UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

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


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

For the transition period from _____ to _____

Commission File Number 001-37988

NexTier Oilfield Solutions Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			38-4016639
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

3990 Rogerdale Rd.	Houston	Texas	77042
(Address of Principal Executive Offices)			(Zip Code)

(713) 325-6000

(Registrant's Telephone Number, Including Area Code)

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

Title of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Stock, $0.01, par value

NEX

New York Stock Exchange

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

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

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


Large Accelerated Filer	☐	Accelerated Filer	☒

Non-accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

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

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

As of ~~August 3,~~November 2, 2020, the registrant had ~~214,329,421~~214,365,310 shares of common stock outstanding.

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	89
	Notes to the Unaudited Condensed Consolidated Financial Statements	1011

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3233

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4244

Item 4.	Controls and Procedures	4345

PART II.	OTHER INFORMATION	4446

Item 1.	Legal Proceedings	4446

Item 1A.	Risk Factors	4446

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4547

Item 3.	Defaults Upon Senior Securities	4648

Item 4.	Mine Safety Disclosures	4648

Item 5.	Other Information	4648

Item 6.	Exhibits	4749

	Signatures	4850

REFERENCES WITHIN THIS QUARTERLY REPORT

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to (i) the terms “Company,” “NexTier,” “we,” “us” and “our” refer to NexTier Oilfield Solutions Inc. and its consolidated subsidiaries; (ii) the term “Keane Group” refers to Keane Group Holdings, LLC and its consolidated subsidiaries; (iii) the term “Keane Investor” refers to Keane Investor Holdings LLC; (iv) the term “Cerberus” refers to Cerberus Capital Management, L.P. and its controlled affiliates and investment funds; (v) the term “C&J” refers to C&J Energy Services, Inc.; (vi) the term “C&J Merger” refers to the consummation of the transactions described in that certain Agreement and Plan of Merger, dated as of June 16, 2019 (the “Merger Agreement”), by and among the C&J, us and King Merger Sub Corp., one of our wholly owned subsidiaries. As used in this Quarterly Report on Form 10-Q, capacity in the hydraulic fracturing business refers to the total number of hydraulic horsepower, regardless of whether such hydraulic horsepower is active and deployed, active and not deployed or inactive. While the equipment and amount of hydraulic horsepower required for a customer project varies, we calculate our total number of fleets, as used in this Quarterly Report on Form 10-Q, by dividing our total hydraulic horsepower by approximately ~~45,000~~48,000 hydraulic horsepower.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Our forward-looking statements are generally accompanied by words such as "may," "should," "expect," "believe," "plan," "anticipate," "could," "intend," "target," "goal," "project," "contemplate," "believe," "estimate," "predict," "potential," or "continue," ~~or "COVID-19 Impacts"~~ or the negative of these terms or other similar expressions. Any forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date on which we make them and are based upon our historical performance and on current plans, estimates and expectations. Except as required by law, we have no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the impact of the current COVID-19 pandemic and the evolving response thereto, including the impact of social distancing, shelter-in-place, shutdowns of non-essential businesses and similar measures imposed or undertaken by governments, private businesses or others;

•changing global economic conditions, including oil and gas supply and demand;

•our business strategy;

•our plans, objectives, expectations and intentions;

•the competitive nature of the industry in which we conduct our business, including pricing pressures;

•the impact of the consummation of the merger with C&J ~~Energy Services, Inc. ("C&J")~~ on relationships, including with employees, suppliers, customers, competitors, lenders and credit rating agencies;

•our future operating results;

•~~the competitive nature of the industry in which we conduct our business, including pricing pressures;~~

•crude oil and natural gas commodity prices;

•demand for services in our industry;

•the impact of pipeline and storage capacity constraints;

•the impact of adverse weather conditions;

•the effects of government regulation;

•changes in tax laws;

•legal proceedings, liability claims and effect of external investigations;

•the effect of a loss of, or the financial distress of, one or more customers;

•our ability to obtain or renew customer contracts;

•the effect of a loss of, or interruption in operations of, one or more key suppliers;

•our ability to maintain the right level of commitments under our supply agreements;

•the market price and availability of materials or equipment;

•the impact of new technology;

•our ability to employ a sufficient number of skilled and qualified workers;

•our ability to obtain permits, approvals and authorizations from governmental and third parties;

•planned acquisitions, divestitures, and future capital expenditures;

•our ability to maintain effective information technology systems;

•our ability to maintain an effective system of internal controls over financial reporting;

•our ability to service our debt obligations;

•financial strategy, liquidity or capital required for our ongoing operations and acquisitions, and our ability to raise additional capital;

•the market volatility of our stock;

•our ability or intention to pay dividends or to effectuate repurchases of our common stock;

•the impact of ownership by Keane Investor and Cerberus; and

•the impact of our corporate governance structure.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019, in subsequently filed Form 10-Qs and in the section entitled Part II, "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, circumstances, plans, intentions or expectations reflected in any forward-looking statements will be achieved or occur. Actual results, events or circumstances could differ materially from those described in such forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make, except as specifically set forth herein.

This Quarterly Report on Form 10-Q includes market and industry data and certain other statistical information based on third-party sources including independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, we have not independently verified the accuracy or completeness of this information. Some data is also based on our own good faith estimates, which are supported by our management's knowledge of and experience in the markets and businesses in which we operate.

While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed above and in Part II, "Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q.

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands)


		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	337,147	$	255,015	Cash and cash equivalents	$	305,212	$	255,015
Trade and other accounts receivable, net	Trade and other accounts receivable, net	86,570		350,765		Trade and other accounts receivable, net	96,740		350,765
Inventories, net	Inventories, net	43,153		61,641		Inventories, net	30,199		61,641
Assets held for sale	Assets held for sale	—		141		Assets held for sale	0		141
Prepaid and other current assets	Prepaid and other current assets	51,342		20,492		Prepaid and other current assets	56,164		20,492
Total current assets	Total current assets	518,212		688,054		Total current assets	488,315		688,054
Operating lease right-of-use assets	Operating lease right-of-use assets	47,098		54,503		Operating lease right-of-use assets	42,165		54,503
Finance lease right-of-use assets	Finance lease right-of-use assets	2,743		9,511		Finance lease right-of-use assets	2,396		9,511
Property and equipment (net of accumulated depreciation of $851,015 and $723,060)		575,094		709,404
Property and equipment (net of accumulated depreciation of $878,726 and $723,060)						Property and equipment (net of accumulated depreciation of $878,726 and $723,060)	514,264		709,404
Goodwill	Goodwill	104,198		137,458		Goodwill	104,198		137,458
Intangible assets (net of accumulated amortization of $40,737 and $35,333)		54,881		55,021
Intangible assets (net of accumulated amortization of $44,119 and $35,333)						Intangible assets (net of accumulated amortization of $44,119 and $35,333)	52,945		55,021
Other noncurrent assets	Other noncurrent assets	7,360		10,956		Other noncurrent assets	6,895		10,956
Total assets	Total assets	$	1,309,586	$	1,664,907	Total assets	$	1,211,178	$	1,664,907

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity

Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	37,765	$	115,251	Accounts payable	$	52,598	$	115,251
Accrued expenses	Accrued expenses	144,747		234,895		Accrued expenses	130,585		234,895
Customer contract liabilities	Customer contract liabilities	—		60		Customer contract liabilities	745		60
Current maturities of long-term operating lease liabilities	Current maturities of long-term operating lease liabilities	19,673		23,473		Current maturities of long-term operating lease liabilities	19,555		23,473
Current maturities of long-term finance lease liabilities	Current maturities of long-term finance lease liabilities	1,363		4,594		Current maturities of long-term finance lease liabilities	1,549		4,594
Current maturities of long-term debt	Current maturities of long-term debt	2,303		2,311		Current maturities of long-term debt	2,263		2,311
Other current liabilities	Other current liabilities	2,816		5,610		Other current liabilities	2,672		5,610
Total current liabilities	Total current liabilities	208,667		386,194		Total current liabilities	209,967		386,194
Long-term operating lease liabilities, less current maturities	Long-term operating lease liabilities, less current maturities	32,986		35,123		Long-term operating lease liabilities, less current maturities	28,999		35,123
Long-term finance lease liabilities, less current maturities	Long-term finance lease liabilities, less current maturities	1,479		4,844		Long-term finance lease liabilities, less current maturities	1,167		4,844
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities	Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities	334,375		335,312		Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities	333,844		335,312
Other noncurrent liabilities	Other noncurrent liabilities	20,490		16,662		Other noncurrent liabilities	23,283		16,662
Total noncurrent liabilities	Total noncurrent liabilities	389,330		391,941		Total noncurrent liabilities	387,293		391,941
Total liabilities	Total liabilities	597,997		778,135		Total liabilities	597,260		778,135

Stockholders' equity	Stockholders' equity					Stockholders' equity

Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 214,093 and 212,410 shares, respectively)		2,141		2,124
Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 214,359 and 212,410 shares, respectively)						Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 214,359 and 212,410 shares, respectively)	2,144		2,124
Paid-in capital in excess of par value	Paid-in capital in excess of par value	981,204		966,762		Paid-in capital in excess of par value	985,900		966,762
Retained deficit	Retained deficit	(259,102)		(73,333)		Retained deficit	(361,535)		(73,333)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(12,654)		(8,781)		Accumulated other comprehensive loss	(12,591)		(8,781)
Total stockholders' equity	Total stockholders' equity	711,589		886,772		Total stockholders' equity	613,918		886,772
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,309,586	$	1,664,907	Total liabilities and stockholders' equity	$	1,211,178	$	1,664,907

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

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

(Amounts in thousands, except for per share amounts)

(Unaudited)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
Revenue	Revenue	$	196,227	$	427,733	$	823,852	$	849,387	Revenue	$	163,675	$	443,953	$	987,527	$	1,293,340
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of services⁽¹⁾	Cost of services⁽¹⁾	178,771		324,503		690,997		662,149		Cost of services(1)	150,066		333,438		841,063��		995,587
Depreciation and amortization	Depreciation and amortization	75,260		69,886		161,081		141,362		Depreciation and amortization	73,570		68,708		234,651		210,069
Selling, general and administrative expenses	Selling, general and administrative expenses	38,024		26,463		94,908		54,399		Selling, general and administrative expenses	25,521		26,579		120,429		80,978
Merger and integration	Merger and integration	14,028		6,108		26,210		6,108		Merger and integration	7,288		6,651		33,498		12,759
(Gain) loss on disposal of assets	(Gain) loss on disposal of assets	(953)		(330)		(8,915)		151		(Gain) loss on disposal of assets	(3,027)		679		(11,942)		831
Impairment expense	Impairment expense	—		—		34,327		—		Impairment expense	2,681		0		37,008		0
Total operating costs and expenses	Total operating costs and expenses	305,130		426,630		998,608		864,169		Total operating costs and expenses	256,099		436,055		1,254,707		1,300,224
Operating loss		(108,903)		1,103		(174,756)		(14,782)
Operating income (loss)										Operating income (loss)	(92,424)		7,898		(267,180)		(6,884)
Other income (expense):	Other income (expense):									Other income (expense):
Other income, net		2,259		(43)		2,675		405
Other income (expense), net										Other income (expense), net	(3,978)		55		(1,303)		460
Interest expense, net	Interest expense, net	(5,353)		(5,477)		(11,419)		(10,872)		Interest expense, net	(5,524)		(5,215)		(16,943)		(16,087)
Total other income (expense)		(3,094)		(5,520)		(8,744)		(10,467)
Loss before income taxes		(111,997)		(4,417)		(183,500)		(25,249)
Income tax expense		(491)		(564)		(744)		(1,538)
Net loss		(112,488)		(4,981)		(184,244)		(26,787)
Total other expense										Total other expense	(9,502)		(5,160)		(18,246)		(15,627)
Income (loss) before income taxes										Income (loss) before income taxes	(101,926)		2,738		(285,426)		(22,511)
Income tax (expense) benefit										Income tax (expense) benefit	(507)		820		(1,251)		(718)
Net income (loss)										Net income (loss)	(102,433)		3,558		(286,677)		(23,229)
Other comprehensive loss, net of tax:	Other comprehensive loss, net of tax:									Other comprehensive loss, net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(354)		—		753		(29)		Foreign currency translation adjustments	(157)		0		596		(29)
Hedging activities	Hedging activities	(2,654)		(3,682)		(5,615)		(6,544)		Hedging activities	(453)		(2,120)		(6,068)		(8,664)
Total comprehensive loss		$	(115,496)	$	(8,663)	$	(189,106)	$	(33,360)
Total comprehensive income (loss)										Total comprehensive income (loss)	$	(103,043)	$	1,438	$	(292,149)	$	(31,922)

Net loss per share:
Basic net loss per share		$	(0.53)	$	(0.05)	$	(0.86)	$	(0.26)
Diluted net loss per share		(0.53)		(0.05)		(0.86)		(0.26)
Net income (loss) per share:										Net income (loss) per share:
Basic net income (loss) per share										Basic net income (loss) per share	$	(0.48)	$	0.03	$	(1.34)	$	(0.22)
Diluted net income (loss) per share										Diluted net income (loss) per share	(0.48)		0.03		(1.34)		(0.22)

Weighted-average shares outstanding: basic	Weighted-average shares outstanding: basic	213,760		104,837		213,301		104,631		Weighted-average shares outstanding: basic	214,251		104,899		213,620		104,721
Weighted-average shares outstanding: diluted	Weighted-average shares outstanding: diluted	213,760		104,837		213,301		104,631		Weighted-average shares outstanding: diluted	214,251		105,259		213,620		105,080

⁽¹⁾Cost of services during the three and ~~six~~nine months ended ~~June~~September 30, 2020 exclude depreciation of ~~$70.7~~$68.9 million and ~~$152.0~~$220.9 million, respectively. Cost of services during the three and ~~six~~nine months ended ~~June~~September 30, 2019 exclude depreciation of ~~$66.3~~$65.2 million and ~~$133.9~~$199.2 million, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Amounts in thousands)

(Unaudited)

Common stock Paid-in capital in excess of par value Retained deficit Accumulated other comprehensive loss Total
Balance as of December 31, 2019 $ 2,124 $ 966,762 $ (73,333) $ (8,781) $ 886,772
Stock-based compensation 11 6,869 — — 6,880
Shares repurchased and retired related to stock-based compensation (2) (1,149) — — (1,151)
Other comprehensive loss — — — (1,513) (1,513)
Credit losses standard implementation — — (1,525) — (1,525)
Net loss — — (71,756) — (71,756)
Balance as of March 31, 2020 $ 2,133 $ 972,482 $ (146,614) $ (10,294) $ 817,707
Stock-based compensation 12 9,511 — — 9,523
Shares repurchased and retired related to stock-based compensation (4) (789) — — (793)
Other comprehensive loss — — — (2,360) (2,360)
Net loss — — (112,488) — (112,488)
Balance as of June 30, 2020 $ 2,141 $ 981,204 $ (259,102) $ (12,654) $ 711,589
`


		Common stock		Paid-in capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Total			Common stock		Paid-in capital in excess of par value		Retained deficit		Accumulated other comprehensive loss		Total
Balance as of December 31, 2018		$	1,038	$	455,447	$	31,494	$	(798)	$	487,181
Balance as of December 31, 2019												Balance as of December 31, 2019	$	2,124	$	966,762	$	(73,333)	$	(8,781)	$	886,772

Stock-based compensation⁽¹⁾		2		8,277		—		—		8,279
Stock-based compensation												Stock-based compensation	11		6,869		—		—		6,880
Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	—		(2,861)		—		—		(2,861)		Shares repurchased and retired related to stock-based compensation	(2)		(1,149)		—		—		(1,151)
Other comprehensive loss	Other comprehensive loss	—		—		—		(3,139)		(3,139)		Other comprehensive loss	—		—		—		(1,513)		(1,513)
New lease standard implementation		—		—		1,330		—		1,330
Credit losses standard implementation												Credit losses standard implementation	—		—		(1,525)		—		(1,525)
Net loss	Net loss	—		—		(21,806)		—		(21,806)		Net loss	—		—		(71,756)		—		(71,756)
Balance as of March 31, 2019		$	1,040	$	460,863	$	11,018	$	(3,937)	$	468,984
Stock-based compensation⁽¹⁾		—		5,637		—		—		5,637
Balance as of March 31, 2020												Balance as of March 31, 2020	$	2,133	$	972,482	$	(146,614)	$	(10,294)	$	817,707
Stock-based compensation												Stock-based compensation	12		9,511		—		—		9,523
Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	(1)		(505)		—		—		(506)		Shares repurchased and retired related to stock-based compensation	(4)		(789)		—		—		(793)
Other comprehensive loss	Other comprehensive loss	—		—		—		(3,878)		(3,878)		Other comprehensive loss	—		—		—		(2,360)		(2,360)
Net loss	Net loss	—		—		(4,981)		—		(4,981)		Net loss	—		—		(112,488)		—		(112,488)
Balance as of June 30, 2019		$	1,039	$	465,995	$	6,037	$	(7,815)	$	465,256
Balance as of June 30, 2020												Balance as of June 30, 2020	$	2,141	$	981,204	$	(259,102)	$	(12,654)	$	711,589
Stock-based compensation												Stock-based compensation	4		4,744		—		—		4,748
Shares repurchased and retired related to stock-based compensation												Shares repurchased and retired related to stock-based compensation	(1)		(48)		—		—		(49)
Other comprehensive loss												Other comprehensive loss	—		—		—		63		63
Net loss												Net loss	—		—		(102,433)		—		(102,433)
Balance as of September 30, 2020												Balance as of September 30, 2020	$	2,144	$	985,900	$	(361,535)	$	(12,591)	$	613,918

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Amounts in thousands)

(Unaudited)


	Common stock		Paid-in capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Total
Balance as of December 31, 2018	$	1,038	$	455,447	$	31,494	$	(798)	$	487,181

Stock-based compensation(1)	2		8,277		—		—		8,279
Shares repurchased and retired related to stock-based compensation	—		(2,861)		—		—		(2,861)
Other comprehensive loss	—		—		—		(3,139)		(3,139)
New lease standard implementation	—		—		1,330		—		1,330
Net loss	—		—		(21,806)		—		(21,806)
Balance as of March 31, 2019	$	1,040	$	460,863	$	11,018	$	(3,937)	$	468,984
Stock-based compensation(1)	0		5,637		—		—		5,637
Shares repurchased and retired related to stock-based compensation	(1)		(505)		—		—		(506)
Other comprehensive loss	—		—		—		(3,878)		(3,878)
Net loss	—		—		(4,981)		—		(4,981)
Balance as of June 30, 2019	$	1,039	$	465,995	$	6,037	$	(7,815)	$	465,256
Stock-based compensation	0		5,488		—		—		5,488
Shares repurchased and retired related to stock-based compensation	0		(122)		—		—		(122)
Other comprehensive loss	—		—		—		(2,176)		(2,176)
Net income	—		—		3,558		—		3,558
Balance as of September 30, 2019	$	1,039	$	471,361	$	9,595	$	(9,991)	$	472,004

(1) Stock-based compensation during the ~~six~~nine months ended ~~June~~September 30, 2019 includes stock-based compensation expense recognized during the period of ~~$9.6~~$15.1 million and the vested deferred stock awards of $4.3 million.

See accompanying notes to unaudited condensed consolidated financial statements.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


		Six Months Ended June 30,							Nine Months Ended September 30,
		2020		2019			2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(184,244)	$	(26,787)	Net loss	$	(286,677)	$	(23,229)
Adjustments to reconcile net loss to net cash provided by operating activities	Adjustments to reconcile net loss to net cash provided by operating activities					Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	161,081		141,362		Depreciation and amortization	234,651		210,069
Amortization of deferred financing fees	Amortization of deferred financing fees	1,207		500		Amortization of deferred financing fees	1,710		966

(Gain) loss on disposal of assets	(Gain) loss on disposal of assets	(8,915)		151		(Gain) loss on disposal of assets	(11,942)		831

Loss on impairment of assets	Loss on impairment of assets	34,327		—		Loss on impairment of assets	37,008		0
Unrealized loss on derivative recognized in other comprehensive loss	Unrealized loss on derivative recognized in other comprehensive loss	(5,615)		(6,544)		Unrealized loss on derivative recognized in other comprehensive loss	(6,068)		(8,664)
Gain on financial instrument and derivatives, net		(1,390)		(444)
(Gain) loss on financial instrument and derivatives, net						(Gain) loss on financial instrument and derivatives, net	4,109		(500)
Stock-based compensation	Stock-based compensation	16,403		9,637		Stock-based compensation	21,151		15,125

Other non-cash expense, net		—		8

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Decrease in trade and other accounts receivable, net	Decrease in trade and other accounts receivable, net	224,349		11,600		Decrease in trade and other accounts receivable, net	208,924		14,477

Decrease in inventories	Decrease in inventories	12,804		9,048		Decrease in inventories	20,690		14,084
Decrease (increase) in prepaid and other current assets		3,508		(257)
Increase in prepaid and other current assets						Increase in prepaid and other current assets	(607)		(626)
Decrease (increase) in other assets	Decrease (increase) in other assets	14,393		(46,950)		Decrease (increase) in other assets	20,108		(41,891)
Increase (decrease) in accounts payable	Increase (decrease) in accounts payable	(77,685)		23,511		Increase (decrease) in accounts payable	(65,149)		15,803
Decrease in accrued expenses	Decrease in accrued expenses	(73,555)		(27,141)		Decrease in accrued expenses	(87,736)		(22,284)
Increase (decrease) in customer contract liabilities		(60)		411
Increase in customer contract liabilities						Increase in customer contract liabilities	685		411
Increase (decrease) in other liabilities	Increase (decrease) in other liabilities	(6,194)		53,820		Increase (decrease) in other liabilities	(8,181)		51,007
Net cash provided by operating activities	Net cash provided by operating activities	110,414		141,925		Net cash provided by operating activities	82,676		225,579
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Proceeds from sale of business	Proceeds from sale of business	53,259		—		Proceeds from sale of business	53,666		0
Purchase of property and equipment	Purchase of property and equipment	(83,719)		(111,694)		Purchase of property and equipment	(96,649)		(154,107)
Advances of deposit on equipment	Advances of deposit on equipment	(1,118)		(2,319)		Advances of deposit on equipment	0		(5,049)
Implementation of software	Implementation of software	(5,689)		(1,783)		Implementation of software	(7,191)		(3,321)
Proceeds from disposal of assets	Proceeds from disposal of assets	14,890		18,348		Proceeds from disposal of assets	24,807		23,449

Proceeds from insurance recoveries	Proceeds from insurance recoveries	58		106		Proceeds from insurance recoveries	58		223

Net cash used in investing activities	Net cash used in investing activities	(22,319)		(97,342)		Net cash used in investing activities	(25,309)		(138,805)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from asset-based revolver	Proceeds from asset-based revolver	175,000		—		Proceeds from asset-based revolver	175,000		0
Payments on the term loan facility and asset-based revolver	Payments on the term loan facility and asset-based revolver	(176,750)		(1,750)		Payments on the term loan facility and asset-based revolver	(177,625)		(2,625)
Payments on finance leases	Payments on finance leases	(3,022)		(2,553)		Payments on finance leases	(3,148)		(3,814)

Shares repurchased and retired related to stock-based compensation	Shares repurchased and retired related to stock-based compensation	(1,944)		(3,365)		Shares repurchased and retired related to stock-based compensation	(1,993)		(3,487)

Net cash used financing activities	Net cash used financing activities	(6,716)		(7,668)		Net cash used financing activities	(7,766)		(9,926)
Non-cash effect of foreign translation adjustments	Non-cash effect of foreign translation adjustments	753		(29)		Non-cash effect of foreign translation adjustments	596		(29)
Net increase in cash, cash equivalents	Net increase in cash, cash equivalents	82,132		36,886		Net increase in cash, cash equivalents	50,197		76,819
Cash and cash equivalents, beginning	Cash and cash equivalents, beginning	255,015		80,206		Cash and cash equivalents, beginning	255,015		80,206
Cash and cash equivalents, ending	Cash and cash equivalents, ending	$	337,147	$	117,092	Cash and cash equivalents, ending	$	305,212	$	157,025

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest expense, net	Interest expense, net	$	12,347	$	10,847	Interest expense, net	$	16,122	$	15,847
Income taxes						Income taxes	1,206		1,630

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


Income taxes		6		1,500
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Change in accrued capital expenditures	Change in accrued capital expenditures	$	6,350	$	(10,299)	Change in accrued capital expenditures	$	8,643	$	(16,387)
Non-cash additions to equity security investments						Non-cash additions to equity security investments	5,263		0
Non-cash additions to finance right-of-use assets	Non-cash additions to finance right-of-use assets	—		5,084		Non-cash additions to finance right-of-use assets	0		6,029
Non-cash additions to finance lease liabilities, including current maturities	Non-cash additions to finance lease liabilities, including current maturities	—		5,087		Non-cash additions to finance lease liabilities, including current maturities	0		6,164
Non-cash additions to operating right-of-use assets	Non-cash additions to operating right-of-use assets	8,200		61,670		Non-cash additions to operating right-of-use assets	8,715		62,698
Non-cash additions to operating lease liabilities, including current maturities	Non-cash additions to operating lease liabilities, including current maturities	8,161		61,454		Non-cash additions to operating lease liabilities, including current maturities	8,676		62,444

See accompanying notes to unaudited condensed consolidated financial statements.

910

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(1) Basis of Presentation and Nature of Operations

On October 13, 2016, NexTier Oilfield Solutions Inc. (the “Company” or “NexTier”) was formed as Keane Group, Inc. ("Keane"), a Delaware corporation to be a holding corporation for Keane Group Holdings, LLC and its subsidiaries (collectively referred to as “Keane Group”), for the purpose of facilitating the initial public offering (the “IPO”) of shares of common stock of the Company.

On October 31, 2019, the Company completed its merger (the “C&J Merger”) with C&J Energy Services, Inc. (“C&J”) and changed its name to "NexTier Oilfield Solutions Inc." For more details regarding the C&J Merger, refer to Note (3) C&J Merger. In addition, on March 9, 2020, the Company completed the divestiture of its Well Support Services Segment ("WSS Sale"). For more details regarding the WSS Sale, refer to Note (15) Business Segments. The condensed consolidated financial statements for the period from January 1, 2019 to ~~June~~September 30, 2019 reflect only the historical results of the Company prior to the completion of the C&J Merger.

The accompanying unaudited condensed consolidated financial statements were prepared using United States Generally Accepted Accounting Principles ("GAAP") and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the "SEC") on March 12, 2020.

The Company’s accounting policies are in accordance with GAAP. The preparation of financial statements in conformity with these accounting principles requires the Company to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (2) the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from the Company’s estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment and intangible assets; allowances for doubtful accounts; inventory reserves; acquisition accounting; contingent liabilities; and the valuation of property and equipment, intangible assets, equity issued as consideration in an acquisition, income taxes, stock-based incentive plan awards and derivatives.

Management believes the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company's financial position as of ~~June~~September 30, 2020 and the results of its operations and cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019. Such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated.

(2) Summary of Significant Accounting Policies

(a) Business Combinations

Business combinations are accounted for using the acquisition method of accounting in accordance with the Accounting Standards Codification (“ASC”) 805, “Business Combinations”, as amended by Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business.” The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, using discounted cash flows and other applicable valuation techniques. Any ~~acquisition related~~acquisition-related costs incurred by the Company are expensed as incurred. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill if the definition of a business is met. Operating results of an acquired business are included in the Company’s results of operations from the date of acquisition.

On October 31, 2019, the Company completed its acquisition of C&J, ~~Energy Services, Inc.,~~ for further discussion related to the merger, see Note (3) C&J Merger.

(b) Revenue Recognition

The Company adopted ASU 2014-09, “Revenue from Contracts with Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers, effective January 1, 2018, using the modified retrospective method. Changes were made to the relevant business processes and the related control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting. There were no significant changes to the Company’s internal control over financial reporting due to the Company’s adoption of ASU 2014-09.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. To achieve this core principle, ASC 606 requires the Company to apply the following five steps: (1) identify the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation. The five-step model requires management to exercise judgment when evaluating contracts and recognizing revenue.

Identify the Contract and Determine Transaction Price

The Company typically provides its services (i) under term pricing agreements; (ii) under contracts that include dedicated fleet or unit arrangements; (iii) on a spot market basis; and (iv) under term contracts that include “take-or-pay” provisions.

Under term pricing agreements, the Company and customer agree to set pricing for a specified period of time. The agreed-upon pricing is subject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties. These agreements typically do not feature provisions obligating either party to commit to a certain utilization level. Additionally, these agreements typically allow either party to terminate the agreement for its convenience without incurring a termination penalty.

Under dedicated unit arrangements, customers typically commit to targeted utilization levels based on a specified number of fracturing stages per calendar month or fulfilling the customer's requirements, in either instance at agreed-upon pricing. These agreements typically do not feature obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties. These contracts also typically allow for termination for either party's convenience with a brief notice period and may feature a termination penalty in the event the customer terminates the contract for its convenience.

Rates for services performed on a spot market basis are based on an agreed-upon spot market rate unique to each service line.

Under term contracts with “take-or-pay” provisions, the Company’s customers are typically obligated to pay on a monthly basis for a specified quantity of services, whether or not those services are actually utilized. To the extent customers use more than the specified contracted minimums, the Company will charge a pre-agreed amount for the provision of such additional services, which amounts are typically subject to periodic review. In addition, these contracts typically feature a termination penalty in the event the customer terminates the contract for its convenience.

"Take-or-pay" provisions are considered stand ready performance obligations. The Company recognizes "take-or-pay" revenues using a time-based measure of progress, as the Company cannot reasonably estimate if and when the customer will require the Company to provide the services; likewise, the customer benefits as the Company is standing by to provide such services.

Identify and Satisfy the Performance Obligations

The majority of the Company’s performance obligations are satisfied over time. The Company has determined this best represents the transfer of value from its services to the customer as performance by the Company helps to enhance a customer controlled asset (e.g., unplugging a well, enabling a well to produce oil or natural gas). Measurement of the satisfaction of the performance obligation is measured using the output method, which is typically evidenced by a field ticket. A field ticket includes items such as services performed, consumables used, and man hours incurred to complete the job for the customer. Each field ticket is used to invoice customers. Payment terms for invoices issued are in accordance with a master services agreement with each customer, which typically require payment within 30 days of the invoice issuance.

A portion of the Company’s contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved. Examples of variable consideration include the number of hours that will be incurred and the amount of consumables (such as chemicals and proppants) that will be used to complete a job.

In the course of providing services to its customers, the Company may use consumables; for example, in the Company’s fracturing business, chemicals and proppants are used in the fracturing service for the customer. ASC 606 requires that goods or services promised to a customer be identified separately when they are distinct within the contract. However, the consumables are used to complete the service for the customer and are not beneficial to the customer on their own. As such, the consumables are not a separate performance obligation, but instead are combined with the other services within the context of the contract and accounted for as a single performance obligation.

~~Remaining Performance Obligations~~

1112

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Remaining Performance Obligations

The Company invoices its customers for the services provided at contractual rates multiplied by the applicable unit of measurement, including volume of consumables used and hours incurred. In accordance with ASC 606, the Company has elected the “Right to Invoice” practical expedient for all contracts, which allows the Company to invoice its customers in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. With this election, the Company is not required to disclose information about the variable consideration related to its remaining performance obligations. The Company has also elected the practical expedient to expense immediately mobilization costs, as the amortization period would always be less than one year. As a result of electing these practical expedients, there was no material impact on the Company’s current revenue recognition processes and no retrospective adjustments were necessary. For those contracts with a term of more than one year, the Company had approximately ~~$49.0~~$39.4 million of unsatisfied performance obligations as of ~~June~~September 30, 2020, which will be recognized as services are performed over the remaining contractual terms.

The Company’s obligations for refunds as well as the warranties and related obligations stated in its contracts with its customers are standard to the industry and are related to the correction of any defectiveness in the execution of its performance obligations.

Contract Balances

In line with industry practice, the Company bills its customers for its services in arrears, typically when the stage or well is completed or at month-end. The majority of the Company’s jobs are completed in less than 30 days. Furthermore, it is currently not standard practice for the Company to execute contracts with prepayment features. As such, the Company’s contract liabilities are immaterial to its consolidated balance sheets. Payment terms after invoicing are typically 30 days or less.

The Company does not have any significant contract costs to obtain or fulfill contracts with customers; as such, no amounts are recognized on the consolidated balance sheet. Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the condensed consolidated statements of operations and comprehensive income (loss) and net cash provided by operating activities in the condensed consolidated statements of cash flows.

The following is a description of the Company’s core service lines separated by reportable segments from which the Company generates its revenue. For additional detailed information regarding reportable segments, see Note (15) Business Segments.

Revenue from the Company’s Completion Services, Well Construction and Intervention (“WC&I”), and Well Support Services segments are recognized as follows:

Completion Services

The Company provides hydraulic fracturing, wireline and pumpdown services pursuant to contractual arrangements, such as term contracts and pricing agreements. Revenue from these services are earned as services are rendered, which is generally on a per stage or fixed monthly rate. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied over time, the amount to which the Company has the right to invoice has been determined and collectability of amounts subject to invoice is probable. Contract fulfillment costs, such as mobilization costs and shipping and handling costs, are expensed as incurred and are recorded in cost of services in the condensed consolidated statements of operations and comprehensive income (loss). To the extent fulfillment costs are considered separate performance obligations that are billable to the customer, the amounts billed are recorded as revenue in the condensed consolidated statements of operations and comprehensive income (loss).

Once a stage has been completed, a field ticket is created that includes charges for the service performed and the chemicals and proppant consumed during the course of the service. The field ticket may also include charges for the mobilization of the equipment to the location, any additional equipment used on the job and other miscellaneous items. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Well Construction and Intervention

The Company provides cementing services pursuant to contractual arrangements, such as term contracts, or on a spot market basis. Revenue is recognized upon the completion of each performance obligation, which for cementing services, represents the portion of the well cemented: surface casing, intermediate casing or production liner. The performance obligations are satisfied over time. Jobs for these services are typically short term in nature, with most jobs completed in a day. Once the well has been cemented, a field ticket is created that includes charges for the services performed and the consumables used during the course of service. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

The Company provides a range of coiled tubing services primarily used for fracturing plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue is recognized upon completion of each day’s work based upon a completed field ticket. The field ticket includes charges for the services performed and the consumables used during the course of service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates, at times, or pursuant to pricing agreements.

Disaggregation of Revenue

Revenue activities during the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 were as follows:


		Three Months Ended June 30, 2020														Six Months Ended June 30, 2020													Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
		(Thousands of Dollars)														(Thousands of Dollars)													(Thousands of Dollars)						(Thousands of Dollars)
		Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total			Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total
Geography	Geography																	Geography
Northeast	Northeast	$	82,228	$	5,394	$	—	$	87,622	$	159,653	$	13,024	$	—	$	172,677	Northeast	$	58,099	$	3,704	$	0	$	61,803	$	217,752	$	16,728	$	0	$	234,480
Central	Central	3,684		578		—		4,262		80,515		7,478		—		87,993		Central	20,139		0		0		20,139		100,654		7,478		0		108,132
West Texas	West Texas	68,498		10,104		—		78,602		332,997		43,736		8,373		385,106		West Texas	55,416		5,094		0		60,510		388,413		48,830		8,373		445,616
West	West	15,039		1,174		—		16,213		98,726		9,837		49,556		158,119		West	9,278		861		0		10,139		108,004		10,698		49,556		168,258
International	International	9,528		—		—		9,528		19,957		—		—		19,957		International	11,084		0		0		11,084		31,041		0		0		31,041
		$	178,977	$	17,250	$	—	$	196,227	$	691,848	$	74,075	$	57,929	$	823,852		$	154,016	$	9,659	$	0	$	163,675	$	845,864	$	83,734	$	57,929	$	987,527


		Three Months Ended June 30, 2019												Six Months Ended June 30, 2019															Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
		(Thousands of Dollars)												(Thousands of Dollars)															(Thousands of Dollars)						(Thousands of Dollars)
		Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total			Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total
Geography	Geography																	Geography
Northeast	Northeast	$	130,063	$	—	$	—	$	130,063	$	284,929	$	—	$	—	$	284,929	Northeast	$	134,757	$	0	$	0	$	134,757	$	419,686	$	0	$	0	$	419,686
Central	Central	24,876		—		—		24,876		35,991		—		—		35,991		Central	14,844		0		0		14,844		50,835		0		0		50,835
West Texas	West Texas	189,887		102		—		189,989		380,439		3,943		—		384,382		West Texas	213,917		0		0		213,917		594,356		3,943		0		598,299
West	West	75,537		7,268		—		82,805		130,979		13,106		—		144,085		West	71,825		6,610		0		78,435		202,804		19,716		0		222,520

International	International	—		—		—		—		—		—		—		—		International	2,000		0		0		2,000		2,000		0		0		2,000
		$	420,363	$	7,370	$	—	$	427,733	$	832,338	$	17,049	$	—	$	849,387		$	437,343	$	6,610	$	0	$	443,953	$	1,269,681	$	23,659	$	0	$	1,293,340

Contract Balances

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

In line with industry practice, the Company bills its customers for its services in arrears, typically when the stage or well is completed or at month-end. The majority of the Company's jobs are completed in less than 30 days. Furthermore, it is currently not standard practice for the Company to execute contracts with prepayment features. As such, the Company's contract liabilities are immaterial to its unaudited condensed consolidated balance sheets. Payment terms after invoicing are typically 30 days or less.

Property and equipment, inclusive of equipment under capital lease, are generally stated at cost.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 13 months to 40 years. Property and equipment with an estimated useful life less than 13 months are expensed as incurred and are immaterial to the unaudited condensed consolidated financial statements. Management bases the estimate of the useful lives and salvage values of property and equipment on expected utilization, technological change and effectiveness of maintenance programs. When components of an item of property and equipment have different useful lives, they are accounted for separately as major components of property and equipment. Equipment held under finance leases are generally amortized on a straight-line basis over the shorter of the estimated useful life of the underlying asset and the term of the lease.

Long-lived assets are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain property and equipment may not be recoverable. Property and equipment are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of property and equipment is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. The Company's asset groups consist of fracturing services, wireline, cementing, and coiled tubing. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group's major classifications.

During the first quarter of 2020, management determined the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics coupled with the sustained decrease in the Company’s share price were deemed triggering events. As a result of the triggering event, recoverability testing was performed and it was determined that the estimated undiscounted net cash flow for all asset groups was greater than the carrying amount of their related assets and no impairment loss was recorded.

During the ~~second~~third quarter of 2020, the Company assessed and determined ~~there were~~the sustained reductions in commodity prices and continuing market economic disruptions as a triggering event. As a result of the triggering event, recoverability testing was performed; however, no ~~events that would indicate the carrying amount~~impairment of ~~its indefinite-lived assets and~~ long-lived assets ~~may not be recoverable, and as such, no impairment charge~~ was ~~recognized.~~recorded.

Major classifications of property and equipment and their respective useful lives are as follows:


Land			Indefinite life
Building and leasehold improvements			13 months – 40 years
Machinery and equipment			13 months – 10 years
Office furniture, fixtures and equipment			3 years – 5 years

Leasehold improvements are assigned a useful life equal to the term of the related lease. Depreciation methods, useful lives and residual values are reviewed annually.

(d) Leases

Effective January 1, 2019, the Company adopted ASU 2016-02, "Leases (Topic 842)," and subsequently-issued related ASUs, which set out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors, using the modified retrospective method. In connection with the adoption of these standards, the Company implemented internal

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

controls to ensure that the Company's contracts are properly evaluated to determine applicability under ASU 2016-02 and that the Company properly applies ASU 2016-02 in accounting for and reporting on all its qualifying leases.

In accordance with ASC 842, the Company has made the following elections for its lease accounting:

•all short-term leases with term lengths of 12 months or less will not be capitalized; the underlying class of assets to which the Company has applied this expedient is primarily its apartment leases;

•for non-revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one lease component and accounted for under ASC 842; and

•for revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one component and accounted for under ASC 606.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

As part of the Company's adoption of ASU 2016-02, the Company elected to adopt the standard using the modified retrospective transition method and elected the practical expedient transition method package whereby the Company did not:

•reassess whether any expired or existing contracts contained leases;

•reassess the lease classification for any expired or existing leases; and

•reassess initial direct costs for any existing leases.

For additional information, see Note (12) Leases.

(e) Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The Company utilizes interest rate derivatives to manage interest rate risk associated with its floating-rate borrowings. The Company recognizes all derivative instruments as either assets or liabilities on the condensed consolidated balance sheets at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income (loss) until the hedged item affects earnings.

The Company only enters into derivative contracts that it intends to designate as hedges for the variability of cash flows to be received or paid related to a recognized asset or liability (i.e. cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged and how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

In addition, we evaluate the terms of our operating agreements and other contracts, if any, to determine whether they contain embedded components that are required to be bifurcated and accounted for separately as derivative financial instruments.

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Notes to the Unaudited Condensed Consolidated Financial Statements

(f) Stock-based compensation

The Company recognizes compensation expense for restricted stock awards, restricted stock units to be settled in common stock (“RSUs”), performance based RSU award (“PSUs”), and non-qualified stock options (“stock options”) based on the fair value of the awards at the date of grant. The fair value of restricted stock awards and RSUs is determined based on the number of shares or RSUs granted and the closing price of the Company’s common stock on the date of grant. The fair value of stock options is determined by applying the Black-Scholes model to the grant-date market value of the underlying common shares of the Company. The fair value of PSUs with market conditions is determined using a Monte Carlo simulation method. The Company has elected to recognize forfeiture credits for these awards as they are incurred, as this method best reflects actual stock-based compensation expense.

Compensation expense from time-based restricted stock awards, RSUs, PSUs, and stock options is amortized on a straight-line basis over the requisite service period, which is generally the vesting period.

Deferred compensation expense associated with liability-based awards, such as deferred stock awards that are expected to settle with the issuance of a variable number of shares based on a fixed monetary amount at inception, is recognized at the fixed monetary amount at inception and is amortized on a straight-line basis over the requisite service period, which is generally the vesting period. Upon settlement, the holders receive an amount of common stock equal to the fixed monetary amount at inception, based on the closing price of the Company’s stock on the date of settlement.

Tax deductions on the stock-based compensation awards are not realized until the awards are vested or exercised. The Company recognizes deferred tax assets for stock-based compensation awards that will result in future deductions on its income tax returns, based on the amount of tax deduction for stock-based compensation recognized at the statutory tax rate in the jurisdiction in which the Company will receive a tax deduction. If the tax deduction for a stock-based award is greater than the cumulative GAAP compensation expense for that award upon realization of a tax deduction, an excess tax benefit will be recognized and recorded as a

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

favorable impact on the effective tax rate. If the tax deduction for an award is less than the cumulative GAAP compensation expense for that award upon realization of the tax deduction, a tax shortfall will be recognized and recorded as an unfavorable impact on the effective tax rate. Any excess tax benefits or shortfalls will be recorded as discrete, adjustments in the period in which they occur. The cash flows resulting from any excess tax benefit will be classified as financing cash flows in the condensed consolidated statements of cash flows.

The Company provides its employees with the option to settle income tax obligations arising from the vesting of their restricted or deferred stock-based compensation awards by withholding shares equal to such income tax obligations. Shares acquired from employees in connection with the settlement of the employees’ income tax obligations are accounted for as treasury shares that are subsequently retired. Restricted stock awards, RSUs, and PSUs are not considered issued and outstanding for purposes of earnings per share calculations until vested.

For additional information, see Note (10) Stock-Based Compensation.

(3) C&J Merger

On October 31, 2019 (the “C&J Acquisition Date”), the Company completed the C&J Merger in accordance with the terms of the Agreement and Plan of Merger, dated as of June 16, 2019 (the "Merger Agreement"), by and among NexTier, C&J and King Merger Sub Corp., a wholly owned subsidiary of NexTier ("Merger Sub"), pursuant to which Merger Sub merged with and into C&J, with C&J surviving the merger as a wholly owned subsidiary of NexTier, and immediately following the C&J Merger, C&J was merged with and into King Merger Sub II LLC ("LLC Sub"), with LLC Sub continuing as the surviving entity as a wholly-owned subsidiary of NexTier and the successor in interest to C&J.

The C&J Merger was completed for total consideration of approximately $485.1 million, consisting of (i) equity consideration in the form of 105.9 million shares of Keane common stock issued to C&J stockholders with a value of $481.9 million and (ii) replacement share based compensation awards attributable to pre-merger services with a value of $3.2 million.

The Company accounted for the C&J Merger using the acquisition method of accounting. The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition. The majority of the measurements of assets acquired and liabilities assumed, are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired inventory and property and equipment is based on both available market data and a cost approach. The fair value of the financial assets acquired includes trade receivables with a fair value of $312.6 million. The gross amount due under the contracts is $322.8 million, of which $10.2 million ~~is expected~~was determined to be

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

uncollectible. A liability of $40.2 million has been recognized for legal reserves and sales and use tax assessments. As of ~~June~~September 30, 2020, there has been no change in the amount recognized for the liability or any change in the range of outcomes or assumptions used to develop the estimates on October 31, 2019.

The preliminary purchase price has been allocated to the net assets acquired and liabilities assumed based upon their estimated fair values. The estimated fair values of certain assets and liabilities, including accounts receivable, taxes (including uncertain tax positions), and contingencies require significant judgments and estimates. C&J is subject to the legal and regulatory requirements, including but not limited to those related to environmental matters and taxation. The Company has conducted a preliminary assessment of liabilities arising from these matters and has recognized provisional amounts in its initial accounting for the C&J Merger for all identified liabilities in accordance with the requirements of ASC Topic 805. Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, valuation of pre-acquisition contingencies and final tax returns that provide underlying tax basis of assets acquired and liabilities assumed. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized. As a result, the provisional measurements below are preliminary and subject to change during the measurement period and such changes could be material. The Company will finalize the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate. The Company continues to assess the fair values of the assets acquired and liabilities assumed.

The following table summarizes the fair value of the consideration transferred in the C&J Merger and the preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the C&J Merger Date:

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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


Total Purchase Consideration:	Purchase Price Allocation as of ~~June~~September 30, 2020
(Thousands of Dollars)
Equity consideration	$	481,912
Replacement awards attributable to pre-combination services	3,212
Less: Cash acquired	(68,807)
Total purchase consideration	416,317


Trade and accounts receivable	312,620
Inventories	43,142
Prepaid and other current assets	18,512
Property and equipment	311,886
Intangible assets	17,590
Right of use assets	24,318
Other noncurrent assets	4,409
Total identifiable assets acquired	732,477
Accounts payable	43,620
Accrued expenses	236,959

Short term lease liability	7,842
Long term lease liability	15,517
Non-current liabilities	17,156
Total liabilities assumed	321,094
Goodwill	4,934
Total purchase consideration	$	416,317

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(4) Goodwill

Goodwill may be allocated across 2 reporting units: Completion Services and Well Construction and Intervention Services. At the reporting unit level, the Company tests goodwill for impairment on an annual basis as of October 31 of each year, or when events or changes in circumstances, referred to as triggering events, indicate the carrying value of goodwill may not be recoverable and that a potential impairment exists.

Judgment is used in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes and other external events may require more frequent assessments. During the first quarter of 2020, a significant decline in the Company's share price, which resulted in the Company's market capitalization dropping below the book value of equity, as well as reductions in commodity prices driven by the potential impact of the COVID-19 pandemic and global supply and demand dynamics were deemed triggering events that led to a test for goodwill impairment. The Step 1 impairment testing methodologies for the first quarter 2020 are discussed below.

During the ~~second~~third quarter of 2020, the Company assessed and determined ~~there were no events that would indicate~~ the ~~carrying value~~sustained reductions in commodity prices and continuing market economic disruptions as a triggering event. As a result of the triggering event, the Company performed a test for goodwill impairment using the same methodologies used in the first quarter of 2020; however, 0 impairment of goodwill ~~may not be recoverable or that a potential impairment exists.~~was recorded.

Income approach

The income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the Completions and Well Construction and Intervention reporting units, the future cash flows were projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows took into account known market conditions as of March 31, 2020, and management’s anticipated business outlook. A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5%. The future cash flows were discounted using a market-participant

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

risk-adjusted weighted average cost of capital (“WACC”) of 19.9% for the Completions reporting unit and 22.4% for the Well Construction and Intervention reporting unit. These assumptions were derived from both observable and unobservable inputs and combined reflect management’s judgments and assumptions.

Market approach

The market approach impairment testing methodology is based upon the guideline public company method and the guideline transaction method. The application of the guideline public company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparable competitor data, operational multiples were derived for the reporting units weighted based on management’s assessment of reliability. The selected market multiples for the guideline public company method were forward-looking enterprise value to revenue and enterprise value to EBITDA multiples, with multiples ranging from 0.5x to 0.6x for revenues and from 3.3x to 6.2x for EBITDA. The application of the guideline transaction method was based upon valuation multiples derived from actual control transactions for comparable companies. Based on this, valuation multiples are derived from historical data of selected transactions, then evaluated and adjusted, if necessary, based on the strengths and weaknesses of the subject reporting unit relative to each acquired guideline company. The selected market multiples for the guideline transaction method were enterprise value to revenue and enterprise value to book value of invested capital, with multiples ranging from 0.7x to 2.1x for revenues and from 0.6x to 1.3x for book value of invested capital.

The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce the estimated fair value of the reporting unit below its carrying value. Earnings estimates were derived from unobservable inputs that require significant estimates, judgments and assumptions as described in the income approach.

Reconciliation of value and goodwill impairment conclusion

The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the market approach. The concluded fair value for both reporting units consisted of a weighted average, with a 40.0% weighted under the income approach and 60.0% weight under the market approach. Market data in support of the implied control premium were used in this reconciliation to corroborate the estimated reporting unit fair values with the Company's overall market-indicated value. The results of the Step 1 impairment testing for goodwill resulted in the Company recognizing an impairment expense of $32.6 million during the first quarter of 2020, consisting of $32.2 million related to the Completions Services reporting unit and $0.4 million representing the entire balance of goodwill for the Well Construction and Intervention reporting unit.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

The changes in the carrying amount of goodwill from December 31, 2019 to ~~June~~September 30, 2020 were as follows:


	(Thousands of Dollars)
Goodwill as of December 31, 2019	137,458
Disposition of Well Support Services reporting unit	(660)
Impairment expense	(32,600)
Goodwill as of ~~June~~September 30, 2020	$	104,198

(5) Inventories, net

Inventories, net, consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019:


		(Thousands of Dollars)							(Thousands of Dollars)
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Sand, including freight	Sand, including freight	$	5,643	$	4,405	Sand, including freight	$	2,629	$	4,405
Chemicals and consumables	Chemicals and consumables	2,662		11,408		Chemicals and consumables	3,367		11,408
Materials and supplies	Materials and supplies	34,848		45,828		Materials and supplies	24,203		45,828

Total inventory, net	Total inventory, net	$	43,153	$	61,641	Total inventory, net	$	30,199	$	61,641

Inventories are reported net of obsolescence reserves of ~~$5.5~~$5.6 million and $1.8 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively. The Company recognized ~~$2.4~~$0.1 million and ~~$0.1~~$0.2 million of obsolescence expense during the three months ended ~~June~~September 30, 2020 and 2019, respectively. The Company recognized ~~$3.7~~$3.8 million and ~~$0.4~~$0.6 million of obsolescence expense during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. Additionally, during the three and nine months ended September 30, 2020, the Company recognized a$2.7 million write-down in inventory carrying value down to its net realizable value.

(6) Long-Term Debt

Long-term debt at September 30, 2020 and December 31, 2019 consisted of the following:


	(Thousands of Dollars)
	September 30, 2020		December 31, 2019
2018 Term Loan Facility	$	342,125	$	344,750

Less: Unamortized debt discount and debt issuance costs	(6,018)		(7,127)
Total debt, net of unamortized debt discount and debt issuance costs	336,107		337,623
Less: Current portion	(2,263)		(2,311)
Long-term debt, net of unamortized debt discount and debt issuance costs	$	333,844	$	335,312

Below is a summary of the Company’s credit facilities outstanding as of September 30, 2020:


	(Thousands of Dollars)
	2019 ABL Facility		2018 Term Loan Facility
Original facility size	$	450,000	$	350,000
Outstanding balance	$	0	$	342,125
Letters of credit issued	$	28,840	$	0
Available borrowing base commitment	$	65,573	n/a
Interest Rate(1)	LIBOR or base rate plus applicable margin		LIBOR or base rate plus applicable margin
Maturity Date	October 31, 2024		May 25, 2025

(1) London Interbank Offer Rate (“LIBOR”) is subject to a 1.00% floor

1820

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

~~(6) Long-Term Debt~~

~~Long-term debt at June 30, 2020 and December 31, 2019 consisted of the following:~~

(Thousands of Dollars)
June 30,
2020 December 31,
2019
2018 Term Loan Facility $ 343,000 $ 344,750
Less: Unamortized debt discount and debt issuance costs (6,322) (7,127)
Total debt, net of unamortized debt discount and debt issuance costs 336,678 337,623
Less: Current portion (2,303) (2,311)
Long-term debt, net of unamortized debt discount and debt issuance costs $ 334,375 $ 335,312

~~Below is a summary of the Company’s credit facilities outstanding as of June 30, 2020:~~

(Thousands of Dollars)
2019 ABL Facility 2018 Term Loan Facility
Original facility size $ 450,000 $ 350,000
Outstanding balance $ — $ 343,000
Letters of credit issued $ 28,874 $ —
Available borrowing base commitment $ 93,409 n/a
Interest Rate⁽¹⁾
LIBOR or base rate plus applicable margin LIBOR or base rate plus applicable margin
Maturity Date October 31, 2024 May 25, 2025

⁽¹⁾~~London Interbank Offer Rate (“LIBOR”) is subject to a 1.00% floor~~

Maturities of the 2018 Term Loan Facility for the next five years are presented below:


(Thousands of Dollars)	(Thousands of Dollars)			(Thousands of Dollars)
Year-end December 31,	Year-end December 31,			Year-end December 31,
2020	2020	$	1,750	2020	$	875
2021	2021	3,500		2021	3,500
2022	2022	3,500		2022	3,500
2023	2023	3,500		2023	3,500
2024	2024	3,500		2024	3,500
		$	15,750		$	14,875

On October 31, 2019, the Company entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (“2019 ABL Facility”), modifying the Company’s pre-existing asset-based revolving credit facility (“2017 ABL Facility”). During the first quarter of 2020, the Company provided notice to the lenders to borrow a total of $175 million under the 2019 ABL Facility. The interest rates for the $150.0 million LIBOR borrowing and $25.0 million Base Rate borrowing were 2.125% and 3.75%, respectively. During the second quarter of 2020, the Company repaid the $150.0 million LIBOR borrowing and the $25.0 million Base Rate borrowing and did not incur any penalties.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

(7) Significant Risks and Uncertainties

Subsequent to the sale of the Well Support Services segment, the Company operates in 2 reportable segments: Completion Services and Well Construction and Intervention with significant concentration in the Completion Services segment. During the three months ended ~~June~~September 30, 2020 and 2019, sales to Completion Services customers represented ~~91%~~94% and ~~98%~~99% of the Company's consolidated revenue, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, sales to Completion Services customers represented ~~84%~~86% and 98% of the Company's consolidated revenue, respectively.

The Company depends on its customers' willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas onshore in the U.S. This activity is driven by many factors, including current and expected crude oil and natural gas prices. The U.S. energy industry experienced a significant downturn in the second half of 2014 through early 2016, driven primarily by global oversupply and a decline in commodity prices. From early 2016 through late 2018, the U.S. generally experienced some recovery in commodity prices and drilling and completion activity. Over this time frame, the U.S. active rig count increased from a trough of 404 rigs in May 2016 to a peak of 1,083 rigs in December 2018, driving significant demand for the Company's completion services. From December 28, 2018 through December 31, 2019, U.S. active rig count decreased by approximately 26% to 805 rigs, as market conditions tightened and competition within the completions industry increased.

In late 2019 and early 2020, and in response to the oversupply of hydraulic fracturing equipment, an increasing number of horsepower retirements were announced, removing a significant base of equipment from the market. Despite some of these announcements, the oversupply of hydraulic fracturing equipment persisted, resulting in a continuation of highly competitive market conditions into 2020.

In late first quarter of 2020, the industry faced sudden and unprecedented circumstances, including major shocks to both supply and demand. COVID-19 has resulted in significant demand destruction for oil products, driven by a significant slowdown in economic activity throughout the U.S. and abroad.

This resulted in a rapid and significant decline in crude oil prices and an increasingly utilized storage network, limiting distribution outlets and optionality for production and further exacerbating price declines.

U.S. exploration and production companies responded with drastic reductions in budgets and outright completion stoppages. From the end of the fourth quarter of 2019 to the end of the ~~second~~third quarter of 2020, U.S. active rig count decreased by ~~67%~~68%, from 805 to ~~265~~261 rigs.

This backdrop has drastically impacted the demand for U.S. completions services and resulted in increased ~~uncertainty for the remainder of 2020.~~uncertainty. While activity has modestly improved relative to the trough in activity experienced in late May / early June 2020, and supply / demand dynamics are improving, the market remains highly ~~competitive with continued uncertainty, particularly for the fourth quarter~~competitive. The magnitude, cadence and lasting power of ~~2020.~~activity improvement is uncertain and dependent on a range of factors including COVID-19 demand resolution.

For the three months ended ~~June~~September 30, 2020 the ~~Company's~~Company had ~~two~~four customers that individually accounted for 10% of more of the Company's consolidated revenue and collectively represented ~~49%~~59%. For the three months ended ~~June~~September 30, 2019, the

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Company' had four ~~individual~~ customers that individually accounted for 10% or more of the Company's consolidated revenue and collectively represented ~~67%~~59%. For the ~~six~~nine months ended ~~June~~September 30, 2020 the Company's had ~~one~~two customer that individually accounted for ~~13%~~31% of the Company's consolidated revenue. For the ~~six~~nine months ended ~~June~~September 30, 2019, the Company' had four individual customers that accounted for 10% or more of the Company's consolidated revenue and collectively represented 60%.

For the three months ended ~~June 30, 2020, purchases from the Company's top three suppliers represented approximately 5% to 10% of the Company's overall purchases. For the six months ended June~~September 30, 2020, purchases from the Company's top supplier represented approximately 6%7% of the Company's overall purchases. For the nine months ended September 30, 2020, purchases from the Company's top supplier represented approximately 5% of the Company's overall purchases. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, purchases from the Company's top ~~two suppliers~~supplier represented approximately 5% ~~to 10%~~ of the Company's overall purchases.

(8) Derivatives

The Company uses interest-rate-related derivative instruments to manage its variability of cash flows associated with changes in interest rates on its variable-rate debt.

On March 9, 2020, the Company sold its Well Support Services segment to Basic Energy Services, Inc. (“Basic”) for $93.7 million of total proceeds, including $59.4 million in cash, before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close, and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, (“WSS Notes”) previously issued by Basic. On July 29, 2020, the Company agreed to use the escrowed amount in the final settlement of the working capital reconciliation. Under the terms of the agreement, the WSS Notes are accompanied by a make-whole guarantee at par value, which guarantees the payment of $34.4 million to NexTier after the WSS Notes are held to the

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

one-year anniversary of March 9, 2021. The cash equivalent make-whole is issued under a fund guarantee by Ascribe III Investments LLC, a private equity investment firm with approximately $1.0 billion in assets under management. In the event of a Basic restructuring or a credit rating downgrade in conjunction with a change in control prior to the one-year anniversary, the make-whole guarantee accelerates the WSS Notes to par value of $34.4 million. NexTier is entitled to semi-annual interest payments on the WSS Notes based on the 10.75% annual coupon throughout the holding period. The Company identified the make-whole guarantee as an embedded derivative and bifurcated the valuation of the WSS Note and the make-whole guarantee. The Company elected the fair value option for the WSS Notes at the inception of the transaction. The fair value on the date of the transaction for the make-whole derivative and WSS Notes was $12.2 million and $22.2 million, respectively, and resulted in a gain on divestiture of $8.7 million. The fair value of the WSS Notes and the make-whole guarantee are measured at the end of each reporting period. Gains and losses recognized in relation to these instruments ~~will be~~are recognized in net income. The fair value of the WSS Notes and make-whole guarantee are recorded in Other Current Assets. See Note (15) Business Segments for further discussion.

On May 25, 2018, the Company, and certain subsidiaries of the Company as guarantors, entered into a term loan facility (the "2018 Term Loan Facility") with each lender from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent. The 2018 Term Loan Facility has an initial aggregate principal amount of $350.0 million and proceeds were used to repay the Company's pre-existing 2017 term loan facility. The 2018 Term Loan Facility has a variable interest rate based on the London Interbank Offer Rate ("LIBOR"), subject to a 1.0% floor. ~~As a result of this transaction,~~In June 2018, the Company ~~desired~~executed a new off-market interest rate swap effective through March 31, 2025 to hedge ~~additional notional amounts to continue to hedge approximately~~ 50% of its expected LIBOR exposure ~~and~~matching the swap to ~~extend~~ the ~~terms~~1-month LIBOR, 1% floor, of ~~its swaps to align with~~ the 2018 Term Loan ~~Facility.~~

~~On June 22, 2018,~~Facility, and terminated the ~~Company unwound its existing~~pre-existing interest rate ~~swaps and received $3.2 million in proceeds. The Company used~~swaps. After completing all appropriate accounting treatment, including the ~~$3.2~~$3.5 million of ~~proceeds to execute a new off-market~~deferred gains in accumulated other comprehensive loss for the pre-existing interest rate, ~~swap. Under~~ the terms of the new interest rate swap, the Company receives 1-month LIBOR, subject to a 1% floor, and makes payments based on a fixed rate of 2.625%. The new interest rate swap is effective through March 31, 2025 and has a notional amount of $175 million. The new interest rate swap was designated in a new cash flow hedge relationship.

~~The Company discontinued hedge accounting on~~

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the ~~pre-existing interest rate swaps upon termination. At~~Unaudited Condensed Consolidated Financial Statements

the time hedge accounting was discontinued, the exiting interest rate swaps had $3.5 million of deferred gains in accumulated other comprehensive loss. This amount was not reclassified from accumulated other comprehensive loss into earnings, as it remained probable that the originally forecasted transaction will occur. This amount will be recognized into earnings through August 18, 2022, the termination date of the pre-existing interest rate swap.

The following tables present the fair value of the Company's derivative instruments on a gross and net basis as of the periods shown below:

~~(Thousands of Dollars)~~

Derivatives
designated as
hedging
instruments

Derivatives
not
designated as
hedging
instruments

Gross Amounts
of Recognized
Assets and
Liabilities

~~Gross  Amounts  Offset in the  Balance Sheet~~⁽¹⁾

~~Net Amounts  Presented in  the Balance  Sheet~~⁽²⁾

~~As of June 30, 2020:~~

~~Other current asset~~

—

~~27,948~~

—

~~27,948~~

~~Other current liability~~

~~(2,841)~~

—

~~(2,841)~~

—

~~(2,841)~~

~~Other noncurrent liability~~

~~(8,928)~~

—

~~(8,928)~~

—

~~(8,928)~~

~~As of December 31, 2019:~~

~~Other current liability~~

~~(1,729)~~

—

~~(1,729)~~

—

~~(1,729)~~

~~Other noncurrent liability~~

~~(5,559)~~

—

~~(5,559)~~

—

~~(5,559)~~


	(Thousands of Dollars)
	Derivatives designated as hedging instruments		Derivatives not designated as hedging instruments		Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet(2)
As of September 30, 2020:
Other current asset	$	0	$	26,008	$	26,008	$	0	$	26,008

Other current liability	(2,841)		0		(2,841)		0		(2,841)
Other noncurrent liability	(8,653)		0		(8,653)		0		(8,653)
As of December 31, 2019:


Other current liability	$	(1,729)	$	0	$	(1,729)	$	0	$	(1,729)
Other noncurrent liability	(5,559)		0		(5,559)		0		(5,559)

⁽¹⁾Agreements are in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

⁽²⁾There are no amounts subject to an enforceable master netting arrangement that are not netted in these amounts. There are no amounts of related financial collateral received or pledged.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

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


		Three Months Ended June 30,						Six Months Ended June 30,								Three Months Ended September 30,					Nine Months Ended September 30,
		2020		2019		2020		2019		Location		2020		2019			2020		2019			Location
Amount of loss recognized in total other comprehensive loss on derivative	Amount of loss recognized in total other comprehensive loss on derivative	$	(2,654)	$	(3,682)	$	(5,615)	$	(6,544)	OCI	Amount of loss recognized in total other comprehensive loss on derivative	$	(453)	$	(2,120)		$	(6,068)	$	(8,664)		OCI
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	(648)		196		(989)		444		Interest Expense	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	(673)		56			(1,662)		500			Interest Expense

The gain (loss) recognized in other comprehensive loss for the derivative instrument is presented within hedging activities in the unaudited condensed consolidated statements of operations and comprehensive loss.

There were 0 gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness. Based on recorded values as of ~~June~~September 30, 2020, $2.7 million of net losses will be reclassified from accumulated other comprehensive loss into earnings within the next 12 months.

The Company recognized a ~~gain~~loss on the change in fair market value of the WSS Notes and make-whole derivative of ~~$2.3~~$3.8 million and $~~2.4~~1.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, which is recorded within other income (expense) on the Condensed Consolidated Statements of Operations and Comprehensive ~~Loss.~~Income (Loss).

See Note (9) Fair Value Measurements and Financial Information for discussion on fair value measurements related to the Company's derivative instruments.

(9) Fair Value Measurements and Financial Information

The Company discloses the required fair values of financial instruments in its assets and liabilities under the hierarchy guidelines, in accordance with GAAP. As of ~~June~~September 30, 2020, the Company's financial instruments consisted of cash and cash equivalents, accounts receivable, equity security investments, accounts payable, accrued expenses, derivative instruments, long-term debt and lease obligations. As of ~~June~~September 30, 2020 and December 31, 2019, the carrying values of the Company's financial instruments, included in its condensed consolidated balance sheets, approximated or equaled their fair values.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

Recurring Fair Value Measurement

As of ~~June~~September 30, 2020 the Company has 34 financial instruments measured at fair value on a recurring basis which are its interest rate derivative, make-whole derivative, ~~and~~ WSS Notes, see Note (8) Derivatives ~~above.~~above, and equity security investment. The equity security investment is composed primarily of common equity shares in a publicly traded company, acquired at a fair value of $5.3 million. The make-whole derivative, WSS Notes, and the ~~WSS Notes~~equity security investment are presented within other current assets in the condensed consolidated balance sheets. As of December 31, 2019, the Company had 1 financial instrument measured on a recurring basis which was its interest rate derivative.

The fair market value of the financial instruments reflected on the condensed consolidated balance sheets as of ~~June~~September 30, 2020 and December 31, 2019 were determined using industry-standard models that consider various assumptions, including current market and contractual rates for the underlying instrument, time value, implied volatilities, nonperformance risk as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.

The following tables present the placement in the fair value hierarchy of assets and liabilities that were measured at fair value on a recurring basis at ~~June~~September 30, 2020 and December 31, 2019 (in thousands of dollars):


				Fair value measurements at reporting date using													Fair value measurements at reporting date using
		June 30, 2020		Level 1		Level 2		Level 3			September 30, 2020		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Make-whole derivative	Make-whole derivative	$	27,948	$	—	$	27,948	$	—	Make-whole derivative	$	26,008	$	0	$	26,008	$	0
WSS Note	WSS Note	8,847		—		8,847		—		WSS Note	6,940		0		6,940		0
Equity security investment										Equity security investment	4,158		4,158		0		0
Liabilities:	Liabilities:									Liabilities:

Interest rate derivative	Interest rate derivative	$	(11,769)	$	—	$	(11,769)	$	—	Interest rate derivative	$	(11,494)	$	0	$	(11,494)	$	0

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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


				Fair value measurements at reporting date using													Fair value measurements at reporting date using
		December 31, 2019		Level 1		Level 2		Level 3			December 31, 2019		Level 1		Level 2		Level 3

Liabilities:	Liabilities:									Liabilities:

Interest rate derivative	Interest rate derivative	$	(7,288)	$	—	$	(7,288)	$	—	Interest rate derivative	$	(7,288)	$	0	$	(7,288)	$	0

Non-Recurring Fair Value Measurement

The fair values of indefinite-lived assets and long-lived assets are determined with internal cash flow models based on significant unobservable inputs. The Company measures the fair value of its property, plant and equipment using the discounted cash flow method, the fair value of its customer contracts using the multi-period excess earning method and income based "with and without" method, the fair value of its trade names and acquired technology using the "income-based relief-from-royalty" method and the fair value of its non-compete agreement using the "lost income" approach.

Given the unobservable nature of the inputs used in the Company's internal cash flow models, the cash flows models are deemed to use Level 3 inputs.

In the first quarter of 2020, the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics represented triggering events that may indicate that the carrying value of the Company's indefinite-lived assets and long-lived assets may not be recoverable as of March 31, 2020. During the third quarter of 2020, the Company assessed and determined the sustained reductions in commodity prices and continuing market economic disruptions as a triggering event. See Note (4) Goodwill.During the three months ended June 30, 2020, the Company determined there were no events that would indicate the carrying amount of its indefinite-lived assets and long-lived assets may not be recoverable, and as such, no impairment charge was recognized.

Credit Risk

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

The Company's cash balances on deposit with financial institutions totaled ~~$337.1~~$305.2 million and $255.0 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively, which exceeded Federal Deposit Insurance Corporation insured limits. The Company regularly monitors these institutions' financial condition.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

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

The majority of the Company's trade receivables have payment terms of 30 days or less. Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. As of ~~June~~September 30, 2020, trade receivables from ~~two~~three customers individually represented 10% or more and collectively represented ~~35%~~48% of the Company's total accounts receivable. As of December 31, 2019, trade receivables from the Company's top customer individually represented 10% of the Company's total accounts receivable. The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers. The Company has a process in place to collect all receivables within 30 to 60 days of aging. As of ~~June~~September 30, 2020 and December 31, 2019, the Company had ~~$9.1~~$5.1 million, including the increase resulting from the adoption of ASU 2016-13, and $0.7 million in allowance for credit ~~losses.~~losses, respectively. During the third quarter of 2020, the Company recovered $5.3 million of accounts receivable, which resulted in a net credit in bad debt expense of $4.6 million during the three months ended September 30, 2020 and $0.3 million of bad debt expense during the nine months ended September 30, 2020. The Company wrote-off ~~$3.3~~$0.3 million and ~~$4.9~~$0.7 million of bad debts during the three and ~~six~~nine months ended ~~June 30, 2020, respectively. The Company wrote-off $0.3 million and $0.5 million of bad debts during the three and six months ended June~~September 30, 2019, respectively

(10) Stock-Based Compensation

Effective as of October 31, 2019, the Company (i) amended and restated the Keane Group, Inc. Equity and Incentive Award Plan under the name NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (“Equity and Incentive Award Plan”), and (ii) assumed and amended and restated the C&J Energy Services, Inc. 2017 Management Incentive Plan under the name NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan ( “Management Incentive Plan”, and collectively with the Equity and Incentive Award Plan, the “Equity Award Plans”). As part of the C&J Merger, the Company assumed the award agreements outstanding under the Management Incentive Plan on the terms set forth in the Merger agreement.

As of ~~June~~September 30, 2020, the Company has 43 types of stock-based compensation under its Equity Award Plans: (i) ~~deferred stock awards for 3 executive officers, (ii)~~ restricted stock awards issued to independent directors and certain executives and employees, (ii) restricted stock units issued to executive officers and key management employees and (iii) non-qualified stock options issued to executive officers.

The following table summarizes stock-based compensation costs for the three and nine months ended September 30, 2020 and 2019 (in thousands of dollars):


	Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019
Restricted stock awards		$	406	$	238	$	1,192	$	859
Restricted stock time-based unit awards		3,271		4,166		15,985		11,390
Non-qualified stock options		100		670		804		2,025
Restricted stock performance-based unit awards		971		414		3,170		851
Equity-based compensation cost		4,748		5,488		21,151		15,125
Tax Benefit		(1,138)		(1,309)		(5,076)		(3,650)
Equity-based compensation cost, net of tax		$	3,610	$	4,179	$	16,075	$	11,475

2325

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

~~employees, (iii) restricted stock units issued to executive officers and key management employees and (iv) non-qualified stock options issued to executive officers.~~

~~The following table summarizes stock-based compensation costs for the three and six months ended June 30, 2020 and 2019 (in thousands of dollars):~~

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Restricted stock awards $ 361 $ 381 $ 786 $ 621
Restricted stock time-based unit awards 7,554 4,171 12,714 7,224
Non-qualified stock options 468 675 704 1,355
Restricted stock performance-based unit awards 1,140 410 2,199 437
Equity-based compensation cost 9,523 5,637 16,403 9,637
Tax Benefit (2,287) (1,360) (3,938) (2,341)
Equity-based compensation cost, net of tax $ 7,236 $ 4,277 $ 12,465 $ 7,296

Performance-based RSU awards

During the first quarter of 2020, the Company issued 1,033,936 of performance-based RSUs to executive officers under its Equity Award Plans, which were fair valued at $8.5 million using a Monte Carlo simulation method. 50% of the performance-based RSUs vest after two years (the "two-year performance-based RSUs"), while the remaining 50% vest after three years (the "three-year performance-based RSUs"). Each vesting is subject to a payout percentage based on the Company's annualized total stockholder return ranking relative to its total stockholder return peer group achieved during the performance period. The number of shares that may be earned at the end of the vesting period ranges from 50% to 200% of the target award amount, if the threshold performance criteria is met. These performance-based RSUs will be settled in the Company's common stock and are classified as equity awards. The compensation expense associated with these performance-based RSUs will be amortized into earnings on a straight-line basis. As of ~~June~~September 30, 2020, total unamortized compensation cost related to unvested performance-based RSUs was ~~$5.9~~$5.1 million, which the Company expects to recognize over the weighted-average period of ~~2.51~~2.25 years.

During the ~~three months ended June 30,~~second quarter of 2020, the Company issued 405,541 of performance-based RSUs to executive officers under its Equity Award Plans, with an estimated value of $1.2 million, based on a 100% target value. The performance RSUs issued by the Company have service and performance conditions. The number of shares that may be earned at the end of the vesting period ranges from 0% to 150% of the target award amount, if the performance criteria is met. These performance-based RSUs will be settled in the Company's common stock and are classified as equity awards. The compensation expense associated with these performance-based RSUs will be amortized into earnings on a straight-line basis. As of ~~June~~September 30, 2020, total unamortized compensation cost related to unvested performance-based RSUs was ~~$1.1~~$1.0 million, which the Company expects to recognize over the weighted-average period of ~~1.50~~1.25 years.

(11) Earnings per Share

Basic income or (loss) per share is based on the weighted average number of common shares outstanding during the period. Diluted income or (loss) per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect, such as stock awards from the Equity Awards Plans, had been issued. Anti-dilutive securities represent potentially dilutive securities which are excluded from the computation of diluted income or (loss) per share as their impact would be anti-dilutive.

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
Numerator:	Numerator:									Numerator:
Net loss		$	(112,488)	$	(4,981)	$	(184,244)	$	(26,787)
Net income (loss)										Net income (loss)	$	(102,433)	$	3,558	$	(286,677)	$	(23,229)

Denominator:	Denominator:									Denominator:
Basic weighted-average common shares outstanding⁽¹⁾	Basic weighted-average common shares outstanding⁽¹⁾	213,760		104,837		213,301		104,631		Basic weighted-average common shares outstanding(1)	214,251		104,899		213,620		104,721
Dilutive effect of restricted stock awards granted to Board of Directors	Dilutive effect of restricted stock awards granted to Board of Directors	147		29		134		35		Dilutive effect of restricted stock awards granted to Board of Directors	195		33		139		30
Dilutive effect of time-based restricted stock awards granted under the Equity Plan	Dilutive effect of time-based restricted stock awards granted under the Equity Plan	—		15		727		158		Dilutive effect of time-based restricted stock awards granted under the Equity Plan	14		0		16		2
Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	936		327		859		327		Dilutive effect of performance-based restricted stock awards granted under the Equity Plan	1,221		327		981		327

Diluted weighted-average common shares outstanding⁽¹⁾	Diluted weighted-average common shares outstanding⁽¹⁾	214,843		105,208		215,021		105,151		Diluted weighted-average common shares outstanding(1)	215,681		105,259		214,756		105,080

⁽¹⁾ As a result of the net loss incurred by the Company for the three and ~~six~~nine months ended ~~June~~September 30, 2020, ~~and 2019,~~ the calculation of diluted net loss per share gives no consideration to the potentially anti-dilutive securities shown in the above reconciliation, and as such is the same as basic net loss per share.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(12) Leases

The Company has operating leases for certain of its corporate offices, field shops, apartments, warehouses, rail cars, frac pumps, trailers, tractors and certain other equipment. The Company also has both operating and finance leases for its light duty vehicles.

The Company's leases have variable payments with annual escalations that are based on the proportion by which the consumer price index ("CPI") for all urban consumers increased over the CPI index for the prior comparative year. The Company's leases have remaining lease terms of less than 1 year to 14 years, some of which include extension and termination option. None of these extension and termination options were used to determine the Company's right-of-use assets ("ROU assets") and lease liabilities, as the Company has not determined it is probable that it will exercise any of these options. None of the Company's leases have residual value guarantees.

Weighted average remaining lease terms are as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Operating leases

4.59 years

5.00 years

Operating leases

4.59 years

5.14 years

Finance leases

2.20 years

2.58 years

Finance leases

1.98 years

2.51 years

Weighted average discount rate on the Company's lease liabilities are as follows:

Six Months Ended June 30,
2020 2019
Operating leases 8.87% 6.57%
Finance leases 5.87% 5.79%

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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


	Nine Months Ended September 30,
	2020	2019
Operating leases	8.79%	6.62%
Finance leases	5.87%	5.75%

Maturities of the Company's lease liabilities as of ~~June~~September 30, 2020, per ASU 2016-02, were as follows:


		(Thousands of Dollars)							(Thousands of Dollars)
Year ending December 31,	Year ending December 31,	Operating leases		Finance leases		Year ending December 31,	Operating leases		Finance leases
2020	2020	$	11,607	$	754	2020	6,250		$	590
2021	2021	20,783		1,374		2021	21,043		1,375
2022	2022	10,249		766		2022	10,230		766
2023	2023	6,994		125		2023	6,952		125��
2024	2024	2,171		—		2024	2,171		0
Thereafter	Thereafter	10,921		—		Thereafter	10,921		0
Total undiscounted remaining minimum lease payments	Total undiscounted remaining minimum lease payments	62,725		3,019		Total undiscounted remaining minimum lease payments	57,567		2,856
Less imputed interest	Less imputed interest	(10,066)		(177)		Less imputed interest	(9,013)		(140)
Total discounted remaining minimum lease payments	Total discounted remaining minimum lease payments	$	52,659	$	2,842	Total discounted remaining minimum lease payments	$	48,554	$	2,716

During the second quarter of 2020, the Company terminated the majority of its light duty vehicles resulting in a write-off of $4.1 million of ROU assets and lease liabilities. The company also wrote-off $0.7 million of ROU assets and lease liabilities as a result of lease contract negotiations. The Company also wrote-off a total of $2.8 million of ROU assets related to the abandonment of facilities, identified as synergies as a result of the Merger.

As of ~~June~~September 30, 2020, the Company does not have additional operating and finance leases that have not yet commenced, nor did the Company have any lease transactions with any of its related parties.

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(13) Commitments and Contingencies

As of ~~June~~September 30, 2020 and December 31, 2019, the Company had ~~$3.0~~$2.9 million and $9.0 million of deposits on equipment including deposits acquired through the C&J Merger, respectively. Outstanding purchase commitments on equipment were ~~$22.9~~$23.7 million and $64.0 million, as of ~~June~~September 30, 2020 and December 31, 2019, respectively.

In the normal course of operations, the Company enters into certain long-term raw material supply agreements for the supply of proppant to be used in hydraulic fracturing. As part of these agreements, the Company is subject to minimum tonnage purchase requirements and may pay penalties in the event of any shortfall. The Company purchased $6.5 million and $32.6 million amounts of proppant under its take-or-pay agreements during the three months ended June 30, 2020 and 2019, respectively. The Company purchased $17.7 million and $50.7 million amounts of proppant under its take-or-pay agreements during the six months ended June 30, 2020 and 2019, respectively

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

Aggregate minimum commitments under long-term raw material supply contracts for the next five years as of ~~June~~September 30, 2020 are listed below:


		(Thousands of Dollars)			(Thousands of Dollars)
2020	2020	$	9,184	2020	$	1,011
2021	2021	16,755		2021	19,455
2022	2022	9,300		2022	14,730
2023	2023	2,400		2023	4,400
2024	2024	—		2024	0
		$	37,639		$	39,596

Litigation

From time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions, as is typical of the industry. These claims include, but are not limited to, contract claims, environmental claims, employment related claims, claims alleging injury or claims related to operational issues. The Company's assessment of the likely outcome of litigation matters is based on its judgment of a number of factors, including experience with similar matters, past history, precedents, relevant financial information and other evidence and facts specific to the matter. In accordance with GAAP, the Company accrues for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on the Company's best estimate of the expected liability. The Company may increase or decrease its legal accruals in the future, on a matter-by-matter basis, to account for developments in such matters. Notwithstanding the uncertainty as to the final outcome and based upon the information currently available to it, the Company does not currently believe these matters in aggregate will have a material adverse effect on its financial position or results of operations.

Environmental

The Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. The Company cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. The Company continues to monitor the status of these laws and regulations. Currently, the Company has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management does recognize that by the very nature of the Company's business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company's liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or through indemnification.

Regulatory Audits

Prior to the consummation of the C&J Merger, the Company and C&J had been notified by certain state taxing authorities that these taxing authorities would be conducting routine sales and use tax audits of certain wholly owned operating subsidiaries of the Company for tax periods ranging from January 2011 through December 2019. The Company has recorded estimates of potential assessments for each audit totaling in the aggregate approximately $32.6 million. For one audit, in particular, the Company disagrees with many aspects of the state’s assessment and has begun to contest the state’s position through administrative procedures. The Company will defend its position vigorously through all available procedures including litigation, if necessary. In addition, this reserve does not take into account the potential for refund claims relating to such periods that are also pending disposition.

(14) Related Party Transactions

Cerberus Operations and Advisory Company and Cerberus Capital Management, L.P., affiliates of the Company's principal equity holder, provide certain consulting services to the Company. The Company paid ~~$1.2~~$0.3 million and ~~$1.1~~$1.0 million during the three months ended ~~June~~September 30, 2020 and 2019, respectively, for these services. The Company paid ~~$1.8~~$2.1 million and ~~$1.5~~$2.5 million during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

In connection with the Company's research and development initiatives, the Company has engaged in transactions with its equity-method investee. In the first quarter of 2020, the Company had enough evidence to believe that it would not be able to recover its $1.7 million investment in its equity-method investee completely impaired it. The impairment is recorded in impairment expense in the condensed and consolidated statement of operations and comprehensive income (loss).

~~NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES~~

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

(15) Business Segments

In accordance with Accounting Standard Codification (“ASC”) No. 280, Segment Reporting (“ASC 280”), the Company routinely evaluates whether its separate segments have changed. This determination is made based on the following factors: (1) the Company’s chief operating decision maker (“CODM”) is currently managing each operating segment as a separate business and evaluating the performance of each segment and making resource allocation decisions distinctly and expects to do so for the foreseeable future, and (2) discrete financial information for each operating segment is available.

In 2019, due to the transformative nature of the C&J Merger, the CODM changed the way in which the Company is managed, including the level at which to make performance evaluation and resource allocation decisions. Discrete financial information was created to provide the segment information necessary for the CODM to manage the Company under the revised operating segment structure. On March 9, 2020, the Company announced it had completed the divestiture of its Well Support Services segment. As a result of the changes to operating segments, the Company revised its reportable segments subsequent to the completion of the C&J Merger and Well Support Services segment divestiture. For the period from after the C&J merger and prior to the WSS divestiture, the Company’s revised reportable segments were: (i) Completion Services, (ii) Well Construction and Intervention (“WC&I”) and (iii) Well Support Services. Subsequent to the WSS divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services. This segment structure reflects the financial information and reports used by the Company’s management, specifically including its CODM, to make decisions regarding the Company’s business, including performance evaluation and resource allocation decisions. As a result of the revised reportable segment structure subsequent to the C&J merger, the Company has restated the corresponding items of segment information for all periods presented.

The following is a description of each reportable segment:

Completion Services

The Company’s Completion Services segment consists of the following businesses and service lines: (1) fracturing services; (2) wireline and pumpdown services; and (3) completion support services, which includes the Company's research and technology department.

Well Construction and Intervention Services

The Company’s WC&I Services segment consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.

Well Support Services

The Company’s Well Support Services segment consisted of the following businesses and service lines: (1) rig services; (2) fluids management services; and (3) other specialty well site services. On March 9, 2020, the Company completed the divestiture of its Well Support Services segment for $93.7 million of total proceeds, including $59.4 million in cash, before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close, and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, ("WSS Notes") previously issued by Basic. This resulted in a gain on divestiture of $8.7 million. The gain is recorded within (Gain) Loss on Disposal of Assets on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Income per share for the three months ended March 31, 2020 attributable to the divested Well Support Services segment was less than 0. On July 29, 2020, the Company ~~agreed to use~~received the escrowed cash amount in ~~the~~ final settlement ~~of the~~for working capital reconciliation.

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Notes to the Unaudited Condensed Consolidated Financial Statements

The following tables present financial information with respect to the Company’s segments. Corporate and Other represents costs not directly associated with a segment, such as interest expense, income taxes and corporate overhead. Corporate assets include cash, deferred financing costs, derivatives and entity-level machinery equipment.


		(Thousands of Dollars)																(Thousands of Dollars)
			Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
			2020		2019		2020		2019			2020		2019		2020		2019
Operations by business segment	Operations by business segment										Operations by business segment
Revenue:	Revenue:										Revenue:
Completion Services	Completion Services		$	178,977	$	420,363	$	691,848	$	832,338	Completion Services	$	154,016	$	437,343	$	845,864	$	1,269,681
WC&I	WC&I		17,250		7,370		74,075		17,049		WC&I	9,659		6,610		83,734		23,659
Well Support Services	Well Support Services		—		—		57,929		—		Well Support Services	0		0		57,929		0
Total revenue	Total revenue		$	196,227	$	427,733	$	823,852	$	849,387	Total revenue	$	163,675	$	443,953	$	987,527	$	1,293,340
Adjusted gross profit (loss):	Adjusted gross profit (loss):										Adjusted gross profit (loss):
Completion Services⁽¹⁾	Completion Services⁽¹⁾		$	31,655	$	102,131	$	129,531	$	187,435	Completion Services(1)	$	15,145	$	109,314	$	144,676	$	296,749
WC&I⁽¹⁾	WC&I⁽¹⁾		812		1,099		9,596		(197)		WC&I(1)	(785)		1,201		8,811		1,004
Well Support Services⁽¹⁾	Well Support Services⁽¹⁾		—		—		12,338		—		Well Support Services(1)	0		0		12,338		0
Total adjusted gross profit	Total adjusted gross profit		$	32,467	$	103,230	$	151,465	$	187,238	Total adjusted gross profit	$	14,360	$	110,515	$	165,825	$	297,753
Operating income (loss):	Operating income (loss):										Operating income (loss):
Completion Services	Completion Services		$	(46,918)	$	36,857	$	(60,020)	$	54,824	Completion Services	$	(50,929)	$	43,505	$	(110,949)	$	98,331
WC&I	WC&I		(6,230)		468		(3,219)		(1,702)		WC&I	(4,023)		699		(7,242)		(1,003)
Well Support Services	Well Support Services		—		—		10,940		—		Well Support Services	0		0		10,940		0
Corporate and Other	Corporate and Other		(55,755)		(36,222)		(122,457)		(67,904)		Corporate and Other	(37,472)		(36,306)		(159,929)		(104,211)
Total operating income (loss)	Total operating income (loss)		$	(108,903)	$	1,103	$	(174,756)	$	(14,782)	Total operating income (loss)	$	(92,424)	$	7,898	$	(267,180)	$	(6,884)
Depreciation and amortization:	Depreciation and amortization:										Depreciation and amortization:
Completion Services	Completion Services		$	65,888	$	65,672	$	141,428	$	132,419	Completion Services	$	64,282	$	64,735	$	205,710	$	197,152
WC&I	WC&I		4,818		631		9,091		1,504		WC&I	4,591		502		13,682		2,007
Well Support Services	Well Support Services		—		—		1,527		—		Well Support Services	0		0		1,527		0
Corporate and Other	Corporate and Other		4,554		3,583		9,035		7,439		Corporate and Other	4,697		3,471		13,732		10,910
Total depreciation and amortization	Total depreciation and amortization		$	75,260	$	69,886	$	161,081	$	141,362	Total depreciation and amortization	$	73,570	$	68,708	$	234,651	$	210,069
Net income (loss):	Net income (loss):										Net income (loss):
Completion Services	Completion Services		$	(46,918)	$	36,856	$	(60,020)	$	54,823	Completion Services	$	(50,929)	$	43,505	$	(110,949)	$	98,331
WC&I	WC&I		(6,230)		468		(3,219)		(1,702)		WC&I	(4,023)		699		(7,242)		(1,003)
Well Support Services	Well Support Services		—		—		10,940		—		Well Support Services	0		0		10,940		0
Corporate and Other	Corporate and Other		(59,340)		(42,305)		(131,945)		(79,908)		Corporate and Other	(47,481)		(40,646)		(179,426)		(120,557)
Total net income (loss)	Total net income (loss)		$	(112,488)	$	(4,981)	$	(184,244)	$	(26,787)	Total net income (loss)	$	(102,433)	$	3,558	$	(286,677)	$	(23,229)

⁽¹⁾ Adjusted gross profit (loss) at the segment level is not considered to be a non-GAAP financial measure as it is the Company's segment measure of profitability and is required to be disclosed under GAAP pursuant to ASC 280. Adjusted gross profit (loss) is defined as revenue less cost of services, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance.

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Notes to the Unaudited Condensed Consolidated Financial Statements


		Three Months Ended June 30, 2020														Six Months Ended June 30, 2020															Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
		Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total			Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total
Revenue	Revenue	$	178,977	$	17,250	$	—	$	196,227	$	691,848	$	74,075	$	57,929	$	823,852	Revenue	$	154,016	$	9,659	$	0	$	163,675	$	845,864	$	83,734	$	57,929	$	987,527
Cost of Services	Cost of Services	159,149		19,622		—		178,771		576,531		68,875		45,591		690,997		Cost of Services	139,477		10,589		0		150,066		716,008		79,464		45,591		841,063
Gross profit excluding depreciation and amortization	Gross profit excluding depreciation and amortization	19,828		(2,372)		—		17,456		115,317		5,200		12,338		132,855		Gross profit excluding depreciation and amortization	14,539		(930)		0		13,609		129,856		4,270		12,338		146,464
Management adjustments associated with cost of services⁽¹⁾	Management adjustments associated with cost of services⁽¹⁾	11,827		3,184		—		15,011		14,214		4,396		—		18,610		Management adjustments associated with cost of services(1)	606		145		0		751		14,820		4,541		0		19,361
Adjusted gross profit	Adjusted gross profit	$	31,655	$	812	$	—	$	32,467	$	129,531	$	9,596	$	12,338	$	151,465	Adjusted gross profit	$	15,145	$	(785)	$	0	$	14,360	$	144,676	$	8,811	$	12,338	$	165,825

⁽¹⁾ Adjustments relate to market-driven severance and restructuring costs incurred as a result of significant declines in crude oil prices resulting from demand destruction from the COVID-19 pandemic and global oversupply.


		Three Months Ended June 30, 2019														Six Months Ended June 30, 2019															Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
		Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total			Completion Services		WC&I		Well Support Services		Total		Completion Services		WC&I		Well Support Services		Total
Revenue	Revenue	$	420,363	$	7,370	$	—	$	427,733	$	832,338	$	17,049	$	—	$	849,387	Revenue	$	437,343	$	6,610	$	0	$	443,953	$	1,269,681	$	23,659	$	0	$	1,293,340
Cost of Services	Cost of Services	318,232		6,271		—		324,503		644,903		17,246		—		662,149		Cost of Services	328,029		5,409		0		333,438		972,932		22,655		0		995,587
Gross profit excluding depreciation and amortization	Gross profit excluding depreciation and amortization	102,131		1,099		—		103,230		187,435		(197)		—		187,238		Gross profit excluding depreciation and amortization	109,314		1,201		0		110,515		296,749		1,004		0		297,753
Management adjustments associated with cost of services	Management adjustments associated with cost of services	—		—		—		—		—		—		—		—		Management adjustments associated with cost of services	0		0		0		0		0		0		0		0
Adjusted gross profit	Adjusted gross profit	$	102,131	$	1,099	$	—	$	103,230	$	187,435	$	(197)	$	—	$	187,238	Adjusted gross profit	$	109,314	$	1,201	$	0	$	110,515	$	296,749	$	1,004	$	0	$	297,753


		(Thousands of Dollars)							(Thousands of Dollars)
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Total assets by segment:	Total assets by segment:					Total assets by segment:
Completion Services	Completion Services	$	760,660	$	1,091,965	Completion Services	$	708,770	$	1,091,965
WC&I	WC&I	74,160		106,493		WC&I	63,782		106,493
Well Support Services	Well Support Services	—		109,792		Well Support Services	0		109,792
Corporate and Other	Corporate and Other	474,766		356,657		Corporate and Other	438,626		356,657
Total assets	Total assets	$	1,309,586	$	1,664,907	Total assets	$	1,211,178	$	1,664,907
Goodwill by segment:	Goodwill by segment:					Goodwill by segment:
Completion Services	Completion Services	$	104,198	$	136,425	Completion Services	$	104,198	$	136,425
WC&I	WC&I	—		372		WC&I	0		372
Well Support Services	Well Support Services	—		661		Well Support Services	0		661
Corporate and Other	Corporate and Other	—		—		Corporate and Other	0		0
Total goodwill	Total goodwill	$	104,198	$	137,458	Total goodwill	$	104,198	$	137,458

3031

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(16) New Accounting Pronouncements

(a) Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," 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 and lease receivables. In November 2018, the FASB issued ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses," which clarified that receivables arising from operating leases are not within the scope of ASC 326-20, "Financial Instruments-Credit Losses-Measured at Amortized Cost," and should be accounted for in accordance with ASC 842. In April 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which clarified certain amendments related to ASU 2016-13. In May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief," which clarifies certain aspects of the amendments in ASU 2016-13. In November 2019, the FASB issued ASU No. 2019-10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) and ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments—Credit Losses."

The Company adopted these new standards effective January 1, 2020 and analyzed its trade accounts receivable based on a risk assessed portfolio approach, incorporating current and forecasted economic conditions as of January 1, 2020 which resulted in the increase of $1.5 million of allowances for expected credit losses related to our accounts receivable through a cumulative effect offset to retained earnings.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This standard removed, modified and added disclosure requirements from ASC 820. ASU 2018-13 is effective for annual periods beginning after December 15, 2019. The Company adopted this standard on January 1, 2020 and there was no impact to its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." The amendments in this standard aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this standard on January 1, 2020 and there was no impact on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606." The amendments in this standard clarified that certain transactions should be accounted for under ASC 606 if one of the collaborative arrangement participants meets the definition of a customer and that transactions between collaborative participants not directly related to sales to third parties should not be recognized as revenue under Topic 606, if one of the collaborative arrangement participants is not a customer. The Company adopted this standard on January 1, 2020 and there was no impact on its consolidated financial statements.

In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update)". The Company adopted this standard on January 1, 2020 and there was no impact on its consolidated financial statements.

In August 2019, the FASB issued ASU 2019-08, "Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements - Share-Based Consideration Payable to a Customer". ASU 2019-08 expands the scope of ASC Topic 718 to provide guidance for share-based payment awards granted to a customer in conjunction with selling goods or services accounted for under Topic 606. The Company adopted this standard on January 1, 2020 and there was no impact on its consolidated financial statements, as the Company has only issued shares to employees or nonemployee directors and has previously recognized its nonemployee directors share-based payments in line with its recognition of share-based payments to employees, using the grant-date fair value of the equity instruments issued, amortized over the requisite service period.

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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

In March 2020, the FASB issued ASU 2020-03, "Codification Improvements to Financial Instruments," which improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The Company early adopted this new accounting guidance, and there was no additional impact on its consolidated financial statements.

(b) Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06 "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06"). ASU 2020-06 simplifies the guidance on the issuer's accounting for convertible debt instruments and convertible preferred stock. The Company does not expect ASU 2020-06 to have any impact on the Company's consolidated financial statements.

In June 2020, the FASB issued ASU ~~2020-07,~~2020-05, "Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities," which provides a limited deferral of the effective dates of "Revenue from Contracts with Customers (ASC 606)" and "Leases (ASC 842)" to provide immediate, near-term relief for certain entities for whom these updates are either currently effective or imminently effective. The Company does not expect ASU ~~2020-07~~2020-05 to have any impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This standard is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)," which clarifies the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. This standard is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This standard is effective for fiscal years beginning after December 15, 2021 and the adoption is not expected to have any impact on the Company's consolidated financial statements.

In December 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not expect ASU 2019-12 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

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

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related condensed footnotes included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, 2019.

3233

ORGANIZATIONAL OVERVIEW

NexTier Oilfield Solutions Inc. is an industry-leading U.S. land oilfield focused service company, with a diverse set of well completion and production services across a variety of active and demanding basins. We have a history of growth through acquisition, including the October 31, 2019 ~~merger transaction with~~ C&J ~~Energy Services, Inc. (“C&J Merger”).~~Merger. After this business combination, we were organized into three reportable segments:

•Completion Services, which consists of the following businesses and services lines: (1) hydraulic fracturing; (2) wireline and pumpdown services; and (3) completion support services, which includes our innovation centers and activities.

•Well Construction and Intervention Services, which consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.

•Well Support Services, which consists of the following businesses and service lines: (1) rig services; (2) fluids management; and (3) other special well site services.

Our Well Support Services segment was divested in a transaction that closed on March 9, 2020. It focused on post-completion activities at the well site, including rig services, such as workover and plug and abandonment, fluids management services, and other specialty well site services. Subsequent to the Well Support Services divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services.

This history impacts the comparability of our operational results from year to year. Additional information on these transactions can be found in Note (15) Business Segments.

OPERATIONAL OVERVIEW

We provide our services in several of the most active basins in the United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford and the Bakken/Rockies.

Total North America rig count during the ~~second~~third quarter of 2020 averaged ~~392~~254 rigs, reflecting a decrease of approximately ~~50%~~35% as compared to the second quarter 2020 average of 392 rigs and 68% as compared to the first quarter 2020 average of 785 rigs, driven by impacts associated with the COVID-19 demand destruction and the associated significant decline in crude oil prices. North America rig count exited the third quarter of 2020 at 261 rigs, reflecting a 2% decline as compared to the exit rate for the second quarter of 2020 ~~at 265 rigs, reflecting~~and a 64% decline as compared to the exit rate for the first quarter of 2020.

The decrease in North America rig count reflects E&P companies significantly reducing 2020 capital budgets in response to increasing macro uncertainty related to the COVID-19 pandemic and significantly lower crude oil prices. We estimate the market reached a trough of 50 or fewer fully-utilized completions crews in late-May or early-June 2020. Beginning in June 2020, conditions began to improve, as shut-in production was brought back on-line. Producers continue to contemplate drilling and completions plans for the remainder of 2020 and into 2021. Rig and completions in the fourth quarter of 2020 are expected to remain highly uncertain and dependent on macro conditions, including commodity prices, resolution of the COVID-19 pandemic, seasonality and potential lasting changes that a prolonged pandemic may have on supply and demand worldwide.

The Company's natural gas focused position in the Marcellus / Utica outperformed the total North American rig count during the ~~second~~third quarter of 2020 as compared to the first quarter of 2020, where the average rig count decline was ~~20%~~36% as compared to the total North America average rig count decline of ~~50%.~~

The decrease in North America rig count accelerated in the second quarter of 2020 as E&P companies significantly reduced 2020 capital budgets in response to increasing macro uncertainty related to the COVID-19 pandemic and significantly lower crude oil prices. Industry experts expect rig and completions in the second half off 2020 to remain highly uncertain and dependent on macro conditions, including commodity prices, resolution of the COVID-19 pandemic, and production decisions from OPEC+68%.

Our financial performance is significantly affected by rig and well count in North America, as well as oil and natural gas prices. Activity within our business segments is significantly ~~impacted~~influenced by spending on upstream exploration, development and production programs by our customers. Also ~~impacting~~driving our activity is the status of the global economy, which ~~impacts~~is a major factor on oil and natural gas demand. Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, global oil supply, the world economy, the availability of credit, government regulation and global stability, which together drive worldwide drilling activity. We believe that the safety, quality and efficiency of our service execution and our alignment with customers who recognize the value that we provide are central to our efforts to support utilization and grow our business.

Historically, our utilization levels have been highly correlated to U.S. onshore spending by our customers, which is heavily driven by the price of oil and natural gas. Generally, as capital spending by our customers increases, drilling, completion and production activity also increases, resulting in increased demand for our services, and therefore more days or hours worked (as the case may be). Conversely, when drilling, completion and production activity levels decline due to lower spending by our customers, we generally provide fewer services, which results in fewer days or hours worked (as the case may be). Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operating margins can fluctuate

widely depending on supply and demand at a given point in the cycle. Additionally, during periods of decreased spending by our customers, we may be required to discount our rates or provide other pricing concessions to remain competitive and support deployed equipment utilization, which negatively impacts our revenue and operating margins. During periods of pricing weakness

for our services, we may not be able to reduce our costs accordingly, and our ability to achieve any cost reductions from our suppliers typically lags behind the decline in pricing for our services, which could further adversely affect our results. Furthermore, when demand for our services increases following a period of low demand, our ability to capitalize on such increased demand may be delayed while we reengage and redeploy equipment and crews that have been idled during a downturn. The mix of customers that we are working for, as well as limited periods of exposure to the spot market, also impacts our deployed equipment utilization.

The dual supply and demand shock that emerged late in the first quarter of 2020 had immediate negative impacts on commodity prices and market conditions, which has translated into lower completions activity. Activity in April 2020 remained relatively resilient, as producers worked through their immediate plans and programs, followed by a precipitous decline in activity in May and June 2020. We estimate the market reached a trough of 50 or fewer fully-utilized completions crews in late-May or early-June 2020. As a result, beginning in the final weeks of the quarter, we experienced a sharp decline in our deployed fracturing fleets due to declining activity by our customers.

Beginning in June 2020 and into the third quarter of 2020, conditions have shown signs of improvement, as shut-in production is being brought back on-line, while producers contemplate drilling and completions plans for the second half of 2020 and beyond. Crude oil prices have improved from their lows, with the price for a barrel of WTI crude oil at approximately $40 as of ~~June 29,~~September 30, 2020, but remain below threshold levels necessary for driving significant rig activity growth. Against this backdrop, pricing for our services remains highly competitive, as excess ~~industry~~frac capacity pursues limited new opportunities. We continued to see pricing pressure in the third quarter and do not expect pricing to return to normal levels in the near future. See Note (7) Significant Risks and Uncertainties of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" and Part II "Item 1A. Risk Factors."

Following the dramatic pace and magnitude of this year’s downturn, there has been recent attrition through consolidation and other events that have made some progress in realigning frac supply with demand. However, even though well completion activity levels are improving, frac supply remains in excess of demand. In light of this, we intend to reduce our marketed fleet over time to a level that we believe is more in-line with long-term demand and that is that is more in-line with our strategy to harvest the investments made in our traditional fleets, while growing the portion of our fleet that offers better pricing fundamentals and a lower emissions profile. We intend to reduce our marketed hydraulic fracturing fleet by approximately 400,000 horsepower and utilize the major components over time as part of our maintenance inventory. Once consumed, we intend to cut up the frames and permanently remove them from our marketed base of equipment.

We believe that our customers have begun to look beyond the core requirements of efficiency and safety to prefer suppliers that can provided integrated solutions that align the incentives of operators and service providers. NexTier has been developing and building its digital program for some time, and we have now applied our digital platform to all of our operating fleets. We believe our digital program, along with continued investment in diesel substitution (such as duel fuel capabilities), are important to achieving emissions reductions initiatives, both for us and our customers.

However, at wellsites where there is not a reliable nearby gas supply, the full benefit and value of dual fuel or other lower emissions technologies, may not able to be fully realized. To address this situation, we are developing an integrated natural gas treatment and delivery solution designed to provide gas sourcing, compression, transport, decompression, treatment, and related services for our fracing operations. This integrated strategy will provide our customers with a streamlined approach to driving more sustainable, cost effective operations at the wellsite.

We recognize that the COVID-19 pandemic and responses thereto also impact our suppliers. To date, we have generally been able to obtain the equipment, parts and supplies necessary to support our operations on a timely basis. While we believe we will be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers, this may not always be the case. In addition, certain materials for which we do not currently have long-term supply agreements could experience shortages and significant price increases in the future.

Response to the COVID-19 Pandemic and Oil Price Collapse

In response to all of these developments, we have implemented measures to focus on the safety of our partners, employees, and the communities in which we operate, while at the same time seeking to mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

Taking Care of our Partners and Employees. The safety of our partners and employees continues to be a primary focus. As the COVID-19 pandemic has developed, we have taken numerous steps to help customers and employees comply with current health-expert recommendations, including limitation of social functions and non-essential travel, hygiene protocol education, telecommuting as job responsibilities permit, protocols and procedures focused on establishing a safe work environment, protocol for employees who test positive for COVID-19, and a response and mitigation monitoring process.

Expense Management. With the reduction in revenue, we ~~have~~ implemented ~~and will continue to implement,~~ cost saving initiatives, including (i) adjusting active frac fleet count to align with changing demand; (ii) consolidating our footprint; (iii) delaying non-essential maintenance projects; (iv) reducing or suspending other discretionary spending; (v) restructuring our organization in a way that maximizes our managerial talent with a streamlined team; (vi) reductions of salaries or cash retainers, as applicable, by 20% for our directors and executive officers; and (vi) reducing employee-related costs, including furloughing personnel, ~~salary~~pay reductions by 15-20%, and

moderating headcount. While many of these cost savings initiatives continue, with the increase in activity, we have been able to put most of our furloughed personnel back to work, and we have begun rolling out a portion of pay reinstatement, with the focus on field level personnel (no salary or fee reinstatement for executive officers or directors).

Balance Sheet, Cash Flow and Liquidity Management. We have taken actions to increase liquidity and strengthen our financial position. As a result of these actions, our cash and cash equivalents balance as of ~~June~~September 30, 2020 was ~~$337.1~~$305.2 million. For additional information on our liquidity and capital resources, see "Liquidity and Capital Resources."

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, provides temporary relief for payment of certain payroll taxes. Payroll taxes generally would have been deductible for income tax purposes in the same tax year that they were expensed for book purposes in accordance with applicable U.S. federal tax rules and regulations. Should a company defer payment of its payroll taxes as allowable under the CARES Act, such accrued payroll taxes may not be deductible until the tax year in which they are actually paid. The temporary relief for payment of certain payroll taxes did not have an impact to the ~~six~~nine months ended ~~June~~September 30, 2020. We do not currently expect the CARES Act to have a material impact on our financial results, including on our annual estimated effective tax rate or on our liquidity. We will continue to monitor and assess the impact the CARES Act and similar legislation in other countries may have on our business and financial results.

3436

RESULTS OF OPERATIONS IN 2020 COMPARED TO 2019

The following is a comparison of our results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020 compared to the three and ~~six~~nine months ended ~~June~~September 30, 2019. Results for the ~~six~~nine months ended ~~June~~September 30, 2020 include the financial and operating results of Well Support Services segment through March 8, 2020.

Three Months Ended ~~June~~September 30, 2020 Compared with Three Months Ended ~~June~~September 30, 2019


		Three Months Ended June 30,																							Three Months Ended September 30,
(Thousands of Dollars)	(Thousands of Dollars)					As a % of Revenue						Variance						(Thousands of Dollars)					As a % of Revenue				Variance
Description	Description	2020		2019		2020		2019		$		%		Description	2020		2019		2020		2019		$		%
Completion Services	Completion Services	$	178,977	$	420,363	91	%	98	%	$	(241,386)	(57	%)	Completion Services	$	154,016	$	437,343	94	%	99	%	$	(283,327)	(65	%)
WC&I	WC&I	17,250		7,370		9	%	2	%	9,880		134	%	WC&I	9,659		6,610		6	%	1	%	3,049		46	%

Revenue	Revenue	196,227		427,733		100	%	100	%	(231,506)		(54	%)	Revenue	163,675		443,953		100	%	100	%	(280,278)		(63	%)
Completion Services	Completion Services	159,149		318,232		81	%	74	%	(159,083)		(50	%)	Completion Services	139,477		328,029		85	%	74	%	(188,552)		(57	%)
WC&I	WC&I	19,622		6,271		10	%	1	%	13,351		213	%	WC&I	10,589		5,409		6	%	1	%	5,180		96	%

Costs of services	Costs of services	178,771		324,503		91	%	76	%	(145,732)		(45	%)	Costs of services	150,066		333,438		92	%	75	%	(183,372)		(55	%)
Depreciation and amortization	Depreciation and amortization	75,260		69,886		38	%	16	%	5,374		8	%	Depreciation and amortization	73,570		68,708		45	%	15	%	4,862		7	%
Selling, general and administrative expenses	Selling, general and administrative expenses	38,024		26,463		19	%	6	%	11,561		44	%	Selling, general and administrative expenses	25,521		26,579		16	%	6	%	(1,058)		(4	%)
Merger and integration	Merger and integration	14,028		6,108		7	%	1	%	7,920		130	%	Merger and integration	7,288		6,651		4	%	1	%	637		10	%
Gain on disposal of assets		(953)		(330)		0	%	0	%	(623)		189	%

Operating loss		(108,903)		1,103		(55	%)	0	%	(110,006)		(9,973	%)
(Gain) loss on disposal of assets														(Gain) loss on disposal of assets	(3,027)		679		(2	%)	0	%	(3,706)		(546	%)
Impairment														Impairment	2,681		—		2	%	0	%	2,681		0	%
Operating income (loss)														Operating income (loss)	(92,424)		7,898		(56	%)	2	%	(100,322)		(1,270	%)
Other income (expense), net	Other income (expense), net	2,259		(43)		1	%	0	%	2,302		(5,353	%)	Other income (expense), net	(3,978)		55		(2	%)	0	%	(4,033)		(7,333	%)
Interest expense	Interest expense	(5,353)		(5,477)		(3	%)	(1	%)	124		2	%	Interest expense	(5,524)		(5,215)		(3	%)	(1	%)	(309)		(6	%)
Total other income (expense)	Total other income (expense)	(3,094)		(5,520)		(2	%)	(1	%)	2,426		(44	%)	Total other income (expense)	(9,502)		(5,160)		(6	%)	(1	%)	(4,342)		84	%
Income tax expense	Income tax expense	(491)		(564)		0	%	0	%	73		(13	%)	Income tax expense	(507)		820		0	%	0	%	(1,327)		(162	%)
Net loss		$	(112,488)	$	(4,981)	(57	%)	(1	%)	$	(107,507)	2,158	%
Net income (loss)														Net income (loss)	$	(102,433)	$	3,558	(63	%)	1	%	$	(105,991)	(2,979	%)

Revenue: Total revenue is comprised of revenue from our Completion Services and Well Construction and Intervention Services segments. Revenue during the three months ended ~~June~~September 30, 2020 decreased by ~~$231.5~~$280.3 million, or ~~54%~~63%, to ~~$196.2~~$163.7 million from ~~$427.7~~$444.0 million during the three months ended ~~June~~September 30, 2019. This change in revenue by reportable segment is discussed below.

Completion Services: Revenue for Completion Services during the three months ended ~~June~~September 30, 2020 decreased by ~~$241.4~~$283.3 million, or ~~57%~~65%, to ~~$179.0~~$154.0 million from ~~$420.4~~$437.3 million during the three months ended ~~June~~September 30, ~~2019~~2019.. The segment revenue decrease is primarily attributable to a ~~49%~~52% decrease in fully utilized fracturing fleets, decreases in our wireline and pump down services activity, and ~~pricing concessions as a result of significantly~~price reductions resulting from lower ~~global oil~~commodity prices and the COVID-19 pandemic. Fracturing Services decreased to 11 fully utilized fleets during the three months ended ~~June~~September 30, 2020 from 22 fully utilized fleets during the three months ended ~~June~~September 30, 2019. ~~Strong operational performance by all service lines resulted in higher~~Improved stage efficiencies toand strong operational execution partially offset ~~price reductions.~~lower net pricing.

Well Construction and Intervention Services: Well Construction and Intervention Services segment revenue increased ~~$9.9~~$3.0 million, or ~~134%~~46%, to ~~$19.6~~$9.7 million during the three months ended September 30, 2020 from $6.6 million during the three months ended ~~June 30, 2020 from $7.4 million during the three months ended June~~September 30, 2019. The increase in revenue is mostly attributable to the C&J Merger. The WC&I segment was also negatively impacted by the challenging market conditions and COVID-19 pandemic in the ~~second~~third quarter of year 2020.

Cost of Services: Cost of services during the three months ended ~~June~~September 30, 2020 decreased by ~~$145.7~~$183.4 million, or ~~45%~~55%, to ~~$178.8~~$150.1 million from ~~$324.5~~$333.4 million during the three months ended ~~June~~September 30, 2019. This change was driven by several factors, partially attributable to the C&J Merger, but primarily due to significantly less activity and utilization, as explained in Revenue above, ~~combined~~

~~with~~partially offset by increased market driven ~~severance and~~ facility closure costs to reduce ~~personnel and~~ facility costs to be in line with reduced ~~customer~~market activity. ~~Cost saving strategies were quickly implemented as a result of the sharp decline in activity, partially offsetting the market adjustment costs.~~

Equipment Utilization: Depreciation and amortization expense increased ~~$5.4~~$4.9 million, or 8%7%, to ~~$75.3~~$73.6 million during the three months ended ~~June~~September 30, 2020 from ~~$69.9~~$68.7 million, during the three months ended ~~June~~September 30, 2019. The increase in depreciation and amortization was primarily related to the assets acquired during the C&J Merger. Gain (loss) on disposal of assets had a variance of ~~$0.6~~$3.7 million, or ~~189%~~546%, to a gain of ~~$1.0~~$3.0 million during the three months ended September 30, 2020 from a loss of $0.7 million during the three months ended ~~June 30, 2020 from a gain of $0.3 million during the three months ended June~~September 30, 2019.

Selling, general and administrative expense: Selling, general and administrative (“SG&A”) expense, which represents costs associated with managing and supporting our operations, ~~increased~~decreased by ~~$11.6~~$1.1 million, or ~~44%~~4%, to ~~$38.0~~$25.5 million during the three months ended ~~June~~September 30, 2020 from ~~$26.5~~$26.6 million during the three months ended ~~June~~September 30, 2019, primarily due to the C&J Merger.

Merger and integration expense: Merger and integration expense increased by ~~$7.9~~$0.6 million, or ~~130%~~10%, to ~~$14.0~~$7.3 million during the three months ended ~~June~~September 30, 2020 from ~~$6.1~~$6.7 million during the three months ended ~~June~~September 30, 2019, due to the Merger, which was announced late in the second quarter of 2019 and consisted primarily of professional services, severance costs, and facility consolidation.

Effective tax rate: Our effective tax rate on continuing operations for the three months ended ~~June~~September 30, 2020 was ~~0.4%~~0.5% for $0.5 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to foreign withholding taxes and change in valuation allowance. After considering all available positive and negative evidence, we determined that it is unlikely that we will utilize our net deferred tax assets in the foreseeable future and continued to maintain a full valuation allowance.

3638

~~Six~~Nine Months Ended ~~June~~September 30, 2020 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2019


		Six Months Ended June 30,																							Nine Months Ended September 30,
(Thousands of Dollars)	(Thousands of Dollars)					As a % of Revenue						Variance						(Thousands of Dollars)					As a % of Revenue				Variance
Description	Description	2020		2019		2020		2019		$		%		Description	2020		2019		2020		2019		$		%
Completion Services	Completion Services	$	691,848	$	832,338	84	%	98	%	$	(140,490)	(17	%)	Completion Services	$	845,864	$	1,269,681	86	%	98	%	$	(423,817)	(33	%)
WC&I	WC&I	74,075		17,049		9	%	2	%	57,026		334	%	WC&I	83,734		23,659		8	%	2	%	60,075		254	%
Well Support Services	Well Support Services	57,929		—		7	%	0	%	57,929		0	%	Well Support Services	57,929		—		6	%	0	%	57,929		0	%
Revenue	Revenue	823,852		849,387		100	%	100	%	(25,535)		(3	%)	Revenue	987,527		1,293,340		100	%	100	%	(305,813)		(24	%)
Completion Services	Completion Services	576,531		644,903		70	%	76	%	(68,372)		(11	%)	Completion Services	716,008		972,932		73	%	75	%	(256,924)		(26	%)
WC&I	WC&I	68,875		17,246		8	%	2	%	51,629		299	%	WC&I	79,464		22,655		8	%	2	%	56,809		251	%
Well Support Services	Well Support Services	45,591		—		6	%	0	%	45,591		0	%	Well Support Services	45,591		—		5	%	0	%	45,591		0	%
Costs of services	Costs of services	690,997		662,149		84	%	78	%	28,848		4	%	Costs of services	841,063		995,587		85	%	77	%	(154,524)		(16	%)
Depreciation and amortization	Depreciation and amortization	161,081		141,362		20	%	17	%	19,719		14	%	Depreciation and amortization	234,651		210,069		24	%	16	%	24,582		12	%
Selling, general and administrative expenses	Selling, general and administrative expenses	94,908		54,399		12	%	6	%	40,509		74	%	Selling, general and administrative expenses	120,429		80,978		12	%	6	%	39,451		49	%
Merger and integration	Merger and integration	26,210		6,108		3	%	1	%	20,102		329	%	Merger and integration	33,498		12,759		3	%	1	%	20,739		163	%
(Gain) Loss on disposal of assets	(Gain) Loss on disposal of assets	(8,915)		151		(1	%)	0	%	(9,066)		(6,004	%)	(Gain) Loss on disposal of assets	(11,942)		831		(1	%)	0	%	(12,773)		(1,537	%)
Impairment	Impairment	34,327		—		4	%	0	%	34,327		0	%	Impairment	37,008		—		4	%	0	%	37,008		0	%
Operating loss	Operating loss	(174,756)		(14,782)		(21	%)	(2	%)	(159,974)		1,082	%	Operating loss	(267,180)		(6,884)		(27	%)	(1	%)	(260,296)		3,781	%
Other income, net	Other income, net	2,675		405		0	%	0	%	2,270		560	%	Other income, net	(1,303)		460		0	%	0	%	(1,763)		(383	%)
Interest expense	Interest expense	(11,419)		(10,872)		(1	%)	(1	%)	(547)		(5	%)	Interest expense	(16,943)		(16,087)		(2	%)	(1	%)	(856)		(5	%)
Total other income (expense)	Total other income (expense)	(8,744)		(10,467)		(1	%)	(1	%)	1,723		(16	%)	Total other income (expense)	(18,246)		(15,627)		(2	%)	(1	%)	(2,619)		17	%
Income tax expense	Income tax expense	(744)		(1,538)		0	%	0	%	794		(52	%)	Income tax expense	(1,251)		(718)		0	%	0	%	(533)		74	%
Net loss	Net loss	$	(184,244)	$	(26,787)	(22	%)	(3	%)	$	(157,457)	588	%	Net loss	$	(286,677)	$	(23,229)	(29	%)	(2	%)	$	(263,448)	1,134	%

Revenue: Total revenue is comprised of revenue from our Completion Services, Well Construction and Intervention Services and Well Support Services segments. Revenue during the ~~six~~nine months ended ~~June~~September 30, 2020 decreased by ~~$25.5~~$305.8 million, or 3%24%, to ~~$823.9~~$987.5 million from ~~$849.4 million~~$1.3 billion during the ~~three~~nine months ended ~~June~~September 30, 2019. This change in revenue by reportable segment is discussed below.

Completion Services: Revenue for Completion Services during the ~~six~~nine months ended ~~June~~September 30, 2020 decreased by ~~$140.5~~$423.8 million, or ~~17%~~33%, to ~~$691.8~~$845.9 million from ~~$832.3 million~~$1.3 billion during the ~~six~~nine months ended ~~June~~September 30, 2019. The segment revenue decrease was primarily attributable to a ~~14%~~25% decrease in our average number of fully utilized fracturing fleets, combined with decreases in our wireline and pump down services. Fracturing Services decreased to 1916 fully utilized fleets during the ~~six~~nine months ended ~~June~~September 30, 2020 from 22 fully utilized fleets during the ~~six~~nine months ended ~~June~~September 30, 2019. The decreases in all service lines were driven by less activity and price reductions as a result of the continuing impacts from the unforeseen and sudden decline in commodity prices as well as the COVID-19 pandemic that began to impact operations in late first quarter of 2020. Price reductions were slightly offset by efficiency gains delivered at the well site.

Well Construction and Intervention Services: Well Construction and Intervention Services segment revenue increased ~~$57.0~~$60.1 million, or ~~334%~~254%, to ~~$74.1~~$83.7 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$17.0~~$23.7 million during the ~~six~~nine months ended ~~June~~September 30, 2019. This increase in revenue is primarily attributable to the C&J Merger, partially offset by less utilization and price reductions given as a result of continuing negative impacts from unprecedented declines in the market and the COVID-19 pandemic that began to impact operations in ~~the~~late first ~~half of the year~~quarter 2020.

Well Support Services: Well Support Services segment revenue was $57.9 million during the ~~six~~nine months ended ~~June~~September 30, 2020, with no comparison for the same period in 2019.

Cost of Services: Cost of services during the ~~six~~nine months ended ~~June~~September 30, 2020 ~~increased~~decreased by ~~$28.8~~$154.5 million, or 4%16%, to ~~$691.0~~$841.1 million from ~~$662.1~~$995.6 million during the ~~six~~nine months ended ~~June~~September 30, 2019. This change was driven by several factors including decreased overall activity and fleet utilization, as discussed above under Revenue, combined with increased market driven severance and facility closure costs resulting from ~~the deteriorated~~a suppressed market environment and COVID-19 pandemic ~~impact.~~impact that began to impact operations in late first quarter of 2020.

Equipment Utilization: Depreciation and amortization expense increased ~~$19.7~~$24.6 million, or ~~14%~~12%, to ~~$161.1~~$234.7 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$141.4~~$210.1 million, during the ~~six~~nine months ended ~~June~~September 30, 2019. The change in depreciation and amortization was primarily related to the assets acquired during the C&J Merger. (Gain) loss on disposal of assets had a variance of ~~$9.1~~$12.8 million, or ~~6,004%~~1,537%, to a gain of ~~$8.9~~$11.9 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from a loss of ~~$0.2~~$0.8 million during the ~~six~~nine months ended ~~June~~September 30, 2019.

Selling, general and administrative expense: Selling, general and administrative (“SG&A”) expense, which represents costs associated with managing and supporting our operations, increased by ~~$40.5~~$39.5 million, or ~~74%~~49%, to ~~$94.9~~$120.4 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$54.4~~$81.0 million during the ~~six~~nine months ended ~~June~~September 30, 2019 as a result of the Merger.

Merger and integration expense: Merger and integration expense increased by ~~$20.1~~$20.7 million, or ~~329%~~163%, to ~~$26.2~~$33.5 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$6.1~~$12.8 million during the ~~six~~nine months ended ~~June~~September 30, 2019, due to the C&J Merger, which was announced late in the second quarter of 2019 and which consisted primarily of professional services, severance costs, and facility consolidation.

Effective tax rate: Our effective tax rate on continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2020 was 0.4% for ~~$0.7~~$1.3 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to foreign withholding taxes and change in valuation allowance. After considering all available positive and negative evidence, we determined that it is unlikely that we will utilize our net deferred tax assets in the foreseeable future and continued to maintain a full valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity represents a company's ability to adjust its future cash flows to meet its needs and opportunities, both expected and unexpected.


		(Thousands of Dollars)							(Thousands of Dollars)
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Cash		$	337,147	$	255,015
Cash and cash equivalents						Cash and cash equivalents	$	305,212	$	255,015
Debt, net of unamortized deferred financing costs and unamortized debt discount	Debt, net of unamortized deferred financing costs and unamortized debt discount	336,678		337,623		Debt, net of unamortized deferred financing costs and unamortized debt discount	336,107		337,623


		(Thousands of Dollars)							(Thousands of Dollars)
		Six Months Ended June 30,							Nine Months Ended September 30,
		2020		2019			2020		2019
Net cash provided by operating activities	Net cash provided by operating activities	$	110,414	$	141,925	Net cash provided by operating activities	$	82,676	$	225,579
Net cash used in investing activities	Net cash used in investing activities	(22,319)		(97,342)		Net cash used in investing activities	(25,309)		(138,805)
Net cash used in financing activities	Net cash used in financing activities	(6,716)		(7,668)		Net cash used in financing activities	(7,766)		(9,926)

Significant sources and uses of cash during the ~~six~~nine months ended ~~June~~September 30, 2020

Sources of cash:

•Operating activities:

–Net cash generated by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2020 of ~~$110.4~~$82.7 million was a result of our thoroughness in receiving collections from our customers and controlling costs

Uses of cash:

•Investing activities:

–Net cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2020 of ~~$22.3~~$25.3 million, consisting primarily of capital expenditures, net of the cash received as part of the sale of the Wells Support Services business segment, .

•Financing activities:

–Cash used to repay our debt facilities, excluding leases and interest, during the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$176.8~~$2.6 million.

–In the first quarter of 2020, the Company drew down $175 million ~~including the repayment of the cash provided by~~on the 2019 ABL Facility (defined below). This borrowing was to provide the Company better flexibility while managing its cash position during the ongoing COVID-19 pandemic. The borrowing on the 2019 ABL Facility was repaid in full during the ~~first~~second quarter of ~~2020 for the amount of $175 million.~~2020.

–Cash used to repay our finance leases during the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$3.0~~$3.1 million.

–Shares repurchased and retired related to payroll tax withholdings on our share-based compensation for the ~~six~~nine months ended ~~June~~September 30, 2020 totaled ~~$1.9~~$2.0 million.

Significant sources and uses of cash during the ~~six~~nine months ended ~~June~~September 30, 2019

Sources of cash:

•Operating activities:

–Net cash generated by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2019 of ~~$141.9~~$225.6 million was the result of ~~the utilization of 94% of our deployed fleets and~~ our thoroughness in receiving collections from our customers and controlling costs. We continue to focus on maintaining operational and spend efficiencies resulting in positive working capital and net operating cash to support our capital expenditures and other investing activities.

Uses of cash:

•Investing activities:

–Net cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2019 of ~~$97.3~~$138.8 million, consisting primarily of capital expenditures. This activity primarily related to our Completion Services segment.

•Financing activities:

–Cash used to repay our debt facilities, excluding leases and interest, during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$1.7~~$2.6 million.

–Cash used to repay our finance leases during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$2.6~~$3.8 million.

–Shares repurchased and retired related to stock-based compensation during the nine months ended September 30, 2019 totaled 3.5 million.

Future sources and use of cash

The Company is ~~taking actions to significantly reduce and refine~~refining its 2020 total capital expenditures, which it now expects to total between ~~$100~~$120 million and ~~$120~~$130 million, subject to market conditions, driven by strategic innovation investments and maintenance capital expenditures, and reflecting a reduction of more than 50% at the midpoint versus its previous outlook of $210 million. Capital expenditures are weighted to the first half of 2020, driven by the delivery of certain strategic innovation investments, with second half of 2020 spending mainly driven by maintenance.expenditures. The Company is idling a portion of its previously active hydraulic fracturing fleet in-line with the developing market outlook while ~~narrowing~~focusing its innovation and technology investments to focus ~~primarily~~ on ~~those projects that directly reduce capital expenditures or operating costs.~~strategic investments discussed in the Operational Overview section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Debt service for the year ended December 31, 2020 is projected to be ~~$29.9~~$26.6 million, of which $2.0 million is related to finance ~~leases.~~leases, excluding buyout payments. We anticipate our debt service will be funded by cash flows from operations. Our leverage ratio, as calculated pursuant to the terms of our debt agreement, is ~~0.13x~~0.40x for the twelve rolling months ended ~~June~~September 30, 2020. We anticipate our debt service will be funded by cash flows from operations.

Other factors affecting liquidity

Financial position in current market. As of ~~June~~September 30, 2020, we had ~~$337.1~~$305.2 million of cash and a total of ~~$93.4~~$65.6 million available under our revolving credit facility. As of ~~June~~September 30, 2020, we were compliant with all financial and non-financial covenants in our bank agreements. Furthermore, our debt maturities extend over a long period of time. Despite the current uncertainty in global markets resulting from the COVID-19 pandemic, we currently believe that our cash on hand, cash flow generated from operations and availability under our revolving credit facility will provide sufficient liquidity for at least the next 12 months, including for capital expenditures, debt service, working capital investments, and contingent liabilities.

Guarantee agreements. In the normal course of business, we have agreements with financial institutions as part of our 2019 ABL Facility under which ~~$28.9~~$28.8 million of letters of credit were outstanding as of ~~June~~September 30, 2020.

Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. The majority of our trade receivables have payment terms of 30 days. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers' cash flow from operations and their access to the credit markets. The economic impact of the COVID-19 pandemic and the resulting actions taken to control the further spread of the virus may exacerbate these delays or failures to pay in the future. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have an adverse effect on our liquidity, consolidated results of operations and consolidated financial condition.

Purchase Commitments. In the normal course of business, we enter into various contractual obligations that impact or could impact our liquidity. The Company has a number of purchase commitments that primarily relate to our agreements with vendors for sand purchases, other commodities/services and deposits on equipment. The purchase commitments to these vendors include obligations to purchase a minimum amount of product/services; provided that, if the minimum purchase requirement is not met, the shortfall at the end of the applicable period is settled in cash or, in some cases, carried forward to the next period. We also have a variety of operating lease obligations related to our real estate, rail cars, and light duty vehicles. In light of the COVID-19 pandemic and its direct impact on exploration/completion activity, for certain of these commitments, we have addressed or are working with our vendors to address our to near-term obligations. See Part II, "Item 1A. Risk Factors." for additional information on the risks related to these purchase commitments.

Principal Debt Agreements

2019 ABL Facility

We, and certain of our other subsidiaries as additional borrowers and guarantors, are parties to a Second Amended and Restated Asset-Based Revolving Credit Agreement (the “2019 ABL Facility”) that matures on October 31, 2024. This facility provides for, among other things, a $450.0 million revolving credit facility (with a $100.0 million subfacility for letters of credit), subject to a borrowing base in accordance with the terms agreed between us and the lenders. As ~~a response to the uncertainty around the COVID-19 pandemic and in order to increase our cash position and preserve financial flexibility, we provided notice to the lenders to borrow a total~~ of $175 million under the 2019 ABL Facility. The draw comprised of a $150.0 million LIBOR borrowing and a $25.0 million Base Rate borrowing, respectively. During the second quarter of 2020, as we gained comfort in our liquidity position through working capital management, we repaid both the $150.0 million LIBOR borrowing and the $25.0 million Base Rate borrowing and did not incur any penalties. As of JuneSeptember 30, 2020, we had no outstanding principal amounts under the 2019 ABL Facility.

The 2019 ABL Facility is subject to customary fees, guarantees of subsidiaries, events of default, restrictions and covenants, including certain restricted payments and a consolidated fixed charge coverage ratio test. As of ~~June~~September 30, 2020, the Company was in compliance with all covenants.

2018 Term Loan Facility

We are party to a term loan facility and certain of our subsidiaries are guarantors (the "2018 Term Loan Facility") that matures on May 25, 2025. As of ~~June~~September 30, 2020, there was ~~$343.0~~$342.1 million principal amount of term loans outstanding (the "2018

Term Loans") at an interest rate of LIBOR plus an applicable margin, which is currently at 3.50%. The 2018 Term Loan Facility is subject to customary fees, guarantees of subsidiaries, events of default, restrictions and covenants, including certain restricted payments. As of ~~June~~September 30, 2020, the Company was in compliance with all covenants.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet financing arrangements, transactions or special purpose entities.

Significant Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements and related notes to the unaudited condensed consolidated financial statements included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

A critical accounting estimate is one that requires a high level of subjective judgment by management and has a material impact to our financial condition or results of operations. This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q, as well as our consolidated and combined financial statements and related notes included in Part II, "Item 8. Financial Statements and Supplementary Data" and Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2019.

We believe the following is a new critical accounting policy used in the preparation of our unaudited condensed consolidated financial statements.

(a) Credit Loss Standard

The Company adopted this new ~~standards~~standard effective January 1, 2020 and analyzed its trade accounts receivable based on a risk assessed portfolio approach, incorporating current and forecasted economic conditions as of January 1, 2020 which resulted in the increase of $1.5 million of allowances for expected credit losses related to our accounts receivable through a cumulative effect offset to retained earnings.

(b) New Accounting Pronouncements

For discussion on the potential impact of new accounting pronouncements issued but not yet adopted, see Note (16) New Accounting Pronouncements of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

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Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk. As of ~~June~~September 30, 2020, we had variable-rate debt outstanding, the exposure to which we manage with our interest-rate-related derivative instrument. We held no derivative instruments that increased our exposure to market risks for foreign currency rates, commodity prices or other market price risks. We are exposed to changes in interest rates on our floating rate borrowings under our 2019 ABL Facility and 2018 Term Loan. As of ~~June~~September 30, 2020, we had ~~$343.0~~$342.1 million aggregate principal amount outstanding under the 2018 Term Loan. The impact of a 1.0% increase in interest rates under the terms of the 2018 Term Loan would have a $0.9 million and ~~$1.7~~$2.6 million impact on interest expense for the three and ~~six~~nine months ending ~~June~~September 30, 2020, respectively.

Commodity Price Risk. Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our stimulation services such as proppant, chemicals and guar. Our fuel costs consist primarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials (particularly guar and proppant) in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Depending on market conditions, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We generally do not engage in commodity price hedging activities. However, we have purchase commitments with certain vendors to supply a majority of the proppant used in our operations. Some of these agreements are take-or-pay agreements with minimum purchase obligations. As a result of future decreases in the market price of proppants, we could be required to purchase goods and pay prices in excess of market prices at the time of purchase. For further quantitative disclosure about our market risk related to our variable-rate debt, interest-rate-related derivative instrument and purchase commitments, see Part I, "Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations".

Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. As a result of the COVID-19 pandemic, we have seen an increase in collection time related to trade receivables. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts. For certain additional information regarding credit risk related to derivative instruments we hold, see Note (8) Derivatives of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

COVID-19 Risks and Uncertainties. Refer to Item 1A. Risk Factors within this Quarterly Report on Form 10-Q to locate additional information related to current and potential risks of the COVID-19 pandemic on our business and financial performance.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (the "SEC") rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

Effective January 1, 2020, we adopted ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which resulted in the increase of $1.5 million of allowances for expected credit losses related to our accounts receivable through a cumulative effect offset to retained earnings. In connection with the adoption of this standard, we implemented internal controls to ensure we properly evaluate our financial assets for applicability.

On October 31, 2019, we completed the C&J Merger, which resulted in changes to internal controls over the consolidation and reporting of our financial results. In the second quarter of 2020, the Company completed the implementation of a single ERP system. We also continue to further simplify, harmonize and automate processes and migrate data, including from ancillary systems. In connection with the implementation, harmonization, and migrations and the resulting business process changes, we have reviewed and continue to execute, where appropriate, the re-design and documentation of our internal control over financial reporting processes to maintain effective controls over our financial reporting. These transitions have not materially affected, and we do not expect them to materially affect, our internal controls over financial reporting. The condensed consolidated financial statements presented in this Form 10-Q include information obtained from separate accounting systems.

Except as described above, there were no other changes to our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2020 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

As is typical of the industry, the Company is, from time to time and in the ordinary course of business, involved in routine litigation or subject to disputes or claims related to its business activities. It is the Company's opinion that although the amount of liability with respect to certain of these known legal proceedings and claims cannot be ascertained at this time, any resulting liability will not have a material adverse effect individually or in the aggregate on the Company's financial condition, cash flows or results of operations; however, there can be no assurance as to the ultimate outcome of these matters.

Litigation Related to the Merger

In connection with the Merger Agreement and the transactions contemplated thereby the following complaints have been filed: (i) one putative class action complaint was filed in the United States District Court for the District of Colorado by a purported C&J stockholder on behalf of himself and all other C&J stockholders (excluding defendants and related or affiliated persons) against C&J and members of the C&J board of directors, (ii) two putative class action complaints were filed in the United States District Court for the District of Delaware by a purported C&J stockholder on behalf of himself and all other C&J stockholders (excluding defendants and related or affiliated persons) against C&J, members of the C&J board of directors, the Company and Merger Sub, (iii) one putative class action complaint was filed in the United States District Court for the Southern District of Texas by a purported stockholder of the Company on behalf of himself and all other stockholders of the Company (excluding defendants and related or affiliated persons) against the Company and members of its board of directors, and (iv) one putative class action was filed in the Delaware Chancery Court by a purported stockholder of the Company on behalf of himself and all other stockholders of the Company (excluding defendants and related or affiliated persons) against members of the Company's board of directors. The five stockholder actions are captioned as follows: Palumbos v. C&J Energy Services, Inc., et al., Case No. 1:19-cv-02386 (D. Colo.), Wuollet v. C&J Energy Services, Inc., et al., Case No. 1:19-cv-01411 (D. Del.), Plumley v. C&J Energy Services, Inc., et al., Case No. 1:19-cv-01446 (D. Del.), Bushansky v. Keane Group, Inc. et al., Case No. 4:19-cb-02924 (S.D. Tex) and Woods v. Keane Group, Inc., et al., Case No. 2019-0590 (Del. Chan.) (collectively, the "Stockholder Actions").

In general, the Stockholder Actions allege that the defendants violated Sections 14(a) and 20(a) of the Exchange Act, or aided and abetted in such alleged violations, because the Registration Statement on Form S-4 filed with the SEC on July 16, 2019 in connection with the proposed C&J Merger allegedly omitted or misstated material ~~information.The~~information. The Stockholder Actions seek, among other things, injunctive relief preventing the consummation of the C&J Merger, unspecified damages and attorneys' fees. C&J, the Company and the other named defendants believe that no supplemental disclosures were required under applicable laws; however, to avoid the risk of the Stockholder Actions delaying the C&J Merger and to minimize the expense of defending the Stockholder Actions, and without admitting any liability or wrongdoing, C&J and the Company filed a Form 8-K on October 11, 2019 making certain supplemental disclosures in connection with the C&J Merger. Following those supplemental disclosures, plaintiffs in the Woods, Bushansky and Palumbos actions voluntarily dismissed their claims as moot on October 16, 2019, October 29, 2019 and November 20, 2019, respectively. Neither of the remaining Stockholder Actions have been served or otherwise necessitate further response, but the Company continues to believe that the allegations therein lack merit and no supplemental disclosures were required under applicable law, and intends to defend itself vigorously should service be sought and the claims become active.

Item 1A. Risk Factors

The statements in this section describe the known material risks to our business and should be considered carefully. There have been no material changes from the risk factors previously disclosed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, except as set forth below.

The COVID-19 pandemic has significantly reduced demand for our services and adversely impacted our financial condition, results of operations and cash flows.

The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have adversely affected the demand for oil

and natural gas, which has resulted in a reduction in demand for our services. This demand reduction has ~~begun to have,~~had, and is

expected to continue to have for the duration of such reduced demand for our services, an adverse impact on our revenue, which may be material.

While the full impact of the COVID-19 pandemic is not yet known, we are closely monitoring the effects of the pandemic on commodity demands, our customers, our suppliers, and on our operations and employees. These effects have included, and may continue to include, adverse revenue effects; disruptions to our operations; customer shutdowns of oil and gas exploration and production; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities or the facilities of our customers and suppliers.

Because we operate in a very competitive industry, the commodity price volatility, reduction in demand and increased supply of oil has resulted in a very challenging pricing environment. We may not be able to price our services at a rate that is sufficient to offset costs. In addition, we may be unable to replace dedicated contracts that were terminated early, extend expiring contracts or obtain new contracts in the spot market, and the rates and other material terms under any new or extended contracts may be on substantially less favorable rates and terms. These pricing factors could have a material adverse effect on our business, financial condition, cash flows and results of operations.

We have seen an increase in the time accounts receivable are outstanding since the onset of the COVID-19 pandemic, and the effects of the COVID-19 pandemic also may have a material adverse impact on the ability of the Company to collect its accounts receivable in a timely manner, or at all, as customers face higher liquidity and solvency risks and may be unable to continue to operate as a going concern in the future.

We also have a number of purchase commitments, some of which have obligations to purchase a minimum amount of product/services. We may not be able to reduce, extend, eliminate or otherwise address near-term obligations to our satisfaction, which could result in an adverse effect on our financial condition.

Disruption caused by business responses to the COVID-19 pandemic, including working remote arrangements, may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose us to claims from customers, suppliers, financial institutions, regulators, employees and others, which, individually or in the aggregate could have a material adverse effect on our financial condition and results of operations.

The COVID-19 pandemic could have a material adverse effect on our business, results of operations and financial condition, as the extent to which the COVID-19 pandemic will continue to affect our business, results of operations and financial condition will depend on various factors and future developments beyond our control, which are highly uncertain and cannot be predicted at this time. Such developments include the geographic spread, severity and duration of the COVID-19 pandemic, the extent and duration of the impact on the U.S. and global economy (including the resulting economic downturn and recession), the actions that have been and may be taken by businesses and governments in response to the COVID-19 pandemic, the speed and effectiveness of responses to combat the COVID-19 virus and the response of citizens to any such actions now or in the future.

The COVID-19 pandemic, and the volatile regional and global economic conditions stemming from it, could also exacerbate other risk factors that we identify in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. We may also continue to see an increase in the volume of litigation, including contract claims (some of which may result from force majeure claims) and employment related claims.

The COVID-19 pandemic could also have a material adverse effect on our business, results of operations and financial condition in a manner that is not currently known to us or that we do not currently believe presents significant risks to our operations.

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

(a) Unregistered Sales of Equity Securities

None.

(b) Use of Proceeds

None.

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Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities										Issuer Purchases of Equity Securities
Settlement Period	Settlement Period	(a) Total Number of Shares Purchased⁽²⁾	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs⁽¹⁾	Settlement Period	(a) Total Number of Shares Purchased(2)	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
April 1, 2020 through April 30, 2020		9,341	$1.60	—	$50,000,000
May 1, 2020 through May 31, 2020		719	$2.45	—	$50,000,000
June 1, 2020 through June 30, 2020		—	$—	—	$50,000,000
July 1, 2020 through July 31, 2020						July 1, 2020 through July 31, 2020	747	$2.37	—	$50,000,000
August 1, 2020 through August 31, 2020						August 1, 2020 through August 31, 2020	19,987	$2.55	—	$50,000,000
September 1, 2020 through September 30, 2020						September 1, 2020 through September 30, 2020	—	$—	—	$50,000,000
Total	Total	10,060	$2.03	—	$50,000,000	Total	20,734	$2.54	—	$50,000,000

⁽¹⁾ On December 11, 2019, the Company announced that the board of directors approved a new share repurchase program for up to $50.0 million through December 2020.

⁽²⁾ Consists of shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. The value of such shares is based on the closing price of our common shares on the vesting date.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).



Exhibit Number						Exhibit Description
3.1						First Amendment to Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 2, 2020).
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document - The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						XBRL Taxonomy Extension Schema Document.
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~August 5,~~November 4, 2020.


			NexTier Oilfield Solutions Inc. (Registrant)

			By:			/s/ Phung Ngo-Burns
						Phung Ngo-Burns
						Principal Accounting Officer and Duly Authorized Officer

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