Oil States International Inc.
03/04/2026 | Press release | Distributed by Public on 03/04/2026 14:01
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related notes appearing in "Part II Item 8 Financial Statements and Supplementary Data." This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in "Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. This discussion contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our current expectations, estimates and projections about our business operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in "Part I, Item 1A. Risk Factors." You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K in order to understand factors, such as business combinations, charges and credit and financing transactions, which may impact comparability from period to period.
We provide a broad range of manufactured products and services to customers in the energy, military and industrial sectors through our Offshore Manufactured Products, Completion and Production Services and Downhole Technologies segments. Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers' willingness to invest capital in the exploration for and development of crude oil and natural gas reserves. Our customers' capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, making demand for our products and services sensitive to expectations regarding future crude oil and natural gas prices, as well as economic growth, commodity demand and estimates of resource production and regulatory pressures.
Recent Developments
Brent and WTI crude oil and natural gas pricing trends were as follows:
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Average Price(1)for quarter ended
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Average Price(1)for year ended December 31
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| Year | March 31 | June 30 | September 30 | December 31 | ||||||||||||||||||||||||||||
| Brent Crude (per bbl) | ||||||||||||||||||||||||||||||||
| 2025 | $ | 75.87 | $ | 68.07 | $ | 69.03 | $ | 63.65 | $ | 69.14 | ||||||||||||||||||||||
| 2024 | 82.92 | $ | 84.68 | $ | 80.01 | $ | 74.66 | $ | 80.52 | |||||||||||||||||||||||
| WTI Crude (per bbl) | ||||||||||||||||||||||||||||||||
| 2025 | $ | 71.78 | $ | 64.57 | $ | 65.78 | $ | 59.62 | $ | 65.39 | ||||||||||||||||||||||
| 2024 | 77.50 | $ | 81.81 | $ | 76.43 | $ | 70.73 | $ | 76.61 | |||||||||||||||||||||||
| Henry Hub Natural Gas (per MMBtu) | ||||||||||||||||||||||||||||||||
| 2025 | $ | 4.14 | $ | 3.19 | $ | 3.03 | $ | 3.73 | $ | 3.52 | ||||||||||||||||||||||
| 2024 | 2.15 | $ | 2.07 | $ | 2.11 | $ | 2.44 | $ | 2.19 | |||||||||||||||||||||||
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(1)Source: U.S. Energy Information Administration (spot prices).
As can be derived from the table above, the 2025 average spot price of WTI crude oil declined 15% from the 2024 average following increased crude oil production by OPEC+. In addition, the imposition of broad based trade tariffs by the United States has led to ongoing uncertainty regarding the future effect of reciprocal and other trade tariffs on the global economy. These factors have negatively impacted the demand for and pricing of our products and services provided to the U.S. land-based market and have increased the cost of certain products we manufacture in the United States when compared to 2024 levels.
We implemented certain initiatives in 2025 to optimize our operations and improve future returns. These actions were concentrated in our U.S. land-focused operations and included: the consolidation, relocation and exit of certain operating locations; the exit of certain product and service offerings; the exit of previously closed facilities; and reductions in our U.S. workforce. We also assessed the carrying value of certain long-lived and other assets based on the industry outlook regarding overall demand for and pricing of our products and services, market competitiveness and management decisions. As a result of these events, actions and assessments, our reported pre-tax results for 2025 included $121.1 million in non-cash asset
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impairment charges as well as $11.6 million of costs associated with facility exits and other charges. Partially offsetting these charges were sales of facilities, equipment and inventory for net proceeds of $20.2 million in 2025.
During 2025, we generated cash flow from operations of $105.1 million and materially delevered with the purchase of $70.8 million principal amount of our 2026 Notes. We also repurchased 3.3 million shares of our common stock for $16.6 million.
On January 28, 2026, we entered into the Cash Flow Credit Agreement providing for aggregate lender commitments of up to: $75.0 million under the Revolving Credit Facility and $50.0 million under the Term Loan Facility, replacing the existing ABL Agreement. See Note 16, "Subsequent Event," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the Cash Flow Credit Agreement.
On July 4, 2025, the United States enacted tax reform legislation through the OBBBA, which resulted in changes to U.S. tax and related laws, including certain key federal income tax provisions applicable to multinational companies such as ours. These changes include, among others: the reinstatement of 100% bonus depreciation election for investments in qualifying property; the immediate deduction of domestic research and development expenditures; and manufacturing tax incentives related to goods sold outside the United States.
Overview
Current and expected future pricing for WTI crude oil and natural gas, inflationary and tariff-driven cost increases, and expectations regarding the regulatory environment in the regions in which we operate are factors that will continue to influence our customers' willingness to invest capital in their businesses. Expectations for the longer-term price for Brent crude oil will continue to influence our customers' spending related to global offshore and international drilling and development and, thus, a significant portion of the activity of our Offshore Manufactured Products segment.
Crude oil and natural gas prices and levels of demand for crude oil and natural gas are likely to remain highly volatile due to numerous factors, including: geopolitical conflicts in Europe, the Middle East and South America, along with associated international tensions; the moderate perceived risk of a global economic recession; the levels of domestic or international crude oil and natural gas production; technological advancements; consolidation of oil and gas producers; changes in governmental rules and regulations; sanctions; tariffs; the willingness of operators to invest capital in the exploration for and development of resources; use of alternative fuels; improved vehicle fuel efficiency; timing of capital investments in alternative energy sources; a more sustained movement to electric vehicles; and the potential for ongoing supply/demand imbalances.
U.S. drilling, completion and production activity and, in turn, our financial results, are sensitive to near-term fluctuations in commodity prices, particularly U.S. WTI crude oil and natural gas prices, given the short-term, call-out nature of our U.S. operations.
Our Offshore Manufactured Products segment provides technology-driven, highly-engineered products and services for offshore oil and natural gas drilling, completion and production systems and facilities globally, as well as certain products and services to the military and industrial markets. This segment is particularly influenced by global spending on deepwater drilling and production, which is primarily driven by our customers' longer-term commodity demand forecasts and outlook for crude oil and natural gas prices. Approximately 91% of Offshore Manufactured Products segment sales in 2025 were driven by our customers' capital spending for products and services used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as "project-driven products and services"). Deepwater oil and gas development projects typically involve significant capital investments and multi-year development plans. Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies and state-run national oil companies) using relatively conservative crude oil and natural gas pricing assumptions. Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to change based on short-term fluctuations in the price of crude oil and natural gas. Deepwater oil and gas development projects may also be impacted by federal legislative and regulatory actions, including the OBBBA, which mandates that the Bureau of Ocean Energy Management conduct at least two offshore lease sales annually, of a minimum of 80 million acres (if available), in the Central and Western Gulf of America Planning Areas for the next 15 years. Additionally, we are investing in research and product development (and have been awarded select contracts and are bidding on additional projects) to facilitate the development of alternative energy sources, including offshore wind and deep-sea mineral gathering opportunities.
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Backlog reported by our Offshore Manufactured Products segment increased to $435 million as of December 31, 2025 from $311 million as of December 31, 2024. Bookings totaled $554 million in 2025, yielding a book-to-bill ratio of 1.3x. The following table sets forth backlog as of the dates indicated (in millions).
| Backlog as of | ||||||||||||||||||||||||||
| Year | March 31 | June 30 | September 30 | December 31 | ||||||||||||||||||||||
| 2025 | $ | 357 | $ | 363 | $ | 399 | $ | 435 | ||||||||||||||||||
| 2024 | 305 | 300 | 313 | 311 | ||||||||||||||||||||||
| 2023 | 316 | 328 | 341 | 327 | ||||||||||||||||||||||
Our Completion and Production Services segment provides completion and production services in the United States (including the Gulf of America) and internationally. Prior to the sale of its drilling rigs in August of 2024, the segment also provided land drilling services in the United States. U.S. drilling and completion activity and, in turn, our Completion and Production Services segment's results, are sensitive to near-term fluctuations in commodity prices, particularly WTI crude oil prices, given the short-term, call-out nature of its operations. We primarily supply equipment and service personnel utilized in the completion of, and initial production from, new and recompleted wells in our U.S. operations.
Our Downhole Technologies segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations. This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies. Product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools. This expertise has led to the optimization of perforation hole size, depth, and quality of tunnels, which are key factors for maximizing the effectiveness of hydraulic fracturing. Additional offerings include frac plugs, toe valves and other elastomer products, which are focused on zonal isolation for hydraulic fracturing of horizontal wells, and a broad range of consumable products, such as setting tools and bridge plugs, that are used in completion, intervention and decommissioning applications. Hydraulic fracturing activity, and, in turn, our Downhole Technologies segment's results, are sensitive to commodity prices, particularly WTI crude oil prices, given that lower activity may result in reduced demand for our consumable products. Demand drivers for the Downhole Technologies segment include continued trends toward longer lateral lengths, increased frac stages and more perforation clusters to target increased unconventional well productivity.
Demand for our completion-related products and services within our Completion and Production Services and Downhole Technologies segments is highly correlated to changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the completion ("frac") count. The following table sets forth a summary of the U.S. drilling rig count, as measured by Baker Hughes Company, as of and for the periods indicated.
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As of February 20, 2026
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Average for the
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| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| United States Rig Count: | |||||||||||||||||
| Land - Oil | 390 | 429 | 473 | ||||||||||||||
| Land - Natural gas and other | 140 | 116 | 107 | ||||||||||||||
| Offshore | 21 | 16 | 19 | ||||||||||||||
| 551 | 561 | 599 | |||||||||||||||
The U.S. energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S. shale plays utilizing horizontal drilling and completion techniques. As of December 31, 2025, oil-directed drilling accounted for 75% of the total U.S. rig count - with the balance largely natural gas related.
We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. Beginning in the first quarter of 2025, the United States imposed new or additional tariffs, through executive orders, on a variety of imported raw materials and products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. We continue to monitor the effects of the ever-evolving global trade landscape, including with respect to sanctions, tariffs, existing trade agreements, anti-dumping and countervailing duty regulations and more. For example, in the third quarter of 2025, U.S. tariffs on certain steel and other metal components we import from China substantially increased the cost of those products, and President Trump has threatened additional increased tariffs on goods imported from China as result of current Chinese trade policy.
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We cannot predict with certainty the duration of tariffs currently in place, the impact of any new or increased tariffs, or the impact of any retaliatory tariffs. If we encounter difficulty in procuring raw materials and component products, or if the prices we pay for these products remain at current levels or increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations would be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.
Other factors that can affect our business and financial results include but are not limited to: the general global economic environment; competitive pricing pressures; customer consolidations; labor market constraints; supply chain disruptions; inflation in wages, materials, parts, equipment and other costs; climate-related and other regulatory changes; geopolitical conflicts and tensions; management's implementation of strategic decisions; public health crises; natural disasters; industrial accidents; trade restrictions; adoption of new or increases in tariffs; and changes in tax laws in the United States and in the international markets in which we operate. We continue to monitor the global economy, the prices of and demand for crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.
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Selected Financial Data
This selected financial data should be read in conjunction with our Consolidated Financial Statements and related notes included in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in order to understand factors, such as charges and credits, which may impact comparability of the selected financial data.
Consolidated Results of Operations
The following summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024 (in thousands, except per share amounts):
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Year Ended December 31, |
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| 2025 | 2024 | Variance | |||||||||||||||
| Revenues: | |||||||||||||||||
| Products | $ | 436,397 | $ | 402,565 | $ | 33,832 | |||||||||||
| Services | 232,591 | 290,023 | (57,432) | ||||||||||||||
| 668,988 | 692,588 | (23,600) | |||||||||||||||
| Costs and expenses: | |||||||||||||||||
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Product costs(1)
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367,397 | 314,628 | 52,769 | ||||||||||||||
| Service costs | 168,337 | 221,573 | (53,236) | ||||||||||||||
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Cost of revenues (exclusive of depreciation and amortization expense presented below)(1)
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535,734 | 536,201 | (467) | ||||||||||||||
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Selling, general and administrative expenses
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90,425 | 95,009 | (4,584) | ||||||||||||||
| Depreciation and amortization expense | 47,439 | 54,708 | (7,269) | ||||||||||||||
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Long-lived and other asset impairments
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100,321 | 24,554 | 75,767 | ||||||||||||||
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Other operating income, net(2)
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(6,960) | (16,195) | 9,235 | ||||||||||||||
| 766,959 | 694,277 | 72,682 | |||||||||||||||
| Operating loss | (97,971) | (1,689) | (96,282) | ||||||||||||||
| Interest expense, net | (5,852) | (7,731) | 1,879 | ||||||||||||||
| Other income, net | 1,291 | 1,568 | (277) | ||||||||||||||
| Loss before income taxes | (102,532) | (7,852) | (94,680) | ||||||||||||||
| Income tax provision | (6,845) | (3,406) | (3,439) | ||||||||||||||
| Net loss | $ | (109,377) | $ | (11,258) | $ | (98,119) | |||||||||||
| Net loss per share: | |||||||||||||||||
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Basic
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$ | (1.86) | $ | (0.18) | |||||||||||||
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Diluted
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(1.86) | (0.18) | |||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||
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Basic
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58,697 | 62,004 | |||||||||||||||
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Diluted
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58,697 | 62,004 | |||||||||||||||
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(1)During 2025, we recognized an inventory impairment charge of $20.8 million (in product cost).
(2)During 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility.
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Segment Results of Operations
We manage and measure our business performance in three operating segments: Offshore Manufactured Products, Completion and Production Services and Downhole Technologies. Supplemental financial information by operating segment for the years ended December 31, 2025 and 2024 is summarized below (in thousands):
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Year Ended December 31, |
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| 2025 | 2024 | Variance | |||||||||||||||
| Revenues: | |||||||||||||||||
| Offshore Manufactured Products | |||||||||||||||||
| Project-driven: | |||||||||||||||||
| Products | $ | 275,288 | $ | 232,867 | $ | 42,421 | |||||||||||
| Services | 115,351 | 123,906 | (8,555) | ||||||||||||||
| 390,639 | 356,773 | 33,866 | |||||||||||||||
| Military and other products | 40,454 | 41,127 | (673) | ||||||||||||||
| 431,093 | 397,900 | 33,193 | |||||||||||||||
| Completion and Production Services | 114,548 | 163,902 | (49,354) | ||||||||||||||
| Downhole Technologies | 123,347 | 130,786 | (7,439) | ||||||||||||||
| $ | 668,988 | $ | 692,588 | $ | (23,600) | ||||||||||||
| Operating income (loss): | |||||||||||||||||
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Offshore Manufactured Products(1)
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$ | 69,164 | $ | 65,279 | $ | 3,885 | |||||||||||
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Completion and Production Services(2)
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4,015 | (23,225) | 27,240 | ||||||||||||||
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Downhole Technologies(3)
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(124,327) | (20,904) | (103,423) | ||||||||||||||
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Corporate(4)
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(46,823) | (22,839) | (23,984) | ||||||||||||||
| $ | (97,971) | $ | (1,689) | $ | (96,282) | ||||||||||||
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(1)During 2025 and 2024, we recognized charges of $1.6 million and $3.4 million, respectively, within the Offshore Manufactured Products segment, associated primarily with the consolidation and relocation of certain manufacturing and service locations.
(2)During 2025, we recognized charges of $10.8 million within the Completion and Production Services segment, associated with U.S. land-based restructurings. During 2024, the Completion and Production Services segment recognized charges of $24.3 million associated primarily with the exit of its flowback and well testing service offering, the consolidation and exit of certain underperforming service locations, and the defense of certain patents.
(3)During 2025, we recognized non-cash long-lived asset and inventory impairment charges totaling $112.7 million due to the decline in U.S. activity levels, competitive market conditions, increased U.S. tariffs on imported goods and the exit of certain product offerings and technologies. During 2024, the segment incurred a $10.0 million non-cash impairment charge related to goodwill.
(4)During 2025, we recognized a non-cash impairment charge of $7.1 million associated with assets held for sale recorded in Corporate operations. During 2024, we recognized a net gain of $15.3 million within Corporate operations associated with the sale of a previously idled facility.
For further discussion of charges recognized during the years ended December 31, 2025 and 2024, see Note 2, "Summary of Significant Accounting Policies," and Note 3, "Asset Impairments and Other Charges and Credits," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.
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Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
We reported a net loss for the year ended December 31, 2025 of $109.4 million, or $1.86 per share. Net loss included charges of $132.6 million ($130.9 million after tax, or $2.23 per share) primarily associated with non-cash long-lived and other asset impairments, the continued restructuring of certain of our U.S. land-based operations and facilities and valuation allowances established on U.S. deferred tax assets. These results compare to a net loss for the year ended December 31, 2024 of $11.3 million, or $0.18 per share, which included net charges and credits of $22.4 million ($22.0 million after tax, or $0.35 per share) associated with these restructurings, patent defense, and debt extinguishment, partially offset by a gain recognized on the sale of a previously idled facility.
Our results of operations for 2025 reflect the impact of increased capital investments by our offshore and international customers, offset by a decline in U.S. land-based investments, competitive market conditions, increased U.S. trade tariffs and management's decision to exit certain underperforming locations, service lines and product offerings in the United States.
Revenues.Consolidated total revenues in 2025 decreased $23.6 million, or 3%, from 2024 driven by our exit of underperforming service offerings and locations over the past 24 months and lower U.S. land-based activity levels. Excluding the impact of exited operations, consolidated revenues increased $36.9 million year-over-year.
Consolidated product revenues in 2025 increased $33.8 million, or 8%, from 2024, led by higher customer demand for connector, crane and drilling products partially offset by a reduced project-driven platform and valve revenues and U.S. customer demand for completion-related products. Consolidated service revenues in 2025 decreased $57.4 million, or 20%, from 2024. This decrease was concentrated in the United States - reflective of our exit of certain underperforming land-based service offerings following an industry-wide reduction in onshore activity levels.
The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the years ended December 31, 2025 and 2024 (in thousands):
| Offshore Manufactured Products | Completion and Production Services | Downhole Technologies | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||
| Project-driven: | |||||||||||||||||||||||||||||||||||||||||||||||
| Products | $ | 275,288 | $ | 232,867 | $ | - | $ | - | $ | - | $ | - | $ | 275,288 | $ | 232,867 | |||||||||||||||||||||||||||||||
| Services | 115,351 | 123,906 | - | - | - | - | 115,351 | 123,906 | |||||||||||||||||||||||||||||||||||||||
| Total project-driven | 390,639 | 356,773 | - | - | - | - | 390,639 | 356,773 | |||||||||||||||||||||||||||||||||||||||
| Military and other products | 40,454 | 41,127 | - | - | - | - | 40,454 | 41,127 | |||||||||||||||||||||||||||||||||||||||
| Short-cycle: | |||||||||||||||||||||||||||||||||||||||||||||||
| Products | - | - | - | - | 120,655 | 128,571 | 120,655 | 128,571 | |||||||||||||||||||||||||||||||||||||||
| Services | - | - | 114,548 | 163,902 | 2,692 | 2,215 | 117,240 | 166,117 | |||||||||||||||||||||||||||||||||||||||
| Total short-cycle | - | - | 114,548 | 163,902 | 123,347 | 130,786 | 237,895 | 294,688 | |||||||||||||||||||||||||||||||||||||||
| $ | 431,093 | $ | 397,900 | $ | 114,548 | $ | 163,902 | $ | 123,347 | $ | 130,786 | $ | 668,988 | $ | 692,588 | ||||||||||||||||||||||||||||||||
| By destination: | |||||||||||||||||||||||||||||||||||||||||||||||
| Offshore and international | $ | 405,750 | $ | 369,535 | $ | 49,027 | $ | 46,150 | $ | 30,456 | $ | 35,163 | $ | 485,233 | $ | 450,848 | |||||||||||||||||||||||||||||||
| U.S. land | 25,343 | 28,365 | 65,521 | 117,752 | 92,891 | 95,623 | 183,755 | 241,740 | |||||||||||||||||||||||||||||||||||||||
| $ | 431,093 | $ | 397,900 | $ | 114,548 | $ | 163,902 | $ | 123,347 | $ | 130,786 | $ | 668,988 | $ | 692,588 | ||||||||||||||||||||||||||||||||
| As a percentage of total: | |||||||||||||||||||||||||||||||||||||||||||||||
| Offshore and international | 73 | % | 65 | % | |||||||||||||||||||||||||||||||||||||||||||
| U.S. land | 27 | % | 35 | % | |||||||||||||||||||||||||||||||||||||||||||
Cost of Revenues (exclusive of Depreciation and Amortization Expense).Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) in 2025 decreased $0.5 million, compared to 2024.
Consolidated product costs in 2025 increased $52.8 million, or 17%, compared to 2024. Cost of revenues in 2025 included a non-cash inventory impairment provision of $20.8 million - driven by the decision to exit older technology product offerings and the U.S. market downturn. Excluding this 2025 impairment provision, consolidated cost of revenues increased $32.0 million, or 10%, from 2024 due primarily to the reported increase in product revenue. Consolidated service costs in 2025 decreased $53.2 million, or 24%, compared to 2024, due to lower revenue levels and the strategic actions implemented in our U.S. land-based operations to improve reported results.
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Selling, General and Administrative Expense.Selling, general and administrative expense totaled $90.4 million in 2025. This compares to an expense of $95.0 million in 2024, which included $2.8 million of costs associated with enforcing certain of our patents. Excluding these patent litigation costs, selling, general and administrative costs decreased $1.8 million, or 2%, from the prior-year period, due primarily to lower commissions, marketing, information technology and bad debt expenses.
Depreciation and Amortization Expense.Depreciation and amortization expense in 2025 decreased $7.3 million, or 13%, compared to the prior-year period due to reductions in capital investments. Note 13, "Segments and Related Information," to the Consolidated Financial Statements included in this Annual Report on Form 10-K presents depreciation and amortization expense by segment.
Impairment of Goodwill. In the first quarter of 2024, our Downhole Technologies operations recognized a non-cash impairment charge of $10.0 million related to goodwill transferred to the business in connection with the realignment of operations between segments. See Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Impairment of Long-Lived Assets. During 2025, we performed a fair value assessment of the long-lived assets of an asset group within the Downhole Technologies segment and recognized a non-cash impairment charge of $91.0 million. In addition, our Completion and Productions Services and Downhole Technologies segments recognized non-cash impairment charges totaling $2.3 million in connection with the exit of leased locations.
In 2024, management made strategic restructuring decisions leading to the recognition of non-cash impairment charges totaling $3.8 million on operating lease assets held by our Completion and Production Services and Downhole Technologies segments. Additionally, as a result of our decision to exit an underperforming service offering, our Completion and Production Services business recognized non-cash impairment charges of $10.8 million to reduce the carrying amount of its long-lived intangible assets to estimated fair value.
See Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.
Impairment of Assets Held for Sale.During 2025, we made strategic decisions to sell certain facilities, equipment and inventory of the Completion and Production Services and Offshore Manufactured Products segments, which were reclassified to assets held for sale. The carrying value of these assets held for sale were reduced to their estimated fair value, resulting in the recognition of a $7.1 million non-cash impairment charge. See Note 3, "Asset Impairments and Other Charges and Credits," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.
Other Operating Income, Net.In 2024, we recognized a net gain of $15.3 million associated with the sale of a previously idled facility.
Operating Income (Loss).Our consolidated operating loss was $98.0 million in 2025, which included $121.1 million in non-cash asset impairment charges as well as charges totaling $11.6 million associated primarily with the continued restructuring of our U.S. land-based operations and facilities. This compares to a consolidated operating loss of $1.7 million in 2024, which included $24.6 million in non-cash asset impairment charges and $13.7 million associated with facility consolidations and exits, patent defense and other management actions, and a net gain of $15.3 million on the sale of an idled facility. Excluding these charges and gain, operating results improved by $13.5 million year-over-year, driven primarily by a $7.3 million decrease in depreciation and amortization expense, growth in offshore and international activity and strategically implemented restructuring actions in our U.S. land-based operations.
Interest Expense, Net.Net interest expense totaled $5.9 million in 2025, which compares to $7.7 million in 2024. Interest expense as a percentage of total debt outstanding was approximately 7% in 2025 and 2024.
Income Tax.For 2025, our income tax provision was $6.8 million, which included the impact of an increase in valuation allowances recorded against deferred tax assets, certain discrete tax items and other non-deductible expenses, on a pre-tax loss of $102.5 million. This compares to an income tax provision of $3.4 million, which included the impact of a $10.0 million goodwill impairment charge, other non-deductible expenses and an increase in valuation allowances recorded against deferred tax assets, on a pre-tax loss of $7.9 million for 2024.
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Other ComprehensiveIncome (Loss).Reported comprehensive loss is the sum of reported net loss and other comprehensive income (loss). Other comprehensive income was $13.3 million in 2025 compared to other comprehensive loss of $9.5 million in 2024 due to fluctuations in foreign currency exchange rates compared to the U.S. dollar for certain of the international operations of our operating segments. For 2025 and 2024, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil. During 2025, the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S. dollar. This compares to 2024, when the exchange rates for both the British pound and the Brazilian real weakened compared to the U.S. dollar.
Segment Operating Results
Offshore Manufactured Products
Revenues. Our Offshore Manufactured Products segment revenues increased $33.2 million, or 8%, in 2025 compared to 2024 due primarily to increased demand for the segment's international and offshore project-driven connector, crane and drilling products.
Operating Income.Our Offshore Manufactured Products segment reported operating income of $69.2 million in 2025, which included $1.6 million in facility consolidation and relocation charges. This compares to operating income of $65.3 million in 2024, which included $3.4 million in facility consolidation and other charges. Excluding these charges, the Offshore Manufactured Products segment's operating income increased $2.1 million year-over-year due primarily to the reported revenue growth.
Backlog.Backlog in our Offshore Manufactured Products segment totaled $435 million as of December 31, 2025 compared to $311 million as of December 31, 2024. Bookings during 2025 were $554 million, yielding a book-to-bill ratio of 1.3x.
Completion and Production Services
Revenues.Our Completion and Production Services segment revenues decreased $49.4 million, or 30%, in 2025 compared to 2024, driven primarily by the exit of underperforming U.S. land-based service offerings and facilities and lower U.S. land-based activity levels. Excluding the impact of exited operations, revenues increased $11.2 million year-over-year.
Operating Income (Loss).Our Completion and Production Services segment reported operating income of $4.0 million in 2025, which included charges totaling $10.8 million primarily associated with the continued restructuring of its operations. This compares to an operating loss of $23.2 million in 2024, which included charges totaling $24.3 million associated with facility consolidations and exits, the defense of patents and other management actions. Excluding these charges, the Completion and Production Services segment's operating results improved $13.8 million from the prior-year period, due primarily to implemented cost reduction measures and a $5.4 million reduction in depreciation and amortization expense.
Downhole Technologies
Revenues. Our Downhole Technologies segment revenues decreased $7.4 million, or 6%, in 2025 from 2024, driven by lower U.S. customer activity levels and competitive market conditions.
Operating Loss.Our Downhole Technologies segment reported an operating loss of $124.3 million in 2025, which included non-cash charges totaling $112.7 million associated with impairments of long-lived assets and inventories and $0.3 million in restructuring charges. This compares to an operating loss of $20.9 million reported in 2024, which included a $10.0 million non-cash goodwill impairment charge and $1.2 million in charges related to the exit of a facility, personnel reductions and a customer bankruptcy. Excluding charges, the Downhole Technologies segment's operating results declined $1.6 million from the prior-year period, due primarily to higher U.S. tariffs on imported goods and the decrease in activity levels.
Corporate
Operating Loss.Corporate expenses totaled $46.8 million in 2025, which included a $7.1 million impairment of assets held for sale. This compares to Corporate expenses of $22.8 million in 2024, which included a net gain of $15.3 million associated with the sale of an idle facility. Excluding these charges and credits, Corporate expenses increased $1.6 million year-over-year due primarily to higher performance-based incentive costs.
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Liquidity, Capital Resources and Other Matters
Our primary liquidity needs are to fund operating and capital expenditures, new product development, general working capital needs and debt repayment, including the repayment of the 2026 Notes upon their maturity on April 1, 2026. In addition, capital has been used to fund share repurchases and strategic business acquisitions. Our primary sources of funds are cash on-hand, cash flow from operations and proceeds from borrowings under our Cash Flow Credit Agreement, and, less frequently, capital markets transactions.
Operating Activities
Cash flows from operations totaled $105.1 million during 2025, compared to $45.9 million generated by operations during 2024.
During 2025, $46.3 million was provided by net working capital decreases, which included increases in deferred revenues, accounts payable and accrued liabilities, partially offset by an increase in accounts receivable. During 2024, $10.7 million was used to fund net working capital increases, primarily due to a decrease in accounts payable and accrued short- and long-term cash incentive compensation as well as an increase in inventories, partially offset by the favorable impact of an increase in deferred revenue and a decrease in accounts receivable.
Investing Activities
Net cash used in investing activities during 2025 totaled $11.1 million, compared to $2.7 million provided by investing activities during 2024.
Capital expenditures totaled $31.2 million and $37.5 million during 2025 and 2024, respectively. These investments were offset by proceeds from the sale of property, equipment and assets held for sale of $20.2 million and $40.7 million during 2025 and 2024, respectively.
Financing Activities
During 2025, net cash of $90.2 million was used in financing activities, which included the purchase of $70.8 million principal amount of our outstanding 2026 Notes for $70.4 million in cash and the repurchase of 3.3 million shares of our common stock (or 5% of our common stock outstanding as of January 1, 2025) for $16.6 million. This compares to $29.5 million of cash used in financing activities during 2024, which included the purchase of $11.5 million principal amount of our outstanding 2026 Notes for $10.8 million in cash and the repurchase of $14.2 million of our common stock.
As of December 31, 2025, we had cash and cash equivalents totaling $69.9 million, no borrowings outstanding under our ABL Agreement, $52.7 million principal amount of our 2026 Notes outstanding and other debt of $2.4 million. Our reported interest expense included amortization of deferred financing costs of $1.5 million during 2025. For 2025, our contractual cash interest expense was $6.2 million, or approximately 6% of the average principal balance of debt outstanding.
On January 28, 2026, we entered into the Cash Flow Credit Agreement (further discussed below), which replaced our existing ABL Agreement.
We believe that cash on-hand, cash flow from operations and borrowing capacity available under the Cash Flow Credit Agreement will be sufficient to meet our liquidity needs in the coming twelve months, including full retirement of our 2026 Notes upon maturity on April 1, 2026. If our plans or assumptions change, or are inaccurate, we may need to raise additional capital from other sources. Our ability to obtain capital to repay debt, for general liquidity needs and for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global banking and financial markets and other factors, many of which are beyond our control. For companies like ours that support the energy industry, disruptions affecting the availability of capital have in the past and may in the future negatively impact the value of our common stock and may reduce our ability to access capital in the bank and capital markets or result in such capital being available on less favorable terms, which could negatively affect our liquidity.
Stock Repurchase Program.In October 2024, our Board of Directors authorized $50.0 million for repurchases of our common stock, par value $0.01 per share, through October 2026. Subject to applicable securities laws, such purchases will be at such times and in such amounts as we deem appropriate.
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During 2025, $16.6 million in repurchases of common stock were made under this program. The amount remaining under our share repurchase authorization as of December 31, 2025 was $24.7 million.
Revolving Credit and Term Loan Facilities.On January 28, 2026, we entered into an amended and restated cash-flow based credit agreement with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto, referred to herein as the Cash Flow Credit Agreement. The Cash Flow Credit Agreement provides for aggregate lender commitments of up to: $75.0 million under a revolving credit facility and $50.0 million under a multi-draw term loan facility, which is available through July 28, 2026. The Cash Flow Credit Agreement replaced the ABL Agreement discussed below and matures in January 2030. As of February 20, 2026, we had no borrowings outstanding under the Cash Flow Credit Agreement and $12.1 million of outstanding letters of credit. See Note 16, "Subsequent Event," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the Cash Flow Credit Agreement.
Prior to entering into the Cash Flow Credit Agreement, our senior secured credit facility provided for a $100.0 million asset-based revolving credit facility (the "ABL Facility") under which credit availability was subject to a borrowing base calculation. As of December 31, 2025, we had no borrowings outstanding under the ABL Facility and $12.3 million of outstanding letters of credit.
The ABL Facility was governed by a credit agreement with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto. See Note 6, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the ABL Facility.
2026 Notes.We issued $135.0 million aggregate principal amount of the 2026 Notes pursuant to an indenture, dated as of March 19, 2021 (the "2026 Indenture"), between us and Computershare Trust Company, National Association, as successor trustee. As of December 31, 2025, we have purchased a cumulative $82.3 million principal amount of the 2026 Notes for $81.3 million in cash, with $52.7 million principal amount outstanding. The outstanding 2026 Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.
The 2026 Indenture contains certain events of default, including certain defaults by us with respect to other indebtedness of at least $40.0 million. See Note 6, "Long-term Debt," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding the 2026 Notes. As of December 31, 2025, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.
We intend to extinguish the remaining 2026 Notes with a combination of cash on-hand and/or borrowings under the Cash Flow Credit Agreement in the second quarter of 2026, if not repurchased sooner.
Our total debt represented 9% and 16% of our combined total debt and stockholders' equity as of December 31, 2025 and December 31, 2024, respectively.
Contractual Obligations.As discussed above, we believe that cash on-hand, cash flow from operations and borrowing capacity under the New Credit Facilities will be sufficient to meet our liquidity needs in the coming twelve months. The following summarizes our more significant contractual obligations as of December 31, 2025, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands):
| Payments due by year | |||||||||||||||||||||||||||||
| Total |
2026
|
2027 and 2028
|
2029 and 2030
|
After 2030
|
|||||||||||||||||||||||||
| Contractual obligations | |||||||||||||||||||||||||||||
|
ABL Facility(1)
|
$ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
|
2026 Notes(2)
|
53,986 | 53,986 | - | - | - | ||||||||||||||||||||||||
| Other debt and finance lease obligations | 2,390 | 720 | 1,361 | 309 | - | ||||||||||||||||||||||||
|
Operating lease liabilities(3)
|
21,836 | 8,201 | 9,803 | 3,832 | - | ||||||||||||||||||||||||
|
Purchase obligations(4)
|
136,699 | 118,781 | 11,201 | 5,886 | 831 | ||||||||||||||||||||||||
| Total contractual cash obligations | $ | 214,911 | $ | 181,688 | $ | 22,365 | $ | 10,027 | $ | 831 | |||||||||||||||||||
____________________
(1)As of December 31, 2025, we had no borrowings outstanding under our ABL Facility.
(2)Amount represents the full principal amount of the 2026 Notes together with cash interest payments due on April 1, 2026.
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(3)Amount represents payment obligations (including implied interest) for operating leases with an initial term of greater than twelve months. Operating lease obligations are recorded in the consolidated balance sheet as operating lease liabilities while the right-of-use assets are included within operating lease assets.
(4)Our purchase obligations primarily relate to open purchase orders.
Contingencies and Other Obligations.We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters.
See Note 14, "Commitments and Contingencies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion.
Availability and Cost of Products. We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. Beginning in the first quarter of 2025, the United States imposed new or additional tariffs, through executive orders, on a variety of imported raw materials and products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. We continue to monitor the effects of the ever-evolving global trade landscape, including with respect to sanctions, tariffs, existing trade agreements, anti-dumping and countervailing duty regulations and more. For example, in the third quarter of 2025, U.S. tariffs on certain steel and other metal components we import from China substantially increased the cost of those products, and President Trump has threatened additional increased tariffs on goods imported from China as result of current Chinese trade policy.
We cannot predict with certainty the duration of tariffs currently in place, the impact of any new or increased tariffs, or the impact of any retaliatory tariffs. If we encounter difficulty in procuring these raw materials and component products, or if the prices we pay for these products remain at current levels or increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations would be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.
Tax Matters.See Note 2, "Summary of Significant Accounting Policies," and Note 9, "Income Taxes," to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information with respect to tax matters.
Off-Balance Sheet Arrangements.As of December 31, 2025, we had no off-balance sheet arrangements.
Critical Accounting Policies
Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require that we make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position. The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain. We describe our significant accounting policies more fully in Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Revenue and Cost Recognition
Our revenue contracts may include one or more promises to transfer a distinct good or service to the customer, which is referred to as a "performance obligation," and to which revenue is allocated. We recognize revenue and the related cost when, or as, the performance obligations are satisfied. The majority of our significant contracts for custom engineered products have a single performance obligation as no individual good or service is separately identifiable from other performance obligations in the contracts. For contracts with multiple distinct performance obligations, we allocate revenue to the identified performance obligations in the contract. Our product sales terms do not include significant post-performance obligations.
Our performance obligations may be satisfied at a point in time or over time as work progresses. Revenues from goods and services transferred to customers at a point in time accounted for approximately 39%, 33% and 34% of consolidated revenues for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of our revenue recognized at a point in time is derived from short-term contracts for standard products offered by us. Revenue on these contracts is recognized when control
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over the product has transferred to the customer. Indicators we consider in determining when transfer of control to the customer occurs include: right to payment for the product, transfer of legal title to the customer, transfer of physical possession of the product, transfer of risk and customer acceptance of the product.
Revenues from products and services transferred to customers over time accounted for approximately 61%, 67% and 66% of consolidated revenues for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of our revenue recognized over time is for services provided under short-term contracts, with revenue recognized as the customer receives and consumes the services provided by our segments. In addition, we manufacture certain products to individual customer specifications under short-term contracts for which control passes to the customer as the performance obligations are fulfilled and for which revenue is recognized over time.
For significant project-related contracts involving custom engineered products within the Offshore Manufactured Products segment (also referred to as "project-driven products"), revenues are typically recognized over time using an input measure such as the percentage of costs incurred to date relative to total estimated costs at completion for each contract (cost-to-cost method). Contract costs include labor, material and overhead. We believe this method is the most appropriate measure of progress on large contracts. Billings on such contracts in excess of costs incurred and estimated profits are classified as a contract liability (deferred revenue). Costs incurred and estimated profits in excess of billings on these contracts are recognized as a contract asset (a component of accounts receivable).
Contract estimates for project-related contracts involving custom engineered products are based on various assumptions to project the outcome of future events that may span several years. Changes in assumptions that may affect future project costs and margins include production efficiencies, the complexity of the work to be performed and the availability and costs of labor, materials and subcomponents.
As a significant change in one or more of these estimates could affect the profitability of our contracts, contract-related estimates are reviewed regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss will be incurred on the contract, the loss is recognized in the period it is identified.
Cost of goods sold includes all direct material and labor costs and those costs related to contract performance, such as indirect labor, supplies, tools and repairs. As presented on our consolidated statements of operations, costs of goods sold excludes depreciation and amortization expense. Selling, general and administrative costs are charged to expense as incurred.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of products.
Long-Lived Tangible and Intangible Assets
Our long-lived tangible assets totaled $257.1 million, representing 29% of our total assets as of December 31, 2025, and our long-lived intangible assets totaled $31.5 million, representing 4% of our total assets. The remainder of our assets largely consisted of cash, accounts receivable, inventories and goodwill.
An assessment for impairment of long-lived tangible and intangible assets is conducted at the asset group level whenever changes in facts and circumstances indicate that the carrying value of such asset group may not be recoverable based on estimated undiscounted future cash flows. Indicators of impairment might include strategic management actions, persistent negative economic trends affecting the markets we serve, recurring losses or lowered expectations of future cash flows to be generated by our assets. When necessary, the amount of impairment is determined based on the excess of carrying value over fair value of the asset group, using quoted market prices, if available, or our judgment as to the future operating cash flows to be generated from these assets throughout their estimated useful lives.
Events and circumstances in 2025 (including lower crude oil prices, reduced U.S. customer activity, competitive market conditions and the imposition of broad-based trade tariffs by the United States an imported goods, without relief from the U.S. Supreme Court prior to December 31, 2025) indicated that the long-lived tangible and intangible assets of an asset group within our Downhole Technologies segment may not be recoverable. We assessed the carrying value of the long-lived assets of this asset group by comparing our estimates of undiscounted future cash flows to the carrying value of the assets. This assessment indicated that the asset group's long-lived assets were not recoverable. The measured fair value of the asset group's long-lived
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assets was below its carrying amount, resulting in the recognition of a non-cash long-lived asset impairment charge of $91.0 million in the fourth quarter of 2025. This impairment charge did not impact the Company's liquidity position, debt covenants or cash flows.
Management used the income approach (a Level 3 fair value measurement) to estimate fair value by discounting the forecasts of the asset group's future cash flows by a discount rate (expected return) that a market participant is expected to require on its investment. Significant assumptions and estimates used in the income approach included, among others, estimated future net annual cash flows and discount rates for the asset group, current and anticipated market conditions, estimated growth rates and historical data. These estimates rely upon significant management judgment.
During 2025, the Company also recognized non-cash operating lease impairment charges of $2.3 million within its Completion and Production Services and Downhole Technologies segments related to facility closures.
During 2024, in response to further reductions in customer activity in the United States, we made strategic decisions to exit our underperforming flowback and well testing service offering and sell the related equipment and inventory. We also decided to exit eight leased facilities. As a result of these events and actions, we recorded non-cash intangible asset (customer relationships and tradenames) impairment charges of $10.8 million associated with the exit of this service offering and operating lease impairments of $3.8 million related to facility closures.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB"), which are adopted by us as of the specified effective date. We believe that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption.
In 2025, we prospectively expanded our income tax disclosures provided in Note 9, "Income Taxes," to our Consolidated Financial Statements included in this Annual Report in accordance with the FASB guidance ("Accounting Standards Update 2023-09") issued in December 2023.
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