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Dynamic quotes 
OFFON

SUPERIOR ENERGY SERVICES, INC.

(SPNR)
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2021 Management Incentive Plan

12/02/2021 | 04:05pm EST
On June 1, 2021, our Board of Directors (the "Board") and the Compensation
Committee of the Board (the "Compensation Committee") approved and adopted our
Incentive Plan, which provides for the grant of share-based and cash-based
awards and, in connection therewith, the issuance from time to time of up to
1,999,869 shares of our Class B common stock, par value $0.01 per share.



Restricted Stock Grants



On June 1, 2021, the Board and the Compensation Committee approved the forms of
restricted stock award agreements for (i) employee participants (the "Employee
Restricted Stock Award Agreement") and (ii) non-employee directors (the
"Director Restricted Stock Award Agreement").



On June 1, 2021, the Board and the Compensation Committee approved the issuance
of 113,840 restricted shares (76,269 restricted shares after giving effect to
tax withholding) of Class B common stock under the Incentive Plan to certain of
our non-employee directors and officers (the "Restricted Stock Grants"). The
Restricted Stock Grants will vest over a period of three years, subject to
earlier vesting and forfeiture on terms and conditions set forth in the
applicable award agreement. The fair value of the restricted shares was
estimated to be $39.53 per share as of the date of grant. The unamortized
estimated grant date fair value as of September 30, 2021 was approximately $2.7
million.



During the third quarter of 2021, the Board and the Compensation Committee
approved the issuance of $2.0 million in restricted stock units which will be
convertible into Class B common stock upon vesting. These restricted stock units
will vest over a period of 18 months, subject to earlier vesting and forfeiture
on terms and conditions set forth in the applicable award agreement. The
unamortized estimated grant date fair value as of September 30, 2021 was
approximately $1.7 million.



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(17) Income Taxes



The effective tax rate for the Current Predecessor Period, the Successor Quarter
and the Successor Period was 18.2%, 19.2% and 13.6%, respectively, on income
from continuing operations. The tax rate in the Current Predecessor Period is
different from the blended federal and state statutory rate of 22.5% primarily
from the adoption of fresh start accounting during the period. The cancellation
of indebtedness income resulting from the restructuring has significantly
reduced our US tax attributes, including but not limited to NOL carryforwards.
We experienced an ownership change under Sec. 382 of the Internal Revenue Code
of 1986, as amended (the "Code"), which is anticipated to limit certain
remaining tax attributes. The tax rate in the Successor Quarter and the
Successor Period is different from the blended federal and state statutory rate
of 22.5% primarily from non-deductible items and foreign losses for which no tax
benefit is being recorded.



The effective tax rate for Prior Predecessor Quarter and Prior Predecessor
Period was (2.1)% and 7.0%, respectively, on income from continuing operations.
The tax rate is different from the blended federal and state statutory rate of
22.5% primarily from US and foreign losses for which no tax benefit was
recorded.



The Successor had $14.7 million of unrecognized tax benefits as of September 30,
2021 and the Predecessor had $13.2 million of unrecognized tax benefits as of
December 31, 2020, all of which would impact our effective tax rate if
recognized. It is our policy to recognize interest and applicable penalties, if
any, related to uncertain tax positions in income tax expense.



As of September 30, 2021, we have a deferred tax liability of $32.4 million and
a valuation allowance of $96.8 million recorded against our deferred tax assets
that relate to US foreign tax credits, US state net operating losses and other
non-US deferred tax assets. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the carryforward
period. We assess the realizability of deferred tax assets quarterly and
consider carryback availability, the scheduled reversal of deferred tax
liabilities, and tax planning strategies in making this assessment.



(18) Earnings per Share



Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed in the
same manner as basic earnings per share, except that the denominator is
increased to include the number of additional shares of common stock that could
have been outstanding assuming the exercise of stock options and the conversion
of restricted stock units.



Diluted earnings per share for the Successor Period, Successor Quarter, Prior
Predecessor Period and Prior Predecessor Quarter do not include any potentially
dilutive shares as these periods reflected a net loss from continuing
operations. We currently have 0.1 million in unvested restricted stock units
outstanding which will be converted into Class B common shares upon vesting.



(19) Contingencies



Due to the nature of our business, we are involved, from time to time, in
various routine litigation or subject to disputes or claims or actions,
including those commercial in nature, regarding our business activities in the
ordinary course of business. Legal costs related to these matters are expensed
as incurred. Management is of the opinion that none of the claims and actions
will have a material adverse impact on our financial position, results of
operations or cash flows.



A subsidiary of ours is involved in legal proceedings with two former employees
regarding the payment of royalties for a patentable product paid for by the
subsidiary and developed while they worked for the subsidiary. On April 2, 2018,
the former employees and their corporation filed a lawsuit (the "First Case) in
the Harris County District Court (the "District Court") alleging that the
royalty payments they had invoiced at 25% and for which they received payments
since 2010, should have been paid at a rate of 50%. In May 2019, the jury issued
a verdict in favor of the plaintiffs. On October 25, 2019, the court issued a
final judgment against us, which we have fully secured with a bond. We strongly
disagree with the verdict and believe the District Court committed several legal
errors that should result in a reversal or remand of the case by the Court of
Appeals.



A second case (the "Second Case") was filed in District Court against the same
subsidiary of ours bringing the same claims and seeking damages post judgment
from the First Case until discontinuation of the sale of the product at issue by
the subsidiary. In December 2020, the Court entered a final judgement for the
Plaintiffs' and the Second Case was stayed for the duration of our bankruptcy.
We have filed an appeal and a Motion to Abate the Second Case pending the appeal
of the First Case. The Motion to Abate the Second Case was granted on October
26, 2021 by the Court of Appeals. As of September 30, 2021, we have reserved
$7.0 million for the judgements in the First Case and Second Case.



An Indian subsidiary of the Company had entered into a contract with an Indian
oil and gas company to provide an off-shore vessel for various types of work. A
dispute arose over the performability of the terms of the contract. The
potential loss of this possible onerous contract is approximately $7.3 million.

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Commencement of the Chapter 11 Cases automatically stayed certain proceedings and actions against the Predecessor. These cases have continued after the Emergence Date.




(20) Discontinued Operations



On December 10, 2019, Pumpco Energy Services, Inc ("Pumpco") completed its
existing hydraulic fracturing field operations and was determined to
discontinue, wind down and exit its hydraulic fracturing operations. The
financial results of Pumpco's operations have historically been included in our
North America segment. During the Successor Quarter and Successor Period, we
have recognized gains of approximately $8.9 million and $13.9 million,
respectively, related to the sale of these assets. We are currently, and will
continue to, sell Pumpco's fixed assets.



During the third quarter of 2021, we sold all of the issued and outstanding
equity of Complete Energy Services, Inc. ("Complete") to Select Energy Services,
Inc. ("Select"), which also included SPN Well Services, Inc.'s ("SPW") flowback
and well testing businesses, including the associated assets, liabilities and
working capital. On July 9, 2021, we entered into a Securities Purchase and Sale
Agreement (the "Purchase Agreement") with SES Holdings, LLC, Select and
Complete. Pursuant to the Purchase Agreement, Select acquired 100% of the equity
interests of Complete, for a purchase price of approximately $14.0 million in
cash and the issuance of 3.6 million shares of Class A common stock, $0.01 par
value, of Select, subject to customary post-closing adjustments. The Purchase
Agreement contains customary representations, warranties and covenants. In
connection with this disposition, during the second quarter of 2021, we
recognized a reduction in value of assets related to Complete of approximately
$12.4 million.



During the Successor Quarter, we completed an agreement with an unrelated third
party to sell tranches of coil tubing assets held by SPW for $14.0 million. As
of September 30, 2021, no tranches have been sold under this agreement, however
we have received deposits from the buyer of approximately $7.3 million. These
deposits are included in liabilities held for sale as of September 30, 2021 as
deferred revenue. On November 1, 2021, we completed an agreement with an
unrelated third party to sell the remaining assets of SPW for $8.5 million. In
connection with this sale, we recognized a reduction in value of assets totaling
$14.5 million during the Successor Quarter.



The financial results of the operations of Complete and SPW have historically
been included in our Onshore Completion and Workover Services segment, and their
discontinuance is aligned with our overall strategic objective to divest assets
and service lines that do not compete for investment in the current market
environment.



The following tables summarizes the components of our discontinued operations,
net of tax (in thousands):



                                                 Successor                Predecessor
                                               For the Three             For the Three
                                               Months Ended              Months Ended
                                            September 30, 2021        September 30, 2020
Revenues                                    $            16,985       $            30,996
Cost of services                                          6,883                    29,216
Depreciation, depletion, amortization and
accretion                                                   146             

7,055

General and administrative expenses                       2,379                     4,101
Reduction in value of assets                             14,475                    60,230
Loss from operations                                     (6,898 )                 (69,606 )
Other income (expense)                                      238                         6
Loss from discontinued operations before
tax                                                      (6,660 )                 (69,600 )
Income tax benefit (expense)                              1,499                      (314 )
Loss from discontinued operations, net of
income tax                                  $            (5,161 )     $           (69,914 )




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Cost of services during the Successor Quarter includes gains on sales of assets of approximately $10.5 million.



                                     Successor                            Predecessor
                                  For the Period              For the Period          For the Nine
                                 February 3, 2021            January 1, 2021             Months
                               through September 30,       through February 2,      Ended September
                                       2021                        2021                 30, 2020
Revenues                       $              85,351       $             10,719     $        150,992
Cost of services                              62,364                     10,398              145,297
Depreciation, depletion,
amortization and accretion                    31,502                      2,141               24,261
General and administrative
expenses                                       8,597                      1,119               21,576
Reduction in value of assets                  26,905                          -              109,591
Loss from operations                         (44,017 )                   (2,939 )           (149,733 )
Other income (expense)                           188                      2,485                   21
Loss from discontinued
operations before tax                        (43,829 )                     (454 )           (149,712 )
Income tax benefit (expense)                   9,862                        102               11,710
Loss from discontinued
operations, net of income
tax                            $             (33,967 )     $               (352 )   $       (138,002 )

Cost of services during the Successor Period includes gains on sales of assets of approximately $15.5 million.




The following summarizes the assets and liabilities related to assets held for
sale (in thousands):



                                          Successor                 Predecessor
                                      September 30, 2021         December 31, 2020
Current assets:
Accounts receivable, net             $             11,033       $            25,448
Prepaid expenses                                    1,250                     4,881
Other current assets                                5,660                    12,076
Total current assets                               17,943                    42,405

Property, plant and equipment, net                 62,050                   179,380
Operating lease ROU assets                          6,938                    16,958
Other assets                                          991                     3,361
Total assets held for sale           $             87,922       $           242,104

Current liabilities:
Accounts payable                     $              1,964       $             2,830
Accrued expenses                                   13,722                    11,153
Total current liabilities                          15,686                    13,983

Operating lease liabilities                         6,958                    21,987
Decommissioning liabilities                             -                     8,311
Other liabilities                                     597                     2,095
Total liabilities                    $             23,241       $            46,376




                                       37
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Significant operating non-cash items relating to assets held for sale and cash flows from investing activities were as follows (in thousands):

© Edgar Online, source Glimpses

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