UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
1934
For the quarterly period ended
OR
the Securities Exchange Act of 1934
For the transition period from ______ to ______
Commission file number:
EXPRO GROUP HOLDINGS N.V.
(Exact name of registrant as specified in its charter)
| The | | |||
| (State or other jurisdiction of | (IRS Employer | |||
| | ||||
| | | |||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | | Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 23, 2023, there were
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| Item 1. |
Financial Statements |
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| Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022 |
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| Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022 |
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| Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 |
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| Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2023 and 2022 | ||
| Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022 |
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| Notes to the Unaudited Condensed Consolidated Financial Statements |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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| Item 4. |
Controls and Procedures |
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| PART II. OTHER INFORMATION |
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| Item 1. |
Legal Proceedings |
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| Item 1A. |
Risk Factors |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 41 |
| Item 5. | Other Information |
41 |
| Item 6. |
Exhibits |
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| Signatures |
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Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Total revenue |
$ | $ | $ | $ | ||||||||||||
| Operating costs and expenses: |
||||||||||||||||
| Cost of revenue, excluding depreciation and amortization expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| General and administrative expense, excluding depreciation and amortization expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Depreciation and amortization expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Merger and integration expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Severance and other expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total operating cost and expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Operating income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
| Other (expense) income, net |
( |
) | ( |
) | ||||||||||||
| Interest and finance (expense) income, net |
( |
) | ( |
) | ||||||||||||
| (Loss) income before taxes and equity in income of joint ventures |
( |
) | ( |
) | ( |
) | ||||||||||
| Equity in income of joint ventures |
||||||||||||||||
| (Loss) income before income taxes |
( |
) | ( |
) | ( |
) | ||||||||||
| Income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Loss per common share: |
||||||||||||||||
| Basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average common shares outstanding: |
||||||||||||||||
| Basic and diluted |
||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive loss: |
||||||||||||||||
| Amortization of prior service credit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Assets held for sale | ||||||||
| Income tax receivables | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Investments in joint ventures | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Operating lease right-of-use assets | ||||||||
| Non-current accounts receivable, net | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Income tax liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term borrowings | ||||||||
| Deferred tax liabilities, net | ||||||||
| Post-retirement benefits | ||||||||
| Non-current finance lease liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 17) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, € nominal value, shares authorized, and shares issued and and shares outstanding | ||||||||
| Treasury stock (at cost) and shares | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Equity in income of joint ventures | ( | ) | ( | ) | ||||
| Stock-based compensation expense | ||||||||
| Change in fair value of investments | ||||||||
| Elimination of unrealized profit on sales to joint ventures | ||||||||
| Deferred taxes | ( | ) | ( | ) | ||||
| Unrealized foreign exchange loss | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Other liabilities | ( | ) | ( | ) | ||||
| Income taxes, net | ||||||||
| Dividends from joint ventures | ||||||||
| Other | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Payment for acquisition of business, net of cash acquired | ( | ) | ||||||
| Acquisition of technology | ( | ) | ||||||
| Proceeds from disposal of assets | ||||||||
| Proceeds from sale / maturity of investments | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Release of (cash pledged for) collateral deposits, net | ( | ) | ||||||
| Payments of loan issuance and other transaction costs | ( | ) | ||||||
| Proceeds from long-term borrowings | ||||||||
| Acquisition of common stock | ( | ) | ( | ) | ||||
| Payment of withholding taxes on stock-based compensation plans | ( | ) | ( | ) | ||||
| Repayment of financed insurance premium | ( | ) | ( | ) | ||||
| Repayment of finance leases | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net increase (decrease) to cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | $ | ||||||
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands)
| Nine Months Ended September 30, 2022 |
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| Accumulated |
||||||||||||||||||||||||||||
| Additional |
other |
Total |
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| Common |
Treasury |
paid-in |
comprehensive |
Accumulated |
stockholders’ |
|||||||||||||||||||||||
| stock |
Stock |
capital |
income |
deficit |
equity |
|||||||||||||||||||||||
| Balance at January 1, 2022 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common shares issued upon vesting of share-based awards |
||||||||||||||||||||||||||||
| Treasury shares withheld |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at March 31, 2022 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common shares issued upon vesting of share-based awards |
( |
) | ||||||||||||||||||||||||||
| Acquisition of common stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Treasury shares withheld |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at June 30, 2022 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common shares issued upon vesting of share-based awards |
||||||||||||||||||||||||||||
| Treasury shares withheld |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Nine Months Ended September 30, 2023 |
||||||||||||||||||||||||||||
| Accumulated |
||||||||||||||||||||||||||||
| Additional |
other |
Total |
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| Common |
Treasury |
paid-in |
comprehensive |
Accumulated |
stockholders’ |
|||||||||||||||||||||||
| stock |
Stock |
capital |
income |
deficit |
equity |
|||||||||||||||||||||||
| Balance at January 1, 2023 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common stock issued upon vesting of share-based awards |
||||||||||||||||||||||||||||
| Treasury shares withheld |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Acquisition of common stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at March 31, 2023 |
$ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common stock issued upon vesting of share-based awards |
( |
) | ||||||||||||||||||||||||||
| Treasury shares refunded |
||||||||||||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||||||
| Common stock issued upon vesting of share-based awards |
||||||||||||||||||||||||||||
| Treasury shares withheld |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance at September 30, 2023 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||
| The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
| Business description |
With roots dating to 1938, Expro Group Holdings N.V. (the “Company,” “Expro,” “we,” “our” or “us”) is a global provider of energy services with operations in approximately
On March 10, 2021, the Company and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger with Expro Group Holdings International Limited (“Legacy Expro”) providing for the merger of Legacy Expro with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of the Company (the “Merger”). The Merger closed on October 1, 2021, and the Company, previously known as Frank’s International N.V. (“Frank’s”), was renamed Expro Group Holdings N.V.
On June 16, 2022, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program, under which the Company is authorized to acquire up to $
On October 25, 2023, the Company’s Board of Directors (the “Board”) approved an extension to the stock repurchase program, which was set to expire on November 24, 2023. Pursuant to the extended stock repurchase program, the Company is now authorized to acquire up to $
| 2. | Basis of presentation and significant accounting policies |
Basis of presentation
The unaudited condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany balances and transactions, including unrealized profits arising from them, have been eliminated for purposes of preparing these unaudited condensed consolidated financial statements. Investments in which we do not have a controlling interest, but over which we do exercise significant influence, are accounted for under the equity method of accounting.
The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim consolidated financial information. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022, included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.
In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2023, the results of our operations for the three and nine months ended September 30, 2023 and 2022 and our cash flows for the nine months ended September 30, 2023 and 2022. Such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.
The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency.
Significant accounting policies
Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 2022, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 23, 2023, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the significant accounting policies described in our consolidated financial statements as of and for the year ended December 31, 2022.
Recent accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.
We consider the applicability and impact of all accounting pronouncements. Recently issued ASUs were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows.
| 3. | Business combinations and dispositions |
DeltaTek Oil Tools Limited
On February 8, 2023 (“Closing Date”), DeltaTek Oil Tools Limited, a limited liability company registered in the United Kingdom, and its subsidiary (“DeltaTek”), was acquired (“the Acquisition”) by our wholly owned subsidiary Exploration and Production Services (Holdings) Limited, a limited liability company registered in the United Kingdom (“EPSH”). DeltaTek has developed a number of innovative technologies and solutions and their range of low-risk open water cementing solutions increases clients’ operational efficiency, delivers rig time and cost savings, and improves the quality of cementing operations of clients. The fair value of consideration for the Acquisition was $
The contingent consideration arrangement requires the Company to pay the former owners of DeltaTek a percentage of future revenues generated specifically from the acquired technology over a period of seven years. The fair value of the contingent consideration arrangement of $
The Acquisition is accounted for as a business combination and Expro has been identified as the acquirer for accounting purposes. As a result, the Company has in accordance with ASC 805, Business Combinations, applied the acquisition method of accounting to account for DeltaTek’s assets acquired and liabilities assumed. Applying the acquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed.
The following table sets forth the allocation of the Acquisition consideration exchanged to the fair value of identifiable tangible and intangible assets acquired and liabilities assumed as of the Closing Date, with the recording of goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed (in thousands):
| Initial allocation of the consideration | Measurement period adjustments | Allocation of consideration as of September 30, 2023 | ||||||||||
| Cash and cash equivalents | $ | $ | - | $ | ||||||||
| Accounts receivables, net | - | |||||||||||
| Inventories | - | |||||||||||
| Property, plant and equipment | - | |||||||||||
| Goodwill | ||||||||||||
| Intangible assets | ||||||||||||
| Other assets | - | |||||||||||
| Total assets | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Deferred tax liabilities | ||||||||||||
| Other liabilities | ( | ) | ||||||||||
| Total Liabilities | ||||||||||||
| Fair value of net assets acquired | $ | $ | $ | |||||||||
The preliminary valuation of the assets acquired and liabilities assumed, including other liabilities, in the Acquisition initially resulted in a goodwill of $
The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using the relief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The estimated useful lives are based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.
The intangible assets will be amortized on a straight-line basis over an estimated
The goodwill consists largely of the synergies and economies of scale expected from the technology providing more efficient services and expected future developments resulting from the assembled workforce. The goodwill is not subject to amortization but will be evaluated at least annually for impairment or more frequently if impairment indicators are present. Goodwill recorded in the Acquisition is not expected to be deductible for tax purposes.
The Company has determined the estimated unaudited pro forma information to be insignificant for the three and nine months ended September 30, 2023 and 2022, assuming the Acquisition were to have been completed as of January 1, 2023 and 2022, respectively. This is not necessarily indicative of the results that would have occurred had the Acquisition been completed on either date indicated or of future operating results.
PRT Offshore
On October 2, 2023, Expro completed its acquisition of Houston-based offshore services provider PRT Offshore. Total consideration paid at closing was approximately $
| 4. | Fair value measurements |
Recurring Basis
A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of September 30, 2023 and December 31, 2022, were as follows (in thousands):
| September 30, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Non-current accounts receivable, net | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Finance lease liabilities | ||||||||||||||||
| Contingent consideration liabilities | ||||||||||||||||
| December 31, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Non-current accounts receivable, net | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Finance lease liabilities | ||||||||||||||||
| 5. | Business segment reporting |
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, in deciding how to allocate resources and assess performance. Our CODM manages our operational segments that are aligned with our geographical regions as below:
| ● | North and Latin America (“NLA”), |
| ● | Europe and Sub-Saharan Africa (“ESSA”), |
| ● | Middle East and North Africa (“MENA”), and |
| ● | Asia-Pacific (“APAC”). |
The following table presents our revenue disaggregated by our operating segments (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| NLA | $ | $ | $ | $ | ||||||||||||
| ESSA | ||||||||||||||||
| MENA | ||||||||||||||||
| APAC | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Segment EBITDA
Our CODM regularly evaluates the performance of our operating segments using Segment EBITDA, which we define as income (loss) before income taxes adjusted for corporate costs, equity in income of joint ventures, depreciation and amortization expense, impairment expense, gain (loss) on disposal of assets, merger and integration expense, severance and other expense, stock-based compensation expense, foreign exchange gains (losses), other income (expense), net, and interest and finance income (expense), net.
The following table presents our Segment EBITDA disaggregated by our operating segments and a reconciliation to income (loss) before income taxes (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| NLA | $ | $ | $ | $ | ||||||||||||
| ESSA | ||||||||||||||||
| MENA | ||||||||||||||||
| APAC | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Segment EBITDA | ||||||||||||||||
| Corporate costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity in income of joint ventures | ||||||||||||||||
| Depreciation and amortization expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Merger and integration expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Severance and other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock-based compensation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income, net | ( | ) | ( | ) | ||||||||||||
| Interest and finance (expense) income, net | ( | ) | ( | ) | ||||||||||||
| (Loss) income before income taxes | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment.
| 6. | Revenue |
Disaggregation of revenue
We disaggregate our revenue from contracts with customers by geography, as disclosed in Note 5 “Business segment reporting,” as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Additionally, we disaggregate our revenue into main areas of capabilities.
The following table sets forth the total amount of revenue by main area of capabilities as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Well construction | $ | $ | $ | $ | ||||||||||||
| Well management | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Contract balances
We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of unbilled receivables and deferred revenue.
Unbilled receivables are initially recognized for revenue earned on completion of the performance obligation which are not yet invoiced to the customer. The amounts recognized as unbilled receivables are reclassified to trade receivable upon billing. Deferred revenue represents the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer.
Contract balances consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Trade receivable, net | $ | $ | ||||||
| Unbilled receivables (included within accounts receivable, net) | $ | $ | ||||||
| Deferred revenue (included within other liabilities) | $ | $ | ||||||
The Company recognized revenue during the three and nine months ended September 30, 2023 of $
As of September 30, 2023, $
Transaction price allocated to remaining performance obligations
Remaining performance obligations represent firm contracts for which work has not been performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less and for our long-term contracts we have a right to consideration from customers in an amount that corresponds directly with the value to the customer of the performance completed to date. With respect to our construction contracts, revenue allocated to remaining performance obligations is $
| 7. | Income taxes |
For interim financial reporting, the annual tax rate is based on pre-tax income (loss) before equity in income of joint ventures. We have historically calculated the income tax expense/(benefit) during interim reporting periods by applying a full year estimated Annual Effective Tax Rate (“AETR”) to income (loss) before income taxes, excluding infrequent or unusual discrete items, for the reporting period. For the three and nine months ended September 30, 2023, we determined that using an AETR would not provide a reliable estimate of income taxes due to the forecasting methodology used to project income (loss) before income taxes, resulting in significant changes in the estimated AETR. Thus, we concluded to use a discrete effective tax rate, which treats the year-to-date period as an annual period, to calculate income taxes for the three and nine months ended September 30, 2023.
Our effective tax rates were (
Our effective tax rate was impacted primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes, in particular in Latin America and Sub-Saharan Africa.
| 8. | Investment in joint ventures |
We have investments in two joint venture companies, which together provide us access to certain Asian markets that otherwise would be challenging for us to penetrate or develop effectively on our own. COSL-Expro Testing Services (Tianjin) Co. Ltd (“CETS”), in which we have a
The carrying value of our investment in joint ventures as of September 30, 2023, and December 31, 2022, was as follows (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| CETS | $ | $ | ||||||
| PVD-Expro | ||||||||
| Total | $ | $ | ||||||
| 9. | Accounts receivable, net |
Accounts receivable, net consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: Expected credit losses | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| Current | ||||||||
| Non – current | ||||||||
| Total | $ | $ | ||||||
| 10. | Inventories |
Inventories consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials, equipment spares and consumables | ||||||||
| Work-in-progress | ||||||||
| Total | $ | $ | ||||||
| 11. | Other assets and liabilities |
Other assets consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepayments | $ | |||||||
| Value-added tax receivables | ||||||||
| Collateral deposits | ||||||||
| Deposits | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| Current | ||||||||
| Non – current | ||||||||
| Total | $ | $ | ||||||
Other liabilities consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Deferred revenue | $ | $ | ||||||
| Other tax and social security | ||||||||
| Income tax liabilities – non-current portion | ||||||||
| Provisions | ||||||||
| Contingent consideration liabilities | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| Current | ||||||||
| Non – current | ||||||||
| Total | $ | $ | ||||||
| 12. | Accounts payable and accrued liabilities |
Accounts payable and accrued liabilities consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable – trade | $ | $ | ||||||
| Payroll, vacation and other employee benefits | ||||||||
| Accruals for goods received not invoiced | ||||||||
| Other accrued liabilities | ||||||||
| Total | $ | $ | ||||||
| 13. | Property, plant and equipment, net |
Property, plant and equipment, net consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cost: | ||||||||
| Land | $ | $ | ||||||
| Land improvements | ||||||||
| Buildings and lease hold improvements | ||||||||
| Plant and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The carrying amount of our property, plant and equipment recognized in respect of assets held under finance leases as of September 30, 2023 and December 31, 2022 and included in amounts above is as follows (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cost: | ||||||||
| Buildings | $ | $ | ||||||
| Plant and equipment | ||||||||
| Total | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation expense relating to property, plant and equipment, including assets under finance leases, was $
During the nine months ended September 30, 2023 and 2022, assets held for sale were sold for net proceeds of $
| 14. | Intangible assets, net |
The following table summarizes our intangible assets comprising of Customer Relationships & Contracts (“CR&C”), Trademarks, Technology and Software as of September 30, 2023 and December 31, 2022 (in thousands):
| September 30, 2023 | December 31, 2022 | September 30, 2023 | ||||||||||||||||||||||||||
| Gross carrying amount | Accumulated impairment and amortization | Net book value | Gross carrying amount | Accumulated impairment and amortization | Net book value | Weighted average remaining life (years) | ||||||||||||||||||||||
| CR&C | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Trademarks | ( | ) | ( | ) | ||||||||||||||||||||||||
| Technology | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Amortization expense for intangible assets was $
The following table summarizes the intangible assets which were acquired pursuant to the Acquisition (in thousands):
| Acquired Fair Value | Weighted average life (years) | |||||||
| CR&C | ||||||||
| Trademarks | ||||||||
| Technology | ||||||||
| Total | $ | |||||||
| 15. | Goodwill |
Our reporting units are our operating segments which are NLA, ESSA, MENA and APAC.
The allocation of goodwill by operating segment as of September 30, 2023 and December 31, 2022 is as follows (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| NLA | $ | $ | ||||||
| ESSA | ||||||||
| MENA | ||||||||
| APAC | ||||||||
| Total | $ | $ | ||||||
The following table summarizes the goodwill by operating segment which were acquired pursuant to the Acquisition (in thousands):
| September 30, | ||||
| 2023 | ||||
| NLA | $ | |||
| ESSA | ||||
| MENA | ||||
| APAC | ||||
| Total | $ | |||
As of September 30, 2023, we did not identify any triggering events that would represent an indicator of impairment of our goodwill. Accordingly,
| 16. | Interest bearing loans |
New Facility
On October 1, 2021, we entered into a new revolving credit facility (the “New Facility”) with DNB Bank ASA, London Branch, as agent (the “Agent”), with total commitments of $
All obligations under the New Facility are guaranteed jointly and severally by the Company and certain of the Company’s subsidiaries incorporated in the U.S., the U.K., the Netherlands, Norway, Hungary, Australia, Cyprus, the Cayman Islands and Guernsey. Going forward, the guarantors must comprise at least
Borrowings under the New Facility bear interest at a rate per annum of LIBOR, subject to a
The New Facility contains various undertakings and affirmative and negative covenants which limit, subject to certain customary exceptions and thresholds, the Company and its subsidiaries’ ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions; and (5) engage in transactions with affiliates. The New Facility also requires the Company to maintain (i) a minimum cash flow cover ratio of
On March 31, 2022, the Agent, on behalf of the consenting lenders, countersigned a Consent Request Letter dated March 10, 2022, to the New Facility (the “Consent”). Pursuant to the Consent, the lenders consented to, among other things, an amendment to the New Facility permitting dividends or distributions by the Company, or the repurchase or redemption of the Company’s shares in an aggregate amount of $
As of September 30, 2023, we had $
Amended and Restated Facility
On October 6, 2023, we amended and restated the New Facility agreement (the “Amended and Restated Facility Agreement”) pursuant to an amendment and restatement agreement with DNB Bank ASA, London Branch, as agent (the “Agent”), in order to extend the maturity of the New Facility agreement for a further 36 months and increase the total commitments to $
Borrowings under the Amended and Restated Facility Agreement bear interest at a rate per annum of Term SOFR (as defined in the Amended and Restated Facility Agreement), subject to a
The Amended and Restated Facility Agreement retains various undertakings and affirmative and negative covenants (with certain agreed amendments) which limit, subject to certain customary exceptions and thresholds, the Company and its subsidiaries’ ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in transactions with affiliates. The Amended and Restated Facility Agreement amends certain of the financial covenants such that the Company is required to maintain (i) a minimum interest cover ratio of
| 17. | Commitments and contingencies |
Commercial Commitments
During the normal course of business, we enter into commercial commitments in the form of letters of credit and bank guarantees to provide financial and performance assurance to third parties. We entered into contractual commitments for the acquisition of property, plant and equipment totaling $
Contingencies
Certain conditions may exist as of the date our unaudited condensed consolidated financial statements are issued that may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. Our management, with input from legal counsel, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings pending against us or unasserted claims that may result in proceedings, our management, with input from legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable a material loss has been incurred and the amount of liability can be reasonably estimated, then the estimated liability would be accrued in our unaudited condensed consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. We had no material accruals for loss contingencies, individually or in the aggregate, as of September 30, 2023 and December 31, 2022. We believe the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows.
We have conducted an internal investigation of the operations of certain of the Company’s foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act, our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our internal review to the SEC and the U.S. Department of Justice (“DOJ”). The DOJ has provided a declination, subject to the Company and the SEC reaching a satisfactory settlement of civil claims. On the basis of discussions with the SEC up to the end of the first quarter of 2023, we believed that a final resolution of this matter was likely to include a civil penalty in the amount of approximately $
On April 26, 2023, the SEC issued a cease-and-desist order against the Company pursuant to section 21C of the Securities Exchange Act of 1934 (“Exchange Act”). Under this Order, the Company neither admitted nor denied any of the SEC’s findings and agreed to cease and desist from committing or causing any violations and any future violations of the anti-bribery, books and records and internal accounting controls requirements of the FCPA and the Exchange Act. In accepting the Company’s settlement offer, the SEC noted the Company’s self-reporting, co-operation afforded to the SEC staff and remedial action including improving the Company’s internal controls and further enhancements to its internal controls environment and compliance program following the Merger. The Company paid $
Other than discussed above, we had no other material legal accruals for loss contingencies, individually or in the aggregate, as of September 30, 2023 and December 31, 2022.
| 18. | Post-retirement benefits |
Amounts recognized in the unaudited condensed consolidated statements of operations in respect of the defined benefit schemes were as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Amortization of prior service credit | $ | $ | $ | $ | ||||||||||||
| Interest cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Expected return on plan assets | ||||||||||||||||
| Total | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
The Company contributed $
Amortization of prior service credit, interest cost and expected return on plan assets have been recognized in “Other income, net” in the unaudited condensed consolidated statements of operations.
| 19. | Earnings per share |
Basic earnings per share attributable to Company stockholders is calculated by dividing net income attributable to the Company by the weighted-average number of common shares outstanding for the period. Diluted earnings per share attributable to Company stockholders is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued. We apply the treasury stock method to determine the dilutive weighted average common shares represented by unvested restricted stock units, stock options and Employee Stock Purchase Program (“ESPP”) shares.
The calculation of basic and diluted earnings per share attributable to Company stockholders for the three and nine months ended September 30, 2023 and 2022, respectively, are as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average number of shares outstanding | ||||||||||||||||
| Total basic and diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Approximately
Approximately
| 20. | Related party disclosures |
Our related parties consist primarily of CETS and PVD-Expro, the two companies in which we exert significant influence, and Mosing Holdings LLC, a company that is owned by various members of the Mosing family. During the three and nine months ended September 30, 2023, we provided goods and services to related parties totaling $
Additionally, we entered into various operating lease agreements to lease facilities with affiliated companies. Rent expense associated with our related party leases was $
As of September 30, 2023 and December 31, 2022 amounts receivable from related parties were $
As of September 30, 2023, $
Tax Receivable Agreement
Mosing Holdings, LLC, a Delaware limited liability company (“Mosing Holdings”), converted all of its shares of Frank’s Series A convertible preferred stock into shares of Frank’s common stock on August 26, 2016, in connection with its delivery to Frank’s of all of its interests in Frank’s International C.V. (“FICV”) (the “Conversion”).
The tax receivable agreement (the “Original TRA”) that Frank’s entered into with FICV and Mosing Holdings in connection with Frank’s initial public offering (“IPO”) generally provided for the payment by Frank’s to Mosing Holdings of of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Frank’s actually realized (or were deemed to be realized in certain circumstances) in periods after the IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by Frank’s as a result of, and additional tax basis arising from, payments under the Original TRA. Frank’s retained the benefit of the remaining of these cash savings, if any.
In connection with the Merger Agreement, Frank’s, FICV and Mosing Holdings entered into the Amended and Restated Tax Receivable Agreement, dated as of March 10, 2021 (the “A&R TRA”). Pursuant to the A&R TRA, on October 1, 2021, the Company made a payment of $
| 21. | Stock-based compensation |
The Company recognized $
Stock-based compensation expense relating to the Long-Term Incentive Plan (“LTIP”), including restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”) for the three and nine months ended September 30, 2023 was $
During the nine months ended September 30, 2023,
During the three and nine months ended September 30, 2023 we recognized $
| 22. | Supplemental cash flow |
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes, net of refunds | $ | $ | ||||||
| Cash paid for interest, net | $ | $ | ||||||
| Change in accounts payable and accrued expenses related to capital expenditures | $ | $ | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.
This section contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations, and involve risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements because of various factors, including those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” of this Form 10-Q and our Annual Report.
Overview of Business
Working for clients across the entire well life cycle, we are a leading provider of energy services, offering cost-effective, innovative solutions and what we consider to be best-in-class safety and service quality. The Company’s extensive portfolio of capabilities spans well construction, well flow management, subsea well access, and well intervention and integrity solutions.
With roots dating to 1938, we have approximately 7,800 employees and provide services and solutions to leading exploration and production companies in both onshore and offshore environments in approximately 60 countries.
Our broad portfolio of products and services are designed to enhance production and improve recovery across the well lifecycle from exploration through abandonment, including:
| Well Construction |
| • |
Our well construction products and services support customers’ new wellbore drilling, wellbore completion and recompletion, and wellbore plug and abandonment requirements. In particular, we offer advanced technology solutions in drilling, tubular running services, cementing and tubulars. With a focus on innovation, we are continuing to advance the way wells are constructed by optimizing process efficiency on the rig floor, developing new methods to handle and install tubulars and mitigating well integrity risks. |
| Well Management |
Our well management offerings consist of well flow management, subsea well access and well intervention and integrity services:
| • |
Well flow management: We gather valuable well and reservoir data, with a particular focus on well-site safety and environmental impact. We provide global, comprehensive well flow management systems for the safe production, measurement and sampling of hydrocarbons from a well during the exploration and appraisal phase of a new field; the flowback and clean-up of a new well prior to production; and in-line testing of a well during its production life. We also provide early production facilities to accelerate production; production enhancement packages to enhance reservoir recovery rates through the realization of production that was previously locked within the reservoir; and metering and other well surveillance technologies to monitor and measure flow and other characteristics of wells. |
| • |
Subsea well access: With over 35 years of experience providing a wide range of fit-for-purpose subsea well access solutions, our technology aims to ensure safe well access and optimized production throughout the lifecycle of the well. We provide what we believe to be the most reliable, efficient and cost-effective subsea well access systems for exploration and appraisal, development, intervention and abandonment, including an extensive portfolio of standard and bespoke Subsea Test Tree Assemblies, a rig-deployed Intervention Riser System (“IRS”) and a vessel-deployed, wire-through-water Riserless Well Intervention System (“RWIS”). We also provide systems integration and project management services. |
| • |
Well intervention and integrity: We provide well intervention solutions to acquire and interpret well data, ensure well bore integrity and improve production. In addition to our extensive fleet of mechanical and cased hole wireline units, we have recently introduced a number of cost-effective, innovative well intervention services, including CoilHose™, a lightweight, small-footprint solution for wellbore lifting, cleaning and chemical treatments; Octopoda™, for fluid treatments in wellbore annuli; and Galea™, an autonomous well intervention solution. We also possess several other distinct technical capabilities, including non-intrusive metering technologies and wireless telemetry systems for reservoir monitoring. |
We operate a global business and have a diverse and stable customer base that is comprised of national oil companies (“NOC”), international oil companies (“IOC”), independent exploration and production companies (“Independents”) and service partners. We have strong relationships with a number of the world’s largest NOCs and IOCs, some of which have been our customers for decades. We are dedicated to safely and sustainably delivering maximum value to our customers.
We organize and manage our operations on a geographical basis. Our reporting structure and the key financial information used by our management team is organized around our four operating segments: (i) North and Latin America (“NLA”), (ii) Europe and Sub-Saharan Africa (“ESSA”), (iii) Middle East and North Africa (“MENA”) and (iv) Asia-Pacific (“APAC”).
How We Generate Our Revenue
Our revenue is derived primarily from providing services in well construction, well flow management, subsea well access and well intervention and integrity services to operators globally. Our revenue includes equipment service charges, personnel charges, run charges and consumables. Some of our contracts allow us to charge for additional deliverables, such as the costs of mobilization of people and equipment and customer specific engineering costs associated with a project. We also procure products and services on behalf of our customers that are provided by third parties for which we are reimbursed with a mark-up or in connection with an integrated services contract. We also design, manufacture and sell equipment, which is typically done in connection with a related operations and maintenance arrangement with a particular customer. In addition, we also generate revenue from the sale of certain well construction products.
Market Conditions and Price of Oil and Gas
The third quarter of 2023 has seen continued growth and increased activity as the market rebounds from the effects of the pandemic and Russia’s invasion of Ukraine. There are a number of market factors that have had, and may continue to have, an effect on our business, including:
| • |
The market for energy services and our business are substantially dependent on the price of oil and, to a lesser extent, the regional price of gas, which are both driven by market supply and demand. Changes in oil and gas prices impact customer willingness to spend on exploration and appraisal, development, production and abandonment activities. The extent of the impact of a change in oil and gas prices on these activities varies extensively between geographic regions, types of customers, types of activities and the financial returns of individual projects. |
| • |
Average daily oil demand in the third quarter of 2023 exceeded average daily demand levels in 2022, with liquid demand estimated to exceed annualized 2019 levels in 2023. Brent crude oil prices have been on an increasing trend throughout the third quarter, increasing from an average of $75/bbl in June to an average of $94/bbl in September. The Brent price increase has come as a result of balances moving towards a deficit amid strong demand and constrained supply due to the extension of voluntary production cuts by the Organization of Petroleum Exporting Countries and certain other oil producing nations (“OPEC+”), and the additional production cuts by Saudi Arabia. |
| • |
Activity related to gas and liquified natural gas (“LNG”) production (and associated asset development) continues to grow within our ESSA and MENA regions in support Europe’s ongoing drive to diversify away from its reliance on Russian pipeline gas supplies over the long term. More broadly, the energy security and transition imperatives of policymakers in the U.S. and Europe are expected to result in increased investment in global gas development. |
| • |
International, offshore and deepwater activity has continued to strengthen in 2023 as operator upstream investments increase to pre-pandemic levels. We are also experiencing increased demand for services related to brownfield and production enhancement and infield development programs as operators strive to maximize their previous investments and maintain production with a lower carbon footprint. In addition, we have seen an increase in demand for early production facilities and production optimization technologies, especially in support of gas and LNG developments. |
| • |
The clean energy transition continues to gain momentum. We believe, however, that hydrocarbons, and natural gas in particular, will continue to play a vital role in the transition towards more sustainable energy resources, and the existing expertise and future innovation within the energy services sector, both to reduce emissions and enhance efficiency, will be critical. We are already active in the early-stage carbon capture and storage segment and have expertise and established operations within the geothermal and flare reduction segments. We continue to develop technologies to enhance the sustainability of our customers’ operations which, along with our digital transformation initiatives, are expected to enable us to continue to support our customers’ commercial and environmental initiatives. As the industry changes, we continue to evolve our approach to adapt and help our customers develop more sustainable energy solutions. |
Outlook
Global liquids demand growth continued in the third quarter of 2023 and is forecast to continue into the fourth quarter, which, along with Saudi Arabia’s extension of its voluntary 1.0 million b/d production cut until the end of 2023 further constraining supply, is expected to lead to the decline of global inventories. The tight supply and demand balances are expected until at least the end of 2023 and continue to support strong oil prices.
The U.S. Energy Information Administration (“EIA”) estimates that global liquid fuels consumption will reach an average of 100.9 million b/d in 2023 (surpassing pre-pandemic average consumption levels of 100.8 million b/d), an increase of 1.8 million b/d from 2022. Global liquid fuels demand is expected to grow a further 1.3 million b/d to average 102.2 million b/d in 2024. The EIA forecasts that global liquid fuels production will average 101.3 million b/d in 2023 (an increase of 1.3 million b/d over 2022) and grow a further 0.9 million b/d to average 102.2 million b/d in 2024. The 2023 growth in liquid fuels supply comes despite the recent voluntary cuts in production from OPEC+ as non-OPEC+ production is forecast to grow by 2.7 million b/d driven by new projects in Guyana and Brazil adding to supply and the United States and Canada increasing production. The EIA predicts that OPEC+ crude oil production will fall by 0.9 million b/d in 2023 and a further 0.1 million b/d in 2024 assuming some extension of voluntary production cuts from Saudi Arabia and overall OPEC+ production falling short of targets. As a result of tight supply and demand dynamics, the EIA anticipates that global inventories will fall through to the end of 2023, adding upward pressure to oil prices in the coming months. The EIA forecasts the Brent crude oil spot price to average $91/bbl for the fourth quarter of 2023, increasing to $95/bbl for 2024.
In addition to the continued positive oil market outlook, global natural gas prices are expected to remain elevated as the market remains fundamentally tight.
The EIA predicts that Henry Hub prices will decline from their 2022 highs, averaging $2.61 per million British thermal unit (“MMBtu”) in 2023 with elevated storage levels and inelastic supply placing downward pressure on prices. The Henry Hub spot price is expected to increase to $3.23/MMBtu in 2024 as balances may tighten over the winter. Rystad Energy predicts that the European Title Transfer Facility (“TTF”) and Northeast Asian LNG spot price to trade at $13.7/MMBtu and $14.3/MMBtu respectively for 2023 as balances remain healthy amid high European storage levels and a slower LNG comeback in Asia easing upward pressure on the market. The market is expected to remain fundamentally tight through 2026, however. Shocks to the supply or demand side may drive short-term price spikes.
The 2023 market outlook remains positive with signs of growth in exploration and production expenditures, with upstream investments surpassing pre-pandemic levels. Strong investment growth is expected in the deepwater and offshore shelf segments with support from large projects in the Middle East driven by Saudi Arabia, as well as Latin America and Norway.
As a result, we expect demand for our services and solutions to continue trending positively through 2023 and into 2024.
How We Evaluate Our Operations
We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including Revenue, Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion.
Revenue: We analyze our performance by comparing actual monthly revenue by operating segments and areas of capabilities to our internal projections for each month. Our revenue is primarily derived from well construction, well flow management, subsea well access and well intervention and integrity solutions.
Adjusted EBITDA: We regularly evaluate our financial performance using Adjusted EBITDA. Our management believes Adjusted EBITDA is a useful financial performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.
Adjusted Cash Flow from Operations: We regularly evaluate our operating cash flow performance using Adjusted Cash Flow from Operations. Our management believes Adjusted Cash Flow from Operations is a useful tool to measure the operating cash performance of the Company as it excludes exceptional payments, interest payments and non-cash charges not related to our core operating activities and allows more meaningful analysis of the trends and performance of our core operations.
Cash Conversion: We regularly evaluate our efficiency of generating cash from operations using Cash Conversion which provides a useful tool to measure Adjusted Cash Flow from Operations as a percentage of Adjusted EBITDA.
Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion are non-GAAP financial measures. Please refer to the section titled “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial performance measure calculated and presented in accordance with GAAP and a reconciliation of Adjusted Cash Flow from Operations to net cash provided by (used in) operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP.
Executive Overview
Three months ended September 30, 2023, compared to three months ended June 30, 2023
Certain highlights of our financial results and other key developments include:
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Revenue for the three months ended September 30, 2023, decreased by $27.1 million, or 6.8%, to $369.8 million, compared to $396.9 million for the three months ended June 30, 2023. The decrease in revenue was driven by lower activity, primarily in the NLA segment, partially offset by higher revenue in APAC. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” |
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We reported net loss for the three months ended September 30, 2023, of $13.9 million, compared to a net income of $9.3 million for the three months ended June 30, 2023, primarily reflecting lower Adjusted EBITDA by $21.4 million as discussed below, and higher foreign exchange losses by $2.8 million, offset by lower merger and integration expense by $0.8 million. | |
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Adjusted EBITDA for the three months ended September 30, 2023, decreased by $21.4 million, or 29.9%, to $50.2 million from $71.6 million for the three months ended June 30, 2023. Adjusted EBITDA margin decreased to 13.6% during the three months ended September 30, 2023, as compared to 18.0% during the three months ended June 30, 2023. The decrease in Adjusted EBITDA and Adjusted EBITDA margin is primarily attributable to lower revenue, particularly in NLA, a less favorable activity mix, and demobilization and other unrecoverable operating costs within our light well intervention (“LWI”) business. For the three months ended September 30, 2023 Adjusted EBITDA includes LWI-related unrecoverable operating costs of $15.3 million. Adjusted EBITDA for the three months ended June 30, 2023 include LWI-related unrecoverable operating costs of $5.7 million. Excluding LWI-related unrecoverable operating costs, Adjusted EBITDA for the third and second quarter of 2023 would have been $65.5 million and $77.3 million, and Adjusted EBITDA margin would have been 17.7% and 19.5%, respectively.
The Company suspended vessel-deployed LWI operations during the third quarter following a wire failure on the main crane of the third party-owned vessel working with Expro while the crane was suspending the subsea module (“SSM”) of Expro’s vessel-deployed LWI system. We are continuing to work with the relevant stakeholders and independent experts to assess the incident and plan the recovery operation, which we expect to be completed during the fourth quarter of 2023 or in early 2024. Third quarter results do not include an estimate for recovery and repair costs; however, based on the information that is currently available to us, we do not expect that such recovery and repair costs, net of insurance, will be material to Expro’s financial results. After we have recovered our equipment, we will be able to determine a path forward for our vessel-deployed LWI business, including when our LWI system will return to operational status, what alternative service delivery options and service partner options are available to the company, and the timing and cost (including potential damage claims) of completing customer work scopes for which our vessel-deployed LWI system was integral. At this time, we are not able to assess the timing and potential cost of completing customer work scopes and whether such costs could be material to Expro’s financial results. |
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Net cash provided by operating activities for the three months ended September 30, 2023, was $58.9 million, compared to net cash provided by operating activities of $25.4 million for the three months ended June 30, 2023, with the change primarily driven by a favorable movement in net working capital of $46.0 million and decrease in cash paid for exceptional costs of $7.2 million, partially offset by a decrease in Adjusted EBITDA by $21.4 million. Adjusted Cash Flow from Operations and Cash Conversion for the three months ended September 30, 2023 were $63.6 million and 127%, respectively, compared to $36.0 million and 50%, respectively, for the three months ended June 30, 2023. |
Nine months ended September 30, 2023, compared to nine months ended September 30, 2022
Certain highlights of our financial results and other key developments include:
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Revenue for the nine months ended September 30, 2023, increased by $177.5 million, or 19.1%, to $1,106.0 million, compared to $928.5 million for the nine months ended September 30, 2022. The increase in revenue was driven by higher activity across ESSA, MENA and APAC segments, slightly offset by lower activity in NLA. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.” |
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We reported net loss for the nine months ended September 30, 2023, of $10.9 million, compared to a net loss of $33.1 million for the nine months ended September 30, 2022, primarily reflecting higher Adjusted EBITDA by $27.5 million, lower merger and integration expense by $4.3 million and lower foreign exchange losses by $5.8 million, partially offset by higher income tax expense by $1.4 million, higher interest and finance expense by $4.9 million, higher depreciation and amortization expense by $4.2 million and higher other expense by $5.2 million. |
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Adjusted EBITDA for the nine months ended September 30, 2023, increased by $27.5 million, or 20.2%, to $163.7 million from $136.2 million for the nine months ended September 30, 2022. Adjusted EBITDA margin increased to 14.8% during the nine months ended September 30, 2023, as compared to 14.7% during the nine months ended September 30, 2022. The increase in Adjusted EBITDA and Adjusted EBITDA margin is primarily attributable to higher revenue and a more favorable activity mix. The increase is offset by start up and commissioning costs and unrecoverable operating costs associated with our LWI business in APAC. Adjusted EBITDA for the nine months ended September 30, 2023 includes unrecoverable LWI-related costs in APAC of $31.6 million. Adjusted EBITDA for the nine months ended September 30, 2022 includes unrecoverable mobilization costs and start-up and commissioning costs on subsea projects in APAC of $22.9 million. Excluding LWI-related start up and commissioning costs and unrecoverable operating costs, Adjusted EBITDA for the nine months ended September 30, 2023 and 2022 would have been $195.3 million and $159.1 million, and Adjusted EBITDA margin would have been 17.7% and 17.1%, respectively.
The Company suspended vessel-deployed LWI operations during the third quarter following a wire failure on the main crane of the third party-owned vessel working with Expro while the crane was suspending the subsea module of Expro’s vessel-deployed LWI system. We are continuing to work with the relevant stakeholders and independent experts to assess the incident and plan the recovery operation, which we expect to be completed during the fourth quarter of 2023 or in early 2024. Third quarter results do not include an estimate for recovery and repair costs; however, based on the information that is currently available to us, we do not expect that such recovery and repair costs, net of insurance, will be material to Expro’s financial results. After we have recovered our equipment, we will be able to determine a path forward for our vessel-deployed LWI business, including when our LWI system will return to operational status, what alternative service delivery options and service partner options are available to the company, and the timing and cost (including potential damage claims) of completing customer work scopes for which our vessel-deployed LWI system was integral. At this time, we are not able to assess the timing and potential cost of completing customer work scopes and whether such costs could be material to Expro’s financial results. |
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Net cash provided by operating activities for the nine months ended September 30, 2023, was $105.5 million, compared to net cash used in operating activities of $12.8 million for the nine months ended September 30, 2022, with the change primarily driven by favorable movement in net working capital of $95.7 million, and an increase in Adjusted EBITDA of $27.6 million, partially offset by higher payments for income taxes of $14.2 million for the nine months ended September 30, 2023. Adjusted Cash Flow from Operations and Cash Conversion for the nine months ended September 30, 2023, were $126.8 million and 77%, respectively, compared to $16.4 million and 12%, respectively, for the nine months ended September 30, 2022. |
Non-GAAP Financial Measures
We include in this Form 10-Q the non-GAAP financial measures Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion. We provide reconciliations of net income (loss), the most directly comparable financial performance measure calculated and presented in accordance with GAAP, to Adjusted EBITDA. We also provide a reconciliation of Adjusted Cash Flow from Operations to net cash provided by (used in) operating activities, the most directly comparable liquidity measure calculated and presented in accordance with GAAP.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion are used as supplemental financial measures by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others. These non-GAAP financial measures allow our management and others to assess our financial and operating performance as compared to those of other companies in our industry, without regard to the effects of our capital structure, asset base, items outside the control of management and other charges outside the normal course of business.
We define Adjusted EBITDA as net income (loss) adjusted for (a) income tax expense (benefit), (b) depreciation and amortization expense, (c) impairment expense, (d) severance and other expense, net, (e) stock-based compensation expense, (f) merger and integration expense, (g) gain on disposal of assets, (h) other income (expense), net, (i) interest and finance (income) expense, net and (j) foreign exchange (gain) loss. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of revenues.
We define Adjusted Cash Flow from Operations as net cash provided by (used in) operating activities adjusted for cash (received) paid during the period for interest, net, severance and other expense and merger and integration expense. We define Cash Conversion as Adjusted Cash Flow from Operations divided by Adjusted EBITDA.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Flow from Operations and Cash Conversion have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. As Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion may be defined differently by other companies in our industry, our presentation of Adjusted EBITDA, Adjusted Cash Flow from Operations and Cash Conversion may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the three and nine months presented (in thousands):
| Three Months Ended |
Nine Months Ended |
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| September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
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| Net loss |
$ | (13,886 | ) | $ | (17,594 | ) | $ | (10,942 | ) | $ | (33,076 | ) | ||||
| Income tax expense |
$ | 13,307 | $ | 15,405 | $ | 30,931 | $ | 29,550 | ||||||||
| Depreciation and amortization expense |
37,414 | 34,825 | 109,386 | 105,229 | ||||||||||||
| Severance and other expense |
1,897 | 3,242 | 5,487 | 5,414 | ||||||||||||
| Merger and integration expense |
817 | 1,629 | 4,332 | 8,624 | ||||||||||||
| Other expense (income), net (1) |
1,129 | (432 | ) | 3,540 | (1,672 | ) | ||||||||||
| Stock-based compensation expense |
4,934 | 4,684 | 14,682 | 14,932 | ||||||||||||
| Foreign exchange loss |
4,260 | 7,957 | 4,630 | 10,385 | ||||||||||||
| Interest and finance expense (income), net |
373 | (1,502 | ) | 1,688 | (3,227 | ) | ||||||||||
| Adjusted EBITDA (2) |
$ | 50,245 | $ | 48,214 | $ | 163,734 | $ | 136,159 | ||||||||
| Adjusted EBITDA Margin (2) |
13.6 | % | 14.4 | % | 14.8 | % | 14.7 | % | ||||||||
| (1) |
Other expense (income), net, is comprised of immaterial, unusual or infrequently occurring transactions which, in management’s view, do not provide useful measures of the underlying operating performance of the business. |
| (2) | Excluding $15.3 million and $16.8 million of LWI-related unrecoverable operating costs during the three months ended September 30, 2023 and 2022, respectively, Adjusted EBITDA would have been $65.5 million and $65.0 million and Adjusted EBITDA margin would have been 17.7% and 19.4%, respectively. Excluding $31.6 million and $22.9 million of LWI-related start up and commissioning costs and other unrecoverable operating costs during the nine months ended September 30, 2023 and 2022, respectively, Adjusted EBITDA would have been $195.3 million and $159.1 million and Adjusted EBITDA margin would have been 17.7% and 17.1%, respectively. |
The following table provides a reconciliation of net cash provided by (used in) operating activities to Adjusted Cash Flow from Operations for each of the three and nine months presented (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
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| Net cash provided by (used in) operating activities |
$ | 58,841 | $ | (667 | ) | $ | 105,528 | $ | (12,774 | ) | ||||||
| Cash paid for interest, net |
910 | 891 | 1,456 | 2,890 | ||||||||||||
| Cash paid for merger and integration expense |
1,614 | 5,525 | 13,014 | 22,994 | ||||||||||||
| Cash paid for severance and other expense |
2,208 | 2,501 | 6,779 | 3,273 | ||||||||||||
| Adjusted Cash Flow from Operations |
$ | 63,573 | $ | 8,250 | $ | 126,777 | $ | 16,383 | ||||||||
| Adjusted EBITDA |
$ | 50,245 | $ | 48,214 | $ | 163,734 | $ | 136,159 | ||||||||
| Cash Conversion |
127 | % | 17 | % | 77 | % | 12 | % | ||||||||
Results of Operations
Operating Segment Results
We evaluate our business segment operating performance using segment revenue and Segment EBITDA, as described in Note 5 “Business segment reporting” in our consolidated financial statements. We believe Segment EBITDA is a useful operating performance measure as it excludes non-cash charges and other transactions not related to our core operating activities and corporate costs, and Segment EBITDA allows management to more meaningfully analyze the trends and performance of our core operations by segment as well as to make decisions regarding the allocation of resources to our segments.
The following table shows revenue by segment and revenue as a percentage of total revenue by segment for the three months ended September 30, 2023 and June 30, 2023:
| Three Months Ended |
Percentage |
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| (in thousands) |
September 30, 2023 |
June 30, 2023 |
September 30, 2023 |
June 30, 2023 |
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| NLA |
$ | 105,252 | $ | 134,830 | 28.5% |
34.0 | % | ||||||||
| ESSA |
135,395 | 138,062 | 36.6% |
34.8 | % | ||||||||||
| MENA |
58,057 | 59,163 | 15.7% |
14.9 | % | ||||||||||
| APAC |
71,114 | 64,862 | 19.2% |
16.3 | % | ||||||||||
| Total Revenue |
$ | 369,818 | $ | 396,917 | 100.0% |
100.0 | % | ||||||||
The following table shows revenue by segment and revenue as a percentage of total revenue by segment for the nine months ended September 30, 2023 and September 30, 2022:
| Nine Months Ended |
Percentage |
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| (in thousands) |
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
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| NLA |
$ | 366,310 | $ | 368,129 | 33.1% |
39.6 | % | ||||||||
| ESSA |
387,105 | 271,998 | 35.0% |
29.3 | % | ||||||||||
| MENA |
168,165 | 146,108 | 15.2% |
15.7 | % | ||||||||||
| APAC |
184,434 | 142,217 | 16.7% |
15.3 | % | ||||||||||
| Total Revenue |
$ | 1,106,014 | $ | 928,452 | 100.0% |
100.0 | % | ||||||||
The following table shows Segment EBITDA and Segment EBITDA margin by segment and a reconciliation to income before income taxes for the three months ended September 30, 2023 and June 30, 2023:
| Three Months Ended |
Segment EBITDA Margin |
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| (in thousands) |
September 30, 2023 |
June 30, 2023 |
September 30, 2023 |
June 30, 2023 |
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| NLA |
$ | 19,967 | $ | 36,703 | 19.0% |
27.2 | % | ||||||||
| ESSA |
39,268 | 34,964 | 29.0% |
25.3 | % | ||||||||||
| MENA |
16,871 | 18,491 | 29.1% |
31.3 | % | ||||||||||
| APAC (1) |
(4,286 | ) | 3,452 | (6.0)% |
5.3 | % | |||||||||
| Total Segment EBITDA |
71,820 | 93,610 | |||||||||||||
| Corporate costs (2) |
(24,070 | ) | (24,810 | ) | |||||||||||
| Equity in income of joint ventures |
2,495 | 2,805 | |||||||||||||
| Depreciation and amortization expense |
(37,414 | ) | (37,235 | ) | |||||||||||
| Merger and integration expense |
(817 | ) | (1,377 | ) | |||||||||||
| Severance and other expense |
(1,897 | ) | (2,663 | ) | |||||||||||
| Stock-based compensation expense |
(4,934 | ) | (5,577 | ) | |||||||||||
| Foreign exchange loss |
(4,260 | ) | (1,440 | ) | |||||||||||
| Other expense, net |
(1,129 | ) | (1,462 | ) | |||||||||||
| Interest and finance expense, net |
(373 | ) | (17 | ) | |||||||||||
| (Loss) income before income taxes |
$ | (579 | ) | $ | 21,834 | ||||||||||
The following table shows Segment EBITDA and Segment EBITDA margin by segment and a reconciliation to income (loss) before income taxes for the nine months ended September 30, 2023 and September 30, 2022:
| Nine Months Ended |
Segment EBITDA Margin |
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| (in thousands) |
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
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| NLA |
$ | 88,544 | $ | 100,083 | 24.2% |
27.2 | % | ||||||||
| ESSA |
95,017 | 44,502 | 24.5% |
16.4 | % | ||||||||||
| MENA |
49,930 | 43,882 | 29.7% |
30.0 | % | ||||||||||
| APAC (1) |
(3,532 | ) | 1,177 | (1.9)% |
0.8 | % | |||||||||
| Total Segment EBITDA |
229,959 | 189,644 | |||||||||||||
| Corporate costs (2) |
(73,961 | ) | (63,626 | ) | |||||||||||
| Equity in income of joint ventures |
7,736 | 10,141 | |||||||||||||
| Depreciation and amortization expense |
(109,386 | ) | (105,229 | ) | |||||||||||
| Merger and integration expense |
(4,332 | ) | (8,624 | ) | |||||||||||
| Severance and other expense |
(5,487 | ) | (5,414 | ) | |||||||||||
| Stock-based compensation expense |
(14,682 | ) | (14,932 | ) | |||||||||||
| Foreign exchange loss |
(4,630 | ) | (10,385 | ) | |||||||||||
| Other (expense) income, net |
(3,540 | ) | 1,672 | ||||||||||||
| Interest and finance (expense) income, net |
(1,688 | ) | 3,227 | ||||||||||||
| Income (loss) before income taxes |
$ | 19,989 | $ | (3,526 | ) | ||||||||||
| (1) | Excluding $15.3 million and $16.8 million of LWI-related unrecoverable operating costs during the three months ended September 30, 2023 and 2022, respectively, Segment EBITDA would have been $11.0 million and $9.2 million and Segment EBITDA margin would have been 15.5% and 14.2%, respectively. Excluding $31.6 million and $22.9 million of LWI-related start up and commissioning costs and other unrecoverable operating costs during the nine months ended September 30, 2023 and 2022, respectively, Segment EBITDA would have been $28.1 million and $24.1 million and Adjusted EBITDA margin would have been 15.2% and 17.0%, respectively. |
| (2) | Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment. |
Three months ended September 30, 2023 compared to three months ended June 30, 2023
NLA
Revenue for the NLA segment was $105.3 million for the three months ended September 30, 2023, a decrease of $29.5 million, or 21.9%, compared to $134.8 million for the three months ended June 30, 2023. The decrease was generally lower U.S. onshore activity, offshore rigs undergoing maintenance and undertaking non-drilling operations, and a number of dry wells in the region, resulting in lower well construction revenue in the U.S., Canada and Guyana and lower well flow management revenue in Mexico.
Segment EBITDA for the NLA segment was $20.0 million, or 19.0% of revenues, during the three months ended September 30, 2023, a decrease of $16.7 million, or 45.5%, compared to $36.7 million or 27.2% of revenues during the three months ended June 30, 2023. The decrease in Segment EBITDA and Segment EBITDA margin was attributable to lower activity and less favorable activity mix during the three months ended September 30, 2023.
ESSA
Revenue for the ESSA segment was $135.4 million for the three months ended September 30, 2023, a decrease of $2.7 million, or 2.0%, compared to $138.1 million for the three months ended June 30, 2023. The decrease in revenues was primarily driven by lower well construction revenue in Cyprus, Mozambique and Senegal and lower well flow management revenue due to a decrease in customer activity. The decrease in revenue was partially offset by increased subsea well access revenue, particularly in Congo and Angola.
Segment EBITDA for the ESSA segment was $39.3 million, or 29.0% of revenues, for the three months ended September 30, 2023, an increase of $4.3 million, or 12.3%, compared to $35.0 million, or 25.3% of revenues, for the three months ended June 30, 2023. The increase in Segment EBITDA and Segment EBITDA margin was attributable to a combination of a more favorable activity mix and increased activities on higher margin services during the three months ended September 30, 2023.
MENA
Revenue for the MENA segment was $58.1 million for the three months ended September 30, 2023, a decrease of $1.1 million, or 1.9%, compared to $59.2 million for the three months ended June 30, 2023. The decrease in revenue was driven by lower well flow management activity primarily in Saudi Arabia, partially offset by higher activity in Algeria.
Segment EBITDA for the MENA segment was $16.9 million, or 29.1% of revenues, for the three months ended September 30, 2023, a decrease of $1.6 million, or 8.6%, compared to $18.5 million, or 31.3% of revenues, for the three months ended June 30, 2023. The decrease in Segment EBITDA and Segment EBITDA margin was primarily due to lower activity and less favorable product mix during the three months ended September 30, 2023.
APAC
Revenue for the APAC segment was $71.1 million for the three months ended September 30, 2023, an increase of $6.2 million, or 9.6%, compared to $64.9 million for the three months ended June 30, 2023. The increase in revenue was primarily due to higher activity across all product lines, in particular, higher subsea well access revenue in China (product sales) and Australia (LWI activity).
Segment EBITDA for the APAC segment was ($4.3) million, or (6.0)% of revenues, for the three months ended September 30, 2023, a decrease of $7.8 million compared to $3.5 million, or 5.3% of revenues, for the three months ended June 30, 2023. The decrease in Segment EBITDA is attributable primarily to demobilization and unrecoverable operating costs within our LWI business. For the three months ended September 30, 2023 Segment EBITDA includes LWI-related unrecoverable operating costs of $15.3 million. Segment EBITDA for the three months ended June 30, 2023 include LWI-related unrecoverable operating costs of $5.7 million. Excluding LWI-related unrecoverable operating costs, Segment EBITDA for the third and second quarter of 2023 would have been $11.0 million or 15.5% of revenue and $9.2 million or 14.2% of revenue, respectively.
Equity in income of joint ventures
Equity in income of joint ventures for the three months ended September 30, 2023, decreased by $0.3 million, or 10.7%, to $2.5 million as compared to $2.8 million for the three months ended June 30, 2023. The decrease reflects lower income from our joint venture in China during the three months ended September 30, 2023.
Merger and integration expense
Merger and integration expense for the three months ended September 30, 2023, decreased by $0.6 million, to $0.8 million as compared to $1.4 million for the three months ended June 30, 2023. The decrease was primarily attributable to lower integration related expenses incurred during the three months ended September 30, 2023, as compared to the three months ended June 30, 2023.
Income tax expense
Income tax expense for the three months ended September 30, 2023, increased by $0.8 million to $13.3 million from $12.5 million for the three months ended June 30, 2023, primarily due to changes in the mix of taxable profits between jurisdictions.
Nine months ended September 30, 2023 compared to nine months ended September 30, 2022
NLA
Revenue for the NLA segment was $366.3 million for the nine months ended September 30, 2023, a decrease of $1.8 million, or 0.5%, compared to $368.1 million for the nine months ended September 30, 2022. The decrease was primarily due to lower well flow management revenue in Mexico, offset by higher well intervention and integrity revenue in South America, and higher well construction revenue in Mexico and Brazil offset by lower well construction revenue in the U.S.
Segment EBITDA for the NLA segment was $88.5 million, or 24.2% of revenues, during the nine months ended September 30, 2023, compared to $100.1 million or 27.2% of revenues during the nine months ended September 30, 2022. The decrease of $11.6 million in Segment EBITDA was attributable to lower activity and less favorable product mix during the nine months ended September 30, 2023.
ESSA
Revenue for the ESSA segment was $387.1 million for the nine months ended September 30, 2023, an increase of $115.1 million, or 42.3%, compared to $272.0 million for the nine months ended September 30, 2022. The increase in revenues was primarily driven by higher well flow management revenue, particularly in Congo supplemented by higher well intervention and integrity revenue in the U.K. and higher subsea well access revenue in Central and West Africa, Angola and Azerbaijan offset by lower subsea revenue in Norway. Also contributing to the increase in revenue was higher well construction revenue in Southeast Africa, offset by lower well construction revenue in Norway.
Segment EBITDA for the ESSA segment was $95.0 million, or 24.5% of revenues, for the nine months ended September 30, 2023, an increase of $50.5 million, or 113.5%, compared to $44.5 million, or 16.4% of revenues, for the nine months ended September 30, 2022. The increase was primarily attributable to higher activity levels and a more favorable activity mix during the nine months ended September 30, 2023.
MENA
Revenue for the MENA segment was $168.2 million for the nine months ended September 30, 2023, an increase of $22.1 million, or 15.1%, compared to $146.1 million for the nine months ended September 30, 2022. The increase in revenue was primarily due to increased well flow management and well construction activity in Saudi Arabia, increased well flow management in Algeria and increased well construction revenue in the United Arab Emirates.
Segment EBITDA for the MENA segment was $49.9 million, or 29.7% of revenues, for the nine months ended September 30, 2023, an increase of $6.0 million, or 13.7%, compared to $43.9 million, or 30.0% of revenues, for the nine months ended September 30, 2022. The increase in Segment EBITDA was primarily due to higher activity during the nine months ended September 30, 2023.
APAC
Revenue for the APAC segment was $184.4 million for the nine months ended September 30, 2023, an increase of $42.2 million, or 29.7%, compared to $142.2 million for the nine months ended September 30, 2022. The increase in revenue was primarily due to higher subsea well access revenue in Australia and China and higher well construction revenue in Southeast Asia.
Segment EBITDA for the APAC segment was ($3.5) million, or (1.9)% of revenues, for the nine months ended September 30, 2023, a decrease of $4.7 million compared to $1.2 million, or 0.8% of revenues, for the nine months ended September 30, 2022. The decrease in Segment EBITDA despite the increase in revenues was primarily due to unrecoverable LWI-related costs in APAC of $31.6 million incurred during the nine months ended September 30, 2023. Comparatively, during the nine months ended September 30, 2022. the Company incurred unrecoverable mobilization costs and start-up and commissioning costs on subsea projects of $22.9 million. Excluding $31.6 million and $22.9 million of LWI-related start up and commissioning costs and other unrecoverable operating costs during the nine months ended September 30, 2023 and 2022, respectively, Segment EBITDA would have been $28.1 million and $24.1 million and Adjusted EBITDA margin would have been 15.2% and 17.0%, respectively.
Equity in income of joint ventures
Equity in income of joint ventures for the nine months ended September 30, 2023, decreased by $2.4 million, or 23.8%, to $7.7 million as compared to $10.1 million for the nine months ended September 30, 2022. The decrease reflects lower income from our joint venture in China during the nine months ended September 30, 2023.
Merger and integration expense
Merger and integration expense for the nine months ended September 30, 2023, decreased by $4.3 million, to $4.3 million as compared to $8.6 million for the nine months ended September 30, 2022. The decrease was primarily attributable to lower integration related expenses incurred during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.
Income tax expense
Income tax expense for the nine months ended September 30, 2023, increased by $1.3 million to $30.9 million from $29.6 million for the nine months ended September 30, 2022, primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes.
Liquidity and Capital Resources
Liquidity
Our financial objectives include the maintenance of sufficient liquidity, adequate financial resources and financial flexibility to fund our business. As of September 30, 2023, total available liquidity was $337.0 million, including cash and cash equivalents and restricted cash of $257.0 million and $80.0 million available for borrowings under our New Facility. Expro believes these amounts, along with cash generated by ongoing operations, will be sufficient to meet future business requirements for the next 12 months and beyond. Our primary sources of liquidity have been cash flows from operations. Our primary uses of capital have been for capital expenditures and acquisitions. We monitor potential capital sources, including equity and debt financing, in order to meet our investment and liquidity requirements.
Our total capital expenditures are estimated to range between $30.0 million and $40.0 million for the fourth quarter of 2023. Our total capital expenditures were $84.6 million for the nine months ended September 30, 2023, of which approximately 90% were used for the purchase and manufacture of equipment to directly support customer-related activities and approximately 10% for other property, plant and equipment, inclusive of software costs. In addition, we used net cash of approximately $8.4 million during the nine months ended September 30, 2023 for the acquisition of DeltaTek and plan to use net cash of approximately $62.5 million during the fourth quarter 2023 for the acquisition of PRT Offshore. We continue to focus on preserving and protecting our strong balance sheet, optimizing utilization of our existing assets and, where practical, limiting new capital expenditures.
On June 16, 2022, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program, under which the Company is authorized to acquire up to $50.0 million of its outstanding common stock through November 24, 2023. Under the stock repurchase program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The stock repurchase program is being utilized at management’s discretion and in accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased, if any, will depend on a variety of factors including price, corporate requirements, the constraints specified in the stock repurchase program along with general business and market conditions. The stock repurchase program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. Under the stock repurchase plan, the Company has repurchased approximately 0.6 million shares at an average price of $17.99 per share, for a total cost of approximately $10.0 million during the nine months ended September 30, 2023. Since the inception of the stock repurchase program, the Company has repurchased total of approximately 1.7 million shares at an average price of $13.89 per share, for a total cost of $23.0 million through September 30, 2023.
Credit Facility
Revolving Credit Facility
On October 1, 2021, we entered into a new revolving credit facility (the “New Facility”) with DNB Bank ASA, London Branch, as agent (the “Agent”), with total commitments of $200.0 million, of which $130.0 million was available for drawdowns as loans and $70.0 million was available for letters of credit. Proceeds of the New Facility may be used for general corporate and working capital purposes.
On March 31, 2022, the Agent, on behalf of the consenting lenders, countersigned a Consent Request Letter dated March 10, 2022, to the New Facility (the “Consent”). Pursuant to the Consent, the lenders consented to, among other things, an amendment to the New Facility permitting dividends or distributions by the Company, or the repurchase or redemption of the Company’s shares in an aggregate amount of $50.0 million over the life of the New Facility, subject to pro forma compliance with the 2.25 to 1.0 maximum senior leverage ratio financial covenant.
On July 21, 2022, the Company increased the facility available for letters of credit to $92.5 million and total commitments to $222.5 million.
On October 6, 2023, we amended and restated the New Facility agreement (the “Amended and Restated Facility Agreement”) pursuant to an amendment and restatement agreement with DNB Bank ASA, London Branch, as agent (the “Agent”), in order to extend the maturity of the New Facility agreement for a further 36 months and increase the total commitments to $250.0 million, of which $166.7 million was available for drawdowns as loans and $83.3 million was available for letters of credit. The Company has the ability to increase the commitments to $350.0 million.
Please see Note 16 “Interest bearing loans” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.
Cash flow from operating, investing and financing activities
Cash flows provided by (used in) our operations, investing and financing activities are summarized below (in thousands):
| Nine Months Ended |
||||||||
| September 30, 2023 |
September 30, 2022 |
|||||||
| Net cash provided by (used in) operating activities |
$ | 105,528 | $ | (12,774 | ) | |||
| Net cash used in investing activities |
(90,799 | ) | (40,608 | ) | ||||
| Net cash provided by (used in) financing activities |
29,874 | (23,333 | ) | |||||
| Effect of exchange rate changes on cash activities |
(6,052 | ) | (6,418 | ) | ||||
| Net decrease to cash and cash equivalents and restricted cash |
$ | 38,551 | $ | (83,133 | ) | |||
Analysis of cash flow changes between the nine months ended September 30, 2023 and September 30, 2022
Net cash provided by (used in) operating activities
Net cash provided by operating activities was $105.5 million during the nine months ended September 30, 2023 as compared to net cash used in operating activities of $12.8 million during the nine months ended September 30, 2022. The increase in net cash provided by operating activities of $118.3 million for the nine months ended September 30, 2023, was primarily driven by favorable movement in net working capital of $95.7 million, and an increase in Adjusted EBITDA of $27.6 million, partially offset by higher payments for income taxes of $14.2 million for the nine months ended September 30, 2023.
Adjusted Cash Flows from Operations during the nine months ended September 30, 2023, was $126.8 million as compared to Adjusted Cash Flows from Operations of $16.4 million during the nine months ended September 30, 2022. Our primary uses of cash from operating activities were capital expenditures and funding obligations related to our financing arrangements.
Net cash used in investing activities
Net cash used in investing activities was $90.8 million during the nine months ended September 30, 2023, as compared to $40.6 million during the nine months ended September 30, 2022, an increase of $50.2 million. Our principal recurring investing activity is our capital expenditures. The increase in net cash used in investing activities was primarily due to an increase in capital expenditures of $34.0 million, lower proceeds from sale/maturity of investments of $11.1 million and lower proceeds from disposal of assets of $4.6 million.
Net cash provided by (used in) financing activities
Net cash provided by financing activities was $29.9 million during the nine months ended September 30, 2023, as compared to $23.3 million net cash used in financing activities during the nine months ended September 30, 2022. The increase of $53.2 million in net cash used in financing activities is primarily due to proceeds from long-term borrowings of $50.0 million.
New accounting pronouncements
See Note 2 “Basis of presentation and significant accounting policies” in our unaudited condensed consolidated financial statements under the heading “Recent accounting pronouncements.”
Critical accounting policies and estimates
There were no changes to our critical accounting policies and estimates from those disclosed in our Annual Report.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those that express a belief, expectation or intention, as well as those that are not statements of historical fact. Forward-looking statements include information regarding our future plans and goals and our current expectations with respect to, among other things:
| ● |
our business strategy and prospects for growth; |
| ● |
post-Merger integration; |
| ● |
our cash flows and liquidity; |
| ● |
our financial strategy, budget, projections and operating results; |
| ● |
the amount and timing of any future share repurchases; |
| ● |
the amount, nature and timing of capital expenditures; |
| ● |
the availability and terms of capital; |
| ● |
the exploration, development and production activities of our customers; |
| ● |
the market for our existing and future products and services; |
| ● |
competition and government regulations; |
| ● |
general economic conditions (such as recent instability in certain financial institutions); and | |
| ● | general political conditions, including political tensions, conflicts and war (such as the ongoing conflict in Ukraine). |
These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “expect,” “goal,” “plan,” “intend,” “potential,” “predict,” “project,” “may,” “outlook,” or other terms that convey the uncertainty of future events or outcomes, although not all forward-looking statements contain such identifying words. The forward-looking statements in this Form 10-Q speak only as of the date of this report; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. Forward-looking statements are not assurances of future performance and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, but are not limited to, the following:
| ● |
continuing uncertainty relating to global crude oil demand and crude oil prices that correspondingly may lead to further significant reductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services; |
| ● | political, economic and regulatory uncertainties in our international operations, including the impact of actions taken by the OPEC+ and non-OPEC+ nations with respect to production levels and the effects thereof; | |
| ● |
the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations; |
| ● | unique risks associated with our offshore operations (including the ability to recover, and to the extent necessary, service and/or economically repair any equipment located on the seabed); | |
| ● |
uncertainty regarding the extent and duration of the remaining restrictions in the U.S. and globally on various commercial and economic activities due to global pandemics and epidemics (including COVID-19), including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates; |
| ● |
our ability to develop new technologies and products and protect our intellectual property rights; |
| ● |
our ability to attract, train and retain key employees and other qualified personnel; |
| ● |
operational safety laws and regulations; |
| ● |
international trade laws and sanctions; |
| ● |
severe weather conditions and natural disasters, and other operating interruptions (including explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); |
| ● | policy or regulatory changes; | |
| ● |
the overall timing and level of transition of the global energy sector from fossil-based systems of energy production and consumption to more renewable energy sources; |
| ● |
perception related to our environmental, social and governance (“ESG”) performance as well as current and future ESG reporting requirements; and |
| ● |
uncertainty with respect to integration and realization of expected synergies following completion of the Merger and our subsequent acquisitions. |
These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item 1A of this Form 10-Q, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q, and elsewhere within this Form 10-Q, (2) our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023 (our “Annual Report”), (3) our other reports and filings we make with the SEC from time to time and (4) other announcements we make from time to time. Should one or more of the risks or uncertainties described in the documents above or in this Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statements. All such forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements in this section.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Annual Report. Our exposure to market risk has not changed materially since December 31, 2022.
Item 4. Controls and Procedures
| a) |
Evaluation of Disclosure Controls and Procedures |
As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the three months covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure, and such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon our evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of September 30, 2023 at the reasonable assurance level.
| b) |
Change in Internal Control Over Financial Reporting |
As of September 30, 2023, management has concluded that there have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Please see Note 17 “Commitments and contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements.
In addition to the other information set forth in this report, you should carefully consider the risks discussed under the heading “Risk Factors” in our Annual Report, which risks could materially affect our business, financial condition or future results. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Following is a summary of repurchases of Company common stock during the three months ended September 30, 2023.
| Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Program (2) |
||||||||||||
| July 1 - July 31 |
-- | $ | -- | -- | $ | 26,996,269 | ||||||||||
| August 1 - August 31 |
-- | $ | -- | -- | $ | 26,996,269 | ||||||||||
| September 1 - September 30 |
-- | $ | -- | -- | $ | 26,996,269 | ||||||||||
| Total |
-- | $ | -- | -- | ||||||||||||
| 1) |
This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. We administer cashless settlements and generally do not repurchase stock in connection with cashless settlements. |
| 2) |
Our Board authorized a program to repurchase our common stock from time to time. Approximately $27.0 million remained authorized for repurchases as of September 30, 2023, subject to the limitation set in our shareholder authorization for repurchases of our common stock, which is approximately 10% of the common stock issued as of March 21, 2022. |
Securities Trading Arrangements with Officers and Directors
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
The exhibits required to be filed by Item 6 are set forth in the Exhibit Index included below.
EXHIBIT INDEX
| † | Represents management contract or compensatory plan or arrangement. |
| * | Filed herewith. |
| ** | Furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| EXPRO GROUP HOLDINGS N.V. |
|||
| Date: |
October 26, 2023 |
By: |
/s/ Quinn P. Fanning |
| Quinn P. Fanning |
|||
| Chief Financial Officer |
|||
| (Principal Financial Officer) |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Michael Jardon, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q (this “report”) of Expro Group Holdings N.V. (the “registrant”); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the three months covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the three months presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the three months for which this report is being prepared; |
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the three months covered by this report based on such evaluation; and |
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date:
October 26, 2023
/s/ Michael Jardon
Michael Jardon
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Quinn P. Fanning, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q (this “report”) of Expro Group Holdings N.V. (the “registrant”); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the three months covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the three months presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the three months for which this report is being prepared; |
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the three months covered by this report based on such evaluation; and |
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 26, 2023
/s/ Quinn P. Fanning
Quinn P. Fanning
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER UNDER SECTION 906 OF THE
SARBANES OXLEY ACT OF 2002, 18 U.S.C. § 1350
In connection with the Quarterly Report of Expro Group Holdings N.V. (the “Company”) on Form 10-Q for the three months ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Jardon, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| October 26, 2023 |
/s/ Michael Jardon |
|
Michael Jardon |
|
|
President and Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER UNDER SECTION 906 OF THE
SARBANES OXLEY ACT OF 2002, 18 U.S.C. § 1350
In connection with the Quarterly Report of Expro Group Holdings N.V. (the “Company”) on Form 10-Q for the three months ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Quinn P. Fanning, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| October 26, 2023 |
/s/ Quinn P. Fanning |
|
Quinn P. Fanning |
|
|
Chief Financial Officer |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Total revenue | $ 369,818 | $ 334,351 | $ 1,106,014 | $ 928,452 |
| Operating costs and expenses: | ||||
| Cost of revenue, excluding depreciation and amortization expense | (315,825) | (283,695) | (924,420) | (779,808) |
| General and administrative expense, excluding depreciation and amortization expense | (15,437) | (18,593) | (44,908) | (47,943) |
| Depreciation and amortization expense | (37,414) | (34,825) | (109,386) | (105,229) |
| Merger and integration expense | (817) | (1,629) | (4,332) | (8,624) |
| Severance and other expense | (1,897) | (3,242) | (5,487) | (5,414) |
| Total operating cost and expenses | (371,390) | (341,984) | (1,088,533) | (947,018) |
| Operating income (loss) | (1,572) | (7,633) | 17,481 | (18,566) |
| Other (expense) income, net | (1,129) | 432 | (3,540) | 1,672 |
| Interest and finance (expense) income, net | (373) | 1,502 | (1,688) | 3,227 |
| (Loss) income before taxes and equity in income of joint ventures | (3,074) | (5,699) | 12,253 | (13,667) |
| Equity in income of joint ventures | 2,495 | 3,510 | 7,736 | 10,141 |
| (Loss) income before income taxes | (579) | (2,189) | 19,989 | (3,526) |
| Income tax expense | (13,307) | (15,405) | (30,931) | (29,550) |
| Net loss | $ (13,886) | $ (17,594) | $ (10,942) | $ (33,076) |
| Loss per common share: | ||||
| Total basic and diluted loss per share (in dollars per share) | $ (0.13) | $ (0.16) | $ (0.10) | $ (0.30) |
| Weighted average common shares outstanding: | ||||
| Basic and diluted weighted average number of shares outstanding (in shares) | 108,777,429 | 108,708,651 | 108,764,599 | 109,183,863 |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Net loss | $ (13,886) | $ (17,594) | $ (10,942) | $ (33,076) |
| Other comprehensive loss: | ||||
| Amortization of prior service credit | (61) | (61) | (183) | (183) |
| Other comprehensive loss | (61) | (61) | (183) | (183) |
| Comprehensive loss | $ (13,947) | $ (17,655) | $ (11,125) | $ (33,259) |
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - € / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Common stock, par value (in EUR per share) | € 0.06 | € 0.06 |
| Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
| Common stock, shares issued (in shares) | 111,526,719 | 110,710,188 |
| Common stock, shares outstanding (in shares) | 108,814,536 | 108,743,761 |
| Treasury stock, shares (in shares) | 2,712,183 | 1,966,427 |
Note 1 - Business Description |
9 Months Ended | ||
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Business Description and Basis of Presentation [Text Block] |
With roots dating to 1938, Expro Group Holdings N.V. (the “Company,” “Expro,” “we,” “our” or “us”) is a global provider of energy services with operations in approximately 60 countries. The Company’s portfolio of capabilities includes products and services related to well construction, well flow management, subsea well access, and well intervention and integrity which enhance production and improve recovery across the well lifecycle, from exploration through abandonment.
On March 10, 2021, the Company and New Eagle Holdings Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger with Expro Group Holdings International Limited (“Legacy Expro”) providing for the merger of Legacy Expro with and into Merger Sub in an all-stock transaction, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of the Company (the “Merger”). The Merger closed on October 1, 2021, and the Company, previously known as Frank’s International N.V. (“Frank’s”), was renamed Expro Group Holdings N.V.
On June 16, 2022, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program, under which the Company is authorized to acquire up to $50.0 million of its outstanding common stock through November 24, 2023. Under the stock repurchase program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The stock repurchase program is being utilized at management’s discretion and in accordance with U.S. federal securities laws. The timing and actual numbers of shares repurchased, if any, will depend on a variety of factors including price, corporate requirements, the constraints specified in the stock repurchase program along with general business and market conditions. The stock repurchase program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. Under the stock repurchase plan, the Company has repurchased approximately 0.6 million shares at an average price of $17.99 per share, for a total cost of approximately $10.0 million during the nine months ended September 30, 2023. Since the inception of the stock repurchase program, the Company has repurchased total of approximately 1.7 million shares at an average price of $13.89 per share, for a total cost of $23.0 million through September 30, 2023.
On October 25, 2023, the Company’s Board of Directors (the “Board”) approved an extension to the stock repurchase program, which was set to expire on November 24, 2023. Pursuant to the extended stock repurchase program, the Company is now authorized to acquire up to $100.0 million of its outstanding common stock through November 24, 2024 (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company may repurchase shares of the Company’s common stock in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with federal securities laws. The timing and actual numbers of shares repurchased will depend on a variety of factors including price, corporate requirements, the constraints specified in the Stock Repurchase Program along with general business and market conditions. The Stock Repurchase Program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time.
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Note 2 - Basis of Preparation and Significant Accounting Policies |
9 Months Ended | ||
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Basis of Presentation and Significant Accounting Policies [Text Block] |
Basis of presentation
The unaudited condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany balances and transactions, including unrealized profits arising from them, have been eliminated for purposes of preparing these unaudited condensed consolidated financial statements. Investments in which we do not have a controlling interest, but over which we do exercise significant influence, are accounted for under the equity method of accounting.
The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim consolidated financial information. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022, included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.
In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2023, the results of our operations for the three and nine months ended September 30, 2023 and 2022 and our cash flows for the nine months ended September 30, 2023 and 2022. Such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.
The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency.
Significant accounting policies
Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 2022, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 23, 2023, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the significant accounting policies described in our consolidated financial statements as of and for the year ended December 31, 2022.
Recent accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.
We consider the applicability and impact of all accounting pronouncements. Recently issued ASUs were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows.
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Note 3 - Business Combinations and Dispositions |
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| Mergers, Acquisitions and Dispositions Disclosures [Text Block] |
DeltaTek Oil Tools Limited
On February 8, 2023 (“Closing Date”), DeltaTek Oil Tools Limited, a limited liability company registered in the United Kingdom, and its subsidiary (“DeltaTek”), was acquired (“the Acquisition”) by our wholly owned subsidiary Exploration and Production Services (Holdings) Limited, a limited liability company registered in the United Kingdom (“EPSH”). DeltaTek has developed a number of innovative technologies and solutions and their range of low-risk open water cementing solutions increases clients’ operational efficiency, delivers rig time and cost savings, and improves the quality of cementing operations of clients. The fair value of consideration for the Acquisition was $18.4 million, including final cash consideration paid of $9.9 million and contingent consideration which is estimated to be $8.5 million.
The contingent consideration arrangement requires the Company to pay the former owners of DeltaTek a percentage of future revenues generated specifically from the acquired technology over a period of seven years. The fair value of the contingent consideration arrangement of $8.5 million was estimated by applying the income approach and is reflected in “Other liabilities” on the consolidated balance sheets. That measure is based on significant inputs that are not observable in the market, referred to as Level 3 inputs in accordance with ASC 820. To the extent our estimates and assumptions change during the measurement period and such changes are based on facts and circumstances that existed as of the Closing Date, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to goodwill. To the extent our estimates and assumptions change based on facts and circumstances subsequent to the Closing Date or after the measurement period, an adjustment to the contingent consideration liability would be recorded with an offsetting adjustment to earnings during the applicable period.
The Acquisition is accounted for as a business combination and Expro has been identified as the acquirer for accounting purposes. As a result, the Company has in accordance with ASC 805, Business Combinations, applied the acquisition method of accounting to account for DeltaTek’s assets acquired and liabilities assumed. Applying the acquisition method of accounting includes recording the identifiable assets acquired and liabilities assumed at their fair values and recording goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed.
The following table sets forth the allocation of the Acquisition consideration exchanged to the fair value of identifiable tangible and intangible assets acquired and liabilities assumed as of the Closing Date, with the recording of goodwill for the excess of the consideration transferred over the net aggregate fair value of the identifiable assets acquired and liabilities assumed (in thousands):
The preliminary valuation of the assets acquired and liabilities assumed, including other liabilities, in the Acquisition initially resulted in a goodwill of $7.2 million. During the third quarter of 2023, the Company finalized the valuation and recorded measurement period adjustments to its preliminary estimates due to additional information received primarily related to a customary purchase price adjustment. The measurement period adjustments resulted in an increase in goodwill of $1.0 million, for final total goodwill associated with the Acquisition of $8.2 million.
The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using the relief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The estimated useful lives are based on management’s historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.
The intangible assets will be amortized on a straight-line basis over an estimated 5 to 15 years life. We expect annual amortization to be approximately $1.0 million associated with these intangible assets. An associated deferred tax liability has been recorded in regards to these intangible assets. Refer to Note 14 – Intangible assets, net for additional information regarding the various acquired intangible assets.
The goodwill consists largely of the synergies and economies of scale expected from the technology providing more efficient services and expected future developments resulting from the assembled workforce. The goodwill is not subject to amortization but will be evaluated at least annually for impairment or more frequently if impairment indicators are present. Goodwill recorded in the Acquisition is not expected to be deductible for tax purposes.
The Company has determined the estimated unaudited pro forma information to be insignificant for the three and nine months ended September 30, 2023 and 2022, assuming the Acquisition were to have been completed as of January 1, 2023 and 2022, respectively. This is not necessarily indicative of the results that would have occurred had the Acquisition been completed on either date indicated or of future operating results.
PRT Offshore
On October 2, 2023, Expro completed its acquisition of Houston-based offshore services provider PRT Offshore. Total consideration paid at closing was approximately $106.3 million, including $62.5 million of cash and $43.8 million of newly issued Expro shares. Potential additional consideration will be based on PRT Offshore’s financial performance during the four quarters following closing. |
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Note 4 - Fair Value Measurements |
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| Fair Value Disclosures [Text Block] |
Recurring Basis
A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of September 30, 2023 and December 31, 2022, were as follows (in thousands):
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Note 5 - Business Segment Reporting |
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| Segment Reporting Disclosure [Text Block] |
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, in deciding how to allocate resources and assess performance. Our CODM manages our operational segments that are aligned with our geographical regions as below:
The following table presents our revenue disaggregated by our operating segments (in thousands):
Segment EBITDA
Our CODM regularly evaluates the performance of our operating segments using Segment EBITDA, which we define as income (loss) before income taxes adjusted for corporate costs, equity in income of joint ventures, depreciation and amortization expense, impairment expense, gain (loss) on disposal of assets, merger and integration expense, severance and other expense, stock-based compensation expense, foreign exchange gains (losses), other income (expense), net, and interest and finance income (expense), net.
The following table presents our Segment EBITDA disaggregated by our operating segments and a reconciliation to income (loss) before income taxes (in thousands):
Corporate costs include the costs of running our corporate head office and other central functions that support the operating segments, including research, engineering and development, logistics, sales and marketing and health and safety and are not attributable to a particular operating segment.
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Note 6 - Revenue |
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| Revenue from Contract with Customer [Text Block] |
Disaggregation of revenue
We disaggregate our revenue from contracts with customers by geography, as disclosed in Note 5 “Business segment reporting,” as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Additionally, we disaggregate our revenue into main areas of capabilities.
The following table sets forth the total amount of revenue by main area of capabilities as follows (in thousands):
Contract balances
We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of unbilled receivables and deferred revenue.
Unbilled receivables are initially recognized for revenue earned on completion of the performance obligation which are not yet invoiced to the customer. The amounts recognized as unbilled receivables are reclassified to trade receivable upon billing. Deferred revenue represents the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer.
Contract balances consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
The Company recognized revenue during the three and nine months ended September 30, 2023 of $6.3 million and $48.6 million, respectively, and for the three and nine months ended September 30, 2022 of $6.0 million and $14.9 million, respectively, out of the deferred revenue balance as of the beginning of the applicable year.
As of September 30, 2023, $26.9 million of our deferred revenue was classified as current and is included in “Other current liabilities” on the condensed consolidated balance sheets, with the remainder classified as non-current and included in “Other non-current liabilities” on the condensed consolidated balance sheets.
Transaction price allocated to remaining performance obligations
Remaining performance obligations represent firm contracts for which work has not been performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less and for our long-term contracts we have a right to consideration from customers in an amount that corresponds directly with the value to the customer of the performance completed to date. With respect to our construction contracts, revenue allocated to remaining performance obligations is $48.7 million.
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Note 7 - Income Taxes |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Income Tax Disclosure [Text Block] |
For interim financial reporting, the annual tax rate is based on pre-tax income (loss) before equity in income of joint ventures. We have historically calculated the income tax expense/(benefit) during interim reporting periods by applying a full year estimated Annual Effective Tax Rate (“AETR”) to income (loss) before income taxes, excluding infrequent or unusual discrete items, for the reporting period. For the three and nine months ended September 30, 2023, we determined that using an AETR would not provide a reliable estimate of income taxes due to the forecasting methodology used to project income (loss) before income taxes, resulting in significant changes in the estimated AETR. Thus, we concluded to use a discrete effective tax rate, which treats the year-to-date period as an annual period, to calculate income taxes for the three and nine months ended September 30, 2023.
Our effective tax rates were (432.9)% and 252.4% for the three and nine months ended September 30, 2023, respectively, and were (270.3)% and (216.2)% for the three and nine months ended September 30, 2022, respectively.
Our effective tax rate was impacted primarily due to changes in the mix of taxable profits between jurisdictions with different tax regimes, in particular in Latin America and Sub-Saharan Africa.
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Note 8 - Investment in Joint Ventures |
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| Equity Method Investments and Joint Ventures Disclosure [Text Block] |
We have investments in two joint venture companies, which together provide us access to certain Asian markets that otherwise would be challenging for us to penetrate or develop effectively on our own. COSL-Expro Testing Services (Tianjin) Co. Ltd (“CETS”), in which we have a 50% equity interest, has extensive offshore well testing and completions capabilities and a reputation for providing technology-driven solutions in China. Similarly, PV Drilling Expro International Co. Ltd. (“PVD-Expro”) in which we have a 49% equity interest, offers the full suite of Expro products and services, including well testing and completions, in Vietnam. Both of these are strategic to our activities and offer the full capabilities and technology of Expro, but each company is independently managed.
The carrying value of our investment in joint ventures as of September 30, 2023, and December 31, 2022, was as follows (in thousands):
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Note 9 - Accounts Receivable, Net |
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| Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
Accounts receivable, net consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
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Note 10 - Inventories |
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| Inventory Disclosure [Text Block] |
Inventories consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
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Note 11 - Other Assets and Liabilities |
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| Other Assets and Other Liabilities [Text Block] |
Other assets consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
Other liabilities consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
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Note 12 - Accounts Payable and Accrued Liabilities |
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| Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block] |
Accounts payable and accrued liabilities consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
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Note 13 - Property, Plant and Equipment, Net |
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| Property, Plant and Equipment Disclosure [Text Block] |
Property, plant and equipment, net consisted of the following as of September 30, 2023, and December 31, 2022 (in thousands):
The carrying amount of our property, plant and equipment recognized in respect of assets held under finance leases as of September 30, 2023 and December 31, 2022 and included in amounts above is as follows (in thousands):
Depreciation expense relating to property, plant and equipment, including assets under finance leases, was $27.9 million and $81.2 million for the three and nine months ended September 30, 2023, respectively, and $25.9 million and $77.8 million for the three and nine months ended September 30, 2022, respectively.
During the nine months ended September 30, 2023 and 2022, assets held for sale were sold for net proceeds of $2.0 million and $6.3 million, respectively.
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Note 14 - Intangible Assets, Net |
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| Intangible Assets Disclosure [Text Block] |
The following table summarizes our intangible assets comprising of Customer Relationships & Contracts (“CR&C”), Trademarks, Technology and Software as of September 30, 2023 and December 31, 2022 (in thousands):
Amortization expense for intangible assets was $9.6 million and $28.2 million for the three and nine months ended September 30, 2023, respectively, and $8.9 million and $27.4 million for the three and nine months ended September 30, 2022, respectively.
The following table summarizes the intangible assets which were acquired pursuant to the Acquisition (in thousands):
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Note 15 - Goodwill |
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| Goodwill Disclosure [Text Block] |
Our reporting units are our operating segments which are NLA, ESSA, MENA and APAC.
The allocation of goodwill by operating segment as of September 30, 2023 and December 31, 2022 is as follows (in thousands):
The following table summarizes the goodwill by operating segment which were acquired pursuant to the Acquisition (in thousands):
As of September 30, 2023, we did not identify any triggering events that would represent an indicator of impairment of our goodwill. Accordingly, no impairment charges related to goodwill have been recorded during the three and nine months ended September 30, 2023.
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Note 16 - Interest Bearing Loans |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Debt Disclosure [Text Block] |
New Facility
On October 1, 2021, we entered into a new revolving credit facility (the “New Facility”) with DNB Bank ASA, London Branch, as agent (the “Agent”), with total commitments of $200.0 million, of which $130.0 million was available for drawdowns as loans and $70.0 million was available for letters of credit. On July 21, 2022, the Company increased the facility available for letters of credit to $92.5 million and total commitments to $222.5 million. Proceeds of the New Facility may be used for general corporate and working capital purposes.
All obligations under the New Facility are guaranteed jointly and severally by the Company and certain of the Company’s subsidiaries incorporated in the U.S., the U.K., the Netherlands, Norway, Hungary, Australia, Cyprus, the Cayman Islands and Guernsey. Going forward, the guarantors must comprise at least 80% of the EBITDA (as defined in the New Facility) and 70% of the consolidated assets of the Company and its subsidiaries, as well as subsidiaries individually representing 5% or more of the EBITDA or assets of the group, subject to customary exceptions and exclusions. In addition, the obligations under the New Facility are secured by first priority liens on certain assets of the borrowers and guarantors, including pledges of equity interests in certain of the Company’s subsidiaries, including all of the borrowers and subsidiary guarantors, material operating bank accounts, intercompany loans receivable and, in jurisdictions where customary, including the U.S., the U.K., Australia and the Cayman Islands, substantially all of the assets and property of the borrowers and guarantors incorporated in such jurisdictions, in each case subject to customary exceptions and exclusions.
Borrowings under the New Facility bear interest at a rate per annum of LIBOR, subject to a 0.00% floor, plus an applicable margin of 3.75% for cash borrowings or 3.00% for letters of credit. A 0.75% per annum fronting fee applies to letters of credit, and an additional 0.25% or 0.50% per annum utilization fee is payable on drawdowns as loans to the extent one-third or two-thirds, respectively, or more of commitments are drawn. The unused portion of the New Facility is subject to a commitment fee of 30% per annum of the applicable margin. Interest on loans is payable at the end of the selected interest period, but no less frequently than semi-annually.
The New Facility contains various undertakings and affirmative and negative covenants which limit, subject to certain customary exceptions and thresholds, the Company and its subsidiaries’ ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions; and (5) engage in transactions with affiliates. The New Facility also requires the Company to maintain (i) a minimum cash flow cover ratio of 1.5 to 1.0 based on the ratio of cash flow to debt service; (ii) a minimum interest cover ratio of 4.0 to 1.0 based on the ratio of EBITDA to net finance charges; and (iii) a maximum senior leverage ratio of 2.25 to 1.0 based on the ratio of total net debt to EBITDA, in each case tested quarterly on a last-twelve-months basis, subject to certain exceptions. In addition, the aggregate capital expenditure of the Company and its subsidiaries cannot exceed 110% of the forecasted amount in the relevant annual budget, subject to certain exceptions. If the Company fails to perform its obligations under the agreement that results in an event of default, the commitments under the New Facility could be terminated and any outstanding borrowings under the New Facility may be declared immediately due and payable. The New Facility also contains cross-default provisions that apply to the Company and its subsidiaries’ other indebtedness.
On March 31, 2022, the Agent, on behalf of the consenting lenders, countersigned a Consent Request Letter dated March 10, 2022, to the New Facility (the “Consent”). Pursuant to the Consent, the lenders consented to, among other things, an amendment to the New Facility permitting dividends or distributions by the Company, or the repurchase or redemption of the Company’s shares in an aggregate amount of $50.0 million over the life of the New Facility, subject to pro forma compliance with the 2.25 to 1.0 maximum senior leverage ratio financial covenant.
As of September 30, 2023, we had $50.0 million of borrowings outstanding under the New Facility. The Company's New Facility was undrawn as of December 31, 2022. We utilized $58.0 million and $53.8 million as of September 30, 2023 and December 31, 2022, respectively, for bonds and guarantees.
Amended and Restated Facility
On October 6, 2023, we amended and restated the New Facility agreement (the “Amended and Restated Facility Agreement”) pursuant to an amendment and restatement agreement with DNB Bank ASA, London Branch, as agent (the “Agent”), in order to extend the maturity of the New Facility agreement for a further 36 months and increase the total commitments to $250.0 million, of which $166.7 million was available for drawdowns as loans and $83.3 million was available for letters of credit. The Company has the ability to increase the commitments to $350.0 million.
Borrowings under the Amended and Restated Facility Agreement bear interest at a rate per annum of Term SOFR (as defined in the Amended and Restated Facility Agreement), subject to a 0.00% floor, plus an applicable margin of 3.75% (which is subject to a margin ratchet which reduces the margin in 4 step downs according to the Total Net Leverage Ratio (as defined in the Amended and Restated Facility Agreement)) for cash borrowings or 2.50% for letters of credit (which are similarly subject to a margin ratchet which reduces the margin in 4 step downs according to the Total Net Leverage Ratio). A 0.40% per annum fronting fee applies to letters of credit, and an additional 0.25% or 0.50% per annum utilization fee is payable on cash borrowings to the extent one-third or two-thirds, respectively, or more of Facility A commitments are drawn. The unused portion of the Amended and Restated Facility Agreement is subject to a commitment fee of 35% per annum of the applicable margin.
The Amended and Restated Facility Agreement retains various undertakings and affirmative and negative covenants (with certain agreed amendments) which limit, subject to certain customary exceptions and thresholds, the Company and its subsidiaries’ ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in transactions with affiliates. The Amended and Restated Facility Agreement amends certain of the financial covenants such that the Company is required to maintain (i) a minimum interest cover ratio of 4.0 to 1.0 based on the ratio of EBITDA to net finance charges and (ii) a maximum total net leverage ratio of 2.50 to 1.0 based on the ratio of total net debt to EBITDA, in each case tested quarterly on a last-twelve-months basis, subject to certain exceptions.
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Note 17 - Commitments and Contingencies |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Commitments and Contingencies Disclosure [Text Block] |
Commercial Commitments
During the normal course of business, we enter into commercial commitments in the form of letters of credit and bank guarantees to provide financial and performance assurance to third parties. We entered into contractual commitments for the acquisition of property, plant and equipment totaling $50.5 million and $45.5 million as of September 30, 2023 and December 31, 2022, respectively.
Contingencies
Certain conditions may exist as of the date our unaudited condensed consolidated financial statements are issued that may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. Our management, with input from legal counsel, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings pending against us or unasserted claims that may result in proceedings, our management, with input from legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable a material loss has been incurred and the amount of liability can be reasonably estimated, then the estimated liability would be accrued in our unaudited condensed consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. We had no material accruals for loss contingencies, individually or in the aggregate, as of September 30, 2023 and December 31, 2022. We believe the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows.
We have conducted an internal investigation of the operations of certain of the Company’s foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act, our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our internal review to the SEC and the U.S. Department of Justice (“DOJ”). The DOJ has provided a declination, subject to the Company and the SEC reaching a satisfactory settlement of civil claims. On the basis of discussions with the SEC up to the end of the first quarter of 2023, we believed that a final resolution of this matter was likely to include a civil penalty in the amount of approximately $8.0 million and, accordingly, we had recorded a loss contingency in that amount within “Other current liabilities” on our condensed consolidated balance sheet, with the offset taken as an increase to goodwill as a measurement period adjustment associated with the Merger.
On April 26, 2023, the SEC issued a cease-and-desist order against the Company pursuant to section 21C of the Securities Exchange Act of 1934 (“Exchange Act”). Under this Order, the Company neither admitted nor denied any of the SEC’s findings and agreed to cease and desist from committing or causing any violations and any future violations of the anti-bribery, books and records and internal accounting controls requirements of the FCPA and the Exchange Act. In accepting the Company’s settlement offer, the SEC noted the Company’s self-reporting, co-operation afforded to the SEC staff and remedial action including improving the Company’s internal controls and further enhancements to its internal controls environment and compliance program following the Merger. The Company paid $8.0 million to the SEC in respect of disgorgement, prejudgment interest and civil penalty during the second quarter of 2023.
Other than discussed above, we had no other material legal accruals for loss contingencies, individually or in the aggregate, as of September 30, 2023 and December 31, 2022.
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Note 18 - Post-retirement Benefits |
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| Retirement Benefits [Text Block] |
Amounts recognized in the unaudited condensed consolidated statements of operations in respect of the defined benefit schemes were as follows (in thousands):
The Company contributed $1.3 million and $3.8 million for the three and nine months ended September 30, 2023, respectively, and $1.2 million and $3.7 million for the three and nine months ended September 30, 2022, respectively, to defined benefit schemes.
Amortization of prior service credit, interest cost and expected return on plan assets have been recognized in “Other income, net” in the unaudited condensed consolidated statements of operations.
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Note 19 - Earnings Per Share |
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| Earnings Per Share [Text Block] |
Basic earnings per share attributable to Company stockholders is calculated by dividing net income attributable to the Company by the weighted-average number of common shares outstanding for the period. Diluted earnings per share attributable to Company stockholders is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued. We apply the treasury stock method to determine the dilutive weighted average common shares represented by unvested restricted stock units, stock options and Employee Stock Purchase Program (“ESPP”) shares.
The calculation of basic and diluted earnings per share attributable to Company stockholders for the three and nine months ended September 30, 2023 and 2022, respectively, are as follows (in thousands):
Approximately 0.8 million and 0.6 million shares of unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive for the three and nine months ended September 30, 2023, respectively.
Approximately 0.1 million and 0.3 million shares of unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive for the three and nine months ended September 30, 2022, respectively.
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Note 20 - Related Party Disclosures |
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| Notes to Financial Statements | |||
| Related Party Transactions Disclosure [Text Block] |
Our related parties consist primarily of CETS and PVD-Expro, the two companies in which we exert significant influence, and Mosing Holdings LLC, a company that is owned by various members of the Mosing family. During the three and nine months ended September 30, 2023, we provided goods and services to related parties totaling $2.2 million and $8.7 million, respectively and $5.9 million and $8.2 million respectively, during the three and nine months ended September 30, 2022. During the three months ended September 30, 2023 we received no material goods and services from related parties. During the nine months ended September 30, 2023 we received goods and services from related parties totaling $0.4 million. We received no goods or services during both the three and nine months ended September 30, 2022.
Additionally, we entered into various operating lease agreements to lease facilities with affiliated companies. Rent expense associated with our related party leases was $0.1 million and $0.3 million, respectively, for the three and nine months ended September 30, 2023.
As of September 30, 2023 and December 31, 2022 amounts receivable from related parties were $2.3 million and $2.4 million, respectively, and amounts payable to related parties were $1.1 million and $0.8 million, respectively.
As of September 30, 2023, $0.6 million of our operating lease right-of-use assets and $0.6 million of our lease liabilities were associated with related party leases. As of December 31, 2022, $0.7 million of our operating lease right-of-use assets and $0.7 million of our lease liabilities were associated with related party leases.
Tax Receivable Agreement
Mosing Holdings, LLC, a Delaware limited liability company (“Mosing Holdings”), converted all of its shares of Frank’s Series A convertible preferred stock into shares of Frank’s common stock on August 26, 2016, in connection with its delivery to Frank’s of all of its interests in Frank’s International C.V. (“FICV”) (the “Conversion”).
The tax receivable agreement (the “Original TRA”) that Frank’s entered into with FICV and Mosing Holdings in connection with Frank’s initial public offering (“IPO”) generally provided for the payment by Frank’s to Mosing Holdings of of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that Frank’s actually realized (or were deemed to be realized in certain circumstances) in periods after the IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by Frank’s as a result of, and additional tax basis arising from, payments under the Original TRA. Frank’s retained the benefit of the remaining of these cash savings, if any.
In connection with the Merger Agreement, Frank’s, FICV and Mosing Holdings entered into the Amended and Restated Tax Receivable Agreement, dated as of March 10, 2021 (the “A&R TRA”). Pursuant to the A&R TRA, on October 1, 2021, the Company made a payment of $15 million to settle the early termination payment obligations that would otherwise have been owed to Mosing Holdings under the Original TRA as a result of the Merger. As the payment was a condition precedent to effect the Merger, it was included in the determination of Merger consideration exchanged. The A&R TRA also provides for other contingent payments to be made by the Company to Mosing Holdings in the future in the event the Company realizes cash tax savings from tax attributes covered under the Original TRA during the -year period following October 1, 2021 in excess of $18.1 million.
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Note 21 - Stock-based Compensation |
9 Months Ended | ||
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Share-Based Payment Arrangement [Text Block] |
The Company recognized $0.2 million and $0.9 million of stock-based compensation expense attributable to the Management Incentive Plan (“MIP”) stock options during the three and nine months ended September 30, 2023, respectively. The Company recognized expense of $0.5 million and $3.7 million attributable to the MIP stock options during the three and nine months ended September 30, 2022, respectively.
Stock-based compensation expense relating to the Long-Term Incentive Plan (“LTIP”), including restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”) for the three and nine months ended September 30, 2023 was $4.7 million and $13.5 million, respectively. Stock-based compensation expense relating to LTIP RSUs and PRSUs for the three and nine months ended September 30, 2022 was $4.1 million and $10.8 million, respectively.
During the nine months ended September 30, 2023, 788,216 RSUs and 260,762 PRSUs were granted to employees and directors at a weighted average grant date fair value of $18.47 per RSU and per PRSU.
During the three and nine months ended September 30, 2023 we recognized $0.1 million and $0.3 million of compensation expense related to stock purchased under the ESPP. The Company recognized ESPP expense for the three and nine months ended September 30, 2022 of $0.1 million and $0.4 million, respectively. |
Note 22 - Supplemental Cash Flow |
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Item 5. Other Information |
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Sep. 30, 2023 | |
| Notes to Financial Statements | |
| Issuer Rule 10b5-1, Material Terms [Text Block] |
Securities Trading Arrangements with Officers and Directors
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2023 | |
| Accounting Policies [Abstract] | |
| Basis of Accounting, Policy [Policy Text Block] | Basis of presentation
The unaudited condensed consolidated financial statements reflect the accounts of the Company and its subsidiaries. All intercompany balances and transactions, including unrealized profits arising from them, have been eliminated for purposes of preparing these unaudited condensed consolidated financial statements. Investments in which we do not have a controlling interest, but over which we do exercise significant influence, are accounted for under the equity method of accounting.
The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim consolidated financial information. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022, included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.
In the opinion of management, these unaudited condensed consolidated financial statements, which are prepared in accordance with the rules of the SEC and U.S. GAAP for interim financial reporting, included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2023, the results of our operations for the three and nine months ended September 30, 2023 and 2022 and our cash flows for the nine months ended September 30, 2023 and 2022. Such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.
The unaudited condensed consolidated financial statements have been prepared on an historical cost basis using the United States dollar (“$” or “U.S. dollar”) as the reporting currency.
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| Significant Accounting Policies [Policy Text Block] | Significant accounting policies
Refer to Note 2 “Basis of presentation and significant accounting policies” of our consolidated financial statements as of and for the year ended December 31, 2022, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 23, 2023, for a discussion of our significant accounting policies. There have been no material changes in our significant accounting policies as compared to the significant accounting policies described in our consolidated financial statements as of and for the year ended December 31, 2022.
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recent accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.
We consider the applicability and impact of all accounting pronouncements. Recently issued ASUs were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows. |
Note 3 - Business Combinations and Dispositions (Tables) |
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Note 4 - Fair Value Measurements (Tables) |
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Note 5 - Business Segment Reporting (Tables) |
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Note 6 - Revenue (Tables) |
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Note 8 - Investment in Joint Ventures (Tables) |
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Note 9 - Accounts Receivable, Net (Tables) |
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Note 10 - Inventories (Tables) |
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Note 11 - Other Assets and Liabilities (Tables) |
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Note 12 - Accounts Payable and Accrued Liabilities (Tables) |
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Note 13 - Property, Plant and Equipment, Net (Tables) |
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Note 14 - Intangible Assets, Net (Tables) |
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Note 15 - Goodwill (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill [Table Text Block] |
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| Business Combination, Segment Allocation [Table Text Block] |
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Note 18 - Post-retirement Benefits (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Benefit Costs [Table Text Block] |
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Note 19 - Earnings Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 22 - Supplemental Cash Flow (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Cash Flow, Supplemental Disclosures [Table Text Block] |
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Note 1 - Business Description (Details Textual) $ / shares in Units, $ in Thousands, shares in Millions |
3 Months Ended | 9 Months Ended | 16 Months Ended | |||
|---|---|---|---|---|---|---|
|
Mar. 31, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
Sep. 30, 2023
USD ($)
$ / shares
shares
|
Sep. 30, 2023
USD ($)
$ / shares
shares
|
Oct. 25, 2023
USD ($)
|
Jun. 16, 2022
USD ($)
|
|
| Number of Countries in which Entity Operates | 60 | 60 | ||||
| Treasury Stock, Value, Acquired, Cost Method | $ 10,011 | $ 12,995 | ||||
| Stock Repurchase Program [Member] | ||||||
| Stock Repurchase Program, Authorized Amount | $ 50,000 | |||||
| Treasury Stock, Shares, Acquired (in shares) | shares | 0.6 | 1.7 | ||||
| Shares Acquired, Average Cost Per Share (in dollars per share) | $ / shares | $ 17.99 | $ 13.89 | ||||
| Treasury Stock, Value, Acquired, Cost Method | $ 10,000 | $ 23,000 | ||||
| Stock Repurchase Program [Member] | Subsequent Event [Member] | ||||||
| Stock Repurchase Program, Authorized Amount | $ 100,000 | |||||
Note 3 - Business Combinations and Dispositions - Consideration Exchanged and Preliminary Allocation (Details) - USD ($) $ in Thousands |
8 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Feb. 08, 2023 |
Dec. 31, 2022 |
|
| Goodwill | $ 229,131 | $ 220,980 | |
| DeltaTek Oil Tools Limited [Member] | |||
| Cash and cash equivalents | 1,464 | $ 1,464 | |
| Accounts receivables, net | 723 | 723 | |
| Inventories | 183 | 183 | |
| Property, plant and equipment | 642 | 642 | |
| Goodwill | 8,151 | 7,157 | |
| Goodwill, adjustment | 994 | ||
| Intangible assets | 11,065 | 11,063 | |
| Intangible assets, adjustment | 2 | ||
| Other assets | 27 | 27 | |
| Total assets | 22,255 | 21,259 | |
| Total assets, adjustment | 996 | ||
| Accounts payable and accrued liabilities | 247 | 245 | |
| Accounts payable and accrued liabilities, adjustment | 2 | ||
| Deferred tax liabilities | 2,766 | 2,700 | |
| Deferred tax liabilities, adjustment | 66 | ||
| Other liabilities | 815 | 831 | |
| Other liabilities, adjustment | (16) | ||
| Total Liabilities | 3,828 | 3,776 | |
| Total Liabilities, adjustment | 52 | ||
| Fair value of net assets acquired | 18,427 | $ 17,483 | |
| Fair value of net assets acquired, adjustment | $ 944 |
Note 5 - Business Segment Reporting - Revenue by Operating Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Total revenue | $ 369,818 | $ 334,351 | $ 1,106,014 | $ 928,452 |
| NLA [Member] | ||||
| Total revenue | 105,252 | 134,574 | 366,310 | 368,129 |
| ESSA [Member] | ||||
| Total revenue | 135,395 | 99,809 | 387,105 | 271,998 |
| MENA [Member] | ||||
| Total revenue | 58,057 | 50,030 | 168,165 | 146,108 |
| APAC [Member] | ||||
| Total revenue | $ 71,114 | $ 49,938 | $ 184,434 | $ 142,217 |
Note 5 - Business Segment Reporting - Reconciliation of Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization From Segments to Net Loss (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Total Segment EBITDA | $ 71,820 | $ 63,553 | $ 229,959 | $ 189,644 |
| Corporate costs | (24,070) | (18,849) | (73,961) | (63,626) |
| Equity in income of joint ventures | 2,495 | 3,510 | 7,736 | 10,141 |
| Depreciation and amortization expense | (37,414) | (34,825) | (109,386) | (105,229) |
| Merger and integration expense | (817) | (1,629) | (4,332) | (8,624) |
| Severance and other expense | (1,897) | (3,242) | (5,487) | (5,414) |
| Stock-based compensation expense | (4,934) | (4,684) | (14,682) | (14,932) |
| Foreign exchange loss | (4,260) | (7,957) | (4,630) | (10,385) |
| Other (expense) income, net | (1,129) | 432 | (3,540) | 1,672 |
| Interest and finance (expense) income, net | (373) | 1,502 | (1,688) | 3,227 |
| (Loss) income before income taxes | (579) | (2,189) | 19,989 | (3,526) |
| NLA [Member] | ||||
| Total Segment EBITDA | 19,967 | 39,743 | 88,544 | 100,083 |
| ESSA [Member] | ||||
| Total Segment EBITDA | 39,268 | 17,760 | 95,017 | 44,502 |
| MENA [Member] | ||||
| Total Segment EBITDA | 16,871 | 14,667 | 49,930 | 43,882 |
| APAC [Member] | ||||
| Total Segment EBITDA | $ (4,286) | $ (8,617) | $ (3,532) | $ 1,177 |
Note 6 - Revenue (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Contract with Customer, Liability, Revenue Recognized | $ 6.3 | $ 6.0 | $ 48.6 | $ 14.9 |
| Construction [Member] | ||||
| Revenue, Remaining Performance Obligation, Amount | 48.7 | 48.7 | ||
| Other Current Liabilities [Member] | ||||
| Contract with Customer, Liability, Current | $ 26.9 | $ 26.9 | ||
Note 6 - Revenue - Revenue by Areas of Capability (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Total revenue | $ 369,818 | $ 334,351 | $ 1,106,014 | $ 928,452 |
| Well Construction [Member] | ||||
| Total revenue | 116,293 | 129,455 | 388,277 | 362,684 |
| Well Management [Member] | ||||
| Total revenue | $ 253,525 | $ 204,896 | $ 717,737 | $ 565,768 |
Note 6 - Revenue - Contract Balances (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Trade receivable, net | $ 422,992 | $ 428,925 |
| Deferred revenue (included within other liabilities) | 28,509 | 51,192 |
| Billed Revenues [Member] | ||
| Trade receivable, net | 274,124 | 289,235 |
| Unbilled Revenues [Member] | ||
| Trade receivable, net | $ 148,868 | $ 139,690 |
Note 7 - Income Taxes (Details Textual) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Effective Income Tax Rate Reconciliation, Percent | (432.90%) | (270.30%) | 252.40% | (216.20%) |
Note 8 - Investment in Joint Ventures (Details Textual) |
Sep. 30, 2023 |
|---|---|
| CETS [Member] | |
| Equity Method Investment, Ownership Percentage | 50.00% |
| PVD-Expro [Member] | |
| Equity Method Investment, Ownership Percentage | 49.00% |
Note 8 - Investment in Joint Ventures - Carrying Value (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Carrying value | $ 67,500 | $ 66,038 |
| CETS [Member] | ||
| Carrying value | 63,938 | 62,471 |
| PVD-Expro [Member] | ||
| Carrying value | $ 3,562 | $ 3,567 |
Note 9 - Accounts Receivable, Net - Summary of Accounts Receivable, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounts receivable | $ 436,693 | $ 441,605 |
| Less: Expected credit losses | (13,701) | (12,680) |
| Trade receivable, net | 422,992 | 428,925 |
| Current | 412,642 | 419,237 |
| Non – current | $ 10,350 | $ 9,688 |
Note 10 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finished goods | $ 33,820 | $ 26,810 |
| Raw materials, equipment spares and consumables | 100,837 | 102,395 |
| Work-in-progress | 19,831 | 24,513 |
| Total | $ 154,488 | $ 153,718 |
Note 11 - Other Assets and Other Liabilities - Summary of Other Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Prepayments | $ 27,926 | $ 18,084 |
| Value-added tax receivables | 24,089 | 20,727 |
| Collateral deposits | 1,319 | 1,669 |
| Deposits | 7,951 | 7,245 |
| Other | 6,635 | 5,513 |
| Total | 67,920 | 53,238 |
| Current | 59,873 | 44,975 |
| Non – current | $ 8,047 | $ 8,263 |
Note 11 - Other Assets and Other Liabilities - Summary of Other Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Deferred revenue | $ 28,509 | $ 51,192 |
| Other tax and social security | 34,916 | 28,557 |
| Income tax liabilities – non-current portion | 56,652 | 58,036 |
| Provisions | 41,590 | 45,248 |
| Contingent consideration liabilities | 11,655 | 3,227 |
| Other | 17,347 | 18,655 |
| Total | 190,669 | 204,915 |
| Current | 88,597 | 107,750 |
| Non – current | $ 102,072 | $ 97,165 |
Note 12 - Accounts Payable and Accrued Liabilities - Summary of Accounts Payable and Accrued Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounts payable – trade | $ 129,552 | $ 100,951 |
| Payroll, vacation and other employee benefits | 44,820 | 46,935 |
| Accruals for goods received not invoiced | 22,015 | 32,102 |
| Other accrued liabilities | 101,069 | 92,716 |
| Total | $ 297,456 | $ 272,704 |
Note 13 - Property, Plant and Equipment, Net (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Building [Member] | ||||
| Proceeds from Sale, Property, Held-for-Sale | $ 2.0 | $ 6.3 | ||
| Property, Plant and Equipment, Including Assets Under Finance Leases [Member] | ||||
| Depreciation | $ 27.9 | $ 25.9 | $ 81.2 | $ 77.8 |
Note 13 - Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, plant and equipment, gross | $ 998,495 | $ 913,715 |
| Less: accumulated depreciation | (531,601) | (451,399) |
| Property, plant and equipment, net | 466,894 | 462,316 |
| Property, Plant and Equipment, Net [Member] | ||
| Assets under finance lease, gross | 19,212 | 19,898 |
| Less: accumulated amortization, assets under finance lease | (9,325) | (9,085) |
| Total | 9,887 | 10,813 |
| Land [Member] | ||
| Property, plant and equipment, gross | 22,176 | 22,261 |
| Building [Member] | ||
| Assets under finance lease, gross | 18,623 | 18,623 |
| Land Improvements [Member] | ||
| Property, plant and equipment, gross | 3,042 | 3,054 |
| Plant and Equipment [Member] | ||
| Property, plant and equipment, gross | 873,866 | 789,910 |
| Assets under finance lease, gross | 589 | 1,275 |
| Buildings and Leasehold Improvement [Member] | ||
| Property, plant and equipment, gross | $ 99,411 | $ 98,490 |
Note 14 - Intangible Assets, Net (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Amortization of Intangible Assets | $ 9.6 | $ 8.9 | $ 28.2 | $ 27.4 |
Note 14 - Intangible Assets, Net - Summary of Acquired Intangible Assets (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Acquired fair value | $ 11,065 |
| Weighted average life (Year) | 12 years 8 months 12 days |
| Customer Relationships [Member] | |
| Acquired fair value | $ 2,571 |
| Weighted average life (Year) | 6 years |
| Trademarks [Member] | |
| Acquired fair value | $ 257 |
| Weighted average life (Year) | 5 years |
| Technology-Based Intangible Assets [Member] | |
| Acquired fair value | $ 8,237 |
| Weighted average life (Year) | 15 years |
Note 15 - Goodwill (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
|
| Goodwill, Impairment Loss | $ 0 | $ 0 |
Note 15 - Goodwill - Summary of Goodwill (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Goodwill | $ 229,131 | $ 220,980 |
| NLA [Member] | ||
| Goodwill | 120,956 | 118,511 |
| ESSA [Member] | ||
| Goodwill | 83,319 | 80,058 |
| MENA [Member] | ||
| Goodwill | 5,441 | 4,218 |
| APAC [Member] | ||
| Goodwill | $ 19,415 | $ 18,193 |
Note 15 - Goodwill - Summary of Acquired Goodwill by Operating Segment (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Feb. 08, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Goodwill | $ 229,131 | $ 220,980 | |
| NLA [Member] | |||
| Goodwill | 120,956 | 118,511 | |
| ESSA [Member] | |||
| Goodwill | 83,319 | 80,058 | |
| MENA [Member] | |||
| Goodwill | 5,441 | 4,218 | |
| APAC [Member] | |||
| Goodwill | 19,415 | $ 18,193 | |
| DeltaTek Oil Tools Limited [Member] | |||
| Goodwill | 8,151 | $ 7,157 | |
| DeltaTek Oil Tools Limited [Member] | NLA [Member] | |||
| Goodwill | 2,445 | ||
| DeltaTek Oil Tools Limited [Member] | ESSA [Member] | |||
| Goodwill | 3,261 | ||
| DeltaTek Oil Tools Limited [Member] | MENA [Member] | |||
| Goodwill | 1,223 | ||
| DeltaTek Oil Tools Limited [Member] | APAC [Member] | |||
| Goodwill | $ 1,223 |
Note 17 - Commitments and Contingencies (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Loss Contingency Accrual | $ 8.0 | ||
| Payments for Legal Settlements | $ 8.0 | ||
| Capital Addition Purchase Commitments [Member] | |||
| Long-Term Purchase Commitment, Amount | $ 50.5 | $ 45.5 | |
Note 18 - Post-retirement Benefits (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Defined Benefit Plan, Plan Assets, Contributions by Employer | $ 1.3 | $ 1.2 | $ 3.8 | $ 3.7 |
Note 18 - Post-retirement Benefits - Net Periodic Benefit Cost (Details) - UNITED KINGDOM - Pension Plan [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Amortization of prior service credit | $ 61 | $ 61 | $ 183 | $ 183 |
| Interest cost | (1,571) | (958) | (4,655) | (3,003) |
| Expected return on plan assets | 1,030 | 1,313 | 3,023 | 4,116 |
| Total | $ (480) | $ 416 | $ (1,450) | $ 1,296 |
Note 19 - Earnings Per Share (Details Textual) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.8 | 0.1 | 0.6 | 0.3 |
Note 19 - Earnings Per Share - Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net loss | $ (13,886) | $ 9,295 | $ (6,351) | $ (17,594) | $ (4,350) | $ (11,132) | $ (10,942) | $ (33,076) |
| Basic and diluted weighted average number of shares outstanding (in shares) | 108,777,429 | 108,708,651 | 108,764,599 | 109,183,863 | ||||
| Total basic and diluted loss per share (in dollars per share) | $ (0.13) | $ (0.16) | $ (0.10) | $ (0.30) | ||||
Note 22 - Supplemental Cash Flow - Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Supplemental disclosure of cash flow information: | ||
| Cash paid for income taxes, net of refunds | $ 34,722 | $ 20,529 |
| Cash paid for interest, net | 1,456 | 2,890 |
| Change in accounts payable and accrued expenses related to capital expenditures | $ 1,432 | $ 2,508 |