false--12-31FY201900016884761066270.010.0150000000050000000010418800021241000000000061000000P40YP5YP10YP13MP3YP13M0P3YP1YP2YP3YP3YP3Y26.4119.090.7320.4020.0230.0220.500.50P6YP2Y9M18DP8Y1M6DP1Y9M18DP7Y3M18D00000 0001688476 2019-01-01 2019-12-31 0001688476 2020-03-09 0001688476 2019-06-28 0001688476 2018-12-31 0001688476 2019-12-31 0001688476 2017-01-01 2017-12-31 0001688476 2018-01-01 2018-12-31 0001688476 2017-01-01 2017-07-02 0001688476 2017-07-03 2017-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-31 0001688476 frac:MembersEquityMember 2018-12-31 0001688476 us-gaap:RetainedEarningsMember 2018-12-31 0001688476 2016-12-31 0001688476 us-gaap:CommonStockMember 2018-12-31 0001688476 us-gaap:RetainedEarningsMember 2016-12-31 0001688476 frac:MembersEquityMember 2017-01-01 2017-07-02 0001688476 us-gaap:CommonStockMember 2017-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-07-02 0001688476 us-gaap:RetainedEarningsMember 2019-01-01 2019-12-31 0001688476 us-gaap:RetainedEarningsMember 2018-01-01 2018-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0001688476 us-gaap:RetainedEarningsMember 2017-01-01 2017-07-02 0001688476 us-gaap:RetainedEarningsMember 2019-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-12-31 0001688476 us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001688476 us-gaap:CommonStockMember 2019-12-31 0001688476 us-gaap:CommonStockMember 2019-01-01 2019-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001688476 us-gaap:CommonStockMember 2016-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001688476 us-gaap:RetainedEarningsMember 2017-07-03 2017-12-31 0001688476 frac:MembersEquityMember 2019-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2016-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-31 0001688476 us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-12-31 0001688476 frac:MembersEquityMember 2017-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2017-07-03 2017-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001688476 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001688476 us-gaap:RetainedEarningsMember 2017-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001688476 frac:MembersEquityMember 2016-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001688476 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001688476 2017-12-31 0001688476 frac:DeferredStockAwardMember 2019-01-01 2019-12-31 0001688476 frac:DeferredStockAwardMember 2018-01-01 2018-12-31 0001688476 frac:KeaneInvestorandtheCompanysIndependentDirectorsMember 2017-01-25 0001688476 frac:SeniorSecuredNotesDue2010Member frac:TermLoanMember 2017-01-25 2017-01-25 0001688476 frac:TermLoanFacility2016Member frac:TermLoanMember 2017-01-25 2017-01-25 0001688476 frac:IPOSharesSoldbyReportingEntityMember 2017-01-25 2017-01-25 0001688476 2017-01-25 0001688476 us-gaap:IPOMember 2017-01-25 2017-01-25 0001688476 us-gaap:OverAllotmentOptionMember 2017-01-25 2017-01-25 0001688476 frac:IPOSharesSoldbySellingStockholdersMember 2017-01-25 2017-01-25 0001688476 2017-01-25 2017-01-25 0001688476 frac:SeniorSecuredNotesDue2010Member frac:TermLoanMember 2017-01-25 0001688476 us-gaap:IPOMember 2017-01-25 0001688476 frac:WestMember 2017-01-01 2017-12-31 0001688476 frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 frac:NortheastMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 frac:NortheastMember frac:WellConstructionInterventionMember 2017-01-01 2017-12-31 0001688476 frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 frac:WESTTEXASMember 2017-01-01 2017-12-31 0001688476 frac:WestMember frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 frac:WestMember frac:WellConstructionInterventionMember 2017-01-01 2017-12-31 0001688476 frac:CentralMember frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 frac:WESTTEXASMember frac:WellConstructionInterventionMember 2017-01-01 2017-12-31 0001688476 frac:WESTTEXASMember frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 frac:NortheastMember frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 frac:WESTTEXASMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 frac:CentralMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 frac:NortheastMember 2017-01-01 2017-12-31 0001688476 frac:WellConstructionInterventionMember 2017-01-01 2017-12-31 0001688476 frac:CentralMember frac:WellConstructionInterventionMember 2017-01-01 2017-12-31 0001688476 frac:CentralMember 2017-01-01 2017-12-31 0001688476 frac:WestMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 frac:WestMember frac:WellConstructionInterventionMember 2018-01-01 2018-12-31 0001688476 frac:WESTTEXASMember frac:WellConstructionInterventionMember 2018-01-01 2018-12-31 0001688476 frac:NortheastMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:WestMember frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 frac:CentralMember frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 frac:WellConstructionInterventionMember 2018-01-01 2018-12-31 0001688476 frac:NortheastMember 2018-01-01 2018-12-31 0001688476 frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 frac:CentralMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:NortheastMember frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 frac:WESTTEXASMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:WestMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:NortheastMember frac:WellConstructionInterventionMember 2018-01-01 2018-12-31 0001688476 frac:CentralMember frac:WellConstructionInterventionMember 2018-01-01 2018-12-31 0001688476 frac:WESTTEXASMember frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 frac:WESTTEXASMember 2018-01-01 2018-12-31 0001688476 frac:CentralMember 2018-01-01 2018-12-31 0001688476 frac:WestMember 2018-01-01 2018-12-31 0001688476 frac:WestMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:InternationalMember 2019-01-01 2019-12-31 0001688476 frac:WestMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:CentralMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:InternationalMember frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:NortheastMember 2019-01-01 2019-12-31 0001688476 frac:WestMember frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:NortheastMember frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:InternationalMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:CentralMember 2019-01-01 2019-12-31 0001688476 frac:CentralMember frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:NortheastMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:WESTTEXASMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:CentralMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:NortheastMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:WESTTEXASMember 2019-01-01 2019-12-31 0001688476 frac:WESTTEXASMember frac:WellConstructionInterventionMember 2019-01-01 2019-12-31 0001688476 frac:WestMember 2019-01-01 2019-12-31 0001688476 frac:WESTTEXASMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:InternationalMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 frac:NewTermLoanFacilityMember us-gaap:MediumTermNotesMember frac:SeriesOfRelatedTransactionsMember 2019-01-01 2019-12-31 0001688476 srt:MinimumMember 2019-01-01 2019-12-31 0001688476 frac:CaptiveInsuranceSubsidiariesMember 2019-12-31 0001688476 srt:MaximumMember 2019-01-01 2019-12-31 0001688476 2018-01-01 2018-03-31 0001688476 frac:IPOSharesSoldbyReportingEntityMember 2016-01-01 2016-01-01 0001688476 us-gaap:ChangeInAccountingMethodAccountedForAsChangeInEstimateMember 2018-01-01 2018-12-31 0001688476 2018-10-01 2018-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:AssetbasedRevolvingCreditAgreement2016Member us-gaap:LineOfCreditMember 2019-01-01 2019-12-31 0001688476 us-gaap:TradeAccountsReceivableMember 2019-12-31 0001688476 us-gaap:TradeAccountsReceivableMember 2018-12-31 0001688476 frac:NewTermLoanFacilityMember us-gaap:MediumTermNotesMember frac:SingleTransactionMember 2019-01-01 2019-12-31 0001688476 srt:MaximumMember us-gaap:MachineryAndEquipmentMember 2019-01-01 2019-12-31 0001688476 srt:MinimumMember frac:BuildingAndLeaseholdImprovementMember 2019-01-01 2019-12-31 0001688476 srt:MaximumMember frac:BuildingAndLeaseholdImprovementMember 2019-01-01 2019-12-31 0001688476 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2019-01-01 2019-12-31 0001688476 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2019-01-01 2019-12-31 0001688476 srt:MinimumMember us-gaap:MachineryAndEquipmentMember 2019-01-01 2019-12-31 0001688476 frac:CJEnergyServicesInc.Member frac:MergerRelatedMember 2019-10-31 2019-10-31 0001688476 frac:CJEnergyServicesInc.Member 2019-10-31 2019-10-31 0001688476 frac:CJEnergyServicesInc.Member frac:IntegrationMember 2019-10-31 2019-10-31 0001688476 frac:CJEnergyServicesInc.Member us-gaap:TechnologyEquipmentMember 2019-10-31 2019-10-31 0001688476 frac:RockpileEnergyServicesLLCMember 2017-07-04 2017-12-31 0001688476 frac:RockpileEnergyServicesLLCMember 2017-07-03 2017-07-03 0001688476 frac:RockpileEnergyServicesLLCMember 2017-07-03 0001688476 frac:RockpileEnergyServicesLLCMember 2017-12-31 0001688476 frac:RefinerySpecialtiesIncorporatedHorsepowerAndRelatedSupportEquipmentMember 2018-09-01 2018-09-30 0001688476 frac:CJEnergyServicesInc.Member 2019-10-31 0001688476 frac:CJEnergyServicesInc.Member frac:TransactionCostsMember 2017-01-01 2017-12-31 0001688476 2017-07-03 0001688476 frac:RockpileEnergyServicesLLCMember 2017-07-03 2017-12-31 0001688476 frac:CJEnergyServicesInc.Member 2019-11-01 2019-12-31 0001688476 2017-07-03 2017-07-03 0001688476 frac:RockpileEnergyServicesLLCMember 2018-01-01 2018-12-31 0001688476 frac:CJEnergyServicesInc.Member frac:CompensationCostsMember 2017-01-01 2017-12-31 0001688476 frac:RefinerySpecialtiesIncorporatedHorsepowerAndRelatedSupportEquipmentMember 2018-07-24 2018-07-24 0001688476 frac:RockpileEnergyServicesLLCMember 2018-04-03 0001688476 frac:RefinerySpecialtiesIncorporatedHorsepowerAndRelatedSupportEquipmentMember frac:DepositReimbursementForFutureEquipmentDeliveriesMember 2018-09-01 2018-09-30 0001688476 frac:RefinerySpecialtiesIncorporatedHorsepowerAndRelatedSupportEquipmentMember 2018-07-24 0001688476 frac:CJEnergyServicesInc.Member us-gaap:AcquisitionRelatedCostsMember 2017-01-01 2017-12-31 0001688476 frac:RockpileEnergyServicesLLCMember 2017-01-01 2017-12-31 0001688476 frac:RockpileEnergyServicesLLCMember frac:DealCostsMember us-gaap:GeneralAndAdministrativeExpenseMember 2017-01-01 2017-12-31 0001688476 frac:RockpileEnergyServicesLLCMember frac:IntegrationMember us-gaap:GeneralAndAdministrativeExpenseMember 2017-01-01 2017-12-31 0001688476 frac:RockpileEnergyServicesLLCMember us-gaap:CustomerContractsMember 2017-07-03 2017-07-03 0001688476 frac:CJEnergyServicesInc.Member 2019-01-01 2019-12-31 0001688476 frac:CJEnergyServicesInc.Member 2018-01-01 2018-12-31 0001688476 frac:RockpileEnergyServicesLLCMember 2016-01-01 2016-12-31 0001688476 us-gaap:TechnologyBasedIntangibleAssetsMember 2019-12-31 0001688476 us-gaap:CustomerContractsMember 2019-12-31 0001688476 us-gaap:NoncompeteAgreementsMember 2019-12-31 0001688476 us-gaap:TradeNamesMember 2018-12-31 0001688476 us-gaap:NoncompeteAgreementsMember 2018-12-31 0001688476 us-gaap:CustomerContractsMember 2018-12-31 0001688476 us-gaap:TechnologyBasedIntangibleAssetsMember 2018-12-31 0001688476 us-gaap:TradeNamesMember 2019-01-01 2019-12-31 0001688476 frac:MaterialsAndSuppliesMember 2018-12-31 0001688476 frac:ChemicalsAndConsumablesMember 2018-12-31 0001688476 frac:ChemicalsAndConsumablesMember 2019-12-31 0001688476 frac:SandIncludingFreightMember 2019-12-31 0001688476 frac:MaterialsAndSuppliesMember 2019-12-31 0001688476 frac:SandIncludingFreightMember 2018-12-31 0001688476 us-gaap:FurnitureAndFixturesMember 2018-12-31 0001688476 us-gaap:LandMember 2018-12-31 0001688476 us-gaap:FurnitureAndFixturesMember 2019-12-31 0001688476 us-gaap:LandMember 2019-12-31 0001688476 us-gaap:MachineryAndEquipmentMember 2019-12-31 0001688476 us-gaap:MachineryAndEquipmentMember 2018-12-31 0001688476 frac:BuildingAndLeaseholdImprovementMember 2019-12-31 0001688476 frac:BuildingAndLeaseholdImprovementMember 2018-12-31 0001688476 frac:VariousImmaterialAssetsMember frac:OtherServicesMember 2019-01-01 2019-12-31 0001688476 frac:HydraulicFracFleetMember 2018-07-01 2018-07-01 0001688476 frac:HydraulicFracturingPumpComponentsAndIronMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:VariousImmaterialAssetsMember frac:OtherServicesMember 2018-01-01 2018-12-31 0001688476 frac:CoiledTubingAssetsMember frac:OtherServicesMember 2017-01-01 2017-12-31 0001688476 frac:VariousImmaterialAssetsMember frac:OtherServicesMember 2017-01-01 2017-12-31 0001688476 us-gaap:ManufacturingFacilityMember 2018-01-01 2018-12-31 0001688476 frac:HydraulicFracturingPumpComponentsAndIronMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 frac:HydraulicFracturingEquipmentMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:TermLoanFacility2018Member us-gaap:LineOfCreditMember 2018-05-25 0001688476 us-gaap:RevolvingCreditFacilityMember frac:TermLoanFacility2018Member us-gaap:LineOfCreditMember 2018-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:TermLoanFacility2018Member us-gaap:LineOfCreditMember 2019-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:A2017ABLFacilityMember us-gaap:LineOfCreditMember 2019-01-01 2019-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:A2019ABLFacilityMember us-gaap:LineOfCreditMember 2019-10-31 2019-10-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:A2019ABLFacilityMember us-gaap:LineOfCreditMember 2019-10-31 0001688476 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember frac:AssetbasedRevolvingCreditAgreement2017Member us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-12-31 0001688476 us-gaap:RevolvingCreditFacilityMember frac:AssetbasedRevolvingCreditAgreement2017Member us-gaap:LineOfCreditMember 2019-12-31 0001688476 frac:TermLoanFacility2018Member us-gaap:MediumTermNotesMember 2019-12-31 0001688476 2016-05-01 2016-05-31 0001688476 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-01-01 2018-12-31 0001688476 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:LargestTwoSuppliersMember us-gaap:SupplierConcentrationRiskMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 2018-12-28 2019-12-31 0001688476 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-12-31 0001688476 frac:LargestTwoSuppliersMember us-gaap:SupplierConcentrationRiskMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 2018-12-01 2018-12-31 0001688476 frac:SupplierTwoMember us-gaap:SupplierConcentrationRiskMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 frac:TermLoanFacility2018Member us-gaap:MediumTermNotesMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-05-25 2018-05-25 0001688476 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2018-06-22 0001688476 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2018-06-22 2018-06-22 0001688476 us-gaap:LondonInterbankOfferedRateLIBORMember 2018-05-25 0001688476 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-06-22 0001688476 2018-06-22 0001688476 us-gaap:InterestRateContractMember us-gaap:NondesignatedMember us-gaap:InterestExpenseMember 2017-01-01 2017-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:NondesignatedMember us-gaap:InterestExpenseMember 2019-01-01 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:NondesignatedMember us-gaap:InterestExpenseMember 2018-01-01 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2019-01-01 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-01-01 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2017-01-01 2017-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2018-01-01 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-01-01 2017-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember 2019-01-01 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-01-01 2019-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember 2018-12-31 0001688476 us-gaap:OtherCurrentAssetsMember 2019-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember 2018-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0001688476 us-gaap:OtherCurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0001688476 us-gaap:OtherCurrentAssetsMember 2018-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember 2018-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember 2019-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember us-gaap:NondesignatedMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember us-gaap:NondesignatedMember 2018-12-31 0001688476 us-gaap:OtherCurrentAssetsMember us-gaap:NondesignatedMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember us-gaap:NondesignatedMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:NondesignatedMember 2018-12-31 0001688476 us-gaap:OtherCurrentLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0001688476 us-gaap:OtherCurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001688476 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:NondesignatedMember 2019-12-31 0001688476 us-gaap:OtherCurrentAssetsMember us-gaap:NondesignatedMember 2018-12-31 0001688476 us-gaap:OtherNoncurrentAssetsMember us-gaap:NondesignatedMember 2018-12-31 0001688476 srt:MinimumMember 2018-01-01 2018-12-31 0001688476 frac:ThreeCombinedCustomerMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2018-01-01 2018-12-31 0001688476 srt:MaximumMember 2018-01-01 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001688476 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0001688476 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0001688476 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0001688476 frac:PerformanceBasedRestrictedStockUnitsMember 2019-01-01 2019-12-31 0001688476 frac:PerformanceBasedRestrictedStockUnitsMember 2019-12-31 0001688476 frac:PerformanceBasedRestrictedStockUnitsMember 2018-12-31 0001688476 us-gaap:RestrictedStockMember 2018-12-31 0001688476 us-gaap:RestrictedStockMember 2019-12-31 0001688476 us-gaap:RestrictedStockMember 2019-01-01 2019-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2017-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2018-12-31 0001688476 srt:ExecutiveOfficerMember frac:PerformanceBasedRestrictedStockUnitsMember 2019-03-25 0001688476 frac:BusinessCombinationAcquisitionRelatedCostsMember 2019-01-01 2019-12-31 0001688476 srt:MinimumMember srt:ExecutiveOfficerMember 2019-03-25 2019-03-25 0001688476 frac:DeferredStockAwardMember 2017-01-01 2017-12-31 0001688476 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-12-31 0001688476 us-gaap:RestrictedStockUnitsRSUMember frac:CJEnergyServicesInc.Member 2019-01-01 2019-12-31 0001688476 frac:ManagementIncentivePlanMember 2019-12-31 0001688476 srt:MaximumMember srt:ExecutiveOfficerMember 2019-03-25 2019-03-25 0001688476 frac:DeferredStockAwardMember 2017-03-31 0001688476 us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001688476 us-gaap:EmployeeStockOptionMember 2019-12-31 0001688476 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001688476 srt:ExecutiveOfficerMember frac:PerformanceBasedRestrictedStockUnitsMember 2019-03-25 2019-03-25 0001688476 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-12-31 0001688476 us-gaap:RestrictedStockMember 2017-01-01 2017-12-31 0001688476 frac:EquityAndIncentiveAwardPlanMember 2019-12-31 0001688476 us-gaap:RestrictedStockMember frac:CJEnergyServicesInc.Member 2019-01-01 2019-12-31 0001688476 frac:ExecutiveOfficersAndKeyManagementEmployeesMember us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0001688476 frac:PerformanceBasedRestrictedStockUnitsMember 2018-01-01 2018-12-31 0001688476 frac:PerformanceBasedRestrictedStockUnitsMember 2017-01-01 2017-12-31 0001688476 frac:ExecutiveOfficerTwoMember frac:FirstBonusMember 2017-03-16 2017-03-16 0001688476 frac:ExecutiveOfficerThreeMember frac:FirstBonusMember 2017-03-16 2017-03-16 0001688476 frac:ExecutiveOfficerOneMember frac:SecondBonusMember 2017-03-16 2017-03-16 0001688476 frac:ExecutiveOfficerTwoMember frac:SecondBonusMember 2017-03-16 2017-03-16 0001688476 frac:ExecutiveOfficerOneMember frac:FirstBonusMember 2017-03-16 2017-03-16 0001688476 frac:ExecutiveOfficerThreeMember frac:SecondBonusMember 2017-03-16 2017-03-16 0001688476 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001688476 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2019-12-31 0001688476 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2019-12-31 0001688476 srt:MinimumMember us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0001688476 srt:MaximumMember us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0001688476 srt:ExecutiveOfficerMember frac:PerformanceBasedRestrictedStockUnitsMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-03-25 2019-03-25 0001688476 srt:MinimumMember frac:PerformanceBasedRestrictedStockUnitsMember 2019-01-01 2019-12-31 0001688476 srt:ExecutiveOfficerMember frac:PerformanceBasedRestrictedStockUnitsMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-03-25 2019-03-25 0001688476 srt:MaximumMember frac:PerformanceBasedRestrictedStockUnitsMember 2019-01-01 2019-12-31 0001688476 2016-10-13 0001688476 us-gaap:AdditionalPaidInCapitalMember 2017-01-20 2017-01-20 0001688476 2017-01-20 2017-01-20 0001688476 us-gaap:CommonStockMember 2017-01-20 2017-01-20 0001688476 us-gaap:CapitalUnitClassBMember 2017-01-20 2017-01-20 0001688476 2019-12-11 0001688476 frac:PublicStockOfferingMember 2018-01-17 2018-01-17 0001688476 frac:WhiteDeerEnergyRockPileAggregateLLCMember 2018-01-01 2018-12-31 0001688476 frac:PublicStockOfferingMember 2018-01-01 2018-12-31 0001688476 us-gaap:OverAllotmentOptionMember 2018-01-17 2018-01-17 0001688476 frac:KeaneInvestorMember 2018-01-17 2018-01-17 0001688476 frac:PublicStockOfferingMember 2018-12-31 0001688476 frac:PublicStockOfferingMember 2018-01-17 0001688476 us-gaap:CapitalUnitClassAMember 2017-01-20 2017-01-20 0001688476 frac:CapitalUnitClassCMember 2017-01-20 2017-01-20 0001688476 2018-01-17 2018-01-17 0001688476 frac:KeaneInvestorMember 2018-01-01 2018-12-31 0001688476 us-gaap:RetainedEarningsMember 2017-01-20 2017-01-20 0001688476 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember 2017-01-01 2017-12-31 0001688476 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-12-31 0001688476 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedTranslationAdjustmentMember 2017-01-01 2017-12-31 0001688476 us-gaap:InterestRateContractMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember 2018-01-01 2018-12-31 0001688476 frac:WinddownOfForeignSubsidiaryMember 2018-10-01 2018-12-31 0001688476 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-12-31 0001688476 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-01-01 2019-12-31 0001688476 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-12-31 0001688476 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-31 0001688476 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0001688476 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-12-31 0001688476 srt:MinimumMember 2019-09-30 0001688476 srt:MaximumMember 2019-09-30 0001688476 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001688476 2019-01-01 0001688476 frac:NexTierMember 2019-10-31 0001688476 frac:NexTierMember 2019-12-31 0001688476 us-gaap:StateAndLocalJurisdictionMember 2019-12-31 0001688476 frac:CJEnergyServicesInc.Member 2019-12-31 0001688476 us-gaap:DomesticCountryMember 2019-12-31 0001688476 us-gaap:ForeignCountryMember 2019-12-31 0001688476 frac:ChangeInDeferredTaxAssetChangesToOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0001688476 frac:ChangeInDeferredTaxAssetAcquisitionsMember 2019-01-01 2019-12-31 0001688476 frac:ChangeInDeferredTaxAssetIncomeTaxCurrentYearActivityMember 2019-01-01 2019-12-31 0001688476 us-gaap:InventoriesMember 2019-12-31 0001688476 us-gaap:CapitalAdditionsMember 2019-12-31 0001688476 frac:KeaneGroupInc.Member 2019-03-31 0001688476 us-gaap:CapitalAdditionsMember 2018-12-31 0001688476 frac:KeaneGroupInc.Member 2019-07-01 2019-09-30 0001688476 frac:KeaneGroupInc.Member 2019-06-01 2019-06-30 0001688476 us-gaap:LetterOfCreditMember frac:AssetbasedRevolvingCreditAgreement2017Member us-gaap:LineOfCreditMember 2019-12-31 0001688476 us-gaap:ResearchAndDevelopmentArrangementMember 2019-09-30 0001688476 2019-09-30 0001688476 frac:ConsultingServicesMember srt:AffiliatedEntityMember 2018-01-01 2018-12-31 0001688476 frac:WhiteDeerEnergyRockPileAggregateLLCMember us-gaap:RetainedEarningsMember 2018-01-01 2018-12-31 0001688476 frac:WhiteDeerEnergyRockPileAggregateLLCMember srt:AffiliatedEntityMember 2018-05-29 2018-05-29 0001688476 frac:ConsultingServicesMember srt:AffiliatedEntityMember 2017-01-01 2017-12-31 0001688476 frac:ConsultingServicesMember srt:AffiliatedEntityMember 2019-01-01 2019-12-31 0001688476 2018-05-29 0001688476 frac:WhiteDeerEnergyRockPileAggregateLLCMember us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001688476 us-gaap:EmployeeSeveranceMember 2019-01-01 2019-12-31 0001688476 us-gaap:EmployeeSeveranceMember 2018-01-01 2018-12-31 0001688476 us-gaap:EmployeeSeveranceMember 2017-01-01 2017-12-31 0001688476 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellSupportServicesMember 2019-01-01 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:CompletionServicesMember 2018-01-01 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellConstructionAndInterventionServicesMember 2018-01-01 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellConstructionAndInterventionServicesMember 2017-01-01 2017-12-31 0001688476 us-gaap:CorporateNonSegmentMember 2017-01-01 2017-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:CompletionServicesMember 2017-01-01 2017-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellSupportServicesMember 2017-01-01 2017-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellSupportServicesMember 2018-01-01 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:CompletionServicesMember 2019-01-01 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellConstructionAndInterventionServicesMember 2019-01-01 2019-12-31 0001688476 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:CompletionServicesMember 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellConstructionAndInterventionServicesMember 2018-12-31 0001688476 frac:CompletionServicesMember 2019-12-31 0001688476 frac:CompletionServicesMember 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellConstructionAndInterventionServicesMember 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellSupportServicesMember 2019-12-31 0001688476 us-gaap:CorporateNonSegmentMember 2019-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:CompletionServicesMember 2018-12-31 0001688476 us-gaap:OperatingSegmentsMember frac:WellSupportServicesMember 2018-12-31 0001688476 us-gaap:CorporateNonSegmentMember 2018-12-31 0001688476 2019-01-01 2019-03-31 0001688476 2019-07-01 2019-09-30 0001688476 2019-10-01 2019-12-31 0001688476 2019-04-01 2019-06-30 0001688476 2018-04-01 2018-06-30 0001688476 2018-07-01 2018-09-30 0001688476 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember frac:WellSupportServicesMember us-gaap:SubsequentEventMember 2020-03-20 2020-03-20 0001688476 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember frac:WellSupportServicesMember us-gaap:SubsequentEventMember 2020-03-09 0001688476 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember frac:WellSupportServicesMember us-gaap:SubsequentEventMember 2020-03-09 2020-03-09 utreg:hp iso4217:USD xbrli:shares frac:vote xbrli:shares iso4217:USD xbrli:pure frac:fleet frac:executive_officer frac:rig frac:segment frac:type



 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM
10-K
 
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
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)
Not Applicable.
(Former Name, Former Address, if Changed Since Last Report)
 
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
Securities registered pursuant to Section 12(g) of the Act:  None
_______________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes      No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes      No 
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 to not 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    
The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold on June 28, 2019, was approximately $353.0 million.
As of March 9, 2020, the registrant had 213,193,419 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders, which will be filed with the United States Securities and Exchange Commission within 120 days of December 31, 2019, are incorporated by reference into Part III of this Annual Report on Form 10-K.
 






TABLE OF CONTENTS
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 1B.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
Item 7.
 
 
 
Item 7A.
 
 
 
Item 8.
 
 
 
Item 9.
 
 
 
Item 9A.
 
 
 
Item 9B.
 
 
 
 
 
 
 
 
Item 10.
 
 
 
Item 11.
 
 
 
Item 12.
 
 
 
Item 13.
 
 
 
Item 14.




 
 
 
 
 
 
 
 
Item 15.
 
 
 
Item 16.
 
 
 
 






CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report on Form 10-K 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 Annual Report on Form 10-K, 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 the negative of these terms or other similar expressions. Any forward-looking statements contained in this Annual Report on Form 10-K 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 Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:
•    our business strategy;
•    our plans, objectives, expectations and intentions;
•    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 capacity constraints;
•    the impact of adverse weather conditions;
•    the effects of government regulation;
•    legal proceedings, liability claims and effect of external investigations;
•    the effect of a loss of, or the financial distress of, one or more key 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 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;

1



•    the market volatility of our stock;
•    our ability or intention to pay dividends or to effectuate repurchases of our common stock;
•    the impact of ownerships 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 Annual Report on Form 10-K.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K 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” and elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. 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. We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by law.
This Annual Report on Form 10-K 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 1, “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
References Within This Annual Report
As used in this Annual Report on Form 10-K, unless the context otherwise requires, references to (i) the terms “Company,” “NexTier,” “we,” “us” and “our” refer to Keane Group Holdings, LLC and its consolidated subsidiaries for periods prior to our initial public offering (“IPO”), and, for periods as of and following the IPO, 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 “Trican Parent” refers to Trican Well Service Ltd. and, where appropriate, its subsidiaries; (iv) the term “Trican U.S.” refers to Trican Well Service L.P.; (v) the term “Trican” refers to Trican Parent and Trican U.S., collectively; (vi) the term “RockPile” refers to RockPile Energy Services, LLC and its consolidated subsidiaries; (vii) the term “RSI” refers to Refinery Specialties, Incorporated; (viii) the term “Keane Investor” refers to Keane Investor Holdings LLC; (ix) the term “Cerberus” refers to Cerberus Capital Management, L.P. and its controlled affiliates and investment funds; (x) the term “C&J” refers to C&J Energy Services, Inc.; (xi) 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 Annual Report on Form 10-K, 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 Annual Report on Form 10-K, by dividing our total hydraulic horsepower by approximately 45,000 hydraulic horsepower.


2



As used in this Annual Report on Form 10-K, references to cannibalization of parked equipment refer to the removal of parts and components (such as the engine or transmission of a fracturing pump) from an idle hydraulic fracturing fleet in order to service an active hydraulic fracturing fleet.

BASIS OF PRESENTATION IN THIS ANNUAL REPORT ON FORM 10-K
On January 25, 2017, we consummated an initial public offering. Our business prior to the IPO was conducted through Keane Group Holdings, LLC and its consolidated subsidiaries (“Keane Group”). To effectuate the IPO, we completed a series of transactions that resulted in a reorganization of our business, resulting in Keane Group, Inc. as a holding company with no material assets other than its ownership of Keane Group. The consolidated and combined financial statements for the period from January 1, 2017 to July 2, 2017 reflect only the historical results of the Company prior to the completion of the Company’s acquisition of RockPile (as defined herein). The consolidated and combined financial statements for the period from January 1, 2019 to October 31, 2019 reflect only the historical results of the Company prior to the completion of the C&J Merger. The financial statements have been prepared using the acquisition method of accounting under existing U.S. GAAP, which requires that one of the two companies in the C&J Merger be designated as the acquirer for accounting purposes. C&J and Keane determined that Keane was the accounting acquirer. Accordingly, consideration given by Keane to complete the C&J Merger was allocated to the underlying tangible and intangible assets and liabilities acquired based on their estimated fair values as of the date of completion of the C&J Merger, with any excess purchase price allocated to goodwill.
For further details, see Note (1) Basis of Presentation and Nature of Operations of Part II, “Item 8. Financial Statements and Supplemental Data.” For more details regarding the C&J Merger, refer to Note (3) Mergers and Acquisitions.
Unless otherwise indicated, or the context otherwise requires, for periods prior to the completion of the IPO, (i) the historical financial data in this Annual Report on Form 10-K and (ii) the operating and other non-financial data disclosed in Part II, “Item 6. Selected Financial Data” and Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflect the consolidated business and operations of Keane Group. Financial results for 2016 are the financial results of Keane Group, Inc. and Keane Group Holdings, LLC, the Company’s predecessor for accounting purposes, as there was no activity under Keane Group, Inc. in 2016.
All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.




3




PART I
Item 1. Business
General description of the business
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 provide our services through our operating subsidiaries to exploration and production (“E&P”) customers. Our integrated solutions approach is focused on delivering efficiency, and our ongoing commitment to innovation helps our customers capitalize on technological advancements. NexTier is differentiated through four points of distinction, including safety performance, efficiency, partnership and innovation.
We were formed under the name Keane Group, Inc. as a Delaware corporation on October 13, 2016, to be a holding corporation as part of an organizational restructuring of Keane Group Holdings, LLC, which was formed March 1, 2011, and its subsidiaries, for the purpose of facilitating the initial public offering of shares of common stock of the Company in 2017. In connection with the restructuring, the Keane Group entities became wholly owned subsidiaries of the Company.
In continuation of our growth through acquisition strategy - which, since 2013 has notably resulted in the growth of the location and scale of our operational footprint, expansion of our customer base, addition of wireline operations, increase in our pumping capacity and expansion of our hydraulic fracturing operations by more than an additional 1,040,000 hydraulic horsepower - on October 31, 2019, we completed a merger transaction with C&J Energy Services, Inc., a publicly traded Delaware corporation. Pursuant to this transaction, C&J was ultimately merged with and into one of our wholly owned merger subsidiary, with our subsidiary continuing as the surviving entity. On the effective date of the C&J Merger, we changed our name to “NexTier Oilfield Solutions Inc.”
Following the C&J Merger, we are organized into three reportable segments, consisting of:
Completion Services, which consists of the following business lines: (1) fracturing services; (2) wireline and pumping services; and (3) completion support services, which includes our research and technology (“R&T”) department;
Well Construction and Intervention Services (“WC&I”), which consists of the following business lines: (1) cementing services and (2) coiled tubing services; and
Well Support Services, which consists of the following business lines: (1) rig services; (2) fluids management services; and (3) specialty well site services.
Completion Services segment
Our completion services are designed in partnership with our customers to enhance both initial production rates and estimated ultimate recovery from new and existing wells. The core services provided through our Completion Services segment are hydraulic fracturing, wireline and pumping services. We utilize our in-house capabilities, including our R&T department and data control instruments business, to offer a technologically advanced and efficiency focused range of completion techniques. The majority of revenue for this segment is generated by our fracturing business.
Hydraulic Fracturing.    Hydraulic fracturing services are performed to enhance production of oil and natural gas from formations with low permeability and restricted flow of hydrocarbons. The process of hydraulic fracturing involves pumping a highly viscous, pressurized fracturing fluid, typically a mixture of water, chemicals and proppant, into a well casing or tubing in order to fracture underground mineral formations. These fractures release trapped hydrocarbon particles and free a channel for the oil or natural gas to flow freely to the wellbore for

4



collection. Fracturing fluid mixtures include proppant that becomes lodged in the cracks created by the hydraulic fracturing process, “propping” them open to facilitate the flow of hydrocarbons upward through the well.
Wireline Technologies.    Our wireline services involve the use of a truck equipped with a spool of wireline that is unwound and lowered into oil and natural gas wells to convey specialized tools or equipment for well completion, well intervention, pipe recovery and reservoir evaluation purposes. We offer our wireline services in conjunction with our hydraulic fracturing services in “plug-and-perf” well completions to maximize efficiency for our customers. “Plug-and-perf” is a multi-stage well completion technique for cased-hole wells that consists of pumping a plug and perforating guns to a specified depth. Once the plug is set, the zone is perforated and the tools are removed from the well, a ball is pumped down to isolate the zones below the plug and the hydraulic fracturing treatment is applied.
In addition, we offer wireline and pumping services unbundled from our fracturing services. We are one of the leading providers of perforating, pumpdown, pipe recovery, pressure pumping, and wellsite make-up and pressure testing services. We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in some of the most active onshore basins in the United States and provide premium perforating services for both wireline and tubing-conveyed applications. Our in-house manufacturing capabilities through our R&T department allow us to manage costs and lead times with regard to hardware and perforating guns, switches and accessories, providing us with a competitive advantage and enabling higher returns.
Well Construction and Intervention Services segment
Cementing.    Our cementing services incorporate custom engineered mixing and blending equipment to ensure precision and accuracy in providing annulus isolation and hydraulic seal, while protecting fresh water zones from our customers’ zone of interest. Our cement division has the expertise to cement shallow to complex high temperature, high pressure wells. We also offer engineering software and technical guidance for remedial cementing applications and acidizing to optimize the performance of our customers’ wells. We are one of the largest providers of specialty cementing services in the United States. Our operations are supported by multiple full-service laboratory facilities with advanced capabilities.
Coiled Tubing.    We offer a broad range of coiled tubing services to help customers accomplish a wide variety of goals in their horizontal completion, workover and well maintenance projects. The majority of our coiled tubing fleet consists of large diameter coil, meaning two inches or larger in diameter, which allows us to service wells with longer lateral lengths. Our coiled tubing services allow customers to complete projects quickly and safely across a wide spectrum of pressures, without having to shut in their wells.
Well Support Services segment
On March 9, we sold our Well Support Services Segment. For additional information on this transaction, see Note (24) Subsequent Events of Part II, “Item 8. Financial Statements and Supplemental Data.” Prior to the sale, our Well Support Services segment focused on post-completion activities at the well site, and includes rig services, such as workover, fluids management, and other specialty well site services. The majority of revenue for this segment was generated by our rig services business, and we considered our rig services and fluids management businesses to be our primary service lines within this reportable segment.
Rig Services.     As part of our services that helped prolong the productive life of an oil or gas well, we operated one of the largest rig fleets in the United States. These rigs were involved in the routine repair and maintenance of oil and gas wells, re-drilling operations and plug and abandonment operations. Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending on the complexity of the workover. Maintenance services provided with our rig fleet were generally required throughout the life cycle of an oil or gas well. Examples of these maintenance services include routine mechanical repairs to the pumps, tubing

5



and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance services were generally less complicated than completion and workover related services and required less time to perform. Our rig fleet was also used in the process of permanently shutting-in oil or gas wells that were at the end of their productive lives. These plugging and abandonment services generally required auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonment services was not significantly impacted by the demand for oil and gas because well operators are required within a specified period of time by state regulations to plug wells that are no longer productive.
Fluids Management. We provided a full range of fluid services, including the storage, transportation and disposal of various fluids used in various phases including drilling, completion and workover of oil and gas wells. Our fleet of trucks and trailers and portable tanks enabled us to rapidly deploy our equipment across a broad geographic area. Included in our fleet of fluid trucks and trailers were specialized trucks and trailers that were optimized to transport condensate. We also owned private saltwater disposal wells. Demand and pricing for our fluids management services generally corresponded to demand for our rig services.
Business strategy
Our principal business objective is helping our customers win by safely unlocking affordable, reliable and plentiful sources of energy. We believe that by successfully deploying this strategy, we can deliver industry leading returns and increase shareholder value. We maintain a strict focus on health, safety and environmental stewardship and cost-effective customer-centric solutions. We expect to achieve this objective through:
developing and expanding our relationships with existing and new customers;
continuing our industry leading safety performance and focus on the environment;
investing further in driving efficiencies, including our robust maintenance program;
maintaining a conservative balance sheet to preserve operational and strategic flexibility; and
continuing to evaluate potential consolidation opportunities that strengthen our capabilities, increase our scale and create shareholder value.
For further discussion on the business strategies we plan to continue executing in 2020, see Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Customers
Our customers primarily include major integrated and large independent oil and natural gas E&P companies. For the year ended December 31, 2019, we had four customers who individually represented more than 10% of our consolidated revenue. These four customers collectively represented 55% of our consolidated revenue and 21% of our total accounts receivable for the fiscal year ended December 31, 2019. For the year ended December 31, 2018, we had three customers who individually represented more than 10% of our consolidated revenue. These three customers collectively represented 39% of our consolidated revenue and 45% of our total accounts receivable for the fiscal year ended December 31, 2018. For the year ended December 31, 2017, no customer individually represented more than 10% of our consolidated revenue.
Competition and Sales
The markets in which we operate are highly competitive with significant potential for excess capacity. We provide services in various geographic regions across the U.S., and the competitive landscape varies in each. Utilization and pricing for our services have from time to time been negatively affected by increases in supply relative to demand in our operating areas and geographic markets. Our major competitors for both our Completions Services and Well Construction and Intervention Services segments include FTS International, Inc., Halliburton Company, Liberty Oilfield Services Inc., Patterson-UTI Energy, Inc., ProPetro Services, Inc., RPC, Inc.,

6



Schlumberger Limited, Superior Energy Services, Inc. and U.S. Well Services. Our major competitors for our Well Support Services include Key Energy Services, Basic Energy Services, Superior Energy Services, Precision Drilling, Forbes Energy Services, Pioneer Energy Services and Ranger Energy Services. We also compete regionally in each segment with a significant number of smaller service providers.
We believe the principal competitive factors in the markets we serve are our multi-basin service capability and close proximity to our customers, technical expertise, equipment reliability, work force competency, efficiency, safety record, reputation, experience and prices. Additionally, projects are often awarded on a bid basis, which tends to create a highly competitive environment. While we seek to be competitive in our pricing, we believe many of our customers elect to work with us based on our customer-tailored partnership approach, our safety record, the performance and competency of our crews and the quality of our equipment and our services. We seek to differentiate ourselves from our competitors by delivering the highest-quality services and equipment possible, coupled with superior execution and operating efficiency, resulting in cost effective operations and a safe working environment.
Raw materials
We purchase a wide variety of raw materials, parts and components that are manufactured and supplied for our operations. We are not dependent on any single source of supply for those parts, supplies or materials. 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. For the year ended December 31, 2019, purchases from one supplier represented approximately 5% to 10% of the Company’s overall purchases.
Research & technology and intellectual property
We have invested in technological advancement, including the development of a state-of-the-art research and technology center staffed by a team of highly skilled engineers. Our efforts to date have been focused on developing innovative, fit-for-purpose solutions designed to enhance our service offerings, increase efficiencies, provide cost savings to our operations and add value for our customers. Our research and development initiatives generate recurring cost savings for our integrated completion services operations, which is central to our overall strategy of proactively managing our costs to maximize returns. Several of these investments provide value added products and services that, in addition to producing revenue, are creating increasing demand from key customers. In our day-to-day operations, we utilize equipment and products manufactured by our vertically integrated businesses which are managed through our innovation center, and we may also sell such equipment and products to third-party customers in the global energy services industry. We believe that our focus on innovation, with the objective of reducing costs and improving sustainability of our operations, provides a strategic benefit through the ability to fund, develop, and implement new technologies and quickly respond to changes in customer requirements and industry demand.
We own a number of patents and have pending certain patent applications covering various products and services. We are also licensed to utilize technology covered by patents owned by others. Furthermore, we believe the information regarding our customer and supplier relationships are valuable proprietary assets, and we have pending applications and registered trademarks for various names under which our entities conduct business or provide products or services. We do not own or license any patents, trademarks or other intellectual property that we believe to be material to the success of our business.

7



Seasonality
Our results of operations have historically reflected seasonal tendencies, generally in the first and fourth quarters, related to the conclusion and restart of our customers’ annual capital expenditure budgets, the holidays and inclement winter weather, during which we may experience declines in our operating results. Our operations in North Dakota and Pennsylvania are particularly affected by seasonality due to inclement winter weather. During the spring and summer months, our operations in certain areas may be impacted by transportation restrictions due to the work-site conditions caused by the spring thaws or tropical weather systems.
Employees
As of December 31, 2019, we had 6,525 employees, of which, approximately 77% were compensated on an hourly basis. Our employees are not covered by collective bargaining agreements, nor are they members of labor unions. While we consider our relationship with our employees to be satisfactory, disputes may arise over certain classifications of employees that are customary in the oilfield services industry. We are not aware of any other potentially adverse matters involving our employment practices on a company-wide level.
Environmental, health and safety regulation
Our operations are subject to stringent and complex federal, state and local laws, rules and regulations relating to the oil and natural gas industry, including the discharge of materials into the environment or otherwise relating to health and safety or the protection of the environment. Numerous governmental agencies, such as the Environmental Protection Agency (the “EPA”), issue regulations to implement and enforce these laws, which often require costly compliance measures. Failure to comply with these laws and regulations may result in the assessment of substantial administrative, civil and criminal penalties, expenditures associated with exposure to hazardous materials, remediation of contamination, property damage and personal injuries, imposition of bond requirements, and restricting permits or other authorizations, as well as the issuance of injunctions limiting or prohibiting our activities. In addition, some laws and regulations relating to protection of the environment may, in certain circumstances, impose strict liability for environmental contamination, rendering a person liable for environmental damages and clean-up costs without regard to negligence or fault on the part of that person. Strict compliance with these regulatory requirements increases our cost of doing business and consequently affects our profitability. However, environmental laws and regulations have been subject to frequent changes over the years, and the imposition of more stringent requirements, including those that result in any limitation, suspension or moratorium on the services we provide, whether or not short-term in nature, by federal, state, regional or local governmental authority, could have a material adverse effect on our business, financial condition and results of operations.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or the “Superfund law”), and comparable state laws impose liability on certain classes of persons that are considered to be responsible for the release of hazardous or other state-regulated substances into the environment. These persons include the current owner or operator of the site and the owner or operator of the site at the time of the release and the parties that disposed or arranged for the disposal or treatment of hazardous or other state-regulated substances that have been released at the site. Under CERCLA, these persons may be subject to strict liability, joint and several liability, or both, for the costs of investigating and cleaning up hazardous substances that have been released into the environment, damages to natural resources and human health without regard to fault. In addition, companies that incur a CERCLA liability frequently confront claims by neighboring landowners and other third parties for personal injury and property damage allegedly caused by the release of hazardous or other regulated substances or pollutants into the environment.
The federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, (“RCRA”) and analogous state laws generally excludes oil and gas exploration and production wastes (e.g., drilling fluids, produced waters) from regulation as hazardous wastes. However, these wastes remain subject to potential regulation as solid wastes under RCRA and as hazardous waste under other state and local laws. Wastes from some of our operations (such as, but not limited to, our chemical development, blending and distribution operations, as well as some maintenance and manufacturing operations) are or may be regulated under RCRA and

8



analogous state laws under certain circumstances. Further, any exemption or regulation under RCRA does not alter treatment of the substance under CERCLA. The impact of future revisions to environmental laws and regulations cannot be predicted. Moreover, stricter standards for waste handling and disposal may be imposed on the oil and natural gas industry in the future. Removal of RCRA’s exemption for exploration and production wastes has the potential to significantly increase waste disposal costs, which in turn will result in increased operating costs and could adversely impact our business and results of operations. Naturally Occurring Radioactive Materials (“NORM”) may contaminate extraction and processing equipment used in the oil and natural gas industry. The waste resulting from such contamination is regulated by federal and state laws. Standards have been developed for: worker protection; treatment, storage, and disposal of NORM and NORM waste; management of NORM-contaminated waste piles, containers and tanks; and limitations on the relinquishment of NORM contaminated land for unrestricted use under RCRA and state laws. It is possible that we may incur costs or liabilities associated with elevated levels of NORM.
The Federal Water Pollution Control Act (the “Clean Water Act”), and comparable state statutes impose restrictions and strict controls regarding the discharge of pollutants into state waters or waters of the United States. The discharge of pollutants into jurisdictional waters is prohibited unless the discharge is permitted by the EPA or applicable state agencies. The Clean Water Act also prohibits the discharge of dredge and fill material into regulated waters, including jurisdictional wetlands, unless authorized by an appropriately issued permit. CWA program predictability and consistency have been uncertain for several years due to regulatory changes concerning clarity as to the scope of ‘waters of the United States’ federally regulated under the Act and litigation over those changes. The process for obtaining permits has the potential to delay the development of natural gas and oil projects. Also, spill prevention, control and countermeasure regulations under federal law require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak.
In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Moreover, the Oil Pollution Act of 1990 (“OPA”) imposes a variety of requirements on responsible parties related to the prevention of oil spills and liability for damages, including natural resource damages, resulting from such spills in waters of the United States. A responsible party includes the owner or operator of an onshore facility. The Clean Water Act and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the OPA, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.
From time to time, releases of materials or wastes have occurred at locations we own or at which we have operations. These properties and the materials or wastes released thereon may be subject to CERCLA, RCRA, the federal Clean Water Act, the Safe Drinking Water Act (the “SDWA”) and analogous state laws. Under these laws or other laws and regulations, we have been and may be required to remove or remediate these materials or wastes and make expenditures associated with personal injury or property damage. At this time, with respect to any properties where materials or wastes may have been released, it is not possible to estimate the potential costs that may arise from unknown, latent liability risks.
There has been increasing public controversy regarding hydraulic fracturing and its use of fracturing fluids, including potential impacts of the process on drinking water supplies, on the use of water and the potential for impacts to surface water, groundwater and the general environment. Companion bills entitled the Fracturing Responsibility and Awareness Chemicals Act (“FRAC Act”) were first introduced in the United States Congress in 2009 and successor bills have been reintroduced in the House of Representatives on multiple occasions, most recently in July 2019. If the FRAC Act and other similar legislation were to pass, the legislation could significantly alter regulatory oversight of hydraulic fracturing. Currently, unless the fracturing fluid used in the hydraulic fracturing process contains diesel fuel, hydraulic fracturing operations are exempt from permitting under the Underground Injection Control (“UIC”) program established by the SDWA, but subject to regulation by state oil and gas commissions. The FRAC Act would remove this exemption and subject hydraulic fracturing operations to permitting requirements under the UIC program. The FRAC Act and other similar bills propose to also require

9



persons conducting hydraulic fracturing to disclose the chemical constituents of their fracturing fluids to a regulatory agency, although they would not require the disclosure of the proprietary formulas except in cases of emergency. Currently, several states require public disclosure of non-proprietary chemicals on FracFocus.org and other equivalent Internet sites. Disclosure of our proprietary chemical formulas to third parties or to the public, even if inadvertent, could diminish the value of those formulas and could result in competitive harm to our business. Moreover, in response to seismic events near underground injection wells used for the disposal of oil and gas-related wastewater, federal and some state agencies have begun investigating whether such wells have caused increased seismic activity, and some states have imposed volumetric injection limits, shut down or imposed moratorium on the use of such injection wells. At this time, it is not clear what action, if any, the United States Congress will take on the FRAC Act or other related federal and state bills, or the ultimate impact of any such legislation.
If the FRAC Act or similar legislation becomes law, or the Department of the Interior or another federal agency asserts jurisdiction over certain aspects of hydraulic fracturing operations, additional regulatory requirements could be established at the federal level that could lead to operational delays or increased operating costs, making it more difficult to perform hydraulic fracturing and increasing the costs of compliance and doing business for us and our customers. States in which we operate have considered and may again consider legislation that could impose additional regulations and/or restrictions on hydraulic fracturing operations. At this time, it is not possible to estimate the potential impact on our business of these state actions or the enactment of additional federal or state legislation or regulations affecting hydraulic fracturing.
In addition, at the direction of Congress, the EPA undertook a study of the potential impacts of hydraulic fracturing on drinking water and groundwater and issued its report in December 2016. The EPA report states that there is scientific evidence that hydraulic fracturing activities can impact drinking water resources under some circumstances and identifies certain conditions in which the EPA believes the impact of such activities on drinking water and groundwater can be more frequent or severe. The EPA study could spur further initiatives to regulate hydraulic fracturing under the SDWA or otherwise. Similarly, other federal and state studies may recommend additional requirements or restrictions on hydraulic fracturing operations.
Any regulation that restricts the ability to dispose of produced waters or increases the cost of doing business could cause curtailed or decreased demand for our services and have a material adverse effect on our business. Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general or hydraulic fracturing in particular. We believe that we follow applicable standard industry practices and legal requirements for groundwater protection in our hydraulic fracturing activities. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or costly to perform hydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas exploration and production activities and, therefore, adversely affect demand for our services and our business.
The federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, the EPA has developed and continues to develop stringent regulations governing emissions of toxic air pollutants from specified sources. We are or may be required to obtain federal and state permits in connection with certain operations conducted in our manufacturing and maintenance facilities. These permits impose certain conditions and restrictions on our operations, some of which require significant expenditures for filtering or other emissions control devices at each of our manufacturing and maintenance facilities. Changes in these requirements, or in the permits we operate under, could increase our costs or limit certain activities. Many of these regulatory requirements, including New Source Performance Standards and Maximum Achievable Control Technology standards have been made more stringent over time as a result of stricter national ambient air quality standards (“NAAQS”) and other air quality protection goals adopted by the EPA. State implementation of the revised NAAQS could result in stricter permitting requirements, delay or prohibit our ability to obtain such permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant.

10



Exploration and production activities on federal lands may be subject to review under the National Environmental Policy Act (“NEPA”). NEPA requires federal agencies, including the Department of the Interior, to evaluate major agency actions that have the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an environmental assessment of the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed environmental impact statement that may be made available for public review and comment. All of our activities and our customers’ current E&P activities, as well as proposed exploration and development plans, on federal lands require governmental permits that are subject to the requirements of NEPA. The NEPA review process has the potential to delay the permitting and subsequent development of oil and natural gas projects.
Various state and federal statutes prohibit certain actions that adversely affect endangered or threatened species and their habitat, migratory birds, wetlands and natural resources. These statutes include the Endangered Species Act, the Migratory Bird Treaty Act, the Clean Water Act and CERCLA. Government entities or private parties may act to prevent oil and gas exploration activities or seek damages where harm to species, habitat or natural resources may result from the filling of jurisdictional streams or wetlands, the construction of oil and gas facilities or the release of oil, wastes, hazardous substances or other regulated materials. The U.S. Fish and Wildlife Service must also designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development. If our customers were to have areas within their business and operations designated as critical or suitable habitat or a protected species, it could decrease demand for our services and have a material adverse effect on our business. At this time, it is not possible to estimate the potential impact on our business of these speculative federal, state or private actions or the enactment of additional federal or state legislation or regulations with respect to these matters.
More stringent laws and regulations relating to climate change may be adopted in the future and could cause us to incur additional operating costs or reduce the demand for our services. The EPA has determined that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”) present an endangerment to the environment because emissions of such gases are, according to the EPA and many scientists, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, EPA has adopted regulations that restrict emissions of GHGs under existing provisions of the CAA, including rules that require preconstruction and operating permit reviews for GHG emissions from certain large stationary sources.
The EPA has proposed and finalized a number of rules requiring various industry sectors to track and report, and, in some cases, control greenhouse gas emissions. The EPA has also adopted rules requiring the monitoring and reporting of GHG emissions from specified GHG sources, including, among others, certain oil and natural gas production facilities, on an annual basis. Implementation and status of 2016 final rules that establish new air emission controls for emissions of methane from certain equipment and processes in the oil and natural gas source category, including production, processing transmission and storage activities. The EPA’s final rule package included first-time standards to address emissions of methane from equipment and processes across the source category, including hydraulically fractured oil and natural gas well completions. However, regulatory developments to ease or rescind these rules have created uncertainty as to their impact on the oil and gas industry.
The trajectory of future greenhouse regulations remains unsettled. In March 2014, the White House announced its intention to consider further regulation of methane emissions from the oil and gas sector. It is unclear whether Congress will take further action on greenhouse gases, for example, to further regulate greenhouse gas emissions or alternatively to statutorily limit the EPA’s authority over greenhouse gases. However, almost one-half of the states have established or joined GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. Restrictions on emissions of methane or carbon dioxide that may be imposed in various states could adversely affect the oil and natural gas industry and, therefore, could reduce the demand for our products and services.

11



Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities, which could have a material adverse effect on our business and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the oil and natural gas our customers produce. Finally, it should be noted that many scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climatic changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events; if any such effects were to occur, they could have an adverse effect on our assets and operations.
Climate change regulation may also impact our business positively by increasing demand for natural gas for use in producing electricity and as a transportation fuel. Currently, our operations are not materially adversely impacted by existing state and local climate change initiatives. At this time, we cannot accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our business.
Safety is our highest priority, and we believe we are among the safest service providers in the industry. For example, we achieved a total recordable incident rate of 0.68 in 2019, which is substantially less than the industry average of 1.07 from 2015 to 2018. We believe total recordable incident rate is a reliable measure of safety performance.
We are subject to the requirements of the federal Occupational Safety and Health Act, which is administered and enforced by the Occupational Safety and Health Administration, commonly referred to as OSHA, and of comparable state laws that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and the public. We believe that our operations are in substantial compliance with the OSHA requirements, including general industry standards, record keeping requirements and monitoring of occupational exposure to regulated substances. OSHA continues to evaluate worker safety and to propose new regulations, such as but not limited to, the new rule regarding respirable silica sand, which requires the oil and gas industry to implement engineering controls and work practices to limit exposures below the new limits by June 23, 2021.
Among the services we provide, we operate as a motor carrier and therefore are subject to regulation by the United States Department of Transportation (“DOT”) and various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations; regulatory safety; hazardous materials labeling, placarding and marking; financial reporting; and certain mergers, consolidations and acquisitions. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive in any specific period and requiring onboard black box recorder devices or limits on vehicle weight and size, and setting minimum training standards for new drivers seeking a commercial driver’s license. Certain motor vehicle operators are required to register with the DOT. This registration requires an acceptable operating record. The DOT periodically conducts compliance reviews and may revoke registration privileges based on certain safety performance criteria, and a revocation could result in a suspension of operations.
Interstate motor carrier operations are subject to safety requirements prescribed by DOT. To a large degree, intrastate motor carrier operations are subject to safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations. DOT regulations also mandate drug testing of drivers. From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motor fuels, which may increase our costs or adversely

12



impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted.
In addition, some of our operations utilize equipment that contains sealed, low-grade radioactive sources. Our activities involving the use of radioactive materials are regulated by the United States Nuclear Regulatory Commission (“NRC”) and state regulatory agencies under agreement with the NRC. Standards implemented by these regulatory agencies require us to obtain licenses or other approvals for the use of such radioactive materials. We believe that we have obtained these licenses and approvals as necessary and applicable. Numerous governmental agencies issue regulations to implement and enforce these laws, for which compliance is often costly and difficult. The violation of these laws and regulations may result in the denial or revocation of permits, issuance of corrective action orders, injunctions prohibiting some or all of our operations, assessment of administrative and civil penalties, and even criminal prosecution. In addition, releases of radioactive material could result in substantial remediation costs and potentially expose us to third-party property damage or personal injury claims.
We seek to minimize the possibility of a pollution event through equipment and job design, as well as through training of employees. We also maintain a pollution risk management program that is activated in the event a pollution event occurs. This program includes an internal emergency response plan that provides specific procedures for our employees to follow in the event of a chemical release or spill. In addition, we have contracted with several third-party emergency responders in our various operating areas that are available on a 24-hour basis to handle the remediation and clean-up of any chemical release or spill. We carry insurance designed to respond to fortuitous environmental pollution events. This insurance portfolio has been structured in an effort to address pollution incidents that result in bodily injury or property damage and any ensuing clean up required at our owned facilities, as a result of the mobilization and utilization of our fleets, as well as any environmental claims resulting from our operations.
We also seek to manage environmental liability risks through provisions in our contracts with our customers that generally allocate risks relating to surface activities associated with the hydraulic fracturing process, other than water disposal, to us and risks relating to “down-hole” liabilities to our customers. Our customers are responsible for the disposal of the fracturing fluid that flows back out of the well as waste water, for which they use a controlled flow-back process. We are not involved in that process or the disposal of the resulting fluid. Our contracts generally require our customers to indemnify us against pollution and environmental damages originating below the surface of the ground or arising out of water disposal, or otherwise caused by the customer, other contractors or other third parties. In turn, we generally indemnify our customers for pollution and environmental damages originating at or above the surface caused solely by us. We seek to maintain consistent risk-allocation and indemnification provisions in our customer agreements to the extent possible. Some of our contracts, however, contain less explicit indemnification provisions, which typically provide that each party will indemnify the other against liabilities to third parties resulting from the indemnifying party’s actions, except to the extent such liability results from the indemnified party’s gross negligence, willful misconduct or intentional act.
Overall, we do not anticipate that compliance with existing environmental laws and regulations will have a material effect on our financial condition or results of operations. It is possible, however, that substantial costs for compliance or penalties for non-compliance may be incurred in the future. Moreover, it is possible that other developments, such as the adoption of stricter environmental laws, regulations, and enforcement policies, could result in additional costs or liabilities that we cannot currently quantify.
Insurance
Our operations are subject to hazards inherent in the oil and natural gas industry, including blowouts, explosions, cratering, fires, oil spills, surface and underground pollution and contamination, hazardous material spills, loss of well control, damage to or loss of the wellbore, formation or underground reservoir, damage or loss from the use of explosives and radioactive materials, and damage or loss from inclement weather or natural disasters. These conditions can cause personal injury or loss of life, damage to or destruction of property, equipment, the environment and wildlife, and interruption or suspension of operations, among other adverse effects. In addition, claims for loss of oil and natural gas production and damage to formations can occur in the well services industry.

13




Additionally, our business involves, and is subject to hazards associated with, the transportation of heavy equipment and materials, as well as heavily regulated explosive and radioactive materials. Regularly having a significant number of both commercial and non-commercial motor vehicles on the road creates a high risk of vehicle accidents. The occurrence of a serious accident involving our employees, equipment and/or services, could result in our being named as a defendant to a lawsuit asserting significant claims, and we may also be liable to indemnify certain third-parties, specifically including its customers, for large claims for damages in situations where our employees, equipment and/or services were involved.
Despite our efforts to maintain high safety standards, we from time to time have experienced accidents in the past, and we anticipate that we could experience accidents in the future. In addition to the property and personal losses from these accidents, the frequency and severity of these incidents affect our operating costs and insurability, as well as our relationships with customers, employees and regulatory agencies. Any significant increase in the frequency or severity of these incidents, or the general level of compensation awards, could adversely affect the cost of, or our ability to obtain, workers’ compensation and other forms of insurance, and could have other adverse effects on our financial condition and results of operations.

We carry a variety of insurance coverages for our operations, and we are partially self-insured for certain claims, in amounts that we believe to be customary and reasonable. However, our insurance may not be sufficient to cover any particular loss or may not cover all losses. Historically, insurance rates have been subject to various market fluctuations that may result in less coverage, increased premium costs, or higher deductibles or self-insured retentions.
Availability of filings
Our Annual reports on Form 10-K, Quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge on our internet web site at www.nextierofs.com, as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the Securities and Exchange Commission (the “SEC”). The SEC maintains an internet site that contains our reports, proxy and information statements and our other SEC filings. The address of that web site is https://www.sec.gov/.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website at https://investors.nextierofs.com/ir-home. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases and blogs as part of our investor relations website. We have used, and intend to continue to use, our investor relations website as means of disclosing material information and for complying with our disclosure obligations under Regulation Fair Disclosure. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters and code of business conduct and ethics, is also available on our investor relations website under the heading “Corporate Governance.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

14




Item 1A. Risk Factors
RISK FACTORS
An investment in our securities involves a variety of risks. In addition to the other information included or incorporated by reference in this annual report, the following risk factors should be carefully considered, as they could have a significant adverse impact on our business, financial condition and results of operations. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global economic climate amplifies many of these risks. All forward-looking statements made by us or on our behalf are qualified by the risks described below.
Risks Related to Our Industry
Our business is cyclical and depends on spending and well completions by the onshore oil and natural gas industry predominately in the United States, and the level of such activity is volatile. Our business has been, and may continue to be, adversely affected by industry and financial market conditions that are beyond our control.
Our business is cyclical, and we depend on the willingness of our customers to make expenditures to explore for, develop and produce oil and natural gas from onshore unconventional resources located predominantly in the United States (“U.S.”). The willingness of our customers to undertake these activities depends largely upon prevailing industry and financial market conditions that are influenced by numerous factors over which we have no control, including:
prices and expectations about future prices for oil and natural gas;
domestic and foreign supply of, and demand for, oil and natural gas and related products;
the level of global and domestic oil and natural gas inventories;
the supply of and demand for hydraulic fracturing and other oilfield services and equipment in the U.S. and the areas in which we operate;
the cost of exploring for, developing, producing and delivering oil and natural gas;
the availability of adequate pipeline, storage and other transportation capacity;
lead times associated with acquiring equipment and products and availability of qualified personnel;
the rates at which new oil and natural gas reserves are discovered;
federal, state and local regulation of hydraulic fracturing and other oilfield service activities, as well as exploration and production activities, including public pressure on governmental bodies and regulatory agencies to regulate our industry;
the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids;
geopolitical developments, political instability and recent (and potential future) armed hostilities in oil and natural gas producing countries;
actions of the Organization of the Petroleum Exporting Countries (“OPEC”), its members and other state-controlled oil companies relating to oil price and production controls;

15



advances in exploration, development and production technologies or in technologies affecting energy consumption;
the price and availability of alternative fuels and energy sources;
disruptions due to natural disasters, unexpected or extreme weather conditions, public health crises (such as coronavirus) and similar factors;
merger and divestiture activity amongst oil and natural gas producers;
uncertainty in capital and commodities markets and the ability of oil and natural gas producers and oil and natural gas midstream operators to raise equity capital and debt financing;
investor and activist focus on corporate social responsibility and sustainability; and
U.S. federal, state and local and non-U.S. governmental regulations and taxes.
The volatility of the oil and natural gas industry and the resulting impact on exploration and production activity could adversely impact the level of drilling and completion activity by some of our customers. This volatility may result in a decline in the demand for our services or adversely affect the price of our services. In addition, material declines in oil and natural gas prices, or drilling or completion activity in the U.S. oil and natural gas shale regions, could have a material adverse effect on our business, financial condition, prospects, results of operations and cash flows. Furthermore, a decrease in the development of oil and natural gas reserves in the U.S. may also have an adverse impact on our business, even in an environment of strong oil and natural gas prices.
A decline in or substantial volatility of crude oil and natural gas commodity prices could adversely affect the demand for our services.
The demand for our services is substantially influenced by current and anticipated crude oil and natural gas commodity prices, the related level of drilling and completion activity and general production spending in the areas in which we have operations. Volatility or weakness in crude oil and natural gas commodity prices (or the perception that crude oil and natural gas commodity prices will decrease) affects the operational and capital spending patterns of our customers, and the products and services we provide are, to a substantial extent, deferrable in the event oil and natural gas companies reduce capital expenditures. During periods of declining oil and natural gas prices, or when pricing remains depressed, our customer base may experience significant declines in drilling, completion and production activities, which in turn may result in reduced utilization and increased competition and pricing pressure to varying degrees across our service lines and operating areas.
Historically, prices for crude oil and natural gas have been extremely volatile, and these prices are expected to experience continued volatility. For example, since 2014, crude oil prices have ranged from a high of $107.95 per barrel in 2014 to a low of $44.48 per barrel in late December 2018. During 2019, NYMEX crude oil prices ranged from approximately $46.31 to $66.24 per barrel, with natural gas prices ranging from $1.75 per million British thermal units (“MMbtu”) to $4.25 per MMbtu. Continued price volatility for oil and natural gas is expected during 2020.
Worldwide military, political and economic events, including initiatives by OPEC, affect both the demand for, and the supply of, oil and natural gas. Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, commercial development of economically viable alternative energy sources (such as wind, solar, geothermal, tidal, fuel cells and biofuels), fuel conservation measures, the availability of pipeline capacity and other factors that will be beyond our control may also affect the supply of, demand for, and price of oil and natural gas. This, in turn, could result in lower demand for our services and cause lower pricing and utilization levels for our services.

16



Adverse weather conditions could impact demand for our services or materially impact our costs.
Our business could be materially adversely affected by adverse weather conditions. Our operations and the operations of our customers may be adversely affected by seasonal weather conditions, severe weather events and natural disasters. For example, periods of drought, hurricanes, tropical storms, heavy snow, ice or rain may result in customer delays and other disruptions to our services, including availability of key products such as sand and water. Repercussions of adverse weather conditions may include:
curtailment of services;
weather-related damage to facilities and equipment, resulting in delays in operations;
inability to deliver equipment, personnel and products to job sites in accordance with contract schedules;     
increase in the price of key products or insurance; and
loss of productivity.
Competition and availability of excess equipment within the oilfield services industry may adversely affect our ability to market and price our services.
The oilfield services industry is highly competitive. The principal competitive tactics in our markets are generally price, technical expertise, the availability and condition of equipment, work force capability, safety record, reputation and experience. Furthermore, as a result of this competition, available equipment in the markets in which one or more of our product lines competes at times may exceed the demand for such equipment. This excess supply of equipment may result from many factors, including without limitation, a low commodity price environment, increase in the construction of new equipment, or reactivation and improvement of existing equipment. Excess capacity may result in (1) substantial competition for a diminishing amount of demand and/or (2) significant price competition, which could have a material adverse effect on our results of operations, financial condition and prospects.
The oilfield services industry is highly fragmented and includes several large companies that compete in many of the markets we serve, as well as numerous small companies that compete with us on a local basis. Some of our competitors may have greater resources and/or name recognition, which could allow them to better withstand industry downturns and to compete more effectively on the basis of technology, geographic scope, retained skilled personnel and economies of scale. In addition, our industry has experienced recent consolidation through mergers and acquisitions, which could lead to increased resources and capabilities for our competitors. There may also be new companies that enter our business, or re-enter our business with significantly reduced indebtedness following emergence from bankruptcy, or our existing and potential future customers may develop their own oilfield solutions. Our operations may be adversely affected if our current competitors or new market entrants introduce new products, technology or services with better features, performance, prices or other characteristics than our products and services or expand in service areas where we operate.
We periodically seek to increase prices of our services to offset rising costs and to generate higher returns for our stockholders. Because we operate in a very competitive industry, however, we are not always successful in raising or maintaining our existing prices. Even if we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset rising costs without adversely affecting our activity levels. The inability to maintain our pricing and to increase our pricing could have a material adverse effect on our business, financial condition, cash flows and results of operations. 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.
Accordingly, high competition and excess equipment in the market can cause us to have difficulty maintaining pricing, utilization and profit margins and, at times, result in operating losses. We cannot predict the

17



future level of competition or excess equipment in the oil and natural gas service businesses or the level of demand for our services.
Our operations are subject to hazards inherent in the energy services industry.
Risks inherent to our industry can cause personal injury, loss of life, suspension of or impact upon operations, damage to geological formations, damage to facilities, business interruption and damage to, or destruction of, property, equipment and the environment. Such risks may include, but are not limited to:
equipment defects;
vehicle accidents;
fires, explosions and uncontrollable flows of gas or well fluids;
unusual or unexpected geological formations or pressures and industrial accidents;
blowouts;
cratering;
loss of well control;
collapse of the borehole; and
damaged or lost drilling and well completions equipment.
Catastrophic or significantly adverse events can occur at well sites where we conduct our operations, including blow outs resulting in explosions, fires, personal injuries, property damage, pollution, clean-up responsibility and regulatory responsibility. In response, we typically require indemnities, releases and limitations on liability in our contracts with our customers, together with liability insurance coverage, to protect us from potential liability related to such occurrences. However, it is possible that customers or insurers could seek to avoid or be financially unable to meet their obligations, or a court may decline to enforce such provisions. Damages that are not indemnified or released could greatly exceed available insurance coverage and could have a material adverse effect on our business, financial condition, prospects and results of operations.
Catastrophic or significantly adverse events can also occur at our facilities and during transport of our equipment, commodities and personnel to well sites. Our safety procedures may not always prevent such damages. Our insurance coverage or coverage of applicable vendors and service providers may be inadequate to cover our liabilities. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable or on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, a claim in excess of the insurance coverage limits maintained by us or a claim at a time when we are not able to obtain liability insurance could have a material adverse effect on our ability to conduct normal business operations and on our financial condition, results of operations and cash flows.
In addition, our services could become a source of spills or releases of fluids, including chemicals used during activities, at the site where such services are performed, or could result in the discharge of such fluids into underground formations that were not targeted for fracturing or activities, such as potable aquifers. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damages and could result in a variety of claims, losses and remedial obligations that could have an adverse effect on our business and results of operations. The existence, frequency and severity of such incidents could affect operating costs, insurability, reputation and relationships with customers, employees and regulators. Any litigation or claims, even if fully indemnified or insured, could negatively affect our reputation with our customers and the public and make it more difficult for us to compete effectively or obtain adequate insurance in the future.

18



Competition among oilfield service and equipment providers is affected by each provider’s reputation for environmental impact, safety and quality.
Our activities are subject to a wide range of national, state and local environmental, occupational health and safety laws and regulations. In addition, customers maintain their own compliance and reporting requirements. Failure to comply with these environmental, health and safety laws and regulations, or failure to comply with our customers’ compliance or reporting requirements, could tarnish our reputation for safety and quality and have a material adverse effect on our competitive position. In particular, our customers may elect not to purchase our services if they view our environmental or safety record as unsatisfactory, which could cause us to lose customers and substantial revenue.
Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us.
We typically enter into agreements with our customers governing the provision of our services, which usually include certain indemnification provisions for losses resulting from operations. Such agreements may require each party to indemnify the other against certain claims regardless of the negligence or other fault of the indemnified party; however, many states place limitations on contractual indemnity agreements, particularly agreements that indemnify a party against the consequences of its own negligence. Furthermore, certain states, including Louisiana, New Mexico, Texas and Wyoming, have enacted statutes generally referred to as “oilfield anti-indemnity acts” expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements. Such oilfield anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, financial condition, prospects and results of operations.
New technology may cause us to become less competitive.
The oilfield services industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent or other intellectual property protections. As competitors and others use or develop new or comparable technologies in the future, we may lose market share or be placed at a competitive disadvantage. In addition, technological changes, process improvements and other factors that increase operational efficiencies could continue to result in oil and natural gas wells being completed more quickly, which could reduce the number of revenue earning days. Furthermore, we may face competitive pressure to develop, implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources that may allow them to enjoy technological advantages and develop and implement new products on a timely basis or at an acceptable cost. We cannot be certain that we will be able to develop and implement new technologies or products on a timely basis or at an acceptable cost. Limits on our ability to develop, acquire, effectively use and implement new and emerging technologies may have a material adverse effect on our business, financial condition, prospects or results of operations.
We are subject to federal, state and local laws and regulations regarding issues of health, safety and protection of the environment. Under these laws and regulations, we may become liable for penalties, damages or costs of remediation or other corrective measures. Any changes in laws or government regulations could increase our costs of doing business.
Our operations are subject to stringent federal, state, local and tribal laws and regulations relating to, among other things, protection of natural resources, clean air and drinking water, wetlands, endangered species, greenhouse gasses, areas that are not in attainment with air quality standards, the environment, health and safety, chemical use and storage, waste management, waste disposal and transportation of waste and other hazardous and nonhazardous materials. Our operations involve risks of environmental liability, including leakage from an operator’s casing during our operations or accidental spills onto or into surface or subsurface soils, surface water or groundwater. Some environmental laws and regulations may impose strict liability, joint and several liability or both. In some situations, we could be exposed to liability as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, third parties without regard to whether we caused or contributed to the conditions. Additionally, environmental concerns, including potential emissions affecting clean air, drinking water contamination and seismic activity, have prompted investigations that could lead to the enactment of regulations,

19



limitations, restrictions or moratoria that could potentially have a material adverse impact on our business. Actions arising under these laws and regulations could result in the shutdown of our operations, fines and penalties (administrative, civil or criminal), revocations of or restrictions in permits to conduct business, expenditures for remediation or other corrective measures and/or claims for liability for property damage, exposure to hazardous materials, exposure to hazardous waste, nuisance or personal injuries. Sanctions for noncompliance with applicable environmental laws and regulations may also include the assessment of administrative, civil or criminal penalties, revocation of or restrictions in permits and temporary or permanent cessation of operations in a particular location and issuance of corrective action orders. Such claims or sanctions and related costs could cause us to incur substantial costs or losses and could have a material adverse effect on our business, financial condition, prospects and results of operations. Additionally, an increase in regulatory requirements, limitations, restrictions or moratoria on oil and natural gas exploration and completion activities at a federal, state or local level could significantly delay or interrupt our operations, limit the amount of work we can perform, increase our costs of compliance, or increase the cost of our services; thereby possibly having a material adverse impact on our financial condition.
If we do not perform in accordance with government, industry, customer or our own health, safety and environmental standards, we could lose business from our customers, many of whom have an increased focus on environmental and safety issues.
We are subject to requirements imposed by the EPA, U.S. Department of Transportation, U.S. Nuclear Regulatory Commission, OSHA and state regulatory agencies that regulate operations to prevent air, soil and water pollution, and protect worker health and safety.
The EPA regulates air emissions from all engines, including off-road diesel engines that are used by us to power equipment in the field. Under these U.S. emission control regulations, we could be limited in the number of certain off-road diesel engines we can purchase. Further, the requirement to comply with emission control and fuel quality regulations could result in increased costs.
In addition, as part of our business, we handle, transport, and dispose of a variety of fluids and substances used by our customers in connection with their oil and natural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. The generation, handling, transportation, and disposal of these fluids, substances, and wastes are regulated by a number of laws, including CERCLA, RCRA, the Clean Water Act, the SDWA and analogous state laws. Under RCRA, the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes are regulated. RCRA currently exempts many oil and gas exploration and production wastes from classification as hazardous waste. However, these oil and gas exploration and production wastes may still be regulated under state solid waste laws and regulations, and it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous waste in the future.
Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to liability for governmental penalties, third-party claims, cleanup costs associated with releases of such materials, damages to natural resources, and other damages, as well as potentially impair our ability to conduct our operations. Moreover, certain of these environmental laws impose joint and several, strict liability even though our conduct in performing such activities was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third-parties was the basis for such liability. In addition, environmental laws and regulations are subject to frequent change and if existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to make significant unanticipated capital and operating expenditures.
Laws and regulations protecting the environment generally have become more stringent over time, and we expect them to continue to do so. This could lead to material increases in our costs, and liability exposure, for future environmental compliance and remediation.

20



Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing could prohibit, restrict or limit hydraulic fracturing operations, could increase our operating costs or could result in the disclosure of proprietary information resulting in competitive harm.
During recent sessions of the U.S. Congress, several pieces of legislation were introduced in the U.S. Senate and House of Representatives for the purpose of amending environmental laws such as the Clean Air Act, the SDWA and the Toxic Substances Control Act with respect to activities associated with extraction and energy production industries, especially the oil and gas industry. Furthermore, various items of legislation and rulemaking have been proposed that would regulate or prevent federal regulation of hydraulic fracturing on federally owned land. Proposed rulemaking from the EPA and OSHA could increase our regulatory requirements, which could increase our costs of compliance or increase the costs of our services, thereby possibly having a material adverse impact on our business and results of operations.
If the EPA or another federal or state agency asserts jurisdiction over certain aspects of hydraulic fracturing operations, an additional level of regulation established at the federal or state level could lead to operational delays and increase our costs. In December 2016, the EPA issued a study of the potential impacts of hydraulic fracturing on drinking water and groundwater. The EPA report states that there is scientific evidence that hydraulic fracturing activities can impact drinking resources under some circumstances, and identifies certain conditions in which the EPA believes the impact of such activities on drinking water and groundwater can be more frequent or severe. The EPA study could spur further initiatives to regulate hydraulic fracturing under the SDWA or otherwise. Many regulatory and legislative bodies routinely evaluate the adequacy and effectiveness of laws and regulations affecting the oil and gas industry. As a result, state legislatures, state regulatory agencies and local municipalities may consider legislation, regulations or ordinances, respectively, that could affect all aspects of the oil and natural gas industry and occasionally take action to restrict or further regulate hydraulic fracturing operations. At this time, it is not possible to estimate the potential impact on our business of these state and municipal actions or the enactment of additional federal or state legislation or regulations affecting hydraulic fracturing. Compliance, stricter regulations or the consequences of any failure to comply by us could have a material adverse effect on our business, financial condition, prospects and results of operations.
Many states in which we operate require the disclosure of some or all of the chemicals used in our hydraulic fracturing operations. Certain aspects of one or more of these chemicals may be considered proprietary by us or our chemical suppliers. Disclosure of our proprietary chemical information to third parties or to the public, even if inadvertent, could diminish the value of our trade secrets or those of our chemical suppliers and could result in competitive harm to us, which could have an adverse impact on our business, financial condition, prospects and results of operations.
We are also aware that some states, counties and municipalities have enacted or are considering moratoria on hydraulic fracturing. For example, New York and Vermont, states in which we have no operations, have banned or are in the process of banning the use of high-volume hydraulic fracturing. Alternatively, some municipalities are considering or have considered zoning and other ordinances, the conditions of which could impose a de facto ban on drilling and/or hydraulic fracturing operations. Further, some states, counties and municipalities are closely examining water use issues, such as permit and disposal options for processed water, which could have a material adverse impact on our financial condition, prospects and results of operations, if such additional permitting requirements are imposed upon our industry. Additionally, our business could be affected by a moratorium or increased regulation of companies in our supply chain, such as sand mining by our proppant suppliers, which could limit our access to supplies and increase the costs of our raw materials. At this time, it is not possible to estimate how these various restrictions could affect our ongoing operations.
Existing or future laws and regulations related to greenhouse gases and climate change could have a negative impact on our business and may result in additional compliance obligations with respect to the release, capture and use of carbon dioxide that could have a material adverse effect on our business, results of operations, prospects and financial condition.

21



Changes in environmental requirements related to greenhouse gases and climate change may negatively impact demand for our services. For example, oil and natural gas exploration and production may decline as a result of environmental requirements, including land use policies responsive to environmental concerns. Federal, state and local agencies have been evaluating climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases in areas in which we conduct business. Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to emissions of greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws or regulations reduce demand for oil and natural gas. Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, sequestration and use of carbon dioxide that could have a material adverse effect on our business, results of operations, prospects and financial condition.
Additionally, increasing political and social attention to global climate change has resulted in pressure upon shareholders, financial institutions and/or financial markets to modify their relationships with oil and gas companies and to limit investments and/or funding to such companies, which could increase our costs or otherwise adversely affect our business and results of operations.
Changes in transportation regulations may increase our costs and negatively impact our results of operations.
We are subject to various transportation regulations, including regulation of motor carriers by the U.S. Department of Transportation and by various federal, state and tribal agencies, whose regulations include certain permit requirements imposed by highway and safety authorities. These regulatory authorities exercise broad powers over our trucking operations, generally governing such matters as the authorization to engage in motor carrier operations, safety, equipment testing, driver requirements and specifications and insurance requirements. The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period and limits on vehicle weight and size. As the federal government continues to develop and propose regulations relating to fuel quality, engine efficiency and greenhouse gas emissions, we may experience an increase in costs related to truck purchases and maintenance, impairment of equipment productivity, a decrease in the residual value of vehicles, unpredictable fluctuations in fuel prices and an increase in operating expenses. Increased truck traffic may contribute to deteriorating road conditions in some areas where our operations are performed. Our operations, including routing and weight restrictions, could be affected by road construction, road repairs, detours and state and local regulations and ordinances restricting access to certain roads. Proposals to increase federal, state or local taxes, including taxes on motor fuels, are also made from time to time, and any such increase would increase our operating costs. Also, state and local regulation of permitted routes and times on specific roadways could adversely affect our operations. We cannot predict whether, or in what form, any legislative or regulatory changes or municipal ordinances applicable to our logistics operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our business or operations.
We could be negatively impacted by the recent outbreak of coronavirus (COVID-19).

In light of the uncertain and rapidly evolving situation relating to the spread of the coronavirus (COVID-19), this public health concern could pose a risk to our employees, our customers, our vendors and the communities in which we operate, which could negatively impact our business. The extent to which the coronavirus (COVID-19) may impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time. We may experience an impact to the timing and availability of key products from suppliers, customer shutdowns to prevent spread of the virus, employee impacts from illness, school closures and other community response measures, all of which could negatively impact our business.  We continue to monitor the situation and may adjust our current policies and practices as more information and guidance become available.

Risks Related to Our Recent Merger

22



We may not be able to retain customers or suppliers or customers or suppliers may seek to modify contractual obligations with us, which could have an adverse effect on our business and operations. Third parties may terminate or alter existing contracts or relationships with us.

As a result of the C&J Merger, we may experience impacts on relationships with customers and suppliers that may harm our business and results of operations. Certain customers or suppliers may seek to terminate or modify contractual obligations following the C&J Merger whether or not contractual rights are triggered as a result of the C&J Merger. There can be no guarantee that customers and suppliers will remain with or continue to have a relationship with us or do so on the same or similar contractual terms following the C&J Merger. If any customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with us, then our business and results of operations may be harmed. Furthermore, we do not have long-term arrangements with many of our significant suppliers. If our suppliers were to seek to terminate or modify an arrangement with us, then we may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all.
Combining the businesses of legacy Keane and C&J may be more difficult, costly or time-consuming than expected and we may fail to realize the anticipated benefits of the C&J Merger, which may adversely affect our business results and negatively affect the value of our common stock.
The success of the C&J Merger will depend on, among other things, our ability to combine the legacy Keane and C&J in a manner that realizes cost savings and facilitates growth opportunities. However, we must successfully integrate the legacy Keane and C&J businesses in a manner that permits these benefits to be realized. In addition, we must achieve the cost savings and anticipated growth without adversely affecting current revenues and investments in future growth. If we are not able to successfully achieve these objectives, the anticipated benefits of the C&J Merger may not be realized fully, or at all, or may take longer to realize than expected.
An inability to realize the full extent of the anticipated benefits of the C&J Merger and the other transactions contemplated by the C&J Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon our revenues, level of expenses and operating results of the Company, which may adversely affect the value of our common stock.
In addition, the actual integration may result in additional and unforeseen expenses and may cost more than anticipated, and the anticipated benefits of the integration plan may not be realized. Actual cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated. If we are not able to adequately address integration challenges, it may be unable to successfully integrate the operations of legacy Keane and C&J or realize the anticipated benefits of the integration of the two companies.

The failure to successfully integrate the businesses and operations of the Company and C&J in the expected time frame may adversely affect the Company's future results.

There can be no assurances that the businesses of the Company and C&J can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the loss of customers, the disruption of ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of the two businesses in order to realize the anticipated benefits of the C&J Merger so the Company performs as expected:
combining the businesses operations and corporate functions of the Company and C&J, in a manner that permits the Company to achieve any cost savings or revenue synergies anticipated to result from the C&J Merger, the failure of which would result in the anticipated benefits of the C&J Merger not being realized in the time frame currently anticipated or at all;
reducing additional and unforeseen expenses to prevent integration costs from more than anticipated;

23



avoiding delays in the integration process;
integrating personnel from the two companies and retaining key employees;
integrating the companies' technologies;
integrating and standardizing the offerings and services available to customers;
identifying and eliminating redundant and underperforming functions and assets;
harmonizing the companies' operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;
maintaining existing agreements with customers, distributors, providers and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers and vendors;
addressing possible differences in business backgrounds, corporate cultures and management philosophies;
consolidating the companies' administrative and information technology infrastructure;
coordinating distribution and marketing efforts;
managing the movement of certain positions to different locations; and
effecting actions that may be required in connection with obtaining regulatory approvals.
In addition, at times the attention of certain members of the Company's management and resources may be focused on the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to the Company, which may disrupt the business of the Company.
Furthermore, the Company's board of directors and executive leadership of the Company consists of former directors and executive officers from each of the Company and C&J. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

Risks Related to Our Business
The loss of one or more significant customers could adversely affect our financial condition, prospects and results of operations.
Our business, financial condition, prospects and results of operations could be materially adversely affected, if one or more of our significant customers ceases to engage us for our services on favorable terms or at all, or fails to pay or delays in paying us significant amounts of our outstanding receivables. Our completions business has historically had contracts with a portion of our customers that are annual to multi-year.
Additionally, the E&P industry is characterized by frequent consolidation activity. Changes in ownership of our customers may result in the loss of, or reduction in, business from those customers, which could materially and adversely affect our business, financial condition, prospects or results of operations.
We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our financial results.
We are subject to the risk of loss resulting from nonpayment or nonperformance by our customers, many of whose operations are concentrated solely in the domestic E&P industry which, as described above, is subject to

24



volatility and, therefore, credit risk. Our credit procedures and policies may not be adequate to fully reduce customer credit risk. If we are unable to adequately assess the creditworthiness of existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them and our inability to re-market or otherwise use our equipment could have a material adverse effect on our business, financial condition, prospects and results of operations.
Our assets require significant amounts of capital for maintenance, upgrades and refurbishment and may require significant capital expenditures for new equipment.
Our hydraulic fracturing fleets and other service-related equipment require significant capital investment in maintenance, upgrades and refurbishment to maintain their competitiveness. Our fleets and other equipment typically do not generate revenue while they are undergoing maintenance, refurbishment or upgrades. Any maintenance, upgrade or refurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities. Furthermore, such projects may require proportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms. To the extent we are unable to fund such projects, we may have less equipment available for service, or our equipment may not be attractive to potential or current customers. Additionally, increased demand, competition, environmental and safety requirements or advances in technology within our industry may require us to update or replace existing fleets or build or acquire new fleets. For example, in 2018, we purchased approximately 150,000 newbuild hydraulic horsepower, representing three additional hydraulic fracturing fleets, for approximately $129.4 million. Such demands on our capital or reductions in demand for our hydraulic fracturing fleets and other service-related equipment and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, liquidity position, financial condition, prospects and results of operations.
We may be unable to employ a sufficient number of key employees, technical personnel and other skilled or qualified workers.
The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work. As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment with our competitors or in fields that offer a less demanding work environment. Furthermore, we require full compliance with the Immigration Reform and Control Act of 1986 and other laws concerning immigration and the hiring of legally documented workers. We recognize that foreign nationals may be a valuable source of talent, but that not all foreign nationals are authorized to work for U.S. companies immediately, without first obtaining a required work authorization from the U.S. Department of Homeland Security or similar government agency. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to adjust our operations according to geographic demand for our services depends in part on our ability to relocate or increase the size of our skilled labor force. The demand for skilled workers in our areas of operations can be high, the supply may be limited, and we may be unable to relocate our employees from areas of lower utilization to areas of higher demand. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. Furthermore, a significant decrease in the wages paid by us or our competitors as a result of reduced industry demand could result in a reduction of the available skilled labor force, and there is no assurance that the availability of skilled labor will improve following a subsequent increase in demand for our services or an increase in wage rates. If any of these events were to occur, our capacity and profitability could be diminished and our growth potential could be impaired.
We depend heavily on the efforts of executive officers, managers and other key employees to manage our operations. The unexpected loss or unavailability of key members of management or technical personnel may have a material adverse effect on our business, financial condition, prospects or results of operations.
Our commitments under supply agreements could exceed our requirements, exposing us to risks including price, timing of delivery and quality of products and services upon which our business relies.

25



We have purchase commitments with certain vendors to supply a majority of the proppant that we may provide in our operations. Some of these agreements are take-or-pay agreements with minimum purchase obligations. If demand for our hydraulic fracturing services decreases from current levels, demand for the raw materials and products we supply as part of these services will also decrease. If demand decreases enough, we could have contractual minimum commitments that exceed the required amount of goods we need to supply to our customers. In this instance, we could be required to purchase goods that we do not have a present need for, pay for goods that we do not take delivery of or pay prices in excess of market prices at the time of purchase.
Delays in deliveries of key raw materials or increases in the cost of key raw materials could harm our business, results of operations and financial condition.
We have established relationships with a limited number of suppliers of our raw materials (such as proppant, guar, chemicals or coiled tubing) and finished products (such as fluid-handling equipment). Raw materials essential to our business are normally readily available. However, high levels of demand for raw materials, such as gels, guar, proppant and hydrochloric acid, have triggered constraints in the supply chain of those raw materials and could dramatically increase the prices of such raw materials. Should any of our current suppliers be unable to provide the necessary raw materials or finished products or otherwise fail to deliver the products in a timely manner and in the quantities required, any resulting delays in the provision of services could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, increasing costs of certain raw materials, including guar or proppant, may negatively impact demand for our services or the profitability of our business operations. In the past, our industry faced sporadic shortages associated with hydraulic fracturing operations, such as proppant and guar, requiring work stoppages, which adversely impacted the operating results of several competitors. We may not be able to mitigate any future shortages of raw materials, including proppants.
We may be subject to claims for personal injury and property damage, which could materially adversely affect our financial condition, prospects and results of operations.
Our services are subject to inherent risks that can cause personal injury or loss of life, damage to or destruction of property, equipment or the environment or the suspension of our operations. Our operations are subject to, and exposed to, employee/employer liabilities and risks such as wrongful termination, discrimination, labor organizing, retaliation claims and general human resource related matters. Litigation arising from operations where our facilities are located, or our services are provided, may cause us to be named as a defendant in lawsuits asserting potentially large claims including claims for exemplary damages. We maintain what we believe is customary and reasonable insurance to protect our business against these potential losses, but such insurance may not be adequate to cover our liabilities, and we are not fully insured against all risks. Further, our insurance has deductibles or self-insured retentions and contains certain coverage exclusions. The current trend in the insurance industry is towards larger deductibles and self-insured retentions. In addition, insurance may not be available in the future at rates that we consider reasonable and commercially justifiable, compelling us to have larger deductibles or self-insured retentions to effectively manage expenses. As a result, we could become subject to material uninsured liabilities or situations where we have high deductibles or self-insured retentions that expose us to liabilities that could have a material adverse effect on our business, financial condition, prospects or results of operations.
Litigation and other proceedings could have a negative impact on our business.
The nature of our business makes us susceptible to legal proceedings and governmental audits and investigations from time to time. In addition, during periods of depressed market conditions, we may be subject to an increased risk of our customers, vendors, current and former employees and others initiating legal proceedings against us that could have a material adverse effect on our business, financial condition and results of operations. Similarly, any legal proceedings or claims, even if fully indemnified or insured, could negatively impact our reputation among our customers and the public, and make it more difficult for us to compete effectively or obtain adequate insurance in the future. See Note (18) Commitments and Contingencies of Part II, “Item 8. Financial Statements and Supplementary Data” for further discussion of our legal and environmental contingencies for the years ended December 31, 2019, 2018 and 2017.

26



Delays in obtaining, or inability to obtain or renew, permits or authorizations by our customers for their operations or by us for our operations could impair our business.
In most states, our customers are required to obtain permits or authorizations from one or more governmental agencies or other third parties to perform drilling and completion activities, including hydraulic fracturing. Such permits or approvals are typically required by state agencies, but can also be required by federal and local governmental agencies or other third parties. The requirements for such permits or authorizations vary depending on the location where such drilling and completion activities will be conducted. As with most permitting and authorization processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit or approval to be issued and the conditions which may be imposed in connection with the granting of the permit. In some jurisdictions, such as within the jurisdiction of the Delaware River Basin Commission, certain regulatory authorities have delayed or suspended the issuance of permits or authorizations, while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated. New York and Vermont, states in which we have no operations, have prohibited hydraulic fracturing statewide. In Texas, rural water districts have begun to impose restrictions on water use and may require permits for water used in drilling and completion activities. Permitting, authorization or renewal delays, the inability to obtain new permits or the revocation of current permits could cause a loss of revenue and potentially have a materially adverse effect on our business, financial condition, prospects or results of operations.
We are also required to obtain federal, state, local and/or third-party permits and authorizations in some jurisdictions in connection with our wireline services. These permits, when required, impose certain conditions on our operations. Any changes in these requirements could have a material adverse effect on our business, financial condition, prospects and results of operations.
We may not be successful in identifying and making acquisitions.
Part of our strategy is to continue to expand our geographic scope and customer relationships, increase our access to technology and to grow our business, which is dependent on our ability to make acquisitions that result in accretive revenues and earnings. We may be unable to make accretive acquisitions or realize expected benefits of any acquisitions for any of the following reasons:
    failure to identify attractive targets;
    incorrect assumptions regarding the future liabilities or future results of acquired operations or assets or expected cost reductions or other synergies expected to be realized as a result of acquiring operations or assets;
    failure to obtain financing on acceptable terms or at all;
    restrictions in our debt agreements;
    failure to successfully integrate the operations or management of any acquired operations or assets (particularly as we undertake the integration of the legacy Keane and C&J businesses);
    failure to retain or attract key employees;
    new or expanded areas of operational risk (such as offshore or international operations) and related costs and demands of any applicable regulatory compliance; and
diversion of management’s attention from existing operations or other priorities.
Our acquisition strategy requires that we successfully integrate acquired companies into our business practices, as well as our procurement, management and enterprise-wide information technology systems. We may not be successful in implementing our business practices at acquired companies, and our acquisitions could face difficulty in transitioning from their previous information technology systems to our own. Furthermore, unexpected costs and challenges may arise whenever businesses with different operations or management are combined. Any

27



such difficulties, or increased costs associated with such integration, could affect our business, financial performance and operations.
If we are unable to identify, complete and integrate acquisitions, it could have a material adverse effect on our growth strategy, business, financial condition, prospects and results of operations.
Integrating acquisitions may be time-consuming and create costs that could reduce our net income and cash flows.
Part of our strategy includes pursuing acquisitions that we believe will be accretive to our business. If we consummate an acquisition, the process of integrating the acquired business may be complex and time consuming, may be disruptive to the business and may cause an interruption of, or a distraction of management’s attention from, the business as a result of a number of obstacles, including, but not limited to:
a failure of our due diligence process to identify significant risks or issues;
the loss of customers of the acquired company or our company;
negative impact on the brands or banners of the acquired company or our company;
a failure to maintain or improve the quality of our customer service;
difficulties assimilating the operations and personnel of the acquired company;
our inability to retain key personnel of the acquired company;
the incurrence of unexpected expenses and working capital requirements;
our inability to achieve the financial and strategic goals, including synergies, for the combined businesses;
difficulty in maintaining internal controls, procedures and policies;
mistaken assumptions about the overall costs of equity or debt; and
unforeseen difficulties operating in new product areas or new geographic areas.
Any of the foregoing obstacles, or a combination of them, could decrease gross profit margins or increase selling, general and administrative expenses in absolute terms and/or as a percentage of net sales, which could in turn negatively impact our net income and cash flows. The foregoing obstacles could prove to be especially difficult in light of the C&J Merger since we are a newly combined company in the process of integrating the legacy Keane and C&J businesses.
We may not be able to consummate acquisitions in the future on terms acceptable to us, or at all. In addition, future acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may not be adequately reflected in the historical financial statements of that company and the risk that those historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach to accounting policies. Any of these material obligations, liabilities or incorrect or inconsistent assumptions could adversely impact our results of operations, prospects and financial condition.
If labor costs increase or we fail to attract and retain qualified employees our business, results of operations, cash flows and financial condition may be adversely affected.
The labor markets in the industries in which we operate are competitive. We must attract, train and retain a large number of qualified employees while controlling related labor costs. We face significant competition for these employees from the industries in which we operate as well as from other industries. Tighter labor markets may make it even more difficult for us to hire and retain qualified employees and control labor costs. Our ability to attract

28



qualified employees and control labor costs is subject to numerous external factors, including prevailing wage rates, employee preferences, employment law and regulation, environmental, health and safety regulation, labor relations and immigration policy. A significant increase in competition or cost increase arising from any of the aforementioned factors in may have a material adverse impact on our business, results of operations and financial condition.
A failure of our information technology systems, including the implementation of our new enterprise resource planning system, could have a material adverse effect on our business, financial condition, results of operations and cash flows and could adversely affect the effectiveness of our internal control over financial reporting.
We rely on sophisticated information technology systems and infrastructure to support our business. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, usage errors by employees, computer viruses, cyber-attacks or other security breaches or similar events. A failure or prolonged interruption in our information technology systems, or difficulties encountered in upgrading our systems or implementing new systems that compromises our ability to meet our customers’ needs or impairs our ability to record, process and report accurate information, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are in the process of integrating our enterprise resource planning (“ERP”) systems from each of the legacy entities to the C&J Merger that assist with the collection, storage, management and interpretation of data from our business activities to support future growth and to integrate significant processes. Our ERP system is critical to our ability to accurately maintain books and records, record transactions, provide important information to our management and prepare our consolidated financial statements. ERP system integration is complex and time-consuming and involves substantial expenditures on system software and integration activities, as well as changes to business processes and, possibly, adjustments to internal control over financial reporting. The integration of the ERP system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will continue to be beneficial to the extent anticipated. Any disruptions, delays or deficiencies in the integration of our ERP system, particularly ones that impact our financial reporting and accounting systems or our ability to provide services, send invoices, track payments or fulfill contractual obligations, could adversely affect our business, financial condition, results of operations and cash flows. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be impacted, which could cause us to fail to meet our reporting obligations.
We are subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss.
The oil and natural gas industry has become increasingly dependent on digital technologies to conduct certain processing activities. We use these technologies for internal purposes, including data storage (which may include personal identification information of our employees as well as our proprietary business information and that of our customers, suppliers, investors and other stakeholders), processing, and transmissions, as well as in our interactions with customers and suppliers. For example, we depend on digital technologies to perform many of our services and processes and to record operational and financial data. At the same time, cyber incidents, which could include, among other things, deliberate attacks, unintentional events, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks and other attacks and similar disruptions from the unauthorized use of or access to computer systems, have increased. The U.S. government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats. Our technologies, systems and networks, as well as those of our customers, suppliers and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary information, personal information and other data, or other disruption of our business operations. In addition, certain cyber incidents, such as unauthorized surveillance, may remain undetected for an extended period of time. Our systems and insurance coverage for protecting against cyber security risks, including cyberattacks, may not be sufficient and may not protect against or cover all of the losses we may experience as a result of the realization of such risks. In addition, these risks could harm our reputation and our relationships with customers, suppliers, employees, and other third-

29



parties, and may result in claims against us, including liability under laws that protect the privacy of personal information. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate the effects of cyber incidents.
If we fail to maintain an effective system of internal controls as required by Section 404 of the Sarbanes-Oxley Act of 2002, we may not be able to report our financial results accurately or prevent fraud, which could adversely affect our business and result in material misstatements in our financial statements.
Effective internal controls are necessary for us to provide timely and reliable financial reports, prevent fraud and to operate successfully as a publicly traded company. Our efforts to maintain our internal controls may not be successful, and we may be unable to maintain effective controls over our financial processes and reporting in the future or to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). For example, Section 404 requires us, among other things, to annually review and report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal controls over financial reporting. This assessment includes disclosure of any deficiencies or material weaknesses identified by our management in our internal control over financial reporting. Any failure to develop, implement or maintain effective internal controls or to improve our internal controls could harm our operating results, prevent us from identifying future deficiencies and material weaknesses or cause us to fail to meet our reporting obligations. Given the difficulties inherent in the design and operation of internal controls over financial reporting, we can provide no assurance as to our, or our independent registered public accounting firm’s conclusions, about the effectiveness of our internal controls, and we may incur significant costs in our efforts to comply with Section 404. Ineffective internal controls could result in material misstatements in our financial statements and subject us to increased regulatory scrutiny and a loss of confidence in our reported financial information, which could have an adverse effect on our business.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-bribery laws.
The United States Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries and partners from making, offering or authorizing improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Although we currently have limited international operations, we may do business in the future in countries or regions where strict compliance with anti-bribery laws may conflict with local customs and practices. Our employees, intermediaries, and partners may face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal or insurgent organizations, or private entities in the countries in which we operate or may operate in the future. As a result, we face the risk that an unauthorized payment or offer of payment could be made by one of our employees, intermediaries, or partners even if such parties are not always subject to our control or are not themselves subject to the FCPA or other anti-bribery laws to which we may be subject. We are committed to doing business in accordance with applicable anti-bribery laws and have implemented policies and procedures concerning compliance with such laws. Our existing safeguards and any future improvements, however, may prove to be less than effective, and our employees, intermediaries, and partners may engage in conduct for which we might be held responsible. Violations of the FCPA and other anti-bribery laws (either due to our acts, the acts of our intermediaries or partners, or our inadvertence) may result in criminal and civil sanctions and could subject us to other liabilities in the U.S. and elsewhere. Even allegations of such violations could disrupt our business and result in a material adverse effect on our business and operations.


30



Risks Related to Owning Our Indebtedness
Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.
We have a significant amount of indebtedness. As of December 31, 2019, we had $337.6 million of debt outstanding, net of discounts and deferred financing costs (not including capital lease obligations). After giving effect to our borrowing base, we had approximately $303.8 million of availability under our 2019 ABL Facility (as defined herein).
Our substantial indebtedness could have important consequences to you. For example, it could:
adversely affect the market price of our common stock;
increase our vulnerability to interest rate increases and general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes, including acquisitions;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
limit our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service requirements and other general corporate requirements; and
place us at a competitive disadvantage compared to our competitors that have less debt.
In addition, we cannot assure you that we will be able to refinance any of our debt, or that we will be able to refinance our debt on commercially reasonable terms. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as:
sales of assets;
sales of equity; or
negotiations with our lenders to restructure the applicable debt.
Our debt instruments may restrict, or market or business conditions may limit, our ability to use some of our options.

31



Despite our indebtedness levels, we may still be able to incur additional debt, which could further exacerbate the risks associated with our leverage.
We and our subsidiaries may be able to incur additional indebtedness in the future. The terms of the credit agreements that govern the 2019 ABL Facility and the 2018 Term Loan Facility (as defined herein and, together with the 2019 ABL Facility, the “Senior Secured Debt Facilities”) permit us to incur additional indebtedness, subject to certain limitations. If new indebtedness is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face would intensify. See Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Principal Debt Agreements” for further details.
The agreements governing our indebtedness contain operating covenants and restrictions that limit our operations and could lead to adverse consequences if we fail to comply with them.
The agreements governing our indebtedness contain certain operating covenants and other restrictions relating to, among other things, limitations on indebtedness (including guarantees of additional indebtedness) and liens, mergers, consolidations and dissolutions, sales of assets, investments and acquisitions, dividends and other restricted payments, repurchase of shares of capital stock and options to purchase shares of capital stock and certain transactions with affiliates. In addition, our Senior Secured Debt Facilities include certain financial covenants.
The restrictions in the agreements governing our indebtedness may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.
Failure to comply with these financial and operating covenants could result from, among other things, changes in our results of operations, the incurrence of additional indebtedness, declines in the pricing of our services and products, difficulties in implementing cost reduction initiatives, difficulties in implementing our overall business strategy or changes in general economic conditions, which may be beyond our control. The breach of any of these covenants or restrictions could result in a default under the agreements that govern these facilities that would permit the lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay such amounts, lenders having secured obligations could proceed against the collateral securing these obligations. The collateral includes the capital stock of our domestic subsidiaries and substantially all of our and our subsidiaries’ other tangible and intangible assets, subject in each case to certain exceptions. This could have serious consequences on our financial condition and results of operations and could cause us to become bankrupt or otherwise insolvent. In addition, these covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our business and stockholders.
See Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Principal Debt Agreements” for further details.
Substantially all of our debt is variable rate and increases in interest rates could negatively affect our financing costs and our ability to access capital.
We have exposure to future interest rates based on the variable rate debt under the Senior Secured Debt Facilities, and to the extent we raise additional debt in the capital markets to meet maturing debt obligations, to fund our capital expenditures and working capital needs and to finance future acquisitions. Daily working capital requirements are typically financed with operational cash flow and through borrowings under our 2019 ABL Facility, if needed. The interest rate on these borrowing arrangements is generally determined from the inter-bank offering rate at the borrowing date plus a pre-set margin. Although we employ risk management techniques to hedge against interest rate volatility, significant and sustained increases in market interest rates could materially increase our financing costs and negatively impact our reported results.
In addition, in certain circumstances, our variable rate indebtedness uses the London Interbank Offer Rate (“LIBOR”) as a benchmark for establishing the interest rate. The LIBOR has been subject of national, international,

32



and other regulatory guidance and proposals for reform. In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit rates for calculation of LIBOR after 2021. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in our financing costs and our ability to access capital.
Disruptions in the capital and credit markets, continued low commodity prices, our debt level and other factors may restrict our ability to raise capital on favorable terms, or at all.
Disruptions in the capital and credit markets, in particular with respect to companies in the energy sector, could limit our ability to access these markets or may significantly increase our cost to borrow. Continued low commodity prices, among other factors, have caused some lenders to increase interest rates, enact tighter lending standards which we may not satisfy as a result of our debt level or otherwise, refuse to refinance existing debt at maturity on favorable terms, or at all, and in certain instances have reduced or ceased to provide funding to borrowers. If we are unable to access the capital and credit markets on favorable terms or at all, it could adversely affect our business, financial condition and results of operations.
Ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes is subject to limitation under Section 382 of the Internal Revenue Code, and NOLs and other tax attributes is subject to reduction, causing less NOL or tax deductions to be available to offset future taxable income for U.S. federal income tax purpose.
Under U.S. federal income tax law, a corporation is generally permitted to deduct from taxable income net operating losses (“NOLs”) carried forward from prior years. As of December 31, 2019, we reported consolidated federal NOL carryforwards of approximately $787.6 million of which $721.3 million are pre-change NOL's subject to limitation. Our ability to utilize our NOL carryforwards to offset future taxable income and to reduce U.S. federal income tax liability is subject to certain requirements and restrictions. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. An ownership change generally occurs if one or more shareholders (or groups of shareholders) who are each deemed to own at least 5% of our stock have aggregate increases in their ownership of such stock of more than 50 percentage points over such stockholders’ lowest ownership percentage during the testing period (generally a rolling three year period). We believe we experienced an ownership change in October 2019 as a result of the C&J Merger. We also believe we experienced an ownership change in January 2017 as a result of the implementation of the IPO. Thus our pre-change NOLs are subject to limitation under Section 382 of the Code as a result. Such limitation may cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitation were not in effect and could cause a portion of our pre-change NOLs generated prior to 2018 to expire unused, in each case reducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for state income tax purposes.
Risks Related to Owning Our Common Stock
The price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price.
The market price for our common stock is volatile. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including
the failure of securities analysts to cover, or continue to cover, our common stock or changes in financial estimates by analysts;
changes in, or investors’ perception of, the oil field services industry, including hydraulic fracturing;
the activities of competitors;
future issuances and sales of our common stock, including in connection with acquisitions;

33



our quarterly or annual earnings or those of other companies in our industry;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
regulatory or legal developments in the U.S.;
litigation involving us, our industry, or both; and
general economic conditions.
In addition, the stock market often experiences extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of a particular company. These broad market fluctuations and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.
If a substantial number of shares becomes available for sale and are sold in a short period of time, the market price of our common stock could decline and our stockholders may be diluted.
As of March 9, 2019, 213,193,419 shares of common stock were outstanding, of which approximately 19.1% of the shares were held by Cerberus through Keane Investor. If they sell substantial amounts of our common stock in the public market, the market price of our common stock could decrease. The perception in the public market that Keane Investor might sell shares of common stock could also create a perceived overhang and depress our market price.
Because we do not currently pay dividends, our stockholders may not receive any return on investment, unless they sell their common stock for a price greater than that which they paid for it.
We do not currently pay dividends, and our stockholders do not have contractual or other rights, to receive dividends. Our board of directors may, in its discretion, modify or repeal our dividend policy. The declaration and payment of dividends depends on various factors, including: our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors.
In addition, we are a holding company that does not conduct any business operations of our own. As a result, we would be dependent upon cash dividends and distributions and other transfers from our subsidiaries to make dividend payments. Our subsidiaries’ ability to pay dividends is restricted by agreements governing their debt instruments and may be restricted by agreements governing any of our subsidiaries’ future indebtedness. Furthermore, our subsidiaries are permitted under the terms of their debt agreements to incur additional indebtedness that may severely restrict or prohibit the payment of dividends. See Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”
Under the Delaware General Corporation Law (the “DGCL”), our board of directors may not authorize payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
We may not execute our capital return program, including the repurchase of our common stock pursuant to our share repurchase program under the capital return program, and such programs may not have the desired effect.
In December 2019, our board of directors approved a capital return program under which we may expend a total of up to $100 million through December 31, 2020, through stock repurchases, dividends or other capital return strategies. As part of the capital return program, our board of directors approved a stock repurchase program of up to $50 million of the Company's common stock, subject to U.S. Securities and Exchange Commission regulations, stock market conditions, capital needs of the business and other factors. Since the inception of our share repurchase program through December 31, 2019, we have made no share repurchases. We can provide no assurance that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will

34



enhance long-term stockholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.
Although our board of directors has approved a share repurchase program, the share repurchase program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. In addition, repurchases of our common stock pursuant to our share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Furthermore, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the program’s effectiveness.
Our stockholders may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions or otherwise.
We have 286,806,581 shares of common stock authorized but unissued under our certificate of incorporation. We will be authorized to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for consideration and on terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have 14,054,982 shares of our common stock available for award that may be issued under our equity incentive plans. Any common stock that we issue, including under our equity incentive plans or other equity incentive plans that we may adopt in the future, may result in additional dilution to our stockholders.
In the future, we may also issue our securities, including shares of our common stock, in connection with investments or acquisitions. We regularly evaluate potential acquisition opportunities, including ones that would be significant to us, and at any one time we may be participating in processes regarding several potential acquisition opportunities, including ones that would be significant to us. We cannot predict the timing of any contemplated transactions, and none are currently probable. The number of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
Keane Investor and Cerberus own a significant amount of our common stock and continue to have significant influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control.
Cerberus currently controls approximately 19.1% of our common stock. Even though Cerberus no longer controls a majority of our common stock, Cerberus continues to have significant influence over us, including the election of our directors, determination of our corporate and management policies and determination of the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. Two of our 12 directors are employees of, appointees of, or advisors to, members of Cerberus. The interests of Cerberus may not coincide with the interests of other holders of our common stock. For example, the concentration of ownership held by Cerberus could delay, defer or prevent a change of control of our company or impede a merger, takeover or other business combination that may otherwise be favorable for us. Additionally, Cerberus is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Cerberus may also pursue, for its own members’ accounts, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as Cerberus continues to directly or indirectly own a significant amount of our equity, Cerberus will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

35



Provisions in our charter documents, certain agreements governing our indebtedness, our Stockholders’ Agreement (as defined herein) and Delaware law could make acquiring us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
Provisions in our certificate of incorporation, our bylaws and our Stockholders’ Agreement, may discourage, delay or prevent a merger, acquisition or other change in control that some stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares of our common stock. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, possibly depressing the market price of our common stock.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace members of our management team. Examples of such provisions are as follows:
on or after such date that Keane Investor and its respective Affiliates (as defined in Rule 12b-2 of the Exchange Act, or any person who is an express assignee or designee of Keane Investor’s respective rights under our certificate of incorporation (and such assignee’s or designee’s Affiliates)) (of these entities, the entity that is the beneficial owner of the largest number of shares is referred to as the “Designated Controlling Stockholder”) ceases to own, in the aggregate, at least 50% of the then-outstanding shares of our common stock (the “50% Trigger Date”),the authorized number of our directors may be increased or decreased only by the affirmative vote of two-thirds of the then-outstanding shares of our common stock or by resolution of our board of directors;
on or after the 50% Trigger Date, our stockholders may only amend our bylaws with the approval of at least two-thirds of all of the outstanding shares of our capital stock entitled to vote;
the manner in which stockholders can remove directors from the board will be limited;
on or after the 50% Trigger Date, stockholder actions must be effected at a duly called stockholder meeting and actions by our stockholders by written consent are prohibited;
from and after such date that the Designated Controlling Stockholder ceases to own, in the aggregate, at least 35% of the then-outstanding shares of our common stock (the “35% Trigger Date”), advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors will be established;
who may call stockholder meetings is limited;
requirements on any stockholder (or group of stockholders acting in concert), other than, prior to the 35% Trigger Date, the Designated Controlling Stockholder, who seeks to transact business at a meeting or nominate directors for election to submit a list of derivative interests in any of our Company’s securities, including any short interests and synthetic equity interests held by such proposing stockholder;
requirements on any stockholder (or group of stockholders acting in concert) who seeks to nominate directors for election to submit a list of “related party transactions” with the proposed nominee(s) (as if such nominating person were a registrant pursuant to Item 404 of Regulation S-K, and the proposed nominee was an executive officer or director of the “registrant”); and
our board of directors is authorized to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.

36



Our certificate of incorporation authorizes our board of directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined by our board of directors at the time of issuance or fixed by resolution without further action by the stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of preferred stock could diminish the rights of holders of our common stock, and therefore, could reduce the value of our common stock. In addition, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could delay, discourage, prevent or make it more difficult or costly to acquire or effect a change in control, thereby preserving the current stockholders’ control.
In addition, under the agreements governing the Senior Secured Debt Facilities, a change in control may lead the lenders and/or holders to exercise remedies such as acceleration of the obligations thereunder, termination of their commitments to fund additional advances and collection against the collateral securing such obligations.
In connection with the Keane IPO, Keane entered into a Stockholders’ Agreement with Keane Investor. This stockholders’ agreement was amended and restated in conjunction with the C&J Merger (as amended and restated, the “Stockholders’ Agreement”) and provides that, except as otherwise required by applicable law, from the date on which (a) Keane Investor or, in the event a Cerberus Holder no longer holds Company shares through Keane Investor, Cerberus Holder has beneficial ownership of at least 12.5% or greater of the aggregate number of company shares then outstanding, Keane Investor or, in the event Cerberus Holder no longer holds company shares through Keane Investor, Cerberus Representative shall have the right to designate to the board of directors two individuals who satisfy the Director Requirements; and (b) Keane Investor or, in the event Cerberus Holder no longer holder company shares through Keane Investor, Cerberus Holder has beneficial ownership of less than 12.5% but at least 7.5% of the aggregate number of company shares then outstanding, Keane Investor or, in the event Cerberus Holder no longer holds company shares through Keane Investor, Cerberus Representative shall have the right to designate to the board of directors one individual who satisfies the Director Requirements. The ability of Keane Investor or a Holder to appoint one or more directors could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

Our certificate of incorporation and bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws; or (d) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, prospects or results of operations.


37




Item 1B. Unresolved Staff Comments
None.


38




Item 2. Properties
Properties
We lease office space for our principal executive headquarters, which is located at 3990 Rogerdale Rd., Houston, Texas 77042, for our research and technology facility at 10771 Westpark Dr., Houston, Texas 77042 and for our engineering and technology center at 8301 New Trails Dr., The Woodlands, Texas. We also own property for our maintenance facility at 1214 Gas Plant Rd., San Angelo, Texas 76904.
In addition, we own or lease numerous other smaller facilities and administrative offices across the geographic regions in which we operate to support our ongoing operations, including district offices, local sales offices, yard facilities and temporary facilities to house employees in regions where infrastructure is limited. Our leased properties are subject to various lease terms and expirations. We believe that our existing facilities are adequate for our operations and our locations allow us to efficiently serve our customers. However, we continue to evaluate the purchase or lease of additional properties or the consolidation of our properties, as our business requires. We do not believe that any single facility is material to our operations and, if necessary, we could readily obtain a replacement facility.



39




Item 3. Legal Proceedings
Due to the nature of our business, we are, from time to time and in the ordinary course of business, involved in routine litigation or subject to disputes or claims related to our business activities. It is our management’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 our 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 C&J 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 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 and Bushansky actions voluntarily dismissed their claims as moot on October 16, 2019 and October 29, 2019, respectively. The defendants have not yet answered or otherwise responded to the complaints in the remaining Stockholder Actions, 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.



Item 4. Mine Safety Disclosures

40



Not applicable.

41




PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information
From the consummation of our IPO in January of 2017 until October 30, 2019, our common stock traded on the New York Stock Exchange (“NYSE”) under the symbol “FRAC.” As of October 31, 2019, our common stock trades on the NYSE under the symbol “NEX”.     On March 9, 2020, the last reported sales price of our common stock on the NYSE was $2.03 per share.
Comparative Stock Performance Graph
The information contained in this Comparative Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
The graph below compares the cumulative total shareholder return on our common stock, the cumulative total return on the Standard & Poor’s 500 Stock Index, the Standard & Poor’s MidCap Index, the Oilfield Service Index and a composite average of publicly traded peer companies (Basic Energy Services, Inc., FTS International, Inc., Liberty Oilfield Services Inc., Patterson-UTI Energy, Inc., ProPetro Holding Corp., Quintana Energy Services, RPC, Inc., and Superior Energy Services, Inc.), since January 20, 2017.
The graph assumes $100 was invested on January 20, 2017 in our common stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s MidCap Index, the Oilfield Service Index and a composite of publicly traded peer companies. The cumulative total return assumes the reinvestment of all dividends. We elected to include the stock performance of a composite of our publicly traded peers, as we believe it is an appropriate benchmark for our line of business/industry.
COMPARATIVESTOCKPERFORMANCE2.JPG
Holders

42



As of March 9, 2020, we had 213,193,419 shares of common stock issued and outstanding, held by approximately 8 registered holders. The number of registered holders does not include holders that have common stock held for them in “street name,” meaning that the stock is held for their accounts by a broker or other nominee.
Dividends
We have not paid any cash dividends on our common stock to date. However, we anticipate that our board of directors will consider the payment of dividends in the future based on our levels of profitability and indebtedness. The declaration and payment of any future dividends will be at the sole discretion of our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends and other considerations that our board of directors deems relevant. Our board of directors may decide, in its discretion, at any time, to modify or repeal the dividend policy or discontinue entirely the payment of dividends.
The ability of our board of directors to declare a dividend is also subject to limits imposed by Delaware corporate law. Under Delaware law, our board of directors and the boards of directors of our corporate subsidiaries incorporated in Delaware may declare dividends only to the extent of our “surplus,” which is defined as total assets at fair market value minus total liabilities, minus statutory capital, or if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
On December 11, 2019, we announced that our board of directors had authorized a stock repurchase program of up to $50 million of our outstanding common stock, with the intent of returning value to our shareholders, as we continue to expect further growth and profitability. The program does not obligate us to purchase any particular number of shares of common stock during any period, and the program may be modified or suspended at any time at our discretion. The duration of the stock buy-back program was through December 31, 2020.
Purchases of Equity Securities
Issuer Purchases of Equity Securities
Settlement Period
 
(a) Total Number of Shares Purchased(3)

 
(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)(2)

October 1, 2019 through October 31, 2019
 
407,023

 
$
4.32

 

 
$
100,000,000

November 1, 2019 through November 30, 2019
 
36,952

 
$
4.61

 

 
$
100,000,000

December 1, 2019 through December 31, 2019
 
137,890

 
$
6.02

 

 
$
150,000,000

Total
 
581,865

 
$
4.74

 

 
$
150,000,000

 
 
 
 
 
 
 
 
 
(1) On February 26, 2018,  we announced that our board of directors authorized a12-month stock repurchase program of up to $100.0 million of the Company’s outstanding common stock. Effective February 25, 2019, our board of directors authorized a reset of capacity on the existing stock repurchase program back to $100.0 million. Additionally, the program’s expiration date was extended to December 2019 from a previous expiration of September 2019.
(2) On December 11, 2019, the Company announced the board of directors approved a new share repurchase program for up to $50.0 million through December 2020.
(3) 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.

43





44




Item 6. Selected Financial Data
The selected financial data for the periods presented was derived from our audited consolidated and combined financial statements . The selected historical financial data presented below is not intended to replace our historical financial statements, and should be read in conjunction with Part I, “Item 1A. Risk Factors,” Part II, “Item 7. Management’s Discussion and Analysis of Financial and Results of Operations” and our audited consolidated and combined financial statements included in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report in order to understand those factors, such as the C&J Merger, which may affect the comparability of the Selected Financial Data.
 
 
Years Ended December 31,
 
 
2019(1)
 
2018
 
2017(2)
 
2016(3)
 
2015
(in thousands of dollars, except per share amounts)
 
 
 
 
 
 
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
1,821,556

 
$
2,137,006

 
$
1,542,081

 
$
420,570

 
$
366,157

Cost of services(4)
 
1,403,932

 
1,660,546

 
1,282,561

 
416,342

 
306,596

Depreciation and amortization
 
292,150

 
259,145

 
159,280

 
100,979

 
69,547

Selling, general and administrative expenses
 
123,676

 
113,810

 
84,853

 
36,615

 
26,081

Merger and integration
 
68,731

 
448

 
8,673

 
16,540

 

(Gain) loss on disposal of assets
 
4,470

 
5,047

 
(2,555
)
 
(387
)
 
(270
)
Impairment
 
12,346

 

 

 
185

 
3,914

Total operating costs and expenses
 
1,905,305

 
2,038,996

 
1,532,812

 
570,274

 
405,868

Operating income (loss)
 
(83,749
)
 
98,010

 
9,269

 
(149,704
)
 
(39,711
)
Other income (expense), net
 
453

 
(905
)
 
13,963

 
916

 
(1,481
)
Interest expense(5)
 
(21,856
)
 
(33,504
)
 
(59,223
)
 
(38,299
)
 
(23,450
)
Total other expenses
 
(21,403
)
 
(34,409
)
 
(45,260
)
 
(37,383
)
 
(24,931
)
Income (loss) before income taxes
 
(105,152
)
 
63,601

 
(35,991
)
 
(187,087
)
 
(64,642
)
Income tax expense
 
(1,005
)
 
(4,270
)
 
(150
)
 

 

Net income (loss)
 
$
(106,157
)
 
$
59,331

 
$
(36,141
)
 
$
(187,087
)
 
$
(64,642
)
Per Share Data(6)
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per share
 
$
(0.86
)
 
$
0.54

 
$
(0.34
)
 
$
(2.14
)
 
$
(0.74
)
Diluted net income (loss) per share
 
(0.86
)
 
0.54

 
(0.34
)
 
(2.14
)
 
(0.74
)
Weighted average number of shares:
 basic
 
122,977

 
109,335

 
106,321

 
87,313

 
87,313

Weighted average number of shares:
 diluted
 
122,977

 
109,660

 
106,321

 
87,313

 
87,313


45



 
 
Years Ended December 31,
Statement of Cash Flows Data:
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
$
305,463

 
$
350,311

 
$
79,691

 
$
(54,054
)
 
$
37,521

Cash flows from investing activities
 
(114,100
)
 
(297,506
)
 
(250,776
)
 
(227,161
)
 
(26,038
)
Cash flows from financing activities
 
(16,746
)
 
(68,554
)
 
218,122

 
276,633

 
(10,518
)
Other Financial Data:
 
 
 
 
 
 
 
 
 
 
Capital expenditures(7)   
 
$
193,187

 
$
291,543

 
$
189,629

 
$
23,545

 
$
27,246

Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,664,907

 
$
1,054,579

 
$
1,043,116

 
$
536,940

 
$
324,795

Long-term debt (including current portion) (8) 
 
337,623

 
340,730

 
275,055

 
269,750

 
207,067

Total liabilities
 
778,135

 
567,398

 
530,024

 
374,688

 
244,635

Total stockholders’ equity
 
886,772

 
487,181

 
513,092

 
162,252

 
80,160

 
 
 
 
 
 
 
 
 
 
 
(1)
Commencing on November 1, 2019, our consolidated and combined financial statements also include the financial position, results of operations and cash flows of C&J.
(2)
Commencing on July 3, 2017, our consolidated and combined financial statements also include the financial position, results of operations and cash flows of RockPile.
(3)
Commencing on March 16, 2016, our consolidated and combined financial statements also include the financial position, results of operations and cash flows of the Acquired Trican Operations.
(4)
Excludes depreciation and amortization, shown separately.
(5)
Interest expense during the year ended December 31, 2019 includes $0.5 million in write-offs in connection with the modification of the 2017 ABL Facility. Interest expense during the year ended December 31, 2018 includes $7.6 million in write-offs of deferred financing costs, incurred in connection with the early debt extinguishment of our 2017 Term Loan Facility (as defined herein). Interest expense during the year ended December 31, 2017 includes $15.8 million of prepayment penalties and $15.3 million in write-offs of deferred financing costs, incurred in connection with the refinancing of our then existing revolving credit and security agreement (as amended, the “2016 ABL Facility”) and the early debt extinguishment of our the term loan facility provided by that certain credit agreement entered into on March 16, 2016 by KGH Intermediate Holdco I, LLC, Holdco II and Keane Frac, LP (as amended, the “2016 Term Loan Facility”) with certain financial institutions (collectively, the “2016 Term Lenders”) and CLMG Corp., as administrative agent for the 2016 Term Lenders, and Senior Secured Notes (as defined herein).
(6)
The pro forma earnings per unit amounts for 2017, 2016 and 2015 have been computed to give effect to the Organizational Transactions, including the limited liability company agreement of Keane Investor to, among other things, exchange all of our Existing Owners’ membership interests for the newly-created ownership interests. The computations of pro forma earnings per unit do not consider the 15,700,000 shares of common stock newly-issued by the Company to investors in the IPO.
(7)
Capital expenditures do not include, for the year ended December 31, 2018, $35.0 million of capital expenditures related to the asset acquisition from RSI, for the year ended December 31, 2017, $116.6 million of capital expenditures related to the acquisition of RockPile and, for the year ended December 31, 2016, $205.4 million of capital expenditures related to the acquisition of the Acquired Trican Operations.
(8)
Long-term debt includes $7.1 million, $7.5 million, $8.2 million and $18.4 million of unamortized debt discount and debt issuance costs for 2019, 2018, 2017, and 2016 respectively, and excludes capital lease obligations.



46



Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated and combined financial statements and related notes included within Part II, “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. For additional information related to forward looking statements or information related to the basis of presentation and comparability of financial information, please see “Cautionary Statement Regarding Forward-Looking Statements and Information” and “Basis of Presentation in this Annual Report on Form 10-K”, both of which immediately follow the table of contents of this Form 10-K.
Business 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 (i) our 2017 acquisition of RockPile, a multi-basin provider of integrated well completion services in the U.S. whose primary service offerings included hydraulic fracturing, wireline perforation and workover rigs, and (ii) our 2018 asset acquisition from RSI to acquire approximately 90,000 hydraulic horsepower and related support equipment. Our most recent strategic transaction was the October 31, 2019, merger transaction with C&J Energy Services, Inc. (“C&J Merger”), a publicly traded Delaware corporation. This history impacts the comparability of our operational results from year to year. See Part I, “Item 1. Business” of this Annual Report for an overview of our history, including additional information on the acquisitions noted above, including the C&J Merger, our 2017 IPO, predecessor, and business environment. Additional information on these transactions can be found in Note (3) Mergers and Acquisitions of Part II, “Item 8. Financial Statements and Supplemental Data.”
Industry 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. These regions are expected to account for approximately 73% of all new horizontal wells anticipated to be drilled through 2021. In addition, the high density of our operations in the basins in which we are most active provides us the opportunity to leverage our fixed costs and to quickly respond with what we believe are highly efficient, integrated solutions that are best suited to address customer requirements.
In particular, we are one of the largest providers of completion services in the Permian Basin, the most prolific and cost-competitive oil and natural gas basin in the United States. The Permian and the Marcellus Shale/Utica Basins are expected to account for 56% of total active rigs in the United States through 2022. These basins have experienced a recovery in activity since the spring of 2016, with an 156% increase in rig count from their combined second quarter of 2016 low of 185 to 475 as of December 31, 2019. Our financial performance is significantly affected by rig and well count in North America, as well as oil and natural gas prices, which are summarized in the tables below.
Activity within our business segments is significantly impacted by spending on upstream exploration, development and production programs by our customers. Also impacting our activity is the status of the global economy, which impacts 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.

47


While it is too early to determine the impact, the recent actions taken by OPEC are expected to have a material negative impact on crude oil prices. Our customers’ cash flows, in most instances, depend upon the revenue they generate from the sale of oil and natural gas. Lower oil and natural gas prices usually translate into lower exploration and production budgets. We are closely monitoring the situation including potential activity responses by our E&P customers.
The following table shows the average historical oil and natural gas prices for WTI and Henry Hub natural gas:
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Oil price - WTI(1)
 
$
56.98

 
$
64.94

 
$
50.88

Natural gas price - Henry Hub(2)
 
$
2.57

 
$
3.17

 
$
2.99

(1)  Oil price measured in dollars per barrel
(2)  Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu
 
 
 
 
 
 
 
The historical average U.S. rig counts based on the weekly Baker Hughes Incorporated rig count information were as follows:
 
 
Year Ended December 31,
Product Type
 
2019
 
2018
 
2017
Oil
 
773

 
841

 
703

Natural Gas
 
169

 
190

 
172

Other
 
1

 
1

 
1

Total
 
943

 
1,032

 
876

 
 
 
 
 
 
 
 
 
Year Ended December 31,
Drilling Type
 
2019
 
2018
 
2017
Horizontal
 
826

 
900

 
736

Vertical
 
54

 
63

 
70

Directional
 
63

 
69

 
70

Total
 
943

 
1,032

 
876

 
 
 
 
 
 
 
As of February 2020, global liquids demand is expected to average 101.7 million barrels per day in 2020. The EIA anticipates continued growth in the long-term U.S. domestic demand for natural gas, supported by various factors, including (i) increased likelihood of favorable regulatory and legislative initiatives, (ii) increased acceptance of natural gas as a clean and abundant domestic fuel source and (iii) the emergence of low-cost natural gas shale developments. As of February 2020, natural gas demand in the United States is expected to average 86.24 billion cubic feet per day in 2020.
Operating Approach & Strategy
We believe our integrated approach and proven capabilities enable us to deliver cost-effective solutions for increasingly complex and technically demanding well completion requirements, which include longer lateral segments, higher pressure rates and proppant intensity and multiple fracturing stages in challenging high-pressure formations. In addition, our technical team and our three innovation centers, provide us with the ability to supplement our service offerings with engineered solutions specifically tailored to address customers’ completion requirements and unique challenges.

48


Our revenues and profits are generated by providing services and equipment to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. Our results of operations in our core service lines are driven primarily by five interrelated, fluctuating variables: (1) the drilling, completion and production activities of our customers, which is primarily driven by oil and natural gas prices and directly affects the demand for our services; (2) the price we are able to charge for our services and equipment, which is primarily driven by the level of demand for our services and the supply of equipment capacity in the market; (3) the cost of materials, supplies and labor involved in providing our services, and our ability to pass those costs on to our customers; (4) our activity, or deployed equipment “utilization” levels; and (5) the quality, safety and efficiency of our service execution.
Our operating strategy is focused on maintaining high utilization levels of deployed equipment to maximize revenue generation while controlling costs to gain a competitive advantage and drive returns. We believe that the quality and efficiency of our service execution and aligning with customers who recognize the value that we provide through service quality and efficiency gains are central to our efforts to support equipment utilization and grow our business.
However, equipment utilization cannot be relied on as wholly indicative of our financial or operating performance due to variations in revenue and profitability from job to job, the type of service to be performed and the equipment, personnel and consumables required for the job, as well as competitive factors and market conditions in the region in which the services are performed. 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.
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). 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.

49


Our Reportable Segments
As of December 31, 2019, 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.
Completion Services
The core services provided through our Completion Services segment are hydraulic fracturing, wireline and pumpdown services. As of December 31, 2019, we had approximately 45 hydraulic fracturing fleets, 118 wireline trucks and 80 pumpdown units capable of being deployed. Our completion support services are focused on supporting the efficiency, reliability and quality of our operations. Our Innovation Centers provide in-house manufacturing capabilities that help to reduce operating cost and enable us to offer more technologically advanced and efficiency focused completion services, which we believe is a competitive differentiator. For example, through our Innovation Centers we manufacture the data control instruments used in our fracturing operations and the perforating guns and addressable switches used in our wireline operations; these products are also available for sale to third-parties. The majority of revenue for this segment is generated by our fracturing business.
Well Construction and Intervention Services
The core services provided through our Well Construction and Intervention Services segment are cementing and coiled tubing services. The majority of revenue for this segment is generated by our cementing business. As of December 31, 2019, we had approximately 25 coiled tubing units and 101 cementing units capable of being deployed.
Well Support 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. Since early 2017, in response to the highly competitive landscape and reflecting our returns-focused strategy, we had focused on operational rightsizing measures to better align these businesses with current market conditions. This strategy resulted in closing facilities and idling unproductive equipment. For example, we either sold or shut down numerous businesses or asset packages, which included the divestiture of the majority of our fluids management assets in both West and South Texas in the third quarter of 2019. As of December 31, 2019, we had approximately 276 workover rigs and 348 fluids management trucks capable of being deployed. The majority of revenue for this segment is generated by our rig services business, and we consider rig services and fluids management to be the primary businesses within this segment.
How we calculate utilization for each segment
Our management team monitors asset utilization, among other factors, for purposes of assessing our overall activity levels and customer demand. For our Completion Services segment, asset utilization levels for our own fleets is defined as the ratio of the average number of deployed fleets to the number of total fleets for a given time period. We define active fleets as fleets available for deployment; we consider one of our fleets deployed if the fleet has been put in service at least one day during the period for which we calculate utilization; and we define fully-

50


utilized fleets per month as fleets that were deployed and working with our customers for a significant portion of a given month. As a result, as additional fleets are incrementally deployed, our utilization rate increases. We define industry utilization of fracturing assets as the ratio of the total industry demand of hydraulic horsepower to the total available capacity of hydraulic horsepower, in each case as reported by an independent industry source. Our method for calculating the utilization rate for our own fracturing fleets or the industry may differ from the method used by other companies or industry sources which could, for example, be based off a ratio of the total number of days a fleet is put in service to the total number of days in the relevant period. We believe that our measures of utilization, based on the number of deployed fleets, provide an accurate representation of existing, available capacity for additional revenue generating activity.
In our Well Construction and Intervention Services segment, we measure our asset utilization levels for our cementing business primarily by the total number of days that our asset base works on a monthly basis, based on the available working days per month. In our coiled tubing business, we measure certain asset utilization levels by the hour to better understand measures between daylight and 24-hour operations. Both the financial and operating performance of our coiled tubing and cement units can vary in revenue and profitability from job to job depending on the type of service to be performed and the equipment, personnel and consumables required for the job, as well as competitive factors and market conditions in the region in which the services are performed.
In our Well Support Services segment, we measured asset utilization levels primarily by the number of hours our assets work on a monthly basis, based on the available working days per month.
Our operating strategy is focused on maintaining high asset utilization levels to maximize revenue generation while controlling costs to gain a competitive advantage and drive returns. 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. 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. For additional information about factors impacting our business and results of operations, please see “Industry Trends and Outlook” in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.
RESULTS OF OPERATIONS
The following table sets forth our financial results for the year ended December 31, 2019 as compared to the year ended the year ended December 31, 2018. Our financial results for 2019 include the financial and operating results of the businesses acquired in the C&J Merger for the partial period beginning November 1, 2019 through December 31, 2019.
A comparison of our financial results for the year ended December 31, 2018 and for the year ended December 31, 2017 can be found in the "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 27, 2019.

51




Year Ended December 31, 2019 Compared with Year Ended December 31, 2018
 
 
Year Ended December 31,
(Thousands of Dollars)
 
 
 
 
 
As a % of Revenue
 
Variance 
Description
 
2019
 
2018
 
2019
 
2018
 
$
 
%
Completion Services
 
$
1,709,934

 
$
2,100,956

 
94
%
 
98
%
 
$
(391,022
)
 
(19
%)
Well Construction and Intervention Services
 
63,039

 
36,050

 
3
%
 
2
%
 
26,989

 
75
%
Well Support Services
 
48,583

 

 
3
%
 
0
%
 
48,583

 
0
%
Revenue
 
1,821,556

 
2,137,006

 
100
%
 
100
%
 
(315,450
)
 
(15
%)
Completion Services
 
1,308,089

 
1,622,106

 
72
%
 
76
%
 
(314,017
)
 
(19
%)
Well Construction and Intervention Services
 
55,227

 
38,440

 
3
%
 
2
%
 
16,787

 
44
%
Well Support Services
 
40,616

 

 
2
%
 
0
%
 
40,616

 
0
%
Costs of services
 
1,403,932

 
1,660,546

 
77
%
 
78
%
 
(256,614
)
 
(15
%)
Depreciation and amortization
 
292,150

 
259,145

 
16
%
 
12
%
 
33,005

 
13
%
Selling, general and administrative expenses
 
123,676

 
113,810

 
7
%
 
5
%
 
9,866

 
9
%
Merger and integration
 
68,731

 
448

 
4
%
 
0
%
 
68,283

 
15,242
%
(Gain) loss on disposal of assets
 
4,470

 
5,047

 
0
%
 
0
%
 
(577
)
 
(11
%)
Impairment
 
12,346

 

 
1
%
 
0
%
 
12,346

 
0
%
Operating income
 
(83,749
)
 
98,010

 
(5
%)
 
5
%
 
(181,759
)
 
(185
%)
Other income (expense), net
 
453

 
(905
)
 
0
%
 
0
%
 
1,358

 
(150
%)
Interest expense
 
(21,856
)
 
(33,504
)
 
(1
%)
 
(2
%)
 
11,648

 
(35
%)
Total other expenses
 
(21,403
)
 
(34,409
)
 
(1
%)
 
(2
%)
 
13,006

 
(38
%)
Income tax expense
 
(1,005
)
 
(4,270
)
 
0
%
 
0
%
 
3,265

 
(76
%)
Net income (loss)
 
$
(106,157
)
 
$
59,331

 
(6
%)
 
3
%
 
$
(165,488
)
 
(279
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue.     Total revenue is comprised of revenue from our Completion Services, Well Construction and Intervention Services and Well Support Services segments. Revenue in 2019 decreased by $315.5 million, or 15%, to $1.8 billion from $2.1 billion in 2018. The net decline was driven primarily by a decrease in rig count and fleet utilization, combined with pricing pressures from macroeconomic market conditions. This decrease in utilization was primarily from our customers shifting their focus to capital discipline through reduced activity levels and pricing. Despite pricing pressures, we retained our core customer base by aligning with high quality and efficient customers under dedicated agreements. This change in revenue by reportable segment is discussed below.
Completion Services:     Completion Services segment revenue decreased by $391.0 million, or 19%, to $1.7 billion in 2019 from $2.1 billion in 2018. The segment revenue decline was driven by lower fleet utilization and decreased activity levels year over year, in addition to continued pricing pressures from market conditions. This was offset by an increase in revenue attributable to the C&J Merger.

52



Well Construction and Intervention:     Well Construction and Intervention Services segment revenue increased by $27.0 million, or 75%, to $63.0 million in 2019 from $36.1 million in 2018. This increase in revenue was primarily attributable to the C&J Merger.
Well Support Services: Well Support Services segment revenue was $48.6 million in 2019 with no comparison period in 2018. This increase in revenue was solely attributable to the acquisition of the segment through the C&J Merger.
Cost of services.    Cost of services in 2019 decreased by $256.6 million, or 15%, to $1.4 billion from $1.7 billion in 2018. This change was driven by several factors including lower overall activity and fleet utilization, as discussed above under Revenue, in addition to the impact of cost optimization from cost management efforts and input cost deflation.
Equipment Utilization.     Depreciation and amortization expense increased by $33.0 million, or 13%, to $292.2 million in 2019 from $259.1 million in 2018. The change in depreciation and amortization was primarily related to additional equipment purchases from the RSI Acquisition in late 2018, maintenance spend for fleet readiness, and other equipment used for continuing to enhance safety and efficiency through our multi-faceted approach of surface, digital and downhole technologies. Loss on disposal of assets in 2019 decreased by $0.6 million, to a loss of $4.5 million in 2019 from a loss of $5.0 million in 2018. The decrease in loss on disposal of assets is primarily related to a larger number of early failures of major components in 2018 compared to 2019, primarily due to higher activity and use of equipment in 2018.
Selling, general and administrative expense.     Selling, general and administrative (“SG&A”) expense, which represents costs associated with managing and supporting our operations, increased by $9.9 million, or 9%, to $123.7 million in 2019 from $113.8 million in 2018. This change in SG&A was primarily related to non-cash compensation expense of $19.4 million and litigation contingencies of $3.8 million.
Merger and integration expense.     Merger and integration expense increased by $68.3 million to $68.7 million in 2019 from $0.4 million in 2018. The $68.7 million in merger and integration expense in 2019 was due to the C&J Merger, which consisted primarily of professional services, severance costs, and facility consolidation. The $0.4 million in 2018 is related to transaction cost associated with the RSI Acquisition.
 Other income (expense), net.     Other income (expense), net, in 2019 increased by $1.4 million, or 150%, to income of $0.5 million in 2019 from expense of $0.9 million in 2018. In 2018, other expense, net was primarily due to a $13.2 million adjustment to our Rockpile CVR liability, $2.7 million loss on foreign currency related to the wind-down of the Canadian entity, offset by a $14.9 million gain on the insurance proceeds received for losses resulting from the July 1, 2018 accidental fire.
 Interest expense, net.     Interest expense, net of interest income, decreased by $11.6 million, or 35%, to $21.9 million in 2019 from $33.5 million in 2018. This change was primarily attributable to the $7.6 million write-offs of deferred financing costs in 2018, in connection with the debt extinguishment of our 2017 Term Loan Facility.
Effective tax rate.     Upon consummation of the IPO, the Company became a corporation subject to federal income taxes. Our effective tax rate on continuing operations in 2019 was (0.96)%, as compared to 6.71% in 2018. For 2019, the effective rate is primarily made up of state taxes and a tax benefit derived from the current period operating loss offset by a valuation allowance. For 2018, the effective rate was primarily made up of state taxes and tax benefits derived from the current period operating income offset by a valuation allowance. As a result of market conditions and their corresponding impact on our business outlook, we determined that a valuation allowance was appropriate as it is not more likely than not that we will utilize our net deferred tax assets. The remaining tax impact not offset by a valuation allowance is related to indefinite-lived assets.
Industry Drivers of 2019 Operations
Between January and April 2019, the increase in oil prices incentivized many of our customers to significantly increase activity levels early in 2019. This resulted in E&P capital budget exhaustion and early

53



achievement of E&P production targets, and in combination with normal year-end seasonality, resulted in softening demand for completions services by the fourth quarter of 2019. In addition, lackluster oil and gas prices in 2019 resulted in the E&P budgeting process to be more muted, causing many E&P companies to delay activity start-up into early 2020. Furthermore, the current market oversupply of fracturing equipment created a competitive pricing environment at year-end 2019 during E&P budgeting season, which resulted in pricing pressure in order win new work or extend existing dedicated agreements that were up for renewal. With that said, most of our customers see value in a long-term partnership with us, and as a result, traded some price concessions by us for extended terms or additional work scope.
We are committed to continuing to manage our business in line with demand for our services and make adjustments as necessary to effectively respond to changes in market conditions, customer activity levels, pricing for our services and equipment, and utilization of our deployed equipment and personnel. Our response to the industry's persistent uncertainty is to maintain sufficient liquidity, preserve our conservative capital structure and closely monitor our discretionary spending. We take a measured approach to asset deployment, balancing our view of current and expected customer activity levels with a focus on generating positive returns for our shareholders. Our priorities remain to drive revenue by maximizing deployed equipment utilization, to improve margins through cost controls, to protect and grow our market share by focusing on the quality, safety and efficiency of our service execution, and to ensure that we are strategically positioned to capitalize on constructive market dynamics.
Looking Ahead to 2020
We face many challenges and risks in the industry in which we operate. Although many factors contributing to these risks are beyond our ability to control, we continuously monitor these risks and have taken steps to mitigate them to the extent practicable. In addition, while we believe that we are well positioned to capitalize on available growth opportunities, we may not be able to achieve our business objectives and, consequently, our results of operations may be adversely affected. Please read the factors described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Part I, Item 1A of this Annual Report for additional information about the known material risks that we face.
Fiscal 2020 Objectives
With recent commodity price volatility, we intend to closely monitor the market and will adjust our approach as the situation develops. At this time, in 2020, our principal business objective continues to be growing our business and safely providing best-in-class services in all of our operating segments, while delivering shareholder value and maintaining a disciplined capital deployment strategy. We expect to achieve our objective through:
partnering and growing with well-capitalized customers under dedicated agreements who focus their efforts on safety, high-efficiency completions, continuous improvement and innovation;
allocating our assets to maximize utilization and returns, including diversification of geographies and commodities;
maximizing profitability of fully-utilized fleets through leading-edge pricing and efficiencies;
investing in technology to further drive efficiencies, enable differentiation of service offerings, and reduce our overall cost structure;
leveraging our flexible and scalable logistics infrastructure to provide assurance of supply at lowest landed cost;
leveraging our platform to identify, retain and promote talent to sustain growth and support operational and commercial excellence; maintaining agreements with our existing strategic suppliers and identify and develop relationships with additional strategic suppliers to ensure continuity of supply and optimize efficiency;

54



maintaining our conservative and flexible capital position, supporting continued growth and maintenance of active equipment;
gaining scale, enhancing our service offering, and capturing targeted cost synergies from the C&J Merger; and
returning capital to shareholders in a disciplined fashion.
Completion Services
In our Completion Services segment, our strategy remains focused on deploying our market-ready fracturing fleets and bundling more of our wireline and pumpdown units with our deployed fracturing fleets and on a stand-alone basis. We are focused on increasing our dedicated fracturing fleet count with efficient customers that allow us to achieve high equipment utilization, which should result in improved financial performance. Additionally, we are focused on bundling more of our wireline and pumpdown units with our fracturing fleets to increase operational efficiencies and profitability. With that said, current market conditions remain challenging, and our primary focus remains to lower our overall cost structure by aligning with efficient, dedicated customers with deep inventories of work and proven track records of efficient operations, many of which we have created long-term relationships with over the past several years.
Well Construction and Intervention Services
In our Well Construction and Intervention Services segment, our strategy remains focused on deploying our market-ready cementing equipment and two newbuild coiled tubing units that we will take delivery of in the first quarter of 2020. In our cementing business, even though market conditions remain challenged due to customers releasing drilling rigs and declining E&P capital spending in 2020, we remain focused on providing high-quality, timely service and deploying more of our stacked units with efficient customers with deep inventories of work in our core operating basins. We will stay focused on controlling costs, improving market share with an efficient customer base that plan to maintain stable drilling rig counts in 2020. In our coiled tubing business, we are focused on deploying two newbuild, large-diameter units into our core operating basins and increasing market share with large, efficient customers with deep inventories of completion-oriented work that will keep our new units highly utilized.
Well Support Services
We divested our Well Support Services segment on March 9, 2020, for total consideration of $93.7 million.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity represents a company’s ability to adjust its future cash flows to meet needs and opportunities, both expected and unexpected.
 
 
(Thousands of Dollars)
 
 
Year Ended December 31,
 
 
2019
 
2018
Cash
 
$
255,015

 
$
80,206

Debt, net of deferred financing costs and debt discount
 
$
337,623

 
$
340,730



55


 
 
(Thousands of Dollars)
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Net cash provided by operating activities
 
$
305,463

 
$
350,311

 
$
79,691

Net cash used in investing activities
 
$
(114,100
)
 
$
(297,506
)
 
$
(250,776
)
Net cash provided by (used in) financing activities
 
$
(16,746
)
 
$
(68,554
)
 
$
218,122

 
 
 
 
 
 
 
Significant sources and uses of cash during the year ended December 31, 2019
Sources of cash:
Operating activities:
Net cash generated by operating activities during the year ended December 31, 2019 of $305.5 million was a result of 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:
Operating activities:
Net cash used in operating activities for the year ended December 31, 2019, included $61.9 million of merger and integration costs in connection with the C&J Merger.
Investing activities:
Net cash used in investing activities for the year ended December 31, 2019 consisted 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 year ended December 31, 2019 was $3.5 million.
Cash used to repay our finance leases during the year ended December 31, 2019 was $6.0 million.
Shares withheld and retired related to stock-based compensation during the year ended December 31, 2019 totaled $6.0 million.
Significant sources and uses of cash during the year ended December 31, 2018
Sources of cash:
Operating activities:
Net cash generated by operating activities in 2018 of $350.3 million was primarily driven by higher utilization of our combined asset base and increased gross profit in our Completion Services segment.
Investing activities:

56


Cash provided by the insurance proceeds received for losses resulting from the July 1, 2018 accidental fire was $18.1 million. For further details see Note (7) Property and Equipment, net of Part II, “Item 8. Financial Statements and Supplementary Data.”
$4.7 million in proceeds from sales of various assets, including our idle field operations facility in Mathis, Texas, within the Corporate segment, and hydraulic tractors and light general-purpose vehicles within the Completion Services segment.
Financing activities:
Cash provided by the 2018 Term Loan Facility, net of debt discount, was $348.2 million.
Uses of cash:
Operating activities:
$13.0 million of transaction costs, including underwriting discounts paid by the Company, primarily incurred to consummate the secondary stock offering completed in January 2018.
$7.9 million related to the portion of the cash settlement of our RockPile CVR liability that exceeded its acquisition-date fair value, with the remaining $12.0 million of the cash settlement cost reflected in the use of cash in financing activities as described below.
Investing activities:
Net cash used in investing activities of $297.5 million was primarily associated with our asset acquisition from RSI and our newbuild and maintenance capital spend on active fleets, offset by insurance proceeds and proceeds from various asset sales, as discussed above under “Sources of cash.” This activity primarily related to our Completion Services segment.
Financing activities:
Cash used to repay our debt facilities, including capital leases but excluding interest, was $289.1 million.
Cash used to pay debt issuance costs associated with our debt facilities was $7.3 million.
Shares repurchased and retired related to our stock repurchase program totaled $104.9 million.
Shares repurchased and retired related to payroll tax withholdings on our share-based compensation totaled $3.6 million.
$12.0 million related to the portion of the cash settlement of our RockPile CVR liability that was reflective of its acquisition-date fair value.
Significant sources and uses of cash during the year ended December 31, 2017
Sources of cash:
Operating activities:
Net cash generated by operating activities in 2017 of $79.7 million was primarily driven by higher utilization of our combined asset base and increased gross profit in our Completion Services segment. We also had proceeds of $2.1 million and $4.2 million from the indemnification settlement with Trican and our insurance company related to the acquisition of

57


the Acquired Trican Operations. See Note (18) Commitments and Contingencies of Part II, “Item 8. Financial Statements and Supplementary Data.”
Investing activities:
Total proceeds of $30.6 million from the sale of assets relating to our facilities in Woodward, Oklahoma and Searcy, Arkansas, certain air compressor units, coiled tubing assets and the twelve workover rigs acquired in the acquisition of RockPile. See Note (7) Property and Equipment, net of Part II, “Item 8. Financial Statements and Supplementary Data.”
Financing activities:
Cash provided from IPO proceeds, $255.5 million. See Note (1)(a) Initial Public Offering of Part II, “Item 8. Financial Statements and Supplementary Data.”
The 2017 Term Loan Facility, entered into on March 15, 2017, provided for $145.0 million, net of associated origination and other transactions fees. Proceeds received were primarily used to fully repay our Senior Secured Notes. statements.
An incremental term loan facility, entered into on July 3, 2017, provided for $131.1 million, net of associated origination and other transaction fees. Proceeds received were primarily used to fund the acquisition of RockPile.
Uses of cash:
Investing activities:
Cash consideration of $116.6 million associated with the acquisition of RockPile, inclusive of a $7.8 million net working capital settlement.
Cash used for capital expenditures of $164.4 million, associated with maintenance capital spend on active fleets, commissioning costs associated with the deployment of our idle fleets, the newbuild acquired as part of the acquisition of RockPile and deposits on new equipment. This activity primarily related to our Completion Services segment.
Financing activities: Cash used to repay our debt facilities, including capital leases but excluding interest, in 2017 was $310.8 million. We used a portion of our IPO proceeds and the proceeds of the 2017 Term Loan Facility to repay our 2016 Term Loan Facility and Senior Secured Notes.
Future sources and use of cash
Our primary sources of liquidity have historically included, and we have funded our capital expenditures with, cash flows from operations, proceeds from public offerings of our common stock and borrowings under debt facilities. Our ability to generate future cash flows is subject to a number of variables, many of which are outside of our control, including the drilling, completion and production activity by our customers, which is highly dependent on oil and gas prices. See Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview” for additional discussion of certain factors that impact our results and the market challenges within our industry.
Our primary uses of cash are for operating costs, capital expenditures, debt service and our stock repurchase program.
Capital expenditures for 2020 are projected to be primarily related to maintenance capital spend to support our existing active fleets, wireline trucks, coil units, and cementing units.
Debt service for the year ended December 31, 2020 is projected to be $30.9 million, of which $3.5 million is related to capital leases. We anticipate our debt service will be funded by cash flows from operations.

58


On December 11, 2019, the Company announced the board of directors approved a new $100 million capital return program, which includes a $50 million stock repurchase program through December 2020. No share repurchases were made under the share repurchase program in 2019. Although our board of directors has approved a share repurchase program, the share repurchase program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. We anticipate any share repurchases will be funded by cash flows from operations.
Other factors affecting liquidity
Financial position in current market. As of December 31, 2019, we had $255.0 million of cash and a total of $303.8 million available under our revolving credit facility. 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 stock repurchases.
Guarantee agreements. Under the 2019 ABL Facility $31.8 million of letters of credit were outstanding as of December 31, 2019.
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 or less. 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. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our liquidity, consolidated results of operations and consolidated financial condition.

59


Contractual Obligations
In the normal course of business, we enter into various contractual obligations that impact or could impact our liquidity. The table below contains our known contractual commitments as of December 31, 2019.
(Thousands of Dollars)

Contractual obligations
 
Total
 
2020
 
2021-2022
 
2023-2024
 
2025+
Long-term debt, including current portion(1)
 
$
344,750

 
$
3,500

 
$
7,000

 
$
7,000

 
$
327,250

Estimated interest payments(2)
 
115,729

 
22,262

 
43,572

 
42,031

 
7,864

Finance lease obligations(3)
 
10,061

 
4,977

 
4,811

 
273

 

Operating lease obligations(4)
 
68,344

 
26,068

 
22,096

 
9,259

 
10,921

Purchase commitments(5)
 
119,710

 
93,985

 
24,225

 
1,500

 

Equity-method investment(6)
 
1,302

 
1,302

 

 

 

Legal contingency
 
10,059

 
10,059

 

 

 

 
 
$
669,955

 
$
162,153

 
$
101,704

 
$
60,063

 
$
346,035

(1)
Long-term debt represents our obligations under our 2018 Term Loan Facility, exclusive of interest payments. In addition, these amounts exclude $7.1 million of unamortized debt discount and debt issuance costs associated with our 2018 Term Loan Facility.
(2)
Estimated interest payments are based on debt balances outstanding as of December 31, 2019 and include interest related to the 2018 Term Loan Facility. Interest rates used for variable rate debt are based on the prevailing current London Interbank Offer Rate (LIBOR).
(3)
Finance lease obligations primarily consist of obligations on our finance leases of light weight vehicles with ARI Financial Services Inc. and Enterprise FM Trust and includes interest payments.
(4)
Operating lease obligations are related to our real estate, rail cars, and light duty vehicles.
(5)
Purchase commitments primarily relate to our agreements with vendors for sand purchases and deposits on equipment. The purchase commitments to sand suppliers represent our annual obligations to purchase a minimum amount of sand from vendors. If the minimum purchase requirement is not met, the shortfall at the end of the year is settled in cash or, in some cases, carried forward to the next year.
(6)
Equity-method investment is related to our research and development commitments with our equity-method investee. See Notes (18) Commitments and Contingencies and (19) Related Party Transactions of Part II, “Item 8. Financial Statements and Supplementary Data” for further details.
.
Principal Debt Agreements
2019 ABL Facility
Origination.    On the October 31, 2019, we, and certain of our other subsidiaries as additional borrowers and guarantors, entered into a Second Amended and Restated Asset-Based Revolving Credit Agreement (the “2019 ABL Facility”) to the original Asset-Based Revolving Credit Agreement, dated as of February 17, 2017, as amended December 22, 2017 (the “2017 ABL Facility”).
Structure.    Our 2019 ABL Facility provides for 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. In addition, subject to approval by the applicable lenders and other customary conditions, the 2019 ABL Facility allows for an additional increase in commitments of up to $200.0 million. The 2019 ABL Facility is subject to customary fees, guarantees of subsidiaries, restrictions and covenants, including certain restricted payments.
Maturity.    The loans arising under the initial commitments under the 2019 ABL Facility mature on October 31, 2024. The loans arising under any tranche of extended loans or additional commitments mature as specified in the applicable extension amendment or increase joinder, respectively.
Interest.    Pursuant to the terms of the 2019 ABL Facility, amounts outstanding under the 2019 ABL Facility bear interest at a rate per annum equal to, at Keane Group Holdings, LLC’s option, (a) the base rate, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 1.00%, (y) if the

60


average excess availability is greater than or equal to 33% but less than 66%, 0.75% or (z) if the average excess availability is greater than or equal to 66%, 0.50%, or (b) the adjusted LIBOR rate for such interest period, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 2.00%, (y) if the average excess availability is greater than or equal to 33% but less than 66%, 1.75% or (z) if the average excess availability is greater than or equal to 66%, 1.50%, to a rate per annum equal to, at Keane Group Holdings, LLC’s option, (a) the base rate, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 0.75%, (y) if the average excess availability is greater than or equal to 33% but less than 66%, 0.50% or (z) if the average excess availability is greater than or equal to 66%, 0.25%, or (b) the adjusted LIBOR rate for such interest period, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 1.75%, (y) if the average excess availability is greater than or equal to 33% but less than 66%, 1.50% or (z) if the average excess availability is greater than or equal to 66%, 1.25%.
Financial Covenants. The 2019 ABL Facility requires that, under certain circumstances, the consolidated fixed charge coverage ratio not be lower than 1.0:1.0 as of the last day of the most recently completed four consecutive fiscal quarters for which financial statements were required to have been delivered, including if excess availability (or liquidity if no loan or letter of credit, other than any letter of credit that has been cash collateralized, is outstanding) is less than the greater of (i) 10% of the loan cap and (ii) $30.0 million at any time. As of December 31, 2019, the Company was in compliance with all covenants.
2018 Term Loan Facility
On May 25, 2018, Keane Group and the 2018 Term Loan Guarantors (as defined below) entered into 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 proceeds of the 2018 Term Loan Facility were used to refinance Keane Group’s then-existing term loan facility and to repay related fees and expenses, with the excess proceeds to fund general corporate purposes.
Structure. The 2018 Term Loan Facility provides for a term loan facility in an initial aggregate principal amount of $350.0 million (the loans incurred under the 2018 Term Loan Facility, the “2018 Term Loans”). As of December 31, 2019, there was $337.6 million principal amount of 2018 Term Loans outstanding. In addition, subject to certain customary conditions, the 2018 Term Loan Facility allows for additional incremental term loans to be incurred thereunder in an amount equal to the sum of (a) $200.0 million plus the aggregate principal amount of voluntary prepayments of 2018 Term Loans made on or prior to the date of determination (less amounts incurred in reliance on the capacity described in this subclause (a)), plus (b) an unlimited amount, subject to, (x) in the case of debt secured on a pari passu basis with the 2018 Term Loans, immediately after giving effect to the incurrence thereof, a first lien net leverage ratio being less than or equal to 2.00:1.00, (y) in the case of debt secured on a junior basis with the 2018 Term Loans, immediately after giving effect to the incurrence thereof, a secured net leverage ratio being less than or equal to 3.00:1.00 and (z) in the case of unsecured debt, immediately after giving effect to the incurrence thereof, a total net leverage ratio being less than or equal to 3.50:1.00.
Maturity. May 25, 2025 or, if earlier, the stated maturity date of any other term loans or term commitments.
Amortization. The 2018 Term Loans amortize in quarterly installments equal to 1.00% per annum of the aggregate principal amount of all initial term loans outstanding.
Interest. The 2018 Term Loans bear interest at a rate per annum equal to, at Keane Group’s option, (a) the base rate plus 2.75%, or (b) the adjusted LIBOR for such interest period (subject to a 1.00% floor) plus 3.75%, subject to, on and after the fiscal quarter ending September 30, 2018, a pricing grid with three 0.25% per annum step-ups and one 0.25% per annum step-down determined based on total net leverage for the relevant period. Following a payment event of default, the 2018 Term Loans bear interest at the rate otherwise applicable to such 2018 Term Loans at such time plus an additional 2.00% per annum during the continuance of such event of default.
Prepayments. The 2018 Term Loan Facility is required to be prepaid with: (a) 100% of the net cash proceeds of certain asset sales, casualty events and other dispositions, subject to the terms of an intercreditor

61


agreement between the agent for the 2018 Term Loan Facility and the agent for the 2019 ABL Facility and certain exceptions; (b) 100% of the net cash proceeds of debt incurrences or issuances (other than debt incurrences permitted under the 2018 Term Loan Facility, which exclusion is not applicable to permitted refinancing debt) and (c) 50% (subject to step-downs to 25% and 0%, upon and during achievement of certain total net leverage ratios) of excess cash flow in excess of a certain amount, minus certain voluntary prepayments made under the 2018 Term Loan Facility or other debt secured on a pari passu basis with the 2018 Term Loans and voluntary prepayments of loans under the 2019 ABL Facility to the extent the commitments under the 2019 ABL Facility are permanently reduced by such prepayments.
Guarantees. Subject to certain exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility, the amounts outstanding under the 2018 Term Loan Facility are guaranteed by the Company, Keane Frac, LP, KS Drilling, LLC, KGH Intermediate Holdco I, LLC, KGH Intermediate Holdco II, LLC, and Keane Frac GP, LLC, and each subsidiary of the Company that will be required to execute and deliver a facility guaranty in the future pursuant to the terms of the 2018 Term Loan Facility (collectively, the “2018 Term Loan Guarantors”).
Security. Subject to certain exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility, the obligations under the 2018 Term Loan Facility are secured by (a) a first-priority security interest in and lien on substantially all of the assets of Keane Group and the 2018 Term Loan Guarantors to the extent not constituting ABL Facility Priority Collateral (as defined below) and (b) a second-priority security interest in and lien on substantially all of the accounts receivable, inventory, and frac iron equipment, and certain other assets and property related to the foregoing including certain chattel paper, investment property, documents, letter of credit rights, payment intangibles, general intangibles, commercial tort claims, books and records and supporting obligations of the borrowers and guarantors under the 2019 ABL Facility (the “ABL Facility Priority Collateral”).
Fees. Certain customary fees are payable to the lenders and the agents under the 2018 Term Loan Facility.
Restricted Payment Covenant. The 2018 Term Loan Facility includes a covenant restricting the ability of the Company and its restricted subsidiaries to pay dividends and make certain other restricted payments, subject to certain exceptions. The 2018 Term Loan Facility provides that the Company and its restricted subsidiaries may, among things, make cash dividends and other restricted payments in an aggregate amount during the life of the facility not to exceed (a) $100.0 million, plus (b) the amount of net proceeds received by Keane Group from the funding of the 2018 Term Loans in excess of the of such net proceeds required to finance the refinancing of the pre-existing term loan facility and pay fees and expenses related thereto and to the entry into the 2018 Term Loan Facility, plus (c) an unlimited amount so long as, after giving effect to such restricted payment, the total net leverage ratio would not exceed 2.00:1.00. In addition, the Company and its restricted subsidiaries may make restricted payments utilizing the Cumulative Credit (as defined below), subject to certain conditions including, if any portion of the Cumulative Credit utilized is comprised of amounts under clause (b) of the definition thereof below, the pro forma total net leverage ratio being no greater than 2.50:1.00.
“Cumulative Credit”, generally, is defined as an amount equal to (a) $25.0 million, (b) 50% of consolidated net income of the Company and its restricted subsidiaries on a cumulative basis from April 1, 2018 (which cumulative amount shall not be less than zero), plus (c) other customary additions, and reduced by the amount of Cumulative Credit used prior to such time (whether for restricted payments, junior debt payments or investments).
Affirmative and Negative Covenants. The 2018 Term Loan Facility contains various affirmative and negative covenants (in each case, subject to customary exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility). The 2018 Term Loan Facility does not contain any financial maintenance covenants. As of December 31, 2019, the Company was in compliance with all covenants.
Events of Default. The 2018 Term Loan Facility contains customary events of default (subject to exceptions, thresholds and grace periods as set forth in the definitive documentation for the 2018 Term Loan Facility).

62


Off-Balance Sheet Arrangements
We do not have any material off-balance sheet financing arrangements, transactions or special purpose entities.
Related Party Transactions
 Our board of directors has adopted a written policy and procedures (the “Related Party Policy”) for the review, approval and ratification of the related party transactions by the independent members of the audit and risk committee of our board of directors. For purposes of the Related Party Policy, a “Related Party Transaction” is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the aggregate amount involved will or may be reasonably expected to exceed $120,000 in any fiscal year, (2) the company or any of its subsidiaries is a participant, and (3) any Related Party (as defined herein) has or will have a direct or indirect material interest. All Related Party Transactions will be reviewed in accordance with the standards set forth in the Related Party Policy after full disclosure of the Related Party’s interests in the transaction.
 The Related Party Policy defines “Related Party” as any person who is, or, at any time since the beginning of the Company’s last fiscal year, was (1) an executive officer, director or nominee for election as a director of the Company or any of its subsidiaries, (2) a person with greater than five percent (5%) beneficial interest in the Company, (3) an immediate family member of any of the individuals or entities identified in (1) or (2) of this paragraph, and (4) any firm, corporation or other entity in which any of the foregoing individuals or entities is employed or is a general partner or principal or in a similar position or in which such person or entity has a five percent (5%) or greater beneficial interest. Immediate family members includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home, other than a tenant or employee.
 Transaction prices with our related parties are commensurate with transaction prices in arms-length transactions. For further details about our transactions with Related Parties, see Note (19) Related Party Transactions of Part II, “Item 8. Financial Statements and Supplementary Data.”
Recently Issued Accounting Standards
For discussion on the impact of accounting standards issued but not yet adopted to our consolidated and combined financial statements, see Note (23) New Accounting Pronouncements of Part II, “Item 8. Financial Statements and Supplementary Data.”
Critical Accounting Policies and Estimates
The preparation of our consolidated and combined financial statements and related notes included within Part II, “Item 8. Financial Statements and Supplementary Data” 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. We believe the following are the critical accounting policies used in the preparation of our consolidated and combined financial statements, as well as the significant estimates and judgments affecting the application of these policies. This discussion and analysis should be read in conjunction with our consolidated and combined financial statements and related notes included within Part II, “Item 8. Financial Statements and Supplementary Data.”
Business combinations

63


We allocate the purchase price of businesses we acquire to the identifiable assets acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill. We use all available information to estimate fair values, including quoted market prices, the carrying value of acquired assets and assumed liabilities and valuation techniques such as discounted cash flows, multi-period excess earning or income-based-relief-from-royalty methods. We engage third-party appraisal firms to assist in the fair value determination of inventories, identifiable long-lived assets, identifiable intangible assets, as well as any contingent consideration or earn-out provisions that provide for additional consideration to be paid to the seller if certain future conditions are met. These estimates are reviewed during the 12-month measurement period and adjusted based on actual results. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our financial condition or results of operations. See Note (3) Mergers and Acquisitions of Part II, “Item 8. Financial Statements and Supplementary Data” for further discussion of our recently completed merger and acquisition during 2019 and 2017, respectively.
Asset acquisitions
Asset acquisitions are measured based on their cost to us, including transaction costs incurred by us. An asset acquisition’s cost or the consideration transferred by us is assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash we paid to the seller, as well as transaction costs incurred by us. Consideration given in the form of nonmonetary assets, liabilities incurred or equity interests issued is measured based on either the cost to us or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated relative fair values. We engage third-party appraisal firms to assist in the fair value determination of inventories, identifiable long-lived assets and identifiable intangible assets. Goodwill is not recognized in an asset acquisition. See Note (3) Mergers and Acquisitions of Part II, “Item 8. Financial Statements and Supplementary Data” for our asset acquisition from RSI in 2018.
Legal and environmental contingencies
From time to time, we are 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. Our assessment of the likely outcome of litigation matters is based on our 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. We accrue for contingencies when the occurrence of a material loss is probable and can be reasonably estimated, based on our best estimate of the expected liability. The estimate of probable costs related to a contingency is developed in consultation with internal and outside legal counsel representing us. The accuracy of these estimates is impacted by, among other things, the complexity of the issues and the amount of due diligence we have been able to perform. Differences between the actual settlement costs, final judgments or fines from our estimates could have a material adverse effect on our financial position or results of operations. See Note (18) Commitments and Contingencies of Part II, “Item 8. Financial Statements and Supplementary Data” for further discussion of our legal, environmental and other regulatory contingencies.
Valuation of long-lived assets, indefinite-lived assets and goodwill
We assess our long-lived assets, such as definite-lived intangible assets and property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. We assess our goodwill and indefinite-lived assets for impairment annually, as of October 31, or whenever events or circumstances indicate that the carrying amount of goodwill or the indefinite-lived assets may not be recoverable. If the carrying value of an asset exceeds its fair value, we record an impairment charge that reduces our earnings.
We perform our qualitative assessments of the likelihood of impairment by considering qualitative factors relevant to each of our reporting segments, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. The expected future cash flows used for impairment reviews and related fair value

64


calculations are based on subjective, judgmental assessments of projected revenue growth, fleet count, utilization, gross margin rates, SG&A rates, working capital fluctuations, capital expenditures, discount rates and terminal growth rates. Many of these judgments are driven by crude oil prices. If the crude oil market declines and remains at low levels for a sustained period of time, we would expect to perform our impairment assessments more frequently and could record impairment charges.
See Note (2)(h) Goodwill and Indefinite-Lived Intangible Assets and (2)(i) Long-Lived Assets with Definite Lives of Part II, “Item 8. Financial Statements and Supplementary Data” for further discussion on our impairment assessments of our long-lived assets, indefinite-lived assets and goodwill for the years ended December 31, 2019, 2018 and 2017.
Income Taxes
We account for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes,” which requires an asset and liability approach for financial accounting and reporting of income taxes. Under ASC 740, income taxes are accounted for based upon the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carry-forwards using enacted tax rates in effect in the year the differences are expected to reverse. We estimate our annual effective tax rate at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. Our effective tax rates will vary due to changes in estimates of our future taxable income or losses, fluctuations in the tax jurisdictions in which we operate and favorable or unfavorable adjustments to our estimated tax liabilities related to proposed or probable assessments. As a result, our effective tax rate may fluctuate significantly on a quarterly or annual basis.
 In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In addition to our historical financial results, we consider forecasted market growth, earnings and taxable income, the mix of earnings in the jurisdictions in which we operate and the implementation of prudent and feasible tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage our underlying businesses. We establish a valuation allowance against the carrying value of deferred tax assets when we determine that it is more likely than not that the asset will not be realized through future taxable income. Such amounts are charged to earnings in the period in which we make such determination. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance.
We calculate our income tax liability based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Significant judgment is required in assessing, among other things, the timing and amounts of deductible and taxable items. Due to the complexity of some of these uncertainties, the ultimate resolution may result in payment that is materially different from our current estimate of our tax liabilities. These differences are reflected as increases or decreases to income tax expense in the period in which they are determined.
The amount of income tax we pay is subject to ongoing audits by federal and state tax authorities, which may result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is highly judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. Additionally, the jurisdictions in which our earnings or deductions are realized may differ from our current estimates. We recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to, (1) the requirement to pay a one-time transition tax on all undistributed earnings of

65


foreign subsidiaries; (2) reducing the U.S. federal corporate income tax rate from 35% to 21%; (3) eliminating the alternative minimum tax; (4) creating a new limitation on deductible interest expense; and (5) changing rules related to use and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. We evaluated the provisions of the Tax Act and determined only the reduced corporate tax rate from 35% to 21% would have an impact on our consolidated and combined financial statements as of December 31, 2017. Accordingly, we recorded a provision to income taxes for our assessment of the tax impact of the Tax Act on ending deferred tax assets and liabilities and the corresponding valuation allowance. The effects of other provisions of the Tax Act are not expected to have an adverse impact on our consolidated and combined financial statements. We will continue to assess the impact of other aspects of U.S. tax reform on our tax positions and our consolidated and combined financial statements.
See Note (17) Income Taxes of Part II, “Item 8. Financial Statements and Supplementary Data” for further discussion on income taxes for the years ended December 31, 2019, 2018 and 2017.
Leases
Per ASU 2016-02, "Leases (Topic 842)," lessees can classify leases as finance leases or operating leases, while lessors can classify leases as sales-type, direct financing or operating leases. All leases, with the exception of short-term leases, are capitalized on the balance sheet by recording a lease liability, which represents our obligation to make lease payments arising from the lease, along with a corresponding right-of-use asset, which represents our right to use the underlying asset being leased. For leases in which we are the lessee, we use a collateralized incremental borrowing rate to calculate the lease liability, as in most cases we do not know the lessor's implicit rate in the lease. Establishing our lease obligations on our unaudited condensed consolidated balance sheets require judgmental assessments of the term lengths of each and the interest rate yield curve that best represents the collateralized incremental borrowing rate to apply to each lease. We engage third-party specialists to assist us in determining the collateralized incremental borrowing rate yield curve. Errors in determining the lease term lengths and/or selecting the best representative collateralized incremental borrowing rate can have a material adverse effect on our unaudited condensed consolidated financial statements. For further details about our leases, see Note (16) Leases of Part II, "Item 8. Financial Statements and Supplementary Data".
New Accounting Pronouncements
For discussion on the potential impact of new accounting pronouncements issued but not yet adopted, see Note (23) New Accounting Pronouncements of Part II, “Item 8. Financial Statements and Supplementary Data.”



66




Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Exchange Rate Risk. Our operations are currently conducted predominantly within the U.S.; therefore, we had no significant exposure to foreign currency exchange rate risk during 2019.
Interest Rate Risk. As of December 31, 2019, we held variable-rate debt, 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 December 31, 2019, we had no debt outstanding under our 2019 ABL Facility and $337.6 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 2019 ABL Facility would have no impact on interest expense for the 2019 year, and a 1.0% increase in interest rates under the terms of the 2018 Term Loan would have a $3.5 million impact on interest expense for the 2019 year.
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 II, “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations” for the contractual commitments and obligations table as of December 31, 2019.Customer 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. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts.




67




Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
NexTier Oilfield Solutions Inc.
 
 
 
Audited Consolidated and Combined Financial Statements
 
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated and Combined Statements of Operations and Comprehensive Income (Loss)
Consolidated and Combined Statements of Changes in Stockholders’ Equity
Consolidated and Combined Statements of Cash Flows
Notes to Consolidated and Combined Financial Statements
 
 
 


68



Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
NexTier Oilfield Solutions Inc.:
Opinion on the Consolidated and Combined Financial Statements
We have audited the accompanying consolidated balance sheets of NexTier Oilfield Solutions Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated and combined statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated and combined financial statements). In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 12, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 and 16 to the consolidated and combined financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and related amendments.
Basis for Opinion
These consolidated and combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated and combined financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated and combined financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated and combined financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated and combined financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2011.
Houston, Texas
March 12, 2020

69



Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
NexTier Oilfield Solutions Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited NexTier Oilfield Solutions Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, and the related consolidated and combined statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and related notes (collectively, the consolidated and combined financial statements), and our report dated March 12, 2020 expressed an unqualified opinion on those consolidated and combined financial statements.
The Company acquired C&J Energy Services, Inc. during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, C&J Energy Services, Inc.’s internal control over financial reporting associated with total assets of $708.5 million and total revenues of $196.7 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of C&J Energy Services, Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

70



with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Houston, Texas
March 12, 2020


71


NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)

 
 
December 31,
2019
 
December 31,
2018
 
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
 
$
255,015

 
$
80,206

 
Trade and other accounts receivable, net
 
350,765

 
210,428

 
Inventories, net
 
61,641

 
35,669

 
Assets held for sale
 
141

 
176

 
Prepaid and other current assets
 
20,492

 
5,784

 
Total current assets
 
688,054

 
332,263

 
Operating lease right-of-use assets
 
54,503

 

 
Finance lease right-of-use assets
 
9,511

 

 
Property and equipment, net
 
709,404

 
531,319

 
Goodwill
 
137,458

 
132,524

 
Intangible assets
 
55,021

 
51,904

 
Other noncurrent assets
 
10,956

 
6,569

 
Total assets
 
$
1,664,907

 
$
1,054,579

 
Liabilities and Stockholders’ Equity
 
 
 
 
 
Liabilities
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
 
$
115,251

 
$
106,702

 
Accrued expenses
 
234,895

 
101,539

 
Current maturities of long-term operating lease liabilities
 
23,473

 

 
Current maturities of long-term finance lease liabilities
 
4,594

 
4,928

 
Current maturities of long-term debt
 
2,311

 
2,776

 
Stock-based compensation
 

 
4,281

 
Other current liabilities
 
5,670