The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" of this Form 10-Q.

Overview of Business

We are a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and have been in business for over 80 years. We provide our services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.

We conduct our business through three operating segments:



•      Tubular Running Services. The Tubular Running Services ("TRS") segment
       provides tubular running services globally. Internationally, the TRS
       segment operates in the majority of the offshore oil and gas markets and
       also in several onshore regions with operations in approximately 50
       countries on six continents. In the U.S., the TRS segment provides
       services in the active onshore oil and gas drilling regions, including the
       Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and
       Utica Shale, as well as in the U.S. Gulf of Mexico. Our customers in these
       markets are primarily large exploration and production companies,
       including international oil and gas companies, national oil and gas
       companies, major independents and other oilfield service companies.



•      Tubulars. The Tubulars segment designs, manufactures and distributes
       connectors and casing attachments for large outside diameter ("OD") heavy
       wall pipe. Additionally, the Tubulars segment sells large OD pipe
       originally manufactured by various pipe mills, as plain end or fully
       fabricated with proprietary welded or thread-direct connector solutions
       and provides specialized fabrication and welding services in support of
       offshore deepwater projects, including drilling and production risers,
       flowlines and pipeline end terminations, as well as long-length tubular
       assemblies up to 400 feet in length. The Tubulars segment also specializes
       in the development, manufacture and supply of proprietary drilling tool
       solutions that focus on improving drilling productivity through
       eliminating or mitigating traditional drilling operational risks.



•      Cementing Equipment. The Cementing Equipment ("CE") segment provides
       specialty equipment to enhance the safety and efficiency of rig
       operations. It provides specialized equipment, services and products
       utilized in the construction of the wellbore in both onshore and offshore
       environments. The product portfolio includes casing accessories that serve
       to improve the installation of casing, centralization and wellbore zonal
       isolation, as well as enhance cementing operations through advance wiper
       plug and float equipment technology. The CE segment also provides services
       and products utilized in the construction, completion or abandonment of
       the wellbore. These solutions are primarily used to isolate portions of
       the wellbore through the setting of barriers downhole to allow for rig
       evacuation in case of inclement weather, maintenance work on other rig
       equipment, squeeze cementing, pressure testing within the wellbore,
       hydraulic fracturing and temporary and permanent abandonments. These
       offerings improve operational efficiencies and limit non-productive time
       if unscheduled events are encountered at the wellsite.





                                       26

--------------------------------------------------------------------------------

Outlook

Two significant events occurring during the first quarter are creating headwinds across the oil and gas markets. First, there was a breakdown in Organization of Petroleum Exporting Countries ("OPEC") and Russia production cut agreements and during the period of dispute, meaningful downward pressure on commodity prices occurred. There was an ultimate agreement made amongst OPEC+ parties in April 2020 which will take effect beginning in May 2020. Despite this agreement, there is expected to be substantial oversupply in the future. This is due to the second event, the global COVID-19 pandemic which is creating energy demand declines and giving rise to logistical challenges in furthering existing drilling programs. Both of these events have generated reduced capital spending plans for our customers, with U.S. onshore markets seeing the largest reductions from initial 2020 guidance. International customer spending is also being reduced although at a lower rate than the U.S. onshore markets. Due to travel restrictions associated with COIVD-19, clients have suspended several international projects which we believe will recommence as travel restrictions are eased. We are also seeing a number of clients delay the start-up projects of new project later in the year, postponing these into 2021, or longer. We believe that the effects of COVID-19 will depress the oil and gas markets in the short to intermediate term as many governments impose a range of regulations that continue to limit energy demand. We expect commodity over-supply issues to have a long-term effect over the next 24 months, requiring time for the market supply and demand curve to return to balance.

As of March 31, 2020, the full impact of the COVID-19 outbreak and the reduction in oil sector activity continues to evolve daily. It is uncertain how long either event will last. With the significant decline in oil prices as well as the general economic decline caused by the impacts of COVID-19, we expect demand for our products and services to decline due to much lower capital expenditure budgets throughout the industry.

The direct impact of the COVID-19 outbreak on our ability to conduct operations has been minor. We have implemented a work-from-home directive for office personnel across the globe, split-shift rotation protocols for our manufacturing facilities and operations facilities, social distancing guidelines in manufacturing and operations facilities, and quarantine protocols for employees at risk of exposure to COVID-19. In addition, we have experienced local disruptions of activity in response to outbreaks of COVID-19 at certain offshore drilling locations, and disruptions due to travel restrictions and local governmental orders. However, in the majority of locations, our products and services have been deemed essential economic activity and have continued during local restrictions on business activity.

In this challenging and uncertain environment, we are continuing and building upon our profitability improvement project to further reduce our cost base. We are implementing workforce reductions, in conjunction with changes to our compensation and benefits programs and concurrent with the pursuit of several government-sponsored relief support programs globally that will capture additional labor savings. We are also working to reduce our non-labor spend, engaging in active discussions with our vendors and scrutinizing research and development spending. We are also working to optimize working capital, with workstreams under way in the areas of collections, capital expenditures, inventory management and disbursements.

We also continue to monitor potential goodwill impairments as a result of COVID-19. For further information, see Note 6-Goodwill and Intangible Assets in our Notes to Unaudited Condensed Consolidated Financial Statements.

While management anticipates that the industry and economic impact of COVID-19 and OPEC's actions will have a negative effect on our results of operations in 2020 and perhaps beyond, the degree to which these factors will impact our business remains uncertain. Please read Item 1A, Risk Factors, in this Quarterly Report.

How We Evaluate Our Operations

We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance.





                                       27

--------------------------------------------------------------------------------

Revenue

We analyze our revenue growth by comparing actual monthly revenue to our internal projections for each month to assess our performance. We also assess incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gains or losses, the effects of the tax receivable agreement ("TRA"), other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenue. We review Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. We use Adjusted EBITDA and Adjusted EBITDA margin to assess our financial performance because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. ("GAAP").

The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods presented (in thousands):


                                    Three Months Ended
                                         March 31,
                                    2020          2019

Net loss                         $ (85,978 )   $ (28,287 )
Goodwill impairment                 57,146             -
Severance and other charges, net    20,725           455
Interest income, net                  (533 )        (768 )

Depreciation and amortization 19,718 25,242 Income tax expense (benefit) (15,563 ) 9,773 Loss on disposal of assets

              60           227
Foreign currency (gain) loss         9,892          (483 )
Charges and credits (1)              1,592         3,499
Adjusted EBITDA                  $   7,059     $   9,658
Adjusted EBITDA margin                 5.7 %         6.7 %




(1) Comprised of Equity-based compensation expense (for the three months ended

March 31, 2020 and 2019: $2,146 and $2,574, respectively), Unrealized and
     realized gains (for the three months ended March 31, 2020 and 2019: $1,704
     and $308, respectively), and Investigation-related matters (for the three
     months ended March 31, 2020 and 2019: $1,150 and $1,233, respectively).


For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see "Operating Segment Results."

Safety and Quality Performance

Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor our safety performance through the evaluation of safety observations, job and customer surveys,




                                       28

--------------------------------------------------------------------------------

and safety data. The primary measure for our safety performance is the tracking of the Total Recordable Incident Rate which is reviewed on both a monthly and rolling twelve-month basis.

© Edgar Online, source Glimpses