OIL STATES INTERNATIONAL, INC (OIS)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in “Part II Item 8 Financial Statements and Supplementary Data.” This discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in “Part I, Item 1A. Risk Factors.” You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes to those statements included elsewhere in this Annual Report on Form 10‑K in order to understand factors, such as business combinations, charges and credit and financing transactions, which may impact comparability from period to period.

We provide a broad range of manufactured products and services to customers in the energy, industrial and military sectors through our Offshore Manufactured Products, Completion and Production Services (previously referred to as Well Site Services) and Downhole Technologies segments. Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers’ willingness to invest capital in the exploration for and development of crude oil and natural gas reserves. Our customers’ capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, making demand for our products and services sensitive to expectations regarding future crude oil and natural gas prices, as well as economic growth, commodity demand and estimates of resource production and regulatory pressures.

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Recent Developments

Brent and West Texas Intermediate (“WTI”) crude oil and natural gas pricing trends were as follows:

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(1)Source: U.S. Energy Information Administration (spot prices).

In 2023, we began implementing initiatives, which continued throughout 2024, to reduce costs. Management actions in 2024 included: the consolidation, relocation and exit of certain underperforming locations; the exit of certain service offerings; reductions in our U.S. work force as well as the realignment of operations discussed below. We also incurred legal and other related costs to enforce certain patents related to our proprietary technologies. As a result of these actions, our reported pre-tax results for 2024 included $24.6 million in non-cash goodwill, intangible asset and operating lease asset impairment charges as well as $13.7 million of facility consolidation and exit, patent defense and other charges.

Certain short-cycle, consumable product operations historically reported within the Offshore Manufactured Products segment (legacy frac plugs and elastomer products) were integrated into the Downhole Technologies segment in early 2024 to better align with the underlying activity demand drivers and current segment management structure, as well as provide for additional operational synergies. Historical financial data, supplemental disaggregated revenue and backlog information as of and for the years ended December 31, 2023 and 2022 (presented herein) were conformed with the 2024 segment presentation. Additionally, following the sale of its remaining U.S. land-based drilling rigs and the exit of the flowback and well testing service offering in the third quarter of 2024, our Well Site Services segment name was changed to the Completion and Production Services segment.

On February 16, 2024, we amended the ABL Facility to extend its maturity date from February 10, 2025 to February 16, 2028.

During 2024, we sold two manufacturing and service facilities that were classified as held for sale assets, generating net proceeds of $35.1 million, we purchased $14.2 million of our common stock, and we purchased $11.5 million principal amount of our 2026 Notes for $10.8 million.

In October 2024, our Board of Directors terminated our existing common stock repurchase program and replaced it with a new $50.0 million common stock repurchase authorization, which expires in October 2026.

On February 14, 2025, Brent crude oil, WTI crude oil and natural gas spot prices closed at $75.81 per barrel, $71.05 per barrel and $4.60 per MMBtu, respectively – above the fourth quarter 2024 averages. Additionally, the U.S. drilling rig count reported on February 14, 2025 was 588 rigs – comparable to the fourth quarter 2024 average.

Overview

Current and expected future pricing for WTI crude oil and natural gas and inflationary cost increases, along with expectations regarding the regulatory environment in the regions in which we operate, are factors that will continue to influence our customers’ willingness to invest capital in their businesses. Expectations for the longer-term price for Brent crude oil will continue to influence our customers’ spending related to global offshore and international drilling and development and, thus, a significant portion of the activity of our Offshore Manufactured Products segment.

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Crude oil and natural gas prices and levels of demand for crude oil and natural gas are likely to remain highly volatile due to numerous factors, including: geopolitical conflicts in Europe and the Middle East, along with associated international tensions; the moderate perceived risk of a global economic recession; the levels of domestic or international crude oil and natural gas production; changes in governmental rules and regulations; sanctions; the willingness of operators to invest capital in the exploration for and development of resources; use of alternative fuels; improved vehicle fuel efficiency; timing of capital investments in alternative energy sources; a more sustained movement to electric vehicles; and the potential for ongoing supply/demand imbalances.

U.S. drilling, completion and production activity and, in turn, our financial results, are sensitive to near-term fluctuations in commodity prices, particularly U.S. crude oil and natural gas prices, given the short-term, call-out nature of our U.S. operations.

Customer spending in the natural gas shale plays has declined in recent years due to technological advancements that have led to significant amounts of natural gas being produced from prolific basins in the Northeastern United States and from associated gas produced from the drilling and completion of unconventional oil wells in the United States. However, the extended outlook for natural gas in the United States is positive with increased exports of LNG, as well as increased power needs for the technology sector, namely data centers.

Our Offshore Manufactured Products segment provides technology-driven, highly-engineered products and services for offshore oil and natural gas production systems and facilities globally, as well as certain products and services to the offshore drilling and completion markets. This segment is particularly influenced by global spending on deepwater drilling and production, which is primarily driven by our customers’ longer-term commodity demand forecasts and outlook for crude oil and natural gas prices. Approximately 90% of Offshore Manufactured Products segment sales in 2024 were driven by our customers’ capital spending for products and services used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as “project-driven products and services”). Deepwater oil and gas development projects typically involve significant capital investments and multi-year development plans. Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies and state-run national oil companies) using relatively conservative crude oil and natural gas pricing assumptions. Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to change based on short-term fluctuations in the price of crude oil and natural gas. This segment also produces a variety of products for use in industrial, military and other applications outside the traditional energy industry. Additionally, we are investing in research and product development (and have been awarded select contracts and are bidding on additional projects) to facilitate the development of alternative energy sources, including offshore wind and deepsea mineral gathering opportunities.

Backlog reported by our Offshore Manufactured Products segment decreased to $311 million as of December 31, 2024 from $327 million as of December 31, 2023. Bookings totaled $392 million in 2024, yielding an annual book-to-bill ratio of 1.0x in 2024. This compares to total bookings of $414 million in 2023 and a book-to-bill ratio of 1.1x. The following table sets forth backlog as of the dates indicated (in millions).

Our Completion and Production Services segment provides completion and production services in the United States (including the Gulf of America) and internationally. Prior to the sale of its drilling rigs in August of 2024, the segment also provided land drilling services in the United States. U.S. drilling and completion activity and, in turn, our Completion and Production Services results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of its operations. We primarily supply equipment and service personnel utilized in the completion of, and initial production from, new and recompleted wells in our U.S. operations, which are dependent primarily upon the level and complexity of drilling, completion and workover activity in our areas of operations. Well intensity and complexity have increased with the continuing transition to multi-well pads, the drilling of longer lateral wells and increased downhole pressures, along with the increased number of frac stages completed in horizontal wells.

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Our Downhole Technologies segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations. This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies. Product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools. This expertise has led to the optimization of perforation hole size, depth, and quality of tunnels, which are key factors for maximizing the effectiveness of hydraulic fracturing. Additional offerings include frac plugs, toe valves and other elastomer products, which are focused on zonal isolation for hydraulic fracturing of horizontal wells, and a broad range of consumable products, such as setting tools and bridge plugs, that are used in completion, intervention and decommissioning applications. Demand drivers for the Downhole Technologies segment include continued trends toward longer lateral lengths, increased frac stages and more perforation clusters to target increased unconventional well productivity.

Demand for our completion-related products and services within our Completion and Production Services and Downhole Technologies segments is highly correlated to changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the drilling rig count. The following table sets forth a summary of the U.S. drilling rig count, as measured by Baker Hughes Company, as of and for the periods indicated.

The U.S. energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S. shale plays utilizing horizontal drilling and completion techniques. As of December 31, 2024, oil-directed drilling accounted for 82% of the total U.S. rig count – with the balance largely natural gas related.

We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. In 2018, the United States imposed tariffs on a variety of imported products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. In addition, in response to Russia’s invasion of Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland and other countries have enacted sanctions against Russia and Russian interests. In early 2025, the Trump Administration, after taking office, proposed increases to existing U.S. tariffs as well as the imposition of certain new tariffs. The effect of these sanctions and tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continue to evolve, and we continue to monitor these matters. While we cannot predict with certainty the impact of any new or increased tariffs, or the impact of any retaliatory tariffs, if we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.

Other factors that can affect our business and financial results include but are not limited to: the general global economic environment; competitive pricing pressures; customer consolidations; labor market constraints; supply chain disruptions; inflation in wages, materials, parts, equipment and other costs; climate-related and other regulatory changes; geopolitical conflicts and tensions; management’s implementation of strategic decisions; public health crises; natural disasters; and changes in tax laws in the United States and in the international markets in which we operate. We continue to monitor the global economy, the prices of and demand for crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.

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Selected Financial Data

This selected financial data should be read in conjunction with our Consolidated Financial Statements and related notes included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in order to understand factors, such as charges, credits and financing transactions, which may impact comparability of the selected financial data.

In the first quarter of 2024, certain short-cycle manufacturing operations historically reported within the Offshore Manufactured Products segment (legacy frac plug and elastomer products) were integrated into the Downhole Technologies segment to better align with the underlying activity demand drivers and the current segment management structure, as well as provide for additional operational synergies. Historical financial data, supplemental disaggregated revenue information and related discussion and analysis as of and for the years ended December 31, 2023 and 2022 (presented herein) were conformed with the 2024 segment presentation. Additionally, following the sale of its remaining U.S. land-based drilling rigs and the exit of the flowback and well testing service offering in the third quarter of 2024, our Well Site Services segment name was changed to the Completion and Production Services segment.

Consolidated Results of Operations

The following summarizes our consolidated results of operations for the years ended December 31, 2024, 2023 and 2022 (in thousands, except per share amounts):

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(1)During 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility. During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation.

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Segment Results of Operations

We manage and measure our business performance in three distinct operating segments: Offshore Manufactured Products, Completion and Production Services and Downhole Technologies. Supplemental financial information by operating segment for the years ended December 31, 2024, 2023 and 2022 is summarized below (in thousands):

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(1)During 2024 and 2023, we recognized facility consolidation and other charges of $3.4 million and $2.5 million, respectively, within the Offshore Manufactured Products segment, associated primarily with the segment’s consolidation and relocation of certain manufacturing and service locations. During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation against certain service providers.

(2)During 2024, we recognized charges of $24.3 million within the Completion and Production Services segment, associated primarily with the exit of its flowback and well testing service offering, the consolidation and exit of certain underperforming service locations, and the defense of certain patents. In 2023, we recognized $0.6 million in costs associated with the defense of certain of the segment’s patents.

(3)During 2024, we recognized a $10.0 million non-cash impairment charge within the Downhole Technologies segment related to goodwill reassigned to the business in connection with the segment realignment discussed above.

(4)During 2024, we recognized a net gain of $15.3 million within Corporate associated with the sale of a previously idled facility.

For further discussion of charges and credits recognized during the years ended December 31, 2024, 2023 and 2022, see Note 4, “Asset Impairments and Other Charges and Credits,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

We reported a net loss for the year ended December 31, 2024 of $11.3 million, or $0.18 per share. The reported 2024 net loss included net charges and credits of $22.4 million ($22.0 million after tax, or $0.35 per share) associated with the restructuring of certain of our U.S. land-based operations, facility consolidations and closures, patent defense, personnel reductions and debt extinguishment, partially offset by a gain recognized on the sale of a previously idled facility. These results compare to net income for the year ended December 31, 2023 of $12.9 million, or $0.20 per share, which included facility consolidation charges of $2.5 million ($2.0 million after-tax, or $0.03 per share) and patent defense costs of $0.6 million ($0.5 million after-tax, or $0.01 per share).

Results of operations for 2024 reflect the impact of operators’ continued investment in offshore and international projects and associated backlog conversion, partially offset by a decline in land-based investments by our U.S. customers, competitive market conditions and management’s decision to exit certain underperforming locations and service offerings in the United States.

Revenues. Consolidated total revenues in 2024 decreased $89.7 million, or 11%, from 2023. Of this decrease, $74.4 million, or 83%, was concentrated in service offerings and locations exited by our Completion and Production Services segment over the past 15 months.

Consolidated product revenues in 2024 decreased $16.0 million, or 4%, from 2023, with the impact of a decline in U.S. customer demand for completion and perforating products partially offset by higher customer demand for military products. Consolidated service revenues in 2024 decreased $73.7 million, or 20%, from 2023. This decrease was concentrated in the United States – driven by lower land-based customer investments (particularly in natural gas basins), competitive market conditions and our exit of certain underperforming service offerings and locations during 2024, partially offset by higher offshore and international service activity.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the year ended December 31, 2024 and 2023 (in thousands):

Cost of Revenues (exclusive of Depreciation and Amortization Expense). Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) decreased $70.7 million, or 12%, in 2024 compared to 2023.

Consolidated product costs in 2024 decreased $14.2 million, or 4%, compared to 2023 due primarily to the reported decrease in product revenue. Consolidated service costs in 2024 decreased $56.5 million, or 20%, compared to 2023, with the impact of lower U.S. activity levels and implemented cost control measures partially offset by facility consolidation and exit costs, and severance expenses incurred in 2024.

Selling, General and Administrative Expense. Selling, general and administrative expense totaled $95.0 million in 2024, which included $2.8 million of costs associated with enforcing certain of our patents. Excluding these patent defense costs, selling, general and administrative costs decreased $1.4 million, or 1%, from the level reported in 2023, with the impact of

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lower short- and long-term incentive compensation expenses and cost reduction measures partially offset by an increase in the provision for bad debt.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $6.1 million, or 10%, in 2024 compared to the prior-year period. Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K presents depreciation and amortization expense by segment.

Impairment of Goodwill. In the first quarter of 2024, our Downhole Technologies operations recognized a non-cash impairment charge of $10.0 million related to goodwill transferred to the business in connection with the segment realignment discussed above. See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Impairments of Intangible Assets. In 2024, as a result of our decision to exit an underperforming service offering, our Completion and Production Services business recognized non-cash impairment charges of $10.8 million to reduce the carrying amount of its long-lived intangible assets to estimated fair value. See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Impairments of Operating Lease Assets. In 2024, management made strategic decisions to exit seven leased service locations within our Completion and Production Services segment and one within our Downhole Technologies segment. As a result of these decisions, our Completion and Production Services and Downhole Technologies segments recognized non-cash impairment charges totaling $3.8 million to reduce the carrying amount of the related operating lease assets. See Note 4, “Asset Impairments and Other Charges and Credits,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Other Operating Income, Net. In 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility. Other operating income, net for 2023 included gains on disposals of assets totaling $4.1 million, partially offset by charges of $2.5 million recognized in connection with our ongoing consolidation of certain manufacturing and service locations within our Offshore Manufactured Products segment.

Operating Income (Loss). Our consolidated operating loss was $1.7 million in 2024, which included non-cash charges of $24.6 million for goodwill, intangible asset and operating lease asset impairments, other charges totaling $13.7 million associated with facility consolidations and exits, patent defense and other management actions, and a net gain of $15.3 million on the sale of an idled facility. This compares to consolidated operating income of $23.2 million in 2023, which included facility consolidation and other charges of $3.1 million. Excluding these charges, operating results declined $5.0 million year-over-year, driven by the substantial decline in activity levels in the United States during 2024.

Interest Expense, Net. Net interest expense totaled $7.7 million in 2024, which compares to $8.2 million in 2023. Interest expense as a percentage of total debt outstanding was approximately 7% in 2024 and 2023.

Income Tax. For 2024, our income tax provision was $3.4 million, which included the impact of a goodwill impairment charge, other non-deductible expenses and an increase in valuation allowances recorded against deferred tax assets, on a pre-tax loss of $7.9 million. This compares to an income tax provision of $2.9 million, which included the impact of certain non-deductible expenses, discrete tax items and a reduction in valuation allowances recorded against deferred tax assets, on pre-tax income of $15.8 million for 2023.

Other Comprehensive Income (Loss). Reported comprehensive income (loss) is the sum of reported net income (loss) and other comprehensive income (loss). Other comprehensive loss was $9.5 million in 2024 compared to comprehensive income of $9.0 million in 2023 due to fluctuations in foreign currency exchange rates compared to the U.S. dollar for certain of the international operations of our operating segments. For 2024 and 2023, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil. During 2024, the exchange rates for both the British pound and the Brazilian real weakened compared to the U.S. dollar. This compares to 2023, when the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S. dollar.

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Segment Operating Results

Offshore Manufactured Products

Revenues. Our Offshore Manufactured Products segment revenues increased $16.2 million, or 4%, in 2024 compared to 2023 due primarily to increased demand for international and offshore-project driven services and military products.

Operating Income. Our Offshore Manufactured Products segment reported operating income of $65.3 million in 2024, which included $3.4 million in facility consolidation and other charges. This compares to operating income of $56.3 million in 2023, which included $2.5 million in facility consolidation and other charges. Excluding these charges, the Offshore Manufactured Products segment’s operating income increased $9.9 million year-over-year due to the reported revenue growth in 2024 and a favorable shift in revenue mix.

Backlog. Backlog in our Offshore Manufactured Products segment totaled $311 million as of December 31, 2024 compared to $327 million as of December 31, 2023. Bookings during 2024 were $392 million, yielding a book-to-bill ratio of 1.0x.

Completion and Production Services

Revenues. Our Completion and Production Services segment revenues decreased $78.7 million, or 32%, in 2024 compared to 2023, driven primarily by lower U.S. customer activity levels (particularly in natural gas basins), competitive market conditions and the exit of two underperforming service offerings and four additional underperforming service facilities during 2024.

Operating Income (Loss). Our Completion and Production Services segment reported an operating loss of $23.2 million in 2024, which included charges totaling $24.3 million associated with the exit of certain service offerings, facility consolidations and exits, the defense of patents and other management actions. This compares to operating income of $13.9 million in 2023, which included patent defense costs of $0.6 million. Excluding these charges, the Completion and Production Services segment’s operating results declined $13.4 million from the prior-year period, with the impact of a decrease in U.S. land-based revenues partially offset by implemented cost control measures.

The segment’s U.S. land-based service offerings and facilities exited during 2024 collectively generated revenues of $40.6 million and operating losses of $19.6 million in 2024, which included intangible and operating lease asset impairment, facility closure and other charges totaling $21.1 million as well as depreciation and amortization expense of $7.9 million.

Downhole Technologies

Revenues. Our Downhole Technologies segment revenues decreased $27.2 million, or 17%, in 2024 from 2023 due to lower U.S. customer demand for completion and perforating products during 2024.

Operating Loss. Our Downhole Technologies segment reported an operating loss of $20.9 million in 2024, which included the $10.0 million non-cash goodwill impairment charge related to the segment realignment in the first quarter of 2024 and $1.2 million in charges related to the exit of a facility, personnel reductions and a customer bankruptcy. This compares to an operating loss of $5.9 million reported in 2023. Excluding the 2024 charges discussed above, the Downhole Technologies segment’s operating loss increased $3.9 million from the prior-year period, due primarily to the reported decrease in revenue and lower manufacturing volumes.

Corporate

Operating Loss. Corporate expenses in 2024 decreased $18.3 million, or 44%, from 2023, due primarily to the recognition in 2024 of a net gain of $15.3 million associated with the sale of a previously idled facility and lower short- and long-term incentive compensation expense.

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

We reported net income for the year ended December 31, 2023 of $12.9 million, or $0.20 per share, which included facility consolidation charges of $2.5 million ($2.0 million after-tax, or $0.03 per share) and patent defense costs of $0.6 million ($0.5 million after-tax, or $0.01 per share). These results compare to a net loss for the year ended December 31, 2022 of $9.5 million, or $0.15 per share, which included a gain of $6.1 million ($4.6 million after-tax, or $0.07 per share) recognized in connection with the settlement of a litigation matter.

Increased capital investments by our offshore and international customers, together with our internal cost control and strict capital discipline measures and other corporate actions, resulted in improvements in our consolidated results in 2023. The favorable impact of continued growth in offshore and international project activity and associated backlog conversion was partially offset by the impact of an industry-wide decline in U.S. well completions (the U.S. year-end rig count declined 20% from December 2022) – triggered by weaker commodity prices.

Revenues. Consolidated total revenues in 2023 increased $44.6 million, or 6%, from 2022.

Consolidated product revenues in 2023 increased $33.0 million, or 9%, from 2022, driven primarily by higher customer demand for project-driven production facility and connector products. Consolidated service revenues in 2023 increased $11.6 million, or 3%, from 2022 due primarily to increased customer project spending internationally.

The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the years ended December 31, 2023 and 2022 (in thousands):

Cost of Revenues (exclusive of Depreciation and Amortization Expense). Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) increased $28.3 million, or 5%, in 2023 compared to 2022.

Consolidated product costs in 2023 increased $21.4 million, or 7%, compared to 2022 due primarily to the reported revenue growth as well as higher material, transportation, labor and other costs. Consolidated service costs in 2023 increased $6.9 million, or 3%, compared to 2022, due primarily to the impact of higher revenue levels and increased labor and other costs.

Selling, General and Administrative Expense. Selling, general and administrative expense was $94.2 million in 2023, which included $0.6 million of legal and other costs associated with enforcing certain of our patents. Excluding these patent defense costs, selling, general and administrative costs decreased $2.4 million, or 3%, from 2022, due primarily to reductions in short-term incentive compensation and bad debt expenses.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $6.6 million, or 10%, in 2023 compared to the prior-year period, due to certain intangible assets reaching the end of their economic life coupled with reduced capital investments made in our Completion and Production Services segment in recent years. Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K presents depreciation and amortization expense by segment.

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Other Operating Income, Net. In 2023, other operating income, net included gains on disposals of assets totaling $4.1 million, partially offset by charges of $2.5 million recognized in connection with our ongoing consolidation of certain manufacturing and service locations within our Offshore Manufactured Products segment. Other operating income, net for 2022 included a gain of $6.1 million recognized in connection with the settlement of outstanding litigation against certain service providers within our Offshore Manufactured Products segment.

Operating Income. Our consolidated operating income was $23.2 million in 2023, which included the $2.5 million in facility consolidation charges reported within other operating income, net and the $0.6 million in patent defense costs reported within selling, general and administrative expense. This compares to a consolidated operating income of $2.9 million in 2022, which included the $6.1 million gain (discussed above) recognized within other operating income, net. Excluding these charges and prior-year litigation gain, operating income increased $29.4 million year-over-year.

Interest Expense, Net. Net interest expense totaled $8.2 million in 2023, which compares to $10.3 million in 2022. Interest expense as a percentage of total debt outstanding was approximately 7% in 2023, compared to 6% in 2022.

Income Tax. For 2023, our income tax provision was $2.9 million, which included the impact of certain non-deductible expenses, discrete tax items and reductions in valuation allowances recorded against deferred tax assets, on pre-tax income of $15.8 million. This compares to an income tax provision of $5.5 million, which included the impact of certain non-deductible expenses and discrete tax items, on a pre-tax loss of $4.1 million for 2022.

Other Comprehensive Income (Loss). Reported comprehensive income (loss) is the sum of reported net income (loss) and other comprehensive income (loss). Other comprehensive income was $9.0 million in 2023 compared to a comprehensive loss of $12.9 million in 2022 due to fluctuations in foreign currency exchange rates compared to the U.S. dollar for certain of the international operations of our operating segments. For 2023 and 2022, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil. During 2023, the exchange rates for the British pound and the Brazilian real strengthened compared to the U.S. dollar. In 2022, the exchange rate for the British pound weakened compared to the U.S. dollar, while the Brazilian real strengthened compared to the U.S. dollar.

Segment Operating Results

Offshore Manufactured Products

Revenues. Our Offshore Manufactured Products segment revenues increased $59.3 million, or 18%, in 2023 compared to 2022 due primarily to increased demand for international and offshore-project driven products and services.

Operating Income. Our Offshore Manufactured Products segment reported operating income of $56.3 million in 2023, which included the $2.5 million in facility consolidation charges discussed above. This compares to operating income of $35.7 million in 2022, which included a $6.1 million gain recognized in connection with the settlement of outstanding litigation. Excluding the facility consolidation charges and 2022 litigation gain, operating income increased $29.2 million year-over-year due primarily to the Offshore Manufactured Products segment’s reported revenue growth and lower bad debt expense, partially offset by the impact of higher material, transportation, labor and other costs.

Backlog. Backlog in our Offshore Manufactured Products segment totaled $327 million as of December 31, 2023 compared to $300 million as of December 31, 2022. Bookings during 2023 totaled $414 million, yielding a year-to-date book-to-bill ratio of 1.1x.

Completion and Production Services

Revenues. Our Completion and Production Services segment revenues increased $11.4 million, or 5%, in 2023 compared to 2022, driven primarily by higher U.S. customer activity levels during the first half of 2023.

Operating Income. Our Completion and Production Services segment reported operating income of $13.9 million in 2023, compared to operating income of $4.9 million in 2022. Excluding the 2023 patent defense costs, the Completion and Production Services segment’s operating results improved $9.6 million from the prior-year period, due to the reported revenue growth and a $3.2 million decrease in depreciation and amortization expense, partially offset by increased labor, material and other costs.

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Downhole Technologies

Revenues. Our Downhole Technologies segment revenues decreased $26.2 million, or 14%, in 2023 from 2022 due primarily to lower U.S. customer demand for perforating and completion products.

Operating Loss. Our Downhole Technologies segment reported an operating loss of $5.9 million in 2023, compared to operating income of $2.9 million reported in 2022. This year-over-year decrease in operating results is due primarily to the reported decrease in the Downhole Technologies segment’s revenue, $1.1 million in incremental non-cash provisions for excess and obsolete inventory as well as higher labor, material and other costs.

Corporate

Operating Loss. Corporate expenses in 2023 increased $0.6 million, or 1%, from 2022, with the impact of higher personnel and marketing costs partially offset by lower short-term incentive compensation and professional service expenses.

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Liquidity, Capital Resources and Other Matters

Our primary liquidity needs are to fund operating and capital expenditures, new product development and general working capital needs. In addition, capital has been used to repay debt, fund share repurchases and fund strategic business acquisitions. Our primary sources of funds are cash flow from operations, asset sales and proceeds from borrowings under our ABL Facility and, less frequently, capital markets transactions.

Operating Activities

Cash flows from operations totaled $45.9 million during 2024, compared to $56.6 million generated by operations during 2023.

During 2024, $10.7 million was used to fund net working capital increases, primarily due to a decrease in accounts payable and accrued short- and long-term cash incentive compensation as well as an activity-driven increase in inventories, partially offset by the favorable impact of an increase in deferred revenue and a decrease in accounts receivable. During 2023, $21.0 million was used to fund net working capital increases, primarily due to increases in inventories as well as decreases in accounts payable, accrued liabilities and deferred revenue, partially offset by a decrease in accounts receivable.

Investing Activities

Within our Offshore Manufactured Products segment, we completed the consolidation of certain facilities in Houston, Texas during 2023 and strategically relocated our Asian manufacturing and service operations from Singapore to Batam, Indonesia. With these consolidations, facilities classified as held for sale within prepaid expenses and other current assets as of December 31, 2023 were sold during 2024 for net proceeds of $35.1 million.

Given these and other sales proceeds, net cash of $2.7 million was provided by investing activities during 2024, compared to $25.6 million used in investing activities during 2023.

Capital expenditures totaled $37.5 million and $30.7 million during 2024 and 2023, respectively. These investments were offset by proceeds from the sale of property, equipment and asset held for sale of $40.7 million and $5.3 million during 2024 and 2023, respectively.

Including investments associated with the continuing construction of a new facility in Batam, we expect to invest approximately $25 million in capital expenditures during 2025. We plan to fund our capital expenditures with available cash, internally generated funds and, if necessary, borrowings under our ABL Facility discussed below.

Financing Activities

During 2024, net cash of $29.5 million was used in financing activities, which included the repurchase of $14.2 million of our common stock and the purchase of $11.5 million principal amount of our outstanding 2026 Notes for $10.8 million in cash. This compares to $26.7 million of cash used in financing activities during 2023, which included the repayment of the $17.3 million principal amount outstanding under our 2023 Notes and the repurchase of $6.9 million of our common stock.

As of December 31, 2024, we had cash and cash equivalents totaling $65.4 million, which compared to $47.1 million as of December 31, 2023.

As of December 31, 2024, we had no borrowings outstanding under our ABL Facility, $123.5 million principal amount of our 2026 Notes outstanding and other debt of $2.8 million. Our reported interest expense included amortization of deferred financing costs of $1.5 million during 2024. For 2024, our contractual cash interest expense was $7.3 million, or approximately 6% of the average principal balance of debt outstanding.

We believe that cash on-hand, cash flow from operations and borrowing capacity available under our ABL Facility will be sufficient to meet our liquidity needs in the coming twelve months. If our plans or assumptions change, or are inaccurate, we may need to raise additional capital. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global banking and financial markets, stakeholder scrutiny of ESG matters and other factors, many of which are beyond our control. For companies like ours that support the energy industry, disruptions affecting the availability of capital have in the past and may in the future negatively impact the value of our common stock and may reduce our ability to access capital in the bank and capital markets or result in such capital being available on less favorable terms, which could negatively affect our liquidity.

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On March 6, 2024, the SEC finalized rules relating to the disclosure of a range of climate-related information (the “Rules”). The Rules were temporarily stayed by the SEC on April 4, 2024 pending judicial review. While subject to ongoing litigation, these new disclosure requirements are currently effective for us beginning with the year ending December 31, 2026, phased in over a five-year period. The ultimate impact on our business is uncertain but we and our customers may incur increased compliance costs related to the assessment and disclosure of climate-related risks. We may also face increased litigation risks related to disclosures made pursuant to the Rules if finalized as proposed. In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders in restricting access to capital or seeking more stringent conditions with respect to their investments in us, our customers and other companies like ours that support the energy industry. For more information on our risks related to climate change, see the risk factors in “Part I, Item 1A. Risk Factors” included in this Annual Report on Form 10-K titled, “Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide,” “The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and could impose new costs on our customers’ operations” and “Increasing attention to ESG matters may impact our business.”

Stock Repurchase Program. In February 2023, our Board of Directors authorized $25.0 million for repurchases of our common stock, par value $0.01 per share, through February 2025. On October 24, 2024, our Board of Directors terminated our existing common stock repurchase program and replaced it with a new $50.0 million common stock repurchase authorization, which expires in October 2026. Subject to applicable securities laws, such purchases will be at such times and in such amounts as we deem appropriate.

During the year ended December 31, 2024, $14.2 million in repurchases of common stock were made under these programs. The amount remaining under our new share repurchase authorization as of December 31, 2024 was $41.3 million.

Revolving Credit Facility. Our senior secured credit facility provides for a $125.0 million asset-based revolving credit facility (as amended, the “ABL Facility”) under which credit availability is subject to a borrowing base calculation. On February 16, 2024, we amended the ABL Facility to extend the maturity date to February 16, 2028.

The ABL Facility is governed by a credit agreement, as amended, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (as amended, the “ABL Agreement”). The ABL Agreement matures on February 16, 2028 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million. See Note 7, “Long-term Debt,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the ABL Agreement.

As of December 31, 2024, we had $15.9 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement. The total amount available to be drawn as of December 31, 2024 was $57.2 million, calculated based on the then-current borrowing base less outstanding letters of credit.

2026 Notes. We issued $135.0 million aggregate principal amount of the 2026 Notes pursuant to an indenture, dated as of March 19, 2021 (the “2026 Indenture”), between us and Computershare Trust Company, National Association, as successor trustee. As of December 31, 2024, we have purchased a cumulative $11.5 million principal amount of the 2026 Notes for $10.8 million in cash, with $123.5 million principal amount outstanding. The outstanding 2026 Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

The 2026 Indenture contains certain events of default, including certain defaults by us with respect to other indebtedness of at least $40.0 million. See Note 7, “Long-term Debt,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the 2026 Notes. As of December 31, 2024, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

2023 Notes. On February 15, 2023, our 2023 Notes matured and the outstanding $17.3 million in principal amount was repaid in full.

Our total debt represented 16% of our combined total debt and stockholders’ equity as of December 31, 2024 and December 31, 2023.

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Contractual Obligations. As discussed above, we believe that cash on-hand, cash flow from operations and borrowing capacity under our ABL facility will be sufficient to meet our liquidity needs in the coming twelve months. The following summarizes our more significant contractual obligations as of December 31, 2024, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands):

____________________

(1)As of December 31, 2024, we had no borrowings outstanding under our ABL Facility. The total amount available to be drawn as of December 31, 2024 was $57.2 million.

(2)Amount represents the full principal amount of the 2026 Notes together with cash interest payments due semi-annually.

(3)Amount represents payment obligations (including implied interest) for operating leases with an initial term of greater than twelve months. Operating lease obligations are recorded in the consolidated balance sheet as operating lease liabilities while the right-of-use assets are included within operating lease assets.

(4)Our purchase obligations primarily relate to open purchase orders.

Contingencies and Other Obligations. We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters.

See Note 15, “Commitments and Contingencies,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.

Availability and Cost of Products. We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. In 2018, the United States imposed tariffs on a variety of imported products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. In addition, in response to Russia’s invasion of Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland and other countries have enacted sanctions against Russia and Russian interests. In early 2025, the Trump Administration, after taking office, proposed increases to existing U.S. tariffs as well as the imposition of certain new tariffs. The effect of these sanctions and tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continue to evolve, and we continue to monitor these matters. While we cannot predict with certainty the impact of any new or increased tariffs, or the impact of any retaliatory tariffs, if we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.

Tax Matters. See Note 2, “Summary of Significant Accounting Policies,” and Note 10, “Income Taxes,” to the Consolidated Financial Statements included in this Annual Report on Form 10‑K for additional information with respect to tax matters.

Off-Balance Sheet Arrangements. As of December 31, 2024, we had no off-balance sheet arrangements.

Critical Accounting Policies

Our Consolidated Financial Statements included in this Annual Report on Form 10‑K have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require that we make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position. The critical accounting policies and estimates described in this section are those that are most

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important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain. We describe our significant accounting policies more fully in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in this Annual Report on Form 10‑K.

Revenue and Cost Recognition

Our revenue contracts may include one or more promises to transfer a distinct good or service to the customer, which is referred to as a “performance obligation,” and to which revenue is allocated. We recognize revenue and the related cost when, or as, the performance obligations are satisfied. The majority of our significant contracts for custom engineered products have a single performance obligation as no individual good or service is separately identifiable from other performance obligations in the contracts. For contracts with multiple distinct performance obligations, we allocate revenue to the identified performance obligations in the contract. Our product sales terms do not include significant post-performance obligations.

Our performance obligations may be satisfied at a point in time or over time as work progresses. Revenues from goods and services transferred to customers at a point in time accounted for approximately 33%, 34% and 35% of consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. The majority of our revenue recognized at a point in time is derived from short-term contracts for standard products offered by us. Revenue on these contracts is recognized when control over the product has transferred to the customer. Indicators we consider in determining when transfer of control to the customer occurs include: right to payment for the product, transfer of legal title to the customer, transfer of physical possession of the product, transfer of risk and customer acceptance of the product.

Revenues from products and services transferred to customers over time accounted for approximately 67%, 66% and 65% of consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. The majority of our revenue recognized over time is for services provided under short-term contracts, with revenue recognized as the customer receives and consumes the services provided by our segments. In addition, we manufacture certain products to individual customer specifications under short-term contracts for which control passes to the customer as the performance obligations are fulfilled and for which revenue is recognized over time.

For significant project-related contracts involving custom engineered products within the Offshore Manufactured Products segment (also referred to as “project-driven products”), revenues are typically recognized over time using an input measure such as the percentage of costs incurred to date relative to total estimated costs at completion for each contract (cost-to-cost method). Contract costs include labor, material and overhead. We believe this method is the most appropriate measure of progress on large contracts. Billings on such contracts in excess of costs incurred and estimated profits are classified as a contract liability (deferred revenue). Costs incurred and estimated profits in excess of billings on these contracts are recognized as a contract asset (a component of accounts receivable).

Contract estimates for project-related contracts involving custom engineered products are based on various assumptions to project the outcome of future events that may span several years. Changes in assumptions that may affect future project costs and margins include production efficiencies, the complexity of the work to be performed and the availability and costs of labor, materials and subcomponents.

As a significant change in one or more of these estimates could affect the profitability of our contracts, contract-related estimates are reviewed regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss will be incurred on the contract, the loss is recognized in the period it is identified.

Cost of goods sold includes all direct material and labor costs and those costs related to contract performance, such as indirect labor, supplies, tools and repairs. As presented on our consolidated statements of operations, costs of goods sold excludes depreciation and amortization expense. Selling, general and administrative costs are charged to expense as incurred.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of products.

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Long-Lived Tangible and Intangible Assets

Our long-lived tangible assets totaled $286.4 million, representing 29% of our total assets as of December 31, 2024, and our long-lived intangible assets totaled $125.9 million, representing 13% of our total assets. The remainder of our assets largely consisted of cash, accounts receivable, inventories and goodwill.

An assessment for impairment of long-lived tangible and intangible assets is conducted at the asset group level whenever changes in facts and circumstances indicate that the carrying value of such asset group may not be recoverable based on estimated undiscounted future cash flows. Indicators of impairment might include strategic management actions, persistent negative economic trends affecting the markets we serve, recurring losses or lowered expectations of future cash flows to be generated by our assets. When necessary, the amount of impairment is determined based on the excess of carrying value over fair value of the asset group, using quoted market prices, if available, or our judgment as to the future operating cash flows to be generated from these assets throughout their estimated useful lives.

During 2024, in response to further reductions in customer activity in the United States, we made strategic decisions to exit our underperforming flowback and well testing service offering and sell the related equipment and inventory. We also decided to exit eight leased facilities. As a result of these events and actions, we recorded non-cash intangible asset (customer relationships and tradenames) impairment charges of $10.8 million associated with the exit of this service offering and operating lease impairments of $3.8 million related to facility closures.

Events and circumstances in 2024 also indicated that the long-lived tangible and intangible assets of an asset group within our Downhole Technologies segment (totaling $146.7 million as of December 31, 2024) may not be recoverable. We assessed the carrying value of the long-lived assets of this group by comparing our estimates of undiscounted future cash flows to the carrying value of the assets. This assessment indicated that the asset group’s long-lived assets were recoverable. Accordingly, no additional long-lived asset impairment losses were recorded in 2024. However, management actions, competitive market conditions or industry cyclicality and downturns may result in future changes to our estimates of projected cash flows, or their timing, and could potentially cause future impairment to the values of our long-lived assets, including finite-lived intangible assets.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by us as of the specified effective date. We believe that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption.

In 2024, we retrospectively expanded our reportable segment disclosures provided in Note 14, “Segments and Related Information,” to our Consolidated Financial Statements included in this Annual Report in accordance with the FASB guidance (“Accounting Standards Update 2023-07”) issued in November 2023.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in “Part II Item 8 Financial Statements and Supplementary Data.” This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in “Part I, Item 1A. Risk Factors.” You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes to those statements included elsewhere in this Annual Report on Form 10‑K in order to understand factors, such as business combinations, charges and credit and financing transactions, which may impact comparability from period to period.

We provide a broad range of manufactured products and services to customers in the energy, industrial and military sectors through our Offshore/Manufactured Products, Well Site Services and Downhole Technologies segments. Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers’ willingness to invest capital in the exploration for and development of crude oil and natural gas reserves. Our customers’ capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, making demand for our products and services sensitive to expectations regarding future crude oil and natural gas prices, as well as economic growth, commodity demand and estimates of resource production and regulatory pressures related to ESG considerations.

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Recent Developments

Brent and WTI crude oil and natural gas pricing trends were as follows:

________________

(1)Source: U.S. Energy Information Administration (spot prices).

On February 9, 2024, Brent crude oil, WTI crude oil and natural gas spot prices closed at $83.58 per barrel, $77.26 per barrel and $1.74 per MMBtu, respectively. Additionally, the U.S. drilling rig count reported on February 9, 2024 was 623 rigs – comparable to the fourth quarter 2023 average.

In February 2023, we repaid the $17.3 million in principal amount, plus accrued interest, outstanding under our 2023 Notes. Additionally, our Board authorized a $25.0 million stock repurchase plan, which extends through February 2025. During 2023, $6.9 million of share repurchases were made under this authorization. On February 16, 2024, we amended our ABL Facility to extend its maturity date from February 10, 2025 to February 16, 2028.

Overview

Current and expected future pricing for WTI crude oil and natural gas and inflationary cost increases, along with expectations regarding the regulatory environment in the regions in which we operate, are factors that will continue to influence our customers’ willingness to invest capital in their businesses. Expectations for the longer-term price for Brent crude oil will continue to influence our customers’ spending related to global offshore drilling and development and, thus, a significant portion of the activity of our Offshore/Manufactured Products segment.

Crude oil prices and levels of demand for crude oil are likely to remain highly volatile due to numerous factors, including: geopolitical conflicts in Europe and the Middle East, along with associated international tensions; the perceived risk of a global economic recession; domestic or international crude oil production; changes in governmental rules and regulations; sanctions; the willingness of operators to invest capital in the exploration for and development of resources; use of alternative fuels; improved vehicle fuel efficiency; timing of capital investments in alternative energy sources; a more sustained movement to electric vehicles; and the potential for ongoing supply/demand imbalances.

U.S. drilling, completion and production activity and, in turn, our financial results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of our U.S. operations.

Customer spending in the natural gas shale plays has moderated over the last ten years due to technological advancements that have led to significant amounts of natural gas being produced from prolific basins in the Northeastern United States and from associated gas produced from the drilling and completion of unconventional oil wells in the United States.

Our Offshore/Manufactured Products segment provides technology-driven, highly-engineered products and services for offshore oil and natural gas production systems and facilities globally, as well as certain products and services to the offshore and land-based drilling and completion markets. This segment also produces a variety of products for use in industrial, military and other applications outside the traditional energy industry. Additionally, we are investing in research and product development related to, and have been awarded select contracts and are bidding on additional projects that facilitate, the development of alternative energy sources, including offshore wind and deepsea mineral gathering opportunities. This segment is particularly influenced by global spending on deepwater drilling and production, which is primarily driven by our customers’ longer-term commodity demand forecasts and outlook for crude oil and natural gas prices. Approximately 69% of Offshore/Manufactured Products segment sales in 2023 were driven by our customers’ capital spending for products and services used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair

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system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as “project-driven products and services”). Deepwater oil and gas development projects typically involve significant capital investments and multi-year development plans. Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies and state-run national oil companies) using relatively conservative crude oil and natural gas pricing assumptions. Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to change based on short-term fluctuations in the price of crude oil and natural gas.

Backlog reported by our Offshore/Manufactured Products segment increased to $333 million as of December 31, 2023 from $308 million as of December 31, 2022. Bookings totaled $472 million in 2023, yielding a book-to-bill ratio of 1.1x. The following table sets forth backlog as of the dates indicated (in millions).

Our Well Site Services segment provides completion services and, to a much lesser extent, land drilling services, in the United States (including the Gulf of Mexico) and internationally. U.S. drilling and completion activity and, in turn, our Well Site Services results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of its operations. We primarily supply equipment and service personnel utilized in the completion of, and initial production from, new and recompleted wells in our U.S. operations, which are dependent primarily upon the level and complexity of drilling, completion and workover activity in our areas of operations. Well intensity and complexity have increased with the continuing transition to multi-well pads, the drilling of longer lateral wells and increased downhole pressures, along with the increased number of frac stages completed in horizontal wells.

Our Downhole Technologies segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations. This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies. Product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools. This expertise has led to the optimization of perforation hole size, depth, and quality of tunnels, which are key factors for maximizing the effectiveness of hydraulic fracturing. Additional offerings include proprietary frac plug and toe valve products, which are focused on zonal isolation for hydraulic fracturing of horizontal wells, and a broad range of consumable products, such as setting tools and bridge plugs, that are used in completion, intervention and decommissioning applications. Demand drivers for the Downhole Technologies segment include continued trends toward longer lateral lengths, increased frac stages and more perforation clusters to target increased unconventional well productivity.

Demand for our completion-related products and services within each of our segments is highly correlated to changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the drilling rig count. The following table sets forth a summary of the U.S. drilling rig count, as measured by Baker Hughes Company, as of and for the periods indicated.

The U.S. energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S. shale plays utilizing horizontal drilling and completion techniques. As of December 31, 2023, oil-directed drilling accounted for 80% of the total U.S. rig count – with the balance largely natural gas related.

We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. The United States has imposed tariffs on a variety of imported products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. In addition, in response to Russia’s invasion of Ukraine,

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governments in the European Union, the United States, the United Kingdom, Switzerland and other countries have enacted sanctions against Russia and Russian interests. The effect of these sanctions and tariffs and the application and interpretation of existing trade agreements and customs, anti-dumping and countervailing duty regulations continue to evolve, and we continue to monitor these matters. If we encounter difficulty in procuring these raw materials and component products, or if the prices we have to pay for these products increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations could be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.

Other factors that can affect our business and financial results include but are not limited to: the general global economic environment (including disruptions in the banking sector); competitive pricing pressures; public health crises; natural disasters; labor market constraints; supply chain disruptions; inflation in wages, materials, parts, equipment and other costs; climate-related and other regulatory changes; geopolitical conflicts and tensions; and changes in tax laws in the United States and international markets. We continue to monitor the global economy, the prices of and demand for crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.

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Selected Financial Data

This selected financial data should be read in conjunction with our Consolidated Financial Statements and related notes included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in order to understand factors, such as charges, credits and financing transactions, which may impact comparability of the selected financial data.

We revised our presentation of supplemental disclosure of disaggregated revenue information in 2023. Prior-period disclosures of disaggregated revenue information presented within this discussion and analysis were conformed with the current-period presentation.

Consolidated Results of Operations

The following summarizes our consolidated results of operations for the years ended December 31, 2023 and 2022 (in thousands, except per share amounts):

_______________

(1)During 2023, we recognized $0.6 million, associated with the defense of certain Well Site Services segment patents related to proprietary technologies.

(2)During 2023, we recognized facility consolidation charges of $2.5 million associated with the Offshore/Manufactured Products segment’s ongoing consolidation and relocation of certain manufacturing and service locations. During 2022, we recognized a gain of $6.1 million associated with the settlement of outstanding litigation against certain service providers.

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Segment Results of Operations

We manage and measure our business performance in three distinct operating segments: Offshore/Manufactured Products, Well Site Services and Downhole Technologies. Supplemental financial information by operating segment for the years ended December 31, 2023 and 2022 is summarized below (in thousands):