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, ~~2022~~2023

 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~~INC.

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)



	Delaware		87-4613576
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

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

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


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

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

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

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


Large Accelerated filer ☐		Accelerated filer ☐
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 ~~October~~July 31, ~~2022~~2023 was 19,998,695.

The number of shares of the registrant’s Class B common stock outstanding on ~~October~~July 31, ~~2022~~2023 was ~~76,269~~152,030.

TABLE OF CONTENTS




		Page
	Information Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Operations	5
	Unaudited Condensed Consolidated Statements of ~~Comprehensive Income (Loss)~~Changes in Stockholders' Equity	76
	~~Unaudited Consolidated Statements of Changes in Stockholders' Equity (Deficit)~~	8
	Unaudited Condensed Consolidated Statements of Cash Flows	97
	Notes to Unaudited Condensed Consolidated Financial Statements	108
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2717
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3322
Item 4.	Controls and Procedures	3323

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3424
Item 1A.	Risk Factors	34
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	34
~~Item 3.~~	~~Defaults Upon Senior Securities~~	34
~~Item 4.~~	~~Mine Safety Disclosures~~	34
~~Item 5.~~	~~Other Information~~	3424
Item 6.	Exhibits	3525

SIGNATURES		3626

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2022~~2023 (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;~~markets;

•

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~~2022 (the ~~"Form 10-K"~~“Form 10-K”) ~~and this Form 10-Q Part II, Item 1A, "Risk Factors"~~. We undertake no obligation to update any of our forward-looking statements in ~~this discussion.~~the Form 10-Q. 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)


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	453,682		$	314,974		$	330,129		$	258,999
Accounts receivable, net		222,646			182,432			249,479			249,808
Income taxes receivable		5,527			5,099			4,541			6,665
Prepaid expenses		16,029			15,861			19,291			17,299
Inventory		69,962			60,603			82,897			65,587
Investment in equity securities		16,888			25,735
Other current assets		5,790			6,701			6,104			6,276
Assets held for sale		18,314			37,528			1,369			11,978
Total current assets		808,838			648,933			693,810			616,612
Property, plant and equipment, net		283,906			356,274			298,567			282,376
Note receivable		66,078			60,588			71,581			69,679
Restricted cash		79,757			79,561			80,318			80,108
Other long-term assets, net		48,636			54,152
Deferred tax assets								73,362			97,492
Other assets, net								42,978			44,745
Total assets	$	1,287,215		$	1,199,508		$	1,260,616		$	1,191,012

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	51,398		$	43,080			58,865		$	31,570
Accrued expenses		107,972			108,610			100,416			116,575
Income taxes payable		15,900			8,272			11,687			11,682
Decommissioning liability								26,329			9,770
Liabilities held for sale		3,666			5,607			3,090			3,349
Total current liabilities		178,936			165,569			200,387			172,946
Decommissioning liability		144,781			190,380			133,591			150,901
Deferred income taxes		21,761			12,441
Other long-term liabilities		80,616			89,385
Other liabilities								45,186			84,281
Total liabilities		426,094			457,775			379,164			408,128

Stockholders’ equity (deficit):
Class A common stock $0.01 par value; 50,000 shares authorized; 19,999 shares issued and outstanding at September 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 September 30, 2022 and December 31, 2021		1			1
Stockholders’ equity:
Class A common stock $0.01 par value; 50,000 shares authorized; 19,999 shares issued and outstanding at June 30, 2023 and December 31, 2022								200			200
Class B common stock $0.01 par value; 2,000 shares authorized; 156 shares issued and 152 shares outstanding at June 30, 2023 and 84 shares issued and 80 shares outstanding at December 31, 2022								2			1
Class A Additional paid-in capital		902,486			902,486			902,486			902,486
Class B Additional paid-in capital		4,743			1,224			6,855			5,896
Accumulated deficit		(46,309	)		(162,178	)		(28,091	)		(125,699	)
Total stockholders’ equity		861,121			741,733			881,452			782,884
Total liabilities and stockholders’ equity	$	1,287,215		$	1,199,508		$	1,260,616		$	1,191,012

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

~~(unaudited)~~

For the Three Months Ended

September 30, 2022

2022

2021

Revenues:

Services

$
99,763

$
85,667

Rentals

80,173

59,420

Product sales

42,351

33,496

Total revenues

222,287

178,583

Cost of revenues:

Services

66,205

71,688

Rentals

25,816

26,011

Product sales

24,060

28,371

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

116,081

126,070

Depreciation, depletion, amortization and accretion:

Services

8,266

28,426

Rentals

6,749

19,717

Product sales

5,493

11,065

Total depreciation, depletion, amortization and accretion

20,508

59,208

General and administrative expenses

31,841

33,671

Restructuring expenses

1,223

4,712

Other (gains) and losses, net

(13,397
)

(1,097
)
Income (loss) from operations

66,031

(43,981
)
Other income (expense):

Interest income, net

3,373

647

Other income (expense)

(6,838
)

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

62,566

(49,558
)
Income tax (expense) benefit

(14,058
)

9,518

Net income (loss) from continuing operations

48,508

(40,040
)
Income (loss) from discontinued operations, net of income tax

17

(5,161
)
Net income (loss)

$
48,525

$
(45,201
)

Income (loss) per share - basic:

Net income (loss) from continuing operations

$
2.42

$
(2.00
)
Income (loss) from discontinued operations, net of income tax

-

(0.26
)
Net income (loss)

$
2.42

$
(2.26
)

Income (loss) per share - diluted:

Net income (loss) from continuing operations

$
2.41

$
(2.00
)
Income (loss) from discontinued operations, net of income tax

0.01

(0.26
)
Net income (loss)

$
2.42

$
(2.26
)

Weighted-average shares outstanding - basic

20,024

19,999

Weighted-average shares outstanding - diluted

20,090

19,999

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

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

~~Condensed Consolidated Statements of Operations~~

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

~~(unaudited)~~

Successor

Predecessor

For the Nine Months Ended September 30, 2022

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

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

Revenues:

Services

$
291,268

$
209,133

$
19,234

Rentals

224,328

143,972

14,434

Product sales

129,261

97,213

12,260

Total revenues

644,857

450,318

45,928

Cost of revenues:

Services

199,903

166,801

15,080

Rentals

74,664

60,960

5,876

Product sales

74,862

69,391

8,817

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

349,429

297,152

29,773

Depreciation, depletion, amortization and accretion:

Services

30,224

73,174

3,500

Rentals

23,278

50,558

2,627

Product sales

24,437

34,524

2,231

Total depreciation, depletion, amortization and accretion

77,939

158,256

8,358

General and administrative expenses

94,090

84,417

11,052

Restructuring expenses

4,441

20,533

1,270

Other (gains) and losses, net

(30,263
)

(732
)

-

Income (loss) from operations

149,221

(109,308
)

(4,525
)
Other income (expense):

Interest income, net

6,011

1,394

202

Reorganization items, net

-

-

335,560

Other income (expense)

(6,362
)

(6,499
)

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

148,870

(114,413
)

329,132

Income tax (expense) benefit

(32,813
)

15,550

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

116,057

(98,863
)

269,129

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

(188
)

(33,967
)

(352
)
Net income (loss)

$
115,869

$
(132,830
)

$
268,777

Income (loss) per share - basic:

Net income (loss) from continuing operations

$
5.80

$
(4.94
)

$
18.13

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

(0.01
)

(1.70
)

(0.02
)
Net income (loss)

$
5.79

$
(6.64
)

$
18.11

Income (loss) per share - diluted:

Net income (loss) from continuing operations

$
5.78

$
(4.94
)

$
18.06

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

(0.01
)

(1.70
)

(0.03
)
Net income (loss)

$
5.77

$
(6.64
)

$
18.03

Weighted-average shares outstanding - basic

20,016

19,997

14,845

Weighted-average shares outstanding - diluted

20,074

19,997

14,905

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

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

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

~~(in thousands)~~

(unaudited)

For the Three Months Ended

September 30, 2022

2022

2021

Net income (loss)

$
48,525

$
(45,201
)
Change in cumulative translation adjustment, net of tax

-

-

Comprehensive income (loss)

$
48,525

$
(45,201
)

Successor

Predecessor

For the Nine Months Ended September 30, 2022

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

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

Net income (loss)

$
115,869

$
(132,830
)

$
268,777

Change in cumulative translation adjustment, net of tax

-

-

67,947

Comprehensive income (loss)

$
115,869

$
(132,830
)

$
336,724


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenues:
Services	$	106,130		$	100,066		$	199,420		$	191,505
Rentals		85,361			76,993			170,971			144,155
Product sales		52,982			47,581			94,219			86,910
Total revenues		244,473			224,640			464,610			422,570
Cost of revenues:
Services		58,940			73,530			124,019			133,698
Rentals		30,314			24,235			59,362			48,848
Product sales		31,500			23,203			55,094			50,802
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		120,754			120,968			238,475			233,348
Depreciation, depletion, amortization and accretion:
Services		7,704			8,292			14,999			21,958
Rentals		6,165			6,492			12,859			16,529
Product sales		6,752			8,562			12,902			18,944
Total depreciation, depletion, amortization and accretion		20,621			23,346			40,760			57,431
General and administrative expenses		31,177			30,231			62,167			62,249
Restructuring expenses		-			1,663			1,983			3,218
Other (gains) and losses, net		47			(18,013	)		(1,351	)		(16,866	)
Income from operations		71,874			66,445			122,576			83,190
Other income (expense):
Interest income, net		6,513			1,459			11,952			2,638
Other income (expense)		(1,836	)		(13,471	)		(3,988	)		476
Income from continuing operations before income taxes		76,551			54,433			130,540			86,304
Income tax expense		(9,147	)		(10,871	)		(33,212	)		(18,755	)
Net income from continuing operations		67,404			43,562			97,328			67,549
Income (loss) from discontinued operations, net of income tax		(9	)		(1,944	)		280			(205	)
Net income	$	67,395		$	41,618		$	97,608		$	67,344

Income (loss) per share - basic:
Net income from continuing operations	$	3.35		$	2.18		$	4.84		$	3.38
Income (loss) from discontinued operations, net of income tax		-			(0.10	)		0.01			(0.01	)
Net income	$	3.35		$	2.08		$	4.85		$	3.37

Income (loss) per share - diluted:
Net income from continuing operations	$	3.35		$	2.17		$	4.83		$	3.37
Income (loss) from discontinued operations, net of income tax		-			(0.10	)		0.02			(0.01	)
Net income	$	3.35		$	2.07		$	4.85		$	3.36

Weighted-average shares outstanding
Basic		20,126			20,024			20,116			20,011
Diluted		20,143			20,076			20,136			20,065

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

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

(in thousands)

(unaudited)

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

Net income

-

-

-

-

-

-

-

-

(45,201
)

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

-

-

-

-

-

556

-

-

-

556

Balances, September 30, 2021 (Successor)

19,999

$
200

76

$
1

$
902,486

$
640

$
-

$
-

$
(132,830
)

$
770,497

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

Net income

-

-

-

-

-

-

-

-

48,525

48,525

Stock-based compensation expense, net

-

-

-

-

-

1,976

-

-

-

1,976

Balances, September 30, 2022 (Successor)

19,999

$
200

76

$
1

$
902,486

$
4,743

$
-

$
-

$
(46,309
)

$
861,121


										Additional
	Common Stock									paid-in
	Class A				Class B					capital					Accumulated
	Shares		Amount		Shares			Amount		Class A		Class B			deficit			Total

Balances, December 31, 2021		19,999	$	200		76		$	1	$	902,486	$	1,224		$	(162,178	)	$	741,733
Net income		-		-		-			-		-		-			286,465			286,465
Cash dividends ($12.45 per share)		-		-		-			-		-		-			(249,986	)		(249,986	)
Stock-based compensation expense, net		-		-		-			-		-		4,807			-			4,807
Restricted stock units vested		-		-		10			-		-		-			-			-
Share withheld and retired		-		-		(2	)		-		-		(135	)		-			(135	)
Shares placed in treasury		-		-		(4	)		-		-		-			-			-
Balances, December 31, 2022		19,999		200		80			1		902,486		5,896			(125,699	)		782,884
Net income		-		-		-			-		-		-			30,213			30,213
Restricted stock units vested		-		-		91			1		-		(1	)		-			-
Shares withheld and retired		-		-		(19	)		-		-		(1,116	)		-			(1,116	)
Stock-based compensation expense, net		-		-		-			-		-		1,052			-			1,052
Balances, March 31, 2023		19,999	$	200		152		$	2	$	902,486	$	5,831		$	(95,486	)	$	813,033
Net income		-		-		-			-		-		-			67,395			67,395
Stock-based compensation expense, net		-		-		-			-		-		1,024			-			1,024
Balances, June 30, 2023		19,999	$	200		152		$	2	$	902,486	$	6,855		$	(28,091	)	$	881,452

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


										For the Six Months Ended
	Successor						Predecessor			June 30,
	For the Nine Months Ended September 30, 2022			For the Period February 3, 2021 through September 30, 2021			For the Period January 1, 2021 through February 2, 2021			2023				2022
Cash flows from operating activities:
Net income (loss)	$	115,869		$	(132,830	)	$	268,777
Adjustments to reconcile net income (loss) to net cash from operating activities:
Net income										$	97,608			$	67,344
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion, amortization and accretion		77,939			189,758			10,499			40,760				57,431
Deferred income taxes		7,254			(27,126	)		54,322			23,795				1,687
Amortization of credit facility costs		381			-			-
Stock based compensation expense		3,519			2,126			935			2,076				1,543
Reorganization items, net		-			-			(354,279	)
Bad debt		(106	)		(5,303	)		(210	)		668				(920	)
Gain on sale of assets and businesses		-			-			58
Gain on sale of equity securities		(3,611	)		-			-			-				(3,611	)
Unrealized gain on investment in equity securities		(908	)		1,620			-			-				(544	)
Other (gains) and losses, net		(37,148	)		10,601			-
Other gains, net											(2,100	)			(23,296	)
Washington State Tax Settlement											(27,068	)			-
Decommissioning costs											(2,878	)			-
Other reconciling items, net		2,454			9,592			1,017			(1,648	)			2,783
Changes in operating assets and liabilities:
Accounts receivable		(37,072	)		(15,233	)		3,602			(506	)			(26,362	)
Prepaid expenses		(279	)		4,749			(340	)		(1,992	)			(2,652	)
Inventory and other current assets		(8,641	)		15,983			(221	)		(19,464	)			(5,358	)
Accounts payable		(3,296	)		4,842			(2,365	)		16,707				(1,986	)
Accrued expenses		(3,726	)		(31,439	)		23,489			(18,399	)			144
Income taxes		7,200			10,676			340			2,129				2,185
Other, net		2,196			(1,190	)		(241	)		(6,753	)			(144	)
Net cash from operating activities		122,025			36,826			5,383			102,935				68,244
Cash flows from investing activities:
Payments for capital expenditures		(42,901	)		(25,447	)		(3,035	)		(45,626	)			(20,514	)
Proceeds from sales of assets		46,414			58,006			775			15,147				15,183
Proceeds from sales of equity securities		13,366			-			-			-				13,366
Net cash from investing activities		16,879			32,559			(2,260	)		(30,479	)			8,035
Cash flows from financing activities:
Credit facility costs		-			(14	)		(1,920	)
Tax withholdings for vested restricted stock units		-			(1,485	)		-			(1,116	)	-		-
Net cash from financing activities		-			(1,499	)		(1,920	)		(1,116	)			-
Effect of exchange rate changes on cash		-			-			311
Net change in cash, cash equivalents, and restricted cash		138,904			67,886			1,514			71,340				76,279
Cash, cash equivalents, and restricted cash at beginning of period		394,535			269,698			268,184			339,107				394,535
Cash, cash equivalents, and restricted cash at end of period	$	533,439		$	337,584		$	269,698		$	410,447			$	470,814

See accompanying notes to unaudited condensed consolidated financial statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(unless noted otherwise, amounts in thousands, except share data)

(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~~such that the information presented is not misleading.

As used herein, the “Company,” “we,” “us” and similar terms refer to ~~(i) prior to the Emergence Date (as defined below), SESI Holdings, Inc. (formerly known as Superior Energy Services, Inc.) and its subsidiaries (“Predecessor”) and (ii) after the Emergence Date,~~ Superior Energy Services, Inc. ~~(formerly known as Superior Newco, Inc.)~~ and its consolidated subsidiaries, (“Successor”). Due to our adoption of fresh start accounting, discussed below, our operations for the nine months ended September 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 September 30, 2021 (the “Successor Period”).unless otherwise specifically stated.

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

In the opinion of management, the accompanying unaudited condensed consolidated 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, ~~2022, and~~2023, our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, and ~~2021 and~~our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. The balance sheet as of December 31, ~~2021,~~2022, was derived from our audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

~~Emergence from Voluntary Reorganization under Chapter 11~~

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

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

~~Use of Estimates~~

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

(2) Revenue and Accounts Receivable

Disaggregation of Revenue

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

For the Three Months Ended

September 30, 2022

2022

2021

U.S. land

Rentals

$
39,673

$
25,627

Well Services

9,808

6,638

Total U.S. land

49,481

32,265

U.S. offshore

Rentals

37,829

28,997

Well Services

23,609

22,756

Total U.S. offshore

61,438

51,753

International

Rentals

27,055

21,593

Well Services

84,313

72,972

Total International

111,368

94,565

Total Revenues

$
222,287

$
178,583


							For the Three Months Ended				For the Six Months Ended
	Successor				Predecessor		June 30,				June 30,
	For the Nine Months Ended September 30, 2022		For the Period February 3, 2021 through September 30, 2021		For the Period January 1, 2021 through February 2, 2021		2023		2022		2023		2022
U.S. land
Rentals	$	117,426	$	57,525	$	4,917	$	44,730	$	43,791	$	89,863	$	77,753
Well Services		18,507		15,545		3,379		5,806		4,151		12,161		8,699
Total U.S. land		135,933		73,070		8,296		50,536		47,942		102,024		86,452

U.S. offshore
Rentals		106,913		76,290		8,196		37,516		36,331		73,186		69,084
Well Services		84,499		68,751		7,371		23,405		32,569		39,726		60,890
Total U.S. offshore		191,412		145,041		15,567		60,921		68,900		112,912		129,974

International
Rentals		72,703		52,087		5,226		30,165		23,607		58,183		45,648
Well Services		244,809		180,120		16,839		102,851		84,191		191,491		160,496
Total International		317,512		232,207		22,065		133,016		107,798		249,674		206,144
Total Revenues	$	644,857	$	450,318	$	45,928	$	244,473	$	224,640	$	464,610	$	422,570

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

For the Three Months Ended

September 30, 2022

2022

2021

Services

Rentals

$
15,301

$
8,735

Well Services

84,462

76,932

Total Services

99,763

85,667

Rentals

Rentals

77,561

56,743

Well Services

2,612

2,677

Total Rentals

80,173

59,420

Product Sales

Rentals

11,695

10,739

Well Services

30,656

22,757

Total Product Sales

42,351

33,496

Total Revenues

$
222,287

$
178,583


							For the Three Months Ended				For the Six Months Ended
	Successor				Predecessor		June 30,				June 30,
	For the Nine Months Ended September 30, 2022		For the Period February 3, 2021 through September 30, 2021		For the Period January 1, 2021 through February 2, 2021		2023		2022		2023		2022
Services
Rentals	$	39,113	$	24,591	$	2,005	$	17,875	$	12,654	$	35,020	$	23,812
Well Services		252,155		184,542		17,229		88,255		87,412		164,400		167,693
Total Services		291,268		209,133		19,234		106,130		100,066		199,420		191,505

Rentals
Rentals		216,371		133,231		14,082		81,647		73,563		163,722		138,810
Well Services		7,957		10,741		352		3,714		3,430		7,249		5,345
Total Rentals		224,328		143,972		14,434		85,361		76,993		170,971		144,155

Product Sales
Rentals		41,558		28,080		2,252		12,889		17,512		22,490		29,863
Well Services		87,703		69,133		10,008		40,093		30,069		71,729		57,047
Total Product Sales		129,261		97,213		12,260		52,982		47,581		94,219		86,910
Total Revenues	$	644,857	$	450,318	$	45,928	$	244,473	$	224,640	$	464,610	$	422,570

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~~an allowance for ~~doubtful accounts at net realizable value. The allowance for doubtful accounts is~~credit losses 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 for credit losses in future periods may be made based on changing customer conditions. Our allowance for ~~doubtful accounts~~credit losses as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately $~~5.3~~6.5 million and $~~2.2~~6.1 million, respectively.

(3) Inventory

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

September 30, 2022

December 31, 2021

Finished goods

$
36,838

$
26,187

Raw materials

9,562

9,753

Work-in-process

5,398

4,253

Supplies and consumables

18,164

20,410

Total

$
69,962

$
60,603


	June 30, 2023		December 31, 2022
Finished goods	$	45,319	$	36,136
Raw materials		7,898		8,351
Work-in-process		13,759		4,718
Supplies and consumables		15,921		16,382
Total	$	82,897	$	65,587

Finished goods inventory includes component parts awaiting assembly of approximately $22.2 million and $20.7 million as of June 30, 2023 and December 31, 2022, respectively.

(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.~~

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

September 30, 2022

December 31, 2021

Wells

$
83,167

$
97,810

Platform

61,614

92,570

Decommissioning Liability

144,781

190,380

Less: Note Receivable

(66,078
)

(60,588
)
Decommissioning Liability, net of Note Receivable

$
78,703

$
129,792


	June 30, 2023			December 31, 2022
Wells	$	93,564		$	96,171
Platform		66,356			64,500
Total decommissioning liability		159,920			160,671
Note receivable		(71,581	)		(69,679	)
Total decommissioning liability, net of note receivable	$	88,339		$	90,992

Accretion expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $~~2.0~~2.4 million and $~~7.4~~4.7 million, ~~respectively. Accretion expense for the three months ended September 30, 2021, the Successor Period~~respectively, and ~~Predecessor Period was~~ $~~1.4~~ ~~million, $3.6~~2.7 million and $~~0.5~~5.4 million for the three and six months ended June 30, 2022, respectively. Additionally, during the six months ended June 30, 2023, we incurred well decommissioning costs of $5.5 million.

(5) Note Receivable

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

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

~~Due to the reduction in estimated costs under the reef-in-place program, the~~ The gross amount of the ~~seller’s~~seller's obligation ~~was reduced~~ to us is $~~106.9~~105.2 million and is recorded at its present value, which totaled $71.6 million as of June 30, ~~2022. As of September 30, 2022 the carrying value of the note receivable was $66.1~~ ~~million~~.
2023.

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

Non-cash interest income related to the note receivable for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $0.9 million and $~~2.9~~1.9 million, respectively. Non-cash interest income related to the note receivable for the three and six months ended ~~September~~June 30, ~~2021, the Successor Period and Predecessor Period~~2022 was $~~1.2~~ ~~million, $3.1~~1.0 million and $~~0.4~~2.0 million, respectively. ~~As the interest~~Interest income ~~on the note receivable is non-cash, it~~ is included in other reconciling items, net in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows.~~Cash Flows.

(6) Property, Plant and Equipment, Net

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


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
Machinery and equipment	$	379,849		$	360,353		$	413,937		$	378,907
Buildings, improvements and leasehold improvements		71,965			75,374			70,394			70,816
Automobiles, trucks, tractors and trailers		6,326			6,450			6,546			6,376
Furniture and fixtures		19,563			19,668			19,384			19,373
Construction-in-progress		6,696			6,700			11,756			5,185
Land		26,796			28,671			26,698			26,695
Oil and gas producing assets		178			44,700			12,339			11,714
Total		511,373			541,916			561,054			519,066
Accumulated depreciation and depletion		(227,467	)		(185,642	)		(262,487	)		(236,690	)
Property, plant and equipment, net	$	283,906		$	356,274		$	298,567		$	282,376

Depreciation and depletion expense associated with our property, plant and equipment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $~~18.2~~18.0 million and $~~69.8~~35.6 million, respectively. ~~Depreciation~~For the three and six months ended June 30, 2022, depreciation and depletion expense ~~excluding depreciation~~associated with our property, plant and ~~depletion related to assets held for sale, for the three months ended September 30, 2021, the Successor Period and Predecessor Period~~equipment was $~~57.7~~ ~~million, $154.2~~20.4 million and $~~7.8~~51.6 million, respectively.

Gains and losses on disposals of assets are recognized within other (gains) and losses, net in our statement of operations. Prior to emergence from bankruptcy, we recognized gains and losses on the disposal of assets within general and administrative expenses.

~~Other (gains) and losses, net for the three and nine months ended September 30, 2022 totaled $13.4~~ ~~million and $30.3~~ ~~million, respectively and for the three months ended September 30, 2021 and the Successor Period were $1.1~~ ~~million and $0.7~~ ~~million, respectively. Gains on the disposal of assets included in other (gains) and losses, net during the three and nine months ended September 30, 2022 were $13.4~~ ~~million and $12.9~~ ~~million, respectively and primarily relate to disposals of non-core businesses and assets within our Well Services segment.~~

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. 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.~~

(7) Debt

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

As of ~~September~~June 30, ~~2022,~~2023, our borrowing base, as defined in the Credit Agreement, was approximately $120.0 million, and we had $~~40.3~~34.7 million of letters of credit outstanding that reduced the borrowing availability. We had no outstanding borrowings under the Credit Facility as of ~~September~~June 30, ~~2022.~~

Unless all loans are paid off and letters of credit outstanding are cash collateralized and the Credit Facility terminated, the Credit Facility requires, subject to permitted exceptions, compliance with various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility also requires compliance with a fixed charge coverage ratio of ~~1.0~~ to ~~1.0~~ ~~if (a) an event of default has occurred and is continuing or (b) availability under the Credit Facility is less than the greater of $20.0~~ ~~million or~~ 15~~% of the lesser of the aggregate commitments and the borrowing base.~~2023. We were in compliance with all required covenants as of ~~September~~June 30, ~~2022.~~2023.

(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):~~basis:


	September 30, 2022
	Level 1		Level 2		Level 3		Total		June 30, 2023		December 31, 2022
Non-qualified deferred compensation assets and liabilities
Other long-term assets, net	$	-	$	14,873	$	-	$	14,873	$	16,637	$	16,299
Accrued expenses		-		1,780		-		1,780		1,758		1,831
Other long-term liabilities		-		15,205		-		15,205		14,927		15,855

Investment in equity securities	$	16,888	$	-	$	-	$	16,888

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

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

Our non-qualified deferred compensation plans investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent a Level 2 in the fair value hierarchy. Investment in equity securities relates to our ownership of common stock of Select Energy Services, Inc. (“Select”) 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.

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

(9) Other ~~income (expense)~~Income (Expense)

Other income (expense) primarily ~~relate~~relates 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 September 30, 2022, we held~~ ~~2.4~~ ~~million shares of Select common stock. During the three and nine months ended September 30, 2022, we recognized unrealized gains of $0.4~~ ~~million and $0.9~~ ~~million, respectively from our investment in equity securities. During the nine months ended September 30, 2022, we disposed of~~ ~~1.7~~ ~~million shares of Select for $13.4~~ ~~million, and we recognized gains totaling $3.6~~ ~~million, respectively, in connection with these transactions. No shares were disposed of during the three months ended September 30, 2022.~~

Losses on foreign currencies ~~during the three and nine months ended September 30, 2022~~ were $~~7.0~~1.7 million and $~~11.9~~3.6 million for the three and six months ended June 30, 2023, respectively. ~~Losses~~For the three and six months ended June 30, 2022, losses on foreign currencies ~~for the three months ended September 30, 2021, the Successor Period and the Predecessor Period~~ were $~~4.5~~ ~~million, $4.3~~10.5 million and $~~2.1~~4.9 million, respectively. ~~Losses on foreign currencies during the nine months ended September 30, 2022 include an expense of $2.7~~ ~~million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy.~~ Gains and losses on foreign currencies are primarily related to our operations in Brazil and Argentina.

During the three and six months ended June 30, 2022, we recognized unrealized losses of $5.9 million and unrealized gains of $0.5 million, respectively, from our investment in equity securities. During the three and six months ended June 30, 2022, proceeds from the disposal of equity securities totaled $6.0 million and $13.4 million, respectively. All investments in equity securities were disposed of prior to December 31, 2022.

(10) Other (Gains) and Losses

Other (gains) and losses, net include gains and losses on the disposal of assets as well as impairments, if any, related to long-lived assets. During the three months ended June 30, 2023, other losses were immaterial. During the six months ended June 30, 2023, we recognized net gains of $1.4 million. During the three and six months ended June 30, 2022, we recognized net gains of $18.0 million and $16.9 million, respectively.

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”). Converting to a reef-in-place program reduced the estimated costs associated with decommissioning the wells and platform, and also impacted the time required to complete the decommissioning activities.

The reduction in cost estimates 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, such that as of June 30, 2022, our decommissioning liability was reduced by $53.0 million and the related note receivable was increased by $2.6 million. In accordance with ASC 410, the carrying value of our oil and gas producing assets was reduced by $38.2 million, which represented the net book value of our oil and gas assets at June 30, 2022. 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.

(11) Segment Information

~~Business Segments~~

Our reportable segments are Rentals and Well Services.

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

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

We evaluate the performance of our reportable segments based on income or loss from operations. The segment measure is calculated as segment revenues less segment operating expenses, including general and administrative expenses, depreciation, depletion, amortization and accretion expense ~~restructuring expenses~~ and other ~~gains~~(gains) and ~~losses.~~losses, net. 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):~~follows:


For the Three Months Ended June 30, 2023				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	112,411		$	132,062		$	-		$	244,473
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		35,021			85,733			-			120,754
Depreciation, depletion, amortization and accretion		12,553			7,204			864			20,621
General and administrative expenses		6,993			11,391			12,793			31,177
Restructuring expenses		-			-			-			-
Other (gains) and losses, net		(262	)		309			-			47
Income (loss) from operations	$	58,106		$	27,425		$	(13,657	)	$	71,874

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 Six Months Ended June 30, 2023				Well			Corporate and			Consolidated
	Rentals			Services			Other			Total
Revenues	$	221,232		$	243,378		$	-		$	464,610
Cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		71,489			166,986			-			238,475
Depreciation, depletion, amortization and accretion		24,721			14,281			1,758			40,760
General and administrative expenses		14,195			22,890			25,082			62,167
Restructuring expenses		-			-			1,983			1,983
Other gains, net		(293	)		(1,058	)		-			(1,351	)
Income (loss) from operations	$	111,120		$	40,279		$	(28,823	)	$	122,576

For the Six Months Ended June 30, 2022				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 three months ended September 30, 2022

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
104,557

$
117,730

$
-

$
222,287

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

33,638

82,443

-

116,081

Depreciation, depletion, amortization and accretion

12,554

6,900

1,054

20,508

General and administrative expenses

7,020

10,220

14,601

31,841

Restructuring expenses

-

-

1,223

1,223

Other (gains) and losses, net

(4,946
)

(8,082
)

(369
)

(13,397
)
Income (loss) from operations

$
56,291

$
26,249

$
(16,509
)

$
66,031

For the three months ended September 30, 2021

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
76,217

$
102,366

$
-

$
178,583

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

32,638

93,432

-

126,070

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 expenses

-

-

4,712

4,712

Other (gains) and losses, net

800

(1,897
)

-

(1,097
)
Income (loss) from operations

$
(6,046
)

$
(18,229
)

$
(19,706
)

$
(43,981
)

For the nine months ended September 30, 2022 (Successor)

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
297,042

$
347,815

$
-

$
644,857

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

101,250

248,179

-

349,429

Depreciation, depletion, amortization and accretion

46,099

28,290

3,550

77,939

General and administrative expenses

20,944

32,823

40,323

94,090

Restructuring expenses

-

-

4,441

4,441

Other (gains) and losses, net

(4,886
)

(25,008
)

(369
)

(30,263
)
Income (loss) from operations

$
133,635

$
63,531

$
(47,945
)

$
149,221

For the Period February 3, 2021 through September 30, 2021 (Successor)

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
185,902

$
264,416

$
-

$
450,318

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

75,433

221,719

-

297,152

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 expenses

-

-

20,533

20,533

Other (gains) and losses, net

1,360

(2,092
)

-

(732
)
Income (loss) from operations

$
(19,658
)

$
(32,231
)

$
(57,419
)

$
(109,308
)

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

Well

Corporate and

Consolidated

Rentals

Services

Other

Total

Revenues

$
18,339

$
27,589

$
-

$
45,928

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

7,839

21,934

-

29,773

Depreciation, depletion, amortization and accretion

4,271

3,666

421

8,358

General and administrative expenses

2,027

4,111

4,914

11,052

Restructuring expenses

-

-

1,270

1,270

Income (loss) from operations

$
4,202

$
(2,122
)

$
(6,605
)

$
(4,525
)

Identifiable Assets

Well

Corporate

Consolidated

Rentals

Services

and Other

Total

September 30, 2022

$
526,759

$
607,840

$
152,616

$
1,287,215

December 31, 2021

379,453

636,256

183,799

1,199,508


			Well		Corporate		Consolidated
	Rentals		Services		and Other		Total
June 30, 2023	$	507,753	$	568,452	$	184,411	$	1,260,616
December 31, 2022		432,437		533,327		225,248		1,191,012

~~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 regions. We attribute revenue to various countries based on the location where services are performed or the destination of the drilling products or equipment sold or rented. Long-lived assets consist 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~~

For the Three Months Ended
September 30, 2022

2022

2021

United States

$
110,919

$
84,018

Other countries

111,368

94,565

Total

$
222,287

$
178,583

~~Long-Lived Assets~~

September 30, 2022

December 31, 2021

United States

$
209,008

$
231,388

Other countries

74,898

124,886

Total

$
283,906

$
356,274

~~(11)~~(12) Stock-Based Compensation Plans

~~Our~~We have a Management Incentive Plan (“MIP”), which provides the issuance of up to 1,999,869 shares of our Class B common stock, par value $0.01 per share (the “Class B Common Stock”) for the grant of share-based and cash-based awards.

~~Approval of Forms of Award Agreement and Equity Awards~~

On March 28, 2022, the Board and the Compensation Committee approved new forms of restricted stock unit (“RSU”) award agreements and forms of performance stock unit (“PSU”) award agreements (collectively, the “Award Agreements”)To date, grants under the MIP ~~and approved a special grant~~have been in the form of ~~72,050~~ ~~RSUs and~~ ~~288,199~~ ~~PSUs~~shares of Class B common stock (“RSAs”), restricted stock units which ~~was intended to satisfy stock awards for the next three years. Additional grants~~ will be ~~issued for new hires~~settled in Class B common stock upon the satisfaction of time-based vesting conditions (“RSUs”) and ~~promotions.~~performance stock units which will be settled in Class B common stock upon the satisfaction of time and performance-based vesting conditions (“PSUs”).

~~Awards made under~~The RSAs vest over a period of three years, subject to earlier vesting and forfeiture on terms and conditions set forth in the ~~forms of RSU~~applicable award ~~agreements for our employees~~agreement. RSUs granted in 2022 generally vest in three equal annual installments over the three-year period, subject generally to continued employment and the other terms and conditions set forth in the forms of the RSU award agreements. ~~Awards made under~~RSUs granted in 2021 vested in full during the ~~forms PSU award agreements~~current quarter. PSUs may be earned between 25% and 100% of the target award based on achievement of share price goals set forth in the forms of the PSU award agreements and will vest to the extent that share price goals are achieved based on the terms and conditions set forth in the forms of the PSU award agreements.

~~On July 18,~~The following sets forth issuances under the MIP for the six months ended June 30, 2023 and 2022 ~~the Board and the Compensation Committee approved an RSU award agreement for~~ ~~79,375~~ ~~RSUs. The RSUs generally vest in three equal annual installments over a~~ ~~three-year~~ ~~period commencing on the first anniversary of January 20, 2022, subject to terms and conditions set forth in the forms of RSU award agreements.~~:


	Grants of Share-Based Awards
				July/
	June			August			March			July
	2021			2021			2022			2022			Total
Awards outstanding, December 31, 2022		29,976			37,947			72,050			88,215			228,188
Vested		(14,988	)		(37,947	)		(24,017	)		(29,405	)		(106,357	)
Awards outstanding, June 30, 2023		14,988			-			48,033			58,810			121,831

Estimated grant date fair value	$	39.53		$	39.53		$	58.80		$	58.80

Unamortized grant date fair value, December 31, 2022 (in millions)	$	0.9		$	-		$	3.1		$	4.2		$	8.2
Unamortized grant date fair value, June 30, 2023 (in millions)	$	0.5		$	-		$	2.4		$	3.2		$	6.1

~~Additionally, on July 18, 2022, the Board and the Compensation Committee approved accelerated vesting with respect to~~ ~~15,642~~


	Grants of Share-Based Awards
				July/
	June			August		March
	2021			2021		2022		Total
Awards outstanding, December 31, 2021		76,269			50,596		-		126,865
Granted		-			-		72,050		72,050
Vested		(25,423	)		-		-		(25,423	)
Awards outstanding, June 30, 2022		50,846			50,596		72,050		173,492

Estimated grant date fair value	$	39.53		$	39.53	$	58.80

Unamortized grant date fair value, December 31, 2021 (in millions)	$	2.4		$	1.4	$	-	$	3.8
Unamortized grant date fair value, June 30, 2022 (in millions)	$	1.8		$	0.6	$	3.9	$	6.3

~~outstanding restricted shares of our Class B common stock granted by us on June 1, 2021.~~

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we recognized $~~2.0~~ ~~million and $3.5~~ ~~million, respectively, in compensation expense associated with grants of restricted stock awards and RSUs. During the nine months ended September 30, 2021 and the Successor Period, we recognized $2.3~~1.0 million and $2.1 million, respectively, in compensation ~~cost~~expense associated with grants of ~~restricted stock~~RSAs and RSUs. 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 RSAs and RSUs. We are currently not amortizing our PSUs as we have not concluded that it is probable that the performance condition will be achieved.

(13) Income Taxes

The effective tax rate on income from continuing operations for the three and six months ended June 30, 2023 was 11.9% and 25.4%, respectively, and was 20.0% and 21.7% for the three and six months ended June 30, 2022, respectively. The U.S federal statutory rate for all periods was 21%. The effective tax rates for all periods were unfavorably impacted by our current and ongoing operations in foreign jurisdictions which have tax rates significantly in excess of the U.S. federal statutory rate.

~~As a result of~~13

The effective tax rate for the ~~consummation of the Plan, restricted stock units issued prior to the Emergence Date were cancelled for zero consideration. We recognized~~three months ended June 30, 2023 was also favorably impacted by approximately $~~0.9~~14.9 million in ~~compensation costs~~income tax benefits from reversals of uncertain tax positions in foreign jurisdictions and adjustments to valuation allowances on foreign operations.

The effective tax rate for the six months ended June 30, 2023 was also unfavorably impacted by the identification of an error in the tax provision for the year ended December 31, 2022 pertaining to certain net operating loss carryforwards that should have been eliminated as part of a worthless stock deduction taken in the fourth quarter of 2022. As such, we recognized an additional income tax expense of $7.6 million during the ~~Predecessor Period prior~~three months ended March 31, 2023 with a corresponding decrease to ~~cancellation~~deferred tax assets to correct this immaterial misstatement. Management has determined that this misstatement was not material to any of ~~the pre-Emergence outstanding restricted stock units.~~

20its previously issued financial statements.

~~(12) Income Taxes~~

The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, 2022 was ~~22.5% and~~ ~~22.0%, respectively, on income from continuing operations. The effective tax rate is different from the U.S. federal statutory rate of~~ ~~21.0% primarily~~also impacted from non-deductible items, ~~foreign tax rates that differ from the U.S. federal statutory rate,~~ the release of valuation ~~allowance primarily based on current period income~~allowances in certain jurisdictions and foreign losses for which no tax benefit ~~is being~~was recorded.

We had $

~~In recording deferred income~~4.3 million of unrecognized tax ~~assets, we consider whether it is more likely than not some portion or~~benefits as of June 30, 2023, all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income of the appropriate character during the periods in which ~~those deferred income tax assets~~ would ~~be deductible. Our annualized~~impact our effective tax rate for the nine months ended September 30, 2022 includes a tax benefit of $18.5 million related to the release of a valuation allowance previously recorded against U.S. foreign tax credit and general business credit carryforwards. We previously considered these credit carryforwards to be unrealizable primarily due to our cumulative history of losses in the U.S. in recent years and tax attribute utilization limits under Section 382 resulting from bankruptcy. This was significant negative evidence that outweighed positive evidence from forecasts of future taxable income. However, based on recognized built in gains that have increased our limit under Section 382, year to date income in the U.S., and certain attributes promoting use of the foreign tax credit carryovers, when combined with our view on the remaining 2022 outlook, we determined thereif recognized. It is now significant positive evidence for our ability to utilize available U.S. foreign tax credit carryforwards and general business credits in 2022. The amount of valuation allowance released in the U.S. recognizes foreign tax credit deferred tax assets that we estimate will offset U.S. taxes payable in 2022. After the valuation allowance release, we havereasonably possible $~~38.2~~1.0 million of ~~U.S. foreign~~unrecognized tax ~~credit deferred~~benefits could be settled in the next twelve months due to the conclusion of tax ~~assets that continue~~audits or statutes of limitations expiration. It is our policy to ~~have a valuation allowance against them. We will continue~~recognize interest and applicable penalties, if any, related to ~~evaluate~~uncertain tax positions in income tax expense. Unrecognized tax benefits as of December 31, 2022 were $14.0 million and were impacted by the ~~realizability~~reversals of ~~our U.S. foreign~~uncertain 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.~~positions during the six months ended June 30, 2023.

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law in the U.S. Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1.0 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022 and several tax incentives to promote clean energy. Based on our current analysis and pending future guidance to be issued by Treasury, we do not believe these provisions will have a material impact on our consolidated financial statements.

~~The effective tax rate for the three months ended September 30, 2021, the Successor Period and the Predecessor Period was~~ ~~19.2~~%, ~~13.6% and~~ ~~18.2~~%, respectively, on income from
continuing operations. The tax rate during the three months ended September 30, 2021 ~~and the Successor Period is different from the U.S. federal statutory rate of~~ ~~21.0% primarily from non-deductible items and foreign losses for which no tax benefit is being recorded. The tax rate in the Predecessor Period is different from the U.S. federal statutory rate of~~ ~~21.0% primarily due the adoption of fresh start accounting during the period.~~

~~We had $15.2~~ ~~million and $15.0~~ ~~million of unrecognized tax benefits as of September 30, 2022 and December 31, 2021, respectively, all of which would impact our effective tax rate if recognized except for $1.6~~ ~~million offset in deferred income taxes. It is reasonably possible $11.4~~ 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.

~~(13)~~(14) 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 number of shares of Common Stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of Common Stock outstanding during the period plus any potentially dilutive Common Stock, such as restricted stock awards, restricted stock units, and performance-based units calculated using the treasury stock method.

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


											For the Three Months Ended				For the Six Months Ended
	Successor								Predecessor		June 30,				June 30,
	For the Three Months Ended September 30, 2022		For the Three Months Ended September 30, 2021		For the Nine Months Ended September 30, 2022		For the Period February 3, 2021 through September 30, 2021		For the Period January 1, 2021 through February 2, 2021		2023		2022		2023		2022
Weighted-average shares outstanding - basic		20,024		19,999		20,016		19,997		14,845		20,126		20,024		20,116		20,011
Potentially dilutive stock awards and units		66		-		58		-		60		17		52		20		54
Weighted-average shares outstanding - diluted		20,090		19,999		20,074		19,997		14,905		20,143		20,076		20,136		20,065

~~(14)~~(15) 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. ~~Adjustments for legal costs and reserves are included as a component of cost of revenues in our consolidated statement of operations.~~ 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~~As previously reported in the Form 10-K and Form 10-Q for the quarter ended March 31, 2023, we are currently involved in legal proceedings with ~~two~~ ~~former employees regarding the payment of royalties for a patentable product paid for by the subsidiary and developed while they worked for the subsidiary. Those former employees have filed~~ ~~two~~ ~~lawsuits in the Harris County District Court, in which the former employees allege that the royalty payments they had invoiced at~~ 25~~% and for which they received payments in the invoiced amounts since 2010, instead should have been paid at a rate of~~ 50%. The first lawsuit (the “First Case”), filed in May 2018, sought to recover alleged unpaid royalties from May 2014 through May 2019. The second lawsuit (the “Second Case”) was filed in the same district court against the same subsidiary of ours, brought the same claims, and sought damages post-judgment from the First Case until the discontinuation of the leasing of the product at issue by the subsidiary at the end of 2019.

In both lawsuits, the district court ruled against our subsidiary and entered final judgments, which we fully secured with a bond. We strongly disagreed with the result and believed the district court committed several legal errors that should be corrected by reversal of the judgments. Accordingly, we pursued separate appeals in the Fourteenth Court of Appeals.

~~In August 2022, in the appeal from the First Case, the Fourteenth Court of Appeals ruled in favor of our subsidiary on the plaintiffs’ claims for a combined~~ 50~~% royalty. The Court of Appeals ruled that because the plaintiffs invoiced our subsidiary for a combined~~ 25~~% royalty and accepted payments in that amount every month since 2010, the plaintiffs forever waived any claim to any royalties in any amount other than a combined~~ 25% royalty, net of expenses. The Court of Appeals reversed the judgment in the First Case and remanded to the trial court to assess damages, if any, owed for royalties between January 2018 and May 2019.

~~The appeal from the judgment in the Second Case was abated by the Fourteenth Court of Appeals pending the resolution of the appeal in the First Case.~~

On October 7, 2022, our subsidiary reached a confidential settlement with the plaintiffs to resolve any and all disputes between them. At the request of both parties in the appeals from both the First Case and the Second Case, the Fourteenth Court of Appeals has reversed the respective judgments entered by the district court. Our subsidiary is in the process of filing appropriate motions in the district court to enter take-nothing judgments and to release the supersedeas bonds filed by our subsidiary in both cases.

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

~~In October 2022, we had a hearing before~~ the Washington State ~~Board~~Department of ~~Tax Appeals (the “Tax Board”)~~Revenue in relation to a dispute arising in April 2019 pertaining to a use tax assessment from 2016 as a result of the construction of a vessel by one of our subsidiaries. AsThe matter was appealed to the Washington State Board of ~~September 30, 2022,~~Tax Appeals, which affirmed the assessment ~~including interest and penalties, totaled $26.8 million. While~~on May 22, 2023. On June 20, 2023, we ~~are confident that~~appealed this decision to Whatcom County Superior Court where it is currently pending review. In order to appeal the assessment ~~is legally insupportable, if the Tax Board upholds the assessment~~to Whatcom County Superior Court, we ~~will be responsible for payment of~~paid the full $27.1 million assessment within thirty days of the decision. Although we are unable to estimate the probability of the outcome of this matter or the range of reasonably possible loss, if any, we have reserved an amount we believe to be adequate to cover any final assessment levied by the state.on May 31, 2023.

~~(15)~~(16) Discontinued Operations

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

For the Three Months Ended
September 30, 2022

2022

2021

Revenues

$
-

$
16,985

Cost of services

-

17,543

Depreciation, depletion, amortization and accretion

-

146

General and administrative expenses

289

2,379

Other (gains) and losses, net

(303
)

3,815

Loss from operations

14

(6,898
)
Other income (expense)

-

238

Loss from discontinued operations before tax

14

(6,660
)
Income tax benefit (expense)

3

1,499

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

$
17

$
(5,161
)


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
General and administrative expenses	$	(72	)	$	1,711		$	389		$	5,453
Other (gains) and losses, net		79			750			(748	)		(5,193	)
Income (loss) from discontinued operations before tax		(7	)		(2,461	)		359			(260	)
Income tax benefit (expense)		(2	)		517			(79	)		55
Income (loss) from discontinued operations, net of income tax	$	(9	)	$	(1,944	)	$	280		$	(205	)

Successor

Predecessor

For the Nine Months Ended September 30, 2022

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

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

Revenues

$
-

$
85,351

$
10,719

Cost of services

-

77,936

10,398

Depreciation, depletion, amortization and accretion

-

31,502

2,141

General and administrative expenses

5,742

8,597

1,119

Other (gains) and losses, net

(5,496
)

11,333

-

Loss from operations

(246
)

(44,017
)

(2,939
)
Other income (expense)

-

188

2,485

Loss from discontinued operations before tax

(246
)

(43,829
)

(454
)
Income tax benefit (expense)

58

9,862

102

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

$
(188
)

$
(33,967
)

$
(352
)

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


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Assets:
Accounts receivable, net	$	2,111	$	7,469	$	-	$	350
Property, plant and equipment, net		16,042		29,328		1,355		11,468
Other assets		161		731		14		160
Total assets held for sale	$	18,314	$	37,528	$	1,369	$	11,978

Liabilities:
Accounts payable	$	134	$	652	$	-	$	86
Accrued expenses		3,309		4,268		3,090		3,192
Other liabilities		223		687		-		71
Total liabilities held for sale	$	3,666	$	5,607	$	3,090	$	3,349

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

Successor

Predecessor

For the Nine Months Ended September 30, 2022

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

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

Cash flows from discontinued operating activities:

(Gain)/loss on sale of assets

$
-

$
-

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

(5,496
)

11,333

-

Depreciation, depletion, amortization and accretion

-

31,502

2,141

Cash flows from discontinued investing activities:

Proceeds from sales of assets

18,782

53,225

486


	For the Six Months Ended
	June 30,
	2023			2022
Cash flows from discontinued operating activities:
Other gains, net	$	(748	)	$	(5,193	)
Cash flows from discontinued investing activities:
Proceeds from sales of assets	$	11,308		$	13,861

~~(16)~~(17) 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

For the Nine Months Ended September 30, 2022

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

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

Cash, cash equivalents, and restricted cash, beginning of period

Cash and cash equivalents

$
314,974

$
172,768

$
188,006

Restricted cash-current

-

16,751

-

Restricted cash-non-current

79,561

80,179

80,178

Cash, cash equivalents, and restricted cash, beginning of period

$
394,535

$
269,698

$
268,184

Cash, cash equivalents, and restricted cash, end of period

Cash and cash equivalents

$
453,682

$
258,024

$
172,768

Restricted cash-current

-

-

16,751

Restricted cash-non-current

79,757

79,560

80,179

Cash, cash equivalents, and restricted cash, end of period

$
533,439

$
337,584

$
269,698


	June 30,
	2023		2022
Cash and cash equivalents	$	258,999	$	314,974
Restricted cash-non-current		80,108		79,561
Cash, cash equivalents, and restricted cash, beginning of period	$	339,107	$	394,535

Cash and cash equivalents	$	330,129	$	391,219
Restricted cash-non-current		80,318		79,595
Cash, cash equivalents, and restricted cash, end of period	$	410,447	$	470,814

~~(17)~~(18) New Accounting Pronouncements

Recently Issued Accounting Standards

~~In June 2016, the FASB issued~~

On January 1, 2023, we adopted Financial Accounting Standards Board (FASB) ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments (“ASU 2016-13”)~~Statements. ~~This update improves financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope by using~~, which replaces the incurred loss impairment methodology from previous U.S. GAAP with the Current Expected Credit ~~Losses (the “CECL”) model.~~losses model (CECL). 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. We estimate expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ~~update will apply~~updated guidance applies to (i) loans, accounts receivable, trade receivables, ~~arising from revenue transactions.~~and other financial assets measured at amortized cost, and (ii) loan commitments and other off-balance sheet credit exposures. The ~~new standard is effective for us beginning on January 1, 2023. We have concluded that the~~ adoption of ~~ASU 2016-13 will~~this standard update did not have a material impact on our ~~consolidated financial statements.~~Condensed Consolidated Financial Statements.

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

~~(18) Subsequent Events~~

In October 2022, we had a hearing before the Washington State Board of Tax Appeals (the “Tax Board”) in relation to a dispute arising in April 2019 pertaining to a use tax assessment from 2016 as a result of the construction of a vessel by one of our subsidiaries. As of September 30, 2022, the assessment, including interest and penalties, totaled $26.8 million. While we are confident that the assessment is legally insupportable, if the Tax Board upholds the assessment we will be responsible for payment of the full assessment within thirty days of the decision. Although we are unable to estimate the probability of the outcome of this matter or the range of reasonably possible loss, if any, we have reserved an amount we believe to be adequate to cover any final assessment levied by the state.

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

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

Executive Summary

General

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

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

•

being critical to our customers’ oil and gas ~~operations,~~operations;

•

~~limits~~limiting competition from the three largest global oilfield service ~~companies,~~companies;

•

~~requires~~requiring 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,~~rentals;

•

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

•

~~provide~~providing strong cash flow generation capacity and opportunities.

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

Industry Trends

The oil and gas industry is both cyclical and seasonal. The level of spending by oil and gas companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies.

Our financial performance is significantly affected by the rig count in the U.S. land and offshore market areas as well as oil and natural gas prices and worldwide rig activity, which are summarized in the tables ~~below.~~below:


	Three months ended					Nine months ended					For the Three Months Ended					For the Six Months Ended
	September 30,		June 30,			September 30,					June 30,		March 31,			June 30,		June 30,
	2022		2022		% Change	2022		2021		% Change	2023		2023		% Change	2023		2022		% Change
Worldwide Rig Count (1)
U.S.:
Land		745		704	5.8%		692		437	58.4%		722		744	(3.0%)		699		663	5.4%
Offshore		16		15	6.7%		15		13	15.4%		18		16	12.5%		20		15	33.3%
Total		761		719	5.8%		707		450	57.1%		740		760	(2.6%)		719		678	6.0%
International (2)		857		816	5.0%		832		735	13.2%		960		915	4.9%		938		819	14.5%
Worldwide Total		1,618		1,535	5.4%		1,539		1,185	29.9%		1,700		1,675	1.5%		1,657		1,497	10.7%

Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	93.06	$	108.83	(14.5%)	$	98.96	$	65.05	52.1%	$	73.54	$	72.43	1.5%	$	72.97	$	102.01	(28.5%)
Natural Gas (Henry Hub)	$	7.99	$	7.48	6.8%	$	6.71	$	3.62	85.4%	$	2.16	$	2.65	(18.4%)	$	2.41	$	6.07	(60.3%)

(1)

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

(2)

Excludes Canadian rig count

2718

Comparison of the Results of Operations for the Three Months Ended ~~September 30, 2022 and~~ June 30, ~~2022~~2023 and March 31, 2023

We reported net income from continuing operations for the three months ended ~~September~~June 30, ~~2022~~2023 (the “Current Quarter”) of ~~$48.5~~$67.4 million on revenue of ~~$222.3~~$244.5 million. This compares to a net income from continuing operations for the three months ended ~~June 30, 2022~~March 31, 2023 (the “Prior Quarter”) of ~~$43.6~~$29.9 million on revenues of ~~$224.6~~$220.1 million. Net income from continuing operations for the Current Quarter includes net gains of $13.4 million from the disposal of assets and $6.8 million of expense primarily related to foreign currency losses during the quarter. Net income from continuing operations for the Prior Quarter includes a $17.4 million gain from revisions to estimates related to our decommissioning liability and $13.5 million of expense primarily related to foreign currency losses during the quarter totaling $10.5 million and both realized and unrealized losses, net of $4.1 million on our investment in equity securities of Select Energy Services, Inc (“Select”).


	Three months ended						Change				For the Three Months Ended						Change
	September 30,			June 30,							June 30,			March 31,
	2022			2022			$			%	2023			2023			$			%
Revenues:
Revenues
Rentals	$	104,557		$	103,729		$	828		0.8%	$	112,411		$	108,821		$	3,590		3.3%
Well Services		117,730			120,911			(3,181	)	(2.6%)		132,062			111,316			20,746		18.6%
Total revenues		222,287			224,640			(2,353	)			244,473			220,137			24,336
Cost of revenues:
Cost of revenues
Rentals		33,638			35,860			(2,222	)	(6.2%)		35,021			36,468			(1,447	)	(4.0%)
Well Services		82,443			85,108			(2,665	)	(3.1%)		85,733			81,253			4,480		5.5%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		116,081			120,968			(4,887	)			120,754			117,721			3,033
Depreciation, depletion, amortization and accretion		20,508			23,346			(2,838	)	(12.2%)		20,621			20,139			482		**
General and administrative expenses		31,841			30,231			1,610		5.3%		31,177			30,990			187		**
Restructuring expenses		1,223			1,663			(440	)	(26.5%)		-			1,983			(1,983	)	**
Other (gains) and losses, net		(13,397	)		(18,013	)		4,616		**		47			(1,398	)		1,445		(103.4%)
Income (loss) from operations		66,031			66,445			(414	)
Income from operations												71,874			50,702			21,172
Other income (expense):
Interest income, net		3,373			1,459			1,914		131.2%		6,513			5,439			1,074		19.7%
Other income (expense)		(6,838	)		(13,471	)		6,633		**
Income (loss) from continuing operations before income taxes		62,566			54,433			8,133
Income tax (expense) benefit		(14,058	)		(10,871	)		(3,187	)	29.3%
Net income (loss) from continuing operations		48,508			43,562			4,946
Other expense												(1,836	)		(2,152	)		316		**
Income from continuing operations before income taxes												76,551			53,989			22,562
Income tax expense												(9,147	)		(24,065	)		14,918		(62.0%)
Net income from continuing operations												67,404			29,924			37,480
Income (loss) from discontinued operations, net of income tax		17			(1,944	)		1,961		(100.9%)		(9	)		289			(298	)	(103.1%)
Net income (loss)	$	48,525		$	41,618		$	6,907
Net income											$	67,395		$	30,213		$	37,182

** Not a meaningful percentage

Revenues and Cost of Revenues

Revenues from our Rentals segment increased ~~$0.8~~by $3.6 million, or ~~0.8%~~3.3%, in the Current Quarter as compared to the Prior Quarter primarily due to increased International market activity for our premium drill pipe product lines and accommodation rentals in our U.S. offshore market. These increases resulted in an increased gross margin of 68.8% for the Current Quarter as compared to 66.5% in the Prior Quarter.

Revenues from our Well Services segment in the Current Quarter increased $20.7 million, or 18.6%, from the Prior Quarter. The increase in revenue is driven by our International markets which experienced continued improvements in both production and well control services. Additionally, our U.S. offshore market was impacted by stronger performance from our completion services business unit. Cost of revenues ~~decreased $2.2~~increased $4.5 million, or ~~6.2%~~5.5%, in the Current Quarter as compared to the Prior Quarter as a result of the increases in revenue discussed above. Gross margin for the Current Quarter also increased to 35.1% as compared to 27.0% for the Prior Quarter.

Other (gains) and losses, net

Other losses were immaterial in the Current Quarter compared to other gains of $1.4 million for the Prior Quarter. ~~Increase~~Other (gains) and losses, net include gains and losses on the disposal of assets, as well as impairments, if any, related to long-lived assets.

Interest Income, net

Interest income, net was $6.5 million compared to $5.4 million for the Prior Quarter. The increase in ~~utilization~~interest income was driven by interest derived on overnight money market accounts primarily in Argentina and the U.S.

Income Taxes

The effective tax rate on income from continuing operations for the Current Quarter and Prior Quarter was 11.9% and 44.6%, respectively. The U.S federal statutory rate for both periods was 21%. The effective tax rates for both periods were unfavorably impacted by our current and ongoing operations in foreign jurisdictions which have tax rates significantly in excess of the U.S. federal statutory rate.

The effective tax rate in the Current Quarter was also favorably impacted by approximately $14.9 million in income tax benefits from reversals of uncertain tax positions in foreign jurisdictions and adjustments to valuation allowances on foreign operations.

The effective tax rate for the Prior Quarter was also unfavorably impacted by recognition of a $7.6 million immaterial misstatement arising from certain net operating loss carryforwards that should have been eliminated as part of a worthless stock deduction taken in the fourth quarter of 2022.

We had $4.3 million of unrecognized tax benefits as of June 30, 2023, all of which would impact our effective tax rate if recognized. It is reasonably possible $1.0 million of unrecognized tax benefits could be settled in the next twelve months due to the conclusion of tax audits or statute of limitations expirations. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

Comparison of the Results of Operations for the Six Months Ended June 30, 2023 and 2022

We reported net income from continuing operations for the six months ended June 30, 2023 (the “Current Period”) of $97.3 million on revenue of $464.6 million. This compares to a net income from continuing operations for the six months ended June 30, 2022 (the “Prior Year Period") of $67.5 million on revenues of $422.6 million.


	For the Six Months Ended
	June 30,						Change
	2023			2022			$			%
Revenues:
Rentals	$	221,232		$	192,485		$	28,747		14.9%
Well Services		243,378			230,085		$	13,293		5.8%
Total revenues		464,610			422,570			42,040
Cost of revenues:
Rentals		71,489			67,612			3,877		5.7%
Well Services		166,986			165,736			1,250		0.8%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		238,475			233,348			5,127
Depreciation, depletion, amortization and accretion		40,760			57,431			(16,671	)	(29.0%)
General and administrative expenses		62,167			62,249			(82	)	**
Restructuring expenses		1,983			3,218			(1,235	)	(38.4%)
Other gains, net		(1,351	)		(16,866	)		15,515		(92.0%)
Income from operations		122,576			83,190			39,386
Other income (expense):
Interest income, net		11,952			2,638			9,314		353.1%
Other income (expense)		(3,988	)		476			(4,464	)	(937.8%)
Income from continuing operations before income taxes		130,540			86,304			44,236
Income tax expense		(33,212	)		(18,755	)		(14,457	)	77.1%
Net income from continuing operations		97,328			67,549			29,779
Income (loss) from discontinued operations, net of income tax		280			(205	)		485		(236.6%)
Net income	$	97,608		$	67,344		$	30,264

** Not a meaningful percentage

Revenues and Cost of Revenues

Revenues from our Rentals segment increased $28.7 million, or 14.9%, in the Current Period as compared to the Prior Year Period. Cost of revenues increased $3.9 million, or 5.7%, in the Current Period as compared to the Prior Year Period. This increase was due to an increase in both average rig count and commodity prices when compared to the Prior Year Period. During the Current Period, we experienced increased revenue from both premium drill pipe in all our markets and bottom hole assembly accessories in our onshore U.S market, which contributed to ~~a slight~~an increase in gross margin which was ~~67.8%~~67.7% for the Current ~~Quarter~~Period as compared to ~~65.4%~~64.9% in the Prior ~~Quarter.~~Year Period.

Revenues from our Well Services segment ~~decreased $3.2~~increased $13.3 million, or ~~2.6%~~5.8%, in the Current ~~Quarter~~Period as compared to the Prior ~~Quarter.~~Year Period, primarily as a result of improvements in our production and well control services in our International markets. Cost of revenues ~~decreased $2.7~~increased $1.3 million, or ~~3.1%~~0.8%, in the Current ~~Quarter~~Period as compared to the Prior ~~Quarter. Gross~~Year Period. The increase in cost of revenues was driven by the increase in overall segment revenues and gross margin for the Current ~~Quarter~~Period increased to ~~30.0%~~31.4% as compared to ~~29.6%~~28.0% 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 strategic shift of our more labor-intensive service businesses to U.S. offshore and international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.Year Period.

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

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion expense for the Current ~~Quarter~~Period decreased ~~$2.8~~$16.7 million, or ~~12.2%~~29.0%, as compared to the Prior ~~Quarter.~~Year Period. Depreciation expense isfor the Prior Year Period was impacted by the valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. ~~Depreciation, depletion,~~

~~amortization and accretion expense for 2022 is expected to be approximately $102.8 million as compared to $228.2 million for the full year 2021.~~

~~General and Administrative~~Restructuring Expenses

General and administrative expenses for the Current Quarter increased $1.6 million, or 5.3%, as compared to the Prior Quarter. The increase is primarily related to an increase in professional fees for accounting and consulting services, partially offset by a decrease in employee related costs, including benefits and incentive compensation.

~~Other (gains) and losses, net~~

~~Other (gains) and losses, net for the Current Quarter were $13.4 million compared to $18.0 million for the Prior Quarter. Other (gains) and losses, net primarily~~Restructuring expenses relate to charges recorded as part of our 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~~financially. Current Period restructuring expenses decreased $1.2 million, or 38.4%, as compared to the ~~disposal of assets, as well as impairments, if any, related to long-lived assets.~~ Prior Year Period.

Other (gains) and losses, net ~~for the Current Quarter include net~~

Other gains declined by $15.5 million due to inclusion of ~~$13.4 million primarily related to disposals of non-core businesses and assets within our Well Services segment. Other (gains) and losses, net for the Prior Quarter includes~~ a ~~gain of~~ $17.4 million gain from revisions in estimates related to our decommissioning ~~liability.~~liability in the Prior Year Period.

Interest Income ~~Net~~(Expense), net

Interest income, net ~~for the Current Quarter was $3.4~~increased by $9.3 million, ~~compared to $1.5 million for the Prior Quarter. The~~primarily from an increase in interest income ~~was driven by interest derived on overnight money market accounts primarily~~from operations in our Corporate and Argentina ~~and the United States.~~offices.

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.~~

Losses on foreign currencies during the Current Quarter were $7.0 million and primarily related to our operations in Brazil and Argentina. Losses on foreign currencies during the Prior Quarter were $10.5 million primarily related to our operations in Brazil. Losses on foreign currencies during the Prior Quarter include an expense of $2.7 million which represents a correction of an immaterial error relating to a period prior to our emergence from bankruptcy.

Unrealized gains on our investment in equity securities for the Current Quarter were $0.4 million. Unrealized gains on our investment in equity securities for the Prior Quarter were $5.9 million. During the Current Quarter, we did not dispose of any shares. During the Prior Quarter, we disposed of 0.7 million shares for $6.0 million, and recognized gains totaling $1.9 million in connection with these transactions.

~~Income Taxes~~

~~The effective tax rate for the Current Quarter and Prior Quarter was 22.5% and 20.0%~~, respectively, on income from continuing operations. The effective tax rate for the Current Quarter is different from the U.S. federal statutory rate of 21.0% 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 21.0% primarily from non-deductible items and foreign losses for which no tax benefit was recorded.

Unrecognized tax benefit as of the Current Quarter and Prior Quarter was $15.2 million and $15.7 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 $11.4 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.

~~Comparison of the Results of Operations for the Nine Months Ended September 30, 2022 and 2021~~

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

We reported net income from continuing operations for the Current Period of $116.1 million on revenue of $644.9 million. This compares to net income from continuing operations for the Combined Period of $170.3 million on revenues of $496.2 million.

Successor

Predecessor

Non-GAAP

Change

For the Nine Months Ended September 30, 2022

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

$

%
Revenues:

Rentals

$
297,042

$
185,902

$
18,339

$
204,241

$
92,801

45.4%
Well Services

347,815

264,416

27,589

292,005

55,810

19.1%
Total revenues

644,857

450,318

45,928

496,246

148,611

Cost of revenues:

Rentals

101,250

75,433

7,839

83,272

17,978

21.6%
Well Services

248,179

221,719

21,934

243,653

4,526

1.9%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

349,429

297,152

29,773

326,925

22,504

Depreciation, depletion, amortization and accretion

77,939

158,256

8,358

166,614

(88,675
)

(53.2%)
General and administrative expenses

94,090

84,417

11,052

95,469

(1,379
)

(1.4%)
Restructuring expenses

4,441

20,533

1,270

21,803

(17,362
)

(79.6%)
Other (gains) and losses, net

(30,263
)

(732
)

-

(732
)

(29,531
)

**
Income (loss) from operations

149,221

(109,308
)

(4,525
)

(113,833
)

263,054

Other income (expense):

Interest income, net

6,011

1,394

202

1,596

4,415

276.6%
Reorganization items, net

-

-

335,560

335,560

(335,560
)

(100.0%)
Other income (expense)

(6,362
)

(6,499
)

(2,105
)

(8,604
)

2,242

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

148,870

(114,413
)

329,132

214,719

(65,849
)

Income tax (expense) benefit

(32,813
)

15,550

(60,003
)

(44,453
)

11,640

(26.2%)
Net income (loss) from continuing operations

116,057

(98,863
)

269,129

170,266

(54,209
)

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

(188
)

(33,967
)

(352
)

(34,319
)

34,131

(99.5%)
Net income (loss)

$
115,869

$
(132,830
)

$
268,777

$
135,947

$
(20,078
)

** Not a meaningful percentage

~~Revenues and Cost of Revenues~~

Revenues from our Rentals segment increased $92.8 million, or 45.4%, in the Current Period as compared to the Combined Period. Cost of revenues increased $18.0 million, or 21.6%, in the Current Period as compared to the Combined Period. This increase was due to an increase in both average rig count and commodity prices when compared to the Combined Period. During the Current Period, we experienced increases in utilization and pricing of both premium drill pipe and bottom hole assembly accessories, which contributed to an increase in gross margin which was 65.9% for the Current Period as compared to 59.2% in the Combined Period.

Revenues from our Well Services segment increased $55.8 million, or 19.1%, in the Current Period as compared to the Combined Period. Cost of revenues increased $4.5 million, or 1.9%, in the Current Period as compared to the Combined Period. Gross margin for

the Current Period increased to 28.6% as compared to 16.6% for the Combined Period due to changes in revenue mix in our completions applications, increases in service revenues with higher margins and a reduction in pass through and mobilization projects with lower margins. Additionally, the strategic shift of our more labor-intensive service businesses to U.S. offshore and international operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. land headcount.

~~Depreciation, Depletion, Amortization and Accretion~~

Depreciation, depletion, amortization and accretion expense for the Current Period decreased $88.7 million, or 53.2%, as compared to the Combined Period. Depreciation expense is impacted by the valuation process under fresh start accounting, where certain fully depreciated assets were assigned a new estimated fair value and a new remaining useful life of less than 36 months. Depreciation, depletion, amortization and accretion expense for 2022 is expected to be approximately $102.8 million as compared to $228.2 million for the full year 2021.

~~Restructuring Expenses~~

~~Restructuring expenses for the Current Period decreased of $17.4 million, or 79.6%, as compared to the Combined Period, and primarily relate to costs associated with the Transformation Project.~~

~~Other (gains) and losses,~~ net

Other (gains) and losses, net for the Current Period were $30.3 million compared to $0.7 million in the Combined Period. Other (gains) and losses, net primarily relate to charges recorded as part of our strategic disposal of low margin assets in line with our Transformation Project and includes gains/losses on the disposal of assets, as well as impairments, if any, related to long-lived assets. Other (gains) and losses, net for the Current Period include net gains of $12.9 million primarily related to disposals of non-core businesses and assets within our Well Services segment and a gain of $17.4 million from revisions in estimates related to our decommissioning liability.

~~Interest Income, Net~~

Interest income, net for the Current Period was $6.0 million compared to $1.6 million for the Combined Period. The increase in interest income was driven by interest derived on overnight money market accounts primarily in Argentina and the United States.

~~Other Income (Expense)~~

Losses on foreign currencies during the Current Period and ~~Combined~~Prior Year Period were ~~$11.9~~$3.6 million and ~~$6.4~~$4.9 million, respectively. Losses on foreign currencies during the ~~Current~~Prior Year Period also 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~~losses, net on our investment in equity securities for the ~~Current~~Prior Year Period were ~~$4.5~~$4.2 million. During the ~~Current~~Prior Year Period, we disposed of 1.7 million shares for $13.4 million. All investments in equity securities were disposed of prior to December 31, 2022.

Income Taxes

The effective tax rate on income from continuing operations for the Current Period and Prior Year Period was 25.4% and 21.7%, respectively. The U.S federal statutory rate for both periods was 21%. The effective tax rates for both periods were unfavorably impacted by our current and ongoing operations in foreign jurisdictions which have tax rates significantly in excess of the U.S. federal statutory rate.

The effective tax rate for the Current Period ~~and Combined Period~~ was ~~22.0% and 20.7%, respectively, on~~also unfavorably impacted by a $7.6 million immaterial misstatement recognized in the first quarter of 2023 arising from certain net operating loss carryforwards that should have been eliminated as part of a worthless stock deduction taken in the fourth quarter of 2022, partially offset by favorable impacts of approximately $14.9 million from income from continuing operations. The effective tax rate for the Current Period is different from the U.S. federal statutory rate of 21.0% primarily from non-deductible items, foreign tax rates that differ from the U.S. federal statutory rate, the release of valuation allowance based on current period income in certain jurisdictions and foreign losses for which no tax benefit is being recorded. The tax rate for the Combined Period is different from the U.S. federal statutory rate of 21.0% primarily from non-deductible items, foreign losses for which no tax benefit was recorded and the adoption of fresh start accounting during the period.

Unrecognized tax benefit as of September 30, 2022 was $15.2 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 $11.4 million of unrecognized tax benefits ~~could be settled in the next twelve months due~~related to ~~the conclusion~~reversals 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.~~foreign jurisdictions and adjustments to valuation allowances on foreign operations.

Liquidity and Capital Resources

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

Financial Condition and Liquidity

Our primary sources of liquidity have been cash and cash equivalents, cash generated from our operations and from asset sales, and availability under our Credit Facility. As of ~~September~~June 30, ~~2022,~~2023, we had cash, cash equivalents and restricted cash of ~~$533.4~~$410.4 million. During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 net cash provided by operating activities was ~~$122.0~~$102.9 million, and we received ~~$59.8~~$15.1 million in cash proceeds from the sale of ~~assets and equity securities in which we are invested.~~assets. The primary uses of liquidity are to provide support for operating activities ~~restructuring activities~~ and capital expenditures. We spent ~~$42.9~~$45.6 million of cash on capital expenditures during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

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

~~Distributions to Shareholders~~

~~The Board has continued to evaluate strategic alternatives in the third quarter. We now expect to pay a distribution to shareholders in the fourth quarter of 2022.~~

Debt Instruments

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

As of ~~September~~June 30, ~~2022,~~2023, our borrowing base, as defined in the Credit Agreement, was approximately $120.0 million and we had ~~$40.3~~$34.7 million of letters of credit outstanding that reduced the borrowing availability. We had no outstanding borrowings under the Credit Facility as of ~~September~~June 30, ~~2022.~~

Unless all loans are paid off and letters of credit outstanding are cash collateralized and the Credit Facility terminated, the Credit Facility requires, subject to permitted exceptions, compliance with various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Facility also requires compliance with a fixed charge coverage ratio of 1.0 to 1.0 if (a) an event of default has occurred and is continuing or (b) availability under the Credit Facility is less than the greater of $20.0 million or 15% of the lesser of the aggregate commitments and the borrowing base.2023. We were in compliance with all required covenants as of ~~September~~June 30, ~~2022.~~2023.

Other Matters

New Accounting Pronouncements

See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes” – Note 1718 – “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~~2022 (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~~ “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 September 30, 2022, we did not hold financial instruments for trading purposes.~~commodity prices.

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 September~~As of June 30, ~~2022,~~2023, we did not have any outstanding foreign currency forward contracts.

~~Interest Rate Risk~~

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

Commodity Price Risk

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

~~Inflation Risk~~22

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

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, the disclosure controls and procedures provide reasonable assurance that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. An evaluation was carried out, under the supervision and with the participation of our management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures as of ~~September~~June 30, ~~2022~~2023 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 specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required ~~disclosure.~~disclosure as a result of the material weakness in our internal control over financial reporting described below.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is defined as 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.

Management identified a material weakness in our internal control over financial reporting as we did not design and maintain effective controls to review the reasonableness of assumptions determined by, and accuracy of calculations performed by, our external tax service providers. This material weakness resulted in an adjustment to deferred tax benefit and income tax benefit that was recorded in the consolidated financial statements as of and for the year ended December 31, 2022. Additionally, this material weakness could result in misstatements of income tax related balances that would result in a material misstatement to the annual or interim consolidated financial statements which would not be prevented or detected.

Remediation Plan for Material Weakness

In order to address the material weakness described above, management has implemented a remediation plan that includes implementing enhancements to our controls around reviewing the reasonableness of assumptions determined by, and the accuracy of calculations performed by, our external tax service providers. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness.

Based on its evaluation, the controls described above have not had sufficient time for management to conclude that the controls are operating effectively. Therefore, the material weakness described above existed at June 30, 2023, 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~~Other than the changes related to the remediation plan above, there were no changes in internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal actions incidental to our business. However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings after considering available defenses and any insurance coverage or indemnification rights will have a material adverse effect on our financial position, results of operations or cash flows. ~~See Part 1, Item 1, “Unaudited Condensed Consolidated Financial Statements and Notes – Note 14 –~~ ~~Contingencies.”~~

Item 1A. Risk Factors

As of ~~September~~June 30, ~~2022,~~2023, there have been no material changes in risk factors previously disclosed in our ~~Annual Report on~~ Form ~~10-K for the fiscal year ended December 31, 2021, as updated by our quarterly reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022.~~10-K.

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

~~There has been no share repurchase activity during the three months ended September 30, 2022.~~24

~~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 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on January 20, 2021(File No. 001-34037)).
~~2.2~~	Agreement and Plan of Merger, dated as of February 2, 2021, by and among Superior Energy Services, Inc., Superior BottomCo Inc. and Superior NewCo, Inc. (incorporated herein by reference to Exhibit 10.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021 (File No. 001-34037)).
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed on February 3, 2021(File No. 001-34037)).
31.1*	Officer’s certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Officer’s certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1*	Officer’s certification pursuant to Section 1350 of Title 18 of the U.S. Code.
32.2*	Officer’s certification pursuant to Section 1350 of Title 18 of the U.S. Code.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

~~^ Management contract or compensatory plan or arrangement~~

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

3525

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:	~~November~~August 2, ~~2022~~2023	By:	/s/ Brian K. Moore
			Brian K. Moore
			President and Chief Executive Officer
			(Principal Executive Officer)

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


	Successor						Predecessor			Non-GAAP			Change
	For the Nine Months Ended September 30, 2022			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			$			%
Revenues:
Rentals	$	297,042		$	185,902		$	18,339		$	204,241		$	92,801		45.4%
Well Services		347,815			264,416			27,589			292,005			55,810		19.1%
Total revenues		644,857			450,318			45,928			496,246			148,611
Cost of revenues:
Rentals		101,250			75,433			7,839			83,272			17,978		21.6%
Well Services		248,179			221,719			21,934			243,653			4,526		1.9%
Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)		349,429			297,152			29,773			326,925			22,504
Depreciation, depletion, amortization and accretion		77,939			158,256			8,358			166,614			(88,675	)	(53.2%)
General and administrative expenses		94,090			84,417			11,052			95,469			(1,379	)	(1.4%)
Restructuring expenses		4,441			20,533			1,270			21,803			(17,362	)	(79.6%)
Other (gains) and losses, net		(30,263	)		(732	)		-			(732	)		(29,531	)	**
Income (loss) from operations		149,221			(109,308	)		(4,525	)		(113,833	)		263,054
Other income (expense):
Interest income, net		6,011			1,394			202			1,596			4,415		276.6%
Reorganization items, net		-			-			335,560			335,560			(335,560	)	(100.0%)
Other income (expense)		(6,362	)		(6,499	)		(2,105	)		(8,604	)		2,242		**
Income (loss) from continuing operations before income taxes		148,870			(114,413	)		329,132			214,719			(65,849	)
Income tax (expense) benefit		(32,813	)		15,550			(60,003	)		(44,453	)		11,640		(26.2%)
Net income (loss) from continuing operations		116,057			(98,863	)		269,129			170,266			(54,209	)
Income (loss) from discontinued operations, net of income tax		(188	)		(33,967	)		(352	)		(34,319	)		34,131		(99.5%)
Net income (loss)	$	115,869		$	(132,830	)	$	268,777		$	135,947		$	(20,078	)

** Not a meaningful percentage