UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2018~~2019



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

Commission file number 001-35281

Forbes Energy Services Ltd.

(Exact name of registrant as specified in its charter)



Delaware		98-0581100
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3000 South Business Highway 281 Alice, Texas		78332
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(361) 664-0549

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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	¨ ~~(Do not check if a smaller reporting company)~~ x	Smaller reporting company	x

		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 Exchange Act Rule 12b-2). ¨ Yes x No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 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 (as defined in Exchange Act Rule 12b-2). x Yes ¨ No

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



Common stock, $0.01 par value	FLSS	OTCQX Best Market
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

The number of shares of common stock, par value $0.01 per share, of Forbes Energy Services Ltd. outstanding as of August ~~8, 2018~~13, 2019 was ~~5,336,397.~~5,446,447.

FORBES ENERGY SERVICES LTD.

TABLE OF CONTENTS



		Page
Part I—Financial Information
Item 1.	Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2325
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

Part II—Other Information
Item 1.	Legal Proceedings	3839
Item 1A.	Risk Factors	3839
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3839
Item 3.	Default Upon Senior Securities	3839
Item 4.	Mine Safety Disclosures	3839
Item 5.	Other Information	3839
Item 6.	Exhibits	3940
	Signatures	4042

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any oral statements made in connection with it include certain forward-looking statements within the meaning of the federal securities laws. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or “should” or other comparable words or the negative of these words. When you consider our forward-looking statements, you should keep in mind the risk factors we describe and other cautionary statements we make in this Quarterly Report on Form 10-Q. Our forward-looking statements are only predictions based on expectations that we believe are reasonable. Our actual results could differ materially from those anticipated in, or implied by, these forward-looking statements as a result of known risks and uncertainties set forth below and elsewhere in this Quarterly Report on Form 10-Q. These factors include or relate to the following:

the effect of the continuing industry-wide downturn in and the cyclical nature of, energy exploration and development activities;

continuing incurrence of operating losses due to such downturn;

oil and natural gas commodity prices;

market response to global demands to curtail use of oil and natural gas;

capital budgets and spending by the oil and natural gas industry;

the ability or willingness of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain production levels for oil;

oil and natural gas production levels by non-OPEC countries;

supply and demand for oilfield services and industry activity levels;

our ability to maintain stable pricing;

possible impairment of our long-lived assets;

potential for excess capacity;

competition;

substantial capital requirements;

significant operating and financial restrictions under our loan and security agreement which provides for a term loan, ~~of $50.0 million,~~ or the ~~New~~Term Loan ~~Agreement;~~Agreement, excluding paid in kind interest;

technological obsolescence of operating equipment;

dependence on certain key employees;

concentration of customers;

substantial additional costs of compliance with reporting obligations, the Sarbanes-Oxley Act, ~~and New~~Term Loan Agreement, Revolving Loan Agreement and the PIK Notes covenants;

seasonality of oilfield services activity;

collection of accounts receivable;

environmental and other governmental regulation;

the potential disruption of business activities caused by the physical effects, if any, of climate change;

risks inherent in our operations;

ability to fully integrate future acquisitions;

variation from projected operating and financial data;

variation from budgeted and projected capital expenditures;

volatility of global financial markets; and

the other factors discussed under “Risk Factors” beginning on page 10 of the Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To the extent these risks, uncertainties and assumptions give rise to events that vary from our expectations, the forward-looking events discussed in this Quarterly Report on Form 10-Q may not occur. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Forbes Energy Services Ltd.

Condensed Consolidated Balance Sheets ~~(unaudited)~~(unaudited)

(in thousands, except par value amounts)


	Successor
	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	5,383		$	5,465		$	1,030		$	8,083
Cash - restricted	19,701			30,015			73			73
Accounts receivable - trade, net	29,779			24,341			42,468			45,950
Accounts receivable - other	315			496			2,552			2,228
Prepaid expenses and other current assets	6,745			11,212			10,516			14,691
Total current assets	61,923			71,529			56,639			71,025
Property and equipment, net	113,474			117,191			138,780			148,608
Operating lease right-of-use assets							5,785			—
Intangible assets, net	11,292			11,852			13,195			13,980
Goodwill							19,700			19,700
Other assets	1,040			1,185			2,020			3,072
Total assets	$	187,729		$	201,757		$	236,119		$	256,385

Liabilities and Stockholders’ Equity
Current liabilities
Current portions of long-term debt	$	2,765		$	7,566
Accounts payable - trade	11,091			7,497			$	9,955		$	17,841
Accounts payable - related parties	—			11
Accrued interest payable	741			998			2,646			1,993
Accrued expenses	11,415			11,084			12,633			14,348
Current portion of operating lease liabilities							756			—
Current portion of long-term debt							60,273			59,321
Total current liabilities	26,012			27,156			86,263			93,503
Long-term debt, net of current portion	55,218			51,288
Long-term operating lease liabilities, net of current portion							5,029			—
Long-term debt, net of current portion and debt discount							74,928			71,095
Deferred tax liability	362			379			343			357
Total liabilities	81,592			78,823			166,563			164,955

Commitments and contingencies (Note 8)

Common stock, $0.01 par value, 40,000 shares authorized, 5,336 shares issued and outstanding at June 30, 2018 and December 31, 2017	53			53
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.01 par value, 40,000 shares authorized, 5,446 and 5,439 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively							54			54
Additional paid-in capital	149,364			148,866			150,477			149,968
Accumulated deficit	(43,280		)	(25,985		)	(80,975		)	(58,592		)
Total stockholders’ equity	106,137			122,934			69,556			91,430
Total liabilities and stockholders’ equity	$	187,729		$	201,757		$	236,119		$	256,385

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forbes Energy Services Ltd.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)


	Successor						Predecessor
	Three months ended June 30, 2018			April 13 through June 30, 2017			April 1 through April 12, 2017			Three Months Ended June 30,
										2019			2018
Revenues
Well servicing	$	27,375		$	18,139		$	2,449		$	25,762		$	20,415
Coiled tubing										13,292			6,960
Fluid logistics	13,866			9,711			1,269			12,011			13,866
Total revenues	41,241			27,850			3,718			51,065			41,241

Expenses
Well servicing	23,324			13,814			1,813			20,971			17,116
Coiled tubing										13,854			6,208
Fluid logistics	11,151			9,053			1,260			8,823			11,151
General and administrative	5,908			3,130			500			5,417			5,908
Depreciation and amortization	7,652			5,681			1,533			7,013			7,652
Total expenses	48,035			31,678			5,106			56,078			48,035
Operating loss	(6,794		)	(3,828		)	(1,388		)	(5,013		)	(6,794		)

Other income (expense)
Interest income	—			6			—			1			—
Interest expense	(2,426		)	(1,897		)	(40		)	(5,723		)	(2,426		)
Gain (loss) on reorganization items, net	—			(1,299		)	51,090
Pre-tax income (loss)	(9,220		)	(7,018		)	49,662
Income tax benefit	(454		)	(17		)	(4		)
Net income (loss)	(8,766		)	(7,001		)	49,666
Income (loss) per share of common stock
Basic and diluted income (loss) per share	$	(1.64	)	$	(1.33	)	$	1.81
Weighted average number of shares outstanding
Pre-tax loss										(10,735		)	(9,220		)
Income tax expense (benefit)										14			(454		)
Net loss										$	(10,749	)	$	(8,766	)

Loss per share of common stock
Basic and diluted	5,336			5,250			27,508			$	(1.97	)	$	(1.64	)

Weighted average number of shares of common stock outstanding:
Basic and diluted										5,446			5,336

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forbes Energy Services Ltd.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)


	Successor						Predecessor
	Six months ended June 30, 2018			April 13 through June 30, 2017			January 1 through April 12, 2017			Six Months Ended June 30,
										2019			2018
Revenues
Well servicing	$	50,231		$	18,139		$	19,554		$	50,512		$	38,069
Coiled tubing										33,302			12,162
Fluid logistics	26,601			9,711			11,211			25,639			26,601
Total revenues	76,832			27,850			30,765			109,453			76,832

Expenses
Well servicing	42,339			13,814			15,952			38,520			31,968
Coiled tubing										31,792			10,371
Fluid logistics	21,840			9,053			11,207			19,475			21,840
General and administrative	10,796			3,130			5,012			12,242			10,796
Depreciation and amortization	14,815			5,681			13,601			16,452			14,815
Total expenses	89,790			31,678			45,772			118,481			89,790
Operating loss	(12,958		)	(3,828		)	(15,007		)	(9,028		)	(12,958		)

Other income (expense)
Interest income	2			6			13			4			2
Interest expense	(4,793		)	(1,897		)	(2,254		)	(13,409		)	(4,793		)
Gain (loss) on reorganization items, net	—			(1,299		)	44,503
Pre-tax income (loss)	(17,749		)	(7,018		)	27,255
Income tax (benefit) expense	(454		)	(17		)	27
Net income (loss)	(17,295		)	(7,001		)	27,228
Preferred stock dividends	—			—			(46		)
Net income (loss) attributable to common stockholders	$	(17,295	)	$	(7,001	)	$	27,182
Income (loss) per share of common stock
Basic and diluted income (loss) per share	$	(3.24	)	$	(1.33	)	$	0.99
Weighted average number of shares outstanding
Pre-tax loss										(22,433		)	(17,749		)
Income tax benefit										(50		)	(454		)
Net loss										$	(22,383	)	$	(17,295	)

Loss per share of common stock
Basic and diluted	5,336			5,250			27,508			$	(4.11	)	$	(3.24	)

Weighted average number of shares of common stock outstanding:
Basic and diluted										5,444			5,336

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forbes Energy Services Ltd.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Successor						Predecessor
	Six months ended June 30, 2018			April 13 through June 30, 2017			January 1 through April 12, 2017			Six Months Ended June 30,
										2019			2018
Cash flows from operating activities:
Net income (loss)	$	(17,295	)	$	(7,001	)	$	27,228
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Net loss										$	(22,383	)	$	(17,295	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	14,815			5,681			13,601			16,452			14,815
Share-based compensation	498			—			—			509			498
Reorganization items (non-cash)	—			—			(51,166		)
Deferred tax benefit	(17		)	(17		)	(47		)	(14		)	(17		)
Gain on disposal of assets	(67		)	—			(950		)	(2,437		)	(67		)
Bad debt expense	54			217			1			243			54
Amortization of debt discount	413			398			234
Amortization of debt discount/deferred financing costs/premium conversion										4,391			413
Interest paid in kind	1,845			768			—			4,699			1,845
Changes in operating assets and liabilities:
Accounts receivable	(5,311		)	(2,520		)	(916		)	2,915			(5,311		)
Prepaid expenses and other assets	(423		)	(178		)	(748		)	(17		)	(423		)
Accounts payable - trade	1,393			131			6,608			(7,886		)	1,393
Accounts payable - related parties	(11		)	(20		)	2			—			(11		)
Accrued expenses	1,488			(782		)	324			(1,742		)	1,488
Accrued interest payable	(257		)	63			1,575			653			(257		)
Net cash used in operating activities	(2,875		)	(3,260		)	(4,254		)	(4,617		)	(2,875		)
Cash flows from investing activities:
Purchases of property and equipment										(9,700		)	(7,044		)
Proceeds from sale of property and equipment	510			839			937			8,651			510
Purchases of property and equipment	(7,044		)	(1,015		)	(400		)
Net cash provided by (used in) investing activities	(6,534		)	(176		)	537
Net cash used in investing activities										(1,049		)	(6,534		)
Cash flows from financing activities:
Payments for capital leases	(987		)	(285		)	(444		)
Payments for debt issuance costs	—			—			(5,000		)
Payment of Prior Senior Notes	—			—			(20,000		)
Repayment of Prior Loan Agreement	—			—			(15,000		)
Proceeds from New Loan Agreement	—			—			50,000
Net cash provided by (used in) financing activities	(987		)	(285		)	9,556
Net decrease in cash, cash equivalents, and cash - restricted	(10,396		)	(3,721		)	5,839
Cash, cash equivalents, and cash - restricted:
Payments for finance leases										(2,387		)	(987		)
Proceeds from Revolving Loan Agreement										6,000			—
Payments on Term Loan Agreement										(5,000		)	—
Payments for Bridge Loan										(4,422		)	—
Proceeds from PIK Notes										4,422			—
Net cash used in financing activities										(1,387		)	(987		)
Net decrease in cash, cash equivalents and cash - restricted										(7,053		)	(10,396		)
Cash, cash equivalents and cash - restricted:
Beginning of period	35,480			53,839			48,000			8,156			35,480
End of period	$	25,084		$	50,118		$	53,839		$	1,103		$	25,084

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forbes Energy Services Ltd.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

(in thousands)

For the three and six months ended June 30, 2019



	Common Stock			Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2018	5,439	$	54	$	149,968	$	(58,592	)	$	91,430
Share-based compensation	7	—		253		—			253
Net loss	—	—		—		(11,634		)	(11,634		)
Balance at March 31, 2019	5,446	54		150,221		(70,226		)	80,049
Share-based compensation	—	—		256		—			256
Net loss	—	—		—		(10,749		)	(10,749		)
Balance at June 30, 2019	5,446	$	54	$	150,477	$	(80,975	)	$	69,556

For the three and six months ended June 30, 2018



	Common Stock			Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017	5,336	$	53	$	148,866	$	(25,985	)	$	122,934
Share-based compensation	—	—		251		—			251
Net loss	—	—		—		(8,529		)	(8,529		)
Balance at March 31, 2018	5,336	53		149,117		(34,514		)	114,656
Share-based compensation	—	—		247		—			247
Net loss	—	—		—		(8,766		)	(8,766		)
Balance at June 30, 2018	5,336	$	53	$	149,364	$	(43,280	)	$	106,137

The accompanying notes are an integral part of these condensed consolidated financial statements.

Forbes Energy Services Ltd.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Nature of Operations

Nature of ~~Business~~Operations

Forbes Energy Services Ltd., or FES Ltd., is an independent oilfield services contractor that provides ~~a wide range of~~ well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid hauling, fluid disposal, well maintenance, completion services, workovers and ~~re-completions,~~recompletions, plugging and abandonment, and tubing testing. The Company's operations are concentrated in the major onshore oil and natural gas producing regions of Texas, with an additional location in Pennsylvania. The Company believes that its broad range of services, which extends from initial drilling, through production, to eventual abandonment, is fundamental to establishing and maintaining the flow of oil and natural gas throughout the life cycle of ~~its customers'~~our customers’ wells.

As used in these ~~Consolidated Financial Statements,~~condensed consolidated financial statements, the ~~“Company,” “we,”~~“Company”, “we” and “our” mean FES Ltd. and its ~~direct and indirect~~ subsidiaries, except as otherwise indicated.

~~2. Basis of Presentation~~

~~Fresh Start Accounting~~

On January 22, 2017, FES Ltd. and its domestic subsidiaries, or collectively, the Debtors, filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas-Corpus Christi Division, or the Bankruptcy Court, pursuant to the terms of a restructuring support agreement that contemplated the reorganization of the Debtors pursuant to a prepackaged plan of reorganization, as amended and supplemented, the Plan. On March 29, 2017, the Bankruptcy Court entered an order confirming the Plan. On April 13, 2017, or the Effective Date, the Plan became effective pursuant to its terms and the Debtors emerged from their chapter 11 cases.

Upon emergence from bankruptcy on the Effective Date, the Company qualified for and adopted fresh start accounting in accordance with the provisions of ASC 852 as (i) the holders of FES Ltd.’s prior common stock, par value $0.04 per share, or the Old Common Stock, received none of the new class of common stock, par value $0.01 per share, or the New Common Stock, issued upon the Debtors' emergence from bankruptcy and (ii) the reorganization value of the Company's assets immediately prior to confirmation of the Plan was less than the post-petition liabilities and allowed claims. The effects of the Plan and the application of fresh start accounting are reflected in the Company's condensed consolidated financial statements from and after April 13, 2017. References to the "Successor" pertain to the Company from and after the Effective Date. References to "Predecessor" pertain to the Company prior to the Effective Date.

The Company applied fresh start accounting from and after the Effective Date. Fresh start accounting required the Company to present its assets, liabilities and equity as if it were a new entity upon emergence from bankruptcy, with no beginning retained earnings or deficit as of the fresh start reporting date. As a result of the adoption of fresh start accounting, the Company’s unaudited condensed consolidated financial statements from and after the Effective Date will not be comparable to its financial statements prior to such date.

~~Reorganization Items~~

~~Reorganization items represent amounts incurred subsequent to the filing of the Bankruptcy Petitions as a direct result of the filing of the Plan and are comprised of the following (in thousands):~~

Successor Predecessor
April 13 through June 30, 2017 April 1 through April 12, 2017 January 1 through April 12, 2017
Reorganization legal and professional fees $ (1,299 ) $ (2,246 ) $ (6,729 )
Deferred loan costs expensed —
—
(2,104 )
Gain on settlement of liabilities subject to compromise —
140,441
140,441
Fresh start adjustments —
(87,105 ) (87,105 )
Gain (loss) on reorganization items, net $ (1,299 ) $ 51,090
$ 44,503

~~Interim Financial Information~~

The unaudited condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, these condensed consolidated financial statements should be read along with the annual audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments which are of normal recurring natures considered necessary for a fair representation have been made in the accompanying unaudited financial statements.

~~Use of~~ Estimates,

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

~~Cash - Restricted~~

Restricted cash at June 30, 2018 (Successor) and December 31, 2017 (Successor) was $19.7 million and $30.0 million, respectively. The components of restricted cash at June 30, 2018 (Successor) included $11.0 million related to the loan and security agreement which provides for a term loan of $50.0 million, or the New Loan Agreement, which is subject to satisfaction of certain release restrictions and $8.7 million in a cash collateral account related to letters of credit and the Company's corporate credit card program under a new letter of credit facility entered into with Regions, or the New Regions Letter of Credit Facility. The release conditions set forth in the New Loan Agreement include, among other things, (i) no default or event of default under the New Loan Agreement having occurred or being continuing as of the date of the requested release of proceeds of the New Loan Agreement, or that would exist after giving effect to the release requested to be made on such date, and (ii) the Company’s unrestricted cash and cash equivalents being less than $7.0 million after giving pro forma effect to the requested release.

~~Revenue Recognition~~

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," or ASU 2014-09, which provides guidance for revenue recognition and which supersedes nearly all existing revenue recognition guidance under ASU 2014-09 and created ASC 606. This ASU provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. On January 1, 2018, the Company adopted ASC 606 on a modified retrospective basis for all contracts. As a result of the Company's adoption, there were no changes to the timing of the revenue recognition or measurement of revenue, and there was no cumulative effect of adoption as of January 1, 2018. Therefore, the only changes to the financial statements related to the adoption are in the footnote disclosures as included here-in.

Revenue is measured as consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by providing service to a customer. Amounts are billed upon completion of service and are generally due within 30 days.

The Company has its principal revenue generating activities organized into two service lines, well servicing and fluid logistics. The Company's well servicing line consists primarily of maintenance, workover, completion, plugging and

abandonment, and tubing testing services. The Company's fluid logistics line provides supporting services to the well servicing line as well as direct sales to customers for fluid management and movement. The Company generally establishes a master services agreement with each customer and provides associated services on a work order basis in increments of days, by the hour for services performed or on occasion, bid/turnkey pricing. Services provided under the well servicing and the fluid logistics segments are short in duration and generally completed within 30 days.

The majority of the Company’s contracts with customers in both the well servicing and fluid logistics segments are short-term in nature and are recognized as “over-time” performance obligations as the services are performed. The Company applies the “as-invoiced” practical expedient as the amount of consideration the Company has a right to invoice corresponds directly with the value of the Company’s performance to date. Because of the short-term nature of the Company’s services, which generally last a few hours to multiple days, the Company does not have any contracts with a duration longer than one year that require disclosure. The Company has no material contract assets or liabilities.

The Company does not have any revenue expected to be recognized in the future related to remaining performance obligations or contracts with a variable consideration related to undelivered performance obligations. There was no revenue recognized in the current period from performance obligations satisfied in previous periods. The Company's significant judgments made in connection with the adoption of ASC 606 included the determination of when the Company satisfies its performance obligation to customers and the applicability of the as invoiced practical expedient.

The following tables show revenue disaggregated by primary geographical markets and major service lines for the three months ended June 30, 2018 (Successor) and the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor).

Successor Three months ended June 30, 2018
Well Servicing Fluid Logistics Total
Primary Geographical Markets (in thousands)
South Texas $ 18,131
$ 6,669
$ 24,800
East Texas ⁽¹⁾
1,007
577
1,584
Central Texas —
3,461
3,461
West Texas 8,237
3,159
11,396
Total $ 27,375
$ 13,866
$ 41,241

Successor April 13 through June 30, 2017
Well Servicing Fluid Logistics Total
Primary Geographical Markets (in thousands)
South Texas $ 14,470
$ 5,261
$ 19,731
East Texas ⁽¹⁾
617
626
1,243
Central Texas —
2,485
2,485
West Texas 3,052
1,339
4,391
Total $ 18,139
$ 9,711
$ 27,850

Predecessor April 1 through April 12, 2017
Well Servicing Fluid Logistics Total
Primary Geographical Markets (in thousands)
South Texas $ 1,885
$ 659
$ 2,544
East Texas ⁽¹⁾
100
114
214
Central Texas —
189
189
West Texas 464
307
771
Total $ 2,449
$ 1,269
$ 3,718

(1) Includes revenues from the Company's operations in Pennsylvania.

The following tables show revenue disaggregated by primary geographical markets and major service lines for the six months ended June 30, 2018 (Successor) and the periods of April 13 through June 30, 2017 (Successor) and January 1 through April 12, 2017 (Predecessor).

Successor Six months ended June 30, 2018
Well Servicing Fluid Logistics Total
Primary Geographical Markets (in thousands)
South Texas $ 34,787
$ 13,300
$ 48,087
East Texas ⁽¹⁾
1,660
1,152
2,812
Central Texas —
6,464
6,464
West Texas 13,784
5,685
19,469
Total $ 50,231
$ 26,601
$ 76,832

Predecessor January 1 through April 12, 2017
Well Servicing Fluid Logistics Total
Primary Geographical Markets (in thousands)
South Texas $ 14,691
$ 5,872
$ 20,563
East Texas ⁽¹⁾
868
945
1,813
Central Texas —
1,593
1,593
West Texas 3,995
2,801
6,796
Total $ 19,554
$ 11,211
$ 30,765

(1) Includes revenues from the Company's operations in Pennsylvania.

~~3. Risk~~ Risks and Uncertainties

As an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, the Company's revenue, profitability, cash flows and future rate of growth are substantially dependent on its ability to (1) maintain adequate equipment utilization, (2) maintain adequate pricing for the services it provides, and (3) maintain a trained workforce. Failure to do so could adversely affect the Company's financial position, results of operations, and cash flows.

Because the Company's revenues are generated primarily from customers who are subject to the same factors as the Company, the Company's operations are also susceptible to market volatility resulting from economic, cyclical, weather, or other factors related to such industry. The Company is subject to changes in the level of operating and capital spending in the industry, decreases in oil and natural gas prices, and/or industry perception about future oil and natural gas prices that may materially decrease demand for the Company's services, or may have an adverse effect on our financial position, results of operations and cash flows.

2. Basis of Presentation

Interim Financial Information

The unaudited condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, these condensed consolidated financial statements should be read along with the annual audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments which are of normal recurring natures considered necessary for a fair representation have been made in the accompanying unaudited financial statements.

Use of Estimates

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation with no material effect on the unaudited condensed consolidated financial statements.

Fair Values of Financial Instruments

Fair value is the price that would be received to sell an asset, or the amount paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date.

There is a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company classifies fair value balances based on the observability of those inputs. The three levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable. These inputs are either directly observable in the marketplace or indirectly observable through corroboration with market data for substantially the full contractual term of the asset or liability being measured.

Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In valuing certain assets and liabilities, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

The carrying amounts of cash and cash equivalents, accounts receivable-trade, accounts receivable-other, accounts payable-trade and insurance notes approximate fair value because of the short maturity of these instruments. The fair values of finance leases approximate their carrying values, based on current market rates at which the Company could borrow funds with similar maturities (Level 2 in the fair value hierarchy). The fair values of the Term Loan Agreement, Bridge Loan and the PIK Notes as of the respective dates are set forth below (in thousands):



	June 30, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan Agreement	$	60,850	$	64,198	$	62,335	$	65,794
Bridge Loan	$	—	$	—	$	49,568	$	50,000
PIK Notes	$	54,131	$	61,919	$	—	$	—

Cash, Cash Equivalents and Cash - Restricted

The following table provides a reconciliation of cash, cash equivalents and cash - restricted reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows (in thousands).



	June 30,
	2019		2018
Cash and cash equivalents	$	1,030	$	5,383
Cash - restricted	73		19,701
Cash and cash equivalents and cash - restricted as shown in the consolidated statement of cash flows	$	1,103	$	25,084

The Company's restricted cash at June 30, 2018 included $11.0 million related to a prior restriction under the Term Loan Agreement and $8.7 million as collateral for certain outstanding letters of credit and the Company's corporate credit card program under a prior credit facility with Regions.

Revenue Recognition

The Company has its principal revenue generating activities organized into three service lines, well servicing, coiled tubing and fluid logistics. The Company's well servicing line consists primarily of maintenance, workover, completion, plugging and abandonment, and tubing testing services. The Company's coiled tubing line consists of maintenance, workover and completion services. The Company's fluid logistics line provides supporting services to the well servicing line as well as direct sales to customers for fluid management and movement. The Company generally establishes a master services agreement with each customer and provides associated services on a work order basis in increments of days, by the hour for services performed or on occasion, bid/turnkey pricing. Services provided under the well servicing, coiled tubing and the fluid logistics segments are short in duration and generally completed within 30 days.

The majority of the Company’s contracts with customers in the well servicing, coiled tubing and fluid logistics segments are short-term in nature and are recognized as “over-time” performance obligations as the services are performed. The Company applies the “as-invoiced” practical expedient as the amount of consideration the Company has a right to invoice corresponds directly with the value of the Company’s performance to date. Because of the short-term nature of the Company’s services, which generally last a few hours to multiple days, the Company does not have any contracts with a duration longer than one year that require disclosure. The Company has no material contract assets or liabilities.

The Company does not have any revenue expected to be recognized in the future related to remaining performance obligations or contracts with variable consideration related to undelivered performance obligations. There was no revenue recognized in the current period from performance obligations satisfied in previous periods. The Company's significant judgments made in connection with the adoption of ASC 606 included the determination of when the Company satisfies its performance obligation to customers and the applicability of the as invoiced practical expedient.

Leases

Effective January 1, 2019, the Company adopted an accounting standard update issued by the Financial Accounting Standards Board (FASB) related to accounting for leases, which requires lessees to record assets and liabilities that arise for all leases on their balance sheet and expanded financial statement disclosures for both lessees and lessors. Previously, only capital leases were recorded on the balance sheet. This update requires lessees to recognize a lease liability equal to the present value of its lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities and instead recognize lease expense for such leases generally on a straight-line basis over the lease term. Leases with a term of longer than 12 months will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted this standard on a prospective basis using the optional modified retrospective transition method. As such, the comparative financial information has not been restated and continues to be reported under the lease standard in effect during those periods. The Company also elected other practical expedients provided by the new standard, including the package of practical expedients, the hindsight practical expedient and the short-term lease recognition practical expedient in which leases with a term of 12 months or less are not recognized on the balance sheet. The adoption of this standard resulted in the recognition of approximately $6.2 million of operating lease right-of-use assets and operating lease liabilities on the balance sheet as of January 1, 2019. The adoption of this standard did not materially impact the condensed consolidated statements of operations for the three and six months ended June 30, 2019. See Note 8 for the expanded lease disclosures required by the new standard.

3. Acquisition of Cretic Energy Services, LLC

On November 16, 2018, the Company acquired 100% of the outstanding units of Cretic Energy Services, LLC (Cretic). The acquisition of Cretic was accounted for as a business combination using the acquisition method of accounting. The aggregate purchase price was $69.4 million in cash (net of $2.2 million cash acquired).

The purchase price paid in the acquisition has been preliminarily allocated to record the acquired assets and assumed liabilities based on their estimated fair value. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. Management estimated that consideration paid exceeded the fair value of the net assets acquired. The goodwill recorded was primarily attributable to synergies related to the Company’s coiled tubing business strategy that are expected to arise from the Cretic acquisition and was attributable to the Company’s coiled tubing segment.

Proforma Results from the Cretic Acquisition (unaudited)

The following unaudited consolidated pro forma information is presented as if the Cretic acquisition had occurred on January 1, 2018 (in thousands):



	Pro Forma
	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018
Revenue	$	57,611		$	107,067

Net loss	$	(8,926	)	$	(19,498	)

The unaudited pro forma amounts above have been calculated after applying the Company’s accounting policies and adjusting the Cretic acquisition results to reflect the increase to interest expense and depreciation and amortization that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied from January 1, 2018 and other related pro forma adjustments. The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the Cretic acquisition, and are presented for illustrative purposes only and are not necessarily indicative of results that would have been achieved if the Cretic acquisition had occurred as of January 1, 2018 or of future operating performance.

4. Property and Equipment

Property and equipment consisted of the ~~following:~~following (in thousands):


		Successor
	Estimated Life in Years	June 30, 2018			December 31, 2017
		(in thousands)						Estimated Life in Years	June 30, 2019			December 31, 2018
Well servicing equipment	9-15 years	$	87,268		$	80,899		9-15 years	$	132,358		$	128,647
Autos and trucks	5-10 years	46,121			42,831			5-10 years	25,375			32,132
Autos and trucks - finance lease								5-10 years	23,198			20,416
Disposal wells	5-15 years	3,977			3,977			5-15 years	4,159			3,977
Building and improvements	5-30 years	5,668			5,474			5-30 years	5,901			5,705
Furniture and fixtures	3-15 years	2,146			1,950			3-15 years	3,032			2,797
Land		868			868				868			868
		146,048			135,999				194,891			194,542
Accumulated depreciation		(32,574		)	(18,808		)
Accumulated depreciation ⁽¹⁾									(56,111		)	(45,934		)
		$	113,474		$	117,191			$	138,780		$	148,608

⁽¹⁾Includes accumulated depreciation of finance lease assets of $6.1 million and $4.5 million at June 30, 2019 and December 31, 2018, respectively.

Depreciation expense was ~~$7.4 million, $5.5~~$6.7 million and ~~$1.5~~$7.4 million for the three months ended June 30, 2019 and 2018, ~~(Successor)~~respectively, and ~~the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor), respectively. Depreciation expense was $14.2 million, $5.5~~$15.7 million and ~~$13.4~~$14.2 million for the six months ended June 30, 2019 and 2018, ~~(Successor)~~respectively. Depreciation of assets held under finance leases was $1.1 million and ~~the periods of April 13 through June 30, 2017 (Successor) and January 1 through April 12, 2017 (Predecessor), respectively.~~

~~5. Intangible Assets~~

The Company's major class of intangible assets subject to amortization consists of customer relationships, trade names and covenants not to compete. The Company expenses costs associated with extensions or renewals of intangible assets. There were no such extensions or renewals in each of the three and six months ended June 30, 2018 (Successor), the period of April 13 through June 30, 2017 (Successor) and the period of January 1 through April 12, 2017 (Predecessor). Amortization expense is calculated using the straight-line method over the period indicated. Amortization expense$0.7 million for the three months ended June 30, 2019 and 2018, ~~(Successor), the period of April 13 through June 30, 2017 (Successor)~~respectively, and ~~the period of April 1 through April 12, 2017 (Predecessor) was $0.3 million, $0.2~~$2.3 million and ~~less than $0.1~~$1.4 million ~~respectively. Amortization expense~~ for the six months ended June 30, 2019 and 2018, ~~(Successor),~~respectively, and is included in depreciation and amortization expense in the ~~period~~accompanying condensed consolidated statements of ~~April 13 through~~operations.

5. Goodwill and Other Intangible Assets

Goodwill

Goodwill totaled $19.7 million at June 30, ~~2017 (Successor)~~2019 and December 31, 2018 related to the ~~period~~acquisition of ~~January 1 through April 12, 2017 (Predecessor) was $0.6 million, $0.2 million~~Cretic and ~~$0.2 million, respectively.~~is deductible for tax purposes.

Other Intangible Assets

The following table sets forth the identified other intangible assets by major asset ~~class:~~class (in thousands):


	Useful Life (years)	Gross Carrying Value		Accumulated Amortization			Net Book Value		Useful Life (years)	Gross Carrying Value		Accumulated Amortization			Net Book Value
		(in thousands)
As of June 30, 2018 (Successor)
June 30, 2019
Customer relationships	15	$	8,678	$	(704	)	$	7,974	6-15	$	11,378	$	(1,318	)	$	10,060
Trade names	15	2,472		(201		)	2,271		10-15	3,072		(608		)	2,464
Covenants not to compete	4	1,505		(458		)	1,047		4	1,505		(834		)	671
		$	12,655	$	(1,363	)	$	11,292		$	15,955	$	(2,760	)	$	13,195

	Useful Life (years)	Gross Carrying Value		Accumulated Amortization			Net Book Value
		(in thousands)
As of December 31, 2017 (Successor)
December 31, 2018
Customer relationships	15	$	8,678	$	(415	)	$	8,263	6-15	$	11,378	$	(832	)	$	10,546
Trade names	15	2,472		(118		)	2,354		10-15	3,072		(496		)	2,576
Covenants not to compete	4	1,505		(270		)	1,235		4	1,505		(647		)	858
		$	12,655	$	(803	)	$	11,852		$	15,955	$	(1,975	)	$	13,980

Amortization expense was $0.3 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively, and $0.8 million and $0.6 million for the six months ended June 30, 2019 and 2018, respectively.

Future amortization of these intangibles will be as follows:



2019	$	819
2020	1,637
2021	1,367
2022	1,261
2023	1,261
Thereafter	6,850
	$	13,195

6. Long-Term Debt

Long-term debt at ~~June 30, 2018~~ ~~and~~ ~~December 31, 2017~~ consisted of the following (in thousands):


	Successor						June 30, 2019			December 31, 2018
	June 30, 2018			December 31, 2017
	(in thousands)
Third party equipment notes and capital leases	$	6,547		$	5,822
Term Loan Agreement of $55.0 million and $60.0 million, plus $8.9 million and $6.0 million of accrued interest paid in kind and net of debt discount of $3.0 million and $3.6 million as of June 30, 2019 and December 31, 2018, respectively							$	60,850		$	62,335
PIK Notes, including $2.4 million accretion of interest and conversion premium							54,131			—
Bridge Loan of $50.0 million, net of debt discount of $0.4 million as of December 31, 2018							—			49,568
Revolving Loan Agreement							6,000			—
Finance leases							13,258			13,319
Insurance notes	847			5,882			962			5,194
New Loan Agreement, including $4.7 million and $1.7 million of accrued interest paid in kind and net of debt discount of $4.1 million and $4.5 million as of June 30, 2018 and December 31, 2017, respectively	50,589			47,150
Total debt	57,983			58,854			135,201			130,416
Less: Current portion	(2,765		)	(7,566		)	(60,273		)	(59,321		)
Total long-term debt	$	55,218		$	51,288		$	74,928		$	71,095

~~New~~

Term Loan Agreement

On ~~the Effective Date,~~April 13, 2017, the Company entered into the ~~New~~Term Loan Agreement. ~~Forbes Energy Services~~FES LLC is the borrower, or the Borrower, ~~is the borrower~~ under the ~~New~~Term Loan Agreement. The Borrower’s obligations have been guaranteed by FES Ltd. and by ~~Texas Energy Services, LLC, C.C. Forbes, LLC~~TES, CCF and ~~Forbes Energy International, LLC,~~FEI, each direct subsidiaries of the Borrower and indirect subsidiaries of FES Ltd. The ~~New~~Term Loan Agreement, as amended, provides for a term loan of ~~$50.0~~$60.0 million, ~~which was fully funded on the Effective Date.~~excluding paid in kind interest. Subject to certain exceptions and permitted encumbrances, the obligations under ~~this loan~~the Term Loan Agreement are secured by a first priority security interest in substantially all the assets of the Company other than accounts receivable, cash ~~collateralizing~~and related assets, which constitute priority collateral under the ~~New Regions Letters of Credit Facility. Such term loan~~Revolving Loan Agreement (described below). The Term Loan Agreement has a stated maturity date of April 13, 2021. The proceeds of such term loan are only permitted to be used for (i) the payment on account of the Prior Senior Notes in an amount equal to $20.0 million; (ii) the payment of costs, expenses and fees incurred on or prior to the Effective Date in connection with the preparation, negotiation, execution and delivery of the New Loan Agreement and documents related thereto; and (iii) subject to satisfaction of certain release conditions set forth in the New Loan Agreement, for general operating, working capital and other general corporate purposes of the Borrower not otherwise prohibited by the terms of the New Loan Agreement. The release conditions set forth in the New Loan Agreement include, among other things, (i) no default or event of default under the New Loan Agreement having occurred or being continuing as of the date of the requested release of proceeds of the New Loan Agreement, or that would exist after giving effect to the release requested to be made on such date, and (ii) the Company’s unrestricted cash and cash equivalents being less than $7.0 million after giving pro forma effect to the requested release. At June 30, 2018, $11.0 million included in restricted cash was subject to these release restrictions.

Borrowings under ~~this term loan~~the Term Loan Agreement bear interest at a rate equal to five percent (5%) per annum payable quarterly in cash, or the Cash Interest Rate, plus (ii) an initial ~~rate for~~ paid in kind interest rate of seven percent (7%) commencing April 13, 2017 to be capitalized and added to the principal amount of the term loan ~~on the first day of each quarter~~ or, at the election of the Borrower, paid in cash. The paid in kind interest increases by two percent (2%) twelve months after ~~the Effective Date~~April 13, 2017 and every twelve months thereafter until maturity. Upon and after the occurrence of an event of default, the Cash Interest Rate will increase by two percentage points per annum. During the six months ended June 30, 2019, $2.9 million of interest was paid in kind. At June 30, ~~2018,~~2019, the ~~applicable~~paid in kind interest rate was ~~14% per annum.~~

11%.

The ~~New~~Term Loan Agreement includes customary negative covenants for an asset-based term loan, including covenants limiting the ability of the Company to, among other things, (i) effect mergers and consolidations, (ii) sell assets, (iii) create or suffer to exist any lien, (iv) make certain investments, (v) incur debt and (vi) transact with affiliates. In addition, the ~~New~~Term Loan Agreement includes customary affirmative covenants for an asset-based term loan, including covenants regarding the delivery of financial statements, reports and notices to the Agent. The ~~New~~Term Loan Agreement also contains customary representations and warranties and event of default provisions for a secured term loan.

Amendment to Term Loan Agreement and Joinder

In connection with the Cretic acquisition, on November 16, 2018, the Company, as a guarantor, FES LLC, as borrower, and certain of their subsidiaries, as guarantors, entered into Amendment No. 1 to Loan and Security Agreement and Pledge and Security Agreement (the “Term Loan Amendment”) with the lenders party thereto and Wilmington Trust, National Association, as agent (the “Term Loan Agent”), pursuant to which the Term Loan Agreement, was amended to, among other things, permit (i) debt under the Revolving Loan Agreement (described below) and the liens securing the obligations thereunder, (ii) the incurrence of add-on term loans under the Term Loan Agreement in an aggregate principal amount of $10.0 million and (iii) the incurrence of one-year “last-out” bridge loans under the Term Loan Agreement in an aggregate principal amount of $50.0 million (the “Bridge Loan”).

In addition, on November 16, 2018, Cretic entered into joinder documentation pursuant to which it became a guarantor under the Term Loan Agreement and a pledgor under the Pledge and Security Agreement referred to in the Term Loan Agreement.

Revolving Loan Agreement

In connection with the Cretic Acquisition, on November 16, 2018, the Company and certain of its subsidiaries, as borrowers, entered into a Credit Agreement (the “Revolving Loan Agreement”) with the lenders party thereto and Regions Bank, as administrative agent and collateral agent (the “Revolver Agent”). The Revolving Loan Agreement provides for $35 million of revolving loan commitments, subject to a borrowing base comprised of 85% of eligible accounts receivable, 90% of eligible investment grade accounts receivable and 100% of eligible cash, less reserves. The loans under the Revolving Loan Agreement accrue interest at a floating rate of LIBOR plus 2.50% - 3.25%, or a base rate plus 1.50% - 2.25%, with the margin based on the fixed charge coverage ratio from time to time.

The Revolving Loan Agreement is secured on a first lien basis by substantially all assets of the Company and its subsidiaries, subject to an intercreditor agreement between the Revolver Agent and the Term Loan Agent which provides that the priority collateral for the Revolving Loan Agreement consists of accounts receivable, cash and related assets, and that the other assets of the Company and its subsidiaries constitute priority collateral for the Term Loan Agreement. At June 30, ~~2018,~~2019 we ~~are~~had $6.0 million borrowings outstanding, $6.1 million in ~~compliance with our New Loan Agreement.~~

~~New Regions Letters of Credit Facility~~

~~On the Effective Date the Company entered into the New Regions Letters of Credit Facility pursuant to which Regions may issue, upon request by the Company,~~ letters of credit outstanding and ~~continue to provide charge cards for use by~~availability of $9.9 million.

5% Subordinated Convertible PIK Notes

On March 4, 2019, the ~~Company. Amounts available under~~Company issued $51.8 million aggregate original principal amount of 5.00% Subordinated Convertible PIK Notes due June 30, 2020 (the “PIK Notes”). On March 4, 2019, the ~~New Regions Letters of Credit Facility are subject to customary fees~~Company, as Issuer, and ~~are secured by a first-priority lien on, and security interest in, a cash collateral account with Regions containing cash equal to at least (i) 105%~~Wilmington Trust, National Association, as Trustee, entered into an Indenture governing the terms of the ~~sum~~PIK Notes.

The PIK Notes bear interest at a rate of ~~(a) all amounts owing for any drawings under letters~~5.00% per annum. Interest on the PIK Notes will be capitalized to principal semi-annually in arrears on July 1 and January 1 of ~~credit, including any reimbursement obligations, (b)~~each year, commencing on July 1, 2019.

indebtedness. In the event of a liquidation, dissolution, reorganization or any similar proceeding, obligations on the PIK Notes will be paid only after senior indebtedness has been paid in full. Pursuant to the Indenture, the Company is not permitted to (1) make cash payments to pay principal of, premium, if any, and interest on or any other amounts owing in respect of the PIK Notes, or (2) purchase, redeem or otherwise retire the PIK Notes for ~~each letter~~cash, if any senior indebtedness is not paid when due or any other default on senior indebtedness occurs and the maturity of ~~credit for~~such indebtedness is accelerated in accordance with its terms unless, in any case, the ~~period from~~default has been cured or waived, and ~~excluding~~the acceleration has been rescinded or the senior indebtedness has been repaid in full.

The Indenture also provides that upon a default by the Company in the payment when due of principal of, or premium, if any, or interest on, indebtedness in the aggregate principal amount then outstanding of $5.0 million or more, or acceleration of the Company’s indebtedness so that it becomes due and payable before the date on which it would otherwise have become due and payable, and if such default is not cured or waived within 30 days after notice to the Company by the Trustee or by holders of ~~issuance of such letter of credit to and including the date of expiration or termination, are equal to (x) the average daily face~~at least 25% in aggregate principal amount of ~~each~~the PIK Notes then outstanding, ~~letter~~the principal of, ~~credit multiplied by (y) a per annum rate determined by Regions~~(and premium, if any) and accrued and unpaid interest on, the PIK Notes may be declared immediately due and payable.

The PIK Notes are redeemable in whole or from time to time in ~~its discretion based upon such factors as Regions shall determine, including, without limitation,~~part at the ~~credit quality and financial performance~~Company’s option at a redemption price equal to the sum of (i) 100.0% of the ~~Company.~~principal amount of the PIK Notes to be redeemed and (ii) accrued and unpaid interest thereon to, but excluding, the redemption date, which amounts may be payable in cash or in shares of the Company’s common stock, (subject to limitations, if any, in the documentation governing the Company’s senior indebtedness). If redeemed for the Company’s common stock the holder will receive a number of shares of the Company’s common stock calculated based on the Fair Market Value of a share of the Company’s common stock at such time, in each case less a 15% discount per share. The 15% discount represents an implied conversion premium at issuance which will be settled in common stock at the date of conversion. As such, the face value of the PIK Notes will be accreted to the settlement amount at June 30, ~~2018, such rate was 3.00%. In~~2020. For the event the Company is unable to repay amounts due under the New Regions Letters of Credit Facility, Regions could proceed against such cash collateral account. Regions has no commitment under the New Regions Letters of Credit Facility to issue letters of credit. At June 30, 2018, the facility had $8.6 million in letters of credit outstanding.

~~Capital Leases~~

~~The Company financed the purchase of certain vehicles~~three and equipment through commercial loans and capital leases with aggregate principal amounts outstanding as of June 30, 2018 (Successor) and December 31, 2017 (Successor) of approximately $6.5 million and $5.8 million, respectively. These loans are repayable in a range of 42 to 48 monthly installments with the maturity dates ranging from July 2018 to June 2022. Interest accrues at rates ranging from 3.4% to 4.9% and is payable monthly. The loans are collateralized by equipment purchased with the proceeds of such loans. The Company paid total principal payments of approximately $0.5 million during the threesix months ended June 30, ~~2018 (Successor)~~2019, the Company recorded $1.8 million and $2.4 million, respectively in interest expense related to the accretion of the conversion premium.

The Indenture contains provisions permitting the Company and the trustee in certain circumstances, without the consent of the holders of the PIK Notes, and in certain other circumstances, with the consent of the holders of not less than a majority in aggregate principal amount of the PIK Notes at the time outstanding to execute supplemental indentures modifying the terms of the Indenture and the PIK Notes as described It also provided in the Indenture that, subject to certain exceptions, the holders of a majority in aggregate principal amount of the PIK Notes at the time outstanding may on behalf of the holders of all the PIK Notes waive any past default or event of default under the Indenture and its consequences.

The Indenture provides for mandatory conversion of the PIK Notes at maturity (or such earlier date as the Company shall elect to redeem the PIK Notes), ~~$0.3~~or upon a Marketed Public Offering of the Company’s common stock or a Change of Control, in each case as defined in the Indenture, at a conversion rate per $100 principal amount of PIK Notes into a number of shares of the Company’s common stock calculated based on the Fair Market Value of a share of the Company’s common stock at such time, in each case less a 15% discount per share.

Fair Market Value means fair market value as determined by (A) in the case of a Marketed Public Offering, the offering price per share paid by public investors in the Marketed Public Offering, (B) in the case of a Change of Control, the value of the consideration paid per share by the acquirer in the Change of Control transaction, or (C) in the case of mandatory conversion at the Maturity Date (or such earlier date as the Company shall elect to redeem the PIK Notes), such value as shall be determined by a nationally recognized investment banking firm engaged by the Board of Directors of the Company.

The Company used the gross proceeds of $51.8 million that it received from the issuance of the PIK Notes to repay all of the outstanding principal and accrued and unpaid interest on the Bridge Loan.

Interest on the Bridge Loan prior to its repayment accrued at a rate of 14% (5% cash interest plus 9% PIK interest). The payment obligations of the Borrower under the Bridge Loan have been fully satisfied as of March 4, 2019.

The exchange of the Bridge Loan for the ~~period~~PIK Notes was recognized as a modification of ~~April 13 through June 30, 2017 (Successor)~~the Term Loan as the amended Term Loan, resulting from the exchange, was not substantially different from the Term Loan. As such, the net carrying value of the Term Loan was not adjusted and ~~April 1 through April 12, 2017 (Predecessor). The Company paid total principal payments~~a new effective interest that equates the revised cash flows of the modified Term Loan to the existing carrying value of the Term Loan was computed and applied prospectively. Costs incurred with third parties of approximately ~~$1.0~~$1.6 million, ~~during~~related to the issuance of the PIK Notes, were recognized in interest expense for the six months ended June 30, ~~2018, $0.3 million for the period of April 13 through June 30, 2017 (Successor) and $0.4 million for the period of January 1 through April 12, 2017 (Predecessor).~~

~~Following are required principal payments due on capital leases existing as of June 30, 2018:~~

July - December 2018 2019 2020 2021 2022 and thereafter
(in thousands)
Capital lease principal payments $ 958
$ 1,939
$ 2,017
$ 1,488
$ 145

Management has historically acquired all light duty trucks (pickup trucks) through capital leases and may use capital leases or cash to purchase equipment held under operating leases that have reached the end of the lease term. See Note 8 - Commitments and Contingencies.2019.

Insurance Notes

~~During October of 2017, the~~The Company entered into an insurance promissory ~~note~~notes for the payment of insurance premiums at an interest rate of ~~2.9%~~4.99% and 3.27% respectively, with an aggregate principal amount outstanding of approximately $1.0 million and $5.2 million as of June 30, ~~2018 (Successor)~~2019 and December 31, ~~2017 (Successor),~~2018, respectively. The amount outstanding could be substantially offset by the cancellation of ~~approximately $0.8 million and $5.9 million, respectively.~~the related insurance coverage which is classified in prepaid insurance.

7. ~~Fair Value Measurements~~

~~Fair value is defined as the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.~~

~~Financial Assets and Liabilities~~

The carrying amounts of cash and cash equivalents, accounts receivable-trade, accounts receivable-other, accounts payable-trade, and insurance notes, approximate fair value because of the short maturity of these instruments. The fair values of third party notes and equipment notes approximate their carrying values, based on current market rates at which the Company could borrow funds with similar maturities (Level 2 in the fair value hierarchy). The fair values of the New Loan Agreement as of the respective dates are set forth below:

June 30, 2018 December 31, 2017
Carrying Amount Fair Value Carrying Amount Fair Value
Successor (in thousands)
New Loan Agreement $ 50,589
$ 50,719
$ 47,150
$ 55,550

8. Commitments and Contingencies

Concentrations of Credit Risk

~~FDIC~~Financial instruments which subject the Company to credit risk consist primarily of cash balances maintained in excess of federal depository insurance limits and trade receivables. Insurance coverage is currently $250,000 per depositor at each financial institution, and the Company's non-interest bearing cash balances ~~typically exceed~~exceeded federally insured limits. The Company restricts investment of temporary cash investments to financial institutions with high credit standings.

The ~~Company's~~Company’s customer base consists primarily of multi-national and independent oil and natural gas producers. The Company does not require collateral on its trade receivables. For the six months ended June 30, ~~2018 (Successor),~~2019, the Company's largest customer, five largest customers, and ten largest customers constituted ~~13.5%~~10.0%, ~~43.7%~~33.8% and ~~54.3% of consolidated revenues, respectively. For the six months ended June 30, 2018 (Successor), two customers constituted 13.5% and 12.4%~~46.5% of consolidated revenues, respectively. The loss of any one of the Company's top five customers could have a materially adverse effect on the revenues and profits of the Company. Further, the Company's trade accounts receivable are from companies within the oil and natural gas industry and as such the Company is exposed to normal industry credit risks. As of June 30, ~~2018,~~2019, the Company's largest customer, five largest customers, and ten largest customers constituted ~~7.3%~~4.8%, ~~37.3%~~27.0% and ~~41.9%~~44.2% of accounts receivable, respectively. The Company continually evaluates its reserves for potential credit losses and establishes reserves for such losses.

Employee Benefit Plan

The Company has a 401(k) retirement plan for substantially all of its employees based on certain eligibility requirements. The Company may provide profit sharing contributions to the plan at the discretion of management. No such discretionary contributions have been made since inception of the plan.

Litigation

~~From time to time, the~~The Company is subject to various other claims and legal actions that arise in the ordinary course of business. ~~There are no pending material legal proceedings,~~The Company does not believe that any of the currently existing claims and actions, separately or in the ~~Company is not aware of any material threatened legal proceedings, to which the Company is a party or to which its property is subject that would~~aggregate, will have a material adverse effect on the Company's business, financial ~~statements as~~condition, results of ~~June 30, 2018.~~operations, or cash flows. It is reasonably possible that cases could be resolved and result in liabilities that exceed the amounts currently ~~reserved.~~

reserved; however, we cannot reasonably estimate a range of loss based on the status of the cases. If one or more negative outcomes were to occur relative to these matters, the aggregate impact to the Company’s financial condition could be material.

Self-Insurance

The Company is self-insured under its Employee Group Medical Plan for the first ~~$150,000~~$150 thousand per individual. The Company is self-insured with a retention for the first ~~$250,000~~$250 thousand in general liability. The Company has an additional premium payable clause under its lead $10 million limit excess policy that states in the event a loss exceeds $1 million, a loss additional premium of up to 15% to 17% of paid losses in excess of $1 million will be due. The loss additional premium is payable at the time when the loss is paid and will be payable over a period agreed by insurers. The Company has accrued liabilities totaling ~~$5.6~~$5.9 million and ~~$7.2~~$5.2 million as of June 30, ~~2018 (Successor)~~2019 and December 31, ~~2017 (Successor),~~2018, respectively, for the projected additional premium and self-insured portion of these insurance claims as of the financial statement dates. This accrual includes claims made as well as an estimate for claims incurred but not reported by using third party data and claims history as of the financial statement dates.

Other

The Company is currently undergoing sales and use tax audits for multi-year periods. The Company believes the outcome of these audits will not have a material adverse effect on its results of operations or financial position. Because certain of these audits are in a preliminary stage, an estimate of the possible loss or range of loss cannot reasonably be ~~estimated at this time.~~

~~Off-Balance Sheet Arrangements~~

The Company is often party to certain transactions that constitute off-balance sheet arrangements such as performance bonds, guarantees, operating leases for equipment, and bank guarantees that are not reflected in the Company's condensed consolidated balance sheets. These arrangements are made in the Company's normal course of business and they are not reasonably likely to have a current or future material adverse effect on its financial condition, results of operations, liquidity, or cash flows. The Company's off-balance sheet arrangements include $8.6 million in letters of credit and operating leases for equipment.made.

~~9. Share-Based Compensation~~8. Leases

OnThe Company adopted a comprehensive new lease accounting standard effective January 1, 2019. The details of the ~~Effective Date, all prior equity interests (which included~~significant changes to our accounting policies resulting from the ~~Old Common Stock, FES Ltd.’s prior preferred stock, awards~~adoption of the new standard are set out below. The Company adopted the standard on a prospective basis using the optional modified retrospective transition method; accordingly, the comparative information as of December 31, 2018 and for the three and six months ended June 30, 2018 has not been adjusted and continues to be reported under the ~~prior compensation plans~~previous lease standard. Under the new lease standard, assets and liabilities that arise from all leases are required to be recognized on the ~~preferred stock purchase rights under~~balance sheet for lessees. Previously, only capital leases, which are now referred to as finance leases, were recorded on the ~~Rights Agreement) in FES Ltd. were extinguished without recovery.~~balance sheet.

Beginning January 1, 2019, for all leases with a term in excess of 12 months, the Company recognized a lease liability equal to the present value of the lease payments and a right-of-use asset representing our right to use the underlying asset for the lease term. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company elected the practical expedient to not recognize lease assets and liabilities. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. The Company has a significant number of short-term leases including month-to-month agreements that continue in perpetuity until the lessor or the Company terminates the lease agreement.

The Company is a lessee for operating leases, primarily related to real estate, salt water disposal wells and equipment. The vast majority of our operating leases have remaining lease terms of 10 years or less, some of which include options to extend the leases, and some of which include options to terminate the leases. The Company generally does not include renewal or termination options in the assessment of leases unless extension or termination is deemed to be reasonably certain. The accounting for some leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate, and assessing the likelihood of renewal or termination options. Salt water disposal well locations have fixed or both fixed and variable lease amounts where the variable lease payments are based on the volume of fluids injected into to the well and/or sales of products by the Company. The Company also has some lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

The Company is a lessee for finance leases related to autos and trucks and well servicing equipment. The vast majority of the Company's finance leases have remaining lease terms of three years or less, all of which include options to terminate the leases after one year and do not include options to extend the lease. For all finance leases, the Company is subject to a residual value guarantee established by the lessor and based upon the calculated net book value of the vehicle as of the date of early termination of the lease. The loans are collateralized by equipment purchased with the proceeds of such loans. For finance leases, the Company uses discount rates similar to incremental borrowing rates available for comparable equipment financing in our net present value calculation of lease payments. The Company's vehicle finance lease agreements contain lease and non-lease components, which are accounted for separately.

The following tables illustrate the financial impact of the Company's leases as of and for the three and six months ended June 30, 2019, along with other supplemental information about the Company's leases (in thousands, except years and percentages):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Components of lease expense:
Finance lease cost:
Amortization of right-of-use assets	$	1,110	$	2,324
Interest on lease liabilities	154		293
Operating lease cost:
Lease expense ⁽¹⁾	367		733
Short-term lease cost	647		1,306
Total lease cost	$	2,278	$	4,656

⁽¹⁾ Includes variable lease costs of $75 thousand and $150 thousand for the three and six months ended June 30, 2019, respectively.



	As of
	June 30, 2019
Components of balance sheet:
Operating leases:
Operating lease right-of-use assets (non-current)	$	5,785
Current portion of operating lease liabilities	$	756
Long-term operating lease liabilities, net of current portion	$	5,029
Finance leases:
Property and equipment, net	$	17,068
Current portion of long-term debt	$	5,180
Long-term debt, net of current portion and debt discount	$	8,078



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Other supplemental information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,014	$	2,039
Operating cash flows for finance leases - interest	$	154	$	293
Financing cash flows for finance leases	$	1,219	$	2,387
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	6,150
Finance leases	$	890	$	2,326
Weighted-average remaining lease term:
Operating leases			8.5 years
Finance leases			2.6 years
Weighted-average discount rate:
Operating leases			7.50		%
Finance leases			4.19		%

The following table summarizes the maturity of the Company's operating and finance leases as of June 30, 2019 (in thousands):



	Operating Leases - Related Party			Operating Leases - Other			Finance Leases
2019	$	39		$	1,235		$	3,248
2020	58			1,060			5,474
2021	8			1,035			3,974
2022	—			872			1,266
2023	—			747			96
Thereafter	—			3,608			—
Total minimum lease payments	105			8,557			14,058
Less imputed interest	(10		)	(2,166		)	(800		)
Less short-term leases excluded from the balance sheet	—			(701		)	—
Total lease liabilities per balance sheet	$	95		$	5,690		$	13,258

The Company adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December 31, 2018 were as follows (in thousands):



	Operating Leases - Related Party		Operating Leases - Other		Capital Leases
2019	$	30	$	2,027	$	4,559
2020	30		986		4,334
2021	8		946		3,375
2022	—		781		1,051
2023	—		386		—
Thereafter	—		1,350		—
Total	$	68	$	6,476	$	13,319

9. Share-Based Compensation

Management Incentive Plan

~~On the Effective Date, pursuant to the operation of the Plan, the Management Incentive Plan became effective.~~

A summary of the Company's share-based compensation expense during the periods presented are as ~~follows:~~

follows (in thousands):


		Successor
		Three months ended June 30, 2018		Six months ended June 30, 2018
		(in thousands)				Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Share based compensation expense recognized	Share based compensation expense recognized	$	248	$	498	$	256	$	509

				Successor				As of
				June 30, 2018				June 30, 2019

Unrecognized compensation cost (in thousands)	Unrecognized compensation cost (in thousands)			$	3,164			$	2,459
Remaining weighted-average service period (years)	Remaining weighted-average service period (years)			3.16				3.00

~~There was no share based compensation expense recognized during the comparable periods in the prior year.~~ During the ~~period from April 13 through December 31, 2017 (Successor),~~six months ended June 30, 2019, the Company granted ~~450,000~~no restricted stock units to officers and employees subject to the Management Incentive Plan. Below is a summary of the unvested restricted stock ~~units awarded.~~

units.


		Number of Shares	Weighted Average Fair Value		Number of Shares		Weighted Average Fair Value
Unvested as of December 31, 2017 (Successor)		363,300	$	11.00
Unvested as of December 31, 2018					329,240		$	9.68
Granted	Granted	—	$	—	—		$	—
Vested	Vested	—	$	—	(7,200	)	$	11.00
Forfeited		—	$	—	—		$	—
Unvested as of June 30, 2018 (Successor)		363,300	$	11.00
Unvested as of June 30, 2019					322,040		$	9.99

10. Related Party Transactions

~~During~~The Company incurred related party expenses, primarily related to lease rents, of $0.2 million and $0.3 million during the three months ended June 30, 2019 and 2018, ~~(Successor)~~respectively, and ~~the periods of April 13 through June 30, 2017 (Successor)~~$0.5 million and ~~April 1 through April 12, 2017 (Predecessor) the Company incurred $278,000, $186,000 and $109,000, respectively, in related party expenses, primarily related to leases and rents. During~~$0.6 million for the six months ended June 30, 2019 and 2018, (Successor) and the periods of April 13 through June 30, 2017 (Successor) and January 1 through April 12, 2017 (Predecessor) the Company incurred $566,000, $186,000 and $439,000, respectively, in related party expenses.respectively.

There was no related party revenue for the three months ended June 30, 2019 and 2018 or for the six months ended June 30, ~~2018 (Successor)~~2019 and the period of April 13 through June 30, 2017 (Successor). Related party revenue for each of the periods of April 1 through April 12, 2017 (Predecessor) and January 1 through April 12, 2017 (Predecessor) was $1,000. From time to time, vendors of the Company factor their receivables from the Company with a related party. For the period of January 1 through April 12, 2017 (Predecessor), the Company made payments of $65,000 for receivables factored to a related party. The nature of these transactions do not result in recording in the Company’s financial records any revenue, any expense or any receivable and does not result in any payable distinct in amount from the amount payable to such vendors as originally incurred. There were no such payments made during the three and six months ended June 30, 2018 (Successor) or for the period of April 13 through June 30, 2017 (Successor).2018.

~~As of June 30, 2018 (Successor), there~~There were no related party accounts receivable or accounts ~~payable. As~~payable as of June 30, 2019 or December 31, ~~2017 (Successor), related party accounts payable were $11,000 and there were no related party accounts receivable.~~ 2018.

In addition to such related party transactions above, Lawrence “Larry” First, a director of FES Ltd., serves as the Chief Investment Officer and Managing Director of Ascribe Capital LLC, or Ascribe, and Brett G. Wyard, also a director of FES Ltd., serves as a Managing Partner of Solace Capital Partners, or Solace. Ascribe and/or one or more of its affiliates own approximately ~~24.1%~~23.6% of the outstanding ~~New Common Stock~~common stock as of ~~August 8, 2018,~~June 30, 2019, and is owed approximately ~~$13.8~~$16.5 million of the aggregate principal amount of the ~~New~~Term Loan ~~Agreement.~~Agreement and approximately $27.5 million of the aggregate principle amount of the PIK Notes. Solace and/or one of its affiliates own approximately ~~15.8%~~17.4% of the outstanding ~~New Common Stock~~common stock as of ~~August 8, 2018,~~June 30, 2019, and is owed approximately ~~$12.6~~$15.1 million of the aggregate principal amount of the term loan covered by the ~~New~~Term Loan ~~Agreement.~~Agreement and approximately $20.3 million of the aggregate principal amount of the PIK Notes. Moreover, an affiliate of Solace and affiliates of Ascribe are parties to certain registration rights agreement ~~dated as of the Effective Date~~ by and among the Company and certain stockholders of the Company.

11. Earnings per Share

On the Effective Date, the Old Common Stock, the prior Series B Senior Convertible Preferred Stock, or the Prior Preferred Stock, and awards then outstanding under the Prior Compensation Plans were extinguished without recovery.

Basic earnings (loss) per share, or EPS, is computed by dividing net income (loss) available to common stockholders by the weighted-average common stock outstanding during the period. Diluted earnings (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock, such as ~~options and convertible preferred~~restricted stock units or the PIK Notes, were exercised and converted into common stock. Potential common stock equivalents relate to outstanding stock options and unvested restricted stock units, which are determined using the treasury stock method, and the ~~Prior Preferred Stock,~~PIK Notes, which were determined using the "if-converted" method. In applying the if-converted method, conversion is not assumed for purposes of computing diluted EPS if the effect would be antidilutive.

The following table sets forth the computation of basic and diluted loss per ~~share:~~share (in thousands, except per share amounts):


	Successor
	Three months ended June 30, 2018			Six months ended June 30, 2018			Three Months Ended June 30,
	(in thousands, except per share amounts)						2019			2018
Basic and diluted:
Net loss	$	(8,766	)	$	(17,295	)	$	(10,749	)	$	(8,766	)
Weighted-average common shares	5,336			5,336			5,446			5,336
Basic and diluted net loss per share	$	(1.64	)	$	(3.24	)	$	(1.97	)	$	(1.64	)

Successor Predecessor
April 13 through June 30, 2017 April 1 through April 12, 2017 January 1 through April 12, 2017
(in thousands, except per share amounts) (in thousands, except per share amounts)
Basic and diluted:
Net income (loss) $ (7,001 ) $ 49,666
$ 27,228
Preferred stock dividends —
—
(46 )
Net income (loss) attributable to common stockholders $ (7,001 ) $ 49,666
$ 27,182
Weighted-average common shares 5,250
27,508
27,508
Basic and diluted net income (loss) per share $ (1.33 ) $ 1.81
$ 0.99



	Six Months Ended June 30,
	2019			2018
Basic and diluted:
Net loss	$	(22,383	)	$	(17,295	)
Weighted-average common shares	5,444			5,336
Basic and diluted net loss per share	$	(4.11	)	$	(3.24	)

There were 322,040 and 363,300 unvested restricted stock units that were not included in the calculation of diluted EPS for the three and six months ended June 30, 2019 and 2018, ~~(Successor) because their effect would have been antidilutive. There were 602,625 stock options that were not included in~~respectively, and approximately 28.3 million shares related to the ~~calculation~~potential conversion of ~~diluted EPS for~~ the ~~periods of April 1, 2017 through April 12, 2017 (Predecessor) and January 1, 2017 through April 12, 2017 (Predecessor)~~PIK Notes at June 30, 2019 because their effect would have been antidilutive.

12. Business Segment Information

The Company has ~~determined that it has~~ ~~two~~three reportable segments organized based on its products and services—well servicing, coiled tubing and fluid logistics.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Upon the acquisition of Cretic, we evaluated our segment information and determined that coiled tubing represented a separate segment under our current facts. All prior year segment information has been recast to reflect the change in our segment reporting.

Well Servicing

~~At June 30, 2018, the~~The Company's well servicing segment ~~utilized its~~utilizes a fleet of ~~168~~ well servicing rigs, which was comprised of ~~154~~ workover rigs and 14 swabbing rigs ~~in addition to six coiled tubing spreads~~ and other related assets and ~~equipment. These assets are used~~equipment to provide the following services:(i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, (iv) plugging and abandonment services, and (v) pressure testing of oil and natural gas production tubing and scanning tubing for pitting and wall thickness using tubing testing units.

Coiled Tubing

The coiled tubing segment utilizes our fleet of coiled tubing units to provide a range of services accomplishing a wide variety of goals including horizontal completions, well bore clean-outs and maintenance, nitrogen services, thru-tubing services, formation stimulation using acid and other chemicals, and other pre- and post-hydraulic fracturing well preparation services.

Fluid Logistics

The Company's fluid logistics segment utilizes ~~the Company's~~a fleet of ~~264 owned or leased~~ fluid transport trucks and related assets, ~~108 other heavy trucks~~ including specialized vacuum, ~~high pressure~~high-pressure pump and tank trucks, ~~2,874~~ frac tanks, 15water wells, salt water disposal wells and facilities, and related ~~equipment. These assets are used~~equipment to ~~transport, store~~provide services such as transportation, storage and ~~dispose~~disposal of a variety of drilling and produced fluids used in, and generated by, oil and natural gas ~~production activities.~~production. These services are required in most workover and completion projects and are routinely used in the daily operation of producing wells.

The following ~~tables set~~table sets forth certain financial information with respect to the Company’s reportable segments for the three and six months ended June 30, 2018 (Successor), and the periods of April 13 through June 30, 2017 (Successor), April 1 through April 12, 2017 (Predecessor) and January 1 through April 12, 2017 (Predecessor)(in thousands):

Successor
Three months ended June 30, 2018 Six months ended June 30, 2018
(in thousands) (in thousands)
Well Servicing Fluid Logistics Total Well Servicing Fluid Logistics Total
Operating revenues $ 27,375
$ 13,866
$ 41,241
$ 50,231
$ 26,601
$ 76,832
Direct operating costs 23,324
11,151
34,475
42,339
21,840
64,179
Segment operating profit $ 4,051
$ 2,715
$ 6,766
$ 7,892
$ 4,761
$ 12,653
Depreciation and amortization $ 4,186
$ 3,466
$ 7,652
$ 7,918
$ 6,897
$ 14,815
Capital expenditures ⁽¹⁾
$ 4,320
1,500
$ 5,820
$ 8,463
$ 2,494
$ 10,957
Total assets $ 157,375
$ 30,354
$ 187,729
$ 157,375
$ 30,354
$ 187,729
Long-lived assets $ 83,148
$ 41,618
$ 124,766
$ 83,148
$ 41,618
$ 124,766

⁽¹⁾ Capital expenditures listed above include all cash and non-cash additions to property and equipment, including capital leases and fixed assets recorded in accounts payable at period end.

Successor
April 13, 2017 through June 30, 2017
(in thousands)
Well Servicing Fluid Logistics Total
Operating revenues $ 18,139
$ 9,711
$ 27,850
Direct operating costs 13,814
9,053
22,867
Segment operating profit $ 4,325
$ 658
$ 4,983
Depreciation and amortization $ 2,837
$ 2,844
$ 5,681
Capital expenditures ⁽¹⁾
$ 915
454
$ 1,368
Total assets $ 97,208
$ 78,680
$ 175,708
Long-lived assets $ 68,672
$ 49,269
$ 117,941

⁽¹⁾ ~~Capital expenditures listed above include all cash and non-cash additions to property and equipment, including capital leases and fixed assets recorded in accounts payable at period end.~~



	Well Servicing		Coiled Tubing			Fluid Logistics		Total
Three Months Ended June 30, 2019
Operating revenues	$	25,762	$	13,292		$	12,011	$	51,065
Direct operating costs	20,971		13,854			8,823		43,648
Segment profits	$	4,791	$	(562	)	$	3,188	$	7,417
Depreciation and amortization	$	2,783	$	2,531		$	1,699	$	7,013
Capital expenditures ⁽¹⁾	$	2,724	$	2,851		$	1,370	$	6,945

Three Months Ended June 30, 2018
Operating revenues	$	20,415	$	6,960		$	13,866	$	41,241
Direct operating costs	17,116		6,208			11,151		34,475
Segment profits	$	3,299	$	752		$	2,715	$	6,766
Depreciation and amortization	$	2,688	$	1,498		$	3,466	$	7,652
Capital expenditures ⁽¹⁾	$	2,016	$	2,304		$	1,500	$	5,820



⁽¹⁾ Capital expenditures listed above include all cash and non-cash additions to property and equipment, including finance leases and fixed assets recorded in accounts payable at year-end.

Predecessor
April 1, 2017 through April 12, 2017 January 1, 2017 through April 12, 2017
(in thousands) (in thousands)
Well Servicing Fluid Logistics Total Well Servicing Fluid Logistics Total
Operating revenues $ 2,449
$ 1,269
$ 3,718
$ 19,554
$ 11,211
$ 30,765
Direct operating costs 1,813
1,260
3,073
15,952
11,207
27,159
Segment operating profit $ 636
$ 9
$ 645
$ 3,602
$ 4
$ 3,606
Depreciation and amortization $ 782
$ 751
$ 1,533
$ 6,927
$ 6,674
$ 13,601
Capital expenditures ⁽¹⁾
$ 12
11
$ 23
$ 286
$ 114
$ 400
Total assets $ 607,638
$ 434,371
$ 1,042,009
$ 607,638
$ 434,371
$ 1,042,009
Long-lived assets $ 135,942
$ 84,384
$ 220,326
$ 135,942
$ 84,384
$ 220,326

⁽¹⁾ Capital expenditures listed above include all cash and non-cash additions to property and equipment, including capital leases and fixed assets recorded in accounts payable at period end.



	Three Months Ended June 30,
	2019			2018
Reconciliation of Operating Loss As Reported:
Segment profits	$	7,417		$	6,766
Less:
General and administrative expense	5,417			5,908
Depreciation and amortization	7,013			7,652
Operating loss	(5,013		)	(6,794		)
Other income (expenses), net	(5,722		)	(2,426		)
Pre-tax loss	$	(10,735	)	$	(9,220	)

Successor
Three months ended June 30, 2018 Six months ended in June 30, 2018
Reconciliation of the Company's Operating Loss As Reported: (in thousands) (in thousands)
Segment operating profits $ 6,766
$ 12,653
General and administrative expense 5,908
10,796
Depreciation and amortization 7,652
14,815
Operating loss (6,794 ) (12,958 )
Other expense, net (2,426 ) (4,791 )
Pre-tax loss $ (9,220 ) $ (17,749 )

Successor Predecessor
April 13 through June 30, 2017 April 1 through April 12, 2017 January 1 through April 12, 2017
Reconciliation of the Company's Operating Loss As Reported: (in thousands) (in thousands)
Segment operating profits $ 4,983
$ 645
$ 3,606
General and administrative expense 3,130
500
5,012
Depreciation and amortization 5,681
1,533
13,601
Operating loss (3,828 ) (1,388 ) (15,007 )
Other expense, net (1,891 ) (40 ) (2,241 )
Gain (loss) on reorganization items, net (1,299 ) 51,090
44,503
Pre-tax income (loss) $ (7,018 ) $ 49,662
$ 27,255



	Well Servicing		Coiled Tubing		Fluid Logistics		Total
Six Months Ended June 30, 2019
Operating revenues	$	50,512	$	33,302	$	25,639	$	109,453
Direct operating costs	38,520		31,792		19,475		89,787
Segment profits	$	11,992	$	1,510	$	6,164	$	19,666
Depreciation and amortization	$	4,959	$	6,069	$	5,424	$	16,452
Capital expenditures ⁽¹⁾	$	5,167	$	5,149	$	1,710	$	12,026
Total assets	$	75,829	$	102,190	$	50,909	$	228,928
Long lived assets	$	57,078	$	80,320	$	39,292	$	176,690

Six Months Ended June 30, 2018
Operating revenues	$	38,069	$	12,162	$	26,601	$	76,832
Direct operating costs	31,968		10,371		21,840		64,179
Segment profits	$	6,101	$	1,791	$	4,761	$	12,653
Depreciation and amortization	$	5,124	$	2,794	$	6,897	$	14,815
Capital expenditures ⁽¹⁾	$	2,945	$	5,518	$	2,494	$	10,957
Total assets	$	134,527	$	22,848	$	30,354	$	187,729
Long lived assets	$	65,920	$	17,228	$	41,618	$	124,766



⁽¹⁾ Capital expenditures listed above include all cash and non-cash additions to property and equipment, including finance leases and fixed assets recorded in accounts payable at year-end.

Successor
June 30, 2018 December 31, 2017
Reconciliation of the Company's Assets As Reported: (in thousands)
Total reportable segments $ 262,752
$ 215,134
Elimination of internal transactions (415,281 ) (311,147 )
Parent 340,258
297,770
Total assets $ 187,729
$ 201,757

~~13. Supplemental Cash Flow Information~~

Successor Predecessor
Six months ended June 30, 2018 April 13 through June 30, 2017 January 1 through April 12, 2017
Cash paid for (in thousands) (in thousands)
Interest $ 136
$ 657
$ 453
Supplemental schedule of non-cash investing and financing activities
Changes in accounts payable related to capital expenditures $ 2,201
$ —
$ —
Capital leases on equipment $ 1,712
$ 344
$ —
Preferred stock dividends and accretion costs $ —
$ —
$ 10



	Six Months Ended June 30,
	2019			2018
Reconciliation of Operating Loss As Reported:
Segment profits	$	19,666		$	12,653
Less:
General and administrative expense	12,242			10,796
Depreciation and amortization	16,452			14,815
Operating loss	(9,028		)	(12,958		)
Other income (expenses), net	(13,405		)	(4,791		)
Pre-tax loss	$	(22,433	)	$	(17,749	)


	June 30, 2019			December 31, 2018
Reconciliation of Total Assets As Reported:
Total reportable segments	$	228,928		$	243,199
Parent	7,191			13,186
Total assets	$	236,119		$	256,385

~~14. Recent Accounting Pronouncements~~13. Revenue

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230), Restricted Cash," or ASU 2016-18. ASU 2016-18 provides guidance on the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. Restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. On January 1, 2018 the Company adopted the provisions of ASU 2016-18 on a retrospective basis. The 2017 statement of cash flows has been restated to conform to the requirements of ASU 2016-18 and the 2018 presentation.

The following ~~table provides a reconciliation of cash~~tables show revenue disaggregated by primary geographical markets and ~~cash equivalents and restricted cash reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows.~~major service lines (in thousands):

Successor Successor Predecessor Predecessor
June 30, 2018 December 31, 2017 June 30, 2017 December 31, 2016
(in thousands) (in thousands)
Cash and cash equivalents $ 5,383
$ 5,465
$ 16,139
$ 20,437
Restricted cash 19,701
30,015
33,979
27,563
Cash and cash equivalents and restricted cash as shown in the consolidated statement of cash flows $ 25,084
$ 35,480
$ 50,118
$ 48,000



	Three months ended June 30, 2019
	Well Servicing		Coiled Tubing		Fluid Logistics		Total
Primary Geographical Markets
South Texas	$	18,292	$	4,300	$	6,035	$	28,627
East Texas⁽¹⁾	1,897		—		811		2,708
Central Texas	—		—		2,976		2,976
West Texas	5,573		8,992		2,189		16,754
Total	$	25,762	$	13,292	$	12,011	$	51,065

	Three months ended June 30, 2018
	Well Servicing		Coiled Tubing		Fluid Logistics		Total
Primary Geographical Markets
South Texas	$	11,081	$	3,799	$	6,669	$	21,549
East Texas⁽¹⁾	1,097		—		577		1,674
Central Texas	—		—		3,461		3,461
West Texas	8,237		3,161		3,159		14,557
Total	$	20,415	$	6,960	$	13,866	$	41,241

⁽¹⁾Includes revenues from the Company's operations in Pennsylvania.



	Six months ended June 30, 2019
	Well Servicing		Coiled Tubing		Fluid Logistics		Total
Primary Geographical Markets
South Texas	$	36,469	$	9,001	$	12,207	$	57,677
East Texas⁽¹⁾	2,751		—		1,646		4,397
Central Texas	—		—		6,072		6,072
West Texas	11,292		24,301		5,714		41,307
Total	$	50,512	$	33,302	$	25,639	$	109,453

	Six months ended June 30, 2018
	Well Servicing		Coiled Tubing		Fluid Logistics		Total
Primary Geographical Markets
South Texas	$	23,893	$	7,642	$	13,297	$	44,832
East Texas⁽¹⁾	1,749		—		1,155		2,904
Central Texas	—		—		6,465		6,465
West Texas	12,427		4,520		5,684		22,631
Total	$	38,069	$	12,162	$	26,601	$	76,832

⁽¹⁾Includes revenues from the Company's operations in Pennsylvania.

14. Supplemental Cash Flow Information



	Six Months Ended June 30,
	2019		2018
Cash paid for
Interest	$	2,197	$	136
Income tax	$	—	$	—
Supplemental schedule of non-cash investing and financing activities
Change in accounts payable related to capital expenditures	$	—	$	2,201
Exchange of Bridge Loan for PIK Notes	$	47,346	$	—
Finance leases on equipment	$	2,326	$	1,712

15. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", or ASU 2016-13, which introduces a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In ~~February 2016,~~January 2017, the FASB issued ASU ~~No. 2016-02, "Leases~~2017-04, "Intangibles—Goodwill and Other (Topic ~~842)~~350): Simplifying the Test for Goodwill Impairment"," or ASU ~~2016-02,~~2017-04, which ~~increases~~addresses concerns over the ~~transparency~~cost and ~~comparability about leases among entities.~~complexity of the two-step goodwill impairment test by removing the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for operating leases with lease terms greater than 12 months. It also requires additional disclosures about leasing arrangements to help usersdoes not amend the optional qualitative assessment of ~~financial statements better understand the amount, timing, and uncertainty of cash flows arising from leases.~~goodwill impairment. ASU ~~2016-02 becomes~~2017-04 will be effective for ~~interim and annual periods~~fiscal years beginning after December 15, ~~2018~~2019, and ~~requires a modified retrospective approach to adoption.~~interim periods within those fiscal years. The Company ~~has engaged a third party to assist~~is currently in the process of evaluating the impact of ~~this new standard~~adoption on its consolidated financial ~~statements and related disclosures. As of June 30,~~statements.

In August 2018, the ~~Company has identified approximately 400 leases,~~FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" which ~~includes capital leases on equipment, property leases, salt water disposal wells,~~eliminates, adds and ~~various other leases.~~modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The guidance is effective for all entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The Company ~~expects to recognize additional lease assets and liabilities related to operating leases with terms longer than one year.~~is currently in the process of evaluating the impact of adoption on its consolidated financial statements.


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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements for the year ended December 31, ~~2017~~2018 included in our Annual Report on Form ~~10-K, as amended.~~10-K. Any forward-looking statements made by or on our behalf are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that such forward-looking statements involve risks and uncertainties in that the actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ include risks set forth in the Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Overview

Forbes Energy Services Ltd., or FES Ltd., is an independent oilfield services contractor that provides ~~a wide range of~~ well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid hauling, fluid disposal, well maintenance, completion services, workovers and ~~re-completions,~~recompletions, plugging and abandonment, and tubing testing. Our operations are concentrated in the major onshore oil and natural gas producing regions of Texas, ~~plus one~~with an additional location in Pennsylvania. We believe that our broad range of services, which extends from initial drilling, through production, to eventual abandonment, is fundamental to establishing and maintaining the flow of oil and natural gas throughout the life cycle of our customers’ wells. Our headquarters and executive offices are located at 3000 South Business Highway 281, Alice, Texas 78332. We can be reached by phone at (361) 664-0549.

As used in this Quarterly Report on Form 10-Q, the “Company,” “we,” and “our” mean FES Ltd. and its subsidiaries, except as otherwise indicated.

As discussed in Note 2 to the consolidated financial statements in Item 1, we applied fresh start accounting upon emergence from bankruptcy on the Effective Date which resulted in the Company becoming a new entity for financial reporting purposes. The effects of the Plan and the application of fresh start accounting are reflected in our condensed consolidated financial statements from and after April 13, 2017 (Successor). References to the "Successor" pertain to the Company from and after the Effective Date. References to "Predecessor" pertain to the Company prior to the Effective Date.

We provide a wide range of services to a diverse group of companies. ~~During the three months ended June 30, 2018, we provided services to approximately 337 companies. During~~For the six months ended June 30, ~~2018 (Successor),~~2019, we ~~generated consolidated revenues~~provided services to 406 companies. John E. Crisp, Steve Macek and our senior management team have cultivated deep and ongoing relationships with these customers during their combined experience of ~~approximately $76.8 million.~~over 40 years in the oilfield services industry.

We conduct our operations through the following ~~two~~three business segments:

Well ~~Servicing~~Servicing.. Our well servicing segment comprised ~~65.4%~~46.2% of our consolidated revenues for the six months ended June 30, ~~2018. At June 30, 2018, our~~2019. Our well servicing segment ~~utilized~~utilizes our fleet of ~~168~~ well servicing rigs, which at June 30, 2019 was comprised of ~~154~~139 workover rigs and 147 swabbing rigs ~~as well as six coiled tubing spreads~~ and other related assets and equipment. These assets are used to provide (i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, (iv) plugging and abandonment services, and (v) pressure testing of oil and natural gas production tubing and scanning tubing for pitting and wall thickness using tubing testing units.

Coiled Tubing. Our coiled tubing segment comprised 30.4% of our consolidated revenues for the six months ended June 30, 2019. This segment utilizes our fleet of 14 coiled tubing units, of which 11 are large diameter units (2 3/8” or larger). These units provide a range of services accomplishing a wide variety of goals including horizontal completions, well bore clean-outs and maintenance, nitrogen services, thru-tubing services, formation stimulation using acid and other chemicals, and other pre- and post-hydraulic fracturing well preparation services.

Fluid Logistics. Our fluid logistics segment comprised ~~34.6%~~23.4% of our consolidated revenues for the six months ended June 30, ~~2018.~~2019. Our fluid logistics segment ~~utilized~~utilizes our fleet of owned or leased fluid transport trucks and related assets, including specialized vacuum, high-pressure pump and tank trucks, hot oil trucks, frac tanks, fluid mixing tanks, salt water disposal wells and facilities, and related equipment. These assets are used to provide, transport, store, and dispose of a variety of drilling and produced fluids used in, and generated by, oil and natural gas production. These services are required in most workover and completion projects and are routinely used in daily operations of producing wells.

We believe that our ~~two~~three business segments are complementary and create synergies in terms of selling opportunities. Our multiple lines of service are designed to capitalize on our existing customer base to grow it within existing markets, generate more business from existing customers, and increase our operating performance. By offering our customers the ability to reduce the number of vendors they use, we believe that we help improve our customers’ efficiency. ~~This is demonstrated by the fact that 58.9% of revenues for the six months ended June 30, 2018, were from customers that utilized services of both of our~~

~~business segments.~~ Further, by having multiple service offerings that span the life cycle of the well, we believe that we have a competitive advantage over smaller competitors offering more limited services.

Cretic Energy Services, LLC Acquisition

On November 16, 2018, we completed our acquisition of Cretic. Cretic provides coiled tubing services to E&P companies in the United States, primarily in the Permian Basin in Texas . The total consideration was approximately $69.4 million in cash. We believe the acquisition significantly enhanced our coiled tubing services and our position in the Permian Basin. See Note 3

~~Fresh Start Accounting~~

~~Upon our emergence from bankruptcy, we adopted fresh start accounting in accordance with the provisions~~- Acquisition of ~~Accounting Standards Codification 852,~~ ~~“Reorganizations,”~~ or ASC 852, as (i) the holders of Old Common Stock received none of the New Common Stock issued upon the Debtors' emergence from bankruptcy and (ii) the reorganization value of our assets immediately priorCretic Energy Services, LLC to confirmation of the Plan was less than the post-petition liabilities and allowed claims. We applied fresh start accounting from and after the Effective Date. Fresh start accounting required us to present our assets, liabilities and equity as if we were a new entity upon emergence from bankruptcy, with no beginning retained earnings or deficit as of the fresh start reporting date. The cancellation of the Old Common Stock and the issuance of the New Common Stock on the Effective Date caused a change of control under ASC 852. As a result of the adoption of fresh start accounting, ourthese unaudited condensed consolidated financial statements ~~from~~for further discussion regarding the acquisition of Cretic.

Going forward, we intend to pursue selective, accretive acquisitions of complementary assets, businesses and ~~after April 13, 2017 will not be comparable~~technologies, and believe we are well positioned to capture attractive opportunities due to our ~~financial statements prior to such date.~~

market position, customer relationships and industry experience and expertise.

Factors Affecting Results of Operations

Market Conditions

~~The oil and natural gas industry experienced a significant decline~~Commodity prices improved in ~~oil exploration and production activity that began in the fourth quarter of 2014 and continued into~~ the first half of ~~2017. The price~~2019 then moderated through April resulting in quarter end and July 2019 ending crude oil prices in the mid-50’s. This has delayed the demand for completion driven services, such as those offered specifically by our coiled tubing segment. However, we believe continued aging of ~~West Texas Intermediate (“WTI”) oil fell from a price of $104 per barrel as of~~horizontal wells through 2019 and future periods, and customers choosing to increase production through accretive regular well maintenance in these horizontal wells, will strengthen demand and pricing for our well maintenance services over the next several years. On June 30, 2014 to a low of $30 per barrel in February of 2016. Oil prices traded in a range of approximately $45 to $55 in the last half of 2016 and through most of 2017. During the last half of 2017 oil prices trended upward in response to market conditions, and as of June 30, 2018,2019, the price of WTI was approximately ~~$74~~$54.66 per barrel. As oil prices began to rise, U.S. drilling rig count increased from in 404 rigs in May 2016 to ~~1,047~~967 rigs in June ~~2018,~~30, 2019, an increase of ~~643,~~563, with the count stabilizing in the last half of 2017 then experiencing a modest increase in the first half of 2018. During this same time period Texas drilling rig count increased from 173 rigs to ~~530~~464 rigs, an increase of ~~357, similar to the U.S. count increases.~~291. The two basins in which we primarily operate, the Eagle Ford and Permian, had rig count ~~increases~~decreases of 849 and ~~262, respectively,~~38 from ~~48 and 120. Of note, while we are actively pursuing additional business in the Permian, currently 62.6% of our revenues are generated in the Eagle Ford where the rig count increased by 84.~~

June 30, 2018 to June 30, 2019, respectively.

Below are three charts that provide total U.S. rig counts, total Texas rig counts and WTI oil price trends for the twelve months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

Source: Rig counts are per Baker Hughes, Inc. (www.bakerhughes.com). Rig counts are the averages of the weekly rig count activity.

Impact of the Current Market Environment

The declines in oil and natural gas prices and exploration activities that began in 2014 and continued through ~~2016 and into~~ the first ~~few months~~half of 2017 created a ~~more~~ challenging market for the provision of our services. In response to ~~these~~the market conditions in 2015 and 2016, we implemented cost reduction measures and ~~continued~~continue to analyze cost reduction opportunities today while ensuring that appropriate functions and capacity ~~were~~are preserved ~~allowing~~to allow us to be opportunistic asin the current environment. During the second half of 2017, and through June 2019, market conditions improved and stabilized for our well servicing and fluid logistics segments. Our coiled tubing segment experienced stable operations through the middle of the fourth quarter of 2018, then due to a change in completion activity, which is the focus of our coil operations, we experienced lower utilization that has continued through the second quarter of ~~2017. Through~~2019.

Although market conditions are improving, we continue to focus on meeting our customers' expectations and adjusting our cost structure where possible. We are also maintaining our focus on maximizing use of our active operating assets and maintaining cost controls that were established in the first half of 2017, capital spending was largely limited to capital commitments incurred before the market downturn, purchases of certain, limited pieces of equipment with greater operating efficiencies to improve margins, and the purchase of certain equipment under operating leases at the end of their term. In the last part of 2017 and the first half of 2018, we began maintenance capital spending in response to increased demand for our services.

The second key metric, other than volume of work, that impacts profitability is pricing. In 2015 and 2016, price concessions were granted to customers in recognition of the oil and natural gas pricing declines. Since the oil and natural gas price environment began to improve, price increases have been requested and received from customers in certain operating areas.prior twenty-four months.

Oil and Natural Gas Prices

Demand for well servicing and fluid logistics services is generally a function of the willingness of oil and natural gas companies to make operating and capital expenditures to explore for, develop, and produce oil and natural gas, which in turn is affected by current and anticipated levels of oil and natural gas prices. Exploration and production spending is generally categorized as either operating expenditures or capital expenditures. Activities by oil and natural gas companies designed to add oil and natural gas reserves are classified as capital expenditures, and those associated with maintaining or accelerating production, such as workover and fluid logistics services, are categorized as operating expenditures. Operating expenditures are typically more stable than capital expenditures and ~~are~~may be less sensitive to oil and natural gas price volatility. ~~However, during the bottom of the downturn our customers were even limiting these expenditures.~~ In contrast, capital expenditures ~~by oil and natural gas companies~~ for drilling are more directly influenced by current and expected oil and natural gas prices and generally reflect the volatility of commodity ~~prices including~~prices.

Seasonality and Cyclical Trends

Our operations are impacted by seasonal factors. Historically, our business has been negatively impacted during the ~~precipitous decline in~~winter months due to inclement weather, fewer daylight hours, and holidays. We typically experience a significant slowdown during the Thanksgiving and Christmas holiday seasons. Our well servicing rigs and coiled tubing units are mobile, and we operate a significant number of oilfield vehicles. During periods of heavy snow, ice or rain, we may not be able to move our equipment between locations, thereby reducing our ability to generate rig, coiled tubing or truck hours. In addition, the majority of our well servicing rigs work only during daylight hours. In the winter months, as daylight time becomes shorter, the amount of time that the well servicing rigs work is shortened, having a negative impact on total hours worked.

In addition, the oil and natural gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including the domestic and international supply and demand for oil and natural gas, current and expected future prices ~~that began in late 2014 with only a recent modest increase in the price of oil.~~

~~Workover Rig Rates~~

~~Our well servicing segment revenues are dependent on the prevailing market rates~~ for ~~workover rigs. Utilization~~oil and ~~average rates increased through the first six months of 2018 (Successor), compared to the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor).~~

~~Fluid Logistics Rates~~

~~Our fluid logistics segment revenues are dependent on the prevailing market rates for fluid transport trucks~~natural gas and the ~~related assets, including specialized vacuum, high-pressure pump~~perceived stability and ~~tank trucks, hot oil trucks, frac tanks, fluid mixing tanks and salt water disposal wells. Pricing and utilization decreased through 2016 and continued through~~sustainability of those prices. Such cyclical trends also include the ~~first quarter~~resultant levels of ~~2017. During the later part of the second quarter of 2017 we began to see improvements in both utilization and pricing. These improvements have continued through the first six months of 2018.~~

~~Operating Expenses~~

During the second quarter of 2018 (Successor), consolidated operating expenses increased when compared to the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor) were consistent with our increased activity. Future earnings and cash flows ~~will be dependent on our ability~~generated and allocated by exploration and production companies to ~~manage our overall cost structure as well as continued efforts to maintain or increase rates to customers.~~

~~Capital Expenditures~~

~~During the second quarter of 2018, capital expenditures consisted of purchases of equipment~~their drilling, completion and ~~vehicles whose operating leases had reached the end of their term, new well servicing equipment, major equipment overhauls and replacements of heavy trucks.~~workover budget.

Results of Operations

Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018 ~~(Successor) Compared to the Periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor)~~

The following tables compare our segment operating results for the three months ended June 30, 2019 and 2018 (Successor) and the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor). Operating expenses exclude general and administrative expenses, depreciation, and amortization.(in thousands):



Revenues
	Three Months Ended June 30,
	2019		% of revenue		2018		% of revenue		$ change			% change
Well Servicing	$	25,762	50.5	%	$	20,415	49.4	%	$	5,347		26	%
Coiled Tubing	13,292		26.0	%	6,960		16.9	%	6,332			91	%
Fluid Logistics	12,011		23.5	%	13,866		33.7	%	(1,855		)	(13	)%
Total	$	51,065			$	41,241			$	9,824		24	%

Direct Operating Expenses⁽¹⁾
	Three Months Ended June 30,
	2019		% of segment revenue		2018		% of segment revenue		$ change			% change
Well Servicing	$	20,971	81.4	%	$	17,116	83.8	%	$	3,855		23	%
Coiled Tubing	13,854		104.2	%	6,208		89.2	%	7,646			123	%
Fluid Logistics	8,823		73.5	%	11,151		80.4	%	(2,328		)	(21	)%
Total	$	43,648			$	34,475			$	9,173		27	%


Revenues
	Successor								Predecessor
Segment Profit ⁽¹⁾													Segment Profit ⁽¹⁾
	Three months ended June 30, 2018		% of total revenue		April 13 through June 30, 2017		% of total revenue		April 1 through April 12, 2017		% of total revenue		Three Months Ended June 30,
	(in thousands, except percentages)								(in thousands, except percentages)				2019			Segment profit %		2018		Segment profit %		$ change			% change
Well Servicing	$	27,375	66.4	%	$	18,139	65.1	%	$	2,449	65.9	%	$	4,791		18.6	%	$	3,299	16.2	%	$	1,492		45	%
Coiled Tubing													(562		)	(4.2	)%	752		10.8	%	(1,314		)	(175	)%
Fluid Logistics	13,866		33.6	%	$	9,711	34.9	%	1,269		34.1	%	3,188			26.5	%	2,715		19.6	%	473			17	%
Total	$	41,241			$	27,850			$	3,718			$	7,417		14.5	%	$	6,766	16.4	%	$	651		10	%

Operating Expenses
	Successor								Predecessor
	Three months ended June 30, 2018		% of segment revenue		April 13 through June 30, 2017		% of segment revenue		April 1 through April 12, 2017		% of segment revenue
	(in thousands, except percentages)								(in thousands, except percentages)
Well Servicing	$	23,324	85.2	%	$	13,814	76.2	%	$	1,813	74.0	%
Fluid Logistics	11,151		80.4	%	$	9,053	93.2	%	1,260		99.3	%
Total	$	34,475			$	22,867			$	3,073
⁽¹⁾ Excluding general and administrative expenses and depreciation and amortization.													⁽¹⁾ Excluding general and administrative expenses and depreciation and amortization.

Segment Profit ⁽¹⁾
Successor Predecessor
Three months ended June 30, 2018 Gross margin % April 13 through June 30, 2017 Gross margin % April 1 through April 12, 2017 Gross margin %
(in thousands, except percentages) (in thousands, except percentages)
Well Servicing $ 4,051
14.8 % $ 4,325
23.8 % $ 636
26.0 %
Fluid Logistics 2,715
19.6 % $ 658
6.8 % 9
0.7 %
Total $ 6,766
16.4 % $ 4,983
17.9 % $ 645
17.3 %

~~(1) Excluding general and administrative expenses, and depreciation and amortization.~~

Revenues

Consolidated Revenues. Consolidated revenues during the three months ended June 30, ~~2018 (Successor)~~2019 increased as compared to the ~~period of April 13 through~~three months ended June 30, ~~2017 (Successor) and the~~2018 as a direct result of increased spending by our customers during this period ~~of April 1 through April 12, 2017 (Predecessor)~~ due to increased activity ~~from both~~and our ~~well servicing and fluid logistics customers as they increased activity~~acquisition of Cretic in ~~response to rising oil prices.~~November 2018.

Well Servicing. ~~The revenues~~Revenues from ~~the~~our well servicing segment during the three months ended June 30, ~~2018 (Successor)~~2019 increased as compared to the ~~period of April 13 through~~three months ended June 30, ~~2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor)~~2018 due to ~~a 9.6%~~increased rig hours.

Coiled Tubing. Revenues from our coiled tubing segment during the three months ended June 30, 2019 increased as compared to the three months ended June 30, 2018 due to an increase in ~~rates and a 21.3%~~coiled tubing unit hours. The increase in hours ~~worked.~~resulted from the addition of two large diameter coiled tubing units in 2018 and the acquisition of Cretic in November of 2018.

Fluid Logistics.~~Our revenues~~ Revenues from ~~the~~our fluid logistics segment during the three months ended June 30, 2019 decreased as compared to the three months ended June 30, 2018 ~~(Successor)~~due to a reduction in trucking hours that followed the sale of certain trucking assets in under performing yards in West Texas. The decrease in trucking revenue was offset by an increase in frac tank revenue.

Segment Profit

Well Servicing. Segment profit from our well servicing segment during the three months ended June 30, 2019 increased as compared to the ~~period of April 13 through~~three months ended June 30, ~~2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor)~~2018 due to an increase in ~~average hourly trucking rates and an increase~~revenues offset by a decrease in ~~trucking hours driven by tank rental and skim oil sales. Our principal fluid logistics assets~~expenses as a percentage of revenues due to more efficient use of personnel at higher operating levels.

Coiled Tubing. Segment profit from our coiled tubing segment during the three months ended June 30, 2019 decreased as compared to the three months ended June 30, 2018, due in large part to the Cretic acquisition. During the second quarter of 2019 we continued to see a decline in revenues as compared to the first quarter of 2019 in our coiled tubing segment. We believe the decline is a result of a slight downturn in the market for coiled tubing services and ~~2017 were as follows:~~certain quality issues experienced in the integration of the Cretic acquisition. As a result of the declining revenues we have made certain reductions in personnel and other cost reduction initiatives in our coiled tubing segment in June, July and August 2019 to properly align our costs with our new forecasted revenues. We expect revenues to remain constant in the third quarter of 2019 and increase slightly through the fourth quarter of 2019 and into 2020. Based on the cost cutting initiatives discussed above we expect our operating costs to be lower resulting in improved segment performance for the remainder of 2019 and 2020.

Successor Predecessor
June 30, 2018 June 30, 2017
Fluid Logistics segment:
Vacuum trucks 264
293
Other heavy trucks 108
106
Frac tanks 2,874
2,876
Salt water disposal wells ⁽¹⁾
15
19

⁽¹⁾Fluid Logistics. AtSegment profit from our fluid logistics segment during the three months ended June 30, 2019 increased as compared to the three months ended June 30, 2018 ~~10 salt water~~due to a decrease in direct operating cost as a percentage of revenue and a $1.7 million gain on disposal ~~wells, included~~on certain assets sold in the ~~above well count, were subject to ground leases or other~~second quarter of 2019.

Operating Expenses

The following tables compares our operating ~~arrangements with third parties.~~

~~Operating Expenses~~

Successor Predecessor
Three months ended June 30, 2018 April 13 through June 30, 2017 April 1 through April 12, 2017
(in thousands) (in thousands)
Well servicing $ 23,324
$ 13,814
$ 1,813
Fluid logistics 11,151
9,053
1,260
General and administrative 5,908
3,130
500
Depreciation and amortization 7,652
5,681
1,533
Total expenses $ 48,035
$ 31,678
$ 5,106

~~Consolidated Operating Expenses.~~ ~~Direct operating costs~~expenses for the three months ended June 30, 2019 and 2018 ~~(Successor) increased as compared to the period of April 13 through June 30, 2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor), consistent with our increased activity.~~(in thousands):



	Three Months Ended June 30,
	2019		2018		$ change			% change
Well servicing direct operating expenses	$	20,971	$	17,116	$	3,855		23	%
Coiled tubing direct operating expenses	13,854		6,208		7,646			123	%
Fluid logistics direct operating expenses	8,823		11,151		(2,328		)	(21	)%
General and administrative	5,417		5,908		(491		)	(8	)%
Depreciation and amortization	7,013		7,652		(639		)	(8	)%
Total expenses	$	56,078	$	48,035	$	8,043		17	%

Well ~~Servicing.~~Servicing Direct Operating Expenses. Direct operating ~~costs~~expenses for our well servicing segment for the three months ended June 30, ~~2018 (Successor)~~2019 increased as compared to the ~~period of April 13 through~~three months ended June 30, ~~2017 (Successor)~~2018 due to increases in wages, repairs and ~~the period of April 1 through April 12, 2017 (Predecessor). This increase was primarily attributable to higher labor,~~maintenance, supplies and parts, fuel costs and ~~equipment rental costs resulting from the coiled tubing division~~out of ~~our well servicing segment preparing to deploy additional equipment. Other costs were~~town travel, consistent with the increase in revenues.

Coiled Tubing Direct Operating Expenses. Direct operating expenses for our coiled tubing segment for the three months ended June 30, 2019 increased as compared to three months ended June 30, 2018 due to an increase in activity ~~experienced during~~and as a percentage of revenues. The higher costs were mainly associated with wages (including severance payments), equipment rental, supplies and parts and travel, primarily driven by the ~~period.~~Cretic acquisition.

Fluid ~~Logistics.~~Logistics Direct Operating Expenses. Direct operating ~~costs~~expenses for our fluid logistics segment for the three months ended June 30, ~~2018 (Successor) increased~~2019 decreased as compared to the period of April 13 through June 30, 2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor), consistent with increased activity. Fluid logistics costs as a percentage of fluid logistics revenue were 80.4% for the three months ended June 30, 2018 (Successor) compared to 93.2% for the period of April 13 through June 30, 2017 (Successor) and 99.3% for the period of April 1 through April 12, 2017 (Predecessor). This percentage decrease was primarily a result of reduced labor costs as a percentage of revenuemainly due to higher composite customer rates, increased rentals, increased skim oil sales, and improved utilization and efficiencies of our work force with additional activity. Additionally, repairs and maintenance expense and property tax expense declined anda gain on ~~disposal~~the sale of ~~assets increased as we disposed of older or non-productive assets.~~certain fluid logistics equipment, along with a decrease in wages and increase in settlement and litigation expenses.

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, ~~2018 (Successor) increased~~2019 decreased as compared to the period of April 13 through June 30, 2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor). General and administrative expenses as a percentage of revenues were 14.3%, 11.2% and 13.4%% for the three months ended June 30, 2018 (Successor) and the period of April 13 through June 30, 2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor), respectively. This increase as a percentage of revenue is primarily due to ~~increased~~a decrease in professional fees ~~labor costs, and share-based compensation costs.~~related to the acquisition of Cretic, offset in part by an increase in wages.

Depreciation and Amortization. Depreciation and amortization expenses for the three months ended June 30, ~~2018 (Successor) increased~~2019 decreased as compared to ~~the period of April 13 through~~three months ended June 30, ~~2017 (Successor) and the period of April 1 through April 12, 2017 (Predecessor)~~2018 due to approximately $19.5 million of depreciable assets becoming fully depreciated in April 2019, offset in part by depreciation and amortization on the ~~addition of new capital~~additional assets ~~placed into service~~acquired in the ~~current quarter.~~Cretic acquisition in November 2018.

Other Income (Expense)

The following tables compares our other income (expense) for the three months ended June 30, 2019 and 2018 (in thousands):


	Successor						Predecessor
	Three months ended June 30, 2018			April 13 through June 30, 2017			April 1 through April 12, 2017			Three Months Ended June 30,
	(in thousands)						(in thousands)			2019			2018			$ change			% change
Interest income	$	—		$	6		$	—		$	1		$	—		$	1		100	%
Interest expense	(2,426		)	(1,897		)	(40		)	(5,723		)	(2,426		)	(3,297		)	136	%
Gain (loss) on reorganization items, net	—			(1,299		)	51,090
Other income (expense), net	$	(2,426	)	$	(3,190	)	$	51,050		$	(5,722	)	$	(2,426	)	$	(3,296	)	136	%

Income tax benefit	$	(454	)	$	(17	)	$	(4	)
Income tax expense (benefit)										$	14		$	(454	)	$	468		(103	)%

Interest Expense. Interest expense for the three months ended June 30, ~~2018 (Successor)~~2019 increased ~~when~~as compared to the ~~period of April 13 through~~three months ended June 30, ~~2017 (Successor)~~2018 due to the additional debt outstanding under the Revolving Loan Agreement and Term Loan Agreement, plus associated amortization of debt discount and deferred financing costs. In addition, the Company incurred significant debt with the acquisition of Cretic, including third party equipment finance leases and the ~~period~~interest and accretion of ~~April 1 through April 12, 2017 (Predecessor). Interest~~the new issued PIK Notes for its conversion feature at a 15% premium.

Income Taxes. We recognized income tax expense of $14 thousand for the three months ended June 30, 2019, compared to $454 thousand of income tax expense for the three months ended June 30, ~~2018 primarily related to interest on our New Loan Agreement which is subject to higher interest rates than than our Prior Senior Notes.~~

~~Gain (Loss) on Reorganization Items, Net.~~ ~~There were no reorganization costs for the three months ended~~2018. At June 30, ~~2018 (Successor). Gain (loss) on reorganization costs, net for the period~~2019, we estimate our gross NOL carryforwards are approximately $85.7 million (representing $16.2 million of ~~April 13 through June 30, 2017 (Successor) and the period~~gross deferred tax asset), $34.9 million of ~~April 1 through April 12, 2017 (Predecessor) was $(1.3)~~which ($8.3 million and $51.1 million, respectively. These costs were related to bankruptcy activities during the Predecessor period. The $51.1 million gain was generated by the settlement of liabilities subject to compromise of $140.4 million offset by fresh start and reorganization adjustments of $87.1 million and $2.2 million in professional and legal fees.tax effected) represent unrecognized tax benefits.

~~Income Taxes.~~ ~~We recognized income tax benefit of $0.5 million for the three months ended~~Six Months Ended June 30, ~~2018 (Successor). We recognized income tax expense of less than~~$0.1 million for the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor). Our effective tax rate was (4.9)% for the three months ended June 30, 2018 (Successor) due to increased benefit resulting from the expiration of foreign income tax liability. Our effective tax rate was 0.2% and (0.01)% for the periods of April 13 through June 30, 2017 (Successor) and April 1 through April 12, 2017 (Predecessor), respectively, due2019 Compared to the fact that the Company has recorded a full valuation allowance against its net deferred assets. At June 30, 2018 (Successor), we estimate our NOL carryforwards were approximately $52.0 million. On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changed U.S. tax law by, among other things, lowering the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporate income tax rate, we revalued our ending net deferred tax assets at December 31, 2017, but did not recognize any income tax impact in 2017 due to the offsetting change in the valuation allowance.

Six Months Ended June 30, 2018 ~~Compared to the Periods of April 13, 2017 through June 30, 2017 (Successor) and January 1 through April 12, 2017 (Predecessor)~~

The following tables compare ~~the~~our segment operating results ~~of our segments~~ for the six months ended June 30, 2019 and 2018 ~~and the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor)~~ (in ~~thousands, except percentages). Operating expenses exclude general and administrative expenses, depreciation and amortization and impairment.~~

thousands):


Revenues	Revenues												Revenues
	Successor								Predecessor				Six Months Ended June 30,
	Six months ended June 30, 2018		% of revenue		April 13 through June 30, 2017		% of revenue		January 1 through April 12, 2017		% of revenue		2019		% of revenue		2018		% of revenue		$ change			% change
Well Servicing	$	50,231	65.4	%	$	18,139	65.1	%	$	19,554	63.6	%	$	50,512	46.2	%	$	38,069	49.5	%	$	12,443		33	%
Coiled Tubing													33,302		30.4	%	12,162		15.8	%	21,140			174	%
Fluid Logistics													25,639		23.4	%	26,601		34.7	%	(962		)	(4	)%
Total													$	109,453			$	76,832			$	32,621		42	%

Direct Operating Expenses⁽¹⁾													Direct Operating Expenses⁽¹⁾
													Six Months Ended June 30,
													2019		% of segment revenue		2018		% of segment revenue		$ change			% change
Well Servicing													$	38,520	76.3	%	$	31,968	84.0	%	$	6,552		20	%
Coiled Tubing													31,792		95.5	%	10,371		85.3	%	21,421			207	%
Fluid Logistics	26,601		34.6	%	9,711		34.9	%	11,211		36.4	%	19,475		76.0	%	21,840		82.1	%	(2,365		)	(11	)%
Total	$	76,832			$	27,850			$	30,765			$	89,787			$	64,179			$	25,608		40	%


Operating Expenses ⁽¹⁾

Segment Profit ⁽¹⁾													Segment Profit ⁽¹⁾
	Successor								Predecessor				Six Months Ended June 30,
	Six months ended June 30, 2018		% of segment revenue		April 13 through June 30, 2017		% of segment revenue		January 1 through April 12, 2017		% of segment revenue		2019		Segment profit %		2018		Segment profit %		$ change			% change
Well Servicing	$	42,339	84.3	%	$	13,814	76.2	%	$	15,952	81.6	%	$	11,992	23.7	%	$	6,101	16.0	%	$	5,891		97	%
Coiled Tubing													1,510		4.5	%	1,791		14.7	%	(281		)	(16	)%
Fluid Logistics	21,840		82.1	%	9,053		93.2	%	11,207		100.0	%	6,164		24.0	%	4,761		17.9	%	1,403			29	%
Total	$	64,179			$	22,867			$	27,159			$	19,666	18.0	%	$	12,653	16.5	%	$	7,013		55	%

⁽¹⁾ Excluding general and administrative expenses and depreciation and amortization.													⁽¹⁾ Excluding general and administrative expenses and depreciation and amortization.

Segment Profit ⁽¹⁾
Successor Predecessor
Six months ended June 30, 2018 Gross margin % April 13 through June 30, 2017 Gross margin % January 1 through April 12, 2017 Gross margin %
Well Servicing $ 7,892
15.7 % $ 4,325
23.8 % 3,602
18.4 %
Fluid Logistics 4,761
17.9 % 658
6.8 % 4
— %
Total $ 12,653
16.6 % $ 4,983
17.9 % $ 3,606
11.7 %

~~(1) Excluding general and administrative expenses, depreciation and amortization, and impairment of assets.~~

Revenues

Consolidated Revenues. Consolidated revenues during the six months ended June 30, ~~2018~~2019 increased as compared to the ~~periods of April 13, 2017 through~~six months ended June 30, ~~2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor) primarily~~2018 as a direct result of increased spending by our customers during this period due to increased activity ~~from both~~and our ~~well servicing and fluid logistics customers as they increased utilization~~acquisition of Cretic in ~~response to rising oil prices.~~November 2018.

Well Servicing. Revenues from our well servicing segment during the six months ended June 30, ~~2018~~2019 increased as compared to the ~~periods of April 13, 2017 through~~six months ended June 30, ~~2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor)~~2018 due to ~~a 19.5%~~increased rig hours.

Coiled Tubing. Revenues from our coiled tubing segment during the six months ended June 30, 2019 increased as compared to the six months ended June 30, 2018 due to an increase in coiled tubing unit hours. The increase in hours resulted from the addition of two large diameter coiled tubing units in 2018 and ~~a 9.7% increase~~the acquisition of Cretic in ~~rates.~~November of 2018.

Fluid Logistics. Revenues from our fluid logistics segment during the six months ended June 30, ~~2018 increased~~2019 decreased as compared to the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor) driven by an increase in average hourly trucking rates, skim oil revenues, rental income and a 7.3% increase in hours.

~~Operating Expenses~~

Successor Predecessor
Six months ended June 30, 2018 April 13 through June 30, 2017 January 1 through April 12, 2017
Well servicing $ 42,339
$ 13,814
$ 15,952
Fluid logistics 21,840
9,053
11,207
General and administrative 10,796
3,130
5,012
Depreciation and amortization 14,815
5,681
13,601
Total expenses $ 89,790
$ 31,678
$ 45,772

~~Consolidated Operating Expenses.~~ ~~Direct operating expenses during~~ the six months ended June 30, 2018 ~~increased as compared~~due to ~~the periods of April 13, 2017 through June 30, 2017 (Successor)~~a decrease in our trucking hours and ~~January 1, 2017 through April 12, 2017 (Predecessor) consistent with increased activities~~an increase in ~~both~~frac tank rentals, offset by a decrease in our ~~well servicing and fluid logistics segments.~~disposal operations.

Segment Profit

Well Servicing.~~Direct operating costs for~~ Segment profit from our well servicing segment during the six months ended June 30, ~~2018~~2019 increased as compared to the ~~periods of April 13, 2017 through~~six months ended June 30, ~~2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor)~~2018 due to an increase in revenues offset by a decrease in expenses as a percentage of revenues due to more efficient use of personnel at higher operating levels.

Coiled Tubing. ~~This increase was primarily attributable to higher labor, insurance costs and fuel costs resulting~~Segment profit from ~~the~~our coiled tubing ~~division of our well servicing~~ segment ~~preparing to deploy additional equipment. Other costs were consistent with the increased activity experienced~~ during the ~~period.~~six months ended June 30, 2019 decreased as compared to the six months ended June 30, 2018, due in large part to the Cretic acquisition. During the second quarter of 2019 we continued to see a decline in revenues as compared to the first quarter of 2019 in our coiled tubing segment. We believe the decline is a result of a slight downturn in the market for coiled tubing services and certain quality issues experienced in the integration of the Cretic acquisition. As a result of the declining revenues we have made certain reductions in personnel and other cost reduction initiatives in our coiled tubing segment in June, July and August 2019 to properly align our costs with our new forecasted revenues. We expect revenues to remain constant in the third quarter of 2019 and increase slightly through the fourth quarter of 2019 and into 2020. Based on the cost cutting initiatives discussed above we expect our operating costs to be lower resulting in improved segment performance for the remainder of 2019 and 2020.

Fluid Logistics.~~Direct operating costs for~~ Segment profit from our fluid logistics segment during the six months ended June 30, ~~2018~~2019 increased as compared to the ~~periods of April 13, 2017 through~~six months ended June 30, ~~2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor)~~2018 due to ~~higher gain on sales of assets~~an increase in ~~the Predecessor period~~revenue and ~~increases~~a decrease in ~~fuel costs. Fluid logistics costs~~direct operating cost as a percentage of ~~fluid logistics~~ revenue ~~were 82.1%, 93.2%~~ and ~~100.0%~~a $2.6 million gain on disposal of certain assets sold in 2019.

Operating Expenses

The following tables compares our operating expenses for the six months ended June 30, 2019 and 2018 ~~and~~(in thousands):



	Six Months Ended June 30,
	2019		2018		$ change			% change
Well servicing direct operating expenses	$	38,520	$	31,968	$	6,552		20	%
Coiled tubing direct operating expenses	31,792		10,371		21,421			207	%
Fluid logistics direct operating expenses	19,475		21,840		(2,365		)	(11	)%
General and administrative	12,242		10,796		1,446			13	%
Depreciation and amortization	16,452		14,815		1,637			11	%
Total expenses	$	118,481	$	89,790	$	28,691		32	%

Well Servicing Direct Operating Expenses. Direct operating expenses for our well servicing segment for the ~~periods of April 13 through~~six months ended June 30, ~~2017 (Successor) and January 1 through April 12, 2017 (Predecessor), respectively. This percentage decrease was primarily a result of reduced labor costs~~2019 increased as ~~a percentage of revenue~~compared to the six months ended June 30, 2018 due to increases in repairs and maintenance, supplies and parts, fuel costs and out of town travel, consistent with the increase in revenues.

Coiled Tubing Direct Operating Expenses. Direct operating expenses for our coiled tubing segment for the six months ended June 30, 2019 increased as compared to six months ended June 30, 2018 due to an increase in activity. The higher ~~composite customer rates~~costs were mainly associated with wages, equipment rental, supplies and ~~improved utilization~~parts and ~~efficiencies~~travel, primarily driven by the Cretic acquisition.

Fluid Logistics Direct Operating Expenses. Direct operating expenses for our fluid logistics segment for the six months ended June 30, 2019 decreased as compared to the six months ended June 30, 2018 mainly due to a gain on the sale of ~~our work force~~certain fluid logistics equipment, along with ~~additional activity.~~a decrease in wages and increase in settlement and litigation expenses.

General and Administrative Expenses. General and administrative expenses ~~as a percentage of revenues were 14.1%, 11.2% and 16.3% during~~for the six months ended June 30, ~~2018 and for the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor), respectively. General and administrative expenses during the~~2019 increased as compared to six months ended June 30, 2018 ~~increased as compared~~due to an increase in wages and professional fees related to the ~~periods~~acquisition of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor). This increase as a percentage of revenue is primarily due to increased professional fees, labor costs, and share-based compensation costs.Cretic.

Depreciation and Amortization. Depreciation and amortization expenses ~~during~~for the six months ended June 30, 2019 increased as compared to six months ended June 30, 2018 due to the acquisition of Cretic in November 2018.

Other Income (Expense)

The following tables compares our other income (expense) for the six months ended June 30, 2019 and 2018 (in thousands):



	Six Months Ended June 30,
	2019			2018			$ change			% change
Interest income	$	4		$	2		$	2		100	%
Interest expense	(13,409		)	(4,793		)	(8,616		)	180	%
Other income (expense), net	$	(13,405	)	$	(4,791	)	$	(8,614	)	180	%

Income tax benefit	$	(50	)	$	(454	)	$	404		(89	)%

Interest Expense. Interest expense for the six months ended June 30, 2019 increased as compared to the six months ended June 30, 2018 ~~decreased as compared~~due to the ~~periods of April 13, 2017 through June 30, 2017 (Successor) and of January 1, 2017 through April 12, 2017 (Predecessor) due to a decrease in~~additional debt outstanding under the ~~depreciable value of property and equipment as a result of fresh start accounting.~~

~~Other Income (Expense)~~

Successor Predecessor
Six months ended June 30, 2018 April 13 through June 30, 2017 January 1 through April 12, 2017
Interest income $ 2
$ 6
$ 13
Interest expense (4,793 ) (1,897 ) (2,254 )
Gain (loss) on reorganization items, net —
(1,299 ) 44,503
Other income (expense), net $ (4,791 ) $ (3,190 ) $ 42,262

Income tax expense (benefit) $ (454 ) $ (17 ) $ 27

~~Interest Expense~~. Interest expense during the six months ended June 30, 2018 increased as compared to the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor) due to higher

~~interest rates on the New~~Revolving Loan Agreement and Term Loan Agreement, plus associated amortization of debt discount and deferred financing costs. In addition, the Company incurred additional debt with the acquisition of Cretic, including third party equipment finance leases, write-off of certain debt costs with the modification accounting related to the PIK Notes and the accretion of the PIK Notes for its conversion feature at a reduction in interest expense on the Prior Senior Notes during the first quarter of 2017, because such interest was no longer incurred after the date of Bankruptcy Petitions discharged in the chapter 11 cases.

~~Gain (Loss) on Reorganization Items, Net.~~15% premium. Gain (loss) on reorganization items, net was $(1.3) million and $44.5 million for the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor), respectively. There were no reorganization costs for the same period in the current year. For the Predecessor period, the $44.5 million gain was generated by the settlement of liabilities subject to compromise of $140.4 million offset by the fresh start and reorganization adjustments of $87.1 million and legal, professional fess and loan costs of $8.8 million.

Income Taxes. We recognized an income tax benefit of ~~$0.5 million and less than $0.1 million during~~$50 thousand for the six months ended June 30, ~~2018, and during the period April 13, 2017 through June 30, 2017 (Successor), respectively, and~~2019, compared to $454 thousand of income tax ~~expense of less than $0.1 million~~benefit for ~~the period of January 1, 2017 through April 12, 2017 (Predecessor). Our effective tax rate was (2.6)% during~~ the six months ended June 30, ~~2018 due to increased benefit resulting from the expiration of foreign income tax liability. Our effective tax rate was (0.2)% and 0.1% for the periods of April 13, 2017 through~~2018. At June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor), respectively. On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changed U.S. tax law by, among other things, lowering the U.S. corporate income tax rate from a maximum2019, we estimate our gross NOL carryforwards are approximately $85.7 million (representing $16.2 million of ~~35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporate income tax rate, we revalued our ending net~~gross deferred tax ~~assets at December 31, 2017, but did not recognize any income~~asset), $34.9 million of which ($8.3 million tax ~~impact in 2017 due to the offsetting change in the valuation allowance.~~effected) represent unrecognized tax benefits.

Adjusted EBITDA

“Adjusted EBITDA” is defined as income (loss) ~~from continuing operations~~ before interest, taxes, depreciation, amortization, gain ~~or loss~~(loss) on early extinguishment of debt and non-cash stock based compensation, excluding non-recurring items. Management does not include gain (loss) on extinguishment of debt, non-cash stock based compensation or other nonrecurring items in its calculations of ~~Adjusted~~ EBITDA because it believes that such amounts are not representative of our core operations. Further, management believes that most investors exclude gain (loss) on extinguishment of debt, stock based compensation recorded under FASB ASC Topic 718 and other nonrecurring items from customary EBITDA calculations as those items are often viewed as either non-recurring and not reflective of ongoing financial performance or have no cash impact on operations.

Adjusted EBITDA is a non-GAAP financial measure that is used as a supplemental financial measure by our management and directors and by our investors to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to generate cash sufficient to pay interest on our indebtedness; and our operating performance and return on invested capital as compared to those of other companies in the well services industry, without regard to financing methods and capital structure. ~~We use adjusted EBITDA in other filings with the Commission.~~

Adjusted EBITDA has limitations as an analytical tool and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Limitations to using Adjusted EBITDA as an analytical tool include:

Adjusted EBITDA does not reflect our current or future requirements for capital expenditures or capital commitments;




•	~~Adjusted EBITDA does not reflect our current or future requirements for capital expenditures or capital commitments;~~

•	~~Adjusted EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on our debt;~~

•	~~Adjusted EBITDA does not reflect income taxes;~~

•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

•	Adjusted EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on our debt; Adjusted EBITDA does not reflect income taxes; Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.


Reconciliation of Adjusted EBITDA to Net Loss
Reconciliation of Net Income (Loss) to Adjusted EBITDA										Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Unaudited)

	Successor						Predecessor			Three Months Ended June 30,						Six Months Ended June 30,
	Six months ended June 30, 2018			April 13 through June 30, 2017			January 1 through April 12, 2017			2019			2018			2019			2018
	(in thousands)						(in thousands)			(in thousands)						(in thousands)
Net income (loss)	$	(17,295	)	$	(7,001	)	$	27,228
Net loss										$	(10,749	)	$	(8,766	)	$	(22,383	)	$	(17,295	)
Interest income	(2		)	(6		)	(13		)	(1		)	—			(4		)	(2		)
Interest expense	4,793			1,897			2,254			5,723			2,426			13,409			4,793
Income tax (benefit) expense	(454		)	(17		)	27			14			(454		)	(50		)	(454		)
Depreciation and amortization	14,815			5,681			13,601			7,013			7,652			16,452			14,815
Share-based compensation	498			—			—			256			247			509			498
Non-recurring professional fees	1,073			—			—
Acquisition related costs										34			881			1,094			1,073
Restructuring expenses	190			—			—			—			2			—			190
(Gain) loss on reorganization items, net	—			1,299			(44,503		)
Gain on disposal of assets										(1,320		)	(47		)	(2,437		)	(67		)
Adjusted EBITDA	$	3,618		$	1,853		$	(1,406	)	$	969		$	1,941		$	6,590		$	3,551

Settlement expenses related to litigation was $2.0 million and $0.9 million for the three months ended June 30, 2019 and 2018, respectively and $2.3 million and $1.0 million for the six months ended June 30, 2019 and 2018, repectively. We have not included expenses related to settlement of litigation in our Adjusted EBITDA as they are not considered non-recurring.

Liquidity and Capital Resources

Our current and future liquidity is greatly dependent upon our operating results. Our ability to continue to meet our liquidity needs is subject to and will be affected by cash utilized in operations, the economic or business environment in which we operate, weakness in oil and natural gas industry conditions, the financial condition of our customers and vendors, and other factors. Furthermore, as a result of the challenging market conditions we continue to face, for the short term, we anticipate ~~continued~~continuing to use net cash ~~used~~ in operating ~~activities due to working capital needs in connection with increasing activity.~~activities. We believe that our current reserves of cash and cash equivalents and availability of $9.9 million under ~~the New~~our Revolving Loan Agreement are sufficient to finance our cash requirements for current and future operations, budgeted capital expenditures, debt service and other obligations for at least the next twelve months; nevertheless, it is possible that our cash on hand will not be sufficient to cover such expenses. In such event, we would be required to seek additional liquidity, and, prior to any such insufficiency, the Company would take steps to secure such additional liquidity from existing or additional financing sources. There can be no assurance that such financing could be obtained on attractive terms or at all.

months.

Historically, we have funded our operations, including capital expenditures, through ~~our~~the credit facilities, vendor financings, and cash flow from operations, ~~the revolving credit facility under the Prior Loan Agreement, vendor financings,~~ the issuance of senior notes and the proceeds from our public and private equity offerings.

More recently, since our emergence from chapter 11 reorganization, we have funded our operations through our Term Loan Agreement, Bridge Loan, PIK Notes, Revolving Loan Agreement and other financing activities.

As of June 30, ~~2018 (Successor),~~2019, we had ~~$5.4~~$1.0 million in ~~unrestricted~~ cash and cash equivalents and ~~$58.0~~$135.2 million in contractual debt.

~~Restricted cash at June 30, 2018 (Successor) was $19.7 million.~~ The components of restricted cash at June 30, 2018 included $11.0 million related to the New Loan Agreement which is subject to satisfaction of certain release restrictions and $8.7 million in a cash collateral account related to letters of credit and our corporate credit card program under the New Regions Letter of Credit Facility. The release conditions set forth in the New Loan Agreement include, among other things, (i) no default or event of default under the New Loan Agreement having occurred or being continuing as of the date of the requested release of proceeds of the New Loan Agreement, or that would exist after giving effect to the release requested to be made on such date, and (ii) our unrestricted cash and cash equivalents being less than $7.0 million after giving pro forma effect to the requested release.

~~The $58.0~~$135.2 million in contractual debt was comprised of ~~$50.6~~$60.9 million ~~for~~under the ~~New~~Term Loan Agreement, ~~net of debt issuance costs, $0.8~~$54.1 million under the PIK Notes, $6.0 million under the Revolving Loan Agreement, $13.3 million in finance leases and $1.0 million in insurance notes related to our general liability, workers compensation and ~~$6.5 million in equipment notes.~~other insurance. Of our total debt, ~~$2.8~~$60.3 million was ~~short-term debt outstanding on the~~classified as current portion of long-term debt, and ~~$55.2~~$74.9 million ~~of the outstanding contractual debt~~ was classified as ~~long-term debt.~~long-term.

~~New~~Term Loan Agreement

~~Forbes Energy Services~~On April 13, 2017, the Company entered into the Term Loan Agreement. FES LLC is the borrower, or the Borrower, ~~is the borrower~~ under the ~~New~~Term Loan Agreement. The Borrower’s obligations have been guaranteed by FES Ltd. and by ~~Texas Energy Services, LLC, C.C. Forbes, LLC~~TES, CCF and ~~Forbes Energy International, LLC,~~FEI, each direct subsidiaries of the Borrower and indirect subsidiaries of FES Ltd. The ~~New~~Term Loan Agreement provides for a term loan of ~~$50.0~~$60.0 million, ~~which was fully funded on the Effective Date.~~excluding accrued PIK interest at June 30, 2019. Subject to certain exceptions and permitted encumbrances, the obligations under ~~this loan~~the Term Loan Agreement are secured by a first priority security interest in substantially all the assets of the Company other than accounts receivable, cash ~~collateralizing~~and related assets, which constitute priority collateral under the ~~New Regions Letters of Credit Facility. Such term loan~~Revolving Loan Agreement (described below). The Term Loan Agreement has a stated maturity date of April 13, 2021. The proceeds of such term loan are only permitted to be used for (i) the payment on account of the Prior Senior Notes in an amount equal to $20.0 million; (ii) the payment of costs, expenses and fees incurred on or prior to the Effective Date in connection with the preparation, negotiation, execution and delivery of the New Loan Agreement and documents related thereto; and (iii) subject to satisfaction of certain release conditions set forth in the New Loan Agreement, for general operating, working capital and other general corporate purposes of the Borrower not otherwise prohibited by the terms of the New Loan Agreement. The release conditions set forth in the New Loan Agreement include, among other things, (i) no default or event of default under the New Loan Agreement having occurred or being continuing as of the date of the requested release of proceeds of the New Loan Agreement, or that would exist after giving effect to the release requested to be made on such date, and (ii) the Company’s unrestricted cash and cash equivalents being less than $7.0 million after giving pro forma effect to the requested release. At June 30, 2018, $11.0 million included in restricted cash was subject to these release restrictions.

Borrowings under ~~this term loan~~the Term Loan Agreement bear interest at a rate equal to five percent (5%) per annum payable quarterly in cash, or the Cash Interest Rate, plus (ii) an initial ~~rate for~~ paid in kind interest rate of seven percent (7%) commencing April 13, 2017 to be capitalized and added to the principal amount of the term loan ~~on the first day of each quarter,~~ or, at the election of the Borrower, paid in cash. The paid in kind interest increases by two percent (2%) twelve months after ~~the Effective Date~~April 13, 2017 and every twelve months thereafter until maturity. Upon and after the occurrence of an event of default, the Cash Interest Rate will increase by two percentage points per annum.

During the six months ended June 30, 2019, $2.9 million of interest was paid in kind. At June 30, 2019 and December 31, 2018, the ~~applicable~~paid in kind interest rate was ~~14% per annum.~~

11%.

The ~~New~~Term Loan Agreement includes customary negative covenants for an asset-based term loan, including covenants limiting ~~our~~the ability of the Company to, among other things, (i) effect mergers and consolidations, (ii) sell assets, (iii) create or suffer to exist any lien, (iv) make certain investments, (v) incur debt and (vi) transact with affiliates. In addition, the ~~New~~Term Loan Agreement includes customary affirmative covenants for an asset-based term loan, including covenants regarding the delivery of financial statements, reports and notices to the Agent. The ~~New~~Term Loan Agreement also contains customary representations and warranties and event of default provisions for a secured term loan.

Amendment to Term Loan Agreement and Joinder

In connection with the Cretic Acquisition, on November 16, 2018, the Company, as a guarantor, FES LLC, as borrower, and certain of their subsidiaries, as guarantors, entered into Amendment No. 1 to Loan and Security Agreement and Pledge and Security Agreement (the “Term Loan Amendment”) with the lenders party thereto and Wilmington Trust, National Association, as agent (the “Term Loan Agent”), pursuant to which the Term Loan Agreement, was amended to, among other things, permit (i) debt under the Revolving Loan Agreement (described below) and the liens securing the obligations thereunder, (ii) the incurrence of add-on term loans under the Term Loan Agreement in an aggregate principal amount of $10.0 million and (iii) the incurrence of one-year “last-out” bridge loans under the Term Loan Agreement in an aggregate principal amount of $50.0 million (the “Bridge Loan”).

Revolving Loan Agreement

The Revolving Loan Agreement is secured on a first lien basis by substantially all assets of the Company and its subsidiaries, subject to an intercreditor agreement between the Revolver Agent and the Term Loan Agent which provides that the priority collateral for the Revolving Loan Agreement consists of accounts receivable, cash and related assets, and that the other assets of the Company and its subsidiaries constitute priority collateral for the Term Loan Agreement. At June 30, ~~2018,~~2019 we ~~were~~had six million borrowings outstanding, $6.1 million in ~~compliance with our New Loan Agreement.~~

~~New Regions Letters of Credit Facility~~

On the Effective Date, we repaid the outstanding principal balance of $15.0 million plus outstanding interest and fees under the Prior Loan Agreement, and entered into the New Regions Letters of Credit Facility pursuant to which Regions may issue, upon request by the Company, letters of credit outstanding and ~~continue to provide charge cards for use by~~availability of $9.9 million.

5% Subordinated Convertible PIK Notes

The PIK Notes are the ~~aggregate undrawn amount of all outstanding letters of credit, (c) all sums owing to Regions or any affiliate pursuant to any letter of credit document and (d) all~~unsecured general subordinated obligations of the Company ~~arising thereunder, including~~and are subordinated in right of payment to any ~~indemnities~~existing and ~~obligations for reimbursement~~future secured or unsecured senior debt of ~~expenses and (ii) 120% of the aggregate line of credit for charge cards issued by Regions to~~ the Company. The ~~fees~~payment of the principal of, premium, if any, and interest on the PIK Notes will be subordinated to the prior payment in full of all of the Company’s existing and future senior indebtedness. In the event of a liquidation, dissolution, reorganization or any similar proceeding, obligations on the PIK Notes will be paid only after senior indebtedness has been paid in full. Pursuant to the Indenture, the Company is not permitted to (1) make cash payments to pay principal of, premium, if any, and interest on or any other amounts owing in respect of the PIK Notes, or (2) purchase, redeem or otherwise retire the PIK Notes for ~~each letter~~cash, if any senior indebtedness is not paid when due or any other default on senior indebtedness occurs and the maturity of ~~credit for~~such indebtedness is accelerated in accordance with its terms unless, in any case, the ~~period from~~default has been cured or waived, and ~~excluding~~the acceleration has been rescinded or the senior indebtedness has been repaid in full.

The PIK Notes are redeemable in whole or from time to time in ~~its discretion based upon such factors as Regions shall determine, including, without limitation,~~part at the ~~credit quality and financial performance~~Company’s option at a redemption price equal to the sum of (i) 100.0% of the ~~Company.~~principal amount of the PIK Notes to be redeemed and (ii) accrued and unpaid interest thereon to, but excluding, the redemption date, which amounts may be payable in cash or in shares of the Company’s common stock, (subject to limitations, if any, in the documentation governing the Company’s senior indebtedness). If redeemed for the Company’s common stock the holder will receive a number of shares of the Company’s common stock calculated based on the fair market value of a share of the Company’s common stock at such time, in each case less a 15% discount per share. The 15% discount represents an implied conversion premium at issuance which will be settled in common stock at the date of conversion. As such, the face value of the PIK Notes will be accreted to the settlement amount at June 30, ~~2018,~~2020. For the three and six months ended June 30, 2019, the Company recorded $1.8 million and $2.4 million, respectively in interest expense related to the accretion of the conversion premium.

The Indenture provides for mandatory conversion of the PIK Notes at maturity (or such earlier date as the Company shall elect to redeem the PIK Notes), or upon a Marketed Public Offering of the Company’s common stock or a Change of Control, in each case as defined in the Indenture, at a conversion rate ~~was 3.00%. In~~per $100 principal amount of PIK Notes into a number of shares of the ~~event we are unable~~Company’s common stock calculated based on the Fair Market Value of a share of the Company’s common stock at such time, in each case less a 15% discount per share.

The Company used the gross proceeds of $51.8 million that it received from the issuance of the PIK Notes to repay ~~amounts due~~all of the outstanding principal and accrued and unpaid interest on the Bridge Loan.

Interest on the Bridge Loan prior to its repayment accrued at a rate of 14% (5% cash interest plus 9% PIK interest). The payment obligations of the Borrower under the ~~New Regions Letters~~Bridge Loan have been fully satisfied as of Credit Facility, Regions could proceed against such cash collateral account. Regions has no commitment under the New Regions Letters of Credit Facility to issue letters of credit. At June 30, 2018, the facility had $8.6 million in letters of credit outstanding.

March 4, 2019.

Cash Flows

Our cash flows depend, to a large degree, on the level of spending by oil and gas companies' development and production activities. ~~The sustained decreases in~~Although the ~~price~~prices of oil and natural gas have ~~had a material impact on these~~recovered somewhat since the decline that began in 2014 and continued into 2016, completion activity again slowed for our customer base in the fourth quarter of 2018 and has continued into the first quarter of 2019. These lower levels of activities ~~and could~~will likely also materially affect our future cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures and issuances and repurchases of debt and our common stock are within our control and are adjusted as necessary based on market conditions.

~~Cash Flows from Operating Activities~~



	Six months ended June 30,
	2019			2018
Net cash used in operating activities	$	(4,617	)	$	(2,875	)
Net cash used in investing activities	(1,049		)	(6,534		)
Net cash used in financing activities	(1,387		)	(987		)
Net decrease in cash, cash equivalents and cash - restricted	(7,053		)	(10,396		)
Cash, cash equivalents and cash - restricted
Beginning of period	8,156			35,480
End of period	$	1,103		$	25,084

Cash flows ~~from~~used in operating activities for the six months ended June 30, 2019 decreased as compared to the six months ended June 30, 2018. The decrease resulted from working capital needs related to accounts receivable, accounts payable and accrued liabilities.

Cash flows used in investing activities for the six months ended June 30, 2019 decreased as compared to the six months ended June 30, 2018. The decrease is related to proceeds from the sale of certain assets and insurance proceeds from assets for which there was a casualty loss.

Cash flows from financing activities were ~~$(2.9) million, $(3.3)~~$1.4 million and ~~$(4.3)~~$1.0 million for the six months ended June 30, 2019 and 2018, ~~(Successor) and~~respectively. During the ~~periods of April 13, 2017 through~~six months ended June 30, ~~2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor), respectively. The change in cash used in operating activities was primarily related~~2019 we borrowed on the Revolving Loan Agreement to ~~changes in working capital~~make a $5.0 million principal payment on our Term Loan Agreement.

Capital Expenditures

Capital expenditures, including ~~increases in accounts receivable offset by increases accounts payable and accrued liabilities.~~

~~Cash Flows from Investing Activities~~

~~Cash flows from investing activities were $(6.5) million, $(0.2) million and $0.5 million~~assets acquired with finance leases, for the six months ended June 30, 2019 and 2018 ~~(Successor)~~were additions of $12.0 million and ~~the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor),~~$11.0 million, respectively. ~~The change was~~Additions to our fluid logistics segment were primarily ~~due to increased~~ purchases of ~~property~~vacuum trucks and ~~equipment for our coiled tubing division of~~light trucks. Additions to our well servicing segment were for ~~the six months ended June 30, 2018 (Successor).~~well service equipment and light trucks. Additions to our coiled tubing segment were for light trucks and pumping and support.

~~Cash Flows from Financing Activities~~

~~Cash flows from financing activities were $(1.0) million, $(0.3) million and $9.6 million for the six months ended June 30, 2018 (Successor) and~~the periods of April 13, 2017 through June 30, 2017 (Successor) and January 1, 2017 through April 12, 2017 (Predecessor), respectively. The amounts in the current period related to debt payments on our equipment loans. The cash provided by financing activities for the period January 1, 2017 through April 12, 2017 (Predecessor), which included the impact of cash transactions occuring upon emergence from bankruptcy, was due to net proceeds from the New Loan Agreement, offset in part by repayment of the Prior Loan Agreement, repayment of the Prior Senior Notes, and payment of debt issuance costs related to the New Loan Agreement.

Off-Balance Sheet Arrangements

We are often party to certain transactions that require off-balance sheet arrangements such as performance bonds, guarantees, operating leases for equipment, and bank guarantees that are not reflected in our condensed consolidated balance sheets. These arrangements are made in our normal course of business and they are not reasonably likely to have a current or future material adverse effect on our financial condition, results of operations, liquidity, or cash flows. See Note 87 - ~~Commitment~~Commitments and Contingencies.

~~Seasonality and Cyclical Trends~~

The oil and natural gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including the domestic and international supply and demand for oil and natural gas, current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices. Such cyclical trends also include the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling, completion and workover budget. The volatility of the oil and natural gas industry and the decline in oil and natural gas prices have negatively impacted the level of exploration and production activity and capital expenditures by our customers. This has adversely affected, and continues to adversely affect, the demand for our services, which has had, and if it continues, will continue to have, a material adverse effect on our business, financial condition, results of operations, and cash flows.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the applicable reporting periods. On an ongoing basis, management reviews its estimates, particularly those related to depreciation and amortization methods and useful lives and impairment of long-lived assets, ~~and asset retirement obligations,~~ using currently available information. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates. There have been no material changes to the critical accounting policies and estimates set forth in Item 7 in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, except for the application of ASU No. ~~2014-09~~2016-02 which created FASB ASC Topic ~~606 “Revenue from Contracts with Customers”~~842, "Leases" to our accounting and financial reporting activities.

See Note 8 - Leases.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the market risk disclosures set forth in Item 7A in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, ~~2018.~~2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Security and Exchange Commission, or the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, ~~2018,~~2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures over financial reporting were effective.

Changes in Internal Control over Financial Reporting

On January 1, ~~2018,~~2019, we adopted ASC ~~606, Revenue from Contracts with Customers.~~842, Leases. Although the new ~~revenue recognition~~lease standard did not have a material impact on our ~~revenue recognition,~~condensed consolidated financial statements, we nevertheless implemented changes to our processes related to ~~revenue recognition~~leases and the control activities within them.

There was no change in our internal control over financial reporting (as defined in Rules 13-a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION


Item 1.	Legal Proceedings

There are no pending material legal proceedings, and the Company is not aware of any material threatened legal proceedings, to which the Company is a party or to which its property is subject that would have a material adverse effect on the Company's financial statements as of June 30, ~~2018.~~2019.


Item 1A.	Risk Factors

A description of our risk factors can be found in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.


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

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

None.


~~Item 3.~~	~~Default Upon Senior Securities~~

Item 3.Default Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Number			Description of Exhibits

~~2.1~~	3.1	—		~~Debtors’ Prepackaged Joint Plan of Reorganization, dated December 21, 2016 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 23, 2016).~~
~~3.1~~		—		Certificate of Incorporation of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).
3.2		—		Second Amended and Restated Bylaws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).
4.1		—		Specimen Certificate for the Company’s common stock, $0.01 par value (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).
~~10.1~~ 4.2		—		Indenture, dated as of March 4, 2019 between Forbes Energy Services Ltd. and Wilmington Trust, National Association, as trustee (including form of Note) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 4, 2018).
10.1	—		Registration Rights Agreement by and among Forbes Energy Services Ltd. and certain holders identified therein dated as of April 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form 8-A filed April 18, 2017).
10.2		—		Loan and Security Agreement, dated as of April 13, 2017, by and among Forbes Energy Services LLC, as borrower, Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC and Forbes Energy Services Ltd., as guarantors, Wilmington Trust, N.A., as agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 18, 2017).
10.3		—		Agreement regarding Cash Collateral and Letters of Credit dated as of April 13, 2017 by and among Forbes Energy Services LLC, Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, Forbes Energy Services Ltd. and Regions Bank (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 18, 2017).
10.4		—		Forbes Energy Services Ltd. 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed April 18, 2017).
10.5		—		Amended and Restated Employment Agreement effective April 13, 2017, by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed April 18, 2017).
10.6		—		Amended and Restated Employment Agreement effective April 13, 2017, by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed April 18, 2017).
10.7		—		Employment Agreement effective April 13, 2017, by and between Steve Macek and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed April 18, 2017).
10.8		—		Form of Time-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017).
10.9		—		Form of Exit Financing Time-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017.
10.10		—		Form of Performance-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017).


31.1*		—
10.11			Merger Agreement, dated as of November 16, 2018, by and among Forbes Energy Services LLC, as buyer, Cobra Transitory Sub LLC, as Merger Sub, Cretic Energy Services, LLC, as the Company and Catapult Energy Services Group, LLC, as the Holders Representative and Paying Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 23, 2018).
10.12			Revolving Loan Agreement, dated November 16, 2018, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto and Regions Bank, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed November 23, 2018).
10.13			Amendment No. 1 to Loan and Security Agreement and Pledge and Security Agreement, dated as of November 16, 2018, by and among Forbes Energy Services LLC, as borrower, Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC and Forbes Energy Services Ltd., as guarantors, Wilmington Trust, N.A., as agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed November 23, 2018).
10.14			Employment Agreement, effective November 16, 2018, by and between Joe Michetti and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed November 23, 2018).
31.1*	—		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*	31.2*	—		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*	32.1*	—		Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	32.2*	—		Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~99.1~~		—		Order Approving the Debtors’ Disclosure Statement For, and Confirming, the Debtors’ Prepackaged Joint Plan of Reorganization, as entered by the Bankruptcy Court on March 29, 2017 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed March 31, 2017).
101*		—		Interactive Data Files

_________________________


*	Filed herewith.

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.



	FORBES ENERGY SERVICES LTD.

August ~~14, 2018~~13, 2019	By:	/s/ JOHN E. CRISP
		John E. Crisp Chairman, Chief Executive Officer and President (Principal Executive Officer)


August ~~14, 2018~~13, 2019	By:	/S/ L. MELVIN COOPER
		L. Melvin Cooper Senior Vice President, Chief Financial Officer and ~~Assistant~~ Secretary (Principal Financial and Accounting Officer)

~~EXHIBIT INDEX~~



~~Number~~		~~Description of Exhibits~~
~~2.1~~	—	~~Debtors’ Prepackaged Joint Plan of Reorganization, dated December 21, 2016 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 23, 2016).~~
~~3.1~~	—	~~Certificate of Incorporation of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).~~
~~3.2~~	—	~~Second Amended and Restated Bylaws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).~~
~~4.1~~	—	~~Specimen Certificate for the Company’s common stock, $0.01 par value (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed April 18, 2017).~~
~~10.1~~	—	Registration Rights Agreement by and among Forbes Energy Services Ltd. and certain holders identified therein dated as of April 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form 8-A filed April 18, 2017).
~~10.2~~	—	Loan and Security Agreement, dated as of April 13, 2017, by and among Forbes Energy Services LLC, as borrower, Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC and Forbes Energy Services Ltd., as guarantors, Wilmington Trust, N.A., as agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 18, 2017).
~~10.3~~	—	Agreement regarding Cash Collateral and Letters of Credit dated as of April 13, 2017 by and among Forbes Energy Services LLC, Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, Forbes Energy Services Ltd. and Regions Bank (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 18, 2017).
~~10.4~~	—	~~Forbes Energy Services Ltd. 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed April 18, 2017).~~
~~10.5~~	—	Amended and Restated Employment Agreement effective April 13, 2017, by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed April 18, 2017).
~~10.6~~	—	Amended and Restated Employment Agreement effective April 13, 2017, by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed April 18, 2017).
~~10.7~~	—	Employment Agreement effective April 13, 2017, by and between Steve Macek and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed April 18, 2017).
~~10.8~~	—	~~Form of Time-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017).~~
~~10.9~~	—	~~Form of Exit Financing Time-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017).~~
~~10.10~~	—	~~Form of Performance-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2017).~~
31.1*	—	~~Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).~~
31.2*	—	~~Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).~~
32.1*	—	~~Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
32.2*	—	~~Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~99.1~~	—	Order Approving the Debtors’ Disclosure Statement For, and Confirming, the Debtors’ Prepackaged Joint Plan of Reorganization, as entered by the Bankruptcy Court on March 29, 2017 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed March 31, 2017).
101*	—	~~Interactive Data Files~~

~~_________________________~~


*	~~Filed herewith.~~



	July - December 2018		2019		2020		2021		2022 and thereafter
	(in thousands)
Capital lease principal payments	$	958	$	1,939	$	2,017	$	1,488	$	145



	Successor
	April 13, 2017 through June 30, 2017
	(in thousands)
	Well Servicing		Fluid Logistics		Total
Operating revenues	$	18,139	$	9,711	$	27,850
Direct operating costs	13,814		9,053		22,867
Segment operating profit	$	4,325	$	658	$	4,983
Depreciation and amortization	$	2,837	$	2,844	$	5,681
Capital expenditures ⁽¹⁾	$	915	454		$	1,368
Total assets	$	97,208	$	78,680	$	175,708
Long-lived assets	$	68,672	$	49,269	$	117,941



	Predecessor
	April 1, 2017 through April 12, 2017						January 1, 2017 through April 12, 2017
	(in thousands)						(in thousands)
	Well Servicing		Fluid Logistics		Total		Well Servicing		Fluid Logistics		Total
Operating revenues	$	2,449	$	1,269	$	3,718	$	19,554	$	11,211	$	30,765
Direct operating costs	1,813		1,260		3,073		15,952		11,207		27,159
Segment operating profit	$	636	$	9	$	645	$	3,602	$	4	$	3,606
Depreciation and amortization	$	782	$	751	$	1,533	$	6,927	$	6,674	$	13,601
Capital expenditures ⁽¹⁾	$	12	11		$	23	$	286	$	114	$	400
Total assets	$	607,638	$	434,371	$	1,042,009	$	607,638	$	434,371	$	1,042,009
Long-lived assets	$	135,942	$	84,384	$	220,326	$	135,942	$	84,384	$	220,326

⁽¹⁾ Capital expenditures listed above include all cash and non-cash additions to property and equipment, including capital leases and fixed assets recorded in accounts payable at period end.



	Successor
	Three months ended June 30, 2018			Six months ended in June 30, 2018
Reconciliation of the Company's Operating Loss As Reported:	(in thousands)			(in thousands)
Segment operating profits	$	6,766		$	12,653
General and administrative expense	5,908			10,796
Depreciation and amortization	7,652			14,815
Operating loss	(6,794		)	(12,958		)
Other expense, net	(2,426		)	(4,791		)
Pre-tax loss	$	(9,220	)	$	(17,749	)