Pioneer Pressure Pumping Services Agreement
On December 31, 2018, the Company consummated
the purchase of pressure pumping and related assets of Pioneer Natural Resources USA, Inc. (“Pioneer”) and Pioneer
Pumping Services, LLC. In connection with the acquisition, the Company became a long-term service provider to Pioneer under a Pressure
Pumping Services Agreement (the “Pioneer Services Agreement”), providing pressure pumping and related services for
a term of up to 10 years; provided, that Pioneer has the right to terminate the Pioneer Services Agreement, in whole or part, effective
as of December 31 of each of the calendar years of 2022, 2024 and 2026. The material terms of the Pioneer Services Agreement were
previously described in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on
November 16, 2018, and the Pioneer Services Agreement was filed as Exhibit 10.31 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2018. Pursuant to the Pioneer Services Agreement, the Company is entitled to receive compensation
if Pioneer were to idle committed fleets (“idle fees”); however, the Company is first required to use all economically
reasonable effort to deploy the idled fleets to another customer. At the present, the Company has eight fleets committed to Pioneer.
The Company is entitled to receive idle
fees on certain fleets that are not utilized. During times when there is a significant reduction in overall demand for our services
the idle fees could represent a material portion of our revenues. Based on our current expectations and utilization outlook (which
are subject to change based on market volatility and changing capital plans of our customers), the Company expects to receive $32
million to $36 million in idle fees during the second quarter of 2020 and $12 million to $18 million for the second half of 2020.
Shareholder Litigation
In April 2020, Jye-Chun Chang filed a shareholder
derivative suit in the U.S. District Court for the Western District of Texas (the “Chang Lawsuit”) against certain
of the Company’s current and former officers and directors (the “Chang Defendants”). The Company was named as
a nominal defendant only. The claims include (i) violations of section 14(a) of the Exchange Act, (ii) breach of fiduciary duties,
(iii) unjust enrichment, (iv) abuse of control, (v) gross mismanagement and (vi) waste of corporate assets. Chang did not quantify
any alleged damages in its complaint but, in addition to attorneys’ fees and costs, Chang seeks various forms of relief,
including (i) declaring that Chang may sustain the action on behalf of the Company, (ii) declaring that the Chang Defendants breached
their fiduciary duties to the Company, (iii) damages sustained by the Company as a result of the Chang Defendants’ alleged
misconduct, (iv) equitable relief in the form of improvements to the Company’s governance and controls and (v) restitution.
The Company is presently unable to predict
the duration, scope or result of the Chang Lawsuit. The Chang Lawsuit and any related future litigation give rise to risks and
uncertainties that could adversely affect the Company’s business, results of operations and financial condition. Such risks
and uncertainties include, but are not limited to, the costs and expenses of the Chang Lawsuit, including legal fees and possible
monetary penalties in the event of an adverse outcome; the risk of additional potential litigation or regulatory action arising
from this matter; and potential reputational damage that the Company may suffer as a result of this matter. The outcome of the
Chang Lawsuit is necessarily uncertain. The Company could be forced to expend significant resources in the defense of the Chang
Lawsuit or future lawsuits, and it may not prevail.
Forward-Looking Statements
Except for historical information contained
herein, the statements in this Current Report on Form 8-K are forward-looking statements that are made pursuant to the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our expected idle fees. Forward-looking
statements are subject to a number of risks and uncertainties that may cause actual events and results to differ materially from
the forward-looking statements. Such risks and uncertainties include the volatility of and recent declines in oil prices, the operational
disruption and market volatility resulting from the COVID-19 pandemic and other factors described in the Company’s most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, particularly the “Risk Factors” sections
of such filings, and other filings with the SEC. In addition, the Company may be subject to currently unforeseen risks that may
have a materially adverse impact on it, including matters related to the audit committee’s internal review, the shareholder
litigation and the SEC investigation. Accordingly, no assurances can be given that the actual events and results will not be materially
different than the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance
on such forward-looking statements and are urged to carefully review and consider the various disclosures made in the Company’s
most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings made with the SEC from time to time that
disclose risks and uncertainties that may affect the Company’s business. The forward-looking statements contained herein
are made as of the date of this report. The Company does not undertake, and expressly disclaims, any duty to publicly update
these statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure is
required by law.