible and other long-term assets, net of accumulated amortization		52,264		(10,080)	⁽⁴⁾		(17,964)	⁽²²⁾		24,220
Total assets	$	1,497,411	$	(15,221)		$	(25,386)		$	1,456,804

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	51,816	$	(700)	⁽⁵⁾	$	-		$	51,116
Accrued expenses		126,768		9,042	⁽⁶⁾		1,406	⁽²³⁾		137,216
Liabilities held for sale		39,642		1,614	⁽⁷⁾		(3,992)	⁽²⁴⁾		37,264
Total current liabilities		218,226		9,956			(2,586)			225,596

Decommissioning liabilities		134,934		-			34,581	⁽²⁵⁾		169,515
Operating lease liabilities		23,584		-			(29)	⁽²⁶⁾		23,555
Deferred income taxes		4,853		3,100	⁽⁸⁾		51,569	⁽²⁷⁾		59,522
Other long-term liabilities		121,756		-			(45,826)	⁽²⁸⁾		75,930
Total non-current liabilities		285,127		3,100			40,295			328,522

Liabilities subject to compromise		1,572,772		(1,572,772)	⁽⁹⁾		-			-

Total liabilities		2,076,125		(1,559,716)			37,709			554,118
Stockholders’ equity (deficit):
Predecessor common stock $0.001 par value		16		(16)	⁽¹⁰⁾		-			-
Predecessor Additional paid-in capital		2,757,824		(2,757,824)	⁽¹¹⁾		-			-
Predecessor Treasury stock at cost		(4,290)		4,290	⁽¹²⁾		-			-
Successor Class A common stock $0.001 par value		-		200	⁽¹³⁾		-			200
Successor Additional paid-in capital		-		902,486	⁽¹⁴⁾		-			902,486
Accumulated other comprehensive loss, net		(67,532)		-			67,532	⁽²⁹⁾		-
Accumulated deficit		(3,264,732)		3,395,359	⁽¹⁵⁾		(130,627)	⁽³⁰⁾		-
Total stockholders’ equity (deficit)		(578,714)		1,544,495			(63,095)			902,686
Total liabilities and stockholders’ equity (deficit)	$	1,497,411	$	(15,221)		$	(25,386)		$	1,456,804

Reorganization Adjustments (in thousands)

(1)Changes in cash and cash equivalents included the following:


Payment of debtor in possession financing fees	(183)
Payment of professional fees at the Emergence Date	(2,649)
Payment of lease rejection damages classified as liabilities subject to compromise	(400)
Transfers from cash to restricted cash for Professional Fees Escrow and General Unsecured Creditors Escrow	(16,751)
Payment of debt issuance costs for the Credit Facility	(1,920)
Net change in cash and cash equivalents	(21,903)

(2)Changes to restricted cash - current included the following:


Transfer from cash for Professional Fee Escrow	16,626
Transfer from cash for General Unsecured Creditors Escrow	125
Net change in restricted cash - current	16,751

(3)Changes of $11 to accounts receivable reflect a receivable from the solicitor for excess proceeds received during the Rights Offering.

(4)Changes to intangibles and other long-term assets included the following:


Write-off of deferred financing costs related to the Delayed-Draw Term Loan	(12,000)
Capitalization of debt issuance costs associated with the Credit Facility	1,920
Net change in intangibles and other long-term assets	(10,080)

(5)Changes to accounts payable included the following:


Payment of professional fees at the Emergence Date	(2,649)
Professional fees recognized and payable at the Emergence Date	1,949
Net change in accounts payable	(700)

(6)Changes in accrued liabilities include the following:


Payment of debtor in possession financing fees	(183)
Accrual of professional fees	6,500
Accrual for transfer taxes	1,900
Reinstatement of lease rejection liabilities to be settled post-emergence	700
Accrual of general unsecured claims against parent	125
Net change in accrued liabilities	9,042

(7)Changes in liabilities held for sale reflect the fair value reinstatement of rejected leases claims.

(8)Changes in deferred income taxes are due to reorganization adjustments.

(9)The resulting gain on liabilities subject to compromise was determined as follows:


Prepetition 7.125% and 7.750% notes including accrued interest and unpaid interest	1,335,794
Rejected lease liability claims	4,956
Allowed Class 6 General Unsecured Claims against Parent	232,022
Liabilities subject to compromise settled in accordance with the Plan	1,572,772


Reinstatement of accrued liabilities for lease rejection claims	(700)
Reinstatement of liabilities held for sale for lease rejection claims	(1,614)
Payment to settle lease rejection claims	(400)
Cash proceeds from rights offering	963
Cash payout provided to cash opt-in noteholders	(952)
Cash Pool to settle GUCs against Parent	(125)
Issuance of common stock to prepetition noteholders, incremental to rights offering (par value)	(193)
Additional paid-in capital attributable to successor common stock issuance	(869,311)
Successor common stock issued to cash opt-out noteholders in the rights offering (par value)	(7)
Additional paid-in capital attributable to rights offering shares	(33,175)
Gain on settlement of liabilities subject to compromise	667,258

The Equity Rights Offering generated $963 in proceeds used to settle $952 in Cash Opt-in Noteholder claims. The Equity Rights Offering shares were offered at a price of $1.31/share to Cash Opt-out Noteholders. As such, the Equity Rights Offering shares generated the $963 in cash proceeds from the share issuance as well as an implied discount to the Cash Opt-in claimants of $32.2 million, recorded as a loss on share issuance in reorganization items, net. The loss on the Equity Rights Offering share

issuance is offset by the gain on share issuance of $32.2 million implied by the issuance of shares to settle Cash Opt-out Noteholder claims at a value of $46.82/share compared to the reorganization value implied share price of $45.14/share.

(10)Changes of $16 in Predecessor common stock reflect the cancellation of the Predecessor’s common stock.

(11)Changes in Predecessor additional paid-in capital (APIC) include the following:


Extinguishment of APIC related to Predecessor's outstanding equity interests	(2,758,812)
Extinguishment of RSUs for the Predecessor's incentive plan	988
Net change in Predecessor's additional paid-in capital	(2,757,824)

(12)Reflects $4.3 million cancellation of Predecessor treasury stock held at cost.

(13)Changes in the Successor’s Class A common stock include the following:


Issuance of successor Class A common stock to prepetition noteholders, incremental to rights offering (par value)	193
Successor Class A common stock issued to cash opt-out noteholders in the rights offering (par value)	7
Net change in Successor Class A common stock	200

(14)Changes in Successor additional paid-in capital include the following:


Additional paid-in capital (Successor Class A common stock)	869,311
Additional paid-in capital (rights offering shares)	33,175
Net change in Successor additional paid-in capital	902,486

(15)Changes to retained earnings (deficit) include the following:


Gain on settlement of liabilities subject to compromise	667,258
Accrual for transfer tax	(1,900)
Extinguishment of RSUs for Predecessor incentive plan	(988)
Adjustment to net deferred tax liability taken to tax expense	(3,100)
Professional fees earned and payable as a result of consummation of the Plan of Reorganization	(8,449)
Write-off of deferred financing costs related to the Delayed-Draw Term Loan	(12,000)
Extinguishment of Predecessor equity (par value, APIC, and treasury stock)	2,754,538
Net change in retained earnings (deficit)	3,395,359

Fresh Start Adjustments (in thousands)

(16)Changes of $170 in income tax receivable reflects the decrease to current deferred tax assets due to the adoption of fresh start accounting.

(17)Changes in inventory and other current assets included the following:


Fair value adjustment to inventory - Global Segment	12,137
Fair value adjustment to other current assets	(1,070)
Net change in inventory and other current assets due to the adoption of fresh start accounting	11,067

(18)Changes of $20.4 million in assets held for sale primarily reflect a fair value adjustment of $16.5 million decreasing real property and a $3.5 million decrease to Predecessor decommissioning balances due to the adoption of fresh start accounting.

(19)Changes of $139.6 million to property, plant and equipment reflect the fair value adjustment.


	Successor Fair Value	Predecessor Book Value
Land, Buildings, and Associated Improvements	117,341	205,237
Machinery and Equipment	290,593	1,103,501
Rental Services Equipment	92,861	617,762
Other Depreciable or Depletable Assets	35,143	46,403
Construction in Progress	4,912	4,912
	540,850	1,977,815
Less: Accumulated Depreciation and Depletion	-	(1,576,552)
Property, Plant and Equipment, net	540,850	401,263

(20)Reflects $1.4 million due to the fair value adjustment increasing operating lease right-of-use assets.

(21)Changes of $138.9 million to goodwill reflect the derecognition of the Predecessor’s goodwill due to the adoption of fresh start accounting.

(22)The fair value changes of $1.4 million to intangibles assets are reflected in the table below:


	Successor Fair Value	Predecessor Net Book Value
Customer Relationships	-	2,644
Trade Names	4,166	2,268
Patents	2,120	-
Intangible Assets, Net	6,286	4,912

Reduction of other long-term assets was due to the adoption of fresh start accounting and include $17.1 million in decommissioning liabilities related to Predecessor long-term assets fair valued and presented in the Successor’s property, plant, and equipment.

(23)Changes of $1.4 million to accrued expenses reflect the fair value adjustment increasing the current portion of operating lease liabilities.

(24)Reflects the $4.0 million fair value adjustment decreasing decommissioning liabilities and operating lease liabilities related to assets held for sale.

(25)Reflects the $34.6 million fair value adjustment increasing the non-current portion of decommissioning liabilities.

(26)Reflects the fair value adjustment decreasing the non-current portion of operating lease liabilities.

(27)Reflects the $70.4 million increase of deferred tax liabilities netted against an $18.8 million increase in realizable deferred tax assets due to the adoption of fresh start accounting.

(28)Changes of $45.8 million in other long-term liabilities reflects the reclassification of amounts associated with the Predecessor’s decommissioning liability balances that were fair valued and presented in the Successor’s decommissioning liabilities, as well as an increase in FIN48 liabilities of $1.5 million.

(29)Changes to accumulated other comprehensive loss reflect the elimination of Predecessor currency translation adjustment balances

due to the adoption of fresh start accounting on Predecessor currency translation adjustment balances.

(30)Changes reflect the cumulative impact of fresh start accounting adjustments discussed above and the elimination of the Predecessor’s accumulated other comprehensive loss and the Predecessor’s accumulated deficit.



Fresh start valuation adjustments	(77,376)
Adjustment to net deferred tax liability taken to tax expense	(53,251)
Net impact to accumulated other comprehensive loss and accumulated deficit	(130,627)

Reorganization Items, net

The Predecessor incurred costs associated with the reorganization, primarily unamortized debt issuance costs, expenses related to rejected leases and post-petition professional fees. In accordance with applicable guidance, costs associated with the Chapter 11 Cases have been recorded as reorganization items, net within the accompanying consolidated statement of operations for the Current Predecessor Period ended February 2, 2021. Reorganization items, net was 0 for the Successor Period, with $13.7 million used in operating activities during the Successor Period. Reorganization items, net was $335.6 million for the Current Predecessor Period, with $3.1 million representing cash used in operating activities during the Current Predecessor Period, $2.7 million and $0.4 million paid for professional fees and to settle lease rejection damages, respectively.



		Predecessor
		For the Period January 1, 2021 through February 2, 2021
Gain on settlement of liabilities subject to compromise	$	667,258
Allowed claim adjustment for Class 6 claims		(232,022)
Fresh Start valuation adjustments ⁽¹⁾		(77,376)
Professional fees		(16,005)
Predecessor lease liabilities rejected per the Plan		13,347
Write off of deferred financing costs related to the Delayed-Draw Term Loan		(12,000)
Lease rejection damages		(4,956)
Extinguishment of RSU's for the Predecessor's incentive plan		(988)
Other items		(1,698)
Total reorganization items, net	$	335,560

(1) Includes approximately $16.4 million in adjustments to assets and liabilities classified as held for sale. See Note 20-Discontinued Operations.

Restructuring and other expenses

We embarked on a transformation project as part of our emergence from bankruptcy to reconfigure our operations and organization to maximize shareholder value and margin growth. The project is focused around three sequential phases:

Business Unit Review – Analyzing strategic changes that emphasize product optimization and margin enhancement to maximize the cash flow profile of our business units and focus on our core competencies;

Geographic Focus – Review our footprint and improve capital efficiency by focusing on low-risk, high reward geographies to maximize returns; and

Right Size Support – Streamline support to match optimized business units that represent our core portfolio and consolidate our operational footprint to align the size of our operations with current demand to provide a superior value proposition and exhibit capital discipline.

Transformation Project

In connection with this initiative, during 2021, we incurred costs of $7.4 million and $15.8 million in the Successor Quarter and Successor Period, respectively, and $1.3 million in the Current Predecessor Period, which primarily relate to professional fees and separation costs related to former executives and personnel. These costs are included in Restructuring and other expenses in the Condensed Consolidated Statements of Operations.

Additionally, we have disposed of certain assets with a net book value of approximately $27.0 million. Proceeds from the sales of these assets have totaled approximately $43.8 million through October 29, 2021.

(4)Revenue

Revenue Recognition

Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration ~~the Company expects~~we expect to be entitled to in exchange for services rendered, rentals provided, and products sold. Taxes collected from customers and remitted to governmental authorities and revenues are reported on a net basis in ~~the Company’s~~our financial statements.

Performance Obligations

A performance obligation arises under contracts with customers to render services, provide rentals or sell products, and is the unit of account under FASB Accounting Standards Update ~~(ASU)~~ 2014-09 - Revenue from Contracts with Customers (Topic 606). ~~The Company accounts~~We account for services rendered and rentals provided separately if they are distinct and the service or rental is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered or rentals provided on its own or with other resources that are readily available to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A contract’s ~~standalone~~ selling prices are determined based on ~~the~~ prices ~~that the Company charges~~we charge for ~~its~~ services rendered, rentals provided, and products sold. The majority of ~~the Company’s~~our performance obligations are satisfied over time, which is generally represented by a period of 30 days or less. ~~The Company’s~~Our payment terms vary by the type of products or services offered. The term between invoicing and when the payment is due is typically 30 days.

Services Revenue: primarily represents amounts charged to customers for the completion of services rendered, including labor, products and supplies necessary to perform the service. Rates for these services vary depending on the type of services provided and can be based on a per job, per hour or per day basis.

Rentals Revenue: primarily priced on a per day, per man hour or similar basis and consists of fees charged to customers for the use of ~~the Company’s~~our rental equipment over the term of the rental period, which is generally less than twelve months.

Product Sales Revenue: products are generally sold based upon purchase orders or contracts with ~~the Company’s~~our customers that include fixed or determinable prices but do not include right of return provisions or other significant post-delivery obligations. ~~The Company recognizes~~We recognize revenue from product sales when title passes to the customer, the customer assumes risks and rewards of ownership, collectability is reasonably assured and delivery occurs as directed by the customer.

~~The Company expenses~~We expense sales commissions when incurred because the amortization period would be one year or less.

Disaggregation of ~~revenue~~Revenue

The following table presents ~~the Company’s~~our revenues by segment disaggregated by geography (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,				Successor		Predecessor
		2020		2019		2020		2019	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
U.S. land
Rentals									$	20,789	$	N/A
Well Services										6,781		N/A
Drilling Products and Services	$	10,458	$	46,590	$	66,652	$	142,073		N/A		19,538
Onshore Completion and Workover Services		21,559		75,973		103,957		273,727		N/A		-
Production Services		9,777		32,620		51,541		112,095		N/A		6
Technical Solutions		4,694		7,283		13,997		32,589		N/A		3,166
Total U.S. land	$	46,488	$	162,466	$	236,147	$	560,484	$	27,570	$	22,710

U.S. offshore
Rentals									$	26,890	$	N/A
Well Services										26,574		N/A
Drilling Products and Services	$	26,242	$	33,895	$	92,053	$	91,048		N/A		28,587
Onshore Completion and Workover Services		-		-		-		-		N/A		-
Production Services		6,630		18,295		24,292		58,977		N/A		6,363
Technical Solutions		15,740		40,771		70,884		95,195		N/A		23,611
Total U.S. offshore	$	48,612	$	92,961	$	187,229	$	245,220	$	53,464	$	58,561

International
Rentals									$	19,558	$	N/A
Well Services										65,300		N/A
Drilling Products and Services	$	19,301	$	30,700	$	68,639	$	79,825		N/A		19,225
Onshore Completion and Workover Services		-		-		-		-		N/A		-
Production Services		39,948		47,872		136,519		134,167		N/A		37,033
Technical Solutions		12,579		22,586		43,744		69,601		N/A		14,053
Total International	$	71,828	$	101,158	$	248,902	$	283,593	$	84,858	$	70,311
Total Revenues	$	166,928	$	356,585	$	672,278	$	1,089,297	$	165,892	$	151,582

‎



	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
U.S. land
Rentals	$	31,898	$	4,917	$	N/A
Well Services		8,907		3,379		N/A
Drilling Products and Services		N/A		N/A		56,193
Onshore Completion and Workover Services		N/A		N/A		-
Production Services		N/A		N/A		4,633
Technical Solutions		N/A		N/A		9,303
Total U.S. land	$	40,805	$	8,296	$	70,129

U.S. offshore
Rentals	$	47,293	$	8,196	$	N/A
Well Services		45,995		7,371		N/A
Drilling Products and Services		N/A		N/A		65,811
Onshore Completion and Workover Services		N/A		N/A		-
Production Services		N/A		N/A		17,663
Technical Solutions		N/A		N/A		55,144
Total U.S. offshore	$	93,288	$	15,567	$	138,618

International
Rentals	$	30,494	$	5,226	$	N/A
Well Services		107,148		16,839		N/A
Drilling Products and Services		N/A		N/A		49,338
Onshore Completion and Workover Services		N/A		N/A		-
Production Services		N/A		N/A		96,571
Technical Solutions		N/A		N/A		31,165
Total International	$	137,642	$	22,065	$	177,074
Total Revenues	$	271,735	$	45,928	$	385,821

1221

The following table presents ~~the Company’s~~our revenues by segment disaggregated by type (in thousands):



	Successor		Predecessor
	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
Services
Rentals	$	9,592	$	N/A
Well Services		70,195		N/A
Drilling Products and Services		N/A		13,012
Onshore Completion and Workover Services		N/A		-
Production Services		N/A		28,759
Technical Solutions		N/A		18,148
Total Services	$	79,787	$	59,919

Rentals
Rentals	$	47,895	$	N/A
Well Services		5,343		N/A
Drilling Products and Services		N/A		44,573
Onshore Completion and Workover Services		N/A		-
Production Services		N/A		4,959
Technical Solutions		N/A		2,226
Total Rentals	$	53,238	$	51,758

Product Sales
Rentals	$	9,750	$	N/A
Well Services		23,117		N/A
Drilling Products and Services		N/A		9,764
Onshore Completion and Workover Services		N/A		-
Production Services		N/A		9,684
Technical Solutions		N/A		20,457
Total Product Sales	$	32,867	$	39,905
Total Revenues	$	165,892	$	151,582



	Three Months Ended September 30,				Nine Months Ended September 30,				Successor		Predecessor
		2020		2019		2020		2019	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
Services
Rentals									$	15,856	$	2,005	$	N/A
Well Services										107,610		17,229		N/A
Drilling Products and Services	$	11,130	$	18,835	$	38,719	$	52,997		N/A		N/A		27,589
Onshore Completion and Workover Services		20,461		67,022		94,277		245,055		N/A		N/A		-
Production Services		44,550		85,188		167,081		262,658		N/A		N/A		89,224
Technical Solutions		20,860		40,495		67,769		128,538		N/A		N/A		46,909
Total Services	$	97,001	$	211,540	$	367,846	$	689,248	$	123,466	$	19,234	$	163,722

Rentals
Rentals									$	76,488	$	14,082	$	N/A
Well Services										8,064		352		N/A
Drilling Products and Services	$	38,786	$	78,714	$	161,188	$	221,306		N/A		N/A		122,402
Onshore Completion and Workover Services		1,098		8,951		9,680		28,672		N/A		N/A		-
Production Services		2,246		9,216		16,106		25,068		N/A		N/A		10,083
Technical Solutions		432		2,890		9,032		7,773		N/A		N/A		8,600
Total Rentals	$	42,562	$	99,771	$	196,006	$	282,819	$	84,552	$	14,434	$	141,085

Product Sales
Rentals									$	17,341	$	2,252	$	N/A
Well Services										46,376		10,008		N/A
Drilling Products and Services	$	6,085	$	13,636	$	27,437	$	38,643		N/A		N/A		21,352
Onshore Completion and Workover Services		-		-		-		-		N/A		N/A		-
Production Services		9,559		4,383		29,165		17,513		N/A		N/A		19,559
Technical Solutions		11,721		27,255		51,824		61,074		N/A		N/A		40,103
Total Product Sales	$	27,365	$	45,274	$	108,426	$	117,230	$	63,717	$	12,260	$	81,014
Total Revenues	$	166,928	$	356,585	$	672,278	$	1,089,297	$	271,735	$	45,928	$	385,821

~~(3)~~(5)Inventory

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



					Successor		Predecessor
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Finished goods	$	42,180	$	45,127	$	42,000	$	35,074
Raw materials		15,633		16,130		1,009		5,139
Work-in-process		6,329		9,360
WIP						6,350		2,994
Supplies and consumables		33,723		33,322		36,705		33,820
Total	$	97,865	$	103,939	$	86,064	$	77,027

~~(4)~~(6)Notes Receivable

Notes receivable consist of a commitment from the seller of an oil and gas property acquired by ~~the Company~~us related to costs associated with the abandonment of the acquired property. Pursuant to an agreement with the seller, ~~the Company invoices~~we invoice the seller an agreed upon amount at the completion of certain decommissioning ~~activities.~~activities for the offshore platform. The gross amount of ~~this~~the seller’s obligation to us totals $115.0 million and is recorded at present value, ~~using~~which totaled $74.4 million as of June 30, 2021. The related discount, which is based on an effective interest rate of 6.58%~~. The related discount~~, is amortized to interest income based on the expected timing of completion of the decommissioning activities. We recorded non-cash interest income related to notes receivable of $1.2 million and $1.9 million for the Successor Quarter and Successor Period, respectively, which is included in other reconciling items, net in the Condensed Consolidated Statements of Cash Flows. The ~~Company~~Predecessor recorded interest income related to notes receivable of ~~$3.4~~$0.4 million and ~~$3.1~~$1.2 million for the ~~nine months ended September 30, 2020~~Current Predecessor Period and ~~2019,~~the Prior Predecessor Quarter, respectively.

Interest receivable is considered paid in kind and is compounded into the carrying amount of the note.

‎

~~(5)Debt~~(7) Property, Plant and Equipment

~~The Company’s outstanding debt~~Property, plant and equipment are stated at cost, except for assets for which reduction in value is recorded during the period and assets acquired using purchase accounting and through fresh start accounting, which are recorded at fair value as of the date of acquisition. Depreciation on acquired assets is computed using the straight-line method over the estimated useful lives of the related assets as follows:


Machinery and equipment			3-12 years
Buildings, improvements and leasehold improvements			10-25 years
Automobiles, trucks, tractors and trailers			4-7 years
Furniture and fixtures			3-10 years

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

September 30, 2020
December 31, 2019
Stated Interest Rate (%)
Long-term
Senior unsecured notes due September 2024
7.750
$
500,000
$
500,000
Senior unsecured notes due December 2021
7.125
800,000
800,000
Total debt, gross
1,300,000
1,300,000
Unamortized debt issuance costs
(10,712)
(13,371)
Total debt, net
$
1,289,288
$
1,286,629



		Successor		Predecessor
	June 30, 2021		December 31, 2020
Machinery and equipment	$	380,318	$	1,727,454
Buildings, improvements and leasehold improvements		85,082		171,635
Automobiles, trucks, tractors and trailers		7,534		11,742
Furniture and fixtures		19,996		31,407
Construction-in-progress		6,122		4,793
Land		31,782		33,394
Oil and gas producing assets		20,028		15,117
Total		550,862		1,995,542
Accumulated depreciation and depletion		(95,783)		(1,587,435)
Property, plant and equipment, net	$	455,079	$	408,107

Depreciation expense (excluding depletion, amortization and accretion) for the Successor Quarter and Prior Predecessor Quarter was $57.3 million and $26.2 million, respectively. Depreciation expense (excluding depletion, amortization and accretion) for the Successor Period, Current Predecessor Period and Prior Predecessor Period was $95.4 million, $9.5 million and $54.8 million, respectively.

As discussed above, in connection with the valuation process under fresh start accounting, certain fully depreciated assets were assigned an estimated fair value of approximately $282.1 million and remaining useful life of less than 36 months. Depreciation expense for the remainder of 2021 is expected to be approximately $104.6 million and approximately $75.1 million and $46.5 million for the years ended December 31, 2022 and 2023, respectively. See Note 3 – “Fresh Start Accounting” for additional information.

(8) Intangibles

Intangible assets consist of the following (in thousands):



		Successor						Predecessor
		June 30, 2021						December 31, 2020
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful Lives	Amount		Amortization		Balance		Amount		Amortization		Balance
Trade Names	10		4,166		(174)		3,992		4,744		(4,263)		481
Customer Relationships	17		-		-		-		14,592		(10,077)		4,515
Patents	10		2,120		(88)		2,032		-		-		-
Non-Compete Agreements	3		-		-		-		3,478		(3,478)		-
Total		$	6,286	$	(262)	$	6,024	$	22,814	$	(17,818)	$	4,996

At June 30, 2021, trade name intangible assets totaling $0.7 million were included in Assets Held for Sale. Amortization expense for both the Successor Quarter and Prior Predecessor Quarter was $0.2 million. For the Successor Period, Current Predecessor Period and Prior Predecessor Period amortization expense was $0.3 million, $0.1 million and $0.5 million, respectively. Based on the carrying values of intangible assets June 30, 2021, amortization expense for the next five years (2021 through 2025) is estimated to be $0.3 million for the remainder of 2021 and $0.7 million for the years 2022 through 2025.

See Note 3 – “Fresh Start Accounting” for additional information.

(9)Debt

Credit Facility

~~The Company has an~~On the Emergence Date, pursuant to the Plan, the Former Parent, as parent guarantor, and SESI, as borrower, entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and letter of credit issuers named therein providing for a $120.0 million asset-based secured revolving credit facility (the “Credit Facility”), which ~~matures in October 2022.~~provides for revolving loans and is available for the issuances of letters of credit. The Credit Facility will mature on December 9, 2024. The borrowing base under the ~~credit facility~~Credit Facility is ~~calculated based on a formula referencing the borrower’s~~determined by reference to SESI’s and ~~the~~its subsidiary guarantors’ (i) eligible accounts receivable, (ii) eligible inventory, (iii) solely during the period from February 2, 2021 until the earlier of December 9, 2022 and the date that unrestricted cash of SESI and its wholly-owned subsidiaries is less than $75.0 million, eligible premium rental drill pipe and (iv) so long as there are no loans outstanding at such time, certain cash of SESI and its subsidiary guarantors, less ~~reserves.~~ reserves established by the administrative agent in its permitted discretion.

Availability under the ~~credit facility~~Credit Facility at any time is equal to the lesser of (i) the aggregate commitments under the Credit Facility and (ii) the borrowing base ~~and (iii) the highest principal amount permitted to be secured under the indenture governing the 7.125% senior unsecured notes due 2021.~~

~~At September~~at such time. As of June 30, ~~2020,~~2021, the borrowing base under the ~~asset-based revolving credit facility~~Credit Facility was ~~$97.3~~approximately $120.0 million and ~~the Company~~we had ~~$48.5~~$45.0 million of letters of credit outstanding that reduced its borrowing availability under the revolving credit facility. Subject to certain conditions, upon request and with the consent of the participating lenders, the total commitments under the Credit Facility may be increased to $170.0 million. SESI’s obligations under the Credit Facility are guaranteed by the Former Parent and all of SESI’s material domestic subsidiaries, and secured by substantially all of the personal property of the Former Parent, SESI and SESI’s material domestic subsidiaries, in each case, subject to certain customary exceptions.

Borrowings under the Credit Facility bear interest, at SESI’s option, at either an adjusted LIBOR (as defined below) rate plus an applicable margin ranging from 3.00% to 3.50% per annum, or an alternate base rate plus an applicable margin ranging from 2.00% to 2.50% per annum, in each case, on the basis of the then applicable consolidated fixed charge coverage ratio. In addition, SESI is required to pay (i) a letter of credit fee ranging from 3.00% to 3.50% per annum on the basis of the consolidated fixed charge coverage ratio on the aggregate face amount of all outstanding letters of credit, (ii) to the issuing lender of each letter of credit, a fronting fee of no less than 0.25% per annum on the outstanding amount of each such letter of credit and (iii) commitment fees of 0.50% per annum on the daily unused amount of the Credit Facility, in each case, quarterly in arrears.

The ~~credit agreement~~Credit Facility contains various covenants requiring compliance, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, ~~merger,~~mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if either (i) an event of default has occurred and is continuing or (ii) availability under the Credit Facility is less than the greater of $20.0 million or 15% of the lesser of the aggregate commitments and the borrowing base. The covenant and other restrictions of the Credit Facility significantly restrict the ability to incur borrowings other than letters of credit.

On ~~August 5, 2020,~~May 13, 2021, SESI, SESI Holdings, Inc. and the ~~Company amended its asset-based revolving credit facility to permit the Company to use up~~subsidiary guarantors party thereto entered into a first amendment and waiver to the ~~lesser~~Credit Facility (the “First Amendment and Waiver to the Credit Facility”) to, among other things, (i) extend the deadline thereunder for the delivery of ~~(i) $100 million~~our consolidated unaudited financial statements for the quarter ended March 31, 2021 to June 1, 2021 and (ii) ~~105%~~obtain a limited waiver of the face value of certain third-party letters of credit, surety, judgment, appeal or performance bonds, and similar obligations of the Company, to cash collateralize such obligations. The Company also deposited $25 million in an accountpotential defaults under the ~~lenders’ control~~Credit Facility related to ~~further secure its obligations under~~a delayed public filing of such financial statements after the ~~revolving credit facility. The Company reduced the amount~~original deadline for delivery of letters of credit issued through the credit facility by using $52.4 million to cash collateralize these obligations. The amendment also prohibits the Company from requesting any loans under the credit facility and also restricts the Company’s flexibility under certain of the investment, indebtedness, junior debt repayment and restricted payment covenants.such financial statements.

~~Senior Unsecured Notes~~On May 28, 2021, SESI, L.L.C., SESI Holdings, Inc. and the subsidiary guarantors party thereto entered into a waiver to the Credit Facility to (i) extend the deadline under the Credit Agreement for the delivery of Superior Energy Services, Inc.’s consolidated unaudited financial statements for the quarter ended March 31, 2021 and the calendar months ending April 30, 2021 and May 31, 2021 to July 15, 2021 and (ii) agree that until the unaudited financial statements and a revised borrowing base certificate in connection therewith are delivered, the lenders will not be required to make any advances requested.

On July 15, 2021, SESI, the Former Parent, and the subsidiary guarantors party thereto entered into a waiver to the Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent and lender, and certain other financial institutions and other parties thereto as lenders to (i) extend the deadline under the Credit Facility for the delivery of our consolidated unaudited financial statements (x) as of and for the quarter ended March 31, 2021 to September 30, 2021 and (y) as of and for the quarter ended June 30, 2021 and the calendar months ending April 30, 2021, May 31, 2021, July 31, 2021 and August 31, 2021 to October 30, 2021, (ii) obtain a limited waiver of potential defaults under the Credit Facility related to a delayed public filing of this quarterly report on Form 10-Q with respect to the fiscal quarter ended June 30, 2021 (including related financial statements) after the original deadline (and confirmation of such waiver as it pertains to the quarterly report on Form 10-Q with respect to the fiscal quarter ended March 31, 2021), and (iii) agree that until the quarterly unaudited financial statements and a revised borrowing base certificate in connection with each such quarter is delivered, the lenders will not be required to make any advances requested.

Delayed-Draw Term Loan Commitment Letter

On September 29, 2020, the Predecessor entered into a commitment letter (the “Delayed-Draw Term Loan Commitment Letter”) with certain of the consenting noteholders (such consenting noteholders, the “Backstop Commitment Parties”). The Backstop Commitment Parties committed to provide a delayed draw term loan facility (the “Delayed-Draw Term Loan Facility”) in an aggregate principal amount not to exceed $200.0 million, upon our emergence from bankruptcy on the terms and subject to the conditions of the Delayed-Draw Term Loan Commitment Letter.

The ~~Company has~~Predecessor paid $12.0 million of fees in consideration for the commitment by the Backstop Commitment Parties during 2020. On the Emergence Date, the Delayed-Draw Term Loan Commitment Letter terminated in accordance with its terms upon the effectiveness of the Credit Facility without the establishment of the Delayed-Draw Term Loan Facility. The termination resulted in the Predecessor recognizing $12.0 million of reorganization items, net during the Current Predecessor Period.

Debtor-in-Possession Financing

In connection with the Chapter 11 Cases, the Affiliate Debtors filed a motion for approval of a debtor-in-possession financing facility, and on December 8, 2020, the Bankruptcy Court approved such motion and entered into an order approving the financings (the “DIP Order”). In accordance with the DIP Order, on December 9, 2020, the Predecessor, as guarantor, and SESI, as borrower, entered into a $120.0 million Senior Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

On the Emergence Date, the Credit Facility replaced the DIP Credit Facility and approximately $46.6 million of undrawn letters of credit outstanding ~~$800~~under the former DIP Credit Facility were deemed outstanding under the Credit Facility. All accrued and unpaid fees and other amounts outstanding thereunder were paid in full as well.

Prepetition Indebtedness

The Predecessor’s outstanding debt was as follows (in thousands) for the periods indicated:



	Stated Interest Rate (%)	December 31, 2020
Senior unsecured notes due September 2024	7.750	$	500,000
Senior unsecured notes due December 2021	7.125		800,000
Total debt, gross			1,300,000
Reclassification to liabilities subject to compromise			(1,300,000)
Unamortized debt issuance costs			-
Total debt, net		$	-

The Predecessor had outstanding $800.0 million of senior unsecured notes due December 2021. The indenture governing the 7.125% senior unsecured notes due 2021 ~~requires~~required semi-annual interest payments on June 15 and December 15of each year through the maturity date of December 15, 2021.

The ~~Company~~Predecessor also ~~has~~had outstanding ~~$500~~$500.0 million of senior unsecured notes due September 2024. The indenture governing the 7.75% senior unsecured notes due 2024 ~~requires~~required semi-annual interest payments on March 15 and September 15 of each year through the maturity date of September 15, 2024.

IfAt the ~~Debtors file~~Petition Date, there was pre-petition accrued interest of $35.8 million under the ~~Chapter 11 Cases, the principal and interest due under these debt instruments will become immediately due and payable. However, section 362~~two issuances of ~~the Bankruptcy Code will stay the creditors from taking any action as~~senior secured notes. As a result of the ~~default. Any efforts to enforce such payment~~automatic stay from bankruptcy, principal and interest was not paid during the bankruptcy proceedings. On the Emergence Date, obligations under these notes, including principal and accrued interest of $35.8 million, were fully extinguished in exchange for cash and equity in the unsecured notes or other accelerated obligations of the Debtors will be automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the unsecured notes, the credit facility and other accelerated obligations of the Debtors will be subject to the applicable provisions of the Bankruptcy Code.Successor.

~~(6)~~(10)Decommissioning Liabilities

~~The Company’s~~We account for decommissioning liabilities under ASC 410 – Asset Retirement Obligations. Our decommissioning liabilities are associated with an oil and gas property and ~~its related assets~~ include liabilities related to the plugging of wells, removal of the related platform and equipment and site restoration. ~~The Company reviews~~We review the adequacy of ~~its~~our decommissioning liabilities whenever indicators suggest that the estimated cash flows and/or relating timing needed to satisfy the liability have changed materially. The ~~Company~~Successor had decommissioning liabilities of ~~$141.1~~$171.1 million as of June 30, 2021 and ~~$136.3~~the Predecessor had decommissioning liabilities of $142.7 million ~~at September 30, 2020 and~~as of December 31, ~~2019, respectively.~~

2020, respectively, including decommissioning liabilities included within liabilities held for sale. In connection with fresh start accounting, we now present all asset retirement obligations separately as decommissioning liabilities on the balance sheet. Previously, certain of these decommissioning liabilities were included as a component of other long-term liabilities.

‎

~~(7)~~(11) Leases

Accounting Policy for Leases

~~The Company determines~~We determine if an arrangement is a lease at inception. All of ~~the Company’s~~our leases are operating leases and are included in right-of-use ~~(ROU)~~(“ROU”) assets, accounts payable and operating lease liabilities in the condensed consolidated balance sheet.

ROU assets represent ~~the Company’s~~our right to use an underlying asset for the lease term and lease liabilities represent ~~the Company’s~~our obligations to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the respective lease term. ~~The Company uses its~~We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. ~~The Company’s~~Our lease terms may include options to extend or terminate the lease.

The Company has changed its position regarding exercising certain operating lease renewal options given the current industry conditions related to the COVID-19 pandemic. At September 30, 2020, this change resulted in a decrease to the operating lease ROU assets and liabilities of $10.7 million.

Overview

~~The Company’s~~Our operating leases are primarily for real estate, machinery and equipment, and vehicles. The terms and conditions for these leases vary by the type of underlying asset. Subject to certain exceptions, if the Debtors make the Bankruptcy Filing, under the Bankruptcy Code, the Company may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Total operating lease expense was as follows (in thousands):



									Successor		Predecessor
									Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Long-term fixed lease expense	$	4,032	$	8,942	$	18,043	$	25,507	$	3,779	$	4,624
Long-term variable lease expense		85		117		285		298
Short-term lease expense		1,652		3,346		8,175		13,216		2,349		884
Total operating lease expense	$	5,769	$	12,405	$	26,503	$	39,021	$	6,128	$	5,508



	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
Long-term fixed lease expense	$	5,759	$	1,824	$	10,255
Long-term variable lease expense		-		19		-
Short-term lease expense		3,345		789		1,875
Total operating lease expense	$	9,104	$	2,632	$	12,130

Supplemental Balance Sheet and Cash Flows Information

Operating leases were as follows (in thousands):


					Successor		Predecessor
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Operating lease ROU assets	$	56,198	$	80,906	$	30,755	$	33,317

Accrued expenses	$	19,622	$	21,072	$	9,522	$	10,698
Operating lease liabilities		38,649		62,354		21,353		29,464
Total operating lease liabilities	$	58,271	$	83,426	$	30,875	$	40,162

Weighted average remaining lease term		8 years		9 years
Weighted average discount rate		6.51%		6.75%
Weighted-average remaining lease term						11 years		9 years
Weighted-average discount rate						5.34%		6.35%

	Nine Months Ended September 30,
	2020		2019
Cash paid for operating leases	$	20,806	$	26,242
ROU assets obtained in exchange for lease obligations	$	3,513	$	21,045


	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020
Cash paid for operating leases	$	7,614	$	1,575	$	13,494
ROU assets obtained in exchange for lease obligations	$	2,823	$	453	$	2,996

Maturities of operating lease liabilities at ~~September~~June 30, ~~2020~~2021 are as follows (in thousands):



Remainder of 2020	$	7,265
2021		21,905
Remainder of 2021			$	5,284
2022		14,546		9,180
2023		10,977		6,841
2024		8,210		4,403
2025				3,396
Thereafter		28,780		20,902
Total lease payments		91,683		50,006
Less imputed interest		(33,412)		(19,131)
Total	$	58,271	$	30,875

~~(8)~~(12) Fair Value Measurements

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

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

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

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

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




	Fair Value at September 30, 2020								Successor Fair Value at June 30, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Intangible and other long-term assets, net:
Non-qualified deferred compensation assets	$	-	$	14,252	$	-	$	14,252	$	7,457	$	8,146	$	-	$	15,603
Accounts payable:
Non-qualified deferred compensation liabilities	$	-	$	2,741	$	-	$	2,741	$	-	$	2,112	$	-	$	2,112
Other long-term liabilities:
Non-qualified deferred compensation liabilities	$	-	$	19,530	$	-	$	19,530	$	-	$	19,702	$	-	$	19,702
Total debt	$	350,100	$	-	$	-	$	350,100


	Fair Value at December 31, 2019								Predecessor Fair Value at December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Intangible and other long-term assets, net:
Non-qualified deferred compensation assets	$	-	$	15,499	$	-	$	15,499	$	-	$	15,013	$	-	$	15,013
Accounts payable:
Non-qualified deferred compensation liabilities	$	-	$	1,372	$	-	$	1,372	$	-	$	2,869	$	-	$	2,869
Other long-term liabilities:
Non-qualified deferred compensation liabilities	$	-	$	23,466	$	-	$	23,466	$	-	$	20,697	$	-	$	20,697
Total debt	$	1,021,300	$	-	$	-	$	1,021,300	$	409,050	$	-	$	-	$	409,050

~~The Company’s~~Our non-qualified deferred compensation plans allow officers, certain highly compensated employees and non-employee directors to defer receipt of a portion of their compensation and contribute such amounts to one or more hypothetical investment funds. These investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent ~~Levels~~either a Level 1 ~~and~~or Level 2 ~~respectively,~~ in the fair value ~~hierarchy.~~hierarchy depending on the type of investment. Commencement of the Chapter 11 Cases ~~will~~ automatically ~~stay~~stayed payments under the non-qualified deferred compensation plans. As a result of the consummation of the Plan, restricted stock units issued prior to the Fresh Start Accounting Date under our stock incentive plans were cancelled for 0 consideration.

The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued expenses, as reflected in the condensed consolidated balance sheets, approximates fair value due to the short maturities. The fair value of the debt instruments is determined by reference to the market value of such instruments as quoted in an over-the-counter market, which represents Level 1 in the fair value hierarchy.

~~The following table reflects the fair value measurements used in testing the impairment of long-lived assets (in thousands):~~(13) Segment Information

Nine Months Ended September 30,
Impairment
Fair Value
Property, plant and equipment, net
$
19,451
$
13,593

~~Fair value is measured as of impairment date using Level 3 inputs. See Note 10 for a discussion of the reduction in value of assets recorded~~In connection with our previously discussed Transformation Project and pending disposition activities, during the ~~nine months ended September 30, 2020.~~

~~While the Company believes that it will continue~~second quarter of 2021, our reportable segments were changed to ~~operate~~Rentals, Well Services and Corporate and other. Reportable segments for periods prior to January 1, 2021 which were presented in ~~the ordinary course during the Chapter 11 Cases~~our Annual Report on Form 10-K were Drilling Products and ~~upon emergence from the Chapter 11 Cases, the Company’s estimates of fair values are sensitive to inputs~~Services, Onshore Completion and Workover Services, Production Services and Technical Solutions. The Predecessor segment presentation has not been revised due to the ~~valuation approaches, including forecasts~~change in reporting entity as a result of ~~revenues and earnings growth. There can be no assurances that changes to the Company’s inputs would not result in a material impairment~~our application of ~~goodwill.~~

~~(9) Segment Information~~fresh start accounting.

Business Segments

The ~~Drilling Products~~products and ~~Services segment rents~~service offerings of Rentals are comprised of value-added engineering services and ~~sells~~ premium ~~drill pipe,~~downhole tubular rentals, design engineering, manufacturing and rental of bottom hole assemblies ~~tubulars~~ and ~~specialized equipment for use with onshore~~rentals of accommodation units.

The products and ~~offshore oil~~service offerings of Well Services are comprised of risk management, well control and gas well drilling, completion, production and workover activities. It also provides on-site accommodations and machining services. The Onshore Completion and Workover Services segment provides fluid handling services andtraining solutions, hydraulic workover and ~~maintenance services. The Production Services segment provides intervention~~snubbing services, ~~such as~~engineering and manufacturing of premium sand control tools, coiled tubing, cased hole and mechanical wireline, ~~hydraulic workover and snubbing,~~ production testing and optimization, pressure control and remedial pumping services. The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well containment systems, stimulation and sand control services and the production and sale of oil and gas.

~~The Company evaluates~~We evaluate the performance of ~~its~~our reportable segments based on income or loss from operations excluding corporate expenses. The segment measure is calculated as follows: segment revenues less segment operating expenses, depreciation, depletion, amortization and accretion expense and reduction in value of assets. ~~The Company uses~~We use this segment measure to evaluate ~~its~~our reportable segments ~~because~~as it is the measure that is most consistent with how ~~the Company organizes~~we organize and ~~manages its~~manage our business operations. Corporate and other costs primarily include expenses related to support functions, including salaries and benefits for corporate ~~employees and stock-based compensation expense.~~employees.

Summarized financial information for ~~the Company’s~~our segments is as follows (in thousands):



Three Months Ended September 30, 2020

			Onshore
	Drilling		Completion
Successor
Three Months Ended June 30, 2021													Three Months Ended June 30, 2021
	Products and		and Workover		Production		Technical		Corporate and		Consolidated					Well		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total			Rental		Services		Other		Total
Revenues	$	56,001	$	21,559	$	56,355	$	33,013	$	-	$	166,928		$	67,237	$	98,655	$	-	$	165,892
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion		23,714		21,943		46,115		24,461		-		116,233
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)															28,034		75,545		-		103,579
Depreciation, depletion, amortization
and accretion		14,424		5,356		9,584		4,983		825		35,172			42,083		14,859		2,076		59,018
General and administrative expenses		12,948		3,319		6,801		9,844		22,054		54,966			6,352		9,566		16,390		32,308
Restructuring expense		-		-		-		-		25,746		25,746
Restructuring and other expenses															-		-		7,438		7,438
Reduction in value of assets		-		-		-		2,929		-		2,929			-		-		-		-
Income (loss) from operations		4,915		(9,059)		(6,145)		(9,204)		(48,625)		(68,118)			(9,232)		(1,315)		(25,904)		(36,451)
Interest income (expense), net		-		-		-		1,122		(25,916)		(24,794)			-		1		534		535
Other income		-		-		-		-		(1,399)		(1,399)
Other income (expense)															(501)		2,640		431		2,570
Income (loss) from continuing operations
before income taxes	$	4,915	$	(9,059)	$	(6,145)	$	(8,082)	$	(75,940)	$	(94,311)		$	(9,733)	$	1,326	$	(24,939)	$	(33,346)



Predecessor
Three Months Ended June 30, 2020				Onshore
				Completion
		Drilling Products		and Workover		Production		Technical		Corporate and		Consolidated
		and Services		Services		Services		Solutions		Other		Total
Revenues	$	67,349	$	-	$	43,402	$	40,831	$	-	$	151,582
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		22,485		(29)		37,792		33,178		-		93,426
Depreciation, depletion, amortization
and accretion		15,827		102		7,592		4,260		927		28,708
General and administrative expenses		10,927		12		6,343		10,209		28,037		55,528
Income (loss) from operations		18,110		(85)		(8,325)		(6,816)		(28,964)		(26,080)
Interest income (expense), net		-		-				1,104		(25,861)		(24,757)
Other income		-		-						821		821
Income (loss) from continuing operations
before income taxes	$	18,110	$	(85)	$	(8,325)	$	(5,712)	$	(54,004)	$	(50,016)



Predecessor
For the Period January 1, 2021 through February 2, 2021
			Well		Corporate and		Consolidated
	Rental		Services		Other		Total
Revenues	$	18,339	$	27,589	$	-	$	45,928
Cost of revenues (exclusive of depreciation,
depletion, amortization and accretion)		7,839		21,934		-		29,773
Depreciation, depletion, amortization
and accretion		4,271		3,666		421		8,358
General and administrative expenses		2,027		3,107		5,918		11,052
Restructuring and other expenses		-		-		1,270		1,270
Income (loss) from operations		4,202		(1,118)		(7,609)		(4,525)
Interest income (expense), net		10		1		191		202
Reorganization items, net		(2,037)		31,816		305,781		335,560
Other income (expense)		(399)		(165)		(1,541)		(2,105)
Income (loss) from continuing operations
before income taxes	$	1,776	$	30,534	$	296,822	$	329,132

1730



Three Months Ended September 30, 2019

			Onshore
	Drilling		Completion
Successor													Successor
For the Period February 3, 2021 to June 30, 2021													For the Period February 3, 2021 to June 30, 2021
	Products and		and Workover		Production		Technical		Corporate and		Consolidated					Well		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total			Rental		Services		Other		Total
Revenues	$	111,185	$	75,973	$	98,787	$	70,640	$	-	$	356,585		$	109,685	$	162,050	$	-	$	271,735
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion		38,663		61,338		82,556		49,370		-		231,927
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)															43,355		128,092		-		171,447
Depreciation, depletion, amortization
and accretion		20,168		6,853		12,063		4,909		1,169		45,162			70,141		25,676		3,231		99,048
General and administrative expenses		14,363		8,144		2,905		14,935		20,519		60,866			9,803		15,826		25,117		50,746
Reduction in value of assets		-		566		1,997		7,008		-		9,571
Income (loss) from operations		37,991		(928)		(734)		(5,582)		(21,688)		9,059
Restructuring and other expenses															-		-		15,821		15,821
Loss from operations															(13,614)		(7,544)		(44,169)		(65,327)
Interest income (expense), net		-		-		-		1,051		(25,556)		(24,505)			-		3		744		747
Other income		-		-		-		-		(3,353)		(3,353)
Income (loss) from continuing operations
Other income (expense)															(701)		2,235		(1,809)		(275)
Loss from continuing operations
before income taxes	$	37,991	$	(928)	$	(734)	$	(4,531)	$	(50,597)	$	(18,799)		$	(14,315)	$	(5,306)	$	(45,234)	$	(64,855)



Nine Months Ended September 30, 2020

			Onshore
Predecessor
Six Months Ended June 30, 2020													Six Months Ended June 30, 2020				Onshore
	Drilling		Completion														Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated				Drilling Products		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total				and Services		Services		Services		Solutions		Other		Total
Revenues	$	227,344	$	103,957	$	212,352	$	128,625	$	-	$	672,278		$	171,343	$	-	$	118,866	$	95,612	$	-	$	385,821
Cost of revenues (exclusive of depreciation,
depletion, amortization and accretion)		81,163		98,774		177,624		99,161		-		456,722
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)															57,449		(2,018)		100,808		74,700		-		230,939
Depreciation, depletion, amortization
and accretion		48,042		17,183		30,604		14,663		2,821		113,313			33,618		215		15,457		9,604		1,995		60,889
General and administrative expenses		38,388		12,635		21,232		34,044		72,244		178,543			25,440		35		13,607		24,244		51,478		114,804
Restructuring expense		-		-		-		-		27,033		27,033
Reduction in value of assets		-		-		4,096		15,355		-		19,451			-		-		4,064		12,458		-		16,522
Income (loss) from operations		59,751		(24,635)		(21,204)		(34,598)		(102,098)		(122,784)			54,836		1,768		(15,070)		(25,394)		(53,473)		(37,333)
Interest income (expense), net		-		-		-		3,399		(78,076)		(74,677)			-		-				2,277		(52,175)		(49,898)
Other expense		-		-		-		-		(4,810)		(4,810)
Other income															-		-						(3,411)		(3,411)
Income (loss) from continuing operations
before income taxes	$	59,751	$	(24,635)	$	(21,204)	$	(31,199)	$	(184,984)	$	(202,271)		$	54,836	$	1,768	$	(15,070)	$	(23,117)	$	(109,059)	$	(90,642)

Nine Months Ended September 30, 2019
Onshore
Drilling
Completion
Products and
and Workover
Production
Technical
Corporate and
Consolidated
Services
Services
Services
Solutions
Other
Total
Revenues
$
312,946
$
273,727
$
305,239
$
197,385
$
-
$
1,089,297
Cost of revenues (exclusive of depreciation,
depletion, amortization and accretion)
118,732
217,115
240,855
124,810
-
701,512
Depreciation, depletion, amortization
and accretion
64,684
27,940
39,375
17,198
3,579
152,776
General and administrative expenses
44,173
24,044
18,687
46,394
69,717
203,015
Reduction in value of assets
-
8,123
1,997
7,008
-
17,128
Income (loss) from operations
85,357
(3,495)
4,325
1,975
(73,296)
14,866
Interest income (expense), net
-
-
-
3,104
(77,379)
(74,275)
Other expense
-
-
-
-
(4,476)
(4,476)
Income (loss) from continuing operations
before income taxes
$
85,357
$
(3,495)
$
4,325
$
5,079
$
(155,151)
$
(63,885)



Identifiable Assets
			Well		Corporate and		Consolidated
	Rentals		Services		Other		Total
June 30, 2021 - Successor	$	399,537	$	694,074	$	246,976	$	1,340,587

Identifiable Assets
Onshore
Drilling
Completion
Products and
and Workover
Production
Technical
Corporate and
Consolidated
Services
Services
Services
Solutions
Other
Total
September 30, 2020
$
591,152
$
200,101
$
367,944
$
272,893
$
142,156
$
1,574,246
December 31, 2019
$
659,621
467,697
$
421,848
$
377,627
$
66,437
$
1,993,230




		Drilling Products		Completion and Workover		Production		Technical		Corporate and		Consolidated
		and Services		Services		Services		Solutions		Other		Total
December 31, 2020 - Predecessor	$	557,469	$	183,065	$	368,185	$	260,339	$	132,021	$	1,501,079

Geographic Segments

~~The Company attributes~~We attribute revenue to various countries based on the location of where services are performed or the destination of the drilling products or equipment sold or rented. Long-lived assets consist primarily of property, plant and equipment and are attributed to various countries based on the physical location of the asset at the end of a period. ~~The Company’s~~Our revenue attributed to the U.S. and to other countries and the value of ~~its~~our long-lived assets by those locations are as follows (in thousands):



Revenues
	Successor		Predecessor
	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
United States	$	81,034	$	81,271
Other countries		84,858		70,311
Total	$	165,892	$	151,582



Revenues
	Three Months Ended September 30,				Nine Months Ended September 30,				Successor		Predecessor
	2020		2019		2020		2019		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		Six Months Ended June 30, 2020
United States	$	95,100	$	255,427	$	423,376	$	805,704	$	134,093	$	23,863	$	208,747
Other countries		71,828		101,158		248,902		283,593		137,642		22,065		177,074
Total	$	166,928	$	356,585	$	672,278	$	1,089,297	$	271,735	$	45,928	$	385,821

Long-Lived Assets

	September 30, 2020		December 31, 2019						Successor		Predecessor
									June 30, 2021		December 31, 2020
United States	$	411,974	$	489,189					$	285,413	$	253,114
Other countries		162,614		175,760						169,666		154,993
Total	$	574,588	$	664,949					$	455,079	$	408,107

~~(10)~~

(14) Reduction in Value of Assets

Long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of such assets to their fair value calculated, in part, by the estimated undiscounted future cash flows expected to be generated by the assets. Cash flow estimates are based upon, among other things, historical results adjusted to reflect the best estimate of future market rates, utilization levels, and operating performance. Estimates of cash flows may differ from actual cash flows due to, among other things, changes in economic conditions or changes in an asset’s operating performance. Our assets are grouped by line of business or division for the impairment testing, which represents the lowest level of identifiable cash flows. If the asset grouping’s fair value is less than the carrying amount of the asset grouping, impairment losses are recorded in the amount by which the carrying amount of asset grouping exceeds the fair value. The estimate of fair value represents our best estimate based on industry trends and reference to market transactions and is subject to variability.

During the ~~three and nine months ended September 30,~~first quarter of 2020, ~~the Company recorded $2.9 million and $19.5 million, respectively,~~ in ~~connection~~line with the ~~reduction in~~rapidly changing market conditions, our market capitalization deteriorated. We determined that these events constituted a triggering event that required us to review the ~~value~~recoverability of ~~its~~our long-lived ~~assets. The~~assets and to perform an interim goodwill impairment as of March 31, 2020. During the Prior Predecessor Period, we recorded a reduction in value of assets ~~was primarily~~totaling $16.5 million which related to ~~long-lived assets~~property, plant and equipment in the Production Services and Technical Solutions ~~and Production Services~~ segments.

~~(11)~~(15) Goodwill

~~During~~As part of the ~~third quarter~~Successor’s emergence from the Chapter 11 Cases, the Successor adopted fresh start accounting and began reporting as a new accounting entity as of ~~2020~~ the ~~Company entered into~~Emergence Date. Due to the ~~RSA~~fair value measurement of our assets and liabilities as ~~further described~~required by ASC 852, we determined that the Successor retained 0 goodwill balance based on the assignment of reorganization value to the Successor’s identifiable assets and liabilities. As noted in ~~“Financial Statements -~~ Note 13 – ~~Basis~~“Fresh Start Accounting,” the Predecessor’s goodwill balance of ~~Presentation.” Entry into~~$138.9 million was eliminated during the ~~RSA, along with changing industry conditions~~fresh start adjustments to the consolidated condensed balance sheet as of February 2, 2021.

(16) Stock-Based Compensation Plans

As noted in Note 2 – “Emergence from Voluntary Reorganization under Chapter 11,” the Former Parent’s equity interests were cancelled as of the Emergence Date and new Class A common stock was issued to settle claims arising as a result of holding either the ~~COVID-19 pandemic constituted~~7.125% Notes or the 7.750% Notes. As a ~~triggering event that required~~result of the ~~Company~~consummation of the Plan, restricted stock units issued prior to ~~perform an interim goodwill impairment review as~~the fresh start accounting date under our stock incentive plans were cancelled for zero consideration. The balance sheet effect of ~~September 30, 2020.~~the cancellation is noted in Note 3 – “Fresh Start Accounting.”

The Company performs the goodwill impairment test on an annual basis as of October 1 or more often if events or circumstances indicate there may be an impairment. Goodwill impairment testing is performed at the reporting unit level, which is consistent with the reporting segments. The Company assesses whether any indicators of impairment exist, which requires a significant amount of judgment. Such indicators may include a sustained decrease in the Company’s stock price and market capitalization, a decline in the expected future cash flows, overall weakness in the industry, and slower growth rates.2021 Management Incentive Plan

~~Goodwill impairment exists when~~On June 1, 2021, our Board of Directors (the “Board”) and the ~~estimated fair value~~Compensation Committee of the ~~reporting unit is below~~Board (the “Compensation Committee”) approved and adopted our Incentive Plan, which provides for the ~~carrying value. In estimating~~grant of share-based and cash-based awards and, in connection therewith, the ~~fair~~issuance from time to time of up to 1,999,869 shares of our Class B common stock, par value ~~of the reporting units, the Company uses a combination of an income approach and a market-based approach.~~

Income approach – The Company discounts the expected cash flows of each reporting unit. The discount rate used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in the Company’s operations and cash flows and the rate of return an outside investor would expect to earn.

Market-based approach – The Company uses the guideline public company method, which focuses on comparing the Company’s risk profile and growth prospects to select reasonably similar publicly traded companies.$0.01 per share.

1932

The Company weighs the income approach 80% and the market-based approach 20% due to differences between the Company’s reporting units and the peer companies’ size, profitability and diversity of operations. In order to validate the reasonableness of the estimated fair values obtained for the reporting units, a reconciliation of fair value to market capitalization is performed for each unit on a standalone basis. A control premium, derived from market transaction data, is used in this reconciliation to ensure that fair values are reasonably stated in conjunction with the Company’s capitalization. The Company uses all available information to estimate fair value of the reporting units, including discounted cash flows. A significant amount of judgment is involved in performing these evaluations given that the results are based on estimated future events.

The result of the goodwill impairment assessment indicated that the fair value of the Drilling Products and Services segment exceeded its net book value and, therefore, 0 goodwill impairment was recorded. The Company will continue to evaluate the Drilling Products and Services segment for potential goodwill impairment in the fourth quarter of 2020 as market conditions continue to evolve.

~~(12)~~ ~~Stock-Based Compensation Plans~~

The Company maintained various stock incentive plans that provide long-term incentives to the Company’s key employees, including officers, directors, consultants and advisors (the Eligible Participants) prior to the Chapter 11 Cases. Under the stock incentive plans, the Company could grant incentive stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards or any combination thereof to Eligible Participants. The Company’s total compensation expense related to these plans was approximately $6.1 million and $13.9 million for the nine months ended September 30, 2020 and 2019, respectively, which is reflected in general and administrative expenses.Restricted Stock Grants

On ~~September 28, 2020,~~June1, 2021, the Board ~~of Directors of~~and the ~~Company~~Compensation Committee approved the ~~implementation~~forms of ~~a Key Employee Retention Program~~restricted stock award agreements for (i) employee participants (the KERP), which is designed to retain key employees of the Company in their current roles over the near term while providing them with financial stability. The KERP payments are in lieu of any outstanding unvested awards under the Company’s long-term equity-based incentive plans (other than any performance share units granted in 2018“Employee Restricted Stock Award Agreement”) and 2019) and any 2020 annual bonuses that would otherwise be payable to the KERP participants. The KERP provided for one-time retention payments equal to approximately $7.3 million in the aggregate to the six executive officers of the Company, including its named executive officers. The KERP further provided for approximately $2.4 million of retention payments to other non-executive employees, which will be made in installments.

(ii) non-employee directors (the “Director Restricted Stock Award Agreement”).

~~(13)~~On June 1, 2021, the Board and the Compensation Committee approved, pursuant to the applicable Employee Restricted Stock Award Agreements and Director Restricted Stock Award Agreements, the issuance of 113,840 restricted shares (76,269 restricted shares after giving effect to tax withholding) of Class B common stock under the Incentive Plan to certain of our non-employee directors and officers (the “Restricted Stock Grants”). The Restricted Stock Grants will vest over a period of three years, subject to earlier vesting and forfeiture on terms and conditions set forth in the applicable award agreement. The fair value of the restricted shares was estimated to be $39.53 per share as of the date of grant.

(17) Income Taxes

~~Certain~~The effective tax rate for the Current Predecessor Period, the Successor Quarter and the Successor Period was 18.2%, 5.2% and 9.3%, respectively, on income from continuing operations. The tax rate in the Current Predecessor Period is different from the blended federal and state statutory rate of 22.5% primarily from the ~~restructuring transactions contemplated by~~adoption of fresh start accounting during the ~~RSA may have a material impact on the Company’s tax attributes, the full extent of which is currently unknown. Cancellation~~period. The cancellation of indebtedness income resulting from ~~such~~the restructuring ~~transactions may~~has significantly ~~reduce the Company’s~~reduced our US tax attributes, including but not limited to NOL carryforwards. ~~Further, the Company will experience~~We experienced an ownership change under ~~Section~~Sec. 382 of the Internal Revenue Code of 1986, as amended (the ~~Code)~~“Code”), ~~upon confirmation of the Plan by the Bankruptcy Court~~ which ~~will subject~~is anticipated to limit certain remaining tax ~~attributes to an annual limitation under Section 382~~attributes. The tax rate in the Successor Quarter and the Successor Period is different from the blended federal and state statutory rate of ~~the Code. Additionally, if the Company proceeds with the Bankruptcy Filing, the Company will incur additional significant one-time costs associated with the Chapter 11 Cases.~~

~~On March 27, 2020, the President signed the Coronavirus Aid, Relief,~~22.5% primarily from non-deductible items and Economic Security Act (the CARES Act), a tax relief and spending package intended to provide economic stimulus to address the impact of the COVID-19 pandemic. The CARES Act allows corporations with net operating losses generated in 2018, 2019 and 2020 to elect to carryback thoseforeign losses for a period of five years and relaxes the limitation for business interest deductions for 2019 and 2020. Under the provisions of the CARES Act, the Company received a refund of $30.5 million in July 2020.which no tax benefit is being recorded.

The ~~Company~~effective tax rate for Prior Predecessor Quarter and Prior Predecessor Period was 8.6% and 15.6%, respectively, on income from continuing operations. The tax rate is different from the blended federal and state statutory rate of 22.5% primarily from foreign losses for which no tax benefit was recorded.

The Successor had $14.7 million of unrecognized tax benefits as of June 30, 2021 and the Predecessor had $13.2 million of ~~unrecorded~~unrecognized tax benefits as of ~~each of September 30, 2020 and~~ December 31, ~~2019,~~2020, all of which would impact ~~the Company’s~~our effective tax rate if recognized. It is ~~the Company’s~~our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

As of June 30, 2021, we have a deferred tax liability of $43.2 million and a valuation allowance of $96.0 million recorded against our deferred tax assets that relate to US foreign tax credits, US state net operating losses and other non-US deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the carryforward period. We assess the realizability of deferred tax assets quarterly and consider carryback availability, the scheduled reversal of deferred tax liabilities, and tax planning strategies in making this assessment.

~~(14)~~

(18) Earnings per Share

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

~~The Company incurred~~Diluted earnings per share for the Successor Period, Successor Quarter, Prior Predecessor Period and Prior Predecessor Quarter do not include any potentially dilutive shares as these periods reflected a ~~loss from continuing operations for each of the three and nine months ended September 30, 2020 and 2019; therefore, the impact of any incremental shares would be anti-dilutive.~~

net loss.

~~(15)~~

(19) Contingencies

Due to the nature of ~~the Company’s~~our business, ~~the Company is~~we are involved, from time to time, in various routine litigation or subject to disputes or claims or actions, including those commercial in nature, regarding ~~its~~our business ~~activities.~~activities in the ordinary course of business. Legal costs related to these matters are expensed as incurred. Management is of the opinion that none of the claims and actions will have a material adverse impact on our financial position, results of operations or cash flows.

A subsidiary of ~~the Company~~ours is involved in legal proceedings with 2 former employees regarding the payment of royalties for a patentable product paid for by the subsidiary and developed ~~by them.~~while they worked for the subsidiary. On April 2, 2018, the former employees and their corporation filed a lawsuit (the “First Case) in the Harris County District Court (the “District Court”) alleging that the royalty payments they had invoiced at 25% and for which they received payments since 2010, should have been ~~higher.~~paid at a rate of 50%. In May 2019, the jury issued a verdict in favor of the plaintiffs. On October 25, 2019, the court issued a final judgment against ~~the Company. The Company~~us, which we have fully secured with a bond. We strongly ~~disagrees~~disagree with the verdict and ~~believes~~believe the ~~district court~~District Court committed several legal errors that should result in a reversal or remand of the case by the Court of Appeals. ~~The ultimate resolution of this matter could result in a loss of up to $7.5 million in excess of amounts accrued.~~

Commencement of the Chapter 11 Cases will automatically stay certain proceedings and actions against the Debtors, in addition to actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Debtor’s bankruptcy estates.

~~(16) Supplemental Guarantor Information~~

SESI, L.L.C. (the Issuer), a 100% owned subsidiary of Superior Energy Services, Inc. (the Parent), has $500 million of 7.75% senior unsecured notes due 2024 (the SESI 2024 notes). The Parent, along with certain of its direct and indirect 100% owned domestic subsidiaries (the subsidiary guarantors, and together with the Parent, the guarantors), have entered into guarantees of the outstanding SESI 2024 notes (the guarantees). All guarantees provided by the guarantors are full and unconditional, joint and several, except that the guarantee of any subsidiary guarantor may be released under certain customary circumstances, including (i) in connection with a sale or other disposition of all or substantially all of the assets of the applicable subsidiary guarantor (including by way of merger or consolidation) to a person that is not the Issuer, Parent or a subsidiary of the Issuer; (ii) in connection with a sale or other disposition of all of the capital stock of such subsidiary guarantor to a person that is not the Parent or Issuer or their respective subsidiaries; and (iii) upon legal defeasance or satisfaction and discharge of the indenture governing the SESI 2024 notes. The Parent will be released from its guarantee only in connection with any legal defeasance or satisfaction and discharge of the indenture.

~~With respect to each guarantor, each guarantee is a general unsecured senior obligation of such guarantor and~~

~~ranks equally in right of payment with all existing and future senior unsecured indebtedness of such guarantor;~~

~~is senior in right of payment to any future subordinated obligations of such guarantor; and~~

~~is effectively subordinated to existing and future secured indebtedness of such guarantor to the extent of the value of the assets securing that indebtedness.~~

The guarantee obligations of the Parent and each subsidiary guarantor is limited as necessary to prevent the guarantee from constituting a fraudulent conveyance under applicable law. If a guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable guarantor, and, depending on the amount of such indebtedness, such guarantor’s liability on its guarantee could be reduced to zero.

The SESI 2024 notes and the guarantees are structurally subordinated to all indebtedness and other obligations of any of the subsidiary guarantors that do not guarantee the SESI 2024 notes (the non-guarantor subsidiaries). Such non-guarantor subsidiaries have no obligation, contingent or otherwise, to pay amounts due under the SESI 2024 notes or to make funds available to pay those amounts, whether by dividends, distributions, loans or other payments.

However, the Parent, Issuer and Subsidiary Guarantors are all expected to be Debtors pursuant to the Chapter 11 Cases. See Note 1 of the notes to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements – Note 1 – Basis of Presentation” of this Quarterly Report for a complete discussion of the Chapter 11 Cases.

2133

~~The following summarized financial information presents~~A second case (the “Second Case”) was filed in District Court against the ~~financial information~~same subsidiary of ours bringing the same claims and seeking damages post judgment from the First Case until discontinuation of the ~~Parent, Issuer~~sale of the product at issue by the subsidiary. In December 2020, the Court entered a final judgement for the Plaintiffs’ and the ~~subsidiary guarantors (collectively,~~Second Case was stayed for the ~~Obligor Group),~~duration of our bankruptcy. We have filed an appeal and a Motion to Abate the Second Case pending the appeal of the First Case. The Motion to Abate the Second Case was granted on ~~a combined basis, after elimination~~October 26, 2021 by the Court of ~~(i) intercompany transactions~~Appeals. As of June 30, 2021, we have reserved $7.0 million for the judgements in the First Case and ~~balances among the Parent, Issuer and the subsidiary guarantors and (ii) equity in earnings from and investments in any~~Second Case.

An Indian subsidiary of the ~~Parent that~~Company had entered into a contract with an Indian oil and gas company to provide an off-shore vessel for various types of work. A dispute arose over the performability of the terms of the contract. The potential loss of this possible onerous contract is ~~not the Issuer or a subsidiary guarantor.~~approximately $7.3 million.

OBLIGOR GROUP
Summarized Balance Sheets Information
(in thousands)
September 30, 2020
December 31, 2019
Current assets
$
422,138
$
789,562
Noncurrent assets
1,086,516
1,134,238
Total assets
$
1,508,654
$
1,923,800
Current liabilities
$
176,423
$
261,743
Noncurrent liabilities
2,027,477
2,039,138
Total liabilities
$
2,203,900
$
2,300,881

Commencement of the Chapter 11 Cases automatically stayed certain proceedings and actions against the Predecessor. These cases have continued after the Emergence Date.

OBLIGOR GROUP
Summarized Statements of Operations Information
(in thousands)
Nine Months Ended September 30, 2020
Year Ended December 31, 2019
Total revenues
$
507,636
$
1,126,456
Cost of revenues
343,561
723,451
Loss from operations before income taxes
(179,335)
(92,731)
Income taxes
(13,404)
6,102
Net loss from continuing operations
(165,931)
(98,833)
Loss from discontinued operations, net of tax
(111,375)
(177,968)
Net loss attributable to the obligor group
$
(277,306)
$
(276,801)

The same accounting policies as described in “Note 1 – Basis of Presentation” to the consolidated financial statements included in this report are used by the Parent and each of its subsidiaries in connection with the summarized financial information presented above.

~~(17)~~(20) Discontinued Operations

On December 10, 2019, ~~the Company’s indirect, wholly owned subsidiary,~~ Pumpco Energy Services, ~~Inc. (Pumpco),~~Inc (“Pumpco”) completed its existing hydraulic fracturing field operations and was determined to discontinue, wind down and exit its hydraulic fracturing operations. The ~~Company intends to maintain an adequate number of employees to efficiently wind down Pumpco’s business. The~~ financial results of Pumpco’s operations have historically been included in the ~~Company’s Onshore Completions and Workover Services~~Predecessor’s North America segment. The ~~Company intends~~Successor continued to sell Pumpco’s fixed assets ~~over time~~as of June 30, 2021.

During the second quarter of 2021, we signed a Letter of Intent (“LOI”) with Select Energy Services, Inc. (“Select”) to sell all of the issued and outstanding equity of Complete Energy Services, Inc. (“Complete”) which would also include Superior Well Services (“SPW”) flowback and well testing businesses, including the associated assets, liabilities and working capital. The financial results of Complete and SPW operations have historically been included in our Onshore Completion and Workover Services segment. Discontinuing Complete and SPW is aligned with our overall strategic objective to divest assets and service lines that do not compete for investment in the current market environment. Net proceeds from the sale of Complete and any remaining assets from SPW will be used to fund current operations, reinvest in other of the Company’s service lines, or return capital to investors. In connection with these pending dispositions, during the second quarter of 2021, we recognized a reduction in value of assets related to Complete for approximately $12.4 million. We expect to complete the sale of the remaining assets of SPW within the next ~~twelve~~12 months.

The following ~~table~~tables summarizes the components of ~~loss from~~our discontinued operations, net of tax ~~for the three and nine months ended September 30, 2020 and 2019~~ (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,					Successor	Predecessor
	2020			2019	2020			2019		Three Months Ended June 30, 2021	Three Months Ended June 30, 2020
Revenues	$	43	$	69,132	$	511	$	239,911	$	45,114	$	32,485
Cost of services		56		62,279		6,588		219,285		35,459		36,450

Depreciation, depletion, amortization and accretion										18,581		8,034
General and administrative expenses										3,623		3,505
Reduction in value of assets										12,430		3,003
Loss from operations										(24,979)		(18,507)
Other income (expense)										(53)		8
Loss from discontinued operations before tax		(60,864)		(17,276)		(123,659)		(81,050)		(25,032)		(18,499)
Income tax benefit (expense)										5,632		(915)
Loss from discontinued operations, net of income tax		(58,003)		(17,934)		(111,375)		(85,604)	$	(19,400)	$	(19,414)

~~For the nine months ended September 30, 2020, loss from discontinued operations included $109.6 million in the reduction in value of assets relating to the impairment of property, plant and equipment.~~

2234



	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		Six Months Ended June 30, 2020
Revenues	$	68,366	$	10,719	$	119,996
Cost of services		55,481		10,398		116,081
Depreciation, depletion, amortization and accretion		31,356		2,141		17,206
General and administrative expenses		6,218		1,119		17,475
Reduction in value of assets		12,430		-		49,361
Loss from operations		(37,119)		(2,939)		(80,127)
Other income (expense)		(50)		2,485		15
Loss from discontinued operations before tax		(37,169)		(454)		(80,112)
Income tax benefit (expense)		8,363		102		12,024
Loss from discontinued operations, net of income tax	$	(28,806)	$	(352)	$	(68,088)

The following summarizes the assets and liabilities related to ~~the Pumpco business reported as discontinued operations~~assets held for sale (in thousands):




					Successor		Predecessor
	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Current assets:
Accounts receivable, net	$	-	$	25,106	$	35,853	$	25,448
Prepaid expenses						5,154		4,881
Other current assets		2,280		6,215		7,443		12,076
Total current assets	$	2,280	$	31,321		48,450		42,405

Property, plant and equipment, net		49,259		179,144		106,425		179,380
Operating lease ROU assets		209		5,732		13,549		16,958
Total assets	$	51,748	$	216,197
Other assets						1,770		3,361
Total assets held for sale					$	170,194	$	242,104

Current liabilities:
Accounts payable	$	136	$	14,370	$	6,075	$	2,830
Accrued expenses		2,869		24,751		11,391		11,153
Total current liabilities		3,005		39,121		17,466		13,983

Operating lease liabilities		2,755		5,415		13,562		21,987
Other long-term liabilities		-		402
Decommissioning liabilities						4,156		8,311
Other liabilities						546		2,095
Total liabilities	$	5,760	$	44,938	$	35,730	$	46,376

Significant operating non-cash items relating to ~~Pumpco~~assets held for sale and cash flows from investing activities were as follows (in thousands):



	Nine Months Ended September 30,				Successor		Predecessor
	2020			2019	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		Six Months Ended June 30, 2020
Cash flows from discontinued operating activities:
Depreciation and amortization	$	-	$	72,271
Reduction in value of assets		109,591		23,824	$	12,430	$	-	$	49,361

Gain on sale of assets						(5,118)		(43)
Depreciation, depletion, amortization and accretion						31,356		2,142		17,206
Cash flows from discontinued investing activities:
Payments for capital expenditures	$	-	$	(36,743)
Proceeds from sales of assets		14,369		1,669		10,867		486		-

(21) Supplemental Cash Flow Information

~~(18)~~

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



	Successor		Predecessor
	For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Six Months Ended June 30, 2020


Cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents	$	172,768	$	188,006	$	272,624
Restricted cash-current		16,751		-		-
Restricted cash-non-current		80,179		80,178		2,764
Cash, cash equivalents, and restricted cash, beginning of period	$	269,698	$	268,184	$	275,388

Cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	$	205,748	$	172,768	$	278,409
Restricted cash-current		-		16,751		-
Restricted cash-non-current		80,159		80,179		2,774
Cash, cash equivalents, and restricted cash, end of period	$	285,907	$	269,698	$	281,183

(22) New Accounting Pronouncements

Recently Issued Accounting Standards

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

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.~~ This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs of a hosting arrangement that is a service contract will be expensed over the term of the hosting arrangement. The Company adopted the new standard on January 1, 2020 on a prospective basis with respect to all implementation costs incurred after the date of adoption.

In December 2019, the FASB issued ASU 2019-12 - Simplifying the Accounting for Income ~~Taxes.~~ Taxes (“ASU 2019-12”). This update simplifies the accounting for income taxes by removing the following exceptions: (1) the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The ~~new standard~~update also (1) requires an entity to recognize a franchise tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax; (2) requires an entity to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction; (3) specifies that an entity is not required to allocate the consolidate amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; (4) requires an entity to reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date; and (5) makes minor codification improvements for income taxes related to employee stock ownership plans. Our adoption of ASU 2019-12 as of January 1, 2021 has not had a material impact on its financial position, results of operations or cash flows.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This update provides an optional expedient and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, which clarifies that certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December

31, 2022. As our credit agreement allows for alternative benchmark rates to be applied to any borrowings, we do not expect the cessation of LIBOR to have a material impact on our financial position, results of operations, cash flows or disclosures.

(23) Subsequent Events

Divestiture

On July 9, 2021, we entered into a Securities Purchase and Sale Agreement (the “Purchase Agreement”) with SES Holdings, LLC (the “Parent”), Select Energy Services, Inc. (the “Buyer”) (solely to the extent stated therein), and Complete. Pursuant to the Purchase Agreement, the Buyer acquired certain of our onshore oilfield services operations in the United States through the acquisition of 100% of the equity interests of Complete, for a purchase price of approximately $14.0 million in cash and the issuance of 3.6 million shares of Class A common stock, $0.01 par value, of the Buyer, subject to customary post-closing adjustments. The Purchase Agreement also contains certain registration rights of the Company ~~beginning~~which required the Buyer to file a registration statement with the SEC for the resale of the Class A common stock issued to us. On August 26, 2021 the Buyer filed a registration statement on ~~January 1,~~Form S-1 to register the resale of the 3.6 million shares of Class A common stock acquired by us, which was declared effective by the SEC on September 3, 2021. The ~~Company is evaluating~~Purchase Agreement contains customary representations, warranties and covenants. As discussed above, in connection with this disposition, during the ~~effect ASU 2019-12 will have on its consolidated financial statements.~~

second quarter of 2021, we recognized a reduction in value of assets related to Complete for approximately $12.4 million.

2337

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

As used herein, the “Company,” “we,” “us,” “our” and similar terms refer to (i) prior to the Emergence Date (as defined below), SESI Holdings, Inc. (formerly known as Superior Energy Services, Inc.) (the “Former Parent”) and its subsidiaries and (ii) after the Emergence Date, Superior Energy Services, Inc. (formerly known as Superior Newco, Inc.) and its subsidiaries. As used herein, the following terms refer to us and our operations:


"Predecessor"	The Company, prior to the Emergence Date
"Current Predecessor Period"	The Company's operations, January 1, 2021 - February 2, 2021
"Prior Predecessor Quarter"	The Company's operations, April 1, 2020 - June 30, 2020
"Prior Predecessor Period"	The Company's operations January 1, 2020 - June 30, 2020
"Successor"	The Company, after the Emergence Date
"Successor Quarter"	The Company's operations, April 1, 2021 - June 30, 2021
"Successor Period"	The Company's operations, February 3, 2021 - June 30, 2021

Effective as of the Emergence Date, the entity now known as Superior Energy Services, Inc. (formerly known as Superior Newco, Inc.) became the successor reporting company to the Former Parent pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Critical Accounting Policies and Estimates

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the discussion of our Critical Accounting Policies and Estimates. The below is an update to those policies:

Fresh Start Accounting

50% of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Predecessor’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1 – “Basis of Presentation” and Note 3 – “Fresh Start Accounting” for additional information.

Forward-Looking Statements

This quarterly report on Form 10-Q and other documents filed by us with the SEC contain, and future oral or written statements or press releases by us and our management may contain, forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking statements, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact included in this quarterly report on Form 10-Q or such other materials regarding ~~the Chapter 11 Cases,~~ our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to:

risks and uncertainties ~~if we file~~regarding the voluntary petitions for relief filed by the Affiliate Debtors (as defined below) on December 7, 2020 (the “Chapter 11 Cases”) under Chapter 11 ~~Cases,~~of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas Houston Division (the “Bankruptcy Court”), including but not limited to: ~~our ability to obtain Bankruptcy Court approval with respect to motions in~~ the ~~Chapter 11 Cases; the~~continuing effects of the Chapter 11 Cases on us and our various constituents; the impact of Bankruptcy Court rulings in the Chapter 11 Cases; our ability to develop and implement the Plan and whether that Plan will be approved by the Bankruptcy Court and the ultimate outcome of the Chapter 11 Cases in general; the length of time we will operate under the Chapter 11 Cases; attendant risks associated with restrictions on our ability to pursue our business strategies; risks associated with third-party motions in the Chapter 11 Cases; the potential adverse effects of the Chapter 11 Cases on our liquidity; our ability to operate within the restrictions and the liquidity limitations of the planned debtor-in-possession asset based credit facility (the DIP Credit Facility); the potential cancellation of our equity securities, including our common stock in the Chapter 11 Cases; the potential material adverse effect of claims that are not discharged in the Chapter 11 Cases; uncertainty regarding our ability to retain key personnel; and uncertainty and continuing risks associated with our ability to achieve our stated ~~goals~~goals;

the likelihood that our historical financial information may no longer be indicative of our future performance; and ~~continue as a going concern;~~our implementation of fresh start accounting;

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

restrictive covenants in the $120.0 million asset-based secured revolving Credit Facility (as defined below) could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests;

our ability to prepare and file our quarterly report for the quarter ended June 30, 2021 or deliver other required financial information within the time periods prescribed by our Credit Facility or to obtain additional waivers from our lenders;

the conditions in the oil and gas industry;

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

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

~~our outstanding debt obligations and the potential effect of limiting our ability to fund future growth;~~

~~we may not be able to generate enough cash flows to meet our debt obligations;~~

necessary capital financing may not be available at economic rates or at all;

~~volatility of our common stock;~~

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

~~we may~~the possibility of not bebeing fully indemnified against losses incurred due to catastrophic events;

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

credit risk associated with our customer base;

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

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

the potential inability to retain key employees and skilled workers;

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

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

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

changes in competitive and technological factors affecting our operations;

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

~~potential impacts of cyber-attacks on~~ our ~~operations;~~operations may be subject to cyber-attacks;

counterparty risks associated with reliance on key suppliers;

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

risks associated with potential changes of ~~the~~ Bureau of Ocean Energy ~~Management’s~~Management security and bonding requirements for offshore ~~platforms.~~platforms;



24the likelihood that the interests of our significant stockholders may conflict with the interests of our other stockholders;

the risks associated with owning our Class A common stock, par value $0.01 per share, for which there is no public market;

the likelihood that the Stockholders Agreement (as defined below) may prevent certain transactions that could otherwise be beneficial to our stockholders; and

our ability to remediate the identified material weakness in our internal control over financial reporting.

These risks and other uncertainties related to our business are described in detail in Item 1A of our Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, ~~2019 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30,~~ 2020. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason, ~~and,~~ notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Executive Summary

General

We provide a wide variety of services and products to the energy industry. We serve major, national and independent oil and natural gas exploration and production companies around the world and offer products and services with respect to the various phases of a well’s economic life cycle. ~~We report our~~The Successor reports its operating results in ~~four~~two business segments: ~~Drilling Products~~Global and ~~Services; Onshore Completion and Workover Services; Production Services; and Technical Solutions.~~North America.

Recent Developments

Voluntary Reorganization Under Chapter 11

We and certain of our subsidiaries plan to file the Chapter 11 Cases with the Bankruptcy Court. The Debtors plan to commence a solicitation for acceptance of the Plan by causing the Plan and the corresponding disclosure statement to be distributed to certain creditors of the Company shortly before the Bankruptcy Filing. During the Chapter 11 Cases, the Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy ~~Court and in accordance with the applicable provisions of the Bankruptcy~~ Code ~~and orders of the Bankruptcy Court.~~

For the duration of the Chapter 11 Cases, the Debtors are expected to be able to conduct normal business activities and pay all associated obligations for the period following the Bankruptcy Filing. The Debtors are also expected to be authorized to pay employee wages and benefits, and vendors and suppliers in the ordinary course of business for goods and services provided prior to the Bankruptcy Filing. During the pendency of the Chapter 11 Cases, all transactions outside of the ordinary course of business will require the prior approval of the Bankruptcy Court.

For the duration of the Chapter 11 Cases, our operations and ability to develop and execute our business plan will be subject to the risks and uncertainties associated with the Chapter 11 process as described in Part II, Item 1A, “Risk Factors.” As a result of these risks and uncertainties, the number of our shares of common stock and stockholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases, and the description of our operations, properties and capital plans included in this report may not accurately reflect our operations, properties and capital plans following the Chapter 11 Cases.

For the duration of the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the Bankruptcy Filing. In addition, we have incurred significant professional and advisory fees and other costs in connection with preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional and advisory fees and costs throughout the pendency of the Chapter 11 Cases.

See Part I,1, Item 1, ~~“Financial~~“Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1 – “Basis of ~~Presentation” of this Quarterly Report~~Presentation” for ~~a complete discussion~~information regarding the Voluntary Reorganization Under Chapter 11 of the ~~Chapter 11 Cases~~Bankruptcy Code.

Fresh Start Accounting

Beginning on the Emergence Date, we applied fresh start accounting, which resulted in a new basis of accounting and we became a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Plan, the consolidated financial statements after February 2, 2021 are not comparable with the consolidated financial statements on or prior to that date. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 3 – “Fresh Start Accounting” for additional information.

Divestiture

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 23 – “Subsequent Events” for additional information.

Waivers to Credit Agreement

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 9 – “Debt” for additional information.

Credit Facility

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 9 – “Debt” for additional information.

Stockholders Agreement

On the Emergence Date, in order to implement the governance related provisions reflected in the Plan, the stockholder’s agreement, dated February 2, 2021 (the “Stockholders Agreement”), was executed, to provide for certain governance matters. Other than the obligations related to Confidential Information (as defined in the Stockholders Agreement), the rights and preferences of each stockholder under the Stockholders Agreement will terminate when such stockholder ceases to own any shares of Class A common stock.

The foregoing description of the Stockholders Agreement is qualified in its entirety by the full text of the document, which is incorporated herein by reference.

Amendments to Stockholders Agreement

The Company and stockholders holding a majority of our Class A common stock entered into that certain amendment to the Stockholders Agreement, effective May 14, 2021, extending the deadline to provide its stockholders unaudited consolidated quarterly financial statements from 45 days after the conclusion of a quarter to 60 days after such quarter (or, if applicable, the first business day thereafter).

The Company and stockholders holding a majority of our Class A common stock entered into that certain Second Amendment to the Stockholders Agreement, effective May 31, 2021, extending the deadline to provide its stockholders the unaudited consolidated quarterly financial statements for the quarter ended March 31, 2021 to no later than July 15, 2021.

The Company and stockholders holding a majority of our Class A common stock entered into that certain Third Amendment to the Stockholders Agreement, effective as of July 14, 2021, extending the deadline to provide its stockholders the unaudited consolidated quarterly financial statements for the quarters ended March 31, 2021 and June 30, 2021 to no later than September 30, 2021 and October 31, 2021, respectively.

2021 Management Incentive Plan

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 16 – “Stock Based
‎Compensation Plans” for additional information.

Restricted Stock Grants

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 16 – “Stock Based
‎Compensation Plans” for additional information.

Senior Notes-Prepetition Indebtedness

As part of the transactions undertaken pursuant to the Plan, the record holders of certain of the 7.125% Notes and the 7.750% Notes contributed all of their allowed claims described in the Plan in exchange for either (i) a cash payout to be entirely funded by the Equity Rights Offering, or (ii) shares of the Class A common stock. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 2 “Emergence from Voluntary Reorganization under Chapter 11” and Note 9 – “Debt” for additional information.

COVID-19 Pandemic and Market Conditions

Our operations continue to be disrupted due to the circumstances surrounding the COVID-19 pandemic. The significant business disruption resulting from the COVID-19 pandemic has impacted ~~our~~ customers, vendors and suppliers in all geographical areas where we operate. The closure of non-essential business facilities and restrictions on travel put in place by governments around the world have significantly reduced economic activity. Also, the COVID-19 pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. Additionally, recognized health risks associated with the COVID-19 pandemic have altered the policies of companies operating around the world, resulting in these companies instituting safety programs similar to what both domestic and international governmental agencies have implemented, including stay at home orders, social distancing mandates, and other community oriented health objectives. We are complying with all such ordinances in our operations across the globe. Management believes it has proactively addressed many of the known operational impacts of the COVID-19 pandemic to the extent possible and will strive to continue to do so, but there can be no guarantee the measures will be fully effective.

~~Furthermore,~~Commodity prices during 2021 will continue to be impacted by the global containment of the virus, pace of economic recovery, as well as changes to OPEC+ production levels. There is increased economic optimism in 2021 as governments worldwide continue to distribute the COVID-19 vaccines. However, although vaccination campaigns are underway, several regions, including areas of the United States, have been and continue to deal with a rebound in the pandemic. There is also concern about whether vaccines will be effective against different strains of the virus that have developed and may develop in the future. West Texas Intermediate (“WTI”) oil spot prices have recovered to pre-pandemic levels. OPEC+ continues to meet regularly to review the state of global oil supply, demand and inventory levels. Even though signs of economic recovery centered on COVID-19 mitigation, global vaccine distribution and re-opening efforts make demand for oil and gas ~~industry has experienced unprecedented price disruptions during 2020, due in part~~difficult to ~~significantly decreased~~project, we believe demand ~~as a result of the COVID-19 pandemic, as activity significantly declined in the face of depressed crude oil pricing. The U.S. oil~~is recovering and gas rig count fell by more than 60% in the second quarter of 2020 and by more than 30% in the third quarter of 2020. The number of oil and gas rigs outside of the U.S. and Canada fell by more than 10% in the third quarter of 2020 to an average of 731 rigs from 834 rigs in the second quarter of 2020. These market conditions have significantly impacted our business, with third quarter 2020 revenue decreasing to $166.9 million, as compared to $356.6 million in the third quarter of 2019, or 53%. As customers continue to revise their capital budgets in order to adjust spending levels in response to lower commodity prices ~~we have experienced significant pricing pressure for our products and services.~~will be positively impacted.

Low oil prices and industry volatility are likely to continue through the near and long-term. In the second quarter of 2020, OPEC+ reached a supply curtailment agreement of up to 10 million barrels per day, which drove expectations for future hydrocarbon supply lower. However, on July 15, 2020, an alliance of certain OPEC nations led by Saudi Arabia agreed to increase oil production starting in August 2020, citing theoretically increased demand due to the relaxing of COVID-19 pandemic restrictions. As the global outbreak of the COVID-19 pandemic continues to rapidly evolve, management expects it to continue to materially and adversely affect our revenue, financial condition, profitability, and cash flow for an indeterminate period of time.

~~New York Stock Exchange Delisting~~

On September 17, 2020, we were notified by the NYSE that due to our failure to maintain an average global market capitalization over a consecutive 30-day trading period of at least $15 million, pursuant to Section 802.01B of the NYSE Listed Company Manual, the NYSE had determined to commence proceedings to delist the Company’s common stock from the NYSE.

Trading of our common stock was suspended effective as of approximately 4:00 p.m. Eastern Time on September 17, 2020. Effective September 18, 2020, our common stock commenced trading on the OTCQX marketplace under the trading symbol “SPNX”. On October 2, 2020, the NYSE applied to the SEC to delist or common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Exchange Act. The delisting became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of our common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, from the date of the Form 25 filing.

~~Business Outlook~~

Demand for our products and services has declined, and will continue to decline, as long as our customers continue to revise their capital budgets downward and adjust their operations in response to lower oil prices and demand due to the COVID-19 pandemic. In addition to the RSA and our preparation for the Bankruptcy Filing, throughout 2020 we have taken actions to mitigate the near and long-term financial impacts on our operating results to ensure adequate liquidity and capital resources are available to maintain our operations until the oil and gas industry and global economic conditions improve. These actions include, but are not limited to:

~~We implemented continued actions to reduce our payroll costs through a combination of salary reductions, reductions in force and furloughs.~~

~~We exited unnecessary facilities and consolidated our operational footprint to align the size of our operations with current demand.~~

~~We reduced discretionary expenses and deferred any non-essential capital spending.~~

We are leveraging governmental relief efforts to defer payroll and other tax payments, which have benefited our future cash flows for 2020, including a tax refund of $30.5 million that was received in July 2020.

We have taken, and will continue to take, other actions to reduce costs and preserve cash in order to successfully navigate the current economic environment, including limiting expected capital expenditures to no more than $50.0 million for the full fiscal year 2020.

The COVID-19 pandemic continues to adversely impact many jurisdictions and continues to disrupt normal economic activities. As a result, the demand for energy continues to be constrained with continued adverse consequences for our customers and for us. Further, there is an increasing number of bankruptcies in our industry. Our collection of receivables could be materially delayed and/or impaired for the duration of the COVID-19 pandemic. The duration and severity of the COVID-19 pandemic and the resulting potential for continued losses subjects us to significant uncertainty and may cause significant variability in our allowance for credit losses in future periods. We expect the negative impacts of the COVID-19 pandemic to be felt throughout 2020 and into 2021. As the nature of the COVID-19 pandemic is inherently uncertain, we are unable to reasonably estimate the duration and ultimate impacts of the COVID-19 pandemic, including the timing or level of any subsequent recovery. We cannot be certain of the degree of impact on our business, result of operations and/or financial position for future periods.

~~For more information on the~~ Chapter 11 Cases, see Note 1 of the notes to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements – Note 1 – Basis of Presentation” of this Quarterly Report.

Industry Trends

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



	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019		% Change	2020		2019		% Change	2021		2020		% Change	2021		2020		% Change
Worldwide Rig Count ⁽¹⁾
U.S.:
Land		241		894	-73%		461		961	-52%		437		378	16%		411		571	-28%
Offshore		13		26	-50%		16		23	-30%		13		14	-7%		14		17	-18%
Total		254		920	-72%		477		984	-52%		450		392	15%		425		588	-28%
International ⁽²⁾		731		1,144	-36%		879		1,094	-20%		734		834	-12%		716		954	-25%
Worldwide Total		985		2,064	-52%		1,356		2,078	-35%		1,184		1,226	-3%		1,141		1,542	-26%

Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	40.89	$	56.34	-27%	$	38.04	$	57.04	-33%	$	66.19	$	27.96	137%	$	62.24	$	36.58	70%
Natural Gas (Henry Hub)	$	2.00	$	2.38	-16%	$	1.87	$	2.61	-28%	$	2.94	$	1.70	73%	$	3.25	$	1.80	81%

⁽¹⁾ Estimate of drilling activity as measured by the average active drilling rigs based on Baker Hughes Co. rig count information.

⁽²⁾ Excludes Canadian Rig Count.

Comparison of the Results of Operations for the Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~June 30,~~ 2020

~~For~~Our revenue for the ~~third quarter~~Successor Quarter was $165.9 million, an increase of ~~2020, our revenue was $166.9 million and the net loss was $157.3~~$14.3 million, or ~~a $10.61~~9.4%, as compared to the Prior Predecessor Quarter. Net loss ~~per share. Included in the results~~ for the ~~three months ended September 30, 2020~~Successor Quarter was ~~a pre-tax charge of $2.9~~$51.0 million, ~~related~~as compared to ~~the reduction in value of long-lived assets, $4.4 million for inventory write-down, $3.2 million for severance, and $25.7 million of expenses related to restructuring activities. This compares to~~a net loss of $65.1 million ~~or a $4.39 loss per share,~~ for the ~~second quarter of 2020, on revenue of $183.9 million.~~Prior Predecessor Quarter.

Third quarter 2020 revenue in our Drilling Products and Services segment decreased to $56.0 million, as compared to $67.4 million for the second quarter of 2020. U.S. offshore revenue decreased 8% sequentially to $26.2 million primarily due to a decrease in rentals of premium drill pipe during the quarter. International revenue remained flat at $19.3 million. U.S. land revenue decreased 47% to $10.5 million primarily due to a decrease in rentals of premium drill pipe and bottom hole assemblies.

Third quarter 2020 revenue in our Onshore Completion and Workover Services segment increased 2% sequentially to $21.6 million, as compared to $21.2 million for the second quarter of 2020. The increase in revenue is primarily attributable to an increase in well servicing rigs activity.

Third quarter 2020 revenue in our Production Services segment increased 3% sequentially to $56.3 million, as compared to $54.5 million for the second quarter of 2020. U.S. offshore revenue increased 4% to $6.6 million primarily due to an increase in in hydraulic workover and snubbing activities. U.S. land revenue decreased 12% sequentially to $9.8 million primarily due to a decrease in pressure control activities. Revenue from international market areas increased 8% sequentially to $39.9 million primarily due to an increase in electric line and hydraulic workover and snubbing activities.

Third quarter 2020 revenue in our Technical Solutions segment decreased 19% sequentially to $33.0 million, as compared to $40.8 million in the second quarter of 2020. U.S. offshore revenue decreased 33% sequentially to $15.8 million due to a decrease in completion tools and products. International revenue decreased 11% sequentially to $12.6 million, primarily due to a decrease in in completion tools and products. U.S. land revenue increased 48% sequentially to $4.7 million, primarily due to an increase in demand for well control services.

Comparison of the Results of Operations for the Three Months Ended September 30, 2020 and 2019

For the three months ended September 30, 2020, our revenue was $166.9 million, a decrease of $189.6 million, or 53%, as compared to the same period in 2019. Net loss was $157.3 million, or a $10.61 loss per share. Included in the results for the three months ended September 30, 2020 was a pre-tax charge of $2.9 million related to the reduction in value of long-lived assets, $4.4 million for inventory

2741

write-down, $3.2 million for severance, and $25.7 million of expenses related to restructuring activities. This compares to a net loss for the three months ended September 30, 2019 of $38.4 million, or a $2.46 loss per share.

The following table compares our operating results for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands, except percentages). Cost of revenues excludes depreciation, depletion, amortization and ~~accretion for each of our business segments.~~accretion.

Revenue
Cost of Revenues
2020
2019
Change
%
2020
%
2019
%
Change
Drilling Products and
Services
$
56,001
$
111,185
$
(55,184)
-50%
$
23,714
42%
$
38,663
35%
$
(14,949)
Onshore Completion and
Workover Services
21,559
75,973
(54,414)
-72%
21,943
102%
61,338
81%
(39,395)
Production Services
56,355
98,787
(42,432)
-43%
46,115
82%
82,556
84%
(36,441)
Technical Solutions
33,013
70,640
(37,627)
-53%
24,461
74%
49,370
70%
(24,909)
Total
$
166,928
$
356,585
$
(189,657)
-53%
$
116,233
70%
$
231,927
65%
$
(115,694)



		Successor		Predecessor
		For the Three Months Ended June 30, 2021		For the Three Months Ended June 30, 2020		Change

Revenues	$	165,892	$	151,582	$	14,310

Cost of revenues		103,579		93,426		10,153
Depreciation, depletion, amortization and accretion		59,018		28,708		30,310
General and administrative expenses		32,308		55,528		(23,220)
Restructuring and other expenses		7,438		-		7,438
Loss from operations		(36,451)		(26,080)		(10,371)

Other income (expense):
Interest income (expense), net		535		(24,757)		25,292
Other income (expense):		2,570		821		1,749
Loss from continuing operations before income taxes		(33,346)		(50,016)		16,670
Income tax benefit (expense)		1,747		4,324		(2,577)
Loss from continuing operations		(31,599)		(45,692)		14,093
Loss from discontinued operations, net of income tax		(19,400)		(19,414)		14
Net loss	$	(50,999)	$	(65,106)	$	14,107

~~Operating Segments~~:

~~Drilling Products~~Revenues and ~~Services Segment~~Cost of Revenues

Revenue ~~from our Drilling Products and Services segment decreased 50% to $56.0 million~~ for the ~~three months ended September 30, 2020, as compared to $111.2~~Successor Quarter was $165.9 million, ~~for the same period in 2019. Cost~~an increase of ~~services and rentals as a percentage of revenue increased to 42% of segment revenue for the three months ended September 30, 2020, as compared to 35% for the same period in 2019. Revenue~~$14.3 million, or 9.4%, from the U.S. land market areas decreased 78% primarily as a result of decreases in revenue from rentals of premium drill pipe, bottom hole assemblies, and accommodations. Revenue from the U.S. offshore market area decreased 23% primarily due to a decrease in revenue from rentals of premium drill pipe. Revenue from the international market areas decreased 37%, primarily due to a decrease in demand for rentals of premium drill pipe.

~~Onshore Completion and Workover Services Segment~~

Revenue from our Onshore Completion and Workover Services segment decreased 72% to $21.6 million for the three months ended September 30, 2020, as compared to $76.0 million for the same period in 2019. All of this segment’s revenue is derived from the U.S. land market area. Cost of services and rentals as a percentage of revenue increased to 102% of segment revenue for the three months ended September 30, 2020, as compared to 81% for the same period in 2019. The decrease in revenue is primarily attributable to decreased activity in North America, where the average rig count decreased by 73% during the third quarter of 2020.

~~Production Services Segment~~

Revenue from our Production Services segment for the three months ended September 30, 2020 decreased by 43% to $56.4 million, as compared to $98.8 million for the same period in 2019. Cost of services and rentals as a percentage of revenue decreased to 82% of segment revenue for the three months ended September 30, 2020, as compared to 84% for the same period in 2019. Revenue from the U.S. land market area decreased 70%, primarily due to a decrease in coiled tubing and pressure control activities. Revenue from the international market areas decreased 17%, primarily due to a decrease in electric line activities. Revenue from the U.S. offshore market area decreased 64%, primarily due to a decrease in pressure control and slickline activities.

~~Technical Solutions Segment~~

Revenue from our Technical Solutions segment decreased 53% to $33.0 million for the three months ended September 30, 2020, as compared to $70.6 million for the same period in 2019. Cost of services and rentals as a percentage of revenue increased to 74% of segment revenue for the three months ended September 30, 2020, as compared to 70% for the same period in 2019. Revenue from the U.S. land market area decreased 36%, primarily due to a decrease in demand for completion tools and products. Revenue from the international market areas decreased 44%, primarily due to a decrease in demand for well control services. Revenue derived from the U.S. offshore market area decreased 61% primarily due to a decrease in pressure control activities.

~~Depreciation, Depletion, Amortization and Accretion~~

~~Depreciation, depletion, amortization and accretion decreased to $35.2~~million during the three months ended September 30, 2020 from $45.2 million during the same period in 2019. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $5.7 million, or 28%; for our Onshore Completion and Workover Services segment by $1.5 million, or 22%; and for our Production Services segment by $2.5 million, or 21%. Depreciation and amortization expense increased for our Technical Solutions segment by $0.1 million, or 2%. Depreciation expense for Corporate and Other decreased by $0.3 million, or 29%. The decrease in depreciation, depletion, amortization and accretion is primarily due to assets becoming fully depreciated.

~~Restructuring Expense~~

Restructuring expense for the three months ended September 30, 2020 totaled $25.7 million. This amount includes all of the advisory and professional expenses related to our restructuring. Also included in this total is $15.6 million related to the RSA premium paid to certain Consenting Noteholders pursuant to the RSA.

~~Reduction in Value of Assets~~

The reduction in value of assets recorded during the three months ended September 30, 2020 was $2.9 million related to the reduction in value of long-lived assets within the Technical Solutions segment.

~~Income Taxes~~

~~Our effective income tax rate for the three months ended September 30, 2020 was a 5% expense, as compared to a 9% expense for the same period in 2019.~~

~~Discontinued Operations~~

Loss from discontinued operations, net of tax, was $58.0 million for the three months ended September 30, 2020, as compared to $17.9 million for the same period in 2019. Loss from discontinued operations includes reduction in value of assets of $60.2 million for the three months ended September 30, 2020. See Note 16 to our condensed consolidated financial statements in this Quarterly Report for further discussion of the discontinued operations.

Comparison of the Results of Operations for the Nine Months Ended September 30, 2020 and 2019

For the nine months ended September 30, 2020, our revenue was $672.3 million, a decrease of $417.0 million, or 38%, as compared to the same period in 2019. Net loss was $301.9 million, or a $20.40 loss per share. Included in the results for the nine months ended September 30, 2020 was a pre-tax charge of $19.5 million primarily related to the reduction in value of long-lived assets, $11.8 million for inventory write-down and facility closures, $10.9 million primarily for severance, $12.0 million for merger-related transactions, and $27.0 million of expenses related to restructuring activities. This compares to a net loss for the nine months ended September 30, 2019 of $157.2 million, or a $10.09 loss per share.

~~The following table compares our operating results for the nine months ended September 30, 2020 and 2019 (in thousands, except percentages).~~Prior Predecessor Quarter. Cost of revenues ~~excludes depreciation, depletion, amortization and accretion for each of our business segments.~~

Revenue
Cost of Revenue
2020
2019
Change
%
2020
%
2019
%
Change
Drilling Products and
Services
$
227,344
$
312,946
$
(85,602)
-27%
$
81,163
36%
$
118,732
38%
$
(37,569)
Onshore Completion and
Workover Services
103,957
273,727
(169,770)
-62%
98,774
95%
217,115
79%
(118,341)
Production Services
212,352
305,239
(92,887)
-30%
177,624
84%
240,855
79%
(63,231)
Technical Solutions
128,625
197,385
(68,760)
-35%
99,161
77%
124,810
63%
(25,649)
Total
$
672,278
$
1,089,297
$
(417,019)
-38%
$
456,722
68%
$
701,512
64%
$
(244,790)

~~Operating Segments~~:

~~Drilling Products and Services Segment~~

~~Revenue from our Drilling Products and Services segment decreased 27% to $227.3 million~~ for the ~~nine months ended September 30, 2020, as compared to $312.9~~Successor Quarter was $103.6 million, ~~for the same period in 2019. Cost~~an increase of ~~services and rentals as a percentage of revenue decreased to 36% of segment revenue for the nine months ended September 30, 2020, as compared to 38% for the same period in 2019. Revenue~~$10.2 million, or 10.9%, from the ~~U.S. land market areas decreased 53% primarily as a result~~Prior Predecessor Quarter. Both revenues and cost of ~~decreases~~revenues in ~~revenue from rentals~~the Prior Predecessor Quarter were severely impacted by the effects of ~~premium drill pipe, bottom~~

~~hole assemblies,~~COVID-19, and ~~accommodations. Revenue from~~ the ~~U.S. offshore market area remained flat. Revenue from the international market areas decreased 14% primarily as a result of decreases in revenue from rentals of premium drill pipe.~~

~~Onshore Completion and Workover Services Segment~~

Revenue from our Onshore Completion and Workover Services segment decreased 62% to $104.0 million for the nine months ended September 30, 2020, as compared to $273.7 million for the same period in 2019. All of this segment’s revenue is derived from the U.S. land market area. Cost of services and rentals as a percentage of revenue increased to 95% of segment revenue for the nine months ended September 30, 2020, as compared to 79% for the same period in 2019. The decrease in revenue is primarily attributable to decreased activity in North America, where the average rig count decreased by 52% during the first nine months of 2020.

~~Production Services Segment~~

Revenue from our Production Services segment for the nine months ended September 30, 2020 decreased by 30% to $212.4 million, as compared to $305.2 million for the same period in 2019. Cost of services and rentals as a percentage of revenue increased to 84% of segment revenue for the nine months ended September 30, 2020, as compared to 79% for the same period in 2019. Revenue from the U.S. land market area decreased 54%, primarily due to a decrease in coiled tubing and pressure control activities. Revenue from the international market areas increased 2%, primarily due to an increase in ~~cementing~~our results in the Successor Quarter were driven by improvements in our Well Services business related to operations in Latin America and ~~stimulation activities~~improvements in our Wild Well Control business unit, partially offset by ~~a decrease~~declines in electric line activities. Revenue from the U.S. offshore market area decreased 59%, primarily due to a decrease in hydraulic workover and snubbing and electric line activities. During the nine months ended September 30, 2020, we recorded $4.1 million in reduction in value of assets.

~~Technical Solutions Segment~~

Revenue from our Technical Solutions segment decreased 35% to $128.6 million for the nine months ended September 30, 2020, as compared to $197.4 million for the same period in 2019. Cost of services and rentals as a percentage of revenue increased to 77% of segment revenue for the nine months ended September 30, 2020, as compared to 63% for the same period in 2019. Revenue from the U.S. land market area decreased 57%, primarily due to a decrease in demand for well ~~control~~completion services. Revenue from the international market areas decreased 37%, primarily due to a decrease in activity within our well control division. Revenue derived from the U.S. offshore market area decreased 26%, primarily due to a decrease in activity within our well control division and completion tools and products. During the nine months ended September 30, 2020, we recorded $15.4 million in reduction in the value of assets.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion ~~decreased to $113.3~~was $59.0 million during the ~~nine months ended September 30, 2020 from $152.8~~Successor Quarter compared to $28.7 million during the same period in 2019. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $16.6 million, or 26%; for our Onshore Completion and Workover Services segment by $10.8 million, or 39%; for our Production Services segment by $8.8 million, or 22% and for our Technical Solutions segment by $2.5 million, or 15%. Depreciation expense for Corporate and Other decreased by $0.8 million, or 21%.Prior Predecessor Quarter. The ~~decrease~~increase in depreciation, depletion, amortization and accretion is ~~primarily due~~related to both an increase in the carrying value of our assets ~~becoming fully depreciated.~~and lower average remaining useful lives as a result of the fair value adjustment recorded as a part of fresh start accounting.

General and Administrative Expenses

General and administrative expense was $32.3 million during the Successor Quarter compared to $55.5 million during the Prior Predecessor Quarter. The decrease is the result of our continued focus on limiting spending and reducing our cost structure.

Restructuring ~~Expense~~and Other Expenses

Restructuring ~~expense for~~and other expenses were $7.4 million during the ~~nine months ended September 30, 2020 totaled $27.0 million. This amount includes all of~~Successor Quarter and primarily relate professional fees incurred during the ~~advisory and professional expenses related to~~period associated with our ~~restructuring. Also included in this total is $15.6 million related to the RSA premium paid to certain Consenting Noteholders pursuant to the RSA.~~previously discussed Transformation Project.

~~Reduction in Value of Assets~~Interest Income (Expense), net

~~During~~Interest income was $0.5 million for the ~~nine months ended September 30, 2020,~~Successor Quarter compared to interest expense of $24.7 million for the ~~Company recorded $19.5 million~~Predecessor Quarter.

The Predecessor interest expense was a result of outstanding debt during the Predecessor Quarter and was subsequently eliminated as a liability subject to compromise and settled in ~~connection~~accordance with the ~~reduction in value of its long-lived assets.~~ Plan. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 3 – “Fresh Start Accounting” for additional information.

Income Taxes

The ~~reduction in value of assets~~effective tax rate for the Successor Quarter was ~~comprised of $4.1 million and $15.4 million related to property, plant and equipment~~5.2% on income from continuing operations. The tax rate in the ~~Production Services segment~~Successor Quarter is different from the blended federal and ~~the Technical Solutions segment, respectively. The reduction in value~~state statutory rate of ~~assets recorded during the nine months ended September 30, 2019 included $17.1 million,~~22.5% primarily ~~related to the reduction in value of long-lived assets within the Onshore Completion~~from non-deductible items and ~~Workover Services and Technical Solutions segments.~~foreign losses for which no tax benefit is being recorded.

3042

The effective tax rate for Prior Predecessor Quarter was 8.6% on income from continuing operations. The tax rate is different from the blended federal and state statutory rate of 22.5% primarily from foreign losses for which no tax benefit was recorded.

Comparison of the Results of Operations for the Six Months Ended June 30, 2021 and 2020

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



		Successor		Predecessor		Non-GAAP		Predecessor
		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Combined Six Months ended June 30, 2021		For the Six Months Ended June 30, 2020		Change

Revenues	$	271,735	$	45,928	$	317,663	$	385,821	$	(68,158)
Cost of revenues		171,447		29,773		201,220		230,939		(29,719)
Depreciation, depletion, amortization and accretion		99,048		8,358		107,406		60,889		46,517
General and administrative expenses		50,746		11,052		61,798		114,819		(53,021)
Restructuring and other expenses		15,821		1,270		17,091		-		17,091
Reduction in value of assets		-		-		-		16,522		(16,522)
Loss from operations		(65,327)		(4,525)		(69,852)		(37,348)		(32,504)

Other income (expense):
Interest income (expense), net		747		202		949		(49,883)		50,832
Reorganization items, net		-		335,560		335,560		-		335,560
Other income (expense):		(275)		(2,105)		(2,380)		(3,411)		1,031
Income (loss) from continuing operations before income taxes		(64,855)		329,132		264,277		(90,642)		354,919
Income tax benefit (expense)		6,032		(60,003)		(53,971)		14,160		(68,131)
Net income (loss) from continuing operations		(58,823)		269,129		210,306		(76,482)		286,788
Income (loss) from discontinued operations, net of income tax		(28,806)		(352)		(29,158)		(68,088)		38,930
Net income (loss)	$	(87,629)	$	268,777	$	181,148	$	(144,570)	$	325,718

Net income for the Combined Period was $181.1 million, which was driven primarily by recognition of a $335.6 million gain in Reorganization items, net due to debt forgiveness as part of our emergence from bankruptcy. Also included in the results for Combined Period was a pre-tax charge of $13.9 million related to restructuring activities. This compares to a net loss for the Prior Predecessor Period of $144.6 million.

Revenues and Cost of Revenues

Revenue for the Combined Period decreased by 17.7% to $317.7 million, as compared to $385.8 million for the Prior Predecessor Quarter. Cost of revenues for the Combined Period decreased by 12.9%, to $201.2 million, as compared to $230.9 million for the Prior Predecessor Period. Both revenues and cost of revenues were severely impacted by the effects of COVID-19 on the worldwide economy, and our results were impacted by a decline in all business lines. We experienced a decline in rentals of premium drill pipe and bottom hole assemblies as well as a decline in revenues from accommodation units, slickline services and plug and abandonment activities.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion was $107.4 million during the Combined Period compared to $60.9 million during the Prior Predecessor Period. The increase in depreciation, depletion, amortization and accretion is related to both an increase in the

carrying value of our assets and lower average remaining useful lives as a result of the fair value adjustment recorded as a part of fresh start accounting.

General and Administrative Expenses

General and administrative expense was $50.7 million during the Combined Period compared to $114.8 million during the Prior Predecessor Period. The decrease is the result of our continued focus on limiting spending and reducing our cost structure.

Restructuring and Other Expenses

Restructuring and other expenses were $15.8 million during the Combined Period and primarily relate to severance expenses and costs related to executive officers that resigned during the period as well as professional fees associated with our previously discussed Transformation Project.

Reorganization items, net

Reorganization items, net were $335.6 million during the Current Predecessor Period. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 3 – “Fresh Start Accounting” for additional information on reorganization items, net.

Interest Income (Expense), net

Interest income was $0.9 million for the Combined Periodcompared to interest expense of $49.9 million for the Prior Predecessor Period. The Prior Predecessor Period interest expense was a result of outstanding debt during the Prior Predecessor Period and was subsequently eliminated as a liability subject to compromise and settled in accordance with the Plan. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 3 – “Fresh Start Accounting” for additional information.

Income Taxes

~~Our effective income tax rate for the nine months ended September 30, 2020 was a 6% benefit, as compared to a 12% expense for the same period in 2019.~~ The effective tax rate for the ~~nine months ended September 30, 2020~~Current Predecessor Period and the Successor Period was 18.2%, and 9.3%, respectively, on income from continuing operations. The tax rate in the Current Predecessor Period is different from the blended federal and state statutory rate of 22.5% primarily ~~impacted by~~from the ~~filing~~adoption of fresh start accounting during the period. The cancellation of indebtedness income resulting from the restructuring has significantly reduced our US tax attributes, including but not limited to NOL carryforwards. We experienced an ownership change under Sec. 382 of the ~~carryback claim under~~Internal Revenue Code of 1986, as amended (the “Code”), which is anticipated to limit certain remaining tax attributes. The tax rate in the ~~CARES Act.~~Successor Period is different from the blended federal and state statutory rate of 22.5% primarily from non-deductible items and foreign losses for which no tax benefit is being recorded.

~~Discontinued Operations~~

~~Loss from discontinued operations, net of~~The effective tax ~~was $111.4 million~~rate for the ~~nine months ended September 30, 2020 as compared to $85.6 million~~Prior Predecessor Period was 15.6%, respectively, on income from continuing operations. The tax rate is different from the blended federal and state statutory rate of 22.5% primarily from foreign losses for the same period in 2019. Loss from discontinued operations includes reduction in value of assets of $109.6 million and $23.8 million for the nine months ended September 30, 2020 and 2019, respectively. See Note 16 to our condensed consolidated financial statements for further discussion of the discontinued operations.which no tax benefit was recorded.

Liquidity and Capital Resources

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

Also impacting ~~our~~ liquidity is the state of the global economy, which impacts oil and natural gas consumption. Our operations continue to be disrupted due to the circumstances surrounding the COVID-19 pandemic. The significant business disruption resulting from the COVID-19 pandemic has ~~resulted~~impacted customers, vendors and suppliers in ~~travel restrictions,~~all geographical areas where we operate. The closure of non-essential business ~~closures~~facilities and ~~the institution of quarantining and other~~ restrictions on ~~movement~~travel put in ~~many communities. As a result, there has been a significant reduction in demand for, and~~place by governments around the ~~prices of, crude oil and natural gas.~~ ~~The COVID-19 pandemic, together with other dynamics in the marketplace, has recently~~world have significantly ~~increased borrowing costs and, in certain cases, restricted the ability of borrowers to access the capital markets and other sources of financing.~~

~~As a result,~~reduced economic activity. Also, the COVID-19 pandemic ~~created significant challenges that materialized~~has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates and interest rates. There is increased economic optimism in 2021 as governments worldwide continue to distribute the ~~first quarter~~COVID-19 vaccines. However, although vaccination campaigns are underway, several regions, including areas of ~~2020~~the United States, have been and continue to ~~affect us. These include, but are not limited~~deal with a rebound in the pandemic. There is also concern about whether vaccines will be effective against different strains of the virus that have developed and may develop in the future. Even though signs of economic recovery centered on COVID-19 mitigation, global vaccine distribution, and re-opening efforts make demand for oil and gas difficult to ~~slower collections from customers, pricing pressure from customers,~~project, we believe demand is recovering and ~~pressure from suppliers to shorten payment terms or lower credit limits. In order to maintain our liquidity at levels we believed would~~prices will be sufficient to meet our commitments, we undertook a number of actions, including minimizing capital expenditures and further reducing our recurring operating expenses. Ultimately, we concluded, even after taking these actions, we would not have sufficient liquidity to satisfy our debt service obligations as they came due. As a result, on September 29, 2020 we entered into the RSA which contemplates that the Debtors will file the Chapter 11 Cases and discharge all amounts outstanding under the Debtors’ Prepetition Notes.positively impacted.

Financial Condition and Sources of Liquidity

~~Our~~The primary sources of liquidity during the period covered by this quarterly report on Form 10-Q have been cash and cash equivalents, availability under credit facilities, and cash generated from ~~operations and proceeds from divestiture of non-core assets.~~operations. As of ~~September~~June 30, ~~2020,~~2021, we had cash, cash equivalents and restricted cash of ~~$288.0 million and had approximately $265 million of cash, cash equivalents and restricted cash at the end of October 2020.~~$285.9 million. During the ~~nine months ended September 30, 2020,~~Successor Period and the Current Predecessor Period net cash provided by operating activities was ~~$18.6 million.~~

$12.5 million and $5.3 million, respectively. During the ~~nine months ended September 30, 2020, we~~Successor Period and the Current Predecessor Period, $16.2 million and $0.7 million were received ~~$44.1 million~~ in cash proceeds from the ~~divestiture of non-core assets.~~sale assets, respectively.

At ~~September~~June 30, ~~2020,~~2021, the borrowing base on ~~our asset-based revolving credit facility~~the Credit Facility was ~~$97.3~~$120.0 million and wethe Successor had ~~$48.5~~$47.5 million of letters of credit outstanding that reduced ~~our~~the borrowing availability under the ~~revolving credit facility.~~ We reduced the amount of letters of credit issued through the credit facility by using $52.4 million to cash collateralize surety and other obligations in lieu of issuing letters of credit. We also deposited $25 million in an account under the lenders’ control to further secure our obligations under the revolving credit facility. ~~At September 30, 2020, we had no borrowings outstanding on our revolving credit facility.~~Credit Facility.

~~We believe our cash flow from operations, letter of credit capacity under a potential debtor~~The energy industry faces growing negative sentiment in ~~possession asset-based credit facility and cash on hand will provide sufficient liquidity during~~ the ~~Chapter 11 Cases.~~

~~We believe that our~~market which may affect the ability to ~~continue as a going concern~~access appropriate amounts of capital and under suitable terms. While we have confidence in the level of support from our lenders, this negative sentiment in the energy industry has not only impacted our customers in North America, it is ~~contingent on filing~~also affecting the ~~Chapter 11 Cases~~availability and the ~~Bankruptcy Court’s approval of~~pricing for most credit lines extended to participants in the ~~Plan and our ability~~industry. From time to ~~successfully implement the Plan and obtain exit financing, among other factors. While operating as debtors-in-possession during the pendency of the Chapter 11 Cases,~~time we may ~~sell or otherwise~~continue to enter into transactions to dispose of businesses or ~~liquidate~~capital assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in the accompanying condensed consolidated financial statements. Further, the Plan if confirmed, could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements of this Quarterly Report.that no longer fit our long-term strategy.

Uses of Liquidity

~~Our~~The primary uses of liquidity ~~during the period covered by this Quarterly Report were~~are to provide support for ~~our~~ operating activities, restructuring activities ~~debt service obligations~~ and capital expenditures. We have incurred ~~and expect to continue to incur~~ significant costs associated with the Chapter 11 Cases, including fees for legal, financial and restructuring advisors to ~~the Company,~~us, and certain of ~~our~~the creditors. ~~Therefore, our ability to obtain confirmation~~During the Current Predecessor Period, the Predecessor incurred $18.3 million of ~~the Plan in a timely manner is critical to ensuring our liquidity is~~

~~sufficient during the Chapter 11 Cases. We incurred $27.0 million in restructuring expenses during the nine months ended September 30, 2020. These expenses~~ ~~include~~ ~~$15.6 million related to the RSA premium payable to certain Consenting Noteholders pursuant to the RSA and~~ advisory and professional fees relating to the Chapter 11 ~~Cases.~~ ~~Also related to the RSA is $11.7~~Cases and $12.0 million of fees paid in consideration for the commitment by the Backstop Commitment Parties to provide the Delayed-Draw Term Loan Facility upon ~~our~~the emergence from ~~bankruptcy.~~ Webankruptcy (which ultimately did not occur). The Successor spent ~~$37.4~~$4.1 million of cash on capital expenditures during the Successor Period and ~~made $71.2~~the Predecessor spent $3.0 million of ~~net interest payments~~cash on capital expenditures during the nine months ended September 30, 2020. Capital expenditures of $17.2 million primarily related to the expansion and maintenance of our equipment inventory for our Drilling Products and Services segment, capital expenditures of $12.6 million primarily related to the expansion and maintenance of equipment inventory at our Production Services segment and the remaining $7.6 million of capital expenditures primarily related to the maintenance of our equipment for our Onshore Completion and Workover Services and Technical Solutions segments.

During the remainder of 2020, we expect to limit additional capital spending to no more than $12.5 million to meet our target of no more than $50.0 million in capital expenditures for 2020. We also plan to adjust our capital spending as necessary in order to adhere to the terms of the RSA and restrictions stemming from the Bankruptcy Court. However, there can be no assurance that we will be able to successfully accomplish the Bankruptcy Filing and implement the Plan.Current Predecessor Period.

Debt Instruments

We ~~have~~On the Emergence Date, pursuant to the Plan, the Former Parent, as parent guarantor, and SESI, as borrower, entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and letter of credit issuers named therein providing for a $120.0 million asset-based secured revolving credit facility (the “Credit Facility”), which provides for revolving loans and is available for the issuances of letters of credit. The Credit Facility will mature on December 9, 2024. The borrowing base under the Credit Facility is determined by reference to SESI’s and its subsidiary guarantors’ (i) eligible accounts receivable, (ii) eligible inventory, (iii) solely during the period from February 2, 2021 until the earlier of December 9, 2022 and the date that unrestricted cash of SESI and its wholly-owned subsidiaries is less than $75.0 million, eligible premium rental drill pipe and (iv) so long as there are no loans outstanding ~~$500~~at such time, certain cash of SESI and its subsidiary guarantors, less reserves established by the administrative agent in its permitted discretion. On June 30, 2021 approximately $45.0 million of ~~7.75% senior unsecured notes due September 2024. The indenture governing~~undrawn letters of credit were outstanding under the 7.75% senior unsecured notes due 2024 requires semi-annual interest payments on March 15 and September 15 of each year through the maturity date of September 15, 2024. The indenture contains customary events of default and requires that we satisfy various covenants.Credit Facility.

We ~~also have outstanding $800~~Availability under the Credit Facility at any time is equal to the lesser of (i) the aggregate commitments under the Credit Facility and (ii) the borrowing base at such time. As of June 30, 2021, the borrowing base under the Credit Facility was approximately $120.0 million and we had $47.5 million of ~~7.125% senior unsecured notes due December 2021. The indentures governing~~letters of credit outstanding that reduced its borrowing availability under the ~~7.125% senior unsecured notes due 2021 require semi-annual~~revolving credit facility. Subject to certain conditions, upon request and with the consent of the participating lenders, the total commitments under the Credit Facility may be increased to $170.0 million. SESI’s obligations under the Credit Facility are guaranteed by the Former Parent and all of SESI’s material domestic subsidiaries and secured by substantially all of the personal property of the Former Parent, SESI and SESI’s material domestic subsidiaries, in each case, subject to certain customary exceptions.

Borrowings under the Credit Facility bear interest, ~~payments~~at SESI’s option, at either an adjusted LIBOR rate plus an applicable margin ranging from 3.00% to 3.50% per annum, or an alternate base rate plus an applicable margin ranging from 2.00% to 2.50% per annum, in each case, on ~~June 15 and December 15~~the basis of the then applicable consolidated fixed charge coverage ratio. In addition, SESI is required to pay (i) a letter of credit fee ranging from 3.00% to 3.50% per annum on the basis of the consolidated fixed charge coverage ratio on the aggregate face amount of all outstanding letters of credit, (ii) to the issuing lender of each ~~year through~~letter of credit, a fronting fee of no less than 0.25% per annum on the ~~maturity date~~outstanding amount of ~~December 15, 2021. The indentures contain customary events~~each such letter of ~~default~~credit and ~~require that we satisfy various covenants.~~(iii) commitment fees of 0.50% per annum on the daily unused amount of the Credit Facility, in each case, quarterly in arrears.

The ~~commencement~~Credit Facility contains various covenants requiring compliance, including, but not limited to, limitations on the incurrence of ~~the Chapter 11 Cases will constitute~~indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if either (a) an event of default has occurred and is continuing or (b) availability under ~~our credit facility~~the Credit Facility is less than the greater of $20.0 million or 15% of the lesser of the aggregate commitments and the ~~indentures governing our unsecured notes. However, any efforts to enforce such payment obligations under the credit facility~~borrowing base. The covenant and ~~unsecured notes will be automatically stayed as a result~~other restrictions of the ~~Bankruptcy Filing and~~Credit Facility significantly restrict the ~~creditors’ rights~~ability to incur borrowings other than letters of ~~enforcement will be subject to the applicable provisions of the Bankruptcy Code. For more information on the~~ creditChapter 11 Cases, see Note 1 of the notes to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements – Note 1 – Basis of Presentation” of this Quarterly Report..

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 9 – “Debt” for additional information regarding waivers to the Credit Facility and our inability to require the lenders to make any requested advances

until the conditions described therein are satisfied.

Other Matters

Off-Balance Sheet Arrangements and Hedging Activities

At ~~September~~June 30, ~~2020, we~~2021, the Successor had no off-balance sheet arrangements and no hedging contracts.

Recently Adopted Accounting Guidance

See Part I,1, Item 1, ~~“Financial~~“Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1722 – “New Accounting Pronouncements.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks associated with foreign currency fluctuations and changes in interest rates. A discussion of our market risk exposure in financial instruments follows.

Foreign Currency Exchange Rates Risk

~~Because we operate in a number~~Prior to the first quarter of ~~countries throughout~~2021, the ~~world, we conduct a portion~~functional currency of ~~our business in currencies other than~~ the ~~U.S. dollar. The~~majority of the international subsidiaries was US dollars and the functional currency for ~~our international operations, other than~~ certain ~~operations in the United Kingdom and Europe, is the U.S. dollar, but a portion~~ of the ~~revenues from our~~ international ~~operations is paid in foreign currencies. The effects of foreign currency fluctuations are partly mitigated because~~subsidiaries was the local ~~expenses of such international operations are also generally denominated in the same~~ currency. ~~We continually monitor the currency exchange risks associated with all contracts not denominated in the U.S. dollar.~~

~~Assets and liabilities~~Beginning with the first quarter of 2021, as part of adopting a new accounting policy at fresh start accounting, the functional currency of certain international subsidiaries changed from the local currency to US dollars. This brings alignment so that our functional currency is US dollars. Management considered the economic factors outlined in FASB ASC Topic No. 830 - Foreign Currency Matters in the ~~United Kingdom and Europe are translated at end~~determination of ~~period exchange rates, while income and expenses are translated at average rates for~~ the ~~period. Translation gains and losses are reported~~functional currency. Management concluded that the predominance of factors support the use of the Successor parent’s currency as the ~~foreign~~functional currency and resulted in a change in functional currency to US dollars for all international subsidiaries.

The change in functional currency is applied on a prospective basis beginning with the first quarter of 2021 and translation adjustments for prior periods will continue to remain as a component of accumulated other comprehensive ~~loss in stockholders’ equity (deficit).~~loss.

We do not hold derivatives for trading purposes or use derivatives with complex features. When ~~we believe~~ prudent, we enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. We do not enter into forward foreign exchange contracts for trading or speculative purposes. At ~~September~~June 30, ~~2020, we~~2021, the Successor had no outstanding foreign currency forward contracts.

Interest Rate Risk

At ~~September~~June 30, ~~2020, we~~2021, the Successor had no variable rate debt outstanding.

Commodity Price Risk

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

For additional discussion, see Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management has established and maintains a system of disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is appropriately recorded, processed, summarized and reported within the time periods specified by the SEC. In addition, our disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. An evaluation was carried out, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), regarding the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures as of June 30, 2021 were not effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms, and is accumulated and communicated to

46 management, including our CEO and CFO, as appropriate, to allow timely decisions regarding disclosures as a result of the material weakness in our internal control over financial reporting described below. Material Weakness in Internal Control Over Financial Reporting A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness was identified in our internal control over financial reporting as we did not effectively operate control activities to appropriately consider all potential income tax alternatives relating to uncertain tax positions. This material weakness did not result in a misstatement to the consolidated financial statements, however this material weakness could result in a misstatement of the income tax related accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Management’s Plan to Remediate Material Weakness In order to address the material weakness described above under “Material weakness in internal control over financial reporting”, our management has implemented a remediation plan to address the control deficiency that led to this material weakness, including the following: Reinforcing our controls for identifying and reviewing potential uncertain tax positions; and Reinforcing our controls to evaluate, resolve, and document the related conclusions and accounting treatment for uncertain tax positions. Although we have implemented the enhancements described above, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Based on its evaluation, the controls described above have not had sufficient time for management to conclude that they are operating effectively. Therefore, the material weakness described above existed at June 30, 2021 and will continue to exist until the controls described above have had sufficient time for management to conclude that they are effective. Changes in Internal Control Over Financial Reporting There have been no changes in internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~(a)~~	~~Evaluation of disclosure controls and procedures.~~ As of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation, that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

~~(b)~~	~~Changes in internal control~~. There was no change in our internal control over financial reporting during the three months ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

‎

3347

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal actions incidental to our business. The outcome of these proceedings is ~~not predictable.~~unpredictable. See Part I,1, Item 1, ~~“Financial~~“Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1419 – “Contingencies.”

For more information on the Chapter 11 Cases, see Part I,1, Item 1, ~~“Financial~~“Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1 – “Basis of Presentation” and Part I,1, Item 2, ~~Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 1A. Risk Factors

For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see Part I, Item 1A, “Risk Factors” of ~~our~~the Annual Report on Form 10-K for the year ended December 31, 2019 (the Annual Report) and Part II, Item 1A, “Risk Factors” of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 (the Quarterly Reports).Report. There have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in ~~our~~the Annual Report ~~and Quarterly Reports,~~ except as set forth below.

Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely affect our business, financial condition or results of operations or result in changes to the risk factors previously disclosed under the caption “Risk Factors” in our Annual Report. The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding any statement in this report or elsewhere. The following information should be read in conjunction with the condensed consolidated financial statements and related notes herein and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this ~~report.~~quarterly report on Form 10-Q.

In connection with the preparation of our consolidated financial statements as of and for the quarter ended March 31, 2021, our previous independent registered public accounting firm identified a material weakness in our internal control over financial reporting related to the design of our control to engage the appropriate specialists to assist in evaluating the income tax consequences of complex non-routine transactions, such as the Plan. If we ~~make~~are not able to remediate the ~~Bankruptcy Filing, the Chapter 11 Cases may have a~~ material ~~adverse impact on our business,~~weakness and otherwise to maintain an effective system of internal control over financial ~~condition, results of operations and cash flows. In addition, the consummation of the Plan will result~~reporting in the ~~cancellation and exchange of~~future, our ~~equity securities, including our common stock.~~

~~If we make the Bankruptcy Filing, the Chapter 11 Cases could have a material adverse effect on our business,~~ financial ~~condition, liquidity, results of operations and cash flows. During the pendency of the Chapter 11 Cases, our management~~statements may be ~~required to spend a significant amount of time~~materially misstated and effort dealing with restructuring matters rather than focusing exclusively on our business operations. Bankruptcy Court protection and operating as debtors-in-possession may also make it more difficult to retain management and the key personnel necessary for the success of our business. In addition, during the pendency of the Chapter 11 Cases, our customers might lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships, renegotiate the terms of our agreements, terminate their relationships with us or require financial assurances from us. Customersinvestors may lose confidence in the accuracy and completeness of our ~~ability~~financial reports. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We are working to ~~provide them~~remediate the ~~level of service they expect, which may result in~~material weakness and are taking steps to strengthen our internal control over financial reporting. While we are undertaking efforts to remediate this material weakness, the material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a ~~significant decline in our revenues, profitability and cash flow.~~

~~Other significant risks include or relate to the following:~~

~~the effects of the filing of the Chapter 11 Cases on our business and the interests of various constituents, including our stockholders;~~

~~Bankruptcy Court rulings in the Chapter 11 Cases, including with respect to relief requested by both the Debtors and non-Debtor parties;~~

our ability to operate within the restrictions and the liquidity limitations of a potential debtor in possession asset-based credit facility (the DIP Credit Facility) and any related orders entered by the Bankruptcy Court in connection with the Chapter 11 Cases;

~~our ability to maintain strategic control as debtors-in-possession during the pendency of the Chapter 11 Cases;~~

~~the length~~sufficient period of time, and we have concluded, through testing, that ~~we will operate with Chapter 11 protection~~the newly implemented and ~~the continued availability of~~enhanced controls are operating ~~capital during the pendency of the Chapter 11 Cases;~~

~~increased advisory costs during the pendency of the Chapter 11 Cases;~~

~~the risks associated with restrictions on our ability to pursue some of our business strategies during the pendency of the Chapter 11 Cases;~~

~~our ability to satisfy the conditions precedent to consummate a Plan;~~

~~the potential adverse effects of the Chapter 11 Cases on our business, cash flows, liquidity, financial condition and results of operations;~~

~~the ultimate outcome of the Chapter 11 Cases in general;~~

~~the cancellation of our existing equity securities, including our outstanding shares of common stock, in the Chapter 11 Cases;~~

~~the potential material adverse effects of claims that are not discharged in the Chapter 11 Cases;~~

~~uncertainties regarding the reactions of our customers, prospective customers and service providers to the Chapter 11 Cases;~~

~~uncertainties regarding our ability to retain and motivate key personnel; and~~

~~uncertainties and continuing risks associated with our ability to achieve our stated goals and continue as a going concern.~~

~~Because of the risks and uncertainties associated with the Chapter 11 Cases,~~effectively. At this time, we cannot predict the success of such efforts or ~~quantify~~ the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we provide any assurance as to our ability to continue as a going concern.

~~If we file the Chapter 11 Cases, realization of assets and liquidation of liabilities will be subject to uncertainty.~~

If we make the Bankruptcy Filing, delays in the Chapter 11 Cases may increase the risk of us being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the Chapter 11 Cases.

There can be no assurance that the Plan will become effective in accordance with its terms on the timeline we anticipate, or at all if we make the Bankruptcy Filing. Prolonged Chapter 11 proceedings could adversely affect our relationships with customers and employees, among other parties, which in turn could adversely affect our business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakeningoutcome of our financial condition, liquidity and results of operations could adversely affect our ability to implement the Plan (or any other Chapter 11 plan). If we are unable to consummate the Plan, we may be forced to liquidate our assets.

~~If we make the Bankruptcy Filing, we will be subject to the risks and uncertainties associated with our exclusive right to file a plan of reorganization.~~

~~At the outset of a Chapter 11 case, the Bankruptcy Code provides debtors-in-possession the exclusive right to file and solicit acceptance of a plan of reorganization for the first 120 days~~assessment of the bankruptcy case, subject to extension at the discretion of the court. All other parties are prohibited from filing or soliciting a plan of reorganization during this period. If the Bankruptcy Court terminates that right or the exclusivity period expires, there could be a material adverse effect on our ability to achieve confirmation of a plan in order to achieve our stated goals in the event we make the Bankruptcy Filing. The possible decision of creditors and/or other third parties, whose interest may be inconsistent with our own, to file alternative plans of reorganization could further protract the Chapter 11 Cases, leading us to continue to incur significant professional fees and costs. Because of these risks and uncertainties associated with the termination or expiration of such exclusivity rights, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Cases may have on our corporate or capital structure.

~~Adverse publicity in connection with the proposed Chapter 11 Cases or otherwise could negatively affect our businesses.~~

Adverse publicity or news coverage relating to us, including, but not limited to, publicity or news coverage in connection with the proposed Chapter 11 Cases, may negatively impact our efforts to establish and promote a positive image after emergence from the Chapter 11 Cases.

~~The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.~~

There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the Chapter 11 Cases, which include the consummation of the transactions contemplated by the Plan. Our ability to timely complete such milestones is subject to risks and uncertainties, many of which are beyond our control.

~~Even if we file the Chapter 11 Cases, the Plan may not become effective.~~

Even if we file the Chapter 11 Cases and the Plan is confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control). There can be no assurance that such conditions will be satisfied and, therefore, that the Plan will become effective and that the Debtors will emerge from the Chapter 11 Cases as contemplated by the Plan. If the effective date of the Plan is delayed, the Debtors may not have sufficient cash available to operate their businesses. In that case, the Debtors may need new or additional post-petition financing, which may increase the cost of consummating the Plan. There can be no assurance of the terms on which such financing may be available or if such financing will be available.

~~Even if we file the Chapter 11 Cases and a Chapter 11 Plan is consummated, we may not be able to achieve our stated goals.~~

Even if a Chapter 11 Plan is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the transactions under a Chapter 11 Plan will close. As a result of these and other risks, we cannot guarantee that if we file the Chapter 11 Cases that a Chapter 11 Plan will achieve our stated goals.

~~Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.~~

We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash requirements necessary to fund our ongoing operations, we have incurred significant professional fees

and other costs in connection with preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional fees and other costs throughout the Chapter 11 Cases in the event they are filed.remediation efforts. We cannot assure you that ~~cash on hand, letters of credit under a potential DIP Credit Facility, and cash flow from operations~~our efforts will ~~be sufficient to continue to fund~~remediate this material weakness in our ~~operations and allow us to satisfy our obligations related to the Chapter 11 Cases, if filed.~~

The Debtors expect to incur senior secured obligations under the DIP Credit Facility after making the Bankruptcy Filing. Upon entry of the interim order in respect of the DIP Credit Facility, letters of credit under the Prepetition Credit Agreement are expected to be deemed to be outstanding letters of credit under the DIP Credit Facility and are expected to be permitted to be extendedinternal control over financial reporting, or renewed. Upon entry of the final order in respect of the DIP Credit Facility the Borrower is also expected to be able to request issuances of new letters of credit under the DIP Credit Facility, subject to its terms and conditions.

Upon our exit from bankruptcy, the DIP Credit Facility is expected to convert into an asset-based revolving credit facility (the Exit ABL Facility). Upon conversion into the Exit ABL Facility, letters of credit under the DIP Credit Facility are expected to be deemed to be letters of credit outstanding under the Exit ABL Facility.

If we make the Bankruptcy Filing, our liquidity, including our ability to meet our ongoing operational obligations, depends on, among other things: (1) our ability to comply with the terms and conditions of any order governing the use of cash collateral that may be entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (2) our ability to maintain adequate cash on hand, (3) our ability to generate cash flow from operations, (4) our ability to consummate the Plan or other alternative restructuring transaction, (5) the cost, duration and outcome of the Chapter 11 Cases, (6) our ability to access credit support in the form of letters of credit under the DIP Credit Facility and (7) our ability to access capital under the Exit ABL Facility and/or the Delayed-Draw Term Loan Facility upon our emergence from bankruptcy.

~~Under certain limited circumstances, the Chapter 11 Cases may be converted to cases under Chapter 7 of the Bankruptcy Code.~~

If we make the Bankruptcy Filing, upon a showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in a plan of reorganization because of: (1) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern; (2) additional administrative expenses involved in the appointment of a Chapter 7 trustee; and (3) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of executory contracts in connection with a cessation of operations.

~~If we file the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.~~

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements. We also will be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our historical consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.

~~We may be subject to claims that~~material weaknesses will not be ~~discharged~~identified in the ~~Chapter 11 Cases, if we make the Bankruptcy Filing, which could have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.~~

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from, among other things, substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims against the Debtors that arise prior to the Petition Date or before consummation of the Plan (i) would be subject to compromise and/or treatment under the Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Plan. Subject to the terms of the Plan and orders of the Bankruptcy Court, any claims not ultimately discharged pursuant to the Plan could be asserted against the reorganized entities and may have an adverse effect on our business, cash flows, liquidity, financial condition and results of operations on a post-reorganization basis.

~~The Chapter 11 Cases will limit the flexibility of our management team in running our business.~~

If we make the Bankruptcy Filing, we will operate our businesses as debtor-in-possession under supervision by the Bankruptcy Court during the pendency of the Chapter 11 Cases, and we will be required to obtain the approval of the Bankruptcy Court, and in some cases certain lenders, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with the various creditors’ committees and other parties-in-interest and one or more hearings. The creditors’ committees, if any, and other parties-in-interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions. This process may delay

major transactions and limit our ability to respond quickly to opportunities and events if we make the Bankruptcy Filing. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction during bankruptcy proceedings, we would be prevented from engaging in activities and transactions that we believe are beneficial to us.

The pursuit of the RSA and the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may experience increased levels of employee attrition as a result of the restructuring.

As the Chapter 11 Cases progress, our management will be required to spend a significant amount of time and effort focusing on the Chapter 11 Cases. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

~~As a result of the restructuring, we have experienced employee attrition, and during the pendency of the Chapter 11 Cases, our employees may face considerable distraction and uncertainty~~and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Further, our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the expected Chapter 11 Cases will be limited by certain restrictions on the implementation of incentive programs under the Bankruptcy Code.

~~Upon emergence from bankruptcy, the composition of our Board of Directors will change.~~

Our Board of Directors is expected to be replaced following the potential Chapter 11 Cases. Any new directors may have different backgrounds, experiences and perspectives from those individuals who currently serve on our Board of Directors and, thus, may have different views on the issues that will determine the future of our company. As a result, our future strategy and plans may differ materially from those of the past.

~~Trading in our common stock prior to and during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.~~

All of our indebtedness is senior to the existing common stock in our capital structure. The RSA contemplates that our existing equity interests will be canceled in connection with the Chapter 11 Cases. Accordingly, any trading in our common stock prior to and during the pendency of the proposed Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock.

~~Our common stock may become subject to the associated risks of trading in an over-the-counter market.~~

Since September 18, 2020, our common stock has been trading on the OTCQX Marketplace maintained by the OTC Markets Group, Inc. under the symbol “SPNX.” Securities traded in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange, due to factors such as a reduction in the number of investors that will consider investing in the securities and the number of market makers in the securities, reduction in securities analyst and news media coverage and lower market prices than might otherwise be obtained. In addition to those factors, the market for the outstanding shares of our common stock has been adversely affected by the provisions of the RSA that contemplate that our existing equity interests will be cancelled in connection with the Chapter 11 Cases. We can provide no assurance that our common stock will continue to trade on the OTCQX Marketplace, whether broker-dealers will continue to provide public quotes of our common stock on that market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue to be provided on that market in the future.

The COVID-19 pandemic continues to adversely affect our business, and the ultimate effect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

~~The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and the economic environments in which they operate.~~ ~~A number of jurisdictions in which we operate have implemented severe restrictions on the movement of their respective populations.~~ As a result, there has been a significant reduction in demand for, and prices of, crude oil, which has directly affected our business. If the reduced demand for and price of crude oil continues for a prolonged period, our business, financial condition, results of operation and liquidity may be further materially and adversely affected. Our operations also may be further adversely affected if significant portions of our workforce continue to be unable to work effectively due to illness, quarantines, government actions or other restrictions in connection with the COVID-19 pandemic.

Management expects industry activity levels and spending by customers to remain depressed at least throughout the remainder of 2020 and into 2021 as demand destruction from the COVID-19 pandemic continues. We believe that the well-known impacts described above and other potential impacts include, but are not limited to, the following:

~~Disruption to our supply chain for materials essential to our business, including restrictions on importing and exporting products;~~
‎

~~Customers may attempt to cancel of delay projects or may attempt to invoke force majeure clauses in certain contracts resulting in a decreased on delayed demand for our products and services;~~

~~Customers may also seek to delay payments, may default on payment obligations and/or seek bankruptcy protection that could delay or prevent collections of certain accounts receivable;~~

~~A need to preserve liquidity and volatility in the financial markets;~~

~~Reduction of our global workforce to adjust to market conditions, including severance payments, retention issues, and an inability to hire employees when market conditions improve;~~

~~Liabilities resulting from operational delays due to decreased productivity resulting from stay-at-home orders affecting the work force or facility closures resulting from the COVID-19 pandemic;~~

~~Liabilities resulting from an inability to perform services due to limited manpower availability or an inability to travel to perform the services;~~

~~Other contractual or other legal claims from our customers resulting from the COVID-19 pandemic; and~~

~~Infections and quarantining of our employees and the personnel of our customers, suppliers and other third parties.~~

At this time, it is not possible to quantify these risks, but the combination of these factors could have a further material impact on our financial results. The ultimate extent to which the COVID-19 pandemic adversely affects our business, financial condition, results of operation and liquidity will depend on future developments, which are highly uncertain and cannot be predicted. These future developments include, but are not limited to, the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. Disruptions and/or uncertainties related to the COVID-19 pandemic for a sustained period of time will result in, and have resulted to date in, delays or modifications to our strategic plans and initiatives and will hinder our ability to achieve our strategic goals. The COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the COVID-19 pandemic, will likely have the effect of heightening many of the other risks described in the “Risk Factors” section included in the Annual Report, as those risk factors are amended or supplemented by subsequent Quarterly Reports on Form 10-Q and other reports and documents filed with the SEC.

~~Potential changes to Bureau of Ocean Energy Management security and bonding requirements could impact our operating cash flows and results of operations.~~

Federal oil and natural gas leases contain standard terms and require compliance with detailed Bureau of Safety and Environmental Enforcement (BSEE) and BOEM regulations and orders issued pursuant to various federal laws, including the Outer Continental Shelf Lands Act. In 2016 BOEM undertook a review of its historical policies and procedures for determining a lessee’s ability to decommission platforms on the Outer Continental Shelf (OCS) and whether lessees should furnish additional security, and in July 2016, BOEM issued a new Notice to Lessees requiring additional security for decommissioning activities. In January 2017, BOEM extended the implementation timeline for properties with co-lessees by an additional six months, and in June 2017 announced that the Notice to Lessees would be stayed while BOEM continued to review its implementation issues and continued industry engagement to gather additional information on the financial assurance program.

During the second half of 2016, BSEE increased its estimates of many offshore operator’s decommissioning costs, including the decommissioning costs at our sole federal offshore oil and gas property, in which our subsidiary owns a 51% non-operating interest. In October 2016, BOEM sent an initial proposal letter to the operator of the oil and gas property, proposing an increase in the supplemental bonding requirement for the property’s sole fixed platform that was eight to ten times higher than the revised supplemental bonding requirement requested for any other deep-water fixed platform in the U.S. Gulf of Mexico. Both the operator and our subsidiary submitted formal dispute notices, asserting that the estimates in the October 2016 proposal letter may be based on erroneous or arbitrary estimates of the potential decommissioning costs, and requesting in-person meetings to discuss the estimate. We asked that BSEE and BOEM reduce the estimate to an amount that more closely approximates actual decommissioning costs, consistent with estimates identified by BSEE and BOEM for similar deep-water platforms. BSEE and BOEM have not yet responded to our dispute notice.

On September 17, 2020, BOEM issued a proposed rule addressing OCS oil and gas decommissioning costs (BOEM-2018-0033). The proposed rule contains updated criteria for determining decommissioning costs. Under the proposed rule, BOEM would only require additional security when (1) a lessee or grant holder poses a substantial risk of becoming financially unable to meet its obligations; (2) there is no co-lessee, co-grant holder or predecessor that is liable for those obligations with sufficient financial capacity; and (3) the property is at or near the end of its productive life. BSEE would typically issue orders to predecessors in title in a reverse chronological order. The proposed rule would also require that a party appealing any final decommissioning decision or order provide a surety bond to ensure that funding for decommissioning is available if the order is affirmed and the liable party then defaults. The comment period for the proposed rule is expected to close on December 15, 2020. Based on the proposed framework, BOEM estimates its amount of financial assurance would decrease from $3.3 billion to $3.1 billion, although BOEM expects the rule would provide greater protection as the financial assurance would be focused on the riskiest properties.

We cannot predict when these laws and regulations may be adopted or change in the future, particularly in connection with a potential transition of presidential administrations. If BOEM ultimately issues a formal order and we are unable to obtain the additional required bonds or assurances, BOEM may suspend or cancel operations at the oil and gas property or otherwise impose monetary penalties. Any of these actions could have a material adverse effect on our financial condition, operating cash flows and liquidity.

Moreover, under existing BOEM and BSEE rules relating to assignment of offshore leases and other legal interests on the OCS, assignors of such interests may be held jointly and severally liable for decommissioning of OCS facilities existing at the time the assignment was approved by BOEM, in the event that the assignee or any subsequent assignee is unable or unwilling to conduct required decommissioning.

From 2003 until 2008 we were engaged through a wholly-owned subsidiary in the acquisition of mature shelf oil and gas properties, and we provided parent guarantees for this subsidiary’s acquisitions. While we have sold our equity interest in the subsidiary, our parent guarantees could expose us to material costs for decommissioning liabilities in the event subsequent lessors fail to meet their decommissioning obligations and liability is imposed on the predecessor in title for which we provided a parent guarantee. Such payments could be significant and adversely affect our business, results of operations, financial condition and cash flows.

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

~~None.~~On June 1, 2021, the Board and the Compensation Committee approved the issuance (without giving effect to tax withholding) of 113,840 restricted shares of Class B common stock (or 76,269 shares of Class B common stock after giving effect to tax withholding) under the Company’s Management Incentive Plan to certain of the Company’s non-employee directors and officers (the “Restricted Stock Grants”). The Restricted Stock Grants will vest over a period of three years, subject to earlier vesting and forfeiture on terms and conditions set forth in the applicable award agreement. The issuance of the restricted Class B common stock is exempt from registration under the Securities Act of 1933, as amended, pursuant to section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

~~Item 3~~
‎~~. Defaults Upon Senior Securities~~

Our proposed Bankruptcy Filing described above would constitute an event of default that accelerate our obligations under our senior credit facility and our unsecured notes. Under the Bankruptcy Code, if we make the Bankruptcy Filing, the creditors under these debt agreements will be stayed from taking any action against us as a result of an event of default after such filing. See Note 1 to the unaudited condensed consolidated financial statements included in Part I, Item 1 “Financial Statements – Note 1 – Basis of Presentation” for additional details about our anticipated Bankruptcy Filing and the Chapter 11 Cases.

~~Item 4. Mine Safety Disclosur~~es

~~Not applicable.~~

~~Item 5. Other Information~~

~~None.~~

3948

Item 6. Exhibits

~~(a) The following exhibits are filed with this Form 10-Q:~~

2.1
First Amended Joint Prepackaged Plan of Reorganization for Superior Energy Services, Inc. and its Affiliate Debtors Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed on January 20, 2021 (File No. 001-34037))	~~Description~~
~~2.1~~2.2	Agreement and Plan of Merger, dated as of ~~December 18, 2019,~~February 2, 2021, by and among Superior Energy Services, Inc., ~~New NAM, Inc., Forbes Energy Services Ltd. Spieth Newco, Inc., Spieth Merger Sub,~~Superior BottomCo Inc. and ~~Fowler Merger Sub,~~Superior NewCo, Inc. (incorporated ~~herein~~ by reference to Exhibit ~~2.1 to Superior Energy Services, Inc.’s~~10.2 of the Company’s Current Report on Form 8-K, filed ~~December 18, 2019~~on February 3, 2021 (File No. 001-34037)).
~~2.2~~3.1	~~Amendment No. 1 to Agreement~~Amended and Plan of Merger, dated as of February 20, 2020, by and among Superior Energy Services, Inc., New NAM, Inc., Forbes Energy Services Ltd. Spieth Newco, Inc., Spieth Merger Sub, Inc. and Fowler Merger Sub, Inc. (incorporated herein by reference to Exhibit 2.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed February 26, 2020 (File No. 001-34037)).
~~3.1~~	Restated Certificate of Incorporation ~~of Superior Energy Services, Inc.~~ (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Quarterly Report on Form 10-Q filed August 7, 2013 (File No. 001-34037)), as amended by Certificate of Amendment of the Restated Certificate of Incorporation of Superior Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed ~~December 18, 2019 (File~~on February 3, 2021(File No. 001-34037)).
3.2	Amended and Restated Bylaws ~~of Superior Energy Services, Inc. (as amended through March 7, 2012)~~ (incorporated ~~herein~~ by reference to Exhibit ~~3.1~~3.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed ~~March 12, 2012 (File~~on February 3, 2021(File No. 001-34037)).
~~4.1~~3.3	~~Supplemental Indenture, dated as~~Certificate of ~~June 3, 2020, by~~Amendment of Amended and ~~among SESI, L.L.C., the guarantors named therein and The Bank~~Restated Certificate of ~~New York Mellon Trust Company, as trustee~~Incorporation (incorporated ~~herein~~ by reference to Exhibit ~~4.1~~3.3 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed ~~June 4, 2020 (File~~on February 3, 2021(File No. 001-34037)).
10.1^	~~Fourth Amendment to Fifth Amended and Restated Credit~~Transition Agreement, dated ~~August 5, 2020, among~~as of April 21, 2021, between William B. Masters and Superior Energy Services, Inc., (incorporated by reference to Exhibit 10.6 of the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021 (File No. 001-34037))
10.2	First Amendment and Waiver to the Credit Agreement dated, as of May 13, 2021, by and among SESI, L.L.C., SESI Holdings, Inc., the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., ~~each issuing~~as administrative agent and lender, and certain other financial institutions and other parties thereto as lenders (incorporated by reference to Exhibit 10.1 of the ~~lenders~~Company’s Current Report on Form 8-K filed on May 18, 2021 (File No. 001-34037))
10.3	Waiver to Credit Agreement, dated as of May 28, 2021, by and among SESI, L.L.C., SESI Holdings, Inc., the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent and lender, and certain other financial institutions and other parties thereto as lenders (incorporated ~~herein~~by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on June 4, 2021 (File No. 001-34037))
10.4^	2021 Management Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on June 4, 2021 (File No. 001-34037))
10.5^	Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on June 4, 2021 (File No. 001-34037))
10.6^	Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on June 4, 2021 (File No. 001-34037))
10.7	First Amendment to the Stockholders Agreement, dated as of February 2, 2021, by and among Superior Energy Services, Inc. and the stockholders party thereto (incorporated by reference to Exhibit 10.1 to Superior Energy Services, Inc.’s's Current Report on Form 8-K filed ~~August 6, 2020~~on June 14, 2021 (File No. 001-34037)).
~~10.2~~10.8	~~Restructuring Support~~Second Amendment to the Stockholders Agreement, dated ~~September 29, 2020,~~as of May 31, 2021, by and among Superior Energy Services, Inc. and the stockholders party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on June 14, 2021 (File No. 001-34037))
10.9	Waiver to Credit Agreement, dated as of July 15, 2021, by and among SESI, L.L.C., SESI Holdings, Inc., the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent and lender, and certain ~~direct~~other financial institutions and ~~indirect wholly-owned domestic subsidiaries~~other parties thereto as lenders (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on July 21, 2021 (File No. 001-34037))
10.10	Third Amendment to the Stockholders Agreement, dated as of July 14, 2021, by and among Superior Energy Services, Inc. and the ~~noteholders~~stockholders party ~~thereto.~~thereto (incorporated ~~herein~~by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on July 21, 2021 (File No. 001-34037))
10.11^	Transition and Retirement Agreement between A. Patrick Bernard and Superior Energy Services, Inc., dated September 9, 2021 (incorporated by reference to Exhibit 10.1 to Superior Energy Services, Inc.~~’s Current Report on~~'s Form 8-K filed on September ~~30, 2020~~13, 2021 (File No. 001-34037)).
~~10.3~~	Delayed-Draw Term Loan Commitment Letter (incorporated herein by reference to Exhibit 10.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed September 30, 2020 (File No. 001-34037)).
~~10.4~~	~~Form of Award Agreement (incorporated herein by reference to Exhibit 10.3 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed September 30, 2020 (File No. 001-34037)).~~
~~10.5~~	Second Amendment to Restructuring Support Agreement, dated October 22, 2020, by and among Superior Energy Services, Inc., certain direct and indirect wholly-owned domestic subsidiaries of Superior Energy Services, Inc. and the noteholders party thereto (incorporated herein by reference to Exhibit 10.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed October 28, 2020 (File No. 001-34037)).
31.1*	Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002
32.2*	Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002


101.INS*	XBRL Instance 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*	The cover page of this Quarterly report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (contained in Exhibit 101)

*Filed herewith

^Management contract or compensatory plan or arrangement

‎

4049

~~SIGNATURE~~SIGNATURES

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

SUPERIOR ENERGY SERVICES, INC.

(Registrant)



Date:	October 29, 2021	By:	/s/ ~~Westervelt T. Ballard, Jr.~~Michael Y. McGovern
			~~Westervelt T. Ballard, Jr.~~Michael Y. McGovern
			Principal Executive ~~Vice President, Chief Financial~~ Officer ~~and Treasurer~~
			(Duly Authorized Officer)


		By:	/s/ James W. Spexarth
			James W. Spexarth Chief Financial Officer
			~~Chief Accounting Officer~~(Principal Financial Officer)

~~Date:~~	~~November 6, 2020~~

4150


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Nine Months Ended September 30, 2019
(in thousands, except share data)
(unaudited)

						Accumulated
	Common			Additional		other
	stock	Common		paid-in		comprehensive		Accumulated
	shares	stock		capital		loss, net		deficit		Total
Balances, December 31, 2018	15,488,542	$	155	$	2,735,125	$	(73,177)	$	(2,371,364)	$	290,739
Net loss	-		-		-		-		(47,705)		(47,705)
Foreign currency translation adjustment	-		-		-		1,073		-		1,073
Stock-based compensation expense,
net of forfeitures	-		-		5,625		-		-		5,625
Transactions under stock plans	107,118		1		(1,667)		-		-		(1,666)
Balances, March 31, 2019	15,595,660	$	156	$	2,739,083	$	(72,104)	$	(2,419,069)	$	248,066

Net loss	-		-		-		-		(71,050)		(71,050)
Foreign currency translation adjustment	-		-		-		(1,916)		-		(1,916)
Stock-based compensation expense,
net of forfeitures	-		-		4,650		-		-		4,650
Transactions under stock plans	11,637		-		(10)		-		-		(10)
Shares issued under Employee Stock Purchase Plan	50,019		1		650		-		-		651
Balances, June 30, 2019	15,657,316	$	157	$	2,744,373	$	(74,020)	$	(2,490,119)	$	180,391

Net loss	-		-		-		-		(38,441)		(38,441)
Foreign currency translation adjustment	-		-		-		(2,967)		-		(2,967)
Stock-based compensation expense,
net of forfeitures	-		-		4,104		-		-		4,104
Transactions under stock plans	41		-		-		-		-		-
Balances, September 30, 2019	15,657,357	$	157	$	2,748,477	$	(76,987)	$	(2,528,560)	$	143,087


See accompanying notes to condensed consolidated financial statements.



	Nine Months Ended September 30,
	Impairment		Fair Value
Property, plant and equipment, net	$	19,451	$	13,593



OBLIGOR GROUP
Summarized Balance Sheets Information
(in thousands)

	September 30, 2020		December 31, 2019
Current assets	$	422,138	$	789,562
Noncurrent assets		1,086,516		1,134,238
Total assets	$	1,508,654	$	1,923,800

Current liabilities	$	176,423	$	261,743
Noncurrent liabilities		2,027,477		2,039,138
Total liabilities	$	2,203,900	$	2,300,881



OBLIGOR GROUP
Summarized Statements of Operations Information
(in thousands)

	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Total revenues	$	507,636	$	1,126,456
Cost of revenues		343,561		723,451

Loss from operations before income taxes		(179,335)		(92,731)
Income taxes		(13,404)		6,102
Net loss from continuing operations		(165,931)		(98,833)
Loss from discontinued operations, net of tax		(111,375)		(177,968)
Net loss attributable to the obligor group	$	(277,306)	$	(276,801)



	Revenue							Cost of Revenues
	2020		2019		Change		%	2020		%	2019		%	Change
Drilling Products and
Services	$	56,001	$	111,185	$	(55,184)	-50%	$	23,714	42%	$	38,663	35%	$	(14,949)
Onshore Completion and
Workover Services		21,559		75,973		(54,414)	-72%		21,943	102%		61,338	81%		(39,395)
Production Services		56,355		98,787		(42,432)	-43%		46,115	82%		82,556	84%		(36,441)
Technical Solutions		33,013		70,640		(37,627)	-53%		24,461	74%		49,370	70%		(24,909)
Total	$	166,928	$	356,585	$	(189,657)	-53%	$	116,233	70%	$	231,927	65%	$	(115,694)


	Revenue							Cost of Revenue
	2020		2019		Change		%	2020		%	2019		%	Change

Drilling Products and
Services	$	227,344	$	312,946	$	(85,602)	-27%	$	81,163	36%	$	118,732	38%	$	(37,569)
Onshore Completion and
Workover Services		103,957		273,727		(169,770)	-62%		98,774	95%		217,115	79%		(118,341)
Production Services		212,352		305,239		(92,887)	-30%		177,624	84%		240,855	79%		(63,231)
Technical Solutions		128,625		197,385		(68,760)	-35%		99,161	77%		124,810	63%		(25,649)
Total	$	672,278	$	1,089,297	$	(417,019)	-38%	$	456,722	68%	$	701,512	64%	$	(244,790)