UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




	FORM 10-Q

(Mark One)

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

For the quarterly period ended~~September~~ June 30, ~~2021~~2022

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

For the Transition Period from to

Commission File 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)		(I.R.S. Employer Identification No.)

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

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

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



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

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

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

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


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

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

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

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

The number of shares of the registrant’s Class A common stock outstanding on ~~November 30, 2021~~July 31, 2022 was 19,998,695.

The number of shares of the registrant’s Class B common stock outstanding on ~~November 30, 2021~~July 31, 2022 was 76,269.

TABLE OF CONTENTS




		Page
	Information Regarding Forward-Looking Statements		3
		~~Page~~
PART I.	FINANCIAL INFORMATION

Item 1.	~~Unaudited Condensed Consolidated~~ Financial Statements ~~and Notes~~	3
	Unaudited Condensed Consolidated Balance Sheets	34
	Unaudited Condensed Consolidated Statements of Operations	45
	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
	Unaudited Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4024
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	4929
Item 4.	Controls and Procedures	5030

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	5131
Item 1A.	Risk Factors	5131
Item 2.	Unregistered Sales of ~~Unregistered~~ Equity Securities and Use of Proceeds	5131
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	5232

SIGNATURES		5333

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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

•

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

•

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

•

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

•

the conditions in the oil and gas industry;

•

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

•

the effects of public health threats, pandemics and epidemics, and the adverse impact thereof on our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand and industry demand generally, margins, utilization, cash position, taxes, the price of our securities, and our ability to access capital markets, including the macroeconomic effects from the continuing COVID-19 pandemic;

•

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

•

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

•

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

•

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

•

credit risk associated with our customer base;

•

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

•

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

•

the potential inability to retain key employees and skilled workers;

•

political, legal, economic and other uncertainties associated with our international operations could materially restrict our operations or expose us to additional risks;

•

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

•

changes in competitive and technological factors affecting our operations;

•

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

•

risks to our operations from potential cyber-attacks;

•

counterparty risks associated with reliance on key suppliers;

•

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

•

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

•

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

•

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

•

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

These risks and other uncertainties related to our business are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2021. We undertake no obligation to update any of our forward-looking statements in this discussion. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements and Notes

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

Successor

Predecessor

ASSETS

September 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$
258,024

$
188,006

Accounts receivable, net of allowance for doubtful accounts of $585 and $24,629
  at September 30, 2021 and December 31, 2020, respectively

174,065

158,516

Income taxes receivable

0

8,891

Prepaid expenses

26,881

31,793

Inventory

71,684

77,027

Other current assets

6,946

9,171

Investment in equity securities

18,684

0

Assets held for sale

87,922

242,104

Total current assets

644,206

715,508

Property, plant and equipment, net

403,473

408,107

Operating lease right-of-use assets

28,871

33,317

Goodwill

0

138,677

Notes receivable

75,564

72,129

Restricted cash

79,560

80,178

Intangible and other long-term assets, net

24,109

53,163

Total assets

$
1,255,783

$
1,501,079

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$
56,500

$
50,330

Accrued expenses

109,054

114,777

Liabilities held for sale

23,241

46,376

Total current liabilities

188,795

211,483

Decommissioning liabilities

173,132

134,436

Operating lease liabilities

20,608

29,464

Deferred income taxes

32,396

5,288

Other long-term liabilities

70,355

123,261

Total non-current liabilities

296,491

292,449

Liabilities Subject to Compromise

0

1,335,794

Total liabilities

485,286

1,839,726

Stockholders’ equity (deficit):

Predecessor common stock $0.001 par value; Authorized - 25,000,000;
   15,799,318 shares issued and 14,826,906 shares outstanding at December 31, 2020

0

16

Successor Class A common stock $0.01 par value; Authorized - 50,000,000 shares;
   19,998,695 shares issued and outstanding at September 30, 2021

200

0

Successor Class B common stock $0.01 par value; Authorized - 2,000,000 shares;
   113,840 shares issued and 76,269 shares outstanding at September 30, 2021

1

0

Class A Additional paid-in capital

902,486

2,756,889

Class B Additional paid-in capital

640

0

Predecessor Treasury stock at cost, 972,412 shares at December 31, 2020

0

(4,290
)
Accumulated other comprehensive loss, net

0

(67,947
)
Accumulated deficit

(132,830
)

(3,023,315
)
Total stockholders’ equity (deficit)

770,497

(338,647
)
Total liabilities and stockholders’ equity (deficit)

$
1,255,783

$
1,501,079


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

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

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

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

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Revenues:

Services

$
85,667

$
67,213

Rentals

59,420

41,351

Product sales

33,496

27,412

Total revenues

178,583

135,976

Costs and expenses:

Cost of services

70,591

53,467

Cost of rentals

26,011

21,743

Cost of sales

28,371

11,864

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

124,973

87,074

Depreciation, depletion, amortization and accretion - services

28,426

13,670

Depreciation, depletion, amortization and accretion - rentals

19,717

8,814

Depreciation, depletion, amortization and accretion - sales

11,065

5,679

General and administrative expenses

33,671

51,440

Restructuring and other expense

4,712

25,746

Reduction in value of assets

0

2,929

Loss from operations

(43,981
)

(59,376
)
Other income (expense):

Interest income (expense), net

647

(24,800
)
Other expense

(6,224
)

(1,399
)
Loss from continuing operations before income taxes

(49,558
)

(85,575
)
Income tax benefit (expense)

9,518

(1,815
)
Net loss from continuing operations

(40,040
)

(87,390
)
Loss from discontinued operations, net of income tax

(5,161
)

(69,914
)
Net loss

$
(45,201
)

$
(157,304
)

Loss per share -basic and diluted

Loss from continuing operations

$
(2.00
)

$
(5.89
)
Loss from discontinued operations, net of income tax

(0.26
)

(4.72
)
Net loss

$
(2.26
)

$
(10.61
)

Weighted-average shares outstanding - basic and diluted

19,999

14,827


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

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

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

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

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

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

~~(unaudited)~~

(unaudited)

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Revenues:

Services

$
209,133

$
19,234

$
230,935

Rentals

143,972

14,434

182,436

Product sales

97,213

12,260

108,426

Total revenues

450,318

45,928

521,797

Costs and expenses:

Cost of services

166,069

15,080

176,334

Cost of rentals

60,960

5,876

71,977

Cost of sales

69,391

8,817

69,702

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

296,420

29,773

318,013

Depreciation, depletion, amortization and accretion - services

73,174

3,500

39,501

Depreciation, depletion, amortization and accretion - rentals

50,558

2,627

31,080

Depreciation, depletion, amortization and accretion - sales

34,524

2,231

18,471

General and administrative expenses

84,417

11,052

164,957

Restructuring and other expenses

20,533

1,270

27,033

Reduction in value of assets

0

0

19,451

Loss from operations

(109,308
)

(4,525
)

(96,709
)
Other income (expense):

Interest income (expense), net

1,394

202

(74,698
)
Reorganization items, net

0

335,560

0

Other expense

(6,499
)

(2,105
)

(4,810
)
Income (loss) from continuing operations before income taxes

(114,413
)

329,132

(176,217
)
Income tax (expense) benefit

15,550

(60,003
)

12,345

Net income (loss) from continuing operations

(98,863
)

269,129

(163,872
)
Loss from discontinued operations, net of income tax

(33,967
)

(352
)

(138,002
)
Net income (loss)

$
(132,830
)

$
268,777

$
(301,874
)

Income (loss) per share -basic

Net income (loss) from continuing operations

$
(4.94
)

$
18.13

$
(11.08
)
Loss from discontinued operations, net of income tax

(1.70
)

(0.02
)

(9.32
)
Net income (loss)

$
(6.64
)

$
18.11

$
(20.40
)

Income (loss) per share - diluted:

Net income (loss) from continuing operations

$
(4.94
)

$
18.06

$
(11.08
)
Loss from discontinued operations, net of income tax

(1.70
)

(0.03
)

(9.32
)
Net income (loss)

$
(6.64
)

$
18.03

$
(20.40
)

Weighted-average shares outstanding - basic

19,997

14,845

14,795

Weighted-average shares outstanding - diluted

19,997

14,905

14,795


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

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

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

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

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

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Net loss

$
(45,201
)

$
(157,304
)
Change in cumulative translation adjustment, net of tax

0

4,216

Comprehensive loss

$
(45,201
)

$
(153,088
)


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


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

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Net income (loss)

$
(132,830
)

$
268,777

$
(301,874
)
Change in cumulative translation adjustment, net of tax

0

67,947

(607
)
Comprehensive income (loss)

$
(132,830
)

$
336,724

$
(302,481
)

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

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

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

(in thousands)

(unaudited)


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

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


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


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

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Successor						Predecessor
	For the Six Months Ended June 30, 2022			For the Period February 3, 2021 through June 30, 2021			For the Period January 1, 2021 through February 2, 2021
Cash flows from operating activities:
Net income (loss)	$	67,344		$	(87,629	)	$	268,777
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation, depletion, amortization and accretion		57,431			130,404			10,499
Deferred income taxes		1,687			(16,295	)		54,322
Amortization of credit facility costs		254			0			0
Stock based compensation expense		1,543			1,570			935
Reorganization items, net		0			0			(354,279	)
Bad debt		(920	)		(5,433	)		(210	)
Gain on sale of assets and businesses		0			0			58
Gain on sale of equity securities		(3,611	)		0			0
Unrealized gain on investment in equity securities		(544	)		0			0
Other (gains) and losses, net		(23,296	)		7,883			0
Other reconciling items, net		2,529			(1,886	)		1,017
Changes in operating assets and liabilities:
Accounts receivable		(26,362	)		(12,518	)		3,602
Prepaid expenses		(2,652	)		(2,910	)		(340	)
Inventory and other current assets		(5,358	)		7,314			(221	)
Accounts payable		(1,986	)		9,619			(2,365	)
Accrued expenses		144			(25,604	)		23,489
Income taxes		2,185			13,805			340
Other, net		(144	)		(5,817	)		(241	)
Net cash from operating activities		68,244			12,503			5,383
Cash flows from investing activities:
Payments for capital expenditures		(20,514	)		(10,995	)		(3,035	)
Proceeds from sales of assets		15,183			16,200			775
Proceeds from sales of equity securities		13,366			0			0
Net cash from investing activities		8,035			5,205			(2,260	)
Cash flows from financing activities:
Credit facility costs		0			(14	)		(1,920	)
Tax withholdings for vested restricted stock units		0			(1,485	)		0
Net cash from financing activities		0			(1,499	)		(1,920	)
Effect of exchange rate changes on cash		0			0			311
Net change in cash, cash equivalents, and restricted cash		76,279			16,209			1,514
Cash, cash equivalents, and restricted cash at beginning of period		394,535			269,698			268,184
Cash, cash equivalents, and restricted cash at end of period	$	470,814		$	285,907		$	269,698

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Cash flows from operating activities:

Net income (loss)

$
(132,830
)

$
268,777

$
(301,874
)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion

189,758

10,499

113,313

Deferred income taxes

(27,126
)

54,322

352

Reduction in value of assets

-

-

19,451

Reduction in value of assets held for sale

26,905

-

109,591

Right-of-use assets amortization

6,145

1,372

14,738

Stock based compensation expense

2,126

935

6,074

Reorganization items, net

-

(354,279
)

-

Bad debt

(5,303
)

(210
)

-

Gain on sale of assets and businesses

(16,304
)

58

-

Unrealized loss on investment in equity securities

1,620

-

-

Other reconciling items, net

3,447

(355
)

(3,537
)
Changes in operating assets and liabilities:

Accounts receivable

(15,233
)

3,602

126,439

Prepaid expenses

4,749

(340
)

352

Inventory and other current assets

15,983

(221
)

15,380

Accounts payable

4,842

(2,365
)

(35,828
)
Accrued expenses

(31,439
)

23,489

(26,409
)
Income taxes

10,676

340

(3,114
)
Operating lease liabilities and other, net

(1,190
)

(241
)

(16,331
)
Net cash from operating activities

36,826

5,383

18,597

Cash flows from investing activities:

Payments for capital expenditures

(25,447
)

(3,035
)

(37,408
)
Proceeds from sales of assets

58,006

775

44,097

Net cash from investing activities

32,559

(2,260
)

6,689

Cash flows from financing activities:

Credit facility costs

(14
)

(1,920
)

-

Tax withholdings for vested restricted stock units

(1,485
)

-

(208
)
Delayed draw term loan commitment fee

-

-

(11,700
)
Other

-

-

(432
)
Net cash from financing activities

(1,499
)

(1,920
)

(12,340
)
Effect of exchange rate changes on cash

-

311

(378
)
Net change in cash, cash equivalents, and restricted cash

67,886

1,514

12,568

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

$
337,584

$
269,698

$
287,956

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

~~SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES~~statements

~~Consolidated Statements of Changes in Stockholders’ Equity (Deficit)~~9

~~(in thousands, except share data)~~

~~(unaudited)~~

Accumulated

Common Stock

Additional

other

Class A

Class B

Treasury

paid-in capital

comprehensive

Accumulated

Shares

Amount

Shares

Amount

stock

Class A

Class B

loss, net

deficit

Total

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
)
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
)
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 (Predecessor)

15,799,318

$
16

$
-

$
-

$
(4,290
)

$
2,756,031

$
-

$
(72,534
)

$
(2,928,959
)

$
(249,736
)

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

Net loss

-

-

-

-

-

-

-

-

(45,201
)

(45,201
)
Stock-based compensation expense, net of forfeitures

-

-

-

-

-

-

556

-

-

556

Balances, September 30, 2021 (Successor)

19,998,695

$
200

$
76,269

$
1

$
-

$
902,486

$
640

$
-

$
(132,830
)

$
770,497

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

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Basis of Presentation

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

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

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in ~~Superior Energy Services, Inc.’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2020 (the "Annual Report").~~2021. As described below, as a result of the application of fresh start accounting and the effects of the implementation of ~~our~~the Plan (as defined below), the financial statements after the Emergence Date are not comparable with the consolidated financial statements on or before that date. ~~Refer to Note 3 –~~ ~~“Fresh Start Accounting”~~ ~~below for additional information.~~

In ~~our~~the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary for a fair statement of our financial position as of ~~September~~June 30, ~~2021,~~2022, and our results of operations and cash flows for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, and cash flows for the periods January 1, 2021 through February 2, 2021 and February 3, 2021 through September 30, 2021 and nine months ended September 30, 2020.~~2021. The ~~condensed~~ balance sheet atas of December 31, ~~2020,~~2021, was derived from our audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. ~~See~~ ~~“Changes in Accounting Policies”~~ below for further information. The year-end condensed consolidated balance sheet for the Predecessor (as defined below) was derived from audited financial statements but does not include all disclosures required by GAAP.

Emergence from Voluntary Reorganization under Chapter 11

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~~On December 7, 2020, certain of our direct and indirect wholly-owned domestic subsidiaries (the ~~“Petition Date”~~“Affiliate Debtors”) ~~and the Emergence Date, we operated as a debtor-in-possession~~filed petitions for reorganization under the ~~supervision~~provisions of ~~the United States Bankruptcy Court for the Southern District of Texas Houston Division (the “Bankruptcy Court”). 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, July 1, 2020 - September 30, 2020~~
~~"Prior Predecessor Period"~~		~~The Company's operations January 1, 2020 - September 30, 2020~~
~~"Successor"~~		~~The Company, after the Emergence Date~~
~~"Successor Quarter"~~		~~The Company's operations, July 1, 2021 - September 30, 2021~~
~~"Successor Period"~~		~~The Company's operations, February 3, 2021 - September 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 Bankruptcy Code

On December 4, 2020, the Former Parent and certain of its direct and indirect wholly-owned domestic subsidiaries (together with the 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 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 for relief (the “Chapter 11 Cases”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the 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,~~February 2, 2021 ~~the Bankruptcy Court entered an order, Docket No. 289, confirming and approving the Plan. On the Emergence Date,~~(the “Emergence Date”), the conditions to the 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 accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. The application of fresh start accounting resulted in a new basis of accounting and we became a new entity for financial reporting purposes. As a result of the implementation of the Plan and the application of fresh start accounting, ~~these unaudited condensed consolidated financial statements after the Emergence Date are not comparable to the consolidated financial statements before that date and the~~our 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 the ongoing operations of the 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. 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 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 disposition activities, during the second quarter of 2021, we changed our reportable segments 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's Annual Report 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 September 30, 2021 primarily represents cash of $76.9~~ ~~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 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 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.

~~Executory Contracts~~

Subject to certain exceptions, under the Bankruptcy Code, the Affiliate Debtors 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 from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. 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.

~~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. The Affiliate Debtors’ have received proofs of claim, primarily representing general unsecured claims, of approximately $~~1.7~~ ~~billion. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. 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 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 the 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.~~

~~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 and pursuant to the 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);



~~General unsecured creditors for the Affiliate Debtors remained unimpaired and 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 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 interests and common stock of the Affiliate Debtors were cancelled and 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 Plan, we filed an amended and restated certificate of incorporation (the “Certificate of Incorporation”) and a certificate of amendment of the amended and 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.~~

~~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 Emergence Date (in thousands):~~

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 Successor using various valuation methods, including (i) discounted cash flow analysis (“DCF”), (ii) comparable company analysis and (iii) precedent transaction analysis. The use of each approach provides corroboration for the 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 flows were then discounted to an assumed present value using our estimated weighted-average cost of capital, which is represented by our IRR.

The comparable company analysis provides an estimate of our value relative to other publicly traded companies with similar operating and financial characteristics, by which a range of EBITDA multiples of the 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 implied EBITDA multiple of those transactions, based on sales prices, which was then applied to management’s projected EBITDA.

The 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 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 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.

~~Valuation Process~~

The reorganization value was allocated to the Successor’s reporting segments using the discounted cash flow approach. The reorganization value was then allocated to the Successor’s identifiable assets and liabilities using the fair value principle as contemplated in ASC 820. The specific approach, or approaches, used to allocate reorganization value by asset class are noted below.

~~Inventory~~

The fair value of the 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 raw materials and spare parts inventory were determined using the cost approach. Fair value of finished goods and 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 sell or dispose of the 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 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 real property locations were estimated using the sales comparison (market) approach and 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.

~~Tangible Assets Excluding Real Property and Oil and Gas Assets~~

The fair values of our tangible assets were calculated using either the 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 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 assets.

~~Oil and Gas Assets~~

~~The oil and gas assets were valued using estimates of the reserve volumes and associated income data based on escalated price and cost parameters.~~

~~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 and gas assets were valued using the income approach. Estimates were used for future retirement costs and the expected time to retirement, then adjusted for an estimated inflation rate over the time period prior to retirement and discounted future cash outflows by a credit adjusted risk-free rate of ~~5.6~~%. As such, the Successor changed its presentation to consolidate the fair value of the Predecessor’s decommissioning liabilities previously recorded to other long-term liabilities into the Successor’s decommissioning liabilities.

~~Internally-Developed Software~~

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.

~~Intangible Assets~~

Intangible assets were identified apart from goodwill using the 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 cost or income approaches. The principal intangible assets identified were trademarks and patents. Trademarks and patents were valued using the relief from royalty method in which the subject intangible asset is valued by reference to the amount of royalty income it could generate if it was licensed in an arm’s length transaction to a third party.

~~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

Reorganization

Fresh Start

Predecessor

Adjustments

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

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

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

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 from the Chapter 11 Cases 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 lease 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~~ ~~million in proceeds used to settle $952~~ ~~million 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~~ ~~million 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 which decreased the value of 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)~~

~~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.~~

~~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

~~(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 zero 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~~

~~Transformation Project~~

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 Transformation 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.

The evaluation and implementation of the Business Unit Reviews is substantially complete which has resulted in lower revenue with increased margins. The Right Sizing Support and Geographic Focus components of the Transformation Project are in the early stages and should be completed over the next several months.

~~In connection with this initiative we incurred costs of $4.7~~ ~~million and $20.5~~ ~~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, during the Successor Quarter, we have incurred shut down costs of $~~8.9~~ ~~million at certain locations in our Well Services segment. These shut down costs include the write-down of inventory of $6.5~~ ~~million which is reflected in cost of sales and the severance of personnel and other shut down costs of $2.4~~ ~~million which is primarily reflected in cost of services.~~

~~Subsequent to September 30, 2021, we have continued to dispose of certain non-core assets with proceeds from the sales of these assets totaling approximately $22.8~~ ~~million through November 30, 2021.~~

~~(4)~~(2) Revenue

~~Revenue Recognition~~

Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration 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 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 2014-09 -~~ ~~Revenue from Contracts with Customers (Topic 606)~~. 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 selling prices are determined based on prices we charge for services rendered, rentals provided, and products sold. The majority of our performance obligations are satisfied over time, which is generally represented by a period of ~~30 days~~ ~~or less. 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 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 our customers that include fixed or determinable prices but do not include right of return provisions or other significant post-delivery obligations. 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.

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

Disaggregation of Revenue

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


	Successor		Predecessor		For the Three Months Ended June 30,
	For the Three Months Ended September 30, 2021		For the Three Months Ended September 30, 2020		2022		2021
U.S. land
Rentals	$	25,627	N/A		$	43,791	$	20,789
Well Services		6,638	N/A			4,151		6,781
Drilling Products and Services	N/A			10,459
Production Services	N/A			383
Technical Solutions	N/A			4,694
Total U.S. land	$	32,265	$	15,536		47,942		27,570

U.S. offshore
Rentals	$	28,997	N/A			36,331		26,890
Well Services		22,756	N/A			32,569		26,574
Drilling Products and Services	N/A			26,242
Production Services	N/A			6,630
Technical Solutions	N/A			15,740
Total U.S. offshore	$	51,753	$	48,612		68,900		53,464

International
Rentals	$	21,593	N/A			23,607		19,558
Well Services		72,972	N/A			84,191		65,300
Drilling Products and Services	N/A			19,301
Production Services	N/A			39,948
Technical Solutions	N/A			12,579
Total International		94,565		71,828		107,798		84,858
Total Revenues	$	178,583	$	135,976	$	224,640	$	165,892


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

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

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

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

U.S. land

Rentals

$
57,525

$
4,917

N/A

Well Services

15,545

3,379

N/A

Drilling Products and Services

N/A

N/A

66,652

Production Services

N/A

N/A

5,016

Technical Solutions

N/A

N/A

13,997

Total U.S. land

$
73,070

$
8,296

$
85,665

U.S. offshore

Rentals

$
76,290

$
8,196

N/A

Well Services

68,751

7,371

N/A

Drilling Products and Services

N/A

N/A

92,053

Production Services

N/A

N/A

24,293

Technical Solutions

N/A

N/A

70,884

Total U.S. offshore

$
145,041

$
15,567

$
187,230

International

Rentals

$
52,087

$
5,226

N/A

Well Services

180,120

16,839

N/A

Drilling Products and Services

N/A

N/A

68,639

Production Services

N/A

N/A

136,519

Technical Solutions

N/A

N/A

43,744

Total International

232,207

22,065

248,902

Total Revenues

$
450,318

$
45,928

$
521,797

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


	For the Three Months Ended June 30,
	2022		2021
Services
Rentals	$	12,654	$	9,592
Well Services		87,412		70,195
Total Services		100,066		79,787

Rentals
Rentals		73,563		47,895
Well Services		3,430		5,343
Total Rentals		76,993		53,238

Product Sales
Rentals		17,512		9,750
Well Services		30,069		23,117
Total Product Sales		47,581		32,867
Total Revenues	$	224,640	$	165,892


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

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

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

Accounts Receivable

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

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Services

Rentals

$
8,735

N/A

Well Services

76,932

N/A

Drilling Products and Services

N/A

11,132

Production Services

N/A

35,221

Technical Solutions

N/A

20,860

Total Services

$
85,667

$
67,213

Rentals

Rentals

$
56,743

N/A

Well Services

2,677

N/A

Drilling Products and Services

N/A

38,784

Production Services

N/A

2,135

Technical Solutions

N/A

432

Total Rentals

$
59,420

$
41,351

Product Sales

Rentals

$
10,739

N/A

Well Services

22,757

N/A

Drilling Products and Services

N/A

6,085

Production Services

N/A

9,606

Technical Solutions

N/A

11,721

Total Product Sales

33,496

27,412

Total Revenues

$
178,583

$
135,976

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Services

Rentals

$
24,591

$
2,005

N/A

Well Services

184,542

17,229

N/A

Drilling Products and Services

N/A

N/A

38,721

Production Services

N/A

N/A

124,445

Technical Solutions

N/A

N/A

67,769

Total Services

$
209,133

$
19,234

$
230,935

Rentals

Rentals

$
133,231

$
14,082

N/A

Well Services

10,741

352

N/A

Drilling Products and Services

N/A

N/A

161,186

Production Services

N/A

N/A

12,218

Technical Solutions

N/A

N/A

9,032

Total Rentals

$
143,972

$
14,434

$
182,436

Product Sales

Rentals

$
28,080

$
2,252

N/A

Well Services

69,133

10,008

N/A

Drilling Products and Services

N/A

N/A

27,437

Production Services

N/A

N/A

29,165

Technical Solutions

N/A

N/A

51,824

Total Product Sales

97,213

12,260

108,426

Total Revenues

$
450,318

$
45,928

$
521,797

~~(5)~~(3) Inventory

Inventories are stated at the lower of cost or net realizable value. We apply net realizable value and obsolescence to the gross value of ~~the~~ inventory. Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and ~~WIP.~~work-in-process. Supplies and consumables ~~primarily~~ consist principally of products used in ~~our~~the services provided to ~~customers. As discussed above, during the Successor Quarter, we incurred shut down costs at certain locations primarily in~~ our ~~Well Services segment, which included approximately $6.5~~ ~~million related to the write-down of inventory at these locations.~~customers. The components of ~~the~~ inventory balances are as follows (in thousands):


	Successor		Predecessor
	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Finished goods	$	35,564	$	35,074	$	31,046	$	26,187
Raw materials		184		5,139		9,397		9,753
WIP		5,331		2,994
Work-in-process						3,520		4,253
Supplies and consumables		30,605		33,820		23,238		20,410
Total	$	71,684	$	77,027	$	67,201	$	60,603

(4) Decommissioning Liability

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

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

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

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

~~(6) Notes~~The following table presents our decommissioning liability as of the periods indicated:


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

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

(5) Note Receivable

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

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

Due to the reduction in estimated costs under the reef-in-place program, the gross amount of the seller’s obligation was reduced to ~~us totals~~ $~~115.0~~106.9 million as of June 30, 2022 and iswas recorded at its present value, which totaled $~~75.5~~65.1 ~~million as of September 30, 2021.~~ million.

The ~~related~~ discount on the note receivable, which is currently based on an effective interest rate of ~~6.58~~5.6%, is amortized to interest income ~~based on~~over the expected timing of the completion of the decommissioning ~~activities. We recorded non-cash interest income related~~activities, which are now expected to ~~notes receivable~~be completed during the second quarter of $~~1.2~~ ~~million and $3.1~~ 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 Predecessor recorded interest income related to notes receivable of $~~0.4~~ ~~million, $1.1~~ ~~million and $3.4~~ ~~million for the Current Predecessor Period, the Prior Predecessor Quarter and the Prior Predecessor Period, respectively.~~2031. Interest receivable is considered paid in kind and is compounded into the carrying amount of the note.

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

~~(7)~~(6) Property, Plant and Equipment, Net

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~~		10-30 ~~years~~
~~Automobiles, trucks, tractors and trailers~~		4-7 ~~years~~
~~Furniture and fixtures~~		3-10 ~~years~~

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


	Successor			Predecessor
	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Machinery and equipment	$	391,750		$	1,727,454		$	368,220		$	360,353
Buildings, improvements and leasehold improvements		79,071			171,635			77,529			75,374
Automobiles, trucks, tractors and trailers		7,729			11,742			6,550			6,450
Furniture and fixtures		19,997			31,407			19,707			19,668
Construction-in-progress		4,257			4,793			5,078			6,700
Land		31,067			33,394			28,446			28,671
Oil and gas producing assets		20,318			15,117			0			44,700
Total		554,189			1,995,542			505,530			541,916
Accumulated depreciation and depletion		(150,716	)		(1,587,435	)		(218,603	)		(185,642	)
Property, plant and equipment, net	$	403,473		$	408,107		$	286,927		$	356,274

Depreciation and depletion expense ~~(excluding depletion, amortization~~associated with our property, plant and ~~accretion)~~equipment for the ~~Successor Quarter~~three and ~~Prior Predecessor Quarter~~six months ended June 30, 2022 was $~~56.9~~20.4 million and $~~24.9~~51.6 million respectively. Depreciation and depletion expense, ~~(excluding~~excluding depreciation and depletion ~~amortization and accretion)~~related to assets held for sale, for the three months ended June 30, 2021, the Successor Period ~~Current Predecessor Period~~ and ~~Prior~~ Predecessor Period was $~~152.3~~57.6 million, $~~9.5~~96.5 million and $~~79.7~~7.8 million, respectively. Gains and losses on disposals of assets are recognized within other (gains) and losses, net in our statement of operations.

~~As discussed above,~~During the second quarter of 2022, changes in estimates regarding the timing and the cost of decommissioning our oil and gas property under a reef-in-place program resulted in a reduction in the carrying value of our decommissioning liability and related note receivable, as well as impacted the carrying value of our oil and gas producing assets. Due to the reduction in both costs and timing, our decommissioning liability was reduced by $53.0 million and the related note receivable was increased by $2.6 million. Additionally, in accordance with ASC 410, the carrying value of our oil and gas producing assets, which included capitalized oil and gas reserves and capitalized asset retirement costs, was reduced by $38.2 million, which represented the net book value of all of our oil and gas assets at the time of the reduction. In connection with ~~the valuation process under fresh start accounting, certain fully depreciated assets were assigned an estimated fair value~~these changes, we recognized a gain of approximately $~~282.1~~17.4 million which is included in other (gains) and ~~remaining useful life~~losses, net in our statement of ~~less than~~ 36 ~~months. Depreciation expense for the remainder of 2021 is estimated to be approximately $50.7~~ ~~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.~~operations.

~~(8) Intangibles~~

~~Intangible assets consist of the following (in thousands):~~

Successor

Predecessor

September 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

$
(263
)

$
3,903

$
4,744

$
(4,263
)

$
481

Patents

10

2,120

(141
)

1,979

-

-

-

Customer Relationships

17

-

-

-

14,592

(10,077
)

4,515

Non-Compete Agreements

3

-

-

-

3,478

(3,478
)

-

Total

$
6,286

$
(404
)

$
5,882

$
22,814

$
(17,818
)

$
4,996

~~Amortization expense for the Successor Quarter and Prior Predecessor Quarter was $0.1~~ ~~million and $0.5~~ ~~million, respectively. For the Successor Period, Current Predecessor Period and Prior Predecessor Period amortization expense was $0.5~~ ~~million, $0.1~~ ~~million and $0.9~~ ~~million, respectively. Based on the carrying values of intangible assets of September 30, 2021, amortization expense for the next five years (2021 through 2025) is estimated to be $0.2~~ ~~million for the remainder of 2021 and $0.6~~ ~~million for the years 2022 through 2025.~~

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

~~(9)~~(7) Debt

~~Credit Facility~~

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

As of June 30, 2022, our borrowing base, ~~under~~as defined in 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 at such time, certain cash of SESI and its subsidiary guarantors, less reserves established by the administrative agent in its permitted discretion.

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 September 30, 2021, the borrowing base under the Credit FacilityAgreement, was approximately $120.0 million, and we had $~~41.1~~34.3 million of letters of credit outstanding that reduced ~~its~~the borrowing ~~availability under the revolving credit facility. Subject to certain conditions, upon request and with the consent of the participating lenders, the total commitments~~availability. We had no outstanding borrowings under the Credit Facility ~~may be increased to $~~as of June 30, 2022.

~~170.0~~

~~million. SESI’s obligations under~~Unless all loans are paid off and letters of credit outstanding are cash collateralized and 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~~terminated, 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~~%requires, subject 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 Facility contains~~permitted exceptions, compliance with 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, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility also requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if ~~either (i)~~(a) an event of default has occurred and is continuing or ~~(ii)~~(b) availability under the Credit Facility is less than the greater of $20.0 million or 15% of the lesser of the aggregate commitments and the borrowing base. ~~The covenant and other restrictions of the Credit Facility significantly restrict the ability to incur borrowings other than letters of credit.~~

On May 13, 2021, SESI, SESI Holdings, Inc. and the subsidiary guarantors party thereto entered into a first amendment and waiver to the Credit Facility (the “First Amendment and Waiver to the Credit Facility”) to, among other things, (i) extend the deadline thereunder for the delivery of our consolidated unaudited financial statements for the quarter ended March 31, 2021 to June 1, 2021 and (ii) obtain

~~a limited waiver of potential defaults under the Credit Facility related to a delayed public filing of such financial statements after the original deadline for delivery of such financial statements.~~

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 certificateWe were in ~~connection therewith are delivered, the lenders will not be~~compliance with all required ~~to make any advances requested. As discussed below, we have filed the required financial statements and delivered the revised borrowing base certificate in satisfaction of this requirement.~~

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)covenants 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. We filed our consolidated unaudited financial statements as of, and for, the quarters ended March 31, 2021 and June 30, 2021 and delivered a revised borrowing base certificate within the required timeframe.

~~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 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 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:~~

December 31, 2020

7.75% Senior unsecured notes due September 2024

$
500,000

7.125% Senior unsecured notes due December 2021

800,000

Total debt, gross

1,300,000

Reclassification to liabilities subject to compromise

(1,300,000
)
Total debt, net

$
-

2022.

~~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 required semi-annual interest payments on June 15 and December 15of each year through the maturity date of December 15, 2021.~~

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

~~At the Petition Date, there was pre-petition accrued interest of $35.8~~ million under the two issuances of senior secured notes. As a result of the 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 Successor.~~

~~(10) Decommissioning Liabilities~~

We account for decommissioning liabilities under ASC 410 – Asset Retirement Obligations. Our decommissioning liabilities are associated with an oil and gas property and include liabilities related to the plugging of wells, removal of the related platform and equipment and site restoration. We review the adequacy of our decommissioning liabilities whenever indicators suggest that the estimated cash flows and/or relating timing needed to satisfy the liability have changed materially. The Successor had decommissioning liabilities of $~~173.1~~ ~~million as of September 30, 2021 and the Predecessor had decommissioning liabilities of $142.7~~ million as of December 31, 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.

~~(11) Leases~~

~~Accounting Policy for Leases~~

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

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent 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. We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease.

~~Overview~~

~~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.~~ ~~Total operating lease expense was as follows (in thousands):~~

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Long-term fixed lease expense

$
3,654

$
4,124

Short-term lease expense

2,715

865

Total operating lease expense

$
6,369

$
4,989

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Long-term fixed lease expense

$
9,413

$
1,824

$
14,379

Long-term variable lease expense

-

19

7

Short-term lease expense

6,061

789

2,740

Total operating lease expense

$
15,474

$
2,632

$
17,126

~~Supplemental Balance Sheet and Cash Flows Information~~

~~Operating leases were as follows (in thousands):~~

Successor

Predecessor

September 30, 2021

December 31, 2020

Operating lease ROU assets

$
28,871

$
33,317

Accrued expenses

$
8,513

$
10,698

Operating lease liabilities

20,608

29,464

Total operating lease liabilities

$
29,121

$
40,162

Weighted-average remaining lease term

13 years

9 years

Weighted-average discount rate

5.34%

6.35%

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

Remainder of 2021

$
673

2022

7,150

2023

4,949

2024

3,300

2025

2,504

Thereafter

18,246

Total lease payments

36,822

Less imputed interest

(7,701
)
Total

$
29,121

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

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

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

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

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

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


	Successor Fair Value at
	September 30, 2021								June 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Non-qualified deferred compensation assets and liabilities
Intangible and other long-term assets, net	$	7,989	$	7,534	$	-	$	15,523	$	0	$	15,361	$	-	$	15,361
Accounts payable		-		2,883		-		2,883		-		1,758		-		1,758
Other long-term liabilities		-		18,728		-		18,728		-		15,513		-		15,513

Investment in equity securities	$	18,684	$	-	$	-	$	18,684	$	16,524	$	-	$	-	$	16,524

									December 31, 2021
									Level 1		Level 2		Level 3		Total
Non-qualified deferred compensation assets and liabilities
Intangible and other long-term assets, net									$	-	$	15,896	$	-	$	15,896
Accounts payable										-		2,250		-		2,250
Other long-term liabilities										-		19,218		-		19,218
Investment in equity securities									$	25,735	$	-	$	-	$	25,735

Predecessor Fair Value at

December 31, 2020

Level 1

Level 2

Level 3

Total

Non-qualified deferred compensation assets and liabilities

Intangible and other long-term assets, net

$
-

$
15,013

$
-

$
15,013

Accounts payable

-

2,869

-

2,869

Other long-term liabilities

-

20,697

-

20,697

Total debt

$
409,050

$
-

$
-

$
409,050

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 ~~either~~ a ~~Level 1 or~~ Level 2 in the fair value hierarchy depending on the type of investment. Commencement of the Chapter 11 Cases automatically 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.~~

hierarchy. Investment in equity securities relates to our ownership in ~~3.6~~ ~~million shares~~ of common stock of Select Energy Services, Inc. ~~This investment~~(“Select”) and is reported at fair value based on unadjusted quoted prices which are readily determinable, which represents a Level 1 in the fair value hierarchy. ~~During the Successor Quarter, we recognized an unrealized loss on equity securities of $1.6~~

~~million, which is included in other expense in our condensed consolidated statement of operations. See Note 20 - "Discontinued Operations" for further discussion.~~

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~~

(9) Other income (expense)

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

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

Losses on foreign currencies during the three and six months ended June 30, 2022 were $10.5 million and $4.9 million, respectively. Gain on foreign currencies for the three months ended June 30, 2021 and the Successor Period were $2.9 million and $0.3 million, respectively. Losses on foreign currencies during the three and six months ended June 30, 2022 include an ~~over-the-counter market,~~expense of $2.7 million which represents ~~Level 1~~a correction of an immaterial error relating to a period prior to our emergence from bankruptcy. During the Predecessor Period, losses on foreign currencies were $2.1 million. Gains and losses on foreign currencies are primarily related to our operations in ~~the fair value hierarchy.~~Brazil.

~~(13)~~(10) Segment Information

In connection with our previously discussed Transformation Project and disposition activities, during the second quarter of 2021, our reportable segments were changed to Rentals, Well Services and Corporate and other. Reportable segments for periods prior to January 1, 2021 which were presented in our Annual Report were Drilling Products and Services, Onshore Completion and Workover Services, Production Services and Technical Solutions.

Business Segments

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

The products and service offerings of our Well Services segment are comprised of risk management, well control and training solutions, hydraulic workover and snubbing services, engineering and manufacturing of premium sand control tools, ~~coiled tubing, cased hole~~ and ~~mechanical wireline,~~onshore international production ~~testing~~services. The Well Services segment also includes the operations of our offshore oil and ~~optimization, pressure control and remedial pumping services.~~gas property.

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

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


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

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


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

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

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

~~Successor~~

~~Three Months Ended September 30, 2021~~

Well

Corporate and

Consolidated

Rental

Services

Other

Total

Revenues

$
76,217

$
102,366

$
-

$
178,583

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

33,438

91,535

-

124,973

Depreciation, depletion, amortization and accretion

41,641

15,615

1,952

59,208

General and administrative expenses

7,184

13,445

13,042

33,671

Restructuring and other expenses

-

-

4,712

4,712

Income (loss) from operations

(6,046
)

(18,229
)

(19,706
)

(43,981
)
Interest income (expense), net

(7
)

-

654

647

Other income (expense)

1,754

3,204

(11,182
)

(6,224
)
Income (loss) from continuing operations before income taxes

$
(4,299
)

$
(15,025
)

$
(30,234
)

$
(49,558
)

~~Predecessor~~

~~Three Months Ended September 30, 2020~~

Drilling

Corporate

Products

Production

Technical

and

Consolidated

and Services

Services

Solutions

Other

Total

Revenues

$
56,001

$
46,962

$
33,013

$
-

$
135,976

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

23,714

38,899

24,461

-

87,074

Depreciation, depletion, amortization and accretion

14,424

7,931

4,983

825

28,163

General and administrative expenses

12,948

6,594

9,844

22,054

51,440

Restructuring expense

-

-

-

25,746

25,746

Reduction in value of assets

-

0

2,929

-

2,929

Income (loss) from operations

4,915

(6,462
)

(9,204
)

(48,625
)

(59,376
)
Interest income (expense), net

-

-

1,122

(25,922
)

(24,800
)
Other income

-

-

-

(1,399
)

(1,399
)
Income (loss) from continuing operations before
income taxes

$
4,915

$
(6,462
)

$
(8,082
)

$
(75,946
)

$
(85,575
)

~~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

4,111

4,914

11,052

Restructuring and other expenses

-

-

1,270

1,270

Income (loss) from operations

4,202

(2,122
)

(6,605
)

(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

$
29,530

$
297,826

$
329,132

~~Successor~~

~~For the Period February 3, 2021 through September 30, 2021~~

Well

Corporate and

Consolidated

Rental

Services

Other

Total

Revenues

$
185,902

$
264,416

$
-

$
450,318

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

76,793

219,627

-

296,420

Depreciation, depletion, amortization and accretion

111,781

41,991

4,484

158,256

General and administrative expenses

16,986

35,029

32,402

84,417

Restructuring and other expenses

-

-

20,533

20,533

Loss from operations

(19,658
)

(32,231
)

(57,419
)

(109,308
)
Interest income (expense), net

(7
)

3

1,398

1,394

Other income (expense)

1,053

5,439

(12,991
)

(6,499
)
Loss from continuing operations before income taxes

$
(18,612
)

$
(26,789
)

$
(69,012
)

$
(114,413
)

~~Predecessor~~

~~Nine Months Ended September 30, 2020~~

Drilling

Corporate

Products

Production

Technical

and

Consolidated

and Services

Services

Solutions

Other

Total

Revenues

$
227,344

$
165,828

$
128,625

$
-

$
521,797

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

81,163

137,689

99,161

-

318,013

Depreciation, depletion, amortization and accretion

48,042

23,526

14,663

2,821

89,052

General and administrative expenses

38,388

20,281

34,044

72,244

164,957

Restructuring expense

-

-

-

27,033

27,033

Reduction in value of assets

-

4,096

15,355

-

19,451

Income (loss) from operations

59,751

(19,764
)

(34,598
)

(102,098
)

(96,709
)
Interest income (expense), net

-

-

3,399

(78,097
)

(74,698
)
Other income

-

-

-

(4,810
)

(4,810
)
Income (loss) from continuing operations before income taxes

$
59,751

$
(19,764
)

$
(31,199
)

$
(185,005
)

$
(176,217
)

Identifiable Assets

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

September 30, 2021 - Successor

$
386,220

$
697,291

$
172,272

$
1,255,783

Drilling

Completion

Products

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


			Well		Corporate		Consolidated
	Rentals		Services		and Other		Total
June 30, 2022	$	456,309	$	605,804	$	160,463	$	1,222,576
December 31, 2021		379,453		636,256		183,799		1,199,508

Geographic Segments

We operate in the U.S. and in various other countries throughout the world. Our international operations are primarily focused in Latin America, Asia-Pacific and the Middle East and North Africa regions. We attribute revenue to various countries based on the location 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.

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

~~Revenues~~

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

United States

$
84,017

$
64,148

Other countries

94,566

71,828

Total

$
178,583

$
135,976

Revenues


	Successor		Predecessor				For the Three Months Ended June 30,
	For the Period February 3, 2021 through September 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Nine Months Ended September 30, 2020		2022		2021
United States	$	218,110	$	23,863	$	272,895	$	116,842	$	81,034
Other countries		232,208		22,065		248,902		107,798		84,858
Total	$	450,318	$	45,928	$	521,797	$	224,640	$	165,892


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

Long-Lived Assets

Successor

Predecessor

September 30, 2021

December 31, 2020

United States

$
261,774

$
253,114

Other countries

141,699

154,993

Total

$
403,473

$
408,107


	June 30, 2022		December 31, 2021
United States	$	190,891	$	231,388
Other countries		96,036		124,886
Total	$	286,927	$	356,274

~~(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 first quarter of 2020, in line with the rapidly changing market conditions, our market capitalization deteriorated. We determined that these events constituted a triggering event that required us to review the recoverability of our long-lived 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 totaling $~~16.5~~ ~~million which related to property, plant and equipment in the Production Services and Technical Solutions segments.~~

~~(15) Goodwill~~

As part of the Successor’s emergence from the Chapter 11 Cases, the Successor adopted fresh start accounting and began reporting as a new accounting entity as of the Emergence Date. Due to the fair value measurement of our assets and liabilities as 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 Note 3 – “Fresh Start Accounting,” the Predecessor’s goodwill balance of $138.9~~ ~~million was eliminated during the fresh start adjustments to the consolidated condensed balance sheet as of February 2, 2021.~~

~~(16)~~(11) 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~~ ~~7.125% Notes or the~~ ~~7.750~~% Notes. 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 zero consideration. The balance sheet effect of the cancellation is noted in Note 3 – “Fresh Start Accounting.”

~~2021~~Our Management Incentive Plan

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

Approval of Forms of Award Agreement and Equity Awards

~~Restricted Stock Grants~~

On ~~June1, 2021,~~March 28, 2022, the Board and the Compensation Committee approved ~~the~~new forms of restricted stock unit (“RSU”) award agreements and forms of performance stock unit (“PSU”) award agreements (collectively, the “Award Agreements”) under the MIP, and approved a special grant of 72,050 RSUs and 288,199 PSUs which was intended to satisfy stock awards for the next three years. Additional grants will be issued for new hires and promotions.

Awards made under the forms of RSU award agreements for ~~(i) employee participants (the “Employee Restricted Stock Award Agreement”) and (ii) non-employee directors (the “Director Restricted Stock Award Agreement”).~~our employees generally vest in three equal annual installments over the three-year

~~On June 1, 2021, the Board and the Compensation Committee approved 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~~forms of RSU award ~~agreement. The fair value~~agreements. Awards made under the forms PSU award agreements may be earned between 25% and 100% of the ~~restricted shares was estimated to be $39.53~~ ~~per~~target award based on achievement of share asprice goals set forth in the forms of ~~the date of grant. The unamortized estimated grant date fair value as of September 30, 2021 was approximately $2.7~~ ~~million.~~

~~During the third quarter of 2021, the Board~~PSU award agreements and ~~the Compensation Committee approved the issuance of $2.0~~ ~~million in restricted stock units which will be convertible into Class B common stock upon vesting. These restricted stock units~~ will vest ~~over a period of 18 months, subject~~ to ~~earlier vesting and forfeiture~~the extent that share price goals are achieved based on the terms and conditions set forth in the ~~applicable~~forms of PSU award ~~agreement. The unamortized estimated grant date fair value as~~agreements.

During the three and six months ended June 30, 2022, we recognized $1.0 million and $1.5 million, respectively, in compensation expense associated with grants of ~~September~~restricted stock awards and RSUs. During both the three months ended June 30, 2021 ~~was approximately~~and the Successor Period, we recognized $~~1.7~~1.6 ~~million.~~million in compensation cost associated with grants of restricted stock and RSUs.

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

~~(17)~~(12) Income Taxes

The effective tax rate for the ~~Current Predecessor Period, the Successor Quarter~~three and ~~the Successor Period~~six months ended June 30, 2022 was ~~18.2~~%, ~~19.2~~20.0% and ~~13.6~~21.7%, respectively, on income from continuing operations. The effective tax rate ~~in the Current Predecessor Period~~ is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of ~~22.5~~21% primarily from non-deductible items, foreign tax rates that differ from the ~~adoption~~U.S. federal statutory rate, the release of ~~fresh start accounting~~valuation allowance based on current period income in certain jurisdictions and foreign losses for which 0 tax benefit is being recorded.

In recording deferred income tax assets, we consider whether it is more likely than not some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income of the appropriate character during the ~~period. The cancellation~~periods in which those deferred income tax assets would be deductible. Our annualized effective tax rate for the six months ended June 30, 2022 includes a tax benefit of ~~indebtedness income~~$18.8 million related to the release of a valuation allowance previously recorded against U.S. foreign tax credit carryforwards. We previously considered these credit carryforwards to be unrealizable primarily due to our cumulative history of losses in the U.S. in recent years and tax attribute utilization limits under Section 382 resulting from bankruptcy. This was significant negative evidence that outweighed positive evidence from forecasts of future taxable income. However, based on recognized built in gains that have increased our limit under Section 382, year to date income in the ~~restructuring has significantly reduced our US tax~~U.S., and certain attributes ~~including but not limited to NOL carryforwards. We experienced an ownership change under Sec. 382~~promoting use of the ~~Internal Revenue Code~~foreign tax credit carryovers, when combined with our view on the remaining 2022 outlook, we determined there is now significant positive evidence for our ability to utilize available U.S. foreign tax credit carryforwards in 2022. The amount of ~~1986, as amended (the “Code”)~~valuation allowance released in the U.S. recognizes foreign tax credit deferred tax assets that we estimate will offset U.S. taxes payable in 2022. After the valuation allowance release, we have $37.1 million of U.S. foreign tax credit deferred tax assets that continue to have a valuation allowance against them. We will continue to evaluate the realizability of our U.S. foreign tax credit carryforwards and may have additional valuation allowance releases in future periods if we achieve positive cumulative U.S. income results of appropriate character and timing to do so.

The effective tax rate for the three months ended June 30, 2021, the Successor Period and the Predecessor Period was 5.2%, ~~which is anticipated to limit certain remaining tax attributes.~~9.3% and 18.2%, respectively, on income from
continuing operations. The tax rate induring the ~~Successor Quarter~~three months ended June 30, 2021 and the Successor Period is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of ~~22.5~~21% primarily from non-deductible items and foreign losses for which no tax benefit is being recorded.

The ~~effective~~ tax rate ~~for Prior~~in the Predecessor ~~Quarter and Prior Predecessor~~ Period ~~was (2.1)% and~~ ~~7.0%, respectively, on income from continuing operations. The tax rate~~ is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of ~~22.5~~21% primarily ~~from US and foreign losses for which no tax benefit was recorded.~~due the adoption of fresh start accounting during the period.

~~The Successor~~We had $~~14.7~~15.7 million and $15.0 million of unrecognized tax benefits as of ~~September~~June 30, ~~2021~~2022 and ~~the Predecessor had $13.2~~ ~~million of unrecognized tax benefits as of~~ December 31, ~~2020,~~2021, respectively, all of which would impact our effective tax rate if ~~recognized.~~recognized except for $1.6 million offset in deferred income taxes. It is reasonably possible $3.4 million of unrecognized tax benefits could be settled in the next twelve months due to the conclusion of tax audits or statutes of limitations expiration. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

~~As of September 30, 2021, we have a deferred tax liability of $32.4~~ ~~million and a valuation allowance of $96.8~~ 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.

~~(18)~~(13) Earnings per Share

Our common equity consists of Class A Common Stock and Class B Common Stock (the “Common Stock”).

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

~~Diluted earnings per share for the Successor Period, Successor Quarter, Prior Predecessor Period and Prior Predecessor Quarter do not include~~period plus any potentially dilutive ~~shares~~Common Stock, such as ~~these periods reflected a net loss from continuing operations. We currently have~~ ~~0.1~~ ~~million in unvested~~restricted stock awards, restricted stock units, ~~outstanding which will be converted into Class B common shares upon vesting.~~and performance-based units calculated using the treasury stock method.

~~(19)~~The following table presents the reconciliation between the weighted average number of shares for basic and diluted earnings per share.


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

(14) Contingencies

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

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

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

AnOur Indian subsidiary, ~~of the Company had~~SES Energy Services India Pvt. Ltd, entered into a contract with an Indian oil and gas company to provide an ~~off-shore~~off shore vessel for ~~various types of work.~~well stimulation. A dispute arose over the performability of the terms of the contract. The ~~potential loss of this possible onerous~~contract was terminated by the customer. The maximum liability under the contract is capped at approximately $7.3 ~~million.~~million, of which approximately $

353.5

~~Commencement~~million has been claimed via revocation of ~~the Chapter 11 Cases automatically stayed certain proceedings and actions against the Predecessor. These cases have continued after the Emergence Date.~~performance bank guarantees.

~~(20)~~

(15) Discontinued Operations

On December 10, 2019, Pumpco Energy Services, Inc (“Pumpco”) completed its existing hydraulic fracturing field operations and was determined to discontinue, wind down and exit its hydraulic fracturing operations. The financial results of Pumpco’s operations have historically been included in our North America segment. During the Successor Quarter and Successor Period, we have recognized gains of approximately $~~8.9~~ ~~million and $13.9~~ ~~million, respectively, related to the sale of these assets. We are currently, and will continue to, sell Pumpco’s fixed assets.~~

During the third quarter of 2021, we sold all of the issued and outstanding equity of Complete Energy Services, Inc. (“Complete”) to Select Energy Services, Inc. (“Select”), which also included SPN Well Services, Inc.’s (“SPW”) flowback and well testing businesses, including the associated assets, liabilities and working capital. On July 9, 2021, we entered into a Securities Purchase and Sale Agreement (the “Purchase Agreement”) with SES Holdings, LLC, Select and Complete. Pursuant to the Purchase Agreement, Select acquired ~~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 Select, subject to customary post-closing adjustments. The Purchase Agreement contains customary representations, warranties and covenants. In connection with this disposition, during the second quarter of 2021, we recognized a reduction in value of assets related to Complete of approximately $~~12.4~~ ~~million.~~

~~During the Successor Quarter, we completed an agreement with an unrelated third party to sell tranches of coil tubing assets held by SPW for $14.0~~ ~~million. As of September 30, 2021, no tranches have been sold under this agreement, however we have received deposits from the buyer of approximately $7.3~~ million. These deposits are included in liabilities held for sale as of September 30, 2021 as deferred revenue. On November 1, 2021, we completed an agreement with an unrelated third party to sell the remaining assets of SPW for $~~8.5~~ ~~million. In connection with this sale, we recognized a reduction in value of assets totaling $14.5~~ ~~million during the Successor Quarter.~~

The financial results of the operations of Complete and SPW have historically been included in our Onshore Completion and Workover Services segment, and their discontinuance is aligned with our overall strategic objective to divest assets and service lines that do not compete for investment in the current market environment.

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


	Successor			Predecessor			For the Three Months Ended June 30,
	For the Three Months Ended September 30, 2021			For the Three Months Ended September 30, 2020			2022			2021
Revenues	$	16,985		$	30,996		$	0		$	45,114
Cost of services		6,883			29,216			0			37,871
Depreciation, depletion, amortization and accretion		146			7,055			0			18,581
General and administrative expenses		2,379			4,101			1,711			3,623
Reduction in value of assets		14,475			60,230
Other (gains) and losses, net								750			10,018
Loss from operations		(6,898	)		(69,606	)		(2,461	)		(24,979	)
Other income (expense)		238			6			0			(53	)
Loss from discontinued operations before tax		(6,660	)		(69,600	)		(2,461	)		(25,032	)
Income tax benefit (expense)		1,499			(314	)		517			5,632
Loss from discontinued operations, net of income tax	$	(5,161	)	$	(69,914	)
Income (loss) from discontinued operations, net of income tax							$	(1,944	)	$	(19,400	)

~~Cost of services during the Successor Quarter includes gains on sales of assets of approximately $10.5~~ ~~million.~~

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Revenues

$
85,351

$
10,719

$
150,992

Cost of services

62,364

10,398

145,297

Depreciation, depletion, amortization and accretion

31,502

2,141

24,261

General and administrative expenses

8,597

1,119

21,576

Reduction in value of assets

26,905

-

109,591

Loss from operations

(44,017
)

(2,939
)

(149,733
)
Other income (expense)

188

2,485

21

Loss from discontinued operations before tax

(43,829
)

(454
)

(149,712
)
Income tax benefit (expense)

9,862

102

11,710

Loss from discontinued operations, net of income tax

$
(33,967
)

$
(352
)

$
(138,002
)

~~Cost of services during the Successor Period includes gains on sales of assets of approximately $15.5~~ ~~million.~~


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

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

Successor

Predecessor

September 30, 2021

December 31, 2020

Current assets:

Accounts receivable, net

$
11,033

$
25,448

Prepaid expenses

1,250

4,881

Other current assets

5,660

12,076

Total current assets

17,943

42,405

Property, plant and equipment, net

62,050

179,380

Operating lease ROU assets

6,938

16,958

Other assets

991

3,361

Total assets held for sale

$
87,922

$
242,104

Current liabilities:

Accounts payable

$
1,964

$
2,830

Accrued expenses

13,722

11,153

Total current liabilities

15,686

13,983

Operating lease liabilities

6,958

21,987

Decommissioning liabilities

-

8,311

Other liabilities

597

2,095

Total liabilities

$
23,241

$
46,376


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

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

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

Successor

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Nine Months
Ended September 30, 2020

Cash flows from discontinued operating activities:

Reduction in value of assets

$
26,905

$
-

$
109,591

Gain on sale of assets

(15,572
)

(43
)

-

Depreciation, depletion, amortization and accretion

31,502

2,142

24,261

Cash flows from discontinued investing activities:

Proceeds from sales of assets

53,225

486

14,369


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

~~(21)~~(16) Supplemental Cash Flow Information

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


	Successor		Predecessor				Successor				Predecessor
	For the Period February 3, 2021 through September 30, 2021		For the Period January 1, 2021 through February 2, 2021		For the Nine Months Ended September 30, 2020		For the Six Months Ended June 30, 2022		For the Period February 3, 2021 through June 30, 2021		For the Period January 1, 2021 through February 2, 2021
Cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents	$	172,768	$	188,006	$	272,624	$	314,974	$	172,768	$	188,006
Restricted cash-current		16,751		-		-		0		16,751		0
Restricted cash-non-current		80,179		80,178		2,764		79,561		80,179		80,178
Cash, cash equivalents, and restricted cash, beginning of period	$	269,698	$	268,184	$	275,388	$	394,535	$	269,698	$	268,184

Cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	$	258,024	$	172,768	$	207,781	$	391,219	$	205,748	$	172,768
Restricted cash-current		-		16,751		-		0		0		16,751
Restricted cash-non-current		79,560		80,179		80,175		79,595		80,159		80,179
Cash, cash equivalents, and restricted cash, end of period	$	337,584	$	269,698	$	287,956	$	470,814	$	285,907	$	269,698

~~Non-cash investing activities for the period from February 3, 2021 through September 30, 2021 include the acquisition of an investment in equity securities of $20.3~~ ~~million in connection with our disposal of Complete.~~

~~(22)~~(17) New Accounting Pronouncements

~~Recently Issued Accounting Standards~~

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

In December 2019, the FASB issued ASU 2019-12 - Simplifying the Accounting for Income 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 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)~~(18) Subsequent Events

On ~~November 1, 2021, we completed~~July 18, 2022, our Board and Compensation Committee (the “Committee”) approved an executive chairman agreement ~~with Axis Energy Services to sell the remaining assets~~for Michael Y. McGovern, our Executive Chairman (the “Executive Chairman Agreement”).

Executive Chairman Agreement for Mr. McGovern

Mr. McGovern’s Executive Chairman Agreement provides for an annual base salary of ~~SPW for~~ $~~8.5~~750,000 ~~million. In connection~~, with ~~this sale, we recognized a reduction in value~~an initial one-year term that automatically extends for an additional one-year term on the first anniversary of ~~assets totaling $14.5~~ ~~million~~the effective date of the Agreement (the “Extension Date”) unless either party gives 60 days’ prior written notice of non-renewal before expiration of the then-current term. Mr. McGovern’s annual base salary is subject to adjustment (upward or downward) if Mr. McGovern’s duties or commitments change during the ~~Successor Quarter. Additionally, we retained working capital~~term of the ~~business attributable to pre-closing periods in the amount of approximately $6.8~~ ~~million.~~

On November 15, 2021, we entered into a Second Amendment and Waiver to our Credit Agreement to (i) extend the deadline under the Credit Agreement for the delivery of our consolidated unaudited financial statements as of, and for, the quarter ended September 30, 2021 and the calendar month ending October 31, 2021 to December 10, 2021, (ii) obtain a limited waiver of potential defaults under the Credit Agreement related to a delayed public filing of the quarterly report on Form 10-Q for the quarter ended September 30, 2021 after the original deadline, and (iii) agree that until the quarterly unaudited financial statements and a revised borrowing base certificateExecutive Chairman Agreement. Further, in connection with ~~such quarter are delivered,~~his Executive Chairman Agreement, we will grant Mr. McGovern RSUs under the ~~lenders will not be required to make any advances requested by Borrower. We filed our consolidated unaudited financial statements~~MIP and accelerate the vesting of Mr. McGovern’s restricted shares of Class B common stock granted under the MIP (in each case, as ~~of, and for, the quarter ended September 30, 2021 and delivered a revised borrowing base certificate within the required timeframe.~~ discussed below). In addition, ~~the Credit~~Mr. McGovern’s Executive Chairman Agreement ~~was amended~~provides for a cash lump sum payment to ~~among other things, permit the disposition~~be made within thirty (30) days of the ~~HB Onshore Rentals Business~~Effective Date (as defined in the ~~Credit~~Executive Chairman Agreement). in an amount equal to $288,306.45 to account for the annual base salary Mr. McGovern would have been paid since assuming the position of Executive Chairman until the Effective Date less any payments received from us since assuming the position of Executive Chairman until the Effective Date.

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

•

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

•

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

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

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

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

Equity Awards

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

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

Acceleration of Restricted Stock Grant

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

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

~~As used herein, the “Company,” “we,” “us,” “our”~~The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements 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, July 1, 2020 - September 30, 2020~~
~~"Prior Predecessor Period"~~		~~The Company's operations January 1, 2020 - September 30, 2020~~
~~"Successor"~~		~~The Company, after the Emergence Date~~
~~"Successor Quarter"~~		~~The Company's operations, July 1, 2021 - September 30, 2021~~
~~"Successor Period"~~		~~The Company's operations, February 3, 2021 - September 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~~accompanying notes included elsewhere in this Quarterly Report on Form ~~10-K for~~10-Q. In addition, the ~~year ended December 31, 2020 (the “Annual Report”)~~following discussion and ~~Management’s Discussion~~analysis 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~~

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% 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,~~information contains 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”about our business, operations 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 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~~our current expectations that involve risks, uncertainties 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 ourassumptions. Our actual results tocould differ materially from ~~such statements. Such risks and uncertainties include, but are not limited to:~~



~~risks and uncertainties regarding the voluntary petitions for relief filed~~those anticipated by ~~the Affiliate Debtors (as defined below) on December 7, 2020 (the “Chapter 11 Cases”) under Chapter 11~~these forward-looking statements as a result 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: the continuing effects of the Chapter 11 Cases on us and our various constituents; attendant risks associated with restrictions on our ability to pursue our business strategies; and uncertainty and continuing risks associated with our ability to achieve our stated goals;



~~the likelihood that our historical financial information may no longer be indicative of our future performance; and 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 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,~~many factors. including, but not limited to, ~~our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand~~those identified below and ~~industry demand generally, margins, utilization, cash position, taxes,~~those discussed in the ~~price of our securities,~~sections titled “Risk Factors” and ~~our ability to access capital markets, including~~under the ~~macroeconomic effects from the continuing COVID-19 pandemic;~~



~~the ability of the members of Organization of Petroleum Exporting Countries (“OPEC+”) to agree~~heading “Information Regarding Forward-Looking Statements” in this Quarterly Report on ~~and to maintain crude oil price and production controls;~~



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



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



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



~~credit risk associated with our customer base;~~



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



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



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



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



~~laws, regulations or practices in foreign countries 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;~~



~~our 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;~~



~~risks associated with potential changes of Bureau of Ocean Energy Management security and bonding requirements for offshore platforms;~~



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



~~the risks associated with owning our Class A common stock, par value $0.01 per share, 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.~~

Form 10-Q.

These risks and other uncertainties related to our business are described in detail in Item 1A of the Annual Report. 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, 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. ~~The Successor reports its operating results in two business segments: Global and North America.~~

~~Recent Developments~~

~~Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code~~

~~See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1 – “Basis of Presentation” for information regarding the Voluntary Reorganization Under Chapter 11 of the 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.~~

~~Divestitures~~

~~See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 20 –~~ ~~“Discontinued Operations”~~ ~~for additional information.~~

~~Credit Facility~~

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

~~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.

Relationships regarding certain of our principal stockholders are more fully described in the Annual Report under the headings “Directors, Executive Officers and Corporate Governance – Board of Directors,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Principal Stockholders” and “Certain Relationships and Related Transactions, and Director Independence,” and is incorporated herein by reference.

~~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.

The Company and stockholders holding a majority of the Company’s Class A common stock entered that certain Fourth Amendment to the Stockholders Agreement, effective as of November 15, 2021, extending the deadline to provide its stockholders the unaudited consolidated quarterly financial statements for the quarters ended September 30, 2021 to no later than December 10, 2021 and making certain technical amendments to the financial statement delivery mechanics.

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

•

being critical to our customers’ oil and gas operations,

•

limits competition from the three largest global oilfield service companies,

•

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

•

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

•

provide strong cash flow generation capacity and opportunities.

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

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 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.

On November 4, 2021, the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) announced an Emergency Temporary Standard (“ETS”) requiring that employers with 100 or more employees to implement and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to choose to either be vaccinated or undergo weekly COVID-19 testing and wear a face covering in the workplace. On November 5, 2021, the ETS was stayed by the U.S. Fifth Circuit Court of Appeals pending additional court review. The Biden administration has requested that the appellate court reinstate the mandate. Multiple other lawsuits were filed regarding the ETS in various jurisdictions. The pending lawsuits are expected to be consolidated before a federal circuit court, which circuit is then expected to rule on whether previous grants or denials of temporary stays will stand and to weigh in on the constitutionality of and other challenges to the ETS mandate. Additional vaccine mandates may be announced in jurisdictions in which our businesses operate. Our implementation of any such requirements if and when they are deemed to be enforceable may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business and financial condition, and may result in costs of compliance that are difficult to quantify at this time and may also impact our financial condition.

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. WTI oil prices and rig count averages have both increased during the third quarter of 2021 as compared to the second quarter of 2021. OPEC+ continues to meet regularly to review the state of global oil supply, demand and inventory levels. With the current shortage of other sources of energy, and the economic growth associated with what appears to be a global emergence from the pandemic, the demand for and price of oil has improved.

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					Six months ended
	2021		2020		% Change			2021		2020		% Change			June 30, 2022		March 31, 2022		% Change	June 30, 2022		June 30, 2021		% Change
Worldwide Rig Count (1)
U.S.:
Land		484		241		101	%		437		461		(5	)%		704		621	13.4%		663		409	62.1%
Offshore		12		13		(8	)%		13		16		(19	)%		15		15	0.0%		15		14	7.1%
Total		496		254		95	%		450		477		(6	)%		719		636	13.1%		678		423	60.3%
International (2)		772		731		6	%		735		879		(16	)%		816		823	(0.9%)		819		716	14.4%
Worldwide Total		1,268		985		29	%		1,185		1,356		(13	)%		1,535		1,459	5.2%		1,497		1,139	31.4%

Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	70.58	$	40.89		73	%	$	65.05	$	38.04		71	%	$	108.83	$	95.18	14.3%	$	102.01	$	62.24	63.9%
Natural Gas (Henry Hub)	$	4.36	$	2.00		118	%	$	3.62	$	1.87		94	%	$	7.48	$	4.66	60.5%	$	6.07	$	3.25	86.8%

(1)

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

information

(2)

Excludes Canadian ~~Rig Count.~~

rig count

Comparison of the Results of Operations for the Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~March 31, 2022

Our revenue for the Successor Quarter was $178.6 million, an increase of $42.6 million, or 31.1%, as compared to the Prior Predecessor Quarter. Net loss for the Successor Quarter was $45.2 million, as compared to aWe reported net ~~loss of $157.3 million for the Prior Predecessor Quarter.~~

~~The following table compares our operating results~~income from continuing operations for the three months ended ~~September~~June 30, ~~2021~~2022 (the “Current Quarter”) of $43.6 million on revenue of $224.6 million. This compares to a net income from continuing operations for the three months ended March 31, 2022 (the “Prior Quarter”) of $24.0 million on revenues of $197.9 million. Net income from continuing operations for the Current Quarter includes an $17.4 million gain from revisions to estimates related to our decommissioning liability and ~~2020 (in thousands, except percentages). Cost~~$13.5 million of ~~revenues excludes depreciation, depletion, amortization~~expense primarily related to foreign currency losses during the quarter totaling $10.5 million and ~~accretion.~~both realized and unrealized losses, net of $4.1 million on our investment in equity securities of Select Energy Services, Inc (“Select”).

Successor

Predecessor

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Change

Revenues

$
178,583

$
135,976

$
42,607

Cost of revenues

124,973

87,074

37,899

Depreciation, depletion, amortization and accretion

59,208

28,163

31,045

General and administrative expenses

33,671

51,440

(17,769
)
Restructuring and other expenses

4,712

25,746

(21,034
)
Reduction in value of assets

-

2,929

(2,929
)
Loss from operations

(43,981
)

(59,376
)

15,395

Other income (expense):

Interest income (expense), net

647

(24,800
)

25,447

Other expense

(6,224
)

(1,399
)

(4,825
)
Loss from continuing operations before income taxes

(49,558
)

(85,575
)

36,017

Income tax expense

9,518

(1,815
)

11,333

Net loss from continuing operations

(40,040
)

(87,390
)

47,350

Loss from discontinued operations, net of income tax

(5,161
)

(69,914
)

64,753

Net loss

$
(45,201
)

$
(157,304
)

$
112,103


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

** Not a meaningful percentage

Revenues and Cost of Revenues

~~Revenue for the Successor Quarter was $178.6 million, an increase of $42.6~~Revenues from our Rentals segment increased $15.0 million, or ~~31.1%~~16.9%, ~~from~~in the Current Quarter as compared to the Prior ~~Predecessor~~ Quarter. Cost of revenues increased $4.1 million, or 12.9%, in the Current Quarter as compared to the Prior Quarter. The increase in revenues was due to an increase in both average rig count and commodity prices when compared to the Prior Quarter, which drove increases in utilization and pricing of both premium drill pipe and bottom hole assembly accessories. These factors contributed to slight increase in gross margin which was 65.4% for the ~~Successor~~Current Quarter ~~was $125.0 million, an increase of $37.9 million, or 43.5%, from the Prior Predecessor Quarter. Both revenues and cost of revenues~~as compared to 64.2% in the Prior Predecessor Quarter were severely impacted by the effects of COVID-19, and the increase in our results in the Successor Quarter were driven by improvements in our Well Services business related to operations in Latin America and improvements in our Wild Well Control business unit, partially offset by declines in well completion services. Additionally, during the Successor Quarter, we incurred shut down costs of $8.9 million at certain locations primarily inQuarter.

Revenues from our Well Services segment ~~which include costs associated~~increased $11.7 million, or 10.8%, in the Current Quarter as compared to the Prior Quarter. Cost of revenues increased $4.5 million, or 5.6%, in the Current Quarter as compared to the Prior Quarter. Gross margin for the Current Quarter increased to 29.6% as compared to 26.1% for the Prior Quarter due to changes in revenue mix in our completions applications, increases in service revenues with higher margins and a reduction in pass through and mobilization projects with lower margins. Additionally, the ~~severance~~strategic shift of ~~personnel~~our more labor-intensive service businesses to U.S. offshore and ~~write-down of inventory at these locations.~~international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.

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

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion ~~was $59.2~~expense for the Current Quarter decreased $10.7 million, ~~during the Successor Quarter~~or 31.5%, as compared to ~~$28.2 million during~~ the Prior ~~Predecessor~~ Quarter. ~~The increase in depreciation,~~Depreciation expense for the Prior Quarter was impacted by the valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. Depreciation, depletion, amortization and accretion expense for 2022 is ~~related~~expected to ~~both an increase in~~be approximately $102.8 million as compared to $228.2 million for 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.~~full year 2021.

General and Administrative Expenses

General and administrative ~~expense was $33.7~~expenses for the Current Quarter decreased $1.8 million, ~~during the Successor Quarter~~or 5.6%, as compared to ~~$51.4 million during~~ the Prior ~~Predecessor~~ Quarter. The decrease is primarily related to professional fees for accounting and consulting services as well as declines in employee related costs, including benefits and incentive compensation.

Other gains and losses

Other gains for the ~~result~~Current Quarter were $18.0 million compared to $1.1 million in losses for the Prior Quarter. Other gains and losses primarily relate to charges recorded as part of our ~~continued focus~~strategic disposal of low margin assets in line with our efforts to reconfigure our organization both operationally and financially (the “Transformation Project”) and includes gains/losses on ~~limiting spending~~asset sales, as well as impairments primarily related to long-lived assets. Other gains and ~~reducing~~losses for the Current Quarter include a gain of $17.4 million from revisions in estimates related to our ~~cost structure.~~decommissioning liability.

Other Income (Expense)

~~Restructuring~~

Other income (expense) primarily relate to re-measurement gains and ~~Other Expenses~~

~~Restructuring~~losses associated with our foreign currencies and ~~other expenses~~realized and unrealized gains and losses on our investment in equity securities. Losses on foreign currencies during the ~~Successor~~Current Quarter ~~totaled $4.7~~were $10.5 million and primarily ~~relate~~related to ~~professional fees incurred~~our operations in Brazil. Losses on foreign currencies during the Current Quarter include an expense of $2.7 million which represents a correction of an immaterial error relating to a period ~~associated with~~prior to our ~~previously discussed Transformation Project.~~

~~Restructuring and other expenses~~emergence from bankruptcy. Gain on foreign currencies during the Prior ~~Predecessor~~ Quarter ~~totaled $25.7 million. This amount includes the advisory and professional expenses~~were $5.6 million primarily related to our ~~bankruptcy. Also included~~operations in ~~this total is $15.6 million related to the premium paid to certain consenting noteholders pursuant to the Amended RSA.~~Brazil.

~~Interest Income (Expense), net~~

~~Interest income was $0.6 million~~Unrealized losses on our investment in equity securities for the ~~Successor~~Current Quarter ~~as compared to interest expense of $24.8 million~~were $5.9 million. Unrealized gains on our investment in equity securities for the Prior ~~Predecessor Quarter. The Predecessor interest expense was a result~~Quarter were $6.5 million. During the Current Quarter, we disposed of ~~outstanding debt which was subsequently eliminated as a liability subject to compromise~~0.7 million shares for $6.0 million, and ~~settled~~recognized gains totaling $1.9 million in ~~accordance~~connection with these transactions. During the ~~Plan. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements~~Prior Quarter, we disposed of 1.0 million shares for $7.4 million, and ~~Notes” – Note 3 –~~ ~~“Fresh Start Accounting”~~ ~~for additional information.~~recognized gains totaling $1.8 million in connection with these transactions.

Income Taxes

The effective tax rate for the ~~Successor~~Current Quarter and Prior Quarter was ~~19.2%~~20.0% and 24.7%, respectively, on income from continuing operations. The effective tax rate infor the ~~Successor~~Current Quarter is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of ~~22.5%~~21% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which no tax benefit is being recorded. The tax rate for the Prior Quarter is

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

The effective tax rate for Prior Predecessor Quarter was a negative 2.1% 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.

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

Comparison of the Results of Operations for the Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

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

Successor

Predecessor

Non-GAAP

Predecessor

For the Period
February 3, 2021
through September 30, 2021

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

For the Combined Nine Months ended September 30, 2021

For the Nine Months
Ended September 30, 2020

Change

Revenues

$
450,318

$
45,928

$
496,246

$
521,797

$
(25,551
)

Cost of revenues

296,420

29,773

326,193

318,013

8,180

Depreciation, depletion, amortization and accretion

158,256

8,358

166,614

89,052

77,562

General and administrative expenses

84,417

11,052

95,469

164,957

(69,488
)
Restructuring and other expenses

20,533

1,270

21,803

27,033

(5,230
)
Reduction in value of assets

-

-

-

19,451

(19,451
)
Loss from operations

(109,308
)

(4,525
)

(113,833
)

(96,709
)

(17,124
)

Other income (expense):

Interest income (expense), net

1,394

202

1,596

(74,698
)

76,294

Reorganization items, net

-

335,560

335,560

-

335,560

Other expense

(6,499
)

(2,105
)

(8,604
)

(4,810
)

(3,794
)
Income (loss) from continuing operations before income taxes

(114,413
)

329,132

214,719

(176,217
)

390,936

Income tax (expense) benefit

15,550

(60,003
)

(44,453
)

12,345

(56,798
)
Net income (loss) from continuing operations

(98,863
)

269,129

170,266

(163,872
)

334,138

Loss from discontinued operations, net of income tax

(33,967
)

(352
)

(34,319
)

(138,002
)

103,683

Net income (loss)

$
(132,830
)

$
268,777

$
135,947

$
(301,874
)

$
437,821

~~Net~~We reported net income from continuing operations for the Current Period of $67.5 million on revenue of $422.6 million. This compares to net income from continuing operations for the Combined Period ~~was $135.9~~of $210.3 million ~~which was driven primarily by recognition~~on revenues 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 $21.8 million related to restructuring activities. This compares to a net loss for the Prior Predecessor Period of $301.9$317.7 million.


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

** Not a meaningful percentage

Revenues and Cost of Revenues

~~Revenue for~~Revenues from our Rentals segment increased $64.5 million, or 50.4%, in the ~~Combined~~Current Period ~~decreased by 4.9% to $496.2 million,~~ as compared to ~~$521.8 million for~~ the ~~Prior Predecessor~~Combined Period. Cost of revenues ~~for~~increased $17.0 million, or 33.5%, in the ~~Combined~~Current Period ~~increased by 2.6%, to $326.2 million,~~ as compared to ~~$318.0 million for~~ the ~~Prior Predecessor~~Combined Period. ~~Both revenues~~This increase was due to an increase in both average rig count and ~~cost~~commodity prices when compared to the Combined Period. During the Current Period, we experienced increases in utilization and pricing 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~~both premium drill pipe and bottom hole ~~assemblies~~assembly accessories, which contributed to an increase in gross margin which was 64.9% for the Current Period as ~~well as a decline~~compared to 60.4% in ~~revenues~~the Combined Period.

Revenues from ~~accommodation units, slickline services and plug and abandonment activities. Additionally, during the Successor Period, we incurred shut down costs of $8.9 million at certain locations primarily in~~ our Well Services segment ~~which include costs associated~~increased $40.4 million, or 21.3%, in the Current Period as compared to the Combined Period. Cost of revenues increased $15.5 million, or 10.3%, in the Current Period as compared to the Combined Period. The increase in cost of revenues was driven by the increase in overall segment revenues, and gross margin for the Current Period increased to 28.0% as compared to 20.8% for the Combined Period due to changes in revenue mix in our completions applications, increases in service revenues with higher margins and a reduction in pass through and mobilization projects with lower margins. Additionally, the ~~severance~~strategic shift of ~~personnel~~our more labor-intensive service businesses to U.S. offshore and ~~write-down of inventory at these locations.~~international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion ~~was $166.6~~expense for the Current Period decreased $50.0 million, ~~during~~or 46.5%, as compared to the Combined Period. Depreciation expense for the Combined Period ~~compared to $89.1 million during~~was impacted by the ~~Prior Predecessor Period. The increase in depreciation,~~valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. Depreciation, depletion, amortization and accretion expense for 2022 is ~~related~~expected to ~~both an increase in~~be approximately $102.8 million as compared to $228.2 million for 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.~~full year 2021.

~~General and Administrative~~Restructuring Expenses

~~General and administrative expense was $95.5~~Restructuring expenses for the Current Period decreased of $13.9 million, ~~during~~or 81.2%, as compared to the Combined Period, ~~compared to $165.0 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 during the Combined Period of $21.8 million~~ 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~~the Transformation Project.

Other gains and losses

~~Restructuring~~

Other gains and ~~other expenses during~~losses for the ~~Prior Predecessor~~Current Period ~~totaled $27.0 million. This amount includes the advisory and professional expenses~~include a gain of $17.4 million from revisions in estimates related to our ~~bankruptcy. Also included in this total is $15.6 million related to the premium paid to certain consenting noteholders pursuant to the Amended RSA.~~decommissioning liability.

Other Income (Expense)

~~Reorganization items, net~~

~~Reorganization items, net were $335.6 million~~Losses on foreign currencies during the Current ~~Predecessor Period. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements~~Period and ~~Notes” – Note 3 –~~ ~~“Fresh Start Accounting”~~Combined Period were $4.9 million and $1.8 million, respectively. Losses on foreign currencies during the Current Period include an expense of $2.7 million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy. Realized and unrealized gains on our investment in equity securities for ~~additional information on reorganization items, net.~~the Current Period were $4.2 million. During the Current Period, we disposed of 1.7 million shares for $13.4 million.

~~Interest Income (Expense), net~~

~~Interest income was $1.6 million for the Combined Period as~~compared to interest expense of $74.7 million for the Prior Predecessor Period. The Prior Predecessor Period interest expense was a result of outstanding debt which 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

The effective tax rate for the Current ~~Predecessor~~ Period and ~~the Successor~~Combined Period was ~~18.2%,~~21.7% and ~~13.6%~~20.4%, respectively, on income from continuing operations. The effective tax rate infor the Current ~~Predecessor~~ Period is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of 22.5% primarily from the 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 Internal Revenue Code of 1986, as amended (the “Code”), which is anticipated to limit certain remaining tax attributes. The tax rate in the Successor Period is different from the blended federal and state statutory rate of 22.5%21% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which no tax benefit is being recorded.

The ~~effective~~ tax rate for the ~~Prior Predecessor~~Combined Period ~~was 7.0%, respectively, on income from continuing operations. The tax rate~~ is different from the ~~blended~~U.S. federal ~~and state~~ statutory rate of ~~22.5%~~21% primarily from non-deductible items, foreign losses for which no tax benefit was ~~recorded.~~recorded and the adoption of fresh start accounting during the period.

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

Liquidity and Capital Resources

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

Also impacting 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 impacted 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. 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. 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 project, we believe demand is recovering and prices will be positively impacted.

Financial Condition and ~~Sources of~~ Liquidity

Our ~~current~~ primary sources of liquidity have been cash and cash equivalents, ~~and~~ cash generated from our operations and from asset ~~sales.~~sales, and availability under our Credit Facility. As of ~~September~~June 30, ~~2021,~~2022, we had cash, cash equivalents and restricted cash of ~~$337.6~~$470.8 million. During the ~~Successor Period and the Current Predecessor Period~~six months ended June 30, 2022 net cash provided by operating activities was ~~$36.8~~$68.2 million, and ~~$5.4~~we received $28.5 million ~~respectively. During the Successor Period and the Current Predecessor Period, $58.0 million and $0.8 million were received~~ in cash proceeds from the sale of assets ~~respectively.~~and equity securities in which we are invested. The primary uses of liquidity are to provide support for operating activities, restructuring activities and capital expenditures. We spent $20.5 million of cash on capital expenditures during the six months ended June 30, 2022.

~~At September 30, 2021, the borrowing base on the Credit Facility was $120.0 million and we had $41.1 million of letters of credit outstanding.~~

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

~~Uses of Liquidity~~

The primary uses of liquidity are to provide support for operating activities, restructuring activities and capital expenditures. The Successor spent $32.3 million of cash on capital expenditures during the Successor Period and the Predecessor spent $3.0 million of cash on capital expenditures during the Current Predecessor Period. We have incurred significant costs associated with the Chapter 11 Cases, including fees for legal, financial and restructuring advisors to us, and certain of our creditors. During the Current Predecessor Period, the Predecessor incurred $18.3 million of advisory and professional fees relating to the Chapter 11 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 the emergence from bankruptcy (which ultimately did not occur).

Debt Instruments

As of June 30, 2022, our borrowing base, ~~under~~as defined in 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 at such time, certain cash of SESI and its subsidiary guarantors, less reserves established by the administrative agent in its permitted discretion. On September 30, 2021 approximately $45.0 million of undrawn letters of credit were outstanding under the Credit Facility.

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 September 30, 2021, the borrowing base under the Credit FacilityAgreement, was approximately $120.0 million and we had ~~$41.1~~$34.3 million of letters of credit outstanding that reduced ~~its~~the borrowing ~~availability under the revolving credit facility. Subject to certain conditions, upon request and with the consent of the participating lenders, the total commitments~~availability. We had no outstanding borrowings under the Credit Facility ~~may be increased~~as of June 30, 2022.

Unless all loans are paid off and letters of credit outstanding are cash collateralized and the Credit Facility terminated, the Credit Facility requires, subject to ~~$170.0 million. SESI’s obligations~~permitted exceptions, compliance with various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility also requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if (a) an event of default has occurred and is continuing or (b) availability under the Credit Facility ~~are guaranteed by~~is less than the ~~Former Parent and all~~greater of ~~SESI’s material domestic subsidiaries and secured by substantially all~~$20.0 million or 15% of the ~~personal property~~lesser of the ~~Former Parent, SESI~~aggregate commitments and ~~SESI’s material domestic subsidiaries,~~the borrowing base. We were in ~~each case, subject to certain customary exceptions.~~compliance with all required covenants as of June 30, 2022.

Other Matters

~~Borrowings~~

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Foreign Currency Exchange Rates Risk

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

Interest Rate Risk

We are exposed to changes in interest rates on borrowings under our Credit Facility. Any borrowings under the Credit Facility will bear interest, at ~~SESI’s~~our option, at either an adjusted LIBOR rate plus an applicable margin ranging from 3.00% to 3.50% per annum, or an alternate base rate plus an applicable margin ranging from 2.00% to 2.50% per annum, in each case on the basis of the ~~then applicable~~ consolidated fixed charge coverage ratio. In addition, ~~SESI is~~we are 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~~fees. Upon the cessation of ~~0.50% per annum on the daily unused amount of~~LIBOR, the Credit Facility ~~in each case, quarterly in arrears.~~

~~The Credit Facility contains various covenants requiring compliance, including, but not limited to, limitations on~~provides for the ~~incurrence~~use of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility 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 underalternative benchmark rates for the ~~Credit Facility is less than the greater of $20.0 million or 15%~~determination of the ~~lesser of the aggregate commitments~~borrowing rate, and the ~~borrowing base. The covenants and other restrictions~~cessation of ~~the Credit Facility significantly restrict our ability to incur~~LIBOR will not have a material impact on us. However, as of June 30, 2022, we had no outstanding borrowings ~~other than letters of credit.~~

~~See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 9 –~~ ~~“Debt”~~ ~~and Note 23 - "Subsequent Events" for additional information regarding waivers to~~under the Credit Facility.

~~Other Matters~~

~~Off-Balance Sheet Arrangements and Hedging Activities~~

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

~~Recently Adopted Accounting Guidance~~

~~See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 22 –~~ ~~“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~~

Prior to the first quarter of 2021, the functional currency of the majority of our international subsidiaries was US dollars and the functional currency for certain of our international subsidiaries was the local currency.

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 change 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.

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.

We do not hold derivatives for trading purposes or use derivatives with complex features. When 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 30, 2021, the Successor had no outstanding foreign currency forward contracts.

~~Interest Rate Risk~~

~~At September 30, 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.”~~

Inflation Risk

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

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our ~~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 proceduresare designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, the disclosure controls and procedures provide reasonable assurance that such information is accumulated and communicated to management, including our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer, or persons performing similar functions,~~CFO, as appropriate, to allow timely decisions regarding required disclosure. An evaluation was carried out, under the supervision and with the participation of our management, including our ~~Executive Chairman~~CEO and ~~Principal Executive Officer (“PEO”) and Chief Financial Officer (“CFO”),~~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 ~~PEO~~CEO and CFO have concluded that our disclosure controls and procedures as of ~~September~~June 30, ~~2021~~2022 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~~specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our ~~PEO~~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.~~required disclosure.

~~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 September 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 ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal actions incidental to our business. ~~The outcome~~However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings ~~is unpredictable.~~after considering available defenses and any insurance coverage or indemnification rights will have a material adverse effect on our financial position, results of operations or cash flows. See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and ~~Notes”~~Notes – Note 1913 – “Contingencies.”

~~For more information on the Chapter 11 Cases, see Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1 –~~ ~~“Basis of Presentation”and Part 1, Item 2, “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 the Annual Report. ThereExcept as set forth below, there have been no material changes to the ~~risk factors~~Risk Factors which we previously disclosed ~~under~~in our Form 10-K.

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

Our revenue is derived from the ~~caption “Risk Factors”~~services and products that we offer to major, national and independent oil and natural gas exploration and production companies around the world for the various phases of their respective well’s economic life cycles. Given the concentration of our business activities in the ~~Annual Report except~~oil and gas industry, we will be particularly exposed to certain economic downturns. United States and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including the ongoing COVID-19 pandemic, component shortages and related supply chain challenges, geopolitical developments such as ~~set forth below. Additional risks~~the conflict between Ukraine and ~~uncertainties not currently known~~Russia, and increasing inflation rates and the responses by central banking authorities to control such inflation, among others.

General business and economic conditions that could affect us and our customers include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we and our customers operate. A weak economic environment could result in significant decreases in demand for our products and services, including the delay or cancellation of current or anticipated projects. In particular, rising inflation rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, equipment, parts, consumables and shipping. A high inflationary environment may also cause customers to defer or decrease their expenditures on the services and products that we ~~currently deem immaterial may materially~~provide. In addition, supply chain disruptions and delays, could adversely affect our ~~business, financial condition or results of operations or~~ability to provide our services and deliver our products in a timely manner, which could impair our ability to meet customer demand and result in ~~changes~~lost sales, increased supply chain costs or damage to ~~the risk factors previously disclosed under the caption “Risk Factors” in~~ our ~~Annual Report. The following discussion~~reputation. Any 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 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 are not able to remediate the material weakness and otherwise to maintain an effective system of internal control over financial reporting in the future, our financial statements may be materially misstated and investors may lose confidence in the accuracy and completeness of our 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 remediate the 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 sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively. At this time, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts. We cannot assure you that our efforts will remediate this material weakness in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.

On November 4, 2021, OSHA announced an ETS requiring that employers with 100 or more employees to implement and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to choose to either be vaccinated or undergo weekly COVID-19 testing and wear a face covering in the workplace. On November 5, 2021, the ETS was stayed by the U.S. Fifth Circuit Court of Appeals pending additional court review. The Biden administration has requested that the appellate court reinstate the mandate. Multiple other lawsuits were filed regarding the ETS in various jurisdictions. The pending lawsuits are expected to be consolidated before a federal circuit court, which circuit is then expected to rule on whether previous grants or denials of temporary stays will stand and to weigh in on the constitutionality of and other challenges to the ETS mandate. Additional vaccine mandates may be announced in jurisdictions in which our businesses operate. Our implementation of any such requirements if and when they are deemed to be enforceable may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, whichforegoing these economic conditions could have a material adverse effect on our business, ~~and~~ financial condition, and ~~may result in costs~~results of ~~compliance that are difficult to quantify at this time and may also impact our financial condition.~~operations.

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

On ~~June 1, 2021,~~March 28, 2022, the Board and the Compensation Committee approved new forms of restricted stock unit (“RSU”) award agreements and forms of performance stock unit (“PSU”) award agreements (collectively, the ~~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)~~“Award Agreements”) under the ~~Company’s Management Incentive Plan to certain~~MIP, and approved the grant of 72,050 RSUs and 288,199 PSUs.

Awards made under the ~~Company’s non-employee directors and officers (the “Restricted Stock Grants”). The Restricted Stock Grants will~~forms of RSU award agreements for our employees generally vest in three equal annual installments over athe three-year period, ~~of three years,~~ subject to ~~earlier vesting and forfeiture on~~ terms and conditions set forth in the ~~applicable~~forms of RSU award ~~agreement. The issuance~~agreements. Awards made under the forms PSU award agreements may be earned between 25% and 100% of the ~~restricted Class B common stock is exempt from registration under~~target award based on achievement of share price goals set forth in the ~~Securities Act~~forms of ~~1933, as amended (the “Securities Act”), pursuant~~PSU award agreements and will vest to ~~section 4(a)(2)~~the extent that share price goals are achieved based on the terms and conditions set forth in the forms of ~~the Securities Act and/or Regulation D promulgated thereunder.~~PSU award agreements.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None to report.

Item 6. Exhibits


Exhibit No.	Description
2.1	First Amended Joint Prepackaged Plan of Reorganization for Superior Energy Services, Inc. and its Affiliate Debtors Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 ~~of the Company’s~~to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on January 20, ~~2021 (File~~2021(File No. 001-34037)).
2.2	Agreement and Plan of Merger, dated as of February 2, 2021, by and among Superior Energy Services, Inc., Superior BottomCo Inc. and Superior NewCo, Inc. (incorporated herein by reference to Exhibit 10.2 ~~of the Company’s~~to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021 (File No. 001-34037))
~~2.3*+~~	~~Securities Purchase and Sale Agreement, dated as of July 9, 2021, by and among SES Holdings, LLC, Select Energy Services, Inc. (solely to the extent stated therein), and Complete Energy Services, Inc.~~.
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
~~10.1~~10.1^	~~Waiver to Credit~~Executive Chairman Restricted Stock Unit Award 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 other financial institutions and 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))
~~10.2~~	Second Amendment and Waiver to Credit Agreement and First Amendment to Guaranty and Collateral Agreement, dated as of November 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 other financial institutions and other parties thereto as lenders (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on November 15, 2021 (File No. 001-34037))
~~10.~~3	Third Amendment to the Stockholders Agreement, dated as of July 14, 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 July 21, 2021 (File No. 001-34037))
~~10.4~~	Fourth Amendment to the Stockholders Agreement, dated as of November 15, 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 November 15, 2021 (File No. 001-34037))
~~10.~~5^	~~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’s Current Report on Form 8-K filed on ~~September 13, 2021 (File~~July 18, 2022(File No. 001-34037)).
10.2^	Executive Chairman Agreement (incorporated by reference to Exhibit 10.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on July 18, 2022(File No. 001-34037)).
31.1*	Officer’s certification pursuant to ~~Section 302 of~~Rules 13a-14(a) and 15d-14(a) under the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002~~1934, as amended.
31.2*	Officer’s certification pursuant to ~~Section 302 of~~Rules 13a-14(a) and 15d-14(a) under the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002~~1934, as amended.
32.1*	Officer’s certification pursuant to Section ~~906~~1350 of Title 18 of the ~~Sarbanes-Oxley Act of 2002~~U.S. Code.
32.2*	Officer’s certification pursuant to Section ~~906~~1350 of Title 18 of the ~~Sarbanes-Oxley Act of 2002~~U.S. Code.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
104*	~~The cover page of this Quarterly report on Form 10-Q for~~Cover Page Interactive Data File (embedded within the ~~quarter ended September 30, 2021, formatted in~~ Inline XBRL ~~(contained in Exhibit 101)~~document)

* Filed herewith

+ Schedules and exhibits omitted pursuant to Item 601(a)(5) and/or Item 601(b)(2) of Regulation S-K. The Company will furnish a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request

^ Management contract or compensatory plan or arrangement

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

SIGNATURES

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

SUPERIOR ENERGY SERVICES, INC.

(Registrant)



Date:	~~December 2, 2021~~August 4, 2022	By:	/s/ ~~Michael Y. McGovern~~Brian K. Moore
			~~Michael Y. McGovern~~Brian K. Moore
			~~Principal~~President and Chief Executive Officer
			(~~Duly Authorized~~Principal Executive Officer)


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

5333


	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


	As of February 2, 2021
				Reorganization				Fresh Start
	Predecessor			Adjustments				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		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		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		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


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


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


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


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


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


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


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


	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


	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


	December 31, 2020
7.75% Senior unsecured notes due September 2024	$	500,000
7.125% Senior unsecured notes due December 2021		800,000
Total debt, gross		1,300,000
Reclassification to liabilities subject to compromise		(1,300,000	)
Total debt, net	$	-


Remainder of 2021	$	673
2022		7,150
2023		4,949
2024		3,300
2025		2,504
Thereafter		18,246
Total lease payments		36,822
Less imputed interest		(7,701	)
Total	$	29,121


	Predecessor Fair Value at
	December 31, 2020
	Level 1		Level 2		Level 3		Total
Non-qualified deferred compensation assets and liabilities
Intangible and other long-term assets, net	$	-	$	15,013	$	-	$	15,013
Accounts payable		-		2,869		-		2,869
Other long-term liabilities		-		20,697		-		20,697

Total debt	$	409,050	$	-	$	-	$	409,050



	Drilling								Corporate
	Products		Production			Technical			and			Consolidated
	and Services		Services			Solutions			Other			Total
Revenues	$	56,001	$	46,962		$	33,013		$	-		$	135,976
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		23,714		38,899			24,461			-			87,074
Depreciation, depletion, amortization and accretion		14,424		7,931			4,983			825			28,163
General and administrative expenses		12,948		6,594			9,844			22,054			51,440
Restructuring expense		-		-			-			25,746			25,746
Reduction in value of assets		-		0			2,929			-			2,929
Income (loss) from operations		4,915		(6,462	)		(9,204	)		(48,625	)		(59,376	)
Interest income (expense), net		-		-			1,122			(25,922	)		(24,800	)
Other income		-		-			-			(1,399	)		(1,399	)
Income (loss) from continuing operations before income taxes	$	4,915	$	(6,462	)	$	(8,082	)	$	(75,946	)	$	(85,575	)


	Drilling		Completion
	Products		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