# MAMMOTH ENERGY SERVICES, INC. (TUSK) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from MAMMOTH ENERGY SERVICES, INC.'s 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/1679268/000167926822000006/tusk-20211231.htm Accession: 0001679268-22-000006 Filing date: 2022-03-04 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/TUSK/ All MD&A years: /company/TUSK/mda/ Next year: /company/TUSK/mda/fy2022/ (FY 2022) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Item 1A. “Risk Factors” and the section entitled “Forward-Looking Statements” appearing elsewhere in this annual report. Overview     We are an integrated, growth-oriented energy services company focused on the construction and repair of the electric grid for private utilities, public investor-owned utilities and co-operative utilities through its infrastructure services businesses. We also provide products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserves. Our primary business objective is to grow our operations and create value for stockholders through organic growth opportunities and accretive acquisitions. Our suite of services includes infrastructure services, well completion services, natural sand proppant services, drilling services and other services. Our infrastructure services division provides engineering, design, construction, upgrade, maintenance and repair services to the electrical infrastructure industry. Our well completion services division provides hydraulic fracturing, sand hauling and water transfer services. Our natural sand proppant services division mines, processes and sells natural sand proppant used for hydraulic fracturing. Our drilling services division currently provides rental equipment, such as mud motors and operational tools, for both vertical and horizontal drilling. In addition to these service divisions, we also provide aviation services, equipment rentals, crude oil hauling services, remote accommodations and equipment manufacturing. We believe that the services we offer play a critical role in maintaining and improving electrical infrastructure as well as in increasing the ultimate recovery and present value of production streams from unconventional resources. Our complementary suite of services provides us with the opportunity to cross-sell our services and expand our customer base and geographic positioning.     Our transformation towards an industrial based company is ongoing. We offer infrastructure engineering services focused on the transmission and distribution industry and also have equipment manufacturing operations and offer fiber optic services. Our equipment manufacturing operations provide us with the ability to repair much of our existing equipment in-house, as well as the option to manufacture certain new equipment we may need in the future. The equipment manufacturing operations have initially served the internal needs for our water transfer, equipment rental and infrastructure businesses, but we expect to expand into third party sales in the future. Our fiber optic services include the installation of both aerial and buried fiber. We are continuing to explore other opportunities to expand our business lines as we shift to a broader industrial focus. Our revenues, operating (loss) income and identifiable assets are primarily attributable to four reportable segments: infrastructure services; well completion services; natural sand proppant services; and drilling services. Since the dates presented below, we have conducted our operations through the following entities: Infrastructure Services Segment •Cobra Acquisitions LLC, or Cobra—January 2017 •Lion Power Services LLC, formerly Cobra Energy LLC—January 2017 •Higher Power Electrical LLC—April 2017 •5 Star Electric LLC—July 2017 •Python Equipment LLC—December 2018 •Aquawolf LLC—September 2019 •Falcon Fiber Solutions LLC—May 2021 Well Completion Services Segment •Stingray Pressure Pumping LLC—March 2012 •Silverback Energy LLC—November 2012 •Redback Pump Down Services LLC—January 2015 •Mr. Inspections LLC—January 2015 •Mammoth Equipment Leasing LLC—November 2016 •Bison Sand Logistics LLC—January 2018 •Aquahawk Energy LLC—June 2018 Natural Sand Proppant Services Segment •Muskie Proppant LLC—September 2011 54 •Barracuda Logistics LLC—October 2014 •Piranha Proppant LLC—May 2017 •Sturgeon Acquisitions LLC—June 2017 •Taylor Frac, LLC—June 2017 •Taylor Real Estate Investments, LLC—June 2017 •South River Road, LLC—June 2017 Drilling Services Segment •Bison Drilling and Field Services, LLC—November 2010 •Panther Drilling Systems LLC—December 2012 •Bison Trucking LLC—August 2013 Other •Great White Sand Tiger Lodging Ltd.—October 2007 •Redback Energy Services, LLC—October 2011 •Redback Coil Tubing, LLC—May 2012 •Anaconda Rentals LLC, formerly White Wing Tubular Services LLC—September 2014 •WTL Oil LLC, or WTL, formerly Silverback—June 2016 •Mammoth Energy Services Inc.—June 2016 •Mammoth Energy Partners, LLC—October 2016 •Mako Acquisitions LLC—March 2017 •Stingray Energy Services LLC, or Stingray Energy Services—June 2017 •Stingray Cementing LLC—June 2017 •Tiger Shark Logistics LLC—October 2017 •Cobra Aviation Services LLC—January 2018 •Black Mamba Energy LLC—March 2018 •Stingray Cementing and Acidizing LLC, formerly RTS Energy Services LLC—June 2018 •Ivory Freight Solutions LLC—July 2018 •IFX Transport LLC—December 2018 •Air Rescue Systems LLC—December 2018 •Leopard Aviation LLC—April 2019 •Anaconda Manufacturing LLC—September 2019 Impact of the Ongoing COVID-19 Pandemic and Volatility in Commodity Prices 55 In March and April 2020, concurrent with the spread of COVID-19 and quarantine orders in the U.S. and worldwide, oil prices dropped sharply to below zero for the first time in history due to factors including significantly reduced demand and a shortage of storage facilities. Beginning in March 2020, in response to the COVID-19 pandemic and the depressed commodity prices, many exploration and production companies, including our customers, substantially reduced their capital expenditure budgets. As a result, demand for our oilfield services declined at the end of the first quarter of 2020 and continued to decline further throughout the remainder of 2020. Exploration and production companies set their 2021 budgets based on the prevailing prices for oil and gas at the time. Although demand for oil and natural gas and commodity prices increased during the fourth quarter of 2021, these budgets for the publicly traded exploration and production companies remained relatively unchanged throughout 2021 with any excess cash flows used for debt repayment or shareholder returns rather than to increase production, as has been the case in the past. Although activity levels for many exploration and production companies increased during the fourth quarter of 2021 and early 2022 due to the recent improvement in the U.S. and global economic activity, easing of the COVID-19 pandemic related restrictions, availability of vaccines and treatments and rising energy use and commodity prices, the emergence of the Delta COVID-19 variant in the latter part of 2021 and the subsequent surge of the highly transmissible Omicron variant continued to contribute to the economic and pricing volatility and a cautious production outlook for 2022. On July 18, 2021, the OPEC+ reached an agreement to phase out 5.8 million barrels per day of oil production cuts by September 2022 as prices of crude oil reached their highest levels in more than two years. Coordinated increases in oil supply by OPEC+ began in August 2021, increasing overall oil production by 400,000 barrels per day on a monthly basis from that point forward. Further, on January 4, 2022, OPEC+ agreed to raise its output target by 400,000 Bbl per day in February 2022, which move is expected to further boost oil supply in response to rising demand. In its report issued on February 10, 2022, OPEC noted its expectation that world oil demand will rise by 4.15 million Bbl per day in 2022, as the global economy continues to post a strong recovery from the COVID-19 pandemic. Although this demand outlook is expected to underpin oil prices, which have already seen a seven-year high in early 2022, we cannot predict the impact of these events on commodity prices and expect a competitive market for oilfield services for the foreseeable future. In addition, the current Russian/Ukrainian military conflict could result in a humanitarian crisis and have an adverse impact on the global energy and capital markets and global stability. We have taken, and continue to take, responsible steps to protect the health and safety of our employees during the COVID-19 pandemic. We are also continuing to monitor the adverse industry and market conditions resulting from the COVID-19 pandemic and have taken mitigating steps in an effort to preserve liquidity, reduce costs and lower capital expenditures. These actions have included reducing headcount, adjusting pay and limiting spending. We will continue to take further actions that we deem to be in the best interest of the Company and our stockholders if the current conditions worsen. Given the dynamic nature of these events, we are unable to predict the ultimate impact of the COVID-19 pandemic, the volatility in commodity markets, the reduced demand for oil and oilfield services and uncertain macroeconomic conditions on our business, financial condition, results of operations, cash flows and stock price or the pace or extent of any subsequent recovery. 2021 Highlights •Net loss of $101.4 million, or $2.18 per diluted share, and adjusted net loss of $99.3 million, or $2.13 per diluted share, for the year ended December 31, 2021. See “Non-GAAP Financial Measures” below for a reconciliation of net loss to adjusted net loss. •Adjusted EBITDA of ($11.6) million for the year ended December 31, 2021. See “Non-GAAP Financial Measures” below for a reconciliation of net loss to Adjusted EBITDA. •Organically started a fiber division, which was awarded a fiber installation contract with a cooperative in the Midwest in late 2021 with an expected aggregate revenue of $4.5 million throughout 2022. •Awarded a contract by a major utility to provide engineering and design services for the building of electric vehicle charging station infrastructure with an expected aggregate revenue of $5 million over the next three years. Overview of Our Industries Energy Infrastructure Industry         Our infrastructure services business provides engineering, design, construction, upgrade, maintenance and repair services to the electrical infrastructure industry. We offer a broad range of services on electric transmission and distribution, or T&D, networks and substation facilities, which include engineering, design, construction, upgrade, maintenance and repair of high voltage transmission lines, substations and lower voltage overhead and underground distribution systems. Our commercial services include the installation, maintenance and repair of commercial wiring. We also provide storm repair and restoration 56 services in response to storms and other disasters. We provide infrastructure services primarily in the northeast, southwest, midwest and western portions of the United States.     We currently have agreements in place with private utilities, public IOUs and Co-Ops. Since we commenced operations in this line of business, a substantial portion of our infrastructure revenue has been generated from storm restoration work, primarily from PREPA, due to damage caused by Hurricane Maria. On October 19, 2017, Cobra and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid. The one-year contract, as amended, provided for payments of up to $945 million (the “first contract”). On May 26, 2018, Cobra and PREPA entered into a second one-year, $900 million master services agreement to provide additional repair services and begin the initial phase of reconstruction of the electrical power system in Puerto Rico (the “second contract”). Our work under each of the contracts with PREPA ended on March 31, 2019.      As of December 31, 2021, PREPA owed us approximately $227 million for services we performed, excluding $110.8 million of interest charged on these delinquent balances as of December 31, 2021. See Note 2. Summary of Significant Accounting Policies—Accounts Receivable to our consolidated financial statements included elsewhere in this report. PREPA is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA’s ability to meet its payment obligations under the contracts is largely dependent upon funding from the Federal Emergency Management Agency, or FEMA, or other sources. On September 30, 2019, we filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to us by PREPA, which motion was stayed by the Court. On March 25, 2020, we filed an urgent motion to modify the stay order and allow our recovery of approximately $62 million in claims related to a tax gross-up provision contained in the first contract. This emergency motion was denied on June 3, 2020 and the Court extended the stay of our motion. On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status report by June 7, 2021. On April 6, 2021, we filed a motion to lift the stay order. Following this filing, PREPA initiated discussion with Cobra, which resulted in PREPA and Cobra filing a joint motion to adjourn all deadlines relative to the April 6, 2021 motion until the June 16, 2021 omnibus hearing as a result of PREPA’s understanding that FEMA would be releasing a report in the near future relating to the first contract. The joint motion was granted by the Court on April 14, 2021. On May 26, 2021, FEMA issued a Determination Memorandum related to the first contract between Cobra and PREPA in which, among other things, FEMA raised two contract compliance issues and, as a result, concluded that approximately $47 million in costs were not authorized costs under the contract. On June 14, 2021, the Court issued an order adjourning Cobra’s motion to lift the stay order to a hearing on August 4, 2021 and directing Cobra and PREPA to meet and confer in good faith concerning, among other things, (i) the May 26, 2021 Determination Memorandum issued by FEMA and (ii) whether and when a second determination memorandum is expected. The parties were further directed to file an additional status report, which was filed on July 20, 2021. On July 23, 2021, with our aid, PREPA filed an appeal of the entire $47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum. The appeal is currently pending. On August 4, 2021, the Court denied Cobra’s April 6, 2021 motion to lift the stay order, extended the stay of our motion seeking recovery of amounts owed to Cobra and directed the parties to file an additional joint status report, which was filed on January 22, 2022. On January 26, 2022, the Court extended the stay and directed the parties to file a further status report by July 25, 2022. We believe all amounts charged to PREPA were in accordance with the terms of the contracts. Further, we believe these receivables are collectible. However, in the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to us or (iii) otherwise does not pay amounts owed to us for services performed, the receivable may not be collected and our financial condition, results of operations and cash flows would be materially and adversely affected. In addition, government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits and compliance reviews by government agencies and representatives. In this regard, on September 10, 2019, the U.S. District Court for the District of Puerto Rico unsealed an indictment that charged the former president of Cobra with conspiracy, wire fraud, false statements and disaster fraud. Two other individuals were also charged in the indictment. The indictment is focused on the interactions between a former FEMA official and the former President of Cobra. Neither we nor any of our subsidiaries were charged in the indictment. We are continuing to cooperate with the related investigation. We are also subject to investigations and legal proceedings related to our contracts with PREPA. Given the uncertainty inherent in the criminal litigation, investigations and legal proceedings, it is not possible at this time to determine the potential outcome or other potential impacts that they could have on us. See Note 19. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information regarding these investigations and proceedings. Further, as noted above, our contracts with PREPA have concluded and we have not obtained, and there can be no assurance that we will be able to obtain, one or more contracts with other customers to replace the level of services that we provided to PREPA. Although the COVID-19 pandemic and resulting economic conditions have not had a material impact on demand or pricing for our infrastructure services, revenues for our infrastructure services declined in 2021 as a result of certain 57 management changes, which resulted in crew departures, as well as a decline in storm restoration activities. Our crew count declined from approximately 100 crews as of December 31, 2020 to approximately 82 crews as of December 31, 2021. During the third quarter of 2021, we made leadership changes in our infrastructure group. We are focused on cutting costs and enhancing accountability across the division, and we have already seen improvement in both areas. Funding for projects in the infrastructure space remains strong with added opportunities expected from the Infrastructure Investment and Jobs Act, which was signed into law on November 15, 2021. We continue to pursue opportunities within this sector as we strategically structure our service offerings for growth, intending to increase our infrastructure services activity and expand both our geographic footprint and depth of projects. In late 2021, we were awarded a fiber installation contract as well as an electric vehicle charging station engineering contract. Both of these projects are currently in process. We work for multiple utilities primarily across the northeastern, southwestern, midwestern and western portions of the United States. We believe that we are well-positioned to compete for new projects due to the experience of our infrastructure management team, combined with our vertically integrated service offerings. We are seeking to leverage this experience and our service offerings to grow our customer base and increase our revenues in the continental United States over the coming years. Oil and Natural Gas Industry          The oil and natural gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including the domestic and international supply and demand for oil and natural gas, current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices, production depletion rates and the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling, completion and related services and products budgets. The oil and natural gas industry is also impacted by general domestic and international economic conditions, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of customer demand, the availability of pipeline capacity, storage capacity and other conditions and factors that are beyond our control. See “Recent Developments—Impact of the COVID-19 Pandemic and Volatility in Commodity Prices” above. Demand for most of our oil and natural gas products and services depends substantially on the level of capital expenditures by companies in the oil and natural gas industry. The levels of capital expenditures of our customers are predominantly driven by the prices of oil and natural gas. As discussed above, oil prices dropped sharply throughout March and April of 2020. While improved commodity pricing has contributed to positive industry movement and increased equipment utilization, oil and natural gas prices are expected to continue to be volatile and we cannot predict if, or at what levels, commodity prices will stabilize. We experienced a weakening in demand for our oilfield services during 2019 as a result of reductions in our customers’ capital expenditure budgets. The sharp decline in oil prices beginning in March 2020, the continued volatility and strategic operating decisions by producers to curtail drilling activity have continued to adversely impact the utilization and pricing of our oilfield services. In response to market conditions, we have temporarily shut down our cementing and acidizing operations and flowback operations beginning in July 2019, our contract drilling operations beginning in December 2019, our rig hauling operations beginning in April 2020, our coil tubing, pressure control and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021. We continue to monitor the market to determine if and when we can recommence these services. We are currently operating two of our six pressure pumping fleets. Based on feedback from our exploration and production customers, we believe they plan to take a cautious approach with respect to their activity levels for 2022 given the recent volatility in oil prices and investor sentiment calling for activities to remain within or below cash flows. Market fundamentals are challenging for our oilfield businesses and we expect this trend to continue. Although the reported retirement of equipment across the industry may, at some point, help the market, we believe pricing and utilization for our oilfield services will remain challenging for the foreseeable future. Subject to our liquidity requirements, we expect to be ready to ramp up our oilfield service offerings when oilfield demand, pricing and margins strengthen. We continue to closely monitor our cost structure in response to market conditions and intend to pursue additional cost savings where possible. Further, a significant portion of our revenue from our pressure pumping business had historically been derived from Gulfport. On December 28, 2019, Gulfport filed a lawsuit alleging our breach of our pressure pumping contract with Gulfport and seeking to terminate the contract and recover damages for alleged overpayments, audit costs and legal fees. Gulfport did not make the payments owed to us under this contract for any periods subsequent to its alleged December 28, 2019 termination date. Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On September 21, 2021, we reached a settlement with Gulfport under which all litigation relating to the Stingray Pressure Pumping contract was terminated, Stingray Pressure Pumping released all claims against Gulfport and its 58 subsidiaries with respect to Gulfport’s bankruptcy proceedings and each of the parties released all claims they had against the others with respect to the litigation matters discussed above. We have not been able to obtain long-term contracts with other customers to replace our contract with Gulfport. See Note 19. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information. Natural Sand Proppant Industry     In the natural sand proppant industry, demand growth for frac sand and other proppants is primarily driven by advancements in oil and natural gas drilling and well completion technology and techniques, such as horizontal drilling and hydraulic fracturing, as well as overall industry activity growth.     In 2018 and 2019, several new and existing suppliers completed planned capacity additions of frac sand supply, particularly in the Permian Basin. The industry expansion, coupled with increased capital discipline, budget exhaustion and the impact on oil demand from the COVID-19 pandemic, caused the frac sand market to become oversupplied, particularly in finer grades. With the frac sand market oversupplied, pricing for all grades has fallen significantly from the peaks experienced throughout 2018 and during the first half of 2019. This oversupply resulted in several industry participants idling and closing high cost mines in an attempt to restore the supply and demand balance and reduce the number of industry participants. Nevertheless, demand for our sand declined significantly in the second half of 2019 and throughout 2020 as a result of completion activity falling due to lower oil demand and pricing as discussed above, increased capital discipline by our customers, budget exhaustion and the COVID-19 pandemic. Activity has rebounded modestly in 2021 as we have seen an increase in the volume of sand sold, however the prices of frac sand have continued to be depressed compared to prior levels. We cannot predict if and when pricing and demand will recover sufficiently to return our natural sand proppant services segment to profitability.     Further, as a result of adverse market conditions, production at our Muskie sand facility in Pierce County, Wisconsin has been temporarily idled since September 2018. Our contracted capacity has provided a baseline of business, which has kept our Taylor and Piranha plants operating and our costs low. A portion of our revenue from our natural sand proppant business historically had been derived from Gulfport pursuant to a long-term contract. Gulfport did not made the payments owed to us under this contract for any periods subsequent to May 2020. In September 2020, we filed a lawsuit seeking to recover delinquent payments owed to us under this contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Muskie contract was terminated and a portion of Muskie’s contract claim against Gulfport was allowed under Gulfport’s plan of reorganization. See Note 19. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information. 59 Results of Operations Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 [[GREPCENT_TABLE]] [["","Years Ended"],["","December 31, 2021","","December 31, 2020"],["Revenue:","(in thousands)"],["Infrastructure services","$","93,403","","","$","157,751"],["Well completion services","84,334","","","88,325"],["Natural sand proppant services","34,860","","","34,360"],["Drilling services","4,321","","","7,785"],["Other services","18,510","","","28,829"],["Eliminations","(6,466)","","","(3,974)"],["Total revenue","228,962","","","313,076"],["Cost of revenue:"],["Infrastructure services (exclusive of depreciation and amortization of $21,841 and $29,337, respectively, for 2021 and 2020)","90,559","","","124,555"],["Well completion services (exclusive of depreciation and amortization of $26,356 and $30,395, respectively, for 2021 and 2020)","64,552","","","47,483"],["Natural sand proppant services (exclusive of depreciation, depletion and accretion of $8,993 and $9,758, respectively, for 2021 and 2020)","27,232","","","25,955"],["Drilling services (exclusive of depreciation and amortization of $7,995 and $10,036, respectively, for 2021 and 2020)","6,102","","","10,909"],["Other services (exclusive of depreciation and amortization of $13,209 and $15,713, respectively, for 2021 and 2020)","16,347","","","27,093"],["Eliminations","(6,466)","","","(3,974)"],["Total cost of revenue","198,326","","","232,021"],["Selling, general and administrative expenses","78,246","","","67,185"],["Depreciation, depletion, amortization and accretion","78,475","","","95,317"],["Impairment of goodwill","891","","","54,973"],["Impairment of other long-lived assets","1,212","","","12,897"],["Operating loss","(128,188)","","","(149,317)"],["Interest expense, net","(6,406)","","","(5,397)"],["Other income, net","10,301","","","34,938"],["Loss before income taxes","(124,293)","","","(119,776)"],["Benefit for income taxes","(22,863)","","","(12,169)"],["Net loss","$","(101,430)","","","$","(107,607)"]] [[/GREPCENT_TABLE]]     Revenue. Revenue for 2021 decreased $84.1 million, or 27%, to $229.0 million from $313.1 million for 2020. The decrease in total revenue is attributable to declines in revenue across all business lines other than our natural sand proppant services division. Revenue derived from related parties was $17.9 million, or 8% of our total revenue, for 2021 and $50.6 million, or 16% of our total revenue, for 2020. Substantially all of our related party revenue was derived from Gulfport under pressure pumping and sand contracts which have ended. For additional information regarding the status of these contracts and the related litigation, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 19. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report. Revenue by division was as follows: Infrastructure Services. Infrastructure services division revenue decreased $64.3 million, or 41%, to $93.4 million for 2021 from $157.8 million for 2020 primarily due to less storm activity during the year ended December 31, 2021 compared to the year ended December 31, 2020 resulting in an $58.4 million decline in storm restoration revenue. Additionally, infrastructure services revenue was negatively impacted by the decrease in crew count from 60 approximately 100 crews as of December 31, 2020 to 82 crews as of December 31, 2021. These crew departures were driven by changes in division level management. Well Completion Services. Well completion services division revenue decreased $4.0 million, or 5%, to $84.3 million for 2021 from $88.3 million for 2020. Revenue derived from related parties was $15 million, or 18% of total well completion revenue, for 2021 and $42.5 million, or 48% of total well completion revenue, for 2020. Substantially all of our related party revenue was derived from Gulfport under a pressure pumping contract which has ended. In 2021, we recognized revenue totaling $15 million related to the modification of our pressure pumping contract with Gulfport. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above. Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, totaled $0.1 million and $1.1 million, for 2021 and 2020, respectively. The decrease in our well completion services revenue was primarily driven by a decline in utilization. The number of stages completed decreased 12% to 2,544 for 2021 from 2,880 for 2020. An average of 1.1 of our six fleets were active throughout 2021 compared to 1.5 fleets for 2020. Natural Sand Proppant Services. Natural sand proppant services division revenue increased $0.5 million, or 1%, to $34.9 million for 2021, from $34.4 million for 2020. Revenue derived from related parties was $2.1 million, or 6% of total sand revenue, for 2021 and $8.4 million, or 24% of total sand revenue, for 2020. All of our related party revenue was derived from Gulfport under a sand supply contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. In 2021, we recognized revenue totaling $2 million related to the modification of our sand supply contract with Gulfport. For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above. Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was $4.0 million, or 11% of total sand revenue, for 2021 and a nominal amount for 2020. The increase in our natural sand proppant services revenue was primarily attributable to a 107% increase in tons of sand sold from approximately 0.5 million tons in 2020 to 1.0 million tons in 2021 coupled with a 15% increase in average price per ton of sand sold from $14.58 in 2020 to $16.76 in 2021. Included in natural sand proppant services revenue is shortfall revenue of $12.0 million and $24.8 million, for 2021 and 2020, respectively. Drilling Services. Drilling services division revenue decreased $3.5 million, or 44%, to $4.3 million for 2021, from $7.8 million for 2020. Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $0.6 million for 2021 and a nominal amount for 2020. The decline in our drilling services revenue was primarily attributable to declines in utilization for our directional drilling and rig hauling businesses. In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020. Other Services. Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, equipment rental, crude oil hauling, full service transportation, remote accommodation and equipment manufacturing, decreased $10.3 million, or 36%, to $18.5 million for 2021 from $28.8 million for 2020. Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $0.4 million, or 2% of total other services revenue, for 2021 and $1.0 million, or 3% of total other services revenue, for 2020. Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $2.2 million and $2.7 million, for 2021 and 2020, respectively. The decrease in our other services revenue was primarily due to a decline in utilization for our equipment rental business. We rented an average of 135 pieces of equipment to customers during 2021, a decrease of 34% from an average of 204 pieces of equipment rented to customers during 2020. Additionally, utilization for our crude oil hauling and aviation businesses declined. Due to market conditions, we temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021.     Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $33.7 million from $232.0 million, or 74% of total revenue, for 2020 to $198.3 million, or 87% of total revenue, for 2021. The decrease was primarily due to a decline in activity across all of our business lines. Cost of revenue by operating division was as follows: 61 Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $34.0 million from $124.6 million for 2020 to $90.6 million for 2021, primarily due to a decline in activity. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $21.9 million in 2021 and $29.4 million in 2020, was 97% and 79%, for 2021 and 2020, respectively. The increase as a percentage of revenue is primarily due to increased labor costs as a percentage of revenue. Well Completion Services. Well completion services division cost of revenue, exclusive of depreciation and amortization expense, increased $17.1 million, or 36%, from $47.5 million for 2020 to $64.6 million for 2021 primarily due to an increase in cost of goods sold as a result of providing sand and chemicals with our service package to customers in 2021. As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $26.4 million in 2021 and $30.4 million in 2020, was 77% and 54%, for 2021 and 2020, respectively. The increase as a percentage of revenue was primarily due to the recognition of more pressure pumping services standby revenue in 2020, of which there was a lower percentage of costs recognized compared to 2021. Additionally, during 2021 we provided sand and chemicals with our service package to customers, resulting in higher cost of goods sold as a percentage of revenue for this period in comparison to 2020. Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, increased $1.2 million, or 5%, from $26.0 million for 2020 to $27.2 million for 2021. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $9.0 million in 2021 and $9.8 million in 2020, was 78% and 76%, for 2021 and 2020, respectively. Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $4.8 million, or 44%, from $10.9 million for 2020 to $6.1 million for 2021, as a result of reduced activity. In response to market conditions, we have temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020. As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $8.0 million in 2021 and $10.0 million in 2020, was 139% and 116%, for 2021 and 2020, respectively. The increase as a percentage of revenue was primarily due to a decline in utilization. Other Services. Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $10.7 million, or 40%, from $27.1 million for 2020 to $16.3 million for 2021, primarily due to a decline in costs for our equipment rental, coil tubing, and full service transportation businesses as a result of reduced activity. Due to market conditions, we have temporarily shut down our coil tubing and full service transportation operations beginning in July 2020 and our crude oil hauling operations beginning in July 2021. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13.2 million in 2021 and $15.7 million in 2020, was 88% and 94%, for 2021 and 2020, respectively. The decrease as a percentage of revenue is primarily due to a decline in equipment rental costs as a percentage of revenue.     Selling, General and Administrative Expenses. Selling, general and administrative expenses, or SG&A, represent the costs associated with managing and supporting our operations. Following is a breakout of SG&A expenses for the periods indicated (in thousands): [[GREPCENT_TABLE]] [["","Years Ended"],["","December 31, 2021","","December 31, 2020"],["Cash expenses:"],["Compensation and benefits","$","15,064","","","$","14,876"],["Professional services","11,400","","","19,905"],["Other(a)","9,052","","","8,828"],["Total cash SG&A expense","35,516","","","43,609"],["Non-cash expenses:"],["Bad debt provision","41,662","","","21,958"],["Stock based compensation","1,068","","","1,618"],["Total non-cash SG&A expense","42,730","","","23,576"],["Total SG&A expense","$","78,246","","","$","67,185"]] [[/GREPCENT_TABLE]] 62 a.    Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs. b.    The bad debt provision for the year ended December 31, 2021 includes $41.2 million related to the Stingray Pressure Pumping and Muskie contracts with Gulfport. The bad debt provision for the year ended December 31, 2020, included $19.4 million related to the voluntary petitions for relief filed on November 13, 2020, by Gulfport and certain of its subsidiaries. See Notes 2 and 19 of the Notes to the Consolidated Financial Statements.     Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, amortization and accretion decreased $16.8 million, or 18%, to $78.5 million for 2021 from $95.3 million in 2020. The decrease is primarily due to a decline in property and equipment depreciation expense as a result of lower capital expenditures.     Impairment of Goodwill. We recorded impairment of goodwill of $0.9 million and $55.0 million in 2021 and 2020, respectively. As a result of our annual assessment of goodwill, we determined that the carrying value of goodwill for certain of our entities exceeded their fair values at December 31, 2021, resulting in impairment expense of $0.9 million. As a result of market conditions, we performed an impairment assessment of our goodwill as of March 31, 2020. We determined that the carrying value of goodwill for certain of our entities exceeded their fair values, resulting in impairment expense of $55.0 million.     Impairment of Other Long-lived Assets. We recorded impairments of other long-lived assets of $1.2 million and $12.9 million, in 2021 and 2020, respectively. Beginning in 2021, we temporarily shut down our crude oil hauling operations, resulting in impairment of trade names of $0.5 million. Additionally, as a result of a review of intangible asset balances as of December 31, 2021, we determined the fair value of Higher Power’s trade names and customer relationships was less than their carrying value, resulting in impairment expense of $0.7 million. During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $12.9 million.     Operating Loss. We reported an operating loss of $128.2 million for 2021 compared to an operating loss $149.3 million for 2020. The reduced operating loss was primarily due to the recognition of $67.9 million in impairment expenses during 2020, as compared to $2.1 million in 2021, partially offset by a $19.7 million increase in bad debt expense primarily due to the settlement with Gulfport.     Interest Expense, net. Interest expense, net increased $1.0 million to $6.4 million for 2021 from $5.4 million for 2020, primarily due to an increase in expense recognized on sale-leaseback transactions.     Other Income (Expense), net. Other income, net decreased $22.7 million during 2021 compared to 2020. During 2021, we recognized expense of $25.0 million related to an agreement to settle a legal matter and legal fees related to the matter totaling $5.4 million. This expense was partially offset by a $4.4 million increase in gains on asset disposals and a $4.4 million increase in interest on delinquent account receivables.     Income Taxes. During 2021, we recorded an income tax benefit of $22.9 million on pre-tax loss of $124.3 million compared to an income tax benefit of $12.2 million on pre-tax loss of $119.8 million for 2020. Our effective tax rate was 18.4% for 2021 compared to 10.2% for 2020. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and changes in the valuation allowance that may not be consistent from year to year. See Note 13 to our consolidated financial statements for additional detail regarding our change in tax expense. 63 Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 [[GREPCENT_TABLE]] [["","Years Ended"],["","December 31, 2020","","December 31, 2019"],["Revenue:","(in thousands)"],["Infrastructure services","$","157,751","","","$","213,285"],["Well completion services","88,325","","","243,802"],["Natural sand proppant services","34,360","","","97,063"],["Drilling services","7,785","","","31,964"],["Other services","28,829","","","88,586"],["Eliminations","(3,974)","","","(49,688)"],["Total revenue","313,076","","","625,012"],["Cost of Revenue:"],["Infrastructure services (exclusive of depreciation and amortization of $29,337 and $30,323, respectively, for 2020 and 2019)","124,555","","","173,551"],["Well completion services (exclusive of depreciation and amortization of $30,395 and $40,117, respectively, for 2020 and 2019)","47,483","","","206,543"],["Natural sand proppant services (exclusive of depreciation, depletion and accretion of $9,758 and $14,039, respectively, for 2020 and 2019)","25,955","","","87,652"],["Drilling services (exclusive of depreciation and amortization of $10,036 and $13,138, respectively, for 2020 and 2019)","10,909","","","36,953"],["Other services (exclusive of depreciation and amortization of $15,713 and $19,323, respectively, for 2020 and 2019)","27,093","","","88,837"],["Eliminations","(3,974)","","","(49,748)"],["Total cost of revenue","232,021","","","543,788"],["Selling, general and administrative expenses","67,185","","","51,552"],["Depreciation, depletion, amortization and accretion","95,317","","","117,033"],["Impairment of goodwill","54,973","","","33,664"],["Impairment of other long-lived assets","12,897","","","7,358"],["Operating loss","(149,317)","","","(128,383)"],["Interest expense, net","(5,397)","","","(4,958)"],["Other income, net","34,938","","","42,216"],["Loss before income taxes","(119,776)","","","(91,125)"],["Benefit for income taxes","(12,169)","","","(12,081)"],["Net loss","$","(107,607)","","","$","(79,044)"]] [[/GREPCENT_TABLE]]     Revenue. Revenue for 2020 decreased $311.9 million, or 50%, to $313.1 million from $625.0 million for 2019. The decrease in total revenue is attributable to declines in revenue across all business lines. Revenue derived from related parties was $50.6 million, or 16% of our total revenue, for 2020 and $130.3 million, or 21% of our total revenue, for 2019. Substantially all of our related party revenue was derived from Gulfport under pressure pumping and sand contracts. For additional information regarding the status of these contracts, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 19. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report. Revenue by division was as follows: Infrastructure Services. Infrastructure services division revenue decreased $55.5 million, or 26%, to $157.8 million for 2020 from $213.3 million for 2019 primarily due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico’s electrical grid as a result of Hurricane Maria. For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our Industries - Electrical Infrastructure Industry” above. Revenue from our operations in the continental United States increased $41.1 million, or 35%, to $157.8 million for 2020 from $116.7 million for 2019. 64 Well Completion Services. Well completion services division revenue decreased $155.7 million, or 64%, to $88.3 million for 2020 from $243.8 million for 2019. Revenue derived from related parties was $42.5 million, or 48% of total well completion revenue, for 2020 and $91.2 million, or 37% of total well completion revenue, for 2019. Substantially all of our related party revenue was derived from Gulfport under a well completion contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. In 2020, we recognized pre-petition revenue totaling $38.5 million and post-petition revenue totaling $3.9 million in accordance with the terms of this contract. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above. Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, was $0.9 million and $1.9 million, respectively, for 2020 and 2019. The decrease in our well completion services revenue was primarily driven by a decline in pricing as well as a decline in utilization. The number of stages completed decreased 46% to 2,880 for 2020 from 5,378 for 2019. An average of 1.5 of our fleets were active throughout 2020 compared to 2.4 fleets for 2019. Natural Sand Proppant Services. Natural sand proppant services division revenue decreased $62.7 million, or 65%, to $34.4 million for 2020, from $97.1 million for 2019. Revenue derived from related parties was $8.4 million, or 24% of total sand revenue, for 2020 and $27.7 million, or 29% of total sand revenue, for 2019. All of our related party revenue was derived from Gulfport under a sand supply contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. In 2020, we recognized pre-petition revenue totaling $6.5 million and post-petition revenue totaling $1.0 million in accordance with the terms of this contract. For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above. Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was nominal for 2020 and $30 million, or 31% of total sand revenue, for 2019. The decrease in our natural sand proppant services revenue was primarily attributable to a 75% decline in tons of sand sold from approximately 2.0 million tons in 2019 to 0.5 million tons in 2020 coupled with a 51% decline in average price per ton of sand sold from $29.70 in 2019 to $14.58 in 2020. Included in natural sand proppant services revenue is shortfall revenue of $24.8 million and $2.8 million, respectively, for 2020 and 2019. Drilling Services. Drilling services division revenue decreased $24.2 million, or 76%, to $7.8 million for 2020, from $32.0 million for 2019. Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was nominal for 2020 and $0.6 million for 2019. The decline in our drilling services revenue was primarily attributable to declines in contract land drilling, rig hauling and directional drilling revenue of $9.2 million, $8.6 million, and $6.3 million, respectively. In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020. Other Services. Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, crude oil hauling, full service transportation, remote accommodation, equipment manufacturing and infrastructure engineering and design businesses, decreased $59.8 million, or 67%, to $28.8 million for 2020 from $88.6 million for 2019. Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $1.0 million, or 3% of total other services revenue, for 2020 and $10.9 million, or 12% of total other services revenue, for 2019. Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $2.7 million and $15.2 million, respectively for 2020 and 2019. The decrease in our other services revenue was primarily due to a decline in utilization for our equipment rental business. We rented an average of 204 pieces of equipment to customers during 2020, a decrease of 63% from an average of 557 pieces of equipment rented to customers during 2019. Additionally, utilization for our crude oil hauling and aviation businesses declined. Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations in July 2019 and our coil tubing and full service transportation operations beginning in July 2020. These decreases were partially offset by an increase in revenue for our remote accommodations business.     Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $311.8 million from $543.8 million, or 87% of total revenue, for 2019 to $232.0 million, or 74% of total revenue, for 2020. The decrease was primarily due to a decline in activity across all business lines. Cost of revenue by operating division was as follows: 65 Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $49.0 million from $173.6 million for 2019 to $124.6 million for 2020. The decline is due to the conclusion on March 31, 2019 of the work we performed under our contracts with PREPA for repairs to Puerto Rico’s electrical grid as a result of Hurricane Maria. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $29.4 million in 2020 and $30.3 million in 2019, was 79% and 81%, respectively, for 2020 and 2019. Well Completion Services. Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $159.6 million, or 77%, from $206.5 million for 2019 to $47.5 million for 2020 primarily due to a decline in activity. As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $30.4 million in 2020 and $40.2 million in 2019, was 54% and 85%, respectively, for 2020 and 2019. The decrease was primarily due to the recognition of standby revenue during 2020, of which there was a lower percentage of costs recognized compared to 2019. Additionally, during 2019 we provided sand and chemicals with our service package to customers, resulting in higher costs of goods sold as a percentage of revenue for this period in comparison to 2020. Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $61.7 million, or 70%, from $87.7 million for 2019 to $26.0 million for 2020 primarily due to a decrease in cost of goods sold as a result of a decrease in tons of sand sold. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $9.8 million in 2020 and $14.1 million in 2019, was 76% and 90%, respectively, for 2020 and 2019. The decrease in cost as a percentage of revenue is primarily due to an increase in shortfall revenue, partially offset by a 51% decline in average price per ton of sand sold. Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $26.0 million, or 70%, from $37.0 million for 2019 to $10.9 million for 2020, as a result of reduced activity. In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020. As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $10.0 million in 2020 and $13.1 million in 2019, was 140% and 116%, respectively, for 2020 and 2019. The increase was primarily due to a decline in utilization. Other Services. Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $62.7 million, or 71%, from $88.8 million for 2019 to $27.1 million for 2020, primarily due to a decline in costs for our equipment rental and crude oil hauling businesses as a result of reduced activity. Additionally, due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 and our coil tubing, pressure control and full service transportation operations beginning in July 2020. We continue to monitor market conditions to evaluate if and when we can recommence providing these services. These declines were partially offset by an increase in costs for our equipment manufacturing business. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $15.7 million in 2020 and $19.3 million in 2019, was 93% and 101%, respectively, for 2020 and 2019.     Selling, General and Administrative Expenses. Selling, general and administrative expenses, or SG&A, represent the costs associated with managing and supporting our operations. Following is a breakout of SG&A expenses for the periods indicated (in thousands): 66 [[GREPCENT_TABLE]] [["","Years Ended"],["","December 31, 2020","","December 31, 2019"],["Cash expenses:"],["Compensation and benefits","$","14,876","","","$","19,364"],["Professional services","19,905","","","17,128"],["Other(a)","8,828","","","10,300"],["Total cash SG&A expense","43,609","","","46,792"],["Non-cash expenses:"],["Bad debt provision","21,958","","","1,434"],["Stock based compensation","1,618","","","3,326"],["Total non-cash SG&A expense","23,576","","","4,760"],["Total SG&A expense","$","67,185","","","$","51,552"]] [[/GREPCENT_TABLE]] a.    Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.     Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, accretion and amortization decreased $21.7 million, or 19%, to $95.3 million for 2020 from $117.0 million in 2019. The decrease is primarily due to a decline in property and equipment depreciation expense as well as a decline in depletion expense.     Impairment of Goodwill. We recorded impairment of goodwill of $55.0 million and $33.7 million, respectively, in 2020 and 2019. As a result of market conditions, we performed an impairment assessment of our goodwill as of March 31, 2020. We determined that the carrying value of goodwill for certain of our entities exceeded their fair values, resulting in impairment expense of $55.0 million. As a result of our annual assessment of goodwill, we determined that the carrying value of goodwill for certain of our entities exceeded their fair values at December 31, 2019, resulting in impairment expense of $33.7 million. During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3.1 million.     Impairment of Other Long-lived Assets. We recorded impairments of other long-lived assets of $12.9 million and $7.4 million, respectively, in 2020 and 2019. During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $12.9 million. During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $3.6 million during 2019. Additionally, we recorded impairment expense $3.0 million related to specified drilling rigs and $0.8 million related to WTL’s customer relationship intangible asset during 2019.     Operating Loss. We reported an operating loss of $149.3 million for 2020 compared to operating loss of $128.4 million for 2019. The increased operating loss was primarily due to increases in impairment expense of $26.8 million and SG&A expense of $15.6 million, partially offset by a 15% decline in cost of revenue as a percentage of revenue.     Interest Expense, net. Interest expense, net remained relatively flat at $5.4 million and $5.0 million for 2020 and 2019, respectively.     Other Income (Expense), net. Other income, net decreased $7.3 million during 2020 compared to 2019 primarily due to a decline in the recognition of interest on trade accounts receivable pursuant to the terms of our contracts with PREPA.     Income Taxes. During 2020, we recorded an income tax benefit of $12.2 million on pre-tax loss of $119.8 million compared to income tax benefit of $12.1 million on pre-tax loss of $91.1 million for 2019. Our effective tax rate was 10.2% for 2020 compared to 13.3% for 2019. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and changes in the valuation allowance that may not be consistent from year to year. See Note 13 to our consolidated financial statements for additional detail regarding our change in tax expense. 67 Non-GAAP Financial Measures Adjusted EBITDA     Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as net (loss) income before depreciation, depletion, amortization and accretion, impairment of goodwill, impairment of other long-lived assets, inventory obsolescence charges, acquisition related costs, public offering costs, equity based compensation, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets, interest on trade accounts receivable and certain legal expenses) and (benefit) provision for income taxes, further adjusted to add back interest on trade accounts receivable. We exclude the items listed above from net (loss) income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industries depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net (loss) income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.     The following tables also provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income or (loss) for each of our operating segments for the specified periods (in thousands). Consolidated [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net loss:","2021","","2020","","2019"],["Net loss","$","(101,430)","","","$","(107,607)","","","$","(79,044)"],["Depreciation, depletion, amortization and accretion","78,475","","","95,317","","","117,033"],["Impairment of goodwill","891","","","54,973","","","33,664"],["Impairment of other long-lived assets","1,212","","","12,897","","","7,358"],["Inventory obsolescence charges","\u2014","","","\u2014","","","1,349"],["Acquisition related costs","\u2014","","","\u2014","","","45"],["Public offering costs","91","","","\u2014","","","\u2014"],["Stock based compensation","1,191","","","1,952","","","4,177"],["Interest expense, net","6,406","","","5,397","","","4,958"],["Other income, net","(10,301)","","","(34,938)","","","(42,216)"],["Benefit for income taxes","(22,863)","","","(12,169)","","","(12,081)"],["Interest on trade accounts receivable","34,709","","","34,130","","","42,040"],["Adjusted EBITDA","$","(11,619)","","","$","49,952","","","$","77,283"]] [[/GREPCENT_TABLE]] 68 Infrastructure Services [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net (loss) income:","2021","","2020","","2019"],["Net (loss) income","$","(36,711)","","","$","(928)","","","$","18,135"],["Depreciation, depletion, amortization and accretion","21,880","","","29,373","","","30,349"],["Impairment of goodwill","891","","","\u2014","","","\u2014"],["Impairment of other long-lived assets","665","","","\u2014","","","\u2014"],["Acquisition related costs","\u2014","","","\u2014","","","12"],["Public offering costs","39","","","\u2014","","","\u2014"],["Stock based compensation","500","","","580","","","822"],["Interest expense","3,925","","","2,794","","","1,674"],["Other income, net","(6,785)","","","(32,437)","","","(41,949)"],["Provision for income taxes","712","","","7,133","","","7,908"],["Interest on trade accounts receivable","36,551","","","32,214","","","42,040"],["Adjusted EBITDA","$","21,667","","","$","38,729","","","$","58,991"]] [[/GREPCENT_TABLE]] Well Completion Services [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net loss:","2021","","2020","","2019"],["Net loss","$","(58,051)","","","$","(69,073)","","","$","(39,020)"],["Depreciation, depletion, amortization and accretion","26,377","","","30,411","","","40,159"],["Impairment of goodwill","\u2014","","","53,406","","","23,423"],["Impairment of other long-lived assets","\u2014","","","4,203","","","\u2014"],["Acquisition related costs","\u2014","","","\u2014","","","18"],["Public offering costs","31","","","\u2014","","","\u2014"],["Stock based compensation","333","","","527","","","1,693"],["Interest expense","1,107","","","1,130","","","1,228"],["Other expense (income), net","1,073","","","(2,274)","","","580"],["Interest on trade accounts receivable","(1,841)","","","1,888","","","\u2014"],["Adjusted EBITDA","$","(30,971)","","","$","20,218","","","$","28,081"]] [[/GREPCENT_TABLE]] Natural Sand Proppant Services [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net (loss) income:","2021","","2020","","2019"],["Net loss","$","(6,328)","","","$","(11,324)","","","$","(12,589)"],["Depreciation, depletion, amortization and accretion","9,005","","","9,771","","","14,050"],["Impairment of goodwill","\u2014","","","\u2014","","","2,684"],["Acquisition related costs","\u2014","","","\u2014","","","8"],["Public offering costs","12","","","\u2014","","","\u2014"],["Stock based compensation","202","","","425","","","812"],["Interest expense","474","","","312","","","193"],["Other (income) expense, net","(874)","","","1,839","","","67"],["Interest on trade accounts receivable","(1)","","","3","","","\u2014"],["Adjusted EBITDA","$","2,490","","","$","1,026","","","$","5,225"]] [[/GREPCENT_TABLE]] 69 Drilling Services [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net loss:","2021","","2020","","2019"],["Net loss","$","(11,307)","","","$","(16,865)","","","$","(26,117)"],["Depreciation, depletion, amortization and accretion","7,996","","","10,039","","","13,143"],["Impairment of other long-lived assets","\u2014","","","326","","","2,955"],["Acquisition related costs","\u2014","","","\u2014","","","2"],["Public offering costs","2","","","\u2014","","","\u2014"],["Stock based compensation","76","","","203","","","361"],["Interest expense","293","","","454","","","862"],["Other income, net","(177)","","","(227)","","","(9)"],["Adjusted EBITDA","$","(3,117)","","","$","(6,070)","","","$","(8,803)"]] [[/GREPCENT_TABLE]] Other Services(a) [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["Reconciliation of Adjusted EBITDA to net loss:","2021","","2020","","2019"],["Net income (loss)","$","10,967","","","$","(9,417)","","","$","(19,514)"],["Depreciation, depletion, amortization and accretion","13,217","","","15,722","","","19,332"],["Impairment of goodwill","\u2014","","","1,567","","","7,557"],["Impairment of other long-lived assets","547","","","8,368","","","4,403"],["Inventory obsolescence charges","\u2014","","","\u2014","","","1,349"],["Acquisition related costs","\u2014","","","\u2014","","","5"],["Public offering costs","7","","","\u2014","","","\u2014"],["Stock based compensation","80","","","217","","","489"],["Interest expense, net","607","","","707","","","1,001"],["Other income, net","(3,538)","","","(1,839)","","","(905)"],["Benefit for income taxes","(23,575)","","","(19,302)","","","(19,989)"],["Interest on trade accounts receivable","\u2014","","","25","","","\u2014"],["Adjusted EBITDA","$","(1,688)","","","$","(3,952)","","","$","(6,272)"]] [[/GREPCENT_TABLE]] a.    Includes results for our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations and equipment manufacturing and corporate related activities. Our corporate related activities do not generate revenue. 70 Adjusted Net Loss and Adjusted Loss per Share     Adjusted net loss and adjusted basic and diluted loss per share are supplemental non-GAAP financial measures that are used by management to evaluate our operating and financial performance. Management believes these measures provide meaningful information about the Company’s performance by excluding certain non-cash charges, such as impairment expense, that may not be indicative of the Company’s ongoing operating results. Adjusted net loss and adjusted loss per share should not be considered in isolation or as a substitute for net loss and loss per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net loss and adjusted loss per share to the GAAP financial measures of net loss and loss per share for the periods specified. [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2021","","2020","","2019"],["","(in thousands, except per share amounts)"],["Net loss, as reported","$","(101,430)","","","$","(107,607)","","","$","(79,044)"],["Impairment of goodwill","891","","","54,973","","","33,664"],["Impairment of other long-lived assets","1,212","","","12,897","","","7,358"],["Adjusted net loss","$","(99,327)","","","$","(39,737)","","","$","(38,022)"],["Basic loss per share, as reported","$","(2.18)","","","$","(2.36)","","","$","(1.76)"],["Impairment of goodwill","0.02","","","1.20","","","0.75"],["Impairment of other long-lived assets","0.03","","","0.28","","","0.16"],["Adjusted basic loss per share","$","(2.13)","","","$","(0.88)","","","$","(0.85)"],["Diluted loss per share, as reported","$","(2.18)","","","$","(2.36)","","","$","(1.76)"],["Impairment of goodwill","0.02","","","1.20","","","0.75"],["Impairment of other long-lived assets","0.03","","","0.28","","","0.16"],["Adjusted diluted loss per share","$","(2.13)","","","$","(0.88)","","","$","(0.85)"]] [[/GREPCENT_TABLE]] Liquidity and Capital Resources     We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet of equipment, organic growth initiatives, investments and acquisitions. Our primary sources of liquidity have been cash flows from operations and borrowings under our revolving credit facility. Our primary uses of capital have been for investing in property and equipment used to provide our services and acquire complementary businesses. In July 2019, as a result of oilfield market conditions as well as other factors, which include the status of collections from PREPA, our board of directors suspended our quarterly cash dividend. Future declaration of cash dividends are subject to approval by our board of directors and may be adjusted at its discretion based on market conditions and capital availability.     As of December 31, 2021, we had outstanding borrowing under our revolving credit facility of $83.4 million. 71     The following table summarizes our liquidity as of the dates indicated (in thousands): [[GREPCENT_TABLE]] [["","December 31,"],["","2021","","2020"],["Cash and cash equivalents","$","9,899","","","$","14,822"],["Revolving credit facility availability","118,948","","","129,787"],["Less long-term debt","(85,240)","","","(81,338)"],["Less available borrowing capacity reserve","(10,000)","","","\u2014"],["Less letter of credit facilities (bonding program)","(1,000)","","","(5,000)"],["Less letter of credit facilities (insurance programs)","(3,890)","","","(3,890)"],["Less letter of credit facilities (environmental remediation)","(3,694)","","","(3,694)"],["Less letter of credit facilities (rail car commitments)","(455)","","","(455)"],["Net working capital (less cash)(a)","280,651","","","321,328"],["Total","$","305,219","","","$","371,560"]] [[/GREPCENT_TABLE]] a.    Net working capital (less cash) is a non-GAAP measure and, as of December 31, 2021, is calculated by subtracting total current liabilities of $150.2 million and cash and cash equivalents of $9.9 million from total current assets of $440.8 million. As of December 31, 2020, net working capital (less cash) is calculated by subtracting total current liabilities of $128.6 million and cash and cash equivalents of $14.8 million from total current assets of $464.7 million. Amounts include receivables due from PREPA of $337.8 million and $301.2 million and corresponding liabilities of $42.3 million and $33.5 million at December 31, 2021 and 2020, respectively.     As of March 2, 2022, we had $83.7 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $10.6 million of available borrowing capacity under this facility, after giving effect to $8.5 million of outstanding letters of credit and the requirement to maintain a $7.5 million reserve out of the available borrowing capacity. Continued prolonged volatility in the capital, financial and/or credit markets due to the COVID-19 pandemic, volatility in commodity prices and/or adverse macroeconomic conditions may further limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all. In addition, if we are unable to comply with the covenants under our amended revolving credit facility following the expiration of the waiver period contemplated thereunder, or obtain an additional waiver of such covenants, as discussed below, and an event of default occurs and remains uncured, our lenders would not be required to lend any additional amounts to us, could elect to increase our interest rate by 200 basis points, could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, may have the ability to require us to apply all of our available cash to repay our outstanding borrowings and may foreclose on substantially all of our assets. Liquidity and Cash Flows         The following table sets forth our cash flows for the years indicated (in thousands): [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2021","","2020","","2019"],["Net cash (used in) provided by operating activities","$","(18,865)","","","$","6,967","","","$","(95,318)"],["Net cash provided by (used in) investing activities","5,507","","","(2,295)","","","(33,224)"],["Net cash provided by financing activities","8,428","","","4,266","","","66,702"],["Effect of foreign exchange rate on cash","7","","","12","","","87"],["Net change in cash","$","(4,923)","","","$","8,950","","","$","(61,753)"]] [[/GREPCENT_TABLE]] Operating Activities     Net cash (used in) provided by operating activities was ($18.9) million, $7.0 million and ($95.3) million, respectively, for the years ended December 31, 2021, 2020 and 2019. The decrease in operating cash flows was primarily attributable to the timing of cash inflows for accounts receivable. 72 Investing Activities     Net cash provided by (used in) investing activities was $5.5 million, ($2.3) million and ($33.2) million, respectively, for the years ended December 31, 2021, 2020 and 2019. Substantially all remaining cash used in investing activities was used to purchase property and equipment that is utilized to provide our services, which was partially offset by proceeds from the disposal of property and equipment.     The following table summarizes our capital expenditures by operating division for the periods indicated (in thousands): [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2021","2020","2019"],["Infrastructure services(a)","$","627","","$","258","","$","3,456"],["Well completion services(b)","4,327","","4,358","","14,703"],["Natural sand proppant services(c)","484","","1,073","","2,877"],["Drilling services(d)","44","","432","","3,156"],["Other(e)","361","","716","","11,569"],["Total capital expenditures","$","5,843","","$","6,837","","$","35,761"]] [[/GREPCENT_TABLE]] a.    Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for the years ended December 31, 2021, 2020 and 2019. b.    Capital expenditures primarily for upgrades to our pressure pumping fleet and water transfer equipment for the years ended December 31, 2021, 2020 and 2019. c.    Capital expenditures primarily for maintenance for the years ended December 31, 2021, 2020 and 2019. d.    Capital expenditures primarily for directional drilling equipment for the year ended December 31, 2020 and upgrades to our rig fleet for the year ended December 31, 2019. e.    Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for the years ended December 31, 2021, 2020 and 2019. Financing Activities     Net cash provided by financing activities was $8.4 million, $4.3 million and $66.7 million, respectively, for the years ended December 31, 2021, 2020 and 2019. Net cash provided by financing activities for the year ended December 31, 2021 was primarily attributable to net proceeds received from sale-leaseback transactions of $6.5 million and net borrowings under our revolving credit facility of $4.2 million, partially offset by principal payment on financing leases and equipment notes of $2.3 million. Net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to net proceeds of $4.7 million received from a sale-leaseback transaction and net borrowings under our revolving credit facility of $2.6 million, principal payment on financing leases and equipment notes of $2.0 million and payment of debt issuance costs of $1.0 million. Net cash provided by financing activities for the year ended December 31, 2019 was primarily attributable to net borrowings under our revolving credit facility of $80.0 million, partially offset by dividends paid of $11.2 million. Effect of Foreign Exchange Rate on Cash     The effect of foreign exchange rate on cash was a nominal amount for both of the years ended December 31, 2021 and 2020, and $0.1 million for 2019. The year-over-year effect was driven primarily by a favorable (unfavorable) shift in the weakness (strength) of the Canadian dollar relative to the U.S. dollar for the cash held in Canadian accounts. Working Capital     Our working capital totaled $290.5 million and $336.1 million, respectively, at December 31, 2021 and 2020. Our cash balances totaled $9.9 million and $14.8 million, respectively, at December 31, 2021 and 2020. Included in working capital are receivables due from PREPA totaling $337.8 million and $301.2 million and corresponding liabilities of $42.3 million and $33.5 million at December 31, 2021 and 2020, respectively. Our Revolving Credit Facility      On October 19, 2018, we and certain of our direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit facility, as subsequently amended, with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders. At December 31, 2021, we had outstanding borrowings under our revolving credit facility of $83.4 million and $16.5 million of available borrowing capacity, after giving effect to $9.0 million of outstanding letters of credit and the requirement to maintain a $10.0 million reserve out of the available borrowing 73 capacity during the limited waiver period as discussed below. As a result of the lack of payment from PREPA, we projected that we would likely breach the leverage ratio covenant contained in our revolving credit facility for the fiscal quarter ended on September 30, 2021. On November 3, 2021, we entered into a third amendment to the revolving credit facility (the “Third Amendment”) to, among other things, (i) suspend the leverage ratio and fixed charges coverage ratio covenants for the quarters ending September 30, 2021 and December 31, 2021, (ii) permanently reduce the maximum revolving advance amount from $130 million to $120 million, (iii) add a minimum adjusted EBITDA financial covenant of $6.0 million for the quarter ending December 31, 2021, (iv) set the applicable margin on all loans at 3.50% during the limited covenant waiver period, (v) add a requirement to maintain revolver availability of not less than $10.0 million at all times during the limited covenant waiver period, (vi) permanently reduce the maximum revolving advance amount in an amount equal to fifty percent (50%) of any mandatory prepayments made with non-recurring proceeds that are received during the limited covenant waiver period, and (vii) eliminate the declaration of unrestricted subsidiaries during the limited covenant waiver period. The limited covenant waiver period commenced on the effective date of the Third Amendment and was scheduled to end on the earlier to occur of (i) May 15, 2022, (ii) our reporting compliance with both the leverage ratio and the fixed charge coverage ratio covenants for either its fiscal quarter ending September 30, 2021 or December 31, 2021, and (iii) the occurrence of any event of default after the effective date of the Third Amendment. Under the Third Amendment, we also agreed to engage an advisor during the limited covenant waiver period to advise us and our subsidiaries with regard to, among other things, efforts to achieve certain operational efficiencies, improvement in results of operations, and general business strategy, and provide assistance to us and our subsidiaries in the preparation of the supplemental reporting and information required by the Third Amendment. As of December 31, 2021, we were in compliance with the covenants under our revolving credit facility, as amended and waived by the Third Amendment. On February 28, 2022, we entered into a fourth amendment to the revolving credit facility (the “Fourth Amendment”) to, among other things, (i) amend our financial covenants as outlined below, (ii) provide for a conditional increase of the applicable interest margin, (iii) permit certain sale-leaseback transactions, (iv) provide for a reduction in the maximum revolving advance amount in an amount equal to 50% of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classifies the payments pursuant to our settlement agreement with MasTec Renewables Puerto Rico, LLC as restricted payments and requires $20.0 million of availability both before and after making such payments. The financial covenants under our revolving credit facility were amended as follows: •the leverage ratio was eliminated; •the fixed charge coverage ratio was reduced to 0.85 to 1.0 for the six months ended June 30, 2022 and increases to 1.1 to 1.0 for the periods thereafter; •a minimum adjusted EBITDA covenant of $4.7 million, excluding interest on the accounts receivable from PREPA, for the five months ending May 31, 2022 was added; and •the minimum excess availability covenant was reduced to $7.5 million through the earlier of (i) March 31, 2022 or (ii) the date on which proceeds of permitted sale-leaseback transactions are received, after which the minimum excess availability covenant will increase to $10.0 million. The Fourth Amendment also permanently waived compliance by the borrowers with the leverage ratio and fixed charge coverage ratio covenants in our revolving credit facility for the fiscal quarters ended September 30, 2021 and December 31, 2021, respectively, ending the limited covenant waiver period under the Third Amendment. For additional information regarding our revolving credit facility, see Note 10. Debt to our consolidated financial statements included elsewhere in this report. Sale-Leaseback Transactions On December 30, 2020, we entered into an agreement with First National Capital, LLC, or FNC, whereby we agreed to sell certain assets from our infrastructure segment to FNC for aggregate proceeds of $5.0 million. Concurrent with the sale of assets, we entered into a 36 month lease agreement whereby we will lease back the assets at a monthly rental rate of $0.1 million. On June 1, 2021, we entered into another agreement with FNC whereby we sold additional assets from our infrastructure segment to FNC for aggregate proceeds of $9.5 million and entered into a 42 month lease agreement whereby we lease back the assets at a monthly rental rate of $0.2 million. Under the agreements, we have the option to purchase the assets at the end of the lease term. We recorded a liability for the proceeds received and will continue to depreciate the assets. We imputed an interest rate so that the carrying amount of the financial liabilities will be the expected repurchase price at the end of the initial lease terms. 74 Aviation Note On November 6, 2020, Leopard and Cobra Aviation entered into a 39 month promissory note agreement with Bank7, or the Aviation Note, in an aggregate principal amount of $4.6 million and received net proceeds of $4.5 million. The Aviation Note bears interest at a rate based on the Wall Street Journal Prime Rate plus a margin of 1%. Principal and interest payments of $0.1 million are due monthly, with a final payment of $0.2 million due on February 1, 2024. The Aviation Note is collateralized by Leopard and Cobra Aviation’s assets, including a $1.8 million certificate of deposit. The Aviation Note contains various customary affirmative and restrictive covenants. As of December 31, 2021, we did not meet the minimum debt coverage ratio of 1.25 to 1.0 set forth in the Aviation Note. On March 2, 2022, Bank7 granted us a waiver of this event of default. Capital Requirements and Sources of Liquidity As we pursue our business and financial strategy, we regularly consider which capital resources are available to meet our future financial obligations and liquidity requirement. We believe that our cash on hand, operating cash flow and available borrowings under our credit facility will be sufficient to meet our short-term and long-term funding requirements, including funding our current operations, planned capital expenditures, debt service obligations, litigation settlement obligations and other known contingencies. However, future cash flows are subject to a number of variables (including receipt of payments from our customers, including PREPA). As of December 31, 2021, PREPA owed Cobra approximately $337.8 million for services performed, including $110.8 million of interest charges. Throughout 2021, we released significant data that we obtained through Freedom of Information Act requests that affirm the work performed by Cobra in Puerto Rico. We believe these documents in conjunction with the current Administration’s focus on the recovery of Puerto Rico and our enhanced lobbying efforts will aid in collecting the outstanding amounts owed to us by PREPA. However, in the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to Cobra or (iii) otherwise does not pay amounts owed to Cobra for services performed, the receivable may not be collectible, which may adversely impact our liquidity. During 2021, our capital expenditures totaled $5.8 million and included $0.6 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews, $4.3 million in our well completion segment primarily related to upgrades to our pressure pumping fleet and water transfer equipment, $0.5 million in our natural sand proppant services segment for various maintenance equipment and $0.4 million for our other businesses primarily related to equipment additions for our equipment rental business.     During 2022, we currently estimate that our aggregate capital expenditures will be $6 million, depending upon industry conditions and our financial results. These capital expenditures include $2.5 million in our infrastructure segment for assets for additional equipment, $3.0 million in our well completion segment for conversion of a portion of our fleet to include DGB capabilities and maintenance to our existing pressure pumping fleet and $0.5 million for our other divisions, primarily for additional equipment for our rental business. Also, as noted above in this report, in response to market conditions we have (i) temporarily shut down certain of our oilfield service offerings, including coil tubing, pressure control, flowback, crude oil hauling, cementing, acidizing and land drilling services, (ii) idled certain facilities, including our sand processing plant in Pierce County, Wisconsin and (iii) reduced our workforce across all of our operations. We continue to monitor market conditions to determine if and when we will recommence these services and operations and increase our workforce. Any such recommencement and expansion will further increase our liquidity requirements in advance of revenue generation.     In addition, while we regularly evaluate acquisition opportunities, we do not have a specific acquisition budget for 2022 since the timing and size of acquisitions cannot be accurately forecasted. We continue to evaluate acquisition opportunities, including those in the renewable energy sector as well as transactions involving entities controlled by Wexford. Our acquisitions may be undertaken with cash, our common stock or a combination of cash, common stock and/or other consideration. In the event we make one or more acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital for any of the above or other reasons, we may do so through borrowings under our revolving credit facility, joint venture partnerships, sale-leaseback transactions, asset sales, offerings of debt or equity securities or other means. Although we expect that our sources of capital will be adequate to fund our short-term and long-term liquidity requirement, we cannot assure you that this additional capital will be available on acceptable terms or at all. If we are unable to obtain funds we need, our ability to conduct operations, make capital expenditures, satisfy debt services obligations, pay 75 litigation settlement obligations, fund contingencies and/or complete acquisitions that may be favorable to us will be impaired, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. Contractual and Commercial Commitments     The following table summarizes our contractual obligations and commercial commitments as of December 31, 2021 (in thousands): [[GREPCENT_TABLE]] [["","Total","","Less than 1 year","","1-3 Years","","3-5 Years","","More than 5 Years"],["Contractual obligations:"],["Revolving credit facility(a)","$","83,370","","","$","\u2014","","","$","83,370","","","$","\u2014","","","$","\u2014"],["Interest and commitment fees on revolving credit facility(b)","6,671","","","3,712","","","2,959","","","\u2014","","","\u2014"],["Aviation note(c)","3,569","","","1,620","","","1,949","","","\u2014","","","\u2014"],["Legal settlement obligation(d)","20,274","","","20,274","","","\u2014","","","\u2014","","","\u2014"],["Sale-leaseback arrangement(e)","10,565","","","4,382","","","6,183","","","\u2014","","","\u2014"],["Operating lease obligations(f)","12,532","","","6,220","","","5,241","","","663","","","408"],["Financing lease obligations(g)","6,549","","","2,004","","","3,226","","","1,319","","","\u2014"],["Equipment financing obligations(h)","490","","","482","","","8","","","\u2014","","","\u2014"],["Purchase commitments (i)","521","","","395","","","126","","","\u2014","","","\u2014"],["Capital purchase commitments (j)","915","","","915","","","\u2014","","","\u2014","","","\u2014"],["","$","145,456","","","$","40,004","","","$","103,062","","","$","1,982","","","$","408"]] [[/GREPCENT_TABLE]] a.Excludes interest payments. b.Assumption of revolving credit facility balance outstanding as of December 31, 2021 of $83.4 million using the weighted average interest rate as of December 31, 2021 of 4.17% c.Assumption of an interest rate of 5%. d.Obligation under a legal settlement, including accrued interest. See Note 19 to our consolidated financial statements. e.Obligations under a sale-leaseback arrangement for a portion of our infrastructure segment assets. f.Operating lease obligations primarily relate to rail cars, real estate and other equipment. g.Financing lease obligations primarily relate to equipment for our infrastructure segment. h.Equipment financing obligations primarily relate to vehicles and other equipment for our well completion segment. i.Purchase commitments are comprised primarily of software subscriptions. j.Obligations arising from capital improvements and equipment purchases. 76 Critical Accounting Estimates The preparation of financial statements requires the use of judgments and estimates. Our critical accounting policies are described below to provide a better understanding of how we develop our assumptions and judgments about future events and related estimates and how they can impact our financial statements. A critical accounting estimate is one that requires our most difficult, subjective, or complex judgments and assessments and is fundamental to our results of operations. We identified our most critical accounting estimates to be: –allowance for doubtful accounts; –valuations of long-lived assets, including goodwill and intangible assets; and –litigation and contingencies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We believe the following are the critical accounting policies used in the preparation of our consolidated 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 financial statements and related notes included in this report. Allowance for Doubtful Accounts We regularly review receivables and provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, we make judgments regarding our customers’ ability to make required payments, economic events and other factors. As the financial condition of customers changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. This process involves judgment and estimation. Accordingly, our results of operations can be affected by adjustments to the allowance due to actual write-offs that differ from estimated amounts. As of December 31, 2021 and 2020, our allowance for doubtful accounts totaled $18.1 million and $30.1 million, respectively, which is primarily comprised of accounts receivable from Gulfport. During 2021, we wrote-off accounts receivable totaling $83.0 million, substantially all of which related to Gulfport. See Notes 2, 3 and 19 to the consolidated financial statement for further information related to Gulfport. Our accounts receivable balance included $337.8 million and $301.2 million related to PREPA as of December 31, 2021 and 2020, respectively, which includes interest charged on delinquent balances. PREPA has not made any payments to us on their outstanding receivable since 2019. PREPA is currently subject to bankruptcy proceedings and, as a result, their ability to meet their obligations is largely dependent upon funding from the FEMA or other sources. On September 30, 2019, we filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to us by PREPA, which motion was stayed by the court. On March 25, 2020, we filed an urgent motion to modify the stay order and allow our recovery of approximately $62 million in claims related to a tax gross-up provision contained in the first contract. This emergency motion was denied on June 3, 2020 and the court extended the stay of our motion. On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status motion by June 7, 2021. On April 6, 2021, we filed a motion to lift the stay order. Following this filing, PREPA initiated discussion, which resulted in PREPA and Cobra filing a joint motion to adjourn all deadlines relative to the April 6, 2021 motion until the June 16, 2021 omnibus hearing as a result of PREPA’s understanding that FEMA will release a report in the near future relating to the first contract. The joint motion was granted by the court on April 14, 2021. On May 26, 2021, FEMA issued a Determination Memorandum related to the first contract between Cobra and PREPA in which, among other things, FEMA raised two contract compliance issues and, as a result, concluded that approximately $47 million in costs were not authorized costs under the contract. On June 14, 2021, the Court issued an order adjourning Cobra’s motion to lift the stay order to a hearing on August 4, 2021 and directing Cobra and PREPA to meet and confer in good faith concerning (i) the May 26, 2021 Determination Memorandum issued by FEMA and (ii) whether and when a second determination memorandum is expected. The parties were further directed to file an additional status report, which was filed on July 20, 2021. On July 23, 2021, with our aid, PREPA filed an appeal of the entire $47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum. On August 10, 2021, after hearing oral argument at the August 4, 2021 omnibus hearing, the Court issued an order denying Cobra’s April 2021 motion to lift the stay and directing Cobra and PREPA to file a status report on January 22, 2022. On January 26, 2022, the Court issued an order directing the parties to file a further status report by July 25, 2022. 77 We continuously review the facts and circumstances related to this receivable to determine if an allowance is needed. We believe all amounts charged to PREPA, including interest charged on delinquent accounts receivable, were in accordance with the terms of the contracts. Further, there have been multiple reviews prepared by or on behalf of FEMA that have concluded that the amounts Cobra charged PREPA were reasonable, that PREPA adhered to Puerto Rican legal statutes regarding emergency situations and that PREPA engaged in a reasonable procurement process. As noted above, in May 2021 FEMA raised two contract compliance issues and concluded that $47 million in costs were not eligible under the contract. PREPA, however, has filed an appeal of the entire $47 million, which is currently pending. We believe these receivables are collectible and for the reasons previously described as well as other factors, no allowance was deemed necessary at December 31, 2021 or 2020. However, in the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to us or (iii) otherwise does not pay amounts owed to us for services performed, the receivable may not be collectible. See Note 2 to our consolidated financial statements for additional detail regarding our allowance for doubtful accounts. Valuation of Long-Lived Assets Long-lived assets on our balance sheet include property, plant and equipment, goodwill and intangible assets. We test goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that an impairment may exist. We conduct impairment tests on long-lived assets, other than goodwill, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill. Under generally accepted accounting principles, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one or more of our reporting units is greater than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if we conclude otherwise, then we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference. During the years ended December 31, 2021 and 2020, and 2019, we recorded goodwill impairment charges of $0.9 million, $55.0 million and $33.7 million, respectively. See Note 6 to our consolidated financial statements for details regarding the facts and circumstances that led to this impairment and how the fair value of each reporting unit was estimated, including significant assumptions used and other details. Other Long-Lived Assets. Impairment of other long-lived assets, including property, plant and equipment and intangible assets is evaluated by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with the assets. If such evaluations indicate that the future undiscounted cash flow from the assets is not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values. During the years ended December 31, 2021 and 2020, and 2019, we recorded impairment charges of other long-lived assets totaling $1.2 million, $12.9 million and $7.4 million, respectively. See Note 6 to our consolidated financial statements for additional details. The assumptions used in the impairment evaluation for long-lived assets are inherently uncertain and require management’s judgment. A continued period of low oil and natural gas prices or continued reductions in capital expenditures by our customers would likely have an adverse impact on our utilization and the prices that we receive for our services. This could result in the recognition of future material impairment charges on the same, or additional, property and equipment if future cash flow estimates, based upon information then available to management, indicate that their carrying values are not recoverable. Litigation and Contingencies As discussed in Note 19 of our consolidated financial statements, we are involved in various litigation matters arising in the ordinary course of business. Accruals for litigation and contingencies are based on our assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. For matters in which a liability is probable and reasonably estimable, we accrue an estimate for the resolution of the matter. For matters in which a liability is not probable and reasonably estimable, we do not accrue any amounts. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is 78 reasonably estimable. Accruals are based on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, we reassess potential liabilities related to pending claims and litigation and may revise previous estimates, which could materially affect our results of operations in a given period. New Accounting Pronouncements     Accounting Pronouncements Recently Adopted     In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will report a right of use asset and lease liability on the balance sheet for all leases with a term longer than one year, while maintaining substantially similar classifications for financing and operating leases. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. We adopted this ASU effective January 1, 2019 utilizing the transition method permitted by ASU No. 2018-11 “Leases (Topic 842): Targeted Improvements”, issued in August 2018, which permits an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment made to the comparative periods presented in the consolidated financial statements. See Note 14. Leases to our consolidated financial statements included elsewhere in this annual report for the impact the adoption of this standard had on our financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting,” which simplifies the accounting for share-based payments granted to non-employees by aligning the accounting with requirements for employee share-based compensation. Upon transition, this ASU requires non-employee awards to be measured at fair value as of the adoption date. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. We adopted this ASU effective January 1, 2019 and estimated the fair value of our non-employee awards was approximately $18.9 million as of this date. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments. This ASU requires entities to reflect its current estimate of all expected credit losses. The guidance affects most financial assets, including trade accounts receivable. This ASU is effective for fiscal years beginning after December 31, 2019, with early adoption permitted. We adopted this standard effective January 1, 2020. It did not have a material impact on the our consolidated financial statements. 79