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Dynamic quotes 
OFFON

SUPERIOR ENERGY SERVICES, INC.

(SPNR)
SummaryQuotesNewsCompanyFinancials 
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Superior Energy Services : 2021 Management Incentive Plan

09/30/2021 | 03:35pm EST
On June 1, 2021, the Company's Board of Directors (the "Board") and the
Compensation Committee of the Board (the "Compensation Committee") approved and
adopted the Company's 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 the Company's Class B common
stock, par value $0.01 per share. The accounting and related disclosures will be
incorporated into the Company' Form 10-Q for the period ending June 30, 2021.

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, pursuant to
the applicable Employee Restricted Stock Award Agreements and Director
Restricted Stock Award Agreements, the issuance (without giving effect to tax
withholding) of 113,840 restricted shares of Class B common stock under the
Incentive Plan to certain of the Company's non-employee directors and officers,
including 33,519 and 12,649 shares to Michael Y. McGovern, the Company's
Executive Chairman of the Board, and James W. Spexarth, the Company's Executive
Vice President, Chief Financial Officer and Treasurer, respectively (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 issuance of the
restricted Class B common stock pursuant to the applicable Employee Restricted

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Stock Award Agreements and Director Restricted Stock Award Agreements under the
Incentive Plan is exempt from registration under the Securities Act pursuant to
Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder.

Divestiture


On July 9, 2021, the Company entered into a Securities Purchase and Sale
Agreement (the "Purchase Agreement") with SES Holdings, LLC (the "Parent"),
Select Energy Services, Inc. (the "Buyer") (solely to the extent stated
therein), and Complete Energy Services, Inc. ("Complete"). Pursuant to the
Purchase Agreement, the Buyer acquired certain of the Company's onshore oilfield
services operations in the United States through the acquisition of 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 the Parent, subject to customary post-closing adjustments.
The Purchase Agreement also contains certain registration rights of the Company
which requires the Parent to file a registration statement with the SEC for the
resale of the Class A common stock issued to the Company. The Purchase Agreement
contains customary representations, warranties and covenants. The loss on sale
was $16.7 million in the Successor Period.

Transformation Project


In connection with the Company's previously announced transformation project,
subsequent to March 31, 2021, we have disposed of certain assets with a net book
value of approximately $51 million. Proceeds from the sales of these assets have
totaled approximately $57 million through September 28, 2021.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


As used herein, the "Company," "we," "us" and similar terms refer to (i) prior
to the Emergence Date (as defined below), SESI Holdings, Inc. (formerly known as
Superior Energy Services, Inc.) (the "Former Parent") and its subsidiaries and
(ii) after the Emergence Date, Superior Energy Services, Inc. (formerly known as
Superior Newco, Inc.) and its subsidiaries. As used herein, the following terms
refer to the Company and its operations:

"Predecessor"                The Company, prior to the Emergence Date
                             The Company's operations, January 1, 2021 -

"Current Predecessor Period" February 2, 2021

                             The Company's operations, January 1, 2020 -
"Prior Predecessor Quarter"  March 31, 2020
"Successor"                  The Company, after the Emergence Date
                             The Company's operations, February 3, 2021 -
"Successor Period"           March 31, 2021


Effective as of the Emergence Date, the entity now known as Superior Energy
Services, Inc. (formerly known as Superior Newco, Inc.) became the successor
reporting company to the Former Parent pursuant to Rule 15d-5 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").

Critical Accounting Policies and Estimates


Please refer to our Annual Report on Form 10-K for the year ended December 31,
2020, and Management's Discussion and Analysis of Financial Condition and
Results of Operations for the discussion of our Critical Accounting Policies and
Estimates. The below is an update to those policies:

Fresh Start Accounting


In connection with the emergence from bankruptcy and in accordance with ASC 852,
the Company qualified for and adopted fresh start accounting on the Emergence
Date because (1) the holders of the then-existing common shares of the
Predecessor received less than

50% of the new common shares of the Successor outstanding upon emergence and (2)
the reorganization value of the Predecessor's assets immediately prior to
confirmation of the Plan was less than the total of all post-petition
liabilities and allowed claims. See Part 1, Item 1, "Unaudited Condensed
Consolidated Financial Statements and Notes" - Note 1 - "Basis of Presentation"
and Note 3 - "Fresh Start Accounting" for additional information.

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Forward-Looking Statements


This quarterly report on Form 10-Q and other documents filed by us with the SEC
contain, and future oral or written statements or press releases by us and our
management may contain, forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Generally,
the words "expects," "anticipates," "targets," "goals," "projects," "intends,"
"plans," "believes," "seeks" and "estimates," variations of such words and
similar expressions identify forward-looking statements, although not all
forward-looking statements contain these identifying words. All statements other
than statements of historical fact included in this quarterly report on Form
10-Q or such other materials regarding our financial position, financial
performance, liquidity, strategic alternatives, market outlook, future capital
needs, capital allocation plans, business strategies and other plans and
objectives of our management for future operations and activities are
forward-looking statements. These statements are based on certain assumptions
and analyses made by our management in light of its experience and prevailing
circumstances on the date such statements are made. Such forward-looking
statements, and the assumptions on which they are based, are inherently
speculative and are subject to a number of risks and uncertainties that could
cause our actual results to differ materially from such statements. Such risks
and uncertainties include, but are not limited to:

?risks and uncertainties regarding the voluntary petitions for relief filed by
the Affiliate Debtors (as defined below) on December 7, 2020 (the "Chapter 11
Cases") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Southern District of Texas
Houston Division (the "Bankruptcy Court"), including but not limited to: the
continuing effects of the Chapter 11 Cases on us and our various constituents;
attendant risks associated with restrictions on our ability to pursue our
business strategies; and uncertainty and continuing risks associated with our
ability to achieve our stated goals;

?the likelihood that our historical financial information may no longer be indicative of our future performance; and our implementation of fresh start accounting;

?the difficulty to predict our long-term liquidity requirements and the adequacy of our capital resources;

?restrictive covenants in the $120.0 million asset-based secured revolving Credit Facility (define below) could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests;


?our ability to prepare and file our quarterly report for the quarter ended June
30, 2021 or deliver other required financial information within the time periods
prescribed by our Credit Facility or to obtain additional waivers from our
lenders;

?the conditions in the oil and gas industry;


?the effects of public health threats, pandemics and epidemics, and the adverse
impact thereof on our business, financial condition, results of operations and
liquidity, including, but not limited to, our growth, operating costs, supply
chain, labor availability, logistical capabilities, customer demand and industry
demand generally, margins, utilization, cash position, taxes, the price of our
securities, and our ability to access capital markets, including the
macroeconomic effects from the continuing COVID-19 pandemic;

?the ability of the members of Organization of Petroleum Exporting Countries ("OPEC+") to agree on and to maintain crude oil price and production controls;

?necessary capital financing may not be available at economic rates or at all;


?operating hazards, including the significant possibility of accidents resulting
in personal injury or death, or property damage for which we may have limited or
no insurance coverage or indemnification rights;

?the possibility of not being fully indemnified against losses incurred due to catastrophic events;

?claims, litigation or other proceedings that require cash payments or could impair financial condition;

?credit risk associated with our customer base;

?the effect of regulatory programs and environmental matters on our operations or prospects;

?the impact that unfavorable or unusual weather conditions could have on our operations;

?the potential inability to retain key employees and skilled workers;

?political, legal, economic and other risks and uncertainties associated with our international operations;

?laws, regulations or practices in foreign countries could materially restrict our operations or expose us to additional risks;

?potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results;

?changes in competitive and technological factors affecting our operations;

?risks associated with the uncertainty of macroeconomic and business conditions worldwide;

?our operations may be subject to cyber-attacks;

?counterparty risks associated with reliance on key suppliers;

?challenges with estimating our potential liabilities related to our oil and natural gas property;

?risks associated with potential changes of Bureau of Ocean Energy Management security and bonding requirements for offshore platforms;

?the likelihood that the interests of our significant stockholders may conflict with the interests of our other stockholders;

?the risks associated with owning our Class A common stock, par value $0.01 per share, for which there is no public market;

?the likelihood that the Stockholders Agreement (as defined below) may prevent certain transactions that could otherwise be beneficial to our stockholders; and

?our ability to remediate the identified material weakness in our internal control over financial reporting.

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These risks and other uncertainties related to our business are described in
detail in Item 1A of our Annual Report on Form 10-K (the "Annual Report") for
the year ended December 31, 2020. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to be correct. Investors are
cautioned that many of the assumptions on which our forward-looking statements
are based are likely to change after such statements are made, including for
example the market prices of oil and gas and regulations affecting oil and gas
operations, which we cannot control or anticipate. Further, we may make changes
to our business strategies and plans (including our capital spending and capital
allocation plans) at any time and without notice, based on any changes in the
above-listed factors, our assumptions or otherwise, any of which could or will
affect our results. For all these reasons, actual events and results may differ
materially from those anticipated, estimated, projected or implied by us in our
forward-looking statements. We undertake no obligation to update any of our
forward-looking statements for any reason, notwithstanding any changes in our
assumptions, changes in our business plans, our actual experience, or other
changes. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.

Executive Summary

General


We provide a wide variety of services and products to the energy industry. We
serve major, national and independent oil and natural gas exploration and
production companies around the world and offer products and services with
respect to the various phases of a well's economic life cycle. The Successor
reports its operating results in two business segments: Global and North
America.

Recent Developments

Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 1 - "Basis of Presentation" for information regarding the Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code.

Fresh Start Accounting


Beginning on the Emergence Date, we applied fresh start accounting, which
resulted in a new basis of accounting and we became a new entity for financial
reporting purposes. As a result of the application of fresh start accounting and
the effects of the implementation of the Plan, the consolidated financial
statements after February 2, 2021 are not comparable with the consolidated
financial statements on or prior to that date. See Part 1, Item 1, "Unaudited
Condensed Consolidated Financial Statements and Notes" - Note 3 - "Fresh Start
Accounting" for additional information.

Divestiture

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 23 - "Subsequent Events" for additional information.

Waivers to Credit Agreement

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 23 - "Subsequent Events" for additional information.

Credit Facility

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 9 - "Debt" for additional information.

Stockholders Agreement


On the Emergence Date, in order to implement the governance related provisions
reflected in the Plan, the stockholder's agreement, dated February 2, 2021 (the
"Stockholders Agreement"), was executed, to provide for certain governance
matters. Other than the obligations related to Confidential Information (as
defined in the Stockholders Agreement), the rights and preferences of each
stockholder under the Stockholders Agreement will terminate when such
stockholder ceases to own any shares of Class A common stock.

The foregoing description of the Stockholders Agreement is qualified in its entirety by the full text of the document, which is incorporated herein by reference.

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Amendments to Stockholders Agreement


The Company and stockholders holding a majority of the Company's Class A common
stock entered into that certain amendment to the Stockholders Agreement,
effective May 14, 2021, extending the deadline to provide its stockholders
unaudited consolidated quarterly financial statements from 45 days after the
conclusion of a quarter to 60 days after such quarter (or, if applicable, the
first business day thereafter).

The Company and stockholders holding a majority of the Company's Class A common
stock entered into that certain Second Amendment to the Stockholders Agreement,
effective May 31, 2021, extending the deadline to provide its stockholders the
unaudited consolidated quarterly financial statements for the quarter ended
March 31, 2021 to no later than July 15, 2021.

The Company and stockholders holding a majority of the Company's Class A common
stock entered into that certain Third Amendment to the Stockholders Agreement,
effective as of July 14, 2021, extending the deadline to provide its
stockholders the unaudited consolidated quarterly financial statements for the
quarters ended March 31, 2021 and June 30, 2021 to no later than September 30,
2021 and October 31, 2021, respectively.

Departure and Appointment of Directors


Pursuant to the Plan, as of the Emergence Date, the following directors ceased
to serve on the Predecessor's board of directors: Terence E. Hall, Peter D.
Kinnear, Janiece M. Longoria, Michael M. McShane, James M. Funk and W. Matt
Ralls. All officers immediately prior to the Emergence Date were retained in
their existing positions upon the Emergence Date, subject to the terms of the
Plan.

Pursuant to the Plan and the Stockholders Agreement, our current Board of Directors (the "Board") consists of the following six members:

?Joseph Citarrella

?Daniel E. Flores

?Michael Y. McGovern

?Julie J. Robertson

?Krishna Shivram

?Timothy J. Winfrey

Departure of Executive Officers


On March 22, 2021, the Company announced that David Dunlap, the Company's
President and Chief Executive Officer and a member of the Board, and Westy
Ballard, the Company's Executive Vice President, Chief Financial Officer and
Treasurer, had each resigned from all positions with the Company effective March
16, 2021 (the "Resignation Date"). Mr. Dunlap and Mr. Ballard resigned from the
Company to pursue other opportunities and their departures are not related to
any disagreements regarding financial disclosures, accounting matters or other
business issues. Each of Mr. Dunlap and Mr. Ballard have entered into a waiver
and release agreement which contains, among other things, a release of claims
and an acknowledgment that the individuals will continue to be bound by the
terms of their existing restrictive covenant agreements with the Company
contained in their respective employment agreements, and an acknowledgment that
each will receive predetermined amounts under such employment agreements,
provided that such individual does not subsequently revoke his waiver and
release agreement, as follows: (i) the executive's base salary through the date
of termination, earned and vested benefits under Company long-term incentive and
employee benefit plans and programs, and medical or other welfare benefits
required by law or the applicable plan (including payment of the executive's
accrued deferred compensation and supplemental retirement plan benefits, as
applicable, and the payments, if any, earned under the executive's
previously-disclosed 2018 and 2019 performance share unit awards, provided that
any payment under the 2019 performance share unit award will be pro-rated for
the portion of the performance period elapsed prior to termination); (ii) a lump
sum payment equal to (x) two times the sum of the executive's annual salary plus
target annual bonus, and (y) the executive's pro-rated target annual bonus for
the year of termination, the payments in this clause (ii) resulting in a lump
sum cash payment to Mr. Dunlap and Mr. Ballard of approximately $3.7 million and
$1.7 million, in each case minus required withholding and deductions,
respectively; and (iii) Company-paid healthcare continuation benefits for up to
24 months for the individual and the individual's spouse and family.

On March 18, 2021, Michael Y. McGovern, the Chairman of the Company's Board, was
appointed Executive Chairman and effective as of the Resignation Date assumed
the functions of the Company's Principal Executive Officer on an interim basis
until Mr. Dunlap's successor is identified, and James Spexarth, the Company's
former Chief Accounting Officer, effective as of the Resignation Date was
appointed to also serve as interim Chief Financial Officer of the Company.
Effective August 19, 2021, the Board announced the appointment of Mr. Spexarth
to serve as the Company's Executive Vice President, Chief Financial Officer and
Treasurer. See the filed 8-K dated August 19, 2021 for further information.

Effective April 21, 2021, William B. Masters, a named executive officer of the
Company, resigned from his position as the Company's Executive Vice President
and General Counsel and transitioned to the role of a senior advisor to the
Company.

The Company and Mr. Masters entered into a Transition Agreement, dated April 21,
2021 (the "Transition Agreement"), which replaced the June 15, 2013 employment
agreement between Mr. Masters and the Company in its entirety except for certain
surviving provisions set forth in the Transition Agreement, including the
restrictive covenant agreements contained in his employment agreement (other
than

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the one-year non-compete covenant that otherwise would apply if Mr. Masters voluntarily resigns his employment with the Company with or without good cause).


On July 7, 2021, Blaine Edwards was promoted to Executive Vice President and
General Counsel. Mr. Edwards previously served as Assistant General Counsel and
has been employed at the Company for ten years.

On September 9, 2021, A. Patrick Bernard, a named executive officer of the
Company, and the Company mutually agreed that Mr. Bernard will retire from his
position as the Company's Executive Vice President, effective March 31, 2023. On
September 9, 2021, Mr. Bernard was also assigned to serve as President of the
Company's International segment in connection with the transitioning of Mr.
Bernard's duties, in accordance with the terms of the Transition and Retirement
Agreement (as defined below).

In connection with his retirement, Mr. Bernard entered into a Transition and
Retirement Agreement with the Company on September 9, 2021 (the "Transition and
Retirement Agreement"), which was approved by the Board. Pursuant to the terms
of the Transition and Retirement Agreement, Mr. Bernard will continue to serve
with the Company through the first to occur of March 31, 2023 or his earlier
termination of employment. Mr. Bernard's separation from the Company will deemed
to be a termination without Cause under section 5(a)(iv) of his employment
agreement with the Company, effective June 15, 2013 ("Employment Agreement"), a
composite form of which was previously filed with the SEC. Between September 9,
2021 and March 31, 2023, Mr. Bernard will be paid an amount based on his current
annualized base salary of $400,000 (increased as of July 1, 2021 from his
previous base of $302,400) bi-weekly, and Mr. Bernard and his family will remain
eligible for continued participation in all medical and other welfare benefit
plans generally available to the Company's executive officers. Following March
31, 2023 (or earlier retirement date, if applicable), pursuant to governing law
and independent of the Transition and Retirement Agreement, Mr. Bernard may
elect COBRA benefit continuation coverage.

Unless earlier terminated, on March 31, 2023, Mr. Bernard will be entitled to,
among other things, the severance payments set forth in section 6(c) of his
Employment Agreement. Mr. Bernard's severance payments include a payment equal
to two times the sum of the applicable base salary then in effect and the
applicable target bonus in the Company's annual incentive plan for that fiscal
year. Under the terms of the Transition and Retirement Agreement, Mr. Bernard
has agreed to release the Company from various claims and agrees not to sue the
Company for those claims, subject to certain exceptions required by applicable
law.

2021 Management Incentive Plan

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 23 - "Subsequent Events" for additional information.

Restricted Stock Grants

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 23 - "Subsequent Events" for additional information.

Senior Notes-Prepetition Indebtedness


As part of the transactions undertaken pursuant to the Plan, the record holders
of certain of the 7.125% Notes and the 7.750% Notes contributed all of their
allowed claims described in the Plan in exchange for either (i) a cash payout to
be entirely funded by the Equity Rights Offering, or (ii) shares of the Class A
common stock. See Part 1, Item 1, "Unaudited Condensed Consolidated Financial
Statements and Notes" - Note 2 "Emergence from Voluntary Reorganization under
Chapter 11" and Note 9 - "Debt" for additional information.

COVID-19 Pandemic and Market Conditions


Our operations continue to be disrupted due to the circumstances surrounding the
COVID-19 pandemic. The significant business disruption resulting from the
COVID-19 pandemic has impacted customers, vendors and suppliers in all
geographical areas where we operate. The closure of non-essential business
facilities and restrictions on travel put in place by governments around the
world have significantly reduced economic activity. Also, the COVID-19 pandemic
has impacted and may further impact the broader economies of affected countries,
including negatively impacting economic growth, the proper functioning of
financial and capital markets, foreign currency exchange rates, and interest
rates. For example, the continued spread of COVID-19 has led to disruption and
volatility in the global capital markets, which increases the cost of capital
and adversely impacts access to capital. Additionally, recognized health risks
associated with the COVID-19 pandemic have altered the policies of companies
operating around the world, resulting in these companies instituting safety
programs similar to what both domestic and international governmental agencies
have implemented, including stay at home orders, social distancing mandates, and
other community oriented health objectives. We are complying with all such
ordinances in our operations across the globe. Management believes it has
proactively addressed many of the known operational impacts of the COVID-19
pandemic to the extent possible and will strive to continue to do so, but there
can be no guarantee the measures will be fully effective.

Commodity prices during 2021 will continue to be impacted by the global
containment of the virus, pace of economic recovery, as well as changes to OPEC+
production levels. There is increased economic optimism in 2021 as governments
worldwide continue to distribute the COVID-19 vaccines. However, although
vaccination campaigns are underway, several regions, including areas of the
United States,

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have been and continue to deal with a rebound in the pandemic. There is also
concern about whether vaccines will be effective against different strains of
the virus that have developed and may develop in the future. West Texas
Intermediate (WTI) oil spot prices have recovered to pre-pandemic levels. OPEC+
continues to meet regularly to review the state of global oil supply, demand and
inventory levels. Even though signs of economic recovery centered on COVID-19
mitigation, global vaccine distribution and re-opening efforts make demand for
oil and gas difficult to project, we believe demand is recovering and prices
will be positively impacted.

Industry Trends

The oil and gas industry is both cyclical and seasonal. The level of spending by
oil and gas companies is highly influenced by current and expected demand and
future prices of oil and natural gas. Changes in spending result in an increased
or decreased demand for our services and products. Rig count is an indicator of
the level of spending by oil and gas companies. The Company's financial
performance is significantly affected by the rig count in the U.S. land and
offshore market areas as well as oil and natural gas prices and worldwide rig
activity, which are summarized in the tables below.

                                             March 31,
                                      2021     2020    % Change
Worldwide Rig Count (1)
U.S.:
Land                                     378      764    -51%
Offshore                                  15       21    -29%
Total                                    393      785    -50%
International (2)                        698    1,074    -35%
Worldwide Total                        1,091    1,859    -41%

Commodity Prices (average) Crude Oil (West Texas Intermediate) $ 58.09$ 41.00 42% Natural Gas (Henry Hub)

              $  3.50$  1.90    84%


(1) Estimate of drilling activity as measured by the average active drilling rigs based on Baker Hughes Co. rig count information.

(2) Excludes Canadian Rig Count.

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The following table sets forth consolidated results of operations for the
periods indicated. The Successor Period and the Current Predecessor Period are
distinct reporting periods as a result of the emergence from bankruptcy on the
Emergence Date. References in these results of operations to changes in
comparison to the Prior Predecessor Quarter combine the Successor Period and
Current Predecessor Period results for the three months ended March 31, 2021 in
order to provide some comparability of such information to the Prior Predecessor
Quarter. While this combined presentation is not presented according to
generally accepted accounting principles in the United States of America
("GAAP") and no comparable GAAP measures are presented, management believes that
providing this financial information is the most relevant and useful method for
making comparisons to the corresponding Prior Predecessor Quarter as reviewing
the Successor Period results in isolation would not be useful in identifying
trends in or reaching conclusions regarding our overall operating performance.

                                     Successor     Predecessor     Non-GAAP     Predecessor
                                      For the        For the       For the
                                      period         Period        Combined
                                     February      January 1,       Three         For the
                                      3, 2021         2021          Months         Three
                                      through        through        ended         Months
                                     March 31,     February 2,      March       Ended March
                                       2021           2021         31, 2021      31, 2020        Change

Revenues                           $   129,095$      56,647$  185,742$     321,497$ (135,755)

Cost of revenues                        89,698          39,962      129,660         211,686      (82,026)
Depreciation, depletion,
amortization and accretion              52,807          10,498       63,305          41,355        21,950
General and administrative
expenses                                20,937          12,164       33,101          65,157      (32,056)
Restructuring and other expenses         8,383           1,270        9,653               -         9,653
Reduction in value of assets                 -               -            -          16,522      (16,522)
Loss from operations                  (42,730)         (7,247)     (49,977) 

(13,223) (36,754)


Other income (expense):
Interest income (expense), net             215             204          419        (25,134)        25,553
Reorganization items, net                    -         335,560      335,560               -       335,560
Other income (expense):                (2,845)         (2,104)      (4,949)         (4,232)         (717)
Income (loss) from continuing
operations before income taxes        (45,360)         326,413      281,053        (42,589)       323,642
Income tax benefit (expense)             7,852        (59,901)     (52,049)          10,254      (62,303)
Net income (loss) from
continuing operations                 (37,508)         266,512      229,004        (32,335)       261,339
Income (loss) from discontinued
operations, net of income tax              878           2,265        3,143        (47,129)        50,272
Net income (loss)                  $  (36,630)$     268,777$  232,147$    (79,464)$   311,611

Comparison of the Results of Operations for the Three Months Ended March 31, 2021 and 2020


Net income for the combined three months ended March 31, 2021 (the "Combined
Current Quarter") was $232.1 million, which was driven primarily by recognition
of a $335.6 million gain in Reorganization items, net due to debt forgiveness as
part of the Company's emergence from bankruptcy. Also included in the results
for Combined Current Quarter was a pre-tax charge of $9.7 million related to
restructuring activities. This compares to a net loss for the Prior Predecessor
Quarter of $79.5 million.

Revenues and Cost of Revenues


Revenue for the Combined Current Quarter decreased by 42% to $185.7 million, as
compared to $321.5 million for the Prior Predecessor Quarter. Cost of revenues
for the Combined Current Quarter decreased by 38%, to $131.2 million, as
compared to $211.7 million for the Prior Predecessor Quarter. Both revenues and
cost of revenues were severely impacted by the effects of COVID-19 on the
worldwide economy, and the Company's results were impacted by a decline in all
business lines. The Company experienced a decline in rentals of

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premium drill pipe and bottom hole assemblies as well as a decline in revenues from accommodation units, slickline services and plug and abandonment activities.

Depreciation, Depletion, Amortization and Accretion


Depreciation, depletion, amortization and accretion was $63.3 million during the
Combined Current Quarter compared to $41.4 million during the Prior Predecessor
Quarter. The increase in depreciation, depletion, amortization and accretion is
related to both an increase in the carrying value of our assets and lower
average remaining useful lives as a result of the fair value adjustment recorded
as a part of fresh start accounting.

General and Administrative Expenses


General and administrative expense was $33.1 million during the Combined Current
Quarter compared to $65.2 million during the Prior Predecessor Quarter. The
decrease is the result of our continued focus on limiting spending and reducing
our cost structure.

Restructuring and Other Expenses

Restructuring and other expenses were $9.7 million during the Combined Current Quarter and primarily relate to the severance expenses and costs related to executive officers that resigned during the period.

Reorganization items, net

Reorganization items, net were $335.6 million during the Current Predecessor Period. See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 3 - "Fresh Start Accounting" for additional information on reorganization items, net.

Interest Expense


Contractual interest expense on the Predecessor's senior unsecured notes was
$8.0 million for the Current Predecessor Period, which is in excess of the $0.2
million included in interest expense, net in the condensed consolidated
statements of operations because the Predecessor discontinued accruing interest
with the commencement of the Chapter 11 Cases in accordance with the terms of
the Plan and ASC 852.

Income Taxes

The effective tax rate for the three-month period ending March 31, 2021 was 18.5% on income from continuing operations. The tax rate is different from the statutory rate of 21% primarily from the adoption of fresh start accounting during the period.


The effective tax rate for the three-month ending March 31, 2020 was 24.1% on
income from continuing operations. The tax rate is different from the statutory
rate of 21% primarily because of the impact of the CARES Act legislation which
allowed the company to carryback losses from 2018, 2019 and 2020 to prior
periods for refunds of prior year income tax.

Liquidity and Capital Resources


Cash flows depend, to a large degree, on the level of spending by oil and gas
companies for exploration, development and production activities. Certain
sources and uses of cash, such as our level of discretionary capital
expenditures and divestitures of non-core assets, are within our control and are
adjusted as necessary based on market conditions.

Also impacting liquidity is the state of the global economy, which impacts oil
and natural gas consumption. The Company's operations continue to be disrupted
due to the circumstances surrounding the COVID-19 pandemic. The significant
business disruption resulting from the COVID-19 pandemic has impacted customers,
vendors and suppliers in all geographical areas where the Company operates. The
closure of non-essential business facilities and restrictions on travel put in
place by governments around the world have significantly reduced economic
activity. Also, the COVID-19 pandemic has impacted and may further impact the
broader economies of affected countries, including negatively impacting economic
growth, the proper functioning of financial and capital markets, foreign
currency exchange rates and interest rates. There is increased economic optimism
in 2021 as governments worldwide continue to distribute the COVID-19 vaccines.
However, although vaccination campaigns are underway, several regions, including
areas of the United States, have been and continue to deal with a rebound in the
pandemic. There is also concern about whether vaccines will be effective against
different strains of the virus that have developed and may develop in the
future. Even though signs of economic recovery centered on COVID-19 mitigation,
global vaccine distribution, and re-opening efforts make demand for oil and gas
difficult to project, we believe demand is recovering and prices will be
positively impacted.

                                       40

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Financial Condition and Sources of Liquidity


The primary sources of liquidity during the period covered by this quarterly
report on Form 10-Q have been cash and cash equivalents, availability under
credit facilities, and cash generated from operations. As of March 31, 2021, we
had cash, cash equivalents and restricted cash of $294.1 million. During the
Successor Period and the Current Predecessor Period net cash provided by
operating activities was $21.4 million and $5.4 million, respectively. During
the Successor Period and the Current Predecessor Period, $7.2 million and $0.8
million were received in cash proceeds from the sale assets, respectively.

At March 31, 2021, the borrowing base on the Credit Facility was $120.0 million and the Successor had $47.5 million of letters of credit outstanding that reduced the borrowing availability under the Credit Facility.


The energy industry faces growing negative sentiment in the market which may
affect the ability to access appropriate amounts of capital and under suitable
terms. While we have confidence in the level of support from our lenders, this
negative sentiment in the energy industry has not only impacted our customers in
North America, it is also affecting the availability and the pricing for most
credit lines extended to participants in the industry. From time to time we may
continue to enter into transactions to dispose of businesses or capital assets
that no longer fit the Company's long-term strategy.

Uses of Liquidity


The primary uses of liquidity are to provide support for operating activities,
restructuring activities and capital expenditures. The Company has incurred
significant costs associated with the Chapter 11 Cases, including fees for
legal, financial and restructuring advisors to the Company, and certain of the
creditors. During the Current Predecessor Period, the Predecessor incurred $18.3
million of advisory and professional fees relating to the Chapter 11 Cases and
$12.0 million of fees paid in consideration for the commitment by the Backstop
Commitment Parties to provide the Delayed-Draw Term Loan Facility upon the
emergence from bankruptcy (which ultimately did not occur). The Successor spent
$4.1 million of cash on capital expenditures during the Successor Period and the
Predecessor spent $3.0 million of cash on capital expenditures during the
Current Predecessor Period.

Debt Instruments


On the Emergence Date, pursuant to the Plan, the Former Parent, as parent
guarantor, and SESI, as borrower, entered into a Credit Agreement with JPMorgan
Chase Bank, N.A., as administrative agent, and the other lenders and letter of
credit issuers named therein providing for a $120.0 million asset-based secured
revolving credit facility (the "Credit Facility"), which provides for revolving
loans and is available for the issuances of letters of credit. The Credit
Facility will mature on December 9, 2024. The borrowing base under the Credit
Facility is determined by reference to SESI's and its subsidiary guarantors' (i)
eligible accounts receivable, (ii) eligible inventory, (iii) solely during the
period from February 2, 2021 until the earlier of December 9, 2022 and the date
that unrestricted cash of SESI and its wholly-owned subsidiaries is less than
$75.0 million, eligible premium rental drill pipe and (iv) so long as there are
no loans outstanding at such time, certain cash of SESI and its subsidiary
guarantors, less reserves established by the administrative agent in its
permitted discretion. On March 31, 2021 approximately $46.6 million of undrawn
letters of credit were outstanding under the Credit Facility.

Availability under the Credit Facility at any time is equal to the lesser of (i)
the aggregate commitments under the Credit Facility and (ii) the borrowing base
at such time. As of March 31, 2021, the borrowing base under the Credit Facility
was approximately $120.0 million and the Company had $47.5 million of letters of
credit outstanding that reduced its borrowing availability under the revolving
credit facility. Subject to certain conditions, upon request and with the
consent of the participating lenders, the total commitments under the Credit
Facility may be increased to $170.0 million. SESI's obligations under the Credit
Facility are guaranteed by the Former Parent and all of SESI's material domestic
subsidiaries, and secured by substantially all of the personal property of the
Former Parent, SESI and SESI's material domestic subsidiaries, in each case,
subject to certain customary exceptions.

Borrowings under the Credit Facility bear interest, at SESI's option, at either
an adjusted LIBOR rate plus an applicable margin ranging from 3.00% to 3.50% per
annum, or an alternate base rate plus an applicable margin ranging from 2.00% to
2.50% per annum, in each case, on the basis of the then applicable consolidated
fixed charge coverage ratio. In addition, SESI is required to pay (i) a letter
of credit fee ranging from 3.00% to 3.50% per annum on the basis of the
consolidated fixed charge coverage ratio on the aggregate face amount of all
outstanding letters of credit, (ii) to the issuing lender of each letter of
credit, a fronting fee of no less than 0.25% per annum on the outstanding amount
of each such letter of credit and (iii) commitment fees of 0.50% per annum on
the daily unused amount of the Credit Facility, in each case, quarterly in
arrears.

The Credit Facility contains various covenants requiring compliance, including,
but not limited to, limitations on the incurrence of indebtedness, permitted
investments, liens on assets, making distributions, transactions with
affiliates, mergers, consolidations, dispositions of assets and other provisions
customary in similar types of agreements. The Credit Facility requires
compliance with a fixed charge coverage ratio of 1.0 to 1.0 if either (a) an
event of default has occurred and is continuing or (b) availability under the
Credit Facility is less than the greater of $20.0 million or 15% of the lesser
of the aggregate commitments and the borrowing base. The covenant and other
restrictions of the Credit Facility significantly restrict the ability to incur
borrowings other than letters of credit.

                                       41

--------------------------------------------------------------------------------
See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and
Notes" - Note 23 - "Subsequent Events" for additional information regarding
waivers to the Credit Facility and our inability to require the lenders to make
any requested advances

until the conditions described therein are satisfied.

Other Matters

Off-Balance Sheet Arrangements and Hedging Activities

At March 31, 2021, the Successor had no off-balance sheet arrangements and no hedging contracts.

Recently Adopted Accounting Guidance

See Part 1, Item 1, "Unaudited Condensed Consolidated Financial Statements and Notes" - Note 21 - "New Accounting Pronouncements."

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