UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

______________________________________________

FORM 10-Q

______________________________________________

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-8182

PIONEER ENERGY SERVICES CORP.

(Exact name of registrant as specified in its charter)

____________________________________________


Delaware						74-2088619
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1250 N.E. Loop 410, Suite 1000 San Antonio, Texas						78209
(Address of principal executive offices)						(Zip Code)
Registrant’s telephone number, including area code: (855) 884-0575


Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨

As of ~~April~~July 3031, 2021, there were 1,~~837~~822,~~641~~670 shares of common stock, par value $0.001 per share, of the registrant outstanding.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements and Supplementary Data	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	45
	Condensed Consolidated Statements of Stockholders’ Equity	56
	Condensed Consolidated Statements of Cash Flow	68
	Notes to Unaudited Condensed Consolidated Financial Statements	79
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2026
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3344
Item 4.	Controls and Procedures	3444
	PART II
Item 1.	Legal Proceedings	3545
Item 1A.	Risk Factors	3545
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3550
Item 3.	Defaults Upon Senior Securities	3550
Item 4.	Mine Safety Disclosures	3551
Item 5.	Other Information	3551
Item 6.	Exhibits	3551

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2021		December 31, 2020
	June 30, 2021		December 31, 2020
	(unaudited)		(audited)
	(in thousands, except share data)
ASSETS
Cash and cash equivalents	$	28,~~992~~963	$	31,181
Restricted cash	1,~~503~~298		1,148
Receivables:
Trade, net of allowance for doubtful accounts	3132,~~626~~183		29,803
Unbilled receivables	78,~~487~~094		4,740
Insurance recoveries	21,~~918~~246		22,106
Other receivables	2,~~597~~676		2,716
Inventory	12,~~093~~384		12,641
Assets held for sale	21,~~733~~605		3,608
Prepaid expenses and other current assets	3,~~697~~827		5,190
Total current assets	112,~~646~~276		113,133
Property and equipment, at cost	~~196~~199,~~160~~971		193,529
Less accumulated depreciation	4455,~~026~~137		31,760
Net property and equipment	~~152~~144,~~134~~834		161,769
Intangible assets, net of accumulated amortization	8,~~707~~473		8,942
Deferred income taxes	12,~~253~~908		12,746
Operating lease assets	43,~~228~~972		4,383
Other noncurrent assets	12,~~585~~348		13,457
Total assets	$	~~302~~294,~~553~~811	$	314,430
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	1620,~~784~~096	$	17,516
Current portion of long-term debt	~~505~~300		150
Deferred revenues	~~824~~955		1,019
Accrued expenses:
Employee compensation and related costs	8,~~891~~879		7,325
Insurance claims and settlements	21,~~918~~246		22,106
Insurance premiums and deductibles	3,~~783~~671		3,928
Interest	32,~~662~~002		2,015
Other	43,~~162~~878		4,959
Total current liabilities	6061,~~529~~027		59,018
Long-term debt, less unamortized discount and debt issuance costs	~~149~~151,~~222~~709		147,167
Noncurrent operating lease liabilities	3,~~422~~210		3,622
Deferred income taxes	1,~~825~~739		947
Other noncurrent liabilities	1,~~770~~783		1,779
Total liabilities	~~216~~219,~~768~~468		212,533
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 11)
Stockholders’ equity:
Successor common stock, $0.001 par value; 25,000,000 shares authorized; 1,647,224 shares outstanding at both March 31, 2021 and December 31, 2020	2		2
Successor common stock, $0.001 par value; 25,000,000 shares authorized; 1,840,641 and 1,647,224 shares outstanding June 30, 2021 and December 31, 2020, respectively	2		2
Additional paid-in capital	~~142~~147,~~949~~126		142,119
Accumulated deficit	(5771,~~166~~785)		(40,224)
Total stockholders’ equity	8575,~~785~~343		101,897
Total liabilities and stockholders’ equity	$	~~302~~294,~~553~~811	$	314,430

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Successor		Predecessor
	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Revenues	$	58,738	$	114,322
Costs and expenses:
Operating costs	45,326		92,022
Depreciation and amortization	13,365		21,984
General and administrative	9,713		14,655
Prepetition restructuring charges	—		17,074
Impairment	—		17,853
Bad debt expense (recovery), net	(197)		727
Gain on dispositions of property and equipment, net	(2,298)		(717)
Total costs and expenses	65,909		163,598
Loss from operations	(7,171)		(49,276)
Other income (expense):
Interest expense, net of interest capitalized	(6,534)		(8,651)
Reorganization items, net	(146)		(6,663)
Loss on extinguishment of debt	(83)		—
Other expense, net	(2,550)		(5,545)
Total other expense, net	(9,313)		(20,859)
Loss before income taxes	(16,484)		(70,135)
Income tax (expense) benefit	(458)		1,031
Net loss	$	(16,942)	$	(69,104)
Loss per common share - Basic	$	(14.89)	$	(0.88)
Loss per common share - Diluted	$	(14.89)	$	(0.88)
Weighted average number of shares outstanding—Basic	1,138		78,753
Weighted average number of shares outstanding—Diluted	1,138		78,753

(in thousands, except per share data)


	Successor				Predecessor
	Three months ended June 30, 2021		One Month Ended June 30, 2020		Two Months Ended May 31, 2020




Revenues	$	59,526	$	11,163	$	28,048




Costs and expenses:
Operating costs	46,397		8,743		22,025


Depreciation and amortization	11,944		5,236		13,663
General and administrative	10,997		4,213		7,392
Prepetition restructuring charges	—		—		(252)
Impairment	—		388		—
Bad debt expense (recovery), net	(198)		(283)		482
Gain on dispositions of property and equipment, net	(1,072)		(460)		(272)
Total costs and expenses	68,068		17,837		43,038
Loss from operations	(8,542)		(6,674)		(14,990)

Other income (expense):
Interest expense, net of interest capitalized	(6,698)		(2,215)		(4,135)
Reorganization items, net	239		(1,144)		(15,240)
Loss on extinguishment of debt	(109)		—		(3,723)
Other income (expense), net	(176)		(230)		2,212
Total other expense, net	(6,744)		(3,589)		(20,886)

Loss before income taxes	(15,286)		(10,263)		(35,876)
Income tax benefit	667		446		755




Net loss	$	(14,619)	$	(9,817)	$	(35,121)

Loss per common share - Basic	$	(12.01)	$	(9.37)	$	(0.44)

Loss per common share - Diluted	$	(12.01)	$	(9.37)	$	(0.44)











Weighted average number of shares outstanding—Basic	1,217		1,048		79,288

Weighted average number of shares outstanding—Diluted	1,217		1,048		79,288

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Successor				Predecessor
	Six Months Ended June 30, 2021		One Month Ended June 30, 2020		Five Months Ended May 31, 2020




Revenues	$	118,264	$	11,163	$	142,370




Costs and expenses:
Operating costs	91,723		8,743		114,047


Depreciation and amortization	25,309		5,236		35,647
General and administrative	20,710		4,213		22,047
Prepetition restructuring charges	—		—		16,822
Impairment	—		388		17,853
Bad debt expense (recovery), net	(395)		(283)		1,209
Gain on dispositions of property and equipment, net	(3,370)		(460)		(989)
Total costs and expenses	133,977		17,837		206,636
Loss from operations	(15,713)		(6,674)		(64,266)

Other income (expense):
Interest expense, net of interest capitalized	(13,232)		(2,215)		(12,294)
Reorganization items, net	93		(1,144)		(21,903)
Loss on extinguishment of debt	(192)		—		(4,215)
Other income (expense), net	(2,726)		(230)		(3,333)
Total other expense, net	(16,057)		(3,589)		(41,745)

Loss before income taxes	(31,770)		(10,263)		(106,011)
Income tax benefit	209		446		1,786




Net loss	$	(31,561)	$	(9,817)	$	(104,225)

Loss per common share - Basic	$	(26.79)	$	(9.37)	$	(1.32)

Loss per common share - Diluted	$	(26.79)	$	(9.37)	$	(1.32)











Weighted average number of shares outstanding—Basic	1,178		1,048		78,968

Weighted average number of shares outstanding—Diluted	1,178		1,048		78,968

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

	As of and for the three months ended March 31, 2021 (Successor)
	Shares		Amount				Additional Paid In Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common	Treasury	Common		Treasury
Balance as of December 31, 2020	1,649	(1)	$	2	$	—	$	142,119	$	(40,224)	$	101,897
Balance as of December 31, 2020 (Successor)	1,649	(1)	$	2	$	—	$	142,119	$	(40,224)	$	101,897
Net loss	—	—	—		—		—		(16,942)		(16,942)
Stock-based compensation expense	—	—	—		—		830		—		830
Balance as of March 31, 2021	1,649	(1)	$	2	$	—	$	142,949	$	(57,166)	$	85,785
Balance as of March 31, 2021 (Successor)	1,649	(1)	$	2	$	—	$	142,949	$	(57,166)	$	85,785
Net loss	—	—	—		—		—		(14,619)		(14,619)
Payment of in-kind interest on Convertible Notes	—	—	—		—		2,124		—		2,124
Equity awards vested or exercised	193	—	—		—		—		—		—
Stock-based compensation expense	—	—	—		—		2,053		—		2,053
Balance as of June 30, 2021 (Successor)	1,842	(1)	$	2	$	—	$	147,126	$	(71,785)	$	75,343

	As of and for the three months ended March 31, 2020 (Predecessor)
	Shares		Amount				Additional Paid In Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common	Treasury	Common		Treasury
Balance as of December 31, 2019	80,079	(877)	$	8,008	$	(5,090)	$	553,210	$	(452,052)	$	104,076
Net loss	—	—	—		—		—		(69,104)		(69,104)
Purchase of treasury stock	—	(165)	—		(7)		—		—		(7)
Issuance of restricted stock	542	—	54		—		(54)		—		—
Stock-based compensation expense	—	—	—		—		328		—		328
Balance as of March 31, 2020	80,621	(1,042)	$	8,062	$	(5,097)	$	553,484	$	(521,156)	$	35,293

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)




	Shares		Amount				Additional Paid In Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common	Treasury	Common		Treasury

Balance as of December 31, 2019 (Predecessor)	80,079	(877)	$	8,008	$	(5,090)	$	553,210	$	(452,052)	$	104,076
Net loss	—	—	—		—		—		(69,104)		(69,104)


Purchase of treasury stock	—	(165)	—		(7)		—		—		(7)




Issuance of restricted stock	542	—	54		—		(54)		—		—
Stock-based compensation expense	—	—	—		—		328		—		328
Balance as of March 31, 2020 (Predecessor)	80,621	(1,042)	$	8,062	$	(5,097)	$	553,484	$	(521,156)	$	35,293
Net loss	—	—	—		—		—		(35,121)		(35,121)

Purchase of treasury stock	—	(100)	—		(1)		—		—		(1)
Equity awards vested or exercised	363	—	36		—		(36)		—		—
Equity awards vested in connection with the Plan	7,946	—	795		—		(795)		—		—
Stock-based compensation expense	—	—	—		—		978		—		978
Balance as of May 31, 2020 (Predecessor)	88,930	(1,142)	$	8,893	$	(5,098)	$	553,631	$	(556,277)	$	1,149
Cancellation of Predecessor equity	(88,930)	1,142	(8,893)		5,098		(553,631)		556,277		(1,149)
Balance as of May 31, 2020 (Predecessor)	—	—	$	—	$	—	$	—	$	—	$	—


Balance as of June 1, 2020 (Successor)	—	—	$	—	$	—	$	—	$	—	$	—
Issuance of Successor common stock	1,050	(1)	1		—		18,083		—		18,084
Equity component of Convertible Notes, net of offering costs	—	—	—		—		120,875		—		120,875
Net loss	—	—	—		—		—		(9,817)		(9,817)
Balance as of June 30, 2020 (Successor)	1,050	(1)	$	1	$	—	$	138,958	$	(9,817)	$	129,142

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Successor				Predecessor
	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	Six Months Ended June 30, 2021		One Month Ended June 30, 2020		Five Months Ended May 31, 2020
Cash flows from operating activities:
Net loss	$	(1631,~~942~~561)	$	(9,817)	$	(~~69,~~104,225)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1325,~~365~~309		5,236		2135,~~984~~647
Allowance for doubtful accounts, net of recoveries	(~~197~~395)		(283)		~~727~~1,209
Gain on dispositions of property and equipment, net	(23,~~298~~370)		(460)		(~~717~~989)
Reorganization items, net	—		—		~~988~~18,713
Stock-based compensation expense	~~830~~2,883		—		~~328~~552
Phantom stock compensation expense	—				(3)
Amortization of debt issuance costs and discount	5,323		766		1,084
Amortization of debt issuance costs and discount	2,578				1,219
Interest paid in-kind	4,376		—		—
Interest paid in-kind	1,057				—
Loss on extinguishment of debt	192		—		4,215
Loss on extinguishment of debt	83				—
Impairment	—		388		17,853
Impairment	—				17,853
Deferred income taxes	631		(399)		(546)
Deferred income taxes	1,370				1,115
Change in other noncurrent assets	252		(36)		(800)
Change in other noncurrent assets	64				690
Change in other noncurrent liabilities	(257)		355		1,524
Change in other noncurrent liabilities	(162)				(562)
Changes in current assets and liabilities:
Receivables	(34,~~386~~503)		7,395		1444,~~234~~041
Inventory	~~548~~278		240		~~834~~1,441
Prepaid expenses and other current assets	1,~~548~~476		133		(1,~~253)~~121
Accounts payable	~~(816)~~2,788		1,216		(415,~~114~~174)
Deferred revenues	(~~195~~65)		522		(~~342~~1,219)
Commitment premium	—				9,584
Accrued expenses	179		(539)		(6,692)
Accrued expenses	2,211				1,148
Net cash provided by (used in) operating activities	3,536		4,717		(2,245)
Net cash used in operating activities	(342)				(5,391)
Cash flows from investing activities:
Purchases of property and equipment	(38,~~744~~662)		(900)		(710,~~503~~848)
Proceeds from sale of property and equipment	36,~~522~~058		752		~~727~~1,665
Net cash used in investing activities	(222)				(6,776)
Proceeds from insurance recoveries	—		—		22
Net cash used in investing activities	(2,604)		(148)		(9,161)
Cash flows from financing activities:
Debt repayments	(13,~~270~~000)		—		—(175,000)
Proceeds from DIP Facility	—				4,000
Proceeds from debt issuance	—		—		195,187
DIP Facility issuance costs	—				(988)
Proceeds from DIP Facility	—		—		4,000
Purchase of treasury stock	—				(7)
Repayment of DIP Facility	—		—		(4,000)
Net cash provided by (used in) financing activities	(1,270)				3,005
Payments of debt issuance costs	—		—		(7,625)
Net decrease in cash, cash equivalents and restricted cash	(1,834)				(9,162)
Purchase of treasury stock	—		—		(8)
Beginning cash, cash equivalents and restricted cash	32,329				25,617
Net cash provided by (used in) financing activities	(3,000)		—		12,554
Ending cash, cash equivalents and restricted cash	$	30,495			$	16,455
Net decrease in cash, cash equivalents and restricted cash	(2,068)		4,569		1,148
Beginning cash, cash equivalents and restricted cash	32,329		26,765		25,617
Ending cash, cash equivalents and restricted cash	$	30,261	$	31,334	$	26,765
Supplementary disclosure:
Interest paid	$	13,~~203~~440	$	9	$	48,~~306~~105
Income tax paid	$	~~406~~1,027	$	118	$	~~623~~893
Reorganization items paid	$	~~521~~—	$	784	$	214,~~322~~947
Noncash investing and financing activity:
Change in capital expenditure accruals	$	70(290)	$	(188)	$	~~358~~(1,924)

See accompanying notes to condensed consolidated financial statements.

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Business

Our drilling services business segments provide contract land drilling services through three domestic divisions which are located in the Marcellus/Utica, Permian Basin and Eagle Ford, and Bakken regions, and internationally in Colombia. We provide a comprehensive service offering which includes the drilling rig, crews, supplies, and most of the ancillary equipment needed to operate our drilling rigs. Our fleet is 100% pad-capable and offers the latest advancements in pad drilling. The following table summarizes our current rig fleet count and composition for each drilling services business segment:


	Multi-well, Pad-capable
	AC rigs	SCR rigs	Total
Domestic drilling	17	—	17
International drilling	—	8	8
			25

Our production services business segments provide a range of services to producers primarily in Texas, North Dakota and the Rocky Mountain region. As of ~~March~~June 3130, 2021, the fleet counts for each of our production services business segments were as follows:


	550 HP	600 HP	Total
Well servicing rigs, by horsepower (HP) rating	111	12	123


Wireline services units			72

Basis of Presentation

~~The~~Subsequent ~~accompanying~~Events ~~unaudited~~— ~~condensed~~In ~~consolidated~~preparing ~~financial statements include~~ the ~~accounts of Pioneer Energy Services Corp. and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The~~ accompanying unaudited condensed consolidated financial statements, we have ~~been~~reviewed ~~prepared~~events inthat ~~accordance~~have ~~with~~occurred ~~accounting~~after ~~principles~~June 30, ~~generally~~2021, ~~accepted~~through in the ~~United~~filing ~~States~~ of ~~America~~this ~~for interim financial information and with the instructions to~~ Form 10-Q ~~and Rule 10-01 of Regulation S-X. Accordingly~~, ~~they do not include all of the information and footnotes required by generally accepted accounting principles~~ for ~~complete~~inclusion ~~financial~~as ~~statements. In the opinion of our management, all adjustments (consisting of normal, recurring accruals)~~ necessary ~~for a fair presentation have been included~~. We suggest that you read these unaudited condensed consolidated financial statements together with the consolidated financial statements and the related notes included in our annual report on Form 10-K for the year ended December 31, 2020.

AsOn ~~described~~July in5, ~~Note 2~~2021, ~~Emergence~~we ~~from~~entered ~~Voluntary~~into ~~Reorganization~~an ~~under~~Agreement ~~Chapter 11,~~ and ~~Note~~Plan 3,of ~~Fresh~~Merger ~~Start~~(the ~~Accounting,~~“Merger toAgreement”) ~~our~~with ~~consolidated financial statements included in our annual report on Form 10~~Patterson-KUTI ~~for the year ended December 31~~Energy, ~~2020~~Inc., ona ~~March 1,~~Delaware ~~2020~~corporation (~~the~~ “~~Petition Date~~Patterson”), ~~Pioneer~~Crescent ~~and~~Merger ~~certain~~Sub ofInc., ~~our~~a ~~domestic~~Delaware ~~subsidiaries~~corporation ~~(collectively,~~and ~~the~~wholly ~~“Debtors”)~~owned ~~filed~~subsidiary ~~voluntary~~of ~~petitions~~Patterson (~~the~~ “~~Bankruptcy~~Merger ~~Petitions~~Sub Inc.”), ~~for~~and ~~reorganization~~Crescent ~~under~~Ranch ~~title~~Second 11Merger ofSub ~~the~~LLC, ~~United~~a ~~States~~Delaware ~~Code~~limited ~~(the~~liability ~~“Bankruptcy~~company ~~Code”)~~and inwholly ~~the~~owned ~~United~~subsidiary ~~States Bankruptcy Court for the Southern District~~ of ~~Texas~~Patterson (~~the~~ “~~Bankruptcy~~Merger ~~Court~~Sub LLC”)., Onpursuant ~~May~~to 11which, ~~2020,~~upon the ~~Bankruptcy~~terms ~~Court~~and ~~confirmed~~subject to the ~~plan~~conditions ofset ~~reorganization~~forth ~~(the~~therein, ~~“Plan”~~(i) ~~that~~Merger ~~was~~Sub ~~filed~~Inc. ~~with~~will ~~the~~merge ~~Bankruptcy~~with ~~Court on March 2, 2020,~~ and oninto ~~May~~Pioneer ~~29,~~Energy ~~2020~~Services ~~(the~~Corp. (“~~Effective Date~~Pioneer”), ~~the~~with ~~conditions~~Pioneer tocontinuing ~~effectiveness~~as of the ~~plan~~surviving ~~were~~entity ~~satisfied~~(the ~~and~~“Surviving weCorporation”) ~~emerged~~(the ~~from~~“First ~~Chapter~~Company ~~11.~~Merger”) ~~Upon~~and ~~our emergence from Chapter 11, we adopted fresh start accounting in accordance with Accounting Standards Codification~~ (~~ASC~~ii) ~~Topic~~immediately ~~852~~following ~~and~~the ~~became~~First aCompany ~~new entity for financial reporting purposes. As a result~~Merger, the ~~condensed~~Surviving ~~consolidated~~Corporation ~~financial~~will ~~statements~~merge ~~after~~with ~~the~~and ~~Effective~~into ~~Date~~Merger ~~are~~Sub ~~not~~LLC, ~~comparable~~ with ~~the~~Merger ~~consolidated~~Sub ~~financial~~LLC ~~statements~~continuing ~~on or before that date~~ as ~~indicated~~the bysurviving entity (the “~~black~~Surviving ~~line~~Company”) ~~division in~~ (the ~~financial~~“Second ~~statements~~Company ~~and~~Merger” ~~footnote tables~~and, ~~which~~together ~~emphasizes~~with the ~~lack~~First ofCompany ~~comparability~~Merger, ~~between amounts presented. References to “Successor” relate to our financial position and results of operations after~~ the ~~Effective Date. References to~~ “~~Predecessor~~Mergers”), ~~refer~~which tois ~~our~~described ~~financial~~in ~~position~~more ~~and~~detail ~~results~~in ofNote ~~operations~~2, onSubsequent ~~or before the Effective Date~~Events.

~~Use~~Basis of ~~Estimates~~Presentation — InThe ~~preparing~~accompanying unaudited condensed consolidated financial statements include the accounts of Pioneer Energy Services Corp. and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements, wehave ~~make~~been ~~various~~prepared ~~estimates~~in ~~and~~accordance ~~assumptions~~with ~~that~~accounting ~~affect~~principles generally accepted in the ~~amounts~~United States of ~~assets~~America for interim financial information and ~~liabilities~~with wethe ~~report~~instructions asto Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the ~~dates~~information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of our management, all adjustments (consisting of normal, recurring accruals) necessary for a fair presentation have been included. We suggest that you read these unaudited condensed consolidated financial statements together with the ~~balance~~consolidated ~~sheets~~financial statements and the related notes included in our annual report on Form 10-K for the year ended December 31, 2020.

7As described in Note 2, Emergence from Voluntary Reorganization under Chapter 11, and Note 3, Fresh Start Accounting, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020, on March 1, 2020 (the “Petition Date”), Pioneer and certain of our domestic subsidiaries (collectively, the “Debtors”) filed

income and expenses we report for the periods shown in the income statements and statements of cash flows. Our actual results could differ significantly from those estimates. Material estimates affecting our financial results, including those that are particularly susceptible to significant changes in the near term, relate to our estimates of certain variable revenues and amortization periods of certain deferred revenues and costs associated with drilling daywork contracts, our estimates of projected cash flows and fair values for impairment evaluations, our estimate of the valuation allowance for deferred tax assets, and our estimate of the liability relating to the self-insurance portion of our health and workers’ compensation insurance. 9

~~Subsequent~~voluntary ~~Events~~petitions —(the In“Bankruptcy ~~preparing~~Petitions”) for reorganization under title 11 of the ~~accompanying~~United ~~unaudited~~States ~~condensed~~Code ~~consolidated~~(the ~~financial~~“Bankruptcy ~~statements~~Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). On May 11, we2020, ~~have~~the ~~reviewed~~Bankruptcy ~~events~~Court confirmed the plan of reorganization (the “Plan”) that ~~have~~was ~~occurred~~filed ~~after~~with the Bankruptcy Court on March 31 2, ~~2021~~2020, ~~through~~and on May 29, 2020 (the ~~filing~~“Effective Date”), the conditions to effectiveness of ~~this~~the ~~Form~~plan ~~10-Q~~were satisfied and we emerged from Chapter 11. Upon our emergence from Chapter 11, we adopted fresh start accounting in accordance with Accounting Standards Codification (ASC) Topic 852 and became a new entity for ~~inclusion~~financial reporting purposes. As a result, the condensed consolidated financial statements after the Effective Date are not comparable with the consolidated financial statements on or before that date as ~~necessary~~indicated by the “black line” division in the financial statements and footnote tables, which emphasizes the lack of comparability between amounts presented. References to “Successor” relate to our financial position and results of operations after the Effective Date. References to “Predecessor” refer to our financial position and results of operations on or before the Effective Date.

Use of Estimates — In preparing the accompanying unaudited condensed consolidated financial statements, we make various estimates and assumptions that affect the amounts of assets and liabilities we report as of the dates of the balance sheets and income and expenses we report for the periods shown in the income statements and statements of cash flows. Our actual results could differ significantly from those estimates. Material estimates affecting our financial results, including those that are particularly susceptible to significant changes in the near term, relate to our estimates of certain variable revenues and amortization periods of certain deferred revenues and costs associated with drilling daywork contracts, our estimates of projected cash flows and fair values for impairment evaluations, our estimate of the valuation allowance for deferred tax assets, and our estimate of the liability relating to the self-insurance portion of our health and workers’ compensation insurance.

Recently Issued Accounting Standards

Changes to accounting principles generally accepted in the United States of America (“U.S. GAAP”) are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASUs) to the FASB ASC. We consider the applicability and impact of all ASUs. Additionally, because we have securities registered under the Securities and Exchange Act of 1934, we consider the applicability and impact of releases issued by the Securities & Exchange Commission (the “SEC”). Other than those listed below, we have determined that there are currently no new or recently adopted ASUs or SEC releases which we believe will have a material impact on our consolidated financial position and results of operations.

•Convertible Instruments and Contracts in an Entity’s Own Equity. In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and preferred stock. Additionally, this ASU improves the consistency of EPS calculations by requiring entities to apply one method, the if-converted method, to all convertible instruments in diluted earnings-per-share calculations. This ASU will be effective for us on January 1, 2022, however, early adoption is permitted on January 1, 2021. We are currently evaluating the effect that the ASU will have on our consolidated financial statements.

•Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting and disclosure requirements for income taxes by, among other changes, removing certain exceptions and by clarifying certain aspects of the current accounting guidance. We adopted this ASU on January 1, 2021, and it did not have a material impact on our condensed consolidated financial statements.

Additional Detail of Account Balances

Restricted Cash — Our restricted cash balance primarily reflects the portion of net proceeds from the issuance of our senior secured term loan held in a restricted account until the completion of certain administrative tasks related to providing access rights to certain of our real property, a condition which is still in effect under the terms of our post-emergence debt instruments, as well as $0.53 million and $0.2 million of proceeds from asset sales received at ~~March~~June 3130, 2021 and December 31, 2020, respectively, which were used to fund the redemption of Senior Secured Notes tendered in January and ~~April~~July 2021, respectively, as further described in Note 56, Debt.

Other Receivables — Our other receivables primarily consist of recoverable taxes related to our international operations, asand, ~~well~~for asDecember 31, 2020, refundable payroll tax credit receivables associated with the CARES Act.

Prepaid Expenses and Other Current Assets — Prepaid expenses and other current assets include items such as insurance, rent deposits, software subscriptions, and other fees. We routinely expense these items in the normal course of business over the periods that we benefit from these expenses. Prepaid expenses and other current assets also include deferred mobilization costs for short-term drilling contracts and demobilization revenues recognized on drilling contracts expiring in the near term.

Other Noncurrent Assets — Other noncurrent assets primarily consist of prepaid taxes in Colombia which are creditable against future income taxes, but also includes the noncurrent portion of prepaid insurance premiums, unamortized debt issuance costs associated with our ABL Credit Facility, deferred mobilization costs on long-term drilling contracts, cash deposits related to the deductibles on our workers’ compensation insurance policies, and deferred compensation plan investments.

Other Accrued Expenses — Our other accrued expenses include accruals for items such as sales taxes, property taxes and withholding tax liabilities related to our international operations and accruals for professional fees. We routinely expense these items in the normal course of business over the periods these expenses benefit. Our other accrued expenses also includes the current portion of the lease liability associated with our long-term operating leases.

Other Noncurrent Liabilities — Our other noncurrent liabilities primarily relate to the noncurrent portion of payroll taxes deferred in connection with the CARES Act, as well as the noncurrent portion of deferred mobilization revenues.

2. ~~Revenue~~ Subsequent ~~from Contracts with Customers~~ Events

Merger Agreement with Patterson-UTI

On July 5, 2021, Pioneer entered into the Merger Agreement with Patterson, and Patterson’s wholly owned subsidiaries, Merger Sub Inc., and Merger Sub LLC, pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub Inc. will merge with and into Pioneer, with Pioneer continuing as the surviving entity, which will then merge with and into Merger Sub LLC, which will continue as the surviving entity. Upon consummation of the merger transactions, Pioneer will be a wholly owned subsidiary of Patterson and will no longer be a registrant under the rules of the SEC.

Under the terms of the Merger Agreement and as more fully described below, Pioneer will receive from Patterson aggregate consideration of up to 26,275,000 shares of common stock, par value $0.01 per share, of Patterson (“Patterson common stock”) and $30 million of cash. As more fully described in the Merger Agreement, all of Pioneer’s debt is being retired in connection with the Mergers with a portion of such shares and cash with Pioneer’s cash on hand determined in accordance with the Merger Agreement prior to closing (the “Company Cash”).

Pursuant to the Merger Agreement and subject to certain exceptions, holders of Common stock and holders of Convertible Notes will be issued shares of Patterson common stock according to an exchange ratio (the “Exchange Ratio”) to be determined at the closing of the Mergers and the other transactions contemplated by the Merger Agreement (collectively, the “Transactions”). The Exchange Ratio will equal the quotient obtained by dividing (i) 26,275,000 (subject to a downward adjustment as specified in the Merger Agreement if the average of the volume weighted average prices of the Patterson common stock during the 10 consecutive trading days ending with the last complete trading day prior to the closing date (“Patterson VWAP”) is greater than $11.00) less the shares of Patterson common stock to be delivered to the holders of the Senior Secured Floating Rate Notes due 2025 of Pioneer (the “Senior Notes”) as described below, by (ii) the aggregate number of shares of Common stock issued and outstanding immediately prior to the effective time of the First Company Merger (the “Effective Time”) plus the number of shares of Common stock into which the Convertible Notes are convertible immediately prior to the Effective Time. The shares of common stock to be delivered to holders of common stock and Convertible Notes in the Transactions are referred to as the “Merger Consideration.”

Pursuant to the Merger Agreement, immediately prior to the Effective Time, subject to certain exceptions, each share of Common stock issued and outstanding will be converted into the right to receive a number of shares of Patterson common stock equal to the Exchange Ratio. Each share of Common stock held in treasury by Pioneer or owned directly or indirectly by Patterson or Merger Sub Inc. will be automatically cancelled and will cease to exist, and no consideration will be issued therefor. Additionally, the Convertible Notes will convert into shares of Common stock in accordance with their terms in connection with the closing of the Transactions and the holders will receive shares of Patterson common stock on the same basis as if such notes had been converted pursuant to physical settlement prior to the closing of the Transactions. Additionally, each award of restricted common stock granted under Pioneer’s 2020 Employee Incentive Plan that is outstanding immediately prior to the merger transactions will become fully vested and treated as shares of Common stock.

In connection with the closing under the Merger Agreement, the Senior Notes will be redeemed at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to, but excluding, the closing date. In accordance with the Merger Agreement and the Third Supplemental Indenture to that certain Indenture, dated as of May 29, 2020, between the Company and Wilmington Trust, National Association, as trustee and security agent, as amended and supplemented by that certain First Supplemental Indenture, dated as of March 3, 2021, as further amended and supplemented by that certain Second Supplemental Indenture, dated as of May 11, 2021 (the “Indenture”), to be entered into in connection with the Transactions (the “Third Supplemental Indenture”), the redemption price will be paid in a combination of cash and shares of Patterson common stock, which will reduce the number of shares to be delivered to holders of Common stock and Convertible Notes. The amount of cash to be paid upon such redemption will not exceed an amount equal to $30 million plus Company Cash less the expenses to be paid by Pioneer in connection with the Transactions (the “Company Expenses”) less amounts required to repay in full and retire any indebtedness outstanding under the ABL Credit Facility (and such payoff amount the “Company ABL Payoff Amount”) and less the amount of accrued interest on the Convertible Notes (“Accrued Interest”). The number of shares of Patterson common stock to be delivered in such redemption will equal (i) the redemption price (including accrued interest) less $30 million less Company Cash, plus the Company Expenses, plus the Company ABL Payoff Amount and plus the Accrued Interest, divided by (ii) the product of (x) the average of the Patterson VWAP for the three consecutive trading days ending on the second trading day immediately preceding the closing date and (y) 0.8575.

Each of Pioneer and Patterson makes representations and warranties in the Merger Agreement and is subject to interim operating covenants relating to the conduct of its respective business during the interim period between the execution of the Merger Agreement and the closing of the Transactions. The parties are required to use their reasonable best efforts to cause the Transactions to be consummated as promptly as reasonably practicable and to obtain any required regulatory approvals, subject to certain exceptions.

The closing of the Transactions is subject to the satisfaction or waiver of certain closing conditions, including, among others, (i) the approval of the holders of at least sixty percent of the total voting power of all outstanding securities of Pioneer generally entitled to vote at a meeting of Pioneer’s stockholders (including the Convertible Notes) (the “Pioneer Stockholder Approval”) pursuant to the terms of the Merger Agreement, (ii) the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act shall have expired or been terminated, (iii) there being no law, injunction or order by a governmental body prohibiting the consummation of the Mergers, (iv) the approval for listing of the Patterson common stock to be issued in connection with the First Company Merger on the NASDAQ, (v) the registration statement on Form S-4, to be filed with the SEC by Patterson, having been declared effective by the SEC, (vi) subject to specified materiality standards, the accuracy of the representations and warranties of the other party, (vii) compliance by each other party in all material respects with their respective covenants, (viii) the absence of a Company Material Adverse Effect or a Parent Material Adverse Effect (each as defined in the Merger Agreement), as applicable, (ix) execution and delivery of the Third Supplemental Indenture, and (x) the requirement that not more than 6% of the shares of Common stock outstanding immediately prior to the Mergers have validly exercised appraisal rights pursuant to Delaware law.

The Merger Agreement contains termination rights for each of the Company and Patterson, including, among others, a termination right for each party if the consummation of the Mergers does not occur on or before January 3, 2022 (the “Outside Date”), subject to certain exceptions; provided that the right to terminate the Merger Agreement for failure to consummate the Mergers by the Outside Date will not be available to any party to the Merger Agreement whose failure to fulfill in any material respect any of its obligations under the Merger Agreement is the primary cause of, or the primary factor that resulted in, the failure of the Mergers being consummated by such Outside Date. Additionally, either party may terminate the Merger Agreement if (i) any court of competent jurisdiction or governmental entity takes action that prohibits the Transactions, (ii) if the Pioneer Stockholder Approval is not obtained or (iii) if the other party breaches the Merger Agreement and cannot cure such breach within the applicable time period. Additionally, Pioneer may elect to terminate the Merger Agreement to accept a Superior Proposal (as defined in the Merger Agreement) or if the Patterson VWAP drops below $5.60 for the 10 consecutive trading days prior to the closing of the Transactions. Patterson may elect to terminate the Merger Agreement if the Pioneer board changes its recommendation to approve the Merger Agreement. Moreover, pursuant to the Merger Agreement, Pioneer is subject to customary limitations prohibiting any solicitations or negotiations of alternative proposals between the execution of the Merger Agreement and the closings of the Transactions.

the Merger Agreement for failure to consummate the Mergers by the Outside Date or for failure to obtain the Pioneer Stockholder Approval, or if Patterson terminates the Merger Agreement due to Pioneer’s breach thereof and failure to cure such breach within the specified time, and (iii) within 12 months thereafter Pioneer enters into an alternative transaction.

In connection with the Merger Agreement, certain holders of Common stock and Convertible Notes holding approximately 88% of the voting power of Pioneer and 100% of the Senior Notes (collectively, the “Supporting Holders”) have entered into voting and support agreements with Patterson pursuant to which, among other things, the Supporting Holders have agreed, subject to certain limitations and exceptions, not to transfer any of their Common stock or Convertible Notes (collectively, the “Covered Securities”) until the earlier of the date the Merger Agreement is terminated by the Effective Time, to vote such Covered Securities in a manner to facilitate the consummation of the Mergers and to consent to and approve the Third Supplemental Indenture.

3. Revenue from Contracts with Customers

Our production services business segments earn revenues for well servicing and wireline services pursuant to master services agreements based on purchase orders or other contractual arrangements with the client. Production services jobs are generally short-term (ranging in duration from several hours to less than 30 days) and are charged at current market rates for the labor, equipment and materials necessary to complete the job. Production services jobs are varied in nature but typically represent a single performance obligation, either for a particular job, a series of distinct jobs, or a period of time during which we stand ready to provide services as our client needs them. Revenue is recognized for these services over time, as the services are performed.

Our drilling services business segments earn revenues by drilling oil and gas wells for our clients under daywork contracts. Daywork contracts are comprehensive agreements under which we provide a comprehensive service offering, including the drilling rig, crew, supplies, and most of the ancillary equipment necessary to operate the rig. Contract modifications that extend the term of a dayrate contract are generally accounted for prospectively as a separate dayrate contract. We account for our services provided under daywork contracts as a single performance obligation comprised of a series of distinct time increments which are satisfied over time. Accordingly, dayrate revenues are recognized in the period during which the services are performed.

With most drilling contracts, we also receive payments contractually designated for the mobilization and demobilization of drilling rigs and other equipment to and from the client’s drill site. Revenues associated with the mobilization and demobilization of our drilling rigs to and from the client’s drill site do not relate to a distinct good or service and are recognized ratably over the related contract term.

The amount of demobilization revenue that we ultimately collect is dependent upon the specific contractual terms, most of which include provisions for reduced (or no) payment for demobilization when, among other things, the contract is renewed or extended with the same client, or when the rig is subsequently contracted with another client prior to the termination of the current contract. Since revenues associated with demobilization activity are typically variable, at each period end, they are estimated at the most likely amount, and constrained when the likelihood of a significant reversal is probable. Any change in the expected amount of demobilization revenue is accounted for with the net cumulative impact of the change in estimate recognized in the period during which the revenue estimate is revised.

The upfront costs that we incur to mobilize the drilling rig to our client’s initial drilling site are capitalized and recognized ratably over the term of the related contract, including any contracted renewal or extension periods, which is our estimate of the period during which we expect to benefit from the cost of mobilizing the rig. Costs associated with the final demobilization at the end of the contract term are expensed when incurred, when the demobilization activity is performed.

From time to time, we may receive fees from our clients for capital improvements to our rigs to meet our client’s requirements. Such revenues are not considered to be distinct within the terms of the contract and are therefore allocated to the overall performance obligation, satisfied over the term of the contract. We record deferred revenue for such payments and recognize them ratably as revenue over the initial term of the related drilling contract.

Contract Asset and Liability Balances and Contract Cost Assets

Contract asset and contract liability balances relate to demobilization and mobilization revenues, respectively. Demobilization revenue that we expect to receive is recognized ratably over the related contract term, but invoiced upon completion of the demobilization activity. Mobilization revenue, which is typically collected upon the completion of the initial mobilization activity, is deferred and recognized ratably over the related contract term. Contract asset and liability balances are netted at the contract level, with the net current and noncurrent portions separately classified in our condensed consolidated balance sheets, and the resulting contract liabilities are referred to herein as “deferred revenues.” When demobilization revenues are recognized prior to the activity being performed, they are not yet billable, and the resulting contract assets are included in our other current assets in our unaudited condensed consolidated financial statements.

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the contract level, with the net current and noncurrent portions separately classified in our condensed consolidated balance sheets, and the resulting contract liabilities are referred to herein as “deferred revenues.” When demobilization revenues are recognized prior to the activity being performed, they are not yet billable, and the resulting contract assets are included in our other current assets in our unaudited condensed consolidated financial statements.

Contract cost assets represent the costs associated with the initial mobilization required in order to fulfill the contract, which are deferred and recognized ratably over the period during which we expect to benefit from the mobilization, or the period during which we expect to satisfy the performance obligations of the related contract. Contract cost assets are presented as either current or noncurrent, according to the duration of the original contract to which it relates, and referred to herein as “deferred costs.”

Our current and noncurrent deferred revenues, contract assets and deferred costs as of ~~March~~June 3130, 2021 and December 31, 2020 were as follows (amounts in thousands):

	March 31, 2021		December 31, 2020
	Successor
Current deferred revenues	$	824	$	1,019
	June 30, 2021		December 31, 2020
Current deferred costs	47		361
Current deferred revenues	$	955	$	1,019
Current deferred costs	410		361
Current contract assets	—		300
Noncurrent deferred costs	~~291~~204		194

The changes in contract balances and contract assets during 2021 are primarily related to the amortization of deferred revenues and costs and the impact of demobilization performed in January for which the revenue was earned over the contract period in 2020. These decreases were partially offset by increases related to ~~two~~three rigs deployed under new contracts in 2021. Amortization of deferred revenues and costs were as follows (amounts in thousands):

Successor

Predecessor

~~Predecessor~~

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Six Months Ended June 30, 2021

One Month Ended June 30, 2020

Five Months Ended May 31, 2020

Amortization of deferred revenues

~~528~~889

12,~~613~~705

Amortization of deferred costs

~~381~~541

1,~~263~~876

As of ~~March~~June 3130, 2021, 1615 of our 25 rigs are earning under daywork contracts, of which 69 are under domestic term contracts, and 14 additional ~~international~~rigs ~~rig~~are is contracted but pending operations.

34. Property and Equipment

Assets Held for Sale — In April 2020, we closed our coiled tubing services business and placed all of our coiled tubing services assets as held for sale at June 30, 2020, which represents $21.43 million of our total assets held for sale at ~~March~~June 3130, 2021. We have various other equipment designated as held for sale which is carried at fair value. When the net carrying value of an asset designated as held for sale exceeds its estimated fair value, which we estimate based on expected sales prices, which are classified as Level 3 inputs as defined by ASC Topic 820, Fair Value Measurements and Disclosures, we recognize the difference as an impairment charge.

Impairments — In accordance with ASC Topic 360, Property, Plant and Equipment, we monitor all indicators of potential impairments. We evaluate for potential impairment of long-lived assets when indicators of impairment are present, which may include, among other things, significant adverse changes in industry trends (including revenue rates, utilization rates, oil and natural gas market prices, and industry rig counts). In performing an impairment evaluation, we estimate the future undiscounted net cash flows from the use and eventual disposition of the assets grouped at the lowest level that independent cash flows can be identified. We perform an impairment evaluation and estimate future undiscounted cash flows for each of our asset groups separately, which are our domestic drilling services, international drilling services, well servicing and wireline services segments, and, prior to being placed as held for sale, our coiled tubing services segment. If the sum of the estimated future undiscounted net cash flows is less than the carrying amount of the asset group, then we determine the fair value of the asset group, and the amount of an impairment charge would be measured as the difference between the carrying amount and the fair value of the assets.

Due to the significant decline in industry conditions, commodity prices, and projected utilization of equipment, as well as the COVID-19 pandemic’s impact on our industry, our projected cash flows declined during the first quarter of 2020, and we performed recoverability testing on all our reporting units. As a result of this analysis, we incurred impairment charges of $16.4 million to reduce the carrying values of our coiled tubing assets to their estimated fair values during the three months ended March 31, 2020. For all our other reporting units, excluding coiled tubing, we determined that the sum of the estimated future undiscounted net cash flows were in excess of the carrying amounts and that no impairment existed for these reporting units at March 31, 2020. We continue to monitor potential indicators of impairment and concluded that none of our reporting units are currently at risk of impairment at March 31, 2021.

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$16.4 million to reduce the carrying values of our coiled tubing assets to their estimated fair values during the three months ended March 31, 2020. For all our other reporting units, excluding coiled tubing, we determined that the sum of the estimated future undiscounted net cash flows were in excess of the carrying amounts and that no impairment existed for these reporting units at March 31, 2020. We continue to monitor potential indicators of impairment and concluded that none of our reporting units are currently at risk of impairment at June 30, 2021.

The assumptions we use in the evaluation for impairment are inherently uncertain and require management judgment. Although we believe the assumptions and estimates used in our impairment analysis are reasonable, different assumptions and estimates could materially impact the analysis and resulting conclusions. The most significant inputs used in our impairment analysis include the projected utilization and pricing of our services, as well as the estimated proceeds upon any future sale or disposal of the assets, all of which are classified as Level 3 inputs as defined by ASC Topic 820, Fair Value Measurements and Disclosures. If commodity prices decrease or remain at current levels for an extended period of time, or if the demand for any of our services decreases below what we are currently projecting, our estimated cash flows may decrease and our estimates of the fair value of certain assets may decrease as well. If any of the foregoing were to occur, we could incur impairment charges on the related assets.

45. Leases

As a drilling and production services provider, we provide the drilling rigs and production services equipment which are necessary to fulfill our performance obligations and which are considered leases under ASU No. 2016-02, Leases, (together with its amendments, herein referred to as “ASC Topic 842”). However, ASU No. 2018-11, Leases: Targeted Improvements, allows lessors to (i) combine the lease and non-lease components of revenues when the revenue recognition pattern is the same and when the lease component, when accounted for separately, would be considered an operating lease, and (ii) account for the combined lease and non-lease components under ASC Topic 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component. We elected to apply this expedient and therefore recognize our revenues (both lease and service components) under ASC Topic 606, and present them as one revenue stream in our unaudited condensed consolidated statements of operations.

As a lessee, we lease our corporate office headquarters in San Antonio, Texas, and we conduct our business operations through 14 other regional offices located throughout the United States and internationally in Colombia. These operating locations typically include regional offices, storage and maintenance yards and employee housing sufficient to support our operations in the area. We lease most of these properties under non-cancelable term and month-to-month operating leases, many of which contain renewal options that can extend the lease term from one year to five years and some of which contain escalation clauses. We also lease various items of supplemental equipment, typically under cancelable short-term and very short term (less than 30 days) leases. Due to the nature of our business, any option to renew these short-term leases, and the options to extend certain of our long-term real estate leases, are generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease, and the lease payments during these periods are similarly excluded from the calculation of operating lease asset and lease liability balances.

The following table summarizes our lease expense recognized, excluding variable lease costs (amounts in thousands):

Successor

Predecessor

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Six Months Ended June 30, 2021

One Month Ended June 30, 2020

Five Months Ended May 31, 2020

Long-term operating lease expense

~~315~~615

151

~~662~~1,080

Short-term operating lease expense

24,~~001~~539

456

34,~~526~~456

The following table summarizes the amount and timing of our obligations associated with our long-term operating leases (amounts in thousands):

	March 31, 2021		December 31, 2020
	Successor
Within 1 year	$	1,120	$	1,069
	June 30, 2021		December 31, 2020
In the second year	1,000		985
Within 1 year	$	1,074	$	1,069
In the third year	886		921
In the second year	992		985
In the fourth year	880		874
In the third year	864		921
In the fifth year	740		895
In the fourth year	885		874
Thereafter	229		299
In the fifth year	585		895
Total undiscounted lease obligations	$	4,855	$	5,043
Thereafter	161		299
Impact of discounting	(486)		(532)
Total undiscounted lease obligations	$	4,561	$	5,043
Discounted value of operating lease obligations	$	4,369	$	4,511
Impact of discounting	(438)		(532)
Current operating lease liabilities	$	947	$	889
Discounted value of operating lease obligations	$	4,123	$	4,511
Noncurrent operating lease liabilities	3,422		3,622
Current operating lease liabilities	$	913	$	889
	$	4,369	$	4,511
Noncurrent operating lease liabilities	3,210		3,622
	$	4,123	$	4,511

116. Debt

5. Debt

The principal amount of our outstanding debt obligations, including those issued in payment of in-kind interest, were as follows (amounts in thousands):

	March 31, 2021		December 31, 2020
	Successor
Convertible Notes	$	132,763	$	132,763
	June 30, 2021		December 31, 2020
Senior Secured Notes	77,226		77,439
Convertible Notes	$	136,082	$	132,763
Senior Secured Notes	75,496		77,439

Upon our emergence from Chapter 11, our debt obligations were recognized at fair value on our consolidated balance sheet due to the application of fresh start accounting, and a portion of the fair value of our Convertible Notes is classified as equity, as described further below.

As described further in Note 2, Subsequent Events, upon consummation of the Mergers with Patterson, all our outstanding debt obligations will be retired.

ABL Credit Facility

OnUpon ~~the~~our ~~Effective~~emergence ~~Date~~from Chapter 11, pursuant to the terms of the Plan, we entered into a senior secured asset-based revolving credit agreement in an aggregate amount of $75 million (the “ABL Credit Facility”) among us and substantially all of our domestic subsidiaries as borrowers (the “Borrowers”), the lenders party thereto and PNC Bank, National Association as administrative agent, and on August 7, 2020, we entered into a First Amendment to the ABL Credit Facility (together, herein referred to as the “ABL Credit Facility”) which, among other things, reduced the maximum amount of the revolving credit agreement to $40 million. Among other things, proceeds of loans under the ABL Credit Facility may be used to finance ongoing working capital and general corporate needs.

The maturity date of loans made under the ABL Credit Facility is the earliest of 90 days prior to maturity of the Senior Secured Notes or the Convertible Notes (both of which are described further below) and May 29, 2025. Borrowings under the ABL Credit Facility will bear interest at a rate of (i) the LIBOR rate (subject to a floor of 0%) plus an applicable margin of 375 basis points per annum or (ii) the base rate plus an applicable margin of 275 basis points per annum.

The ABL Credit Facility limits our annual capital expenditures to 125% of the budget set forth in the projections for any fiscal year and provides that if our availability plus pledged cash of up to $3 million falls below $6 million (15% of the maximum revolver amount), we will be required to comply with a fixed charge coverage ratio of 1.0 to 1.0, all of which is defined in the ABL Credit Facility. As of ~~March~~June 3130, 2021, we had no borrowings and approximately $7.3 million in outstanding letters of credit under the ABL Credit Facility and subject to the availability requirements in the ABL Credit Facility, based on eligible accounts receivable and inventory balances at March 31, 2021, availability under the ABL Credit Facility was $16.3 million, which our access to would be subject to (i) our requirement to maintain 15% available or comply with a fixed charge coverage ratio, as described above and (ii) the requirement to maintain availability of at least $4.0 million, which may include up to $2.0 million of pledged cash.

Facility, based on eligible accounts receivable and inventory balances at June 30, 2021, availability under the ABL Credit Facility was $17.2 million, which our access to would be subject to (i) our requirement to maintain 15% available or comply with a fixed charge coverage ratio, as described above and (ii) the requirement to maintain availability of at least $4.0 million, which may include up to $2.0 million of pledged cash.

Convertible Notes

We entered into an indenture, dated asMay ~~of the Effective Date~~29, 2020 among the Company and Wilmington Trust, N.A., as trustee, as supplemented by the First Supplemental Indenture to the Convertible Notes Indenture dated May 11, 2021, (the “Convertible Notes Indenture”), and issued $129.8 million aggregate principal amount of convertible senior unsecured pay-in-kind notes due 2025 thereunder (the “Convertible Notes”). We received net issuance proceeds of $120.2 million, which was net of the $9.6 million Backstop Commitment Premium, which is described further below.

The Convertible Notes are general unsecured obligations which will mature on November 15, 2025, unless earlier accelerated, redeemed, converted or repurchased, and bear interest at a fixed rate of 5% per annum, which will be payable semi-annually on May 15 and November 15 in-kind in the form of an increase to the principal amount. The Convertible Notes are convertible at the option of the holders at any time into shares of our common stock and will convert mandatorily into our common stock at maturity; provided, however, that if the value of our common stock otherwise deliverable in connection with a mandatory conversion of a Convertible Note on the maturity date would be less than the principal amount of such Convertible Note plus accrued and unpaid interest, then the Convertible Note will instead convert into an amount of cash equal to the principal amount thereof plus accrued and unpaid interest. The initial conversion rate is 75 shares of common stock per $1,000 principal amount of the Convertible Notes, which in aggregate represents 9,732,825 shares of common stock and an initial conversion price of $13.33 per share. The conversion rate is subject to customary anti-dilution adjustments.

common stock and an initial conversion price of $13.33 per share. The conversion rate is subject to customary anti-dilution adjustments.

If we undergo a “fundamental change” as defined in the Convertible Notes Indenture, subject to certain conditions, holders may require us to repurchase all or any portion of their Convertible Notes for cash at an amount equal to 100% of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid interest. In the case of certain fundamental change events that constitute merger events (as defined in the Convertible Notes Indenture), we have a superseding right to cause the mandatory conversion of all or part of the Convertible Notes into a number of shares of common stock, per $1,000 principal amount of Convertible Notes, equal to the then-current conversion rate or the cash value of such number of shares of common stock.

Holders of Convertible Notes are entitled to vote on all matters on which holders of our common stock generally are entitled to vote (or, if any, to take action by written consent of the holders of our common stock), voting together as a single class together with the shares of our common stock and not as a separate class, on an as-converted basis, at any annual or special meeting of holders of our common stock and each holder is entitled to such number of votes as such holder would receive on an as-converted basis on the record date for such vote.

The Convertible Notes Indenture contains customary events of default and covenants that limit our ability and the ability of certain of our subsidiaries to incur, assume or guarantee additional indebtedness and create liens and enter into mergers or consolidations.

Because the Convertible Notes contain an embedded conversion option whereby they, or a portion of them, may be settled in cash, we have separately accounted for the liability and equity components of the Convertible Notes in accordance with the accounting requirements for convertible debt instruments set forth in ASC Topic 470-20, Debt with Conversion and Other Options. The initial fair value of the Convertible Notes was estimated and allocated, along with related debt issuance costs, to the liability and equity components in accordance with the application of Fresh Start Accounting and the requirements of ASC Topic 470. We treat the issuance of new Convertible Notes for the payment of in-kind interest as an issuance of a new instrument that retains the original economics associated with the conversion option at inception, and therefore, the Convertible Notes issued in payment of in-kind interest are accounted for with their separate equity and liability components that are proportionally the same as the original issuance.

Backstop Commitment Agreement

Prior to filing the Plan, we entered into a separate backstop commitment agreement with some of our previous creditors as well as certain members of our senior management (the “Backstop Commitment Agreement”), pursuant to which these parties committed to backstop the issuance of new Convertible Notes upon our emergence from Chapter 11. As consideration for this commitment, we committed to make an aggregate payment of $9.6 million in the form of additional new convertible bonds, or in cash if the Backstop Commitment Agreement was terminated under certain circumstances as forth therein. As a result, we incurred a liability and expense at the time we entered into the Backstop Commitment Agreement for the aggregate amount of $9.6 million (the “Commitment Premium”) which was recognized in our Predecessor condensed consolidated financial statements as of and for the three months ended March 31, 2020. The Commitment Premium was settled in conjunction with our emergence from Chapter 11 and the issuance of the Convertible Notes.

for this commitment, we committed to make an aggregate payment of $9.6 million in the form of additional new convertible bonds, or in cash if the Backstop Commitment Agreement was terminated under certain circumstances as forth therein. As a result, we incurred a liability and expense at the time we entered into the Backstop Commitment Agreement for the aggregate amount of $9.6 million (the “Commitment Premium”) which was recognized in our Predecessor condensed consolidated financial statements as of and for the three months ended March 31, 2020. The Commitment Premium was settled in conjunction with our emergence from Chapter 11 and the issuance of the Convertible Notes.

Senior Secured Notes

We entered into an indenture, dated asMay ~~of the Effective Date~~29, 2020 among the Company, the subsidiary guarantors party thereto and Wilmington Trust, N.A., as trustee, as supplemented by the First Supplemental Indenture, dated March 43, 2021, and the Second Supplemental Indenture dated May 11, 2021 (the “Senior Secured Notes Indenture”), and issued $78.1 million aggregate principal amount of floating rate senior secured notes due 2025 (the “Senior Secured Notes”) thereunder. The Senior Secured Notes are guaranteed on a senior secured basis by substantially all of our existing domestic subsidiaries, which also guarantee our obligations under the ABL Credit Facility, (the “Guarantors”) on a full and unconditional basis and are secured by a second lien on the accounts receivable and inventory and a first lien on substantially all of the other assets and properties (including the cash proceeds thereof) of the Company and the Guarantors. We received net issuance proceeds of $75 million, which was net of the original issue discount of $3.1 million.

The Senior Secured Notes will mature on May 15, 2025 and ~~interest will~~ accrue interest at the rate of LIBOR plus 9.5% per annum until May 15, 2024, after which the rate will be LIBOR plus 10.50% per annum, and in both cases with a LIBOR rate floor of 1.5%, and payable quarterly in arrears on ~~February~~the 1515th of each February, May 15, August 15 and November 15 of each year,. ~~commencing~~The oninterest ~~August~~payments ~~15,~~which ~~2020.~~were ~~With~~due ~~respect~~prior to ~~any~~May ~~interest~~2021 ~~payment~~were ~~due~~paid on50% orin ~~prior~~cash toand ~~May~~50% ~~29,~~of ~~2021,~~the ~~50%~~interest was paid in-kind in the form of an increase to the principal amount.

13We may redeem all or part of the Senior Secured Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 104% for the twelve-month period beginning on June 1, 2021; (ii) 102% for the twelve-month period beginning on June 1, 2022; (iii) 101% for the twelve-month period beginning on June 1, 2023 and (iv) 100% for the twelve-month period beginning June 1, 2024 and at any time thereafter, plus accrued and unpaid interest at the redemption date. Notwithstanding the foregoing, if a change of control (as defined in the Senior Secured Notes Indenture) occurs prior to June 1, 2022, we may elect to purchase all remaining outstanding Senior Secured Notes not tendered to us as described below at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the applicable redemption date. If a change of control (as defined in the Senior Secured Notes Indenture) occurs, holders of the Senior Secured Notes will have the right to require us to repurchase all or any part of their Senior Secured Notes at a purchase price equal to 101% of the aggregate principal amount of the Senior Secured Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

interest will be payable in cash and 50% of the interest will be paid in-kind in the form of an increase to the principal amount; however, a majority in interest of the holders of the Senior Secured Notes may elect to have 100% of the interest due on or prior to May 29, 2021 payable in-kind. For all interest periods commencing on or after May 15, 2024, the interest rate for the Senior Secured Notes will be a rate equal to LIBOR plus 10.50%, with a LIBOR rate floor of 1.5%.

We may redeem all or part of the Senior Secured Notes on or after June 1, 2021 at redemption prices (expressed as percentages of the principal amount) equal to (i) 104% for the twelve-month period beginning on June 1, 2021; (ii) 102% for the twelve-month period beginning on June 1, 2022; (iii) 101% for the twelve-month period beginning on June 1, 2023 and (iv) 100% for the twelve-month period beginning June 1, 2024 and at any time thereafter, plus accrued and unpaid interest at the redemption date. Notwithstanding the foregoing, if a change of control (as defined in the Senior Secured Notes Indenture) occurs prior to June 1, 2022, we may elect to purchase all remaining outstanding Senior Secured Notes not tendered to us as described below at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the applicable redemption date. If a change of control (as defined in the Senior Secured Notes Indenture) occurs, holders of the Senior Secured Notes will have the right to require us to repurchase all or any part of their Senior Secured Notes at a purchase price equal to 101% of the aggregate principal amount of the Senior Secured Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

The Senior Secured Notes Indenture contains a minimum asset coverage ratio of 1.5 to 1.0 as of any June 30 or December 31, beginning December 31, 2020. The Senior Secured Notes Indenture provides for certain customary events of default and contains covenants that limit, among other things, our ability and the ability of certain of our subsidiaries, to incur, assume or guarantee additional indebtedness; pay dividends or distributions on capital stock or redeem or repurchase capital stock; make investments; repay junior debt; sell stock of our subsidiaries; transfer or sell assets; enter into sale and lease back transactions; create liens; enter into transactions with affiliates; and enter into mergers or consolidations.

Having completed aggregate qualifying asset sales in excess of $5 million, in accordance with the Senior Notes Indenture, we commenced and completed offers to purchase $2.6 million in aggregate principal amount of the Senior Secured Notes during the year ended December 31, 2020 at a purchase price equal to 100% of the principal amount, plus accrued and unpaid interest through, but not including, the respective purchase dates. During the ~~three~~six months ended ~~March~~June 3130, 2021, we completed additional qualifying asset sales and associated offers to purchase an aggregate $1.3.0 million in principal amount of the Senior Secured Notes and recognized $0.12 million of loss on extinguishment of debt associated with these repayments.

When we have completed qualifying asset sales before a reporting period end which require us to commence an offer to purchase Senior Secured Notes in the subsequent period, the related amount of Senior Secured Notes is presented as a current liability, and the cash on hand which will fund the purchase is classified as “restricted cash” in our consolidated balance sheet.

Successor Debt Issuance Costs and Discount

Costs incurred in connection with the issuance of our Convertible Notes (which were allocated to the liability component, as described above) and Senior Secured Notes, as well as the issuance discounts, were capitalized and are being amortized using the effective interest method over the term of the related debt instrument. Costs incurred in connection with our ABL Credit Facility were capitalized and are being amortized using the straight-line method over the expected term of the agreement. Our unamortized debt issuance costs and discounts are presented below (amounts in thousands):

	Successor
	March 31, 2021
	June 30, 2021		December 31, 2020
Unamortized discount on Convertible Notes (based on imputed interest rate of 20.9%)	$	5453,~~205~~910	$	56,438
Unamortized discount on Senior Secured Notes (based on imputed interest rate of 13.2%)	2,~~556~~214		2,733
Unamortized debt issuance costs	3,~~501~~445		3,714

67. Taxes

Upon emergence from Chapter 11, our Prepetition Senior Notes were exchanged for shares of our new common stock. As a result of the market value of equity upon emergence from Chapter 11 bankruptcy proceedings, the estimated amount of cancellation of debt income (CODI) for federal income tax purposes is approximately $229 million, which reduces the value of our net operating losses by an equal amount. The reduction of net operating losses was fully offset by a corresponding decrease in valuation allowance.

We provide a valuation allowance when it is more likely than not that some portion of our deferred tax assets will not be realized. We evaluated the impact of the reorganization, including the change in control, resulting from our bankruptcy emergence and determined it is more likely than not that we will not fully realize future income tax benefits related to our domestic net deferred tax assets based on the annual limitations that impact us, historical results, and expected market conditions known on the date of measurement.

Our deferred tax assets related to net operating losses available to reduce future taxable income, and our valuation allowance that offset a portion of our domestic net deferred tax assets, consist of the following (amounts in thousands):

Successor

~~Predecessor~~

March 31, 2021

December 31, 2020

June 30, 2021

December 31, 2020

Net operating loss carryforward deferred tax asset

8385,~~277~~944

82,901

~~82,901~~

Valuation allowance

(7677,~~061~~786)

(74,676)

~~(74,676)~~

78. Fair Value of Financial Instruments

The FASB’s Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, defines fair value and provides a hierarchical framework associated with the level of subjectivity used in measuring assets and liabilities at fair value. Currently, our financial instruments consist primarily of cash and cash equivalents, trade and other receivables, trade payables and long-term debt. The carrying value of cash and cash equivalents, trade and other receivables, and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. AsWe ~~a result of the application of fresh start accounting and subsequent stability in the market for energy bonds, we~~ estimate that the carrying value of our long-term debt approximates fair value.

89. Earnings (Loss) Per Common Share

Basic earnings (loss) per share (EPS) is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period.

Diluted EPS is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock-based compensation awards and the Convertible Notes. Potentially dilutive common shares from outstanding stock-based compensation awards are determined using the average share price for each period under the treasury stock method. Potentially dilutive shares from the Convertible Notes are determined using the if-converted method, whereby the Convertible Notes are assumed to be converted and included in the denominator of the EPS calculation (if dilutive) and the interest expense, net of tax, recorded in connection with the Convertible Notes is added back to net income (~~loss~~if dilutive).

1519

The following presents a reconciliation of the numerators and denominators of the basic and diluted EPS computations (amounts in thousands, except per share data):

	Successor					Predecessor
		Three Months Ended March 31, 2021					Three Months Ended March 31, 2020
		Three months ended June 30, 2021		One Month Ended June 30, 2020			Two Months Ended May 31, 2020
Numerator:
Net loss (numerator for basic EPS)		$	(1614,~~942~~619)	$	(9,817)		$	(6935,~~104~~121)
Interest expense on Convertible Notes, net of tax		—		—			—
Numerator for diluted EPS, if-converted method		(1614,~~942~~619)		(9,817)			(6935,~~104~~121)
Denominator:
Weighted-average shares (denominator for basic EPS)		1,~~138~~217		1,048			7879,~~753~~288
Potentially dilutive shares issuable from Convertible Notes, if-converted method		—		—			—
Potentially dilutive shares issuable from outstanding stock-based compensation awards, treasury stock method		—		—			—
Denominator for diluted EPS		1,~~138~~217		1,048			7879,~~753~~288
Loss per common share - Basic		$	(1412.8901)	$	(9.37)		$	(0.8844)
Loss per common share - Diluted		$	(1412.8901)	$	(9.37)		$	(0.8844)
Potentially dilutive securities excluded as anti-dilutive		910,~~957~~204		9,733			4,~~794~~103

In April 2021, our Compensation, Nominating and Governance Committee approved the grant of an aggregate 196,417 shares of restricted stock to our directors and certain employees.


	Successor					Predecessor
		Six Months Ended June 30, 2021		One Month Ended June 30, 2020			Five Months Ended May 31, 2020
Numerator:


Net loss (numerator for basic EPS)		$	(31,561)	$	(9,817)		$	(104,225)
Interest expense on Convertible Notes, net of tax		—		—			—
Numerator for diluted EPS, if-converted method		(31,561)		(9,817)			(104,225)

Denominator:
Weighted-average shares (denominator for basic EPS)		1,178		1,048			78,968
Potentially dilutive shares issuable from Convertible Notes, if-converted method		—		—			—
Potentially dilutive shares issuable from outstanding stock-based compensation awards, treasury stock method		—		—			—
Denominator for diluted EPS		1,178		1,048			78,968


Loss per common share - Basic		$	(26.79)	$	(9.37)		$	(1.32)
Loss per common share - Diluted		$	(26.79)	$	(9.37)		$	(1.32)
Potentially dilutive securities excluded as anti-dilutive		10,113		9,733			4,517

In April 2021, we granted 110,417 shares of restricted stock to our non-employee directors which vested immediately and 83,000 shares of restricted stock to certain employees which will vest in either two or three equal annual installments, all of which had a grant date fair value of $9. ~~Segment~~69 ~~Information~~per share, which was based on the price of our common stock estimated by third-party specialists using a discounted cash flow model with inputs that are defined as Level 3 inputs under ASC Topic 820, Fair Value Measurements and Disclosures.

As ofdescribed ~~March 31,~~in ~~2021~~Note 2, weSubsequent ~~have~~Events, ~~four~~upon ~~operating~~the ~~segments,~~consummation ~~comprised~~ of ~~two~~the ~~drilling services business segments (domestic and international drilling) and two production services business segments (well servicing and wireline services)~~Mergers, ~~which~~all ~~reflects~~outstanding ~~the~~restricted ~~basis~~stock ~~used~~awards bywill ~~management~~vest in ~~making decisions regarding our business for resource allocation and performance assessment~~full, asall ~~required~~Convertible byNotes ~~ASC~~will ~~Topic~~convert ~~280,~~to ~~Segment~~shares ~~Reporting.~~of Incommon ~~April 2020~~stock, ~~we closed our coiled tubing services business~~ and ~~placed~~ all holders of ~~our~~outstanding ~~coiled~~shares ~~tubing~~of ~~services~~common ~~assets~~stock aswill ~~held~~be ~~for~~entitled ~~sale~~to atreceive ~~June~~Patterson ~~30,~~common ~~2020.~~stock ~~Historical~~according ~~financial~~to ~~information~~the ~~for~~Exchange ~~our~~Ratio ~~coiled tubing services business, which had previously been presented~~ as aspecified ~~separate operating segment, continues to be presented~~ in the ~~following~~Merger ~~tables as a component of continuing operations.~~

Agreement.

10. Segment Information

As of June 30, 2021, we have four operating segments, comprised of two drilling services business segments (domestic and international drilling) and two production services business segments (well servicing and wireline services), which reflects the basis used by management in making decisions regarding our business for resource allocation and performance assessment, as required by ASC Topic 280, Segment Reporting. In April 2020, we closed our coiled tubing services business and placed all of our coiled tubing services assets as held for sale at June 30, 2020. Historical financial information for our coiled tubing services business, which had previously been presented as a separate operating segment, continues to be presented in the following tables as a component of continuing operations.

Our domestic and international drilling services segments provide contract land drilling services to a diverse group of exploration and production companies through our three drilling divisions in the US and internationally in Colombia. We provide a comprehensive service offering which includes the drilling rig, crews, supplies, and most of the ancillary equipment needed to operate our drilling rigs.

Our well servicing and wireline services segments provide a range of production services to producers primarily in Texas, North Dakota and the Rocky Mountain region. Our former coiled tubing services segment also provided various production services primarily in Texas, Wyoming, and surrounding areas.

The following tables set forth certain financial information for each of our segments and corporate (amounts in thousands):

	Successor		~~Successor~~				Predecessor		~~Predecessor~~
					Three Months Ended March 31, 2021					Three Months Ended March 31, 2020
	Three months ended June 30, 2021		One Month Ended June 30, 2020				Two Months Ended May 31, 2020
Revenues:
Domestic drilling	$	23,414	$	5,866	$	~~22,483~~	$	17,450		$	~~35,891~~
International drilling	9,685		828		~~11,063~~		1,473			~~14,455~~
Drilling services	33,099		6,694		~~33,546~~		18,923			~~50,346~~
Well servicing	18,033		3,756		~~14,857~~		6,331			~~25,616~~
Wireline services	8,394		713		~~10,335~~		2,410			~~33,133~~
Coiled tubing services	—		—		—		384			~~5,227~~
Production services	26,427		4,469		~~25,192~~		9,125			~~63,976~~
Consolidated revenues	$	59,526	$	11,163	$	~~58,738~~	$	28,048		$	~~114,322~~
Operating costs:
Domestic drilling	$	17,405	$	3,646	$	~~15,459~~	$	9,236		$	~~23,865~~
International drilling	7,760		1,063		~~8,075~~		1,538			~~12,138~~
Drilling services	25,165		4,709		~~23,534~~		10,774			~~36,003~~
Well servicing	13,445		2,810		~~11,888~~		5,926			~~20,951~~
Wireline services	7,754		1,085		~~9,878~~		3,552			~~28,284~~
Coiled tubing services	33		139		26		1,773			~~6,784~~
Production services	21,232		4,034		~~21,792~~		11,251			~~56,019~~
Consolidated operating costs	$	46,397	$	8,743	$	~~45,326~~	$	22,025		$	~~92,022~~
Gross margin:
Domestic drilling	$	6,009	$	2,220	$	~~7,024~~	$	8,214		$	~~12,026~~
International drilling	1,925		(235)		~~2,988~~		(65)			~~2,317~~
Drilling services	7,934		1,985		~~10,012~~		8,149			~~14,343~~
Well servicing	4,588		946		~~2,969~~		405			~~4,665~~
Wireline services	640		(372)		~~457~~		(1,142)			~~4,849~~
Coiled tubing services	(33)		(139)		~~(26)~~		(1,389)			~~(1,557)~~
Production services	5,195		435		~~3,400~~		(2,126)			~~7,957~~
Consolidated gross margin	$	13,129	$	2,420	$	~~13,412~~	$	6,023		$	~~22,300~~
Identifiable Assets:
Domestic drilling (1)					$	141,186				$	336,260
International drilling (1) (2)					41,048					51,443
Drilling services					182,234					387,703
Well servicing					41,778					107,747
Wireline services					19,399					66,712
Coiled tubing services					2,357					11,373
Production services					63,534					185,832
Corporate					56,785					42,199
Consolidated identifiable assets (3)					$	302,553				$	615,734
Depreciation and amortization:
Domestic drilling					$	6,290				$	10,905
International drilling					3,148					1,301
Drilling services					9,438					12,206
Well servicing					2,936					4,781
Wireline services					890					3,077
Coiled tubing services					—					1,693
Production services					3,826					9,551
Corporate					101					227
Consolidated depreciation					$	13,365				$	21,984

1721

	Successor		~~Successor~~				Predecessor		~~Predecessor~~
					Three Months Ended March 31, 2021					Three Months Ended March 31, 2020
	Three months ended June 30, 2021		One Month Ended June 30, 2020				Two Months Ended May 31, 2020
Capital Expenditures:
Identifiable Assets:
Domestic drilling					$	2,385				$	3,241
Domestic drilling (1)	$	138,473	$	150,897			$	158,283
International drilling					565					1,167
International drilling (1) (2)	40,680		47,541				49,611
Drilling services	179,153		198,438		~~2,950~~		207,894			~~4,408~~
Well servicing	41,284		47,832		~~335~~		49,388			~~1,717~~
Wireline services	17,998		22,623		~~492~~		23,948			~~1,572~~
Coiled tubing services	1,339		5,941		—		6,336			~~163~~
Production services	60,621		76,396		~~827~~		79,672			~~3,452~~
Corporate	55,037		68,966		37		65,057			1
Consolidated capital expenditures					$	3,814				$	7,861
Consolidated identifiable assets (3)	$	294,811	$	343,800			$	352,623
Depreciation and amortization:
Domestic drilling	$	5,975	$	2,012			$	7,153
International drilling	2,514		1,076				843
Drilling services	8,489		3,088				7,996
Well servicing	2,555		1,261				3,039
Wireline services	807		763				2,011
Coiled tubing services	—		—				471
Production services	3,362		2,024				5,521
Corporate	93		124				146
Consolidated depreciation	$	11,944	$	5,236			$	13,663
Capital Expenditures:
Domestic drilling	$	2,231	$	484			$	621
International drilling	1,405		138				106
Drilling services	3,636		622				727
Well servicing	564		30				201
Wireline services	307		60				112
Coiled tubing services	—		—				3
Production services	871		90				316
Corporate	51		—				20
Consolidated capital expenditures	$	4,558	$	712			$	1,063

(1) Identifiable assets for our drilling segments include the impact of a $28.5 million and $32.9 million intercompany balance, as of March 31, 2021 and 2020, respectively, between our domestic drilling segment (intercompany receivable) and our international drilling segment (intercompany payable).


	Successor					Predecessor
		Six Months Ended June 30, 2021		One Month Ended June 30, 2020			Five Months Ended May 31, 2020
Revenues:
Domestic drilling		$	45,897	$	5,866		$	53,341
International drilling		20,748		828			15,928
Drilling services		66,645		6,694			69,269
Well servicing		32,890		3,756			31,947
Wireline services		18,729		713			35,543
Coiled tubing services		—		—			5,611
Production services		51,619		4,469			73,101
Consolidated revenues		$	118,264	$	11,163		$	142,370


	Successor					Predecessor
		Six Months Ended June 30, 2021		One Month Ended June 30, 2020			Five Months Ended May 31, 2020
Operating costs:
Domestic drilling		$	32,864	$	3,646		$	33,101
International drilling		15,835		1,063			13,676
Drilling services		48,699		4,709			46,777
Well servicing		25,333		2,810			26,877
Wireline services		17,632		1,085			31,836
Coiled tubing services		59		139			8,557
Production services		43,024		4,034			67,270
Consolidated operating costs		$	91,723	$	8,743		$	114,047

Gross margin:
Domestic drilling		$	13,033	$	2,220		$	20,240
International drilling		4,913		(235)			2,252
Drilling services		17,946		1,985			22,492
Well servicing		7,557		946			5,070
Wireline services		1,097		(372)			3,707
Coiled tubing services		(59)		(139)			(2,946)
Production services		8,595		435			5,831
Consolidated gross margin		$	26,541	$	2,420		$	28,323

Identifiable Assets:
Domestic drilling (1)		$	138,473	$	150,897		$	158,283
International drilling (1) (2)		40,680		47,541			49,611
Drilling services		179,153		198,438			207,894
Well servicing		41,284		47,832			49,388
Wireline services		17,998		22,623			23,948
Coiled tubing services		1,339		5,941			6,336
Production services		60,621		76,396			79,672
Corporate		55,037		68,966			65,057
Consolidated identifiable assets (3)		$	294,811	$	343,800		$	352,623

Depreciation and amortization:
Domestic drilling		$	12,265	$	2,012		$	18,058
International drilling		5,662		1,076			2,144
Drilling services		17,927		3,088			20,202
Well servicing		5,491		1,261			7,820
Wireline services		1,697		763			5,088
Coiled tubing services		—		—			2,164
Production services		7,188		2,024			15,072
Corporate		194		124			373
Consolidated depreciation		$	25,309	$	5,236		$	35,647


Capital Expenditures:
Domestic drilling		$	4,616	$	484		$	3,862
International drilling		1,970		138			1,273
Drilling services		6,586		622			5,135
Well servicing		899		30			1,918
Wireline services		799		60			1,684
Coiled tubing services		—		—			166
Production services		1,698		90			3,768
Corporate		88		—			21
Consolidated capital expenditures		$	8,372	$	712		$	8,924

(1) Identifiable assets for our drilling segments include the impact of a $28.7 million and $28.3 million intercompany balance, as of June 30, 2021 and 2020, respectively, between our domestic drilling segment (intercompany receivable) and our international drilling segment (intercompany payable).

(2) Identifiable assets for our international drilling segment include five drilling rigs that are owned by our Colombia subsidiary and three drilling rigs that are owned by one of our domestic subsidiaries and leased to our Colombia subsidiary.

(3) Upon our emergence from Chapter 11, due to the application of fresh start accounting, the carrying value of our identifiable assets was reduced to the estimated fair value and a new historical cost basis was established for all our property and equipment.

The following is a reconciliation of consolidated gross margin of our segments reported above to loss from operations as reported on the condensed consolidated statements of operations (amounts in thousands):

Successor

Predecessor

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Three months ended June 30, 2021

One Month Ended June 30, 2020

Two Months Ended May 31, 2020

Consolidated gross margin

13,~~412~~129

2,420

226,~~300~~023

Depreciation and amortization

(1311,~~365~~944)

(5,236)

(2113,~~984~~663)

General and administrative

(910,~~713~~997)

(4,213)

(147,~~655~~392)

Prepetition restructuring charges

—

~~(17,074)~~252

Impairment

—

(388)

~~(17,853)~~—

Bad debt (expense) recovery, net

~~197~~198

283

(~~727~~482)

Gain on dispositions of property and equipment, net

21,~~298~~072

460

~~717~~272

Loss from operations

(78,~~171~~542)

(6,674)

(4914,~~276~~990)

10. Commitments, Contingencies and Insurance Claim Liabilities


	Successor					Predecessor
		Six Months Ended June 30, 2021		One Month Ended June 30, 2020			Five Months Ended May 31, 2020
Consolidated gross margin		$	26,541	$	2,420		$	28,323
Depreciation and amortization		(25,309)		(5,236)			(35,647)
General and administrative		(20,710)		(4,213)			(22,047)
Prepetition restructuring charges		—		—			(16,822)
Impairment		—		(388)			(17,853)
Bad debt (expense) recovery, net		395		283			(1,209)
Gain on dispositions of property and equipment, net		3,370		460			989


Loss from operations		$	(15,713)	$	(6,674)		$	(64,266)

11. Commitments, Contingencies and Insurance Claim Liabilities

In connection with our operations in Colombia, our foreign subsidiaries routinely obtain bonds for bidding on drilling contracts, performing under drilling contracts, and remitting customs and importation duties. Based on historical experience and information currently available, we believe the likelihood of demand for payment under these bonds and guarantees is remote.

In February 2021, we received a $2.5 million assessment from the Colombian tax and customs authority related to an administrative delay in documentation provided for one of our drilling rigs. After evaluating the assessment with our customs advisors, we do not believe that it is probable that we will be required to pay the customs duty assessment.

We are routinely subject to various states’ sales and use tax audits. As of ~~March~~June 3130, 2021 and December 31, 2020, our accrued liability was $1.0 million and $0.9 million, respectively, based on our estimate of the indirect tax obligations. Due to the inherent uncertainty of the audit process, we believe that it is reasonably possible that we may incur additional tax assessments with respect to one or more potential audits in excess of the amount accrued. We believe that such an outcome would not have a material adverse effect on our results of operations or financial position, but because of the aforementioned uncertainty, an estimate of the possible loss or range of loss from adverse audit results cannot reasonably be made.

Due to the nature of our business, we are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment-related disputes. Legal costs relating to these matters are expensed as incurred. In the opinion of our management, none of the pending litigation, disputes or claims against us will have a material adverse effect on our financial condition, results of operations or cash flow from operations.

Additionally, if the Mergers are consummated as described in Note 2, Subsequent Events, Pioneer will be required to pay certain fees which are associated with the transactions, including approximately $3.3 million in fees to our advisors which are currently contingent upon closing the transactions, certain fees associated with legal counsel, certain bonuses to employees and a portion of other fees associated with the filing of any necessary SEC documents.

Insurance Claim Liabilities

We use a combination of self-insurance and third-party insurance for various types of coverage. At ~~March~~June 3130, 2021, our accrued insurance premiums and deductibles include approximately $0.76 million of accruals for costs incurred under the self-insurance portion of our health insurance and approximately $1.8 million of accruals for costs associated with our workers’ compensation insurance. We accrue for these costs as claims are incurred using an actuarial calculation that is based on industry and our company’s historical claim development data, and we accrue the cost of administrative services associated with claims processing. Based upon our past experience, management believes that we have adequately provided for potential losses. However, future multiple occurrences of serious injuries to employees could have a material adverse effect on our financial position and results of operations.

Our insurance recoveries receivables and our accrued liability for insurance claims and settlements represent our estimate of claims in excess of our deductible, which are covered and managed by our third-party insurance providers, some of which may ultimately be settled by the insurance provider in the long-term. These are presented in our condensed consolidated balance sheets as current due to the uncertainty in the timing of reporting and payment of claims.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements we make in the following discussion that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements made in good faith that are subject to risks, uncertainties and assumptions. These forward-looking statements are based on our current beliefs, intentions, and expectations and are not guarantees or indicators of future performance. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including risks and uncertainties relating to the effects of the pending merger with Patterson-UTI, the potential failure to complete the merger with Patterson-UTI, the effects of our bankruptcy on our business and relationships, the concentration of our equity ownership following bankruptcy, the effect of the coronavirus (COVID-19) pandemic on our industry, general economic and business conditions and industry trends, levels and volatility of oil and gas prices, the continued demand for drilling services or production services in the geographic areas where we operate, the highly competitive nature of our business, the supply of marketable equipment within the industry, technological advancements and trends in our industry and improvements in our competitors' equipment, the loss of one or more of our major clients or a decrease in their demand for our services, operating hazards inherent in our operations, the continued availability of supplies, equipment and qualified personnel required to operate our fleets, the political, economic, regulatory and other uncertainties encountered by our operations, changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment, the occurrence of cybersecurity incidents, the success or failure of future acquisitions or dispositions, our level of indebtedness and future compliance with covenants under our debt agreements, and the impact of not having our common stock listed on a national securities exchange or quoted on an over-the-counter market. We have discussed many of these factors in more detail elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended by Form 10-K/A for the year ended December 31, 2020, including under the headings “Risk Factors” in Item 1A and “Special Note Regarding Forward-Looking Statements and Risk Factor Summary” in the Introductory Note to Part I. These factors are not necessarily all the important factors that could affect us. Other unpredictable or unknown factors could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our stockholders that they should (1) recognize that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

20Recent Developments

Patterson-UTI Merger Agreement

On July 5, 2021, Pioneer Energy Services Corp., a Delaware corporation (“Pioneer”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson”), Crescent Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Patterson (“Merger Sub Inc.”), and Crescent Ranch Second Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Patterson (“Merger Sub LLC”), pursuant to which, upon the terms and subject to the conditions set forth therein, (i) Merger Sub Inc. will merge with and into Pioneer, with Pioneer continuing as the surviving entity (the “Surviving Corporation”) (the “First Company Merger”) and (ii) immediately following the First Company Merger, the Surviving Corporation will merge with and into Merger Sub LLC, with Merger Sub LLC continuing as the surviving entity (the “Surviving Company”) (the “Second Company Merger” and, together with the First Company Merger, the “Mergers”). Upon consummation of the Mergers, Pioneer will be a wholly owned subsidiary of Patterson and will no longer be a registrant under the rules of the SEC.

Under the terms of the Merger Agreement and as more fully described below, Pioneer will receive from Patterson an aggregate consideration of up to 26,275,000 shares of common stock, par value $0.01 per share, of Patterson (“Patterson common stock”) and $30 million of cash. As more fully described in the Merger Agreement, all of Pioneer’s debt is being retired in connection with the Mergers with a portion of such shares and cash with Pioneer’s cash on hand determined in accordance with the Merger Agreement prior to closing (the “Company Cash”).

Pursuant to the Merger Agreement and subject to certain exceptions, holders of Common stock and holders Convertible Notes will be issued shares of Patterson common stock according to an exchange ratio (the “Exchange Ratio”) to be determined at the closing of the Mergers and the other transactions contemplated by the Merger Agreement (collectively, the “Transactions”). The Exchange Ratio will equal the quotient obtained by dividing (i) 26,275,000 (subject to a downward adjustment as specified in the Merger Agreement if the average of the volume weighted average prices of the Patterson common stock during the 10 consecutive trading days ending with the last complete trading day prior to the closing date

(“Patterson VWAP”) is greater than $11.00) less the shares of Patterson common stock to be delivered to the holders of the Senior Secured Floating Rate Notes due 2025 of Pioneer (the “Senior Notes”) as described below, by (ii) the aggregate number of shares of Common stock issued and outstanding immediately prior to the effective time of the First Company Merger (the “Effective Time”) plus the number of shares of Common stock into which the Convertible Notes are convertible immediately prior to the Effective Time.

The Merger Agreement contains termination rights for each of the Company and Patterson, including, among others, a termination right for each party if the consummation of the merger does not occur on or before January 3, 2022 (the “Outside Date”), subject to certain exceptions; provided that the right to terminate the Merger Agreement for failure to consummate the Mergers by the Outside Date will not be available to any party to the Merger Agreement whose failure to fulfill in any

material respect any of its obligations under the Merger Agreement is the primary cause of, or the primary factor that resulted in, the failure of the Mergers being consummated by such Outside Date. Additionally, either party may terminate the Merger Agreement if (i) any court of competent jurisdiction or governmental entity takes action that prohibits the Transactions, (ii) if the Pioneer Stockholder Approval is not obtained or (iii) if the other party breaches the Merger Agreement and cannot cure such breach within the applicable time period. Additionally, Pioneer may elect to terminate the Merger Agreement to accept a Superior Proposal (as defined in the Merger Agreement) or if the Patterson VWAP drops below $5.60 for the 10 consecutive trading days prior to the closing of the Transactions. Patterson may elect to terminate the Merger Agreement if the Pioneer board changes its recommendation to approve the Merger Agreement. Moreover, pursuant to the Merger Agreement, Pioneer is subject to customary limitations prohibiting any solicitations or negotiations of alternative proposals between the execution of the Merger Agreement and the closings of the Transactions.

As more fully described in the Merger Agreement, in the event that the Merger Agreement is terminated (i) by Pioneer to accept a Superior Proposal prior to obtaining the Pioneer Stockholder Approval or (ii) by Patterson due to the Pioneer board’s change of recommendation with respect to the Transactions, then Pioneer will be obligated to pay to Patterson a break-up fee of $9.5 million (the “Break-Up Fee”) pursuant to the terms of the Merger Agreement. Pioneer will also be obligated to pay the Break-Up Fee if (i) an acquisition proposal of Pioneer is made by a third party, (ii) Pioneer or Patterson then terminates the Merger Agreement for failure to consummate the Mergers by the Outside Date or for failure to obtain the Pioneer Stockholder Approval, or if Patterson terminates the Merger Agreement due to Pioneer’s breach thereof and failure to cure such breach within the specified time, and (iii) within 12 months thereafter Pioneer enters into an alternative transaction.

Company Overview

Pioneer Energy Services Corp. provides land-based drilling services and production services to a diverse group of oil and gas exploration and production companies in the United States and internationally in Colombia. Drilling services and production services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well.

•Drilling Services — Our current drilling rig fleet is 100% pad-capable and offers the latest advancements in pad drilling, with 17 AC rigs in the US and 8 SCR rigs in Colombia. We provide a comprehensive service offering which includes the drilling rig, crews, supplies, and most of the ancillary equipment needed to operate our drilling rigs, which are deployed through our division offices in the following regions:


						Rig Count
Domestic drilling:
Marcellus/Utica						5

Permian Basin and Eagle Ford						10
Bakken						2
International drilling						8
						25

•Production Services — Our production services business segments provide a range of services to producers primarily in Texas, North Dakota and the Rocky Mountain region.

◦Well Servicing. Our fleet consists of 111 rigs with 550 horsepower and 12 rigs with 600 horsepower which are deployed through 5 operating locations in Texas and North Dakota.

◦Wireline Services. Our fleet of 72 wireline units, including nine units that offer greaseless electric wireline used to reach further depths in longer laterals and two greaseless EcoQuietTM units designed to reduce noise when operating in proximity to urban areas, is deployed through 5 operating locations in Texas, the Rocky Mountain region and North Dakota.

Pioneer Energy Services Corp. was incorporated under the laws of the State of Texas in 1979 as the successor to a business that had been operating since 1968. Since then, we have significantly expanded and transformed our business through acquisitions and organic growth. Upon emergence from Chapter 11 in May 2020, we converted from a Texas corporation to a Delaware corporation.

Our current business is comprised of two business lines — Drilling Services (consisting of Domestic Drilling and International Drilling reportable segments) and Production Services (consisting of Well Servicing and Wireline Services reportable segments). In April 2020, we closed our coiled tubing operations and idled all our coiled tubing equipment, which were subsequently placed as held for sale as of June 30, 2020. Financial information about our operating segments is included in Note 910, Segment Information, of the Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

Pioneer Energy Services Corp.’s corporate office is located at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209. Our phone number is (855) 884-0575 and our website address is www.pioneeres.com. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (SEC). Information on our website is not incorporated into this report or otherwise made part of this report.

Reorganization and Emergence from Chapter 11

On March 1, 2020, we filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. On May 11, 2020, the Bankruptcy Court confirmed the plan of reorganization (the “Plan”) that was filed with the Bankruptcy Court on March 2, 2020, and on May 29, 2020 (the “Effective Date”), the conditions to effectiveness of the Plan were satisfied, and we emerged from Chapter 11.

As a result of the application of fresh start accounting and the effects of the implementation of the Plan, our condensed consolidated financial statements after the Effective Date are not comparable with the consolidated financial statements on or

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before that date as indicated by the “black line” division in the financial statements and footnote tables, which emphasizes the lack of comparability between amounts presented. References to “Successor” relate to our financial position and results of operations after the Effective Date. References to “Predecessor” refer to our financial position and results of operations on or before the Effective Date.

Market Conditions and Outlook

Industry Overview — Demand for oilfield services offered by our industry is a function of our clients’ willingness and ability to make capital and operating expenditures to explore for, develop and produce hydrocarbons, which is primarily driven by current and expected oil and natural gas prices. Capital expenditures for the drilling and completion of exploratory and development wells are more directly influenced by current and expected oil and natural gas prices while operating expenditures for the maintenance of existing wells, for which a range of production services are required in order to maintain production, are relatively more stable and predictable.

Although over the longer term, drilling and production services have historically trended similarly in response to fluctuations in commodity prices, because exploration and production companies often adjust their budgets for exploration and development drilling first in response to a change in commodity prices, the demand for drilling services is generally impacted first and to a greater extent than the demand for production services which is more dependent on ongoing expenditures that are necessary to maintain production. Additionally, within the range of production services businesses, those that derive more revenue from production-related activity, as opposed to completion of new wells, tend to be less affected by volatility in commodity prices.

However, in a severe downturn that is prolonged, both operating and capital expenditures are significantly reduced, and the demand for all our service offerings is significantly impacted. After a prolonged or severe downturn, the demand for production-related workover services generally improves first, followed by the demand for completion-oriented services as exploration and production companies begin to complete wells that were previously drilled but not completed during the downturn, and finally by the drilling of new wells.

For additional information concerning the potential effects of volatility in oil and gas prices and other industry trends, see Item 1A – “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.

Market Conditions and Outlook — The COVID-19 pandemic which began in early 2020 resulted in a significant decrease in oil prices and significant disruption and uncertainty in the oil and natural gas market. In March 2020, the decline in demand due to the COVID-19 pandemic coincided with the announcement of price reductions and possible production increases by members of OPEC and other oil exporting nations, including Russia. Although OPEC and other oil exporting nations ultimately agreed to cut production, these extreme supply and demand dynamics caused significant crude oil price declines, negatively impacting our industry’s oil producers who responded with significant cuts in their previously planned and projected spending.

The trends in spot prices of WTI crude oil and Henry Hub natural gas, and the resulting trends in domestic land rig counts (per Baker Hughes) and domestic well servicing rig counts (per Association of Energy Service Companies/Energy Workforce & Technology Council) from January ~~2019~~2020 through ~~March~~June 2021 are illustrated in the graphs below.

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The commodity price environment and global oversupply of oil during 2020 resulted in an oversupply of equipment in the industry, declining rig counts and dayrates, and substantially reduced activity for all our service offerings. Additionally, because our business depends on the level of spending by our clients, we are also affected by our clients’ ability to access the capital markets. After several consecutive years without significant improvement in commodity prices, many exploration and production companies have limited their spending to a level which can be supported by net operating cash flows alone, as access to the capital markets through debt or equity financings has become more challenging in our industry.

However, the recovery of supply chain disruptions and the ~~recent~~ rollout of COVID-19 vaccinations ~~have~~ led to ~~signs of~~ stabilization and improvements in commodity pricing, with oil prices of ~~approximately~~over $6070 per barrel at the end of ~~March~~June 2021, versus approximately $2040 per barrel one year ago. Steadily increasing commodity prices and rig counts since the latter half of 2020 and continued market stabilization led to improved activity levels for all of our business segments.

Activity levels for our domestic drilling, ~~international drilling,~~ and well servicing operations (measured in revenue days and hours, respectively) in the ~~first~~second quarter of 2021 increased 64%, ~~9%,~~ and 316%, respectively, as compared to the prior quarter, while our international drilling revenue days and wireline stage counts completed were down ~~approximately~~ 7% and 35%, respectively. At the end of ~~March~~June 2021, 1615 of our 25 drilling rigs were earning revenue, 1013 of which were under term contracts, and 4 additional rigs are contracted but pending operations. Including the ~~one~~rigs ~~additional~~which ~~rig~~ we have contracted but which isare pending operations, the aggregate average term remaining on our term contracts is approximately 1113 months.

As our clients continue to adjust their capital budgets and operations in response to improving but uncertain industry conditions, we are continuing to focus our efforts on reducing costs and managing labor pressures, ~~the realignment of certain businesses,~~ and maintaining essential functions and readiness for the improving market conditions we expect to continue through 2021. We believe our high-quality equipment, services, and excellent safety record position us well to compete as our industry recovers.

Liquidity and Capital Resources

Liquidity Overview

Our emergence from Chapter 11 has allowed us to significantly reduce our level of indebtedness and our future cash interest obligations. We currently expect that cash and cash equivalents, cash generated from operations, and available funds under the ABL Credit Facility are adequate to cover our liquidity requirements for at least the next 12 months. However, our ability to maintain sufficient liquidity and compliance with our debt instruments over the next 12 months, grow, make capital expenditures, and service our debt depends primarily upon (i) the level of demand for, and pricing of, our products and services; (ii) the level of spending by our clients; (iii) our ability to collect our receivables and access borrowings under the ABL Credit Facility; (iv) the supply and demand for oil and gas; (v) oil and gas prices; (vi) general economic and market conditions; and (vii) and other factors that are beyond our control.

The market competition between OPEC and non-OPEC countries coupled with the impact of the COVID-19 pandemic caused significant crude oil price declines in 2020, negatively impacting our industry’s oil producers who responded with significant cuts in their recent and projected spending which affected, and could continue to negatively affect, the amount of cash we generate and have available for working capital requirements, capital expenditures, and debt service.

Our availability under the ABL Credit Facility at ~~March~~June 3130, 2021 was $1617.32 million, which our access to would be subject to (i) our requirement to maintain 15% of the maximum revolver amount available or comply with a fixed charge coverage ratio and (ii) the requirement to maintain availability of at least $4 million, which may include up to $2 million of pledged cash. In addition, as a result of current market conditions, certain of our clients are facing financial pressures and liquidity issues. There can be no assurance that one or more of our clients will not delay or default on payments owed to us or file for bankruptcy protection, in which case we may be unable to collect all, or any portion, of the accounts receivable owed to us by such clients. Delays or defaults in payments of accounts receivable owed to us may also adversely affect our borrowing base and our ability to borrow under our ABL Credit Facility.

Sources of Capital Resources

Our principal sources of liquidity currently consist of:

•total cash and cash equivalents, including restricted cash ($30.53 million as of ~~March~~June 3130, 2021);

•cash generated from operations; and

•availability under the ABL Credit Facility ($1617.32 million as of ~~March~~June 3130, 2021, as discussed below).

2331

InAlthough we are restricted from doing so during the ~~future~~pendency of the merger with Patterson, if the mergers are not consummated, we may also consider equity and/or debt offerings in the future, as appropriate, to meet our liquidity needs. However, our ability to access the capital markets by issuing debt or equity securities will be dependent on market conditions, our financial condition, and other factors beyond our control. Additionally, the ABL Credit Facility and the indentures for our Convertible Notes and Senior Secured Notes contain covenants that limit our ability to incur additional indebtedness, the incurrence of which would also first require the approval of two of our principal stockholders, and our bylaws limit our ability to issue equity securities without the prior written consent of one of our principal stockholders.

ABL Credit Facility — OnUpon ~~the~~our ~~Effective~~emergence ~~Date~~from Chapter 11, pursuant to the terms of the Plan, we entered into a senior secured asset-based revolving credit agreement in an aggregate amount of $75 million among us and substantially all of our domestic subsidiaries as borrowers (the “Borrowers”), the lenders party thereto and PNC Bank, National Association as administrative agent. On August 7, 2020, we entered into a First Amendment to the ABL Credit Facility (together, herein referred to as the “ABL Credit Facility”) which, among other things, reduced the maximum amount of the revolving credit agreement to $40 million. Among other things, proceeds of loans under the ABL Credit Facility may be used to finance ongoing working capital and general corporate needs.

The maturity date of loans made under the ABL Credit Facility is the earliest of 90 days prior to maturity of the Senior Secured Notes or the Convertible Notes (both of which are described below in the section entitled Debt Instruments and Compliance Requirements) and May 29, 2025. Borrowings under the ABL Credit Facility will bear interest at a rate of (i) the LIBOR rate (subject to a floor of 0%) plus an applicable margin of 375 basis points per annum or (ii) the base rate plus an applicable margin of 275 basis points per annum.

The ABL Credit Facility is guaranteed by the Borrowers and is secured by a first lien on the Borrowers’ accounts receivable and inventory, and the cash proceeds thereof, and a second lien on substantially all of the other assets and properties of the Borrowers. The ABL Credit Facility limits our annual capital expenditures to 125% of the budget set forth in the projections for any fiscal year and provides that if our availability plus pledged cash of up to $3 million falls below $6 million (15% of the maximum revolver amount), we will be required to comply with a fixed charge coverage ratio of 1.0 to 1.0, all of which is defined in the ABL Credit Facility.

As of ~~March~~June 3130, 2021, we had no borrowings and approximately $7.3 million in outstanding letters of credit under the ABL Credit Facility and subject to the availability requirements in the ABL Credit Facility, based on eligible accounts receivable and inventory balances at ~~March~~June 3130, 2021, availability under the ABL Credit Facility was $1617.32 million, which our access to would be subject to (i) our requirement to maintain 15% of the maximum revolver amount available or comply with a fixed charge coverage ratio, as described above, and (ii) the requirement to maintain availability of at least $4 million, which may include up to $2 million of pledged cash.

Uses of Capital Resources

Our principal liquidity requirements are currently for:

•working capital needs;

•capital expenditures; and

•debt service.

Our working capital needs typically fluctuate in relation to activity and pricing. Following a sustained period of low activity, our working capital needs generally increase as we invest in reactivating previously idle equipment and in purchases of inventory and supplies for expected increasing activity. Our capital requirements to maintain our equipment also fluctuate in relation to activity, and increase following a period of sustained low activity. During periods of expansion and/or organic growth, we have been more likely to meet increased capital requirements through equity or debt financing. During periods of sustained low activity and pricing, when our cash flow from operations are negatively impacted, we may also access additional capital through the use of available funds under the ABL Credit Facility.

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Working Capital — Our working capital and current ratio, which we calculate by dividing current assets by current liabilities, were as follows as of ~~March~~June 3130, 2021 and December 31, 2020 (amounts in thousands, except current ratio):

	March 31, 2021		December 31, 2020		Change
	June 30, 2021		December 31, 2020		Change
Current assets	$	112,~~646~~276	$	113,133	$	(~~487~~857)
Current liabilities	6061,~~529~~027		59,018		12,~~511~~009
Working capital	$	5251,~~117~~249	$	54,115	$	(12,~~998~~866)
Current ratio	1.98		1.9		—(0.1)

Our current assets decreased by $0.59 million during 2021, primarily due to a $12.81 million decrease in total cash including restricted cash, a $12.50 million decrease in ~~prepaid~~assets ~~expenses~~held ~~and~~for ~~other current assets~~sale, and a $01.94 million decrease in ~~assets~~prepaid ~~held~~expenses ~~for~~and ~~sale~~other current assets, all of which were largely offset by a $45.67 million increase in total trade and unbilled receivables.

•The decrease in total cash, including cash equivalents and restricted cash, is primarily due to repayments of Senior Secured Notes totaling $1.3.0 million, asand ~~well~~a asnet investment of $02.36 million ofin capital expenditures, net ~~cash~~of ~~used~~proceeds infrom ~~operating~~asset ~~activities~~sales, ~~and~~which awere ~~net~~partially ~~investment~~offset ofby $03.25 million inof ~~capital~~net ~~expenditures~~cash provided by operating activities.

•The decrease in assets held for sale is primarily attributable to the sale of equipment and inventory from our coiled tubing operations which closed in April 2020.

•The decrease in prepaid expenses and other current assets is primarily due to the amortization of prepaid insurance premiums which are generally paid in late October each year.

•The increase in our total trade and unbilled receivables during 2021 is attributable primarily to an increase in activity for our international drilling operations, which experienced an increase in revenue of ~~approximately~~over 5030% for the quarter ended ~~March~~June 3130, 2021 as compared to the quarter ended December 31, 2020. This increase in activity during 2021, combined with the impact of the timing of the billing and collection cycles for our international drilling contracts, drove the 1317% increase in our total trade and unbilled receivables.

Our current liabilities increased $12.50 million during 2021, due to a $12.6 million ~~increases~~increase in ~~both~~trade ~~accrued~~accounts ~~employee~~payable ~~costs~~ and a $1.6 million increase in accrued ~~interest~~employee costs, offset ~~partially~~in part by ~~decreases~~a decrease in other accrued expenses ~~and trade accounts payable~~.

•The increase in ~~accrued~~trade ~~employee~~accounts ~~costs~~payable ~~during 2021~~ is primarily due to the ~~timing~~14% ofincrease ~~pay~~in ~~periods~~our ~~and~~operating ~~the~~costs ~~associated~~for ~~withholding~~the ~~and~~quarter ~~unemployment~~ended ~~tax~~June 30, ~~payments.~~2021 ~~The~~as ~~decrease~~compared ~~was~~to ~~partially~~the ~~offset~~quarter byended aDecember 31, ~~decrease~~2020 inas ~~accrued~~well ~~severance~~as ~~costs~~the ~~associated~~timing ~~with~~of payments ~~made~~at toeach ~~former executives in accordance with their respective severance agreements~~period-end.

•The increase in accrued ~~interest~~employee costs during 2021 is ~~attributable~~primarily due to ~~the~~an ~~timing~~increase ofin ~~interest~~accrued ~~payments~~cash onincentive compensation associated with the reinstatement of our ~~Convertible~~employee ~~Notes,~~incentive ~~for~~plan ~~which~~as ~~interest~~well isas ~~payable~~the ~~semi-annually~~timing inof ~~May~~pay periods and ~~November,~~the associated withholding and ~~our~~unemployment ~~Senior~~tax ~~Secured~~payments. ~~Notes,~~The ~~for~~increase ~~which~~was ~~interest~~partially isoffset ~~payable~~by ~~quarterly~~a decrease in ~~February,~~accrued ~~May,~~severance ~~August~~costs ~~and~~associated ~~November~~with ~~each~~payments ~~year~~made to former executives in accordance with their respective severance agreements.

•The $01.81 million ~~and~~decrease ~~$0.7 million decreases~~ in other accrued expenses ~~and trade accounts payable, respectively,~~ during 2021 ~~are~~is primarily due to the timing of payments made for various items ~~including~~such as property taxes and professional fees that were accrued for at December 31, 2020 ~~and wireline job supplies which were received in December 2020~~.

Capital Expenditures — During the three months ended March 31, 2021 and 2020, our capital expenditures totaled $38.7 million and $711.57 million, respectively, primarily related to routine expenditures that are necessary to maintain our fleets. Currently, we expect to spend a total of approximately $1720 million ~~to $19 million~~ on capital expenditures during 2021, which is limited to routine expenditures necessary to maintain our fleets. Actual capital expenditures may vary depending on the climate of our industry and any resulting increase or decrease in activity levels, the timing of commitments and payments, availability of capital resources, and the level of investment opportunities that meet our strategic and return on capital employed criteria. We expect to fund the remaining capital expenditures in 2021 from cash and operating cash flow in excess of our working capital requirements, although available borrowings under our ABL Credit Facility are also available, if necessary.

Debt Instruments and Compliance Requirements — OnUpon ~~the~~our ~~Effective~~emergence ~~Date~~from Chapter 11, we entered into a $75 million senior secured asset-based revolving credit agreement which was later amended and reduced to $40 million in August 2020 (the “ABL Credit Facility”), and issued $129.8 million of aggregate principal amount of 5% convertible senior unsecured pay-in-kind notes due 2025 (the “Convertible Notes”) and $78.1 million of aggregate principal amount of floating rate senior ~~secured notes due 2025 (the “Senior Secured Notes”). The proceeds from the issuance of the Convertible Notes and the Senior Secured Notes were used to repay the then outstanding term loan.~~

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~~The~~secured ~~following~~notes isdue a2025 ~~summary~~(the ~~of our debt instruments and compliance requirements including covenants, restrictions and guarantees, as it relates to our Convertible Notes and~~ “Senior Secured Notes,”). ~~and~~The aproceeds ~~summary~~from ~~of our ABL Credit Facility is included in~~ the ~~above~~issuance ~~section entitled ABL Credit Facility. As~~ of March 31, 2021, we were in compliance with all covenants required by our debt instruments. However, our ability to maintain compliance with our debt instruments, and to service our debt, is dependent upon the ~~level~~Convertible ofNotes ~~demand for our products~~ and ~~services,~~ the ~~level~~Senior ofSecured ~~spending~~Notes bywere ~~our~~used ~~clients, the supply and demand for oil, oil and gas prices, general economic and market conditions and other factors which are beyond our control. If we are unable~~ to ~~generate~~repay ~~cash~~the ~~flow~~then ~~sufficient~~outstanding ~~for~~term ~~debt service and repayment at maturity, we may seek to refinance our debts or access additional capital through debt/equity offerings~~loan.

~~Convertible~~If ~~Notes~~the ~~Indenture~~Mergers ~~and~~are ~~Convertible~~consummated ~~Notes~~in ~~due~~accordance ~~2025.~~with Wethe ~~entered~~terms ~~into an indenture, dated as~~ of the ~~Effective~~Merger ~~Date~~Agreement, ~~among~~it ~~the~~will ~~Company~~result ~~and~~in ~~Wilmington Trust, N.A., as trustee (~~the ~~“Convertible~~retirement ~~Notes Indenture”), and issued $129.8 million aggregate principal amount~~ of ~~convertible~~all ~~senior~~our ~~unsecured~~outstanding ~~pay-in-kind~~debt ~~notes due 2025 thereunder. The Convertible Notes are general unsecured~~ obligations ~~which will mature on November 15~~, ~~2025,~~as ~~unless~~further ~~earlier~~discussed ~~accelerated, redeemed, converted or repurchased, and bear interest at a fixed rate of 5% per annum, which will be payable semi-annually~~ in~~-kind~~ in the ~~form~~previous ofsection anentitled ~~increase~~“Recent ~~to the principal amount~~Developments.”

The following is a summary of our debt instruments and compliance requirements as of June 30, 2021 including covenants, restrictions and guarantees, as it relates to our Convertible Notes and Senior Secured Notes, and a summary of our ABL Credit Facility is included in the above section entitled ABL Credit Facility. As of June 30, 2021, we were in compliance with all covenants required by our debt instruments. However, our ability to maintain compliance with our debt instruments, and to service our debt, is dependent upon the level of demand for our products and services, the level of spending by our clients, the supply and demand for oil, oil and gas prices, general economic and market conditions and other factors which are beyond our control. If the Mergers are not consummated and we are unable to generate cash flow sufficient for debt service and repayment at maturity, we may seek to refinance our debts or access additional capital through debt/equity offerings.

Convertible Notes Indenture and Convertible Notes due 2025. We entered into an indenture dated May 29, 2020 among the Company and Wilmington Trust, N.A., as trustee, as supplemented by the First Supplemental Indenture to the Convertible Notes Indenture dated May 11, 2021, (the “Convertible Notes Indenture”), and issued $129.8 million aggregate principal amount of convertible senior unsecured pay-in-kind notes due 2025 thereunder. The Convertible Notes are general unsecured obligations which will mature on November 15, 2025, unless earlier accelerated, redeemed, converted or repurchased, and bear interest at a fixed rate of 5% per annum, which will be payable semi-annually in-kind in the form of an increase to the principal amount.

The Convertible Notes are convertible at the option of the holders at any time into shares of our common stock and will convert mandatorily into our common stock at maturity; provided, however, that if the value of our common stock otherwise deliverable in connection with a mandatory conversion of a Convertible Note on the maturity date would be less than the principal amount of such Convertible Note plus accrued and unpaid interest, then the Convertible Note will instead convert into an amount of cash equal to the principal amount thereof plus accrued and unpaid interest. The initial conversion rate is 75 shares of common stock per $1,000 principal amount of the Convertible Notes, which in aggregate represents 9,732,825 shares of common stock and an initial conversion price of $13.33 per share. The conversion rate is subject to customary anti-dilution adjustments.

The Convertible Notes Indenture contains covenants that limit our ability and the ability of certain of our subsidiaries to incur, assume or guarantee additional indebtedness and create liens and enter into mergers or consolidations. The Convertible Notes Indenture also contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or other similar law, with respect to us or any of our significant subsidiaries, all outstanding Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the Convertible Notes then outstanding may declare the Convertible Notes due and payable immediately.

The Convertible Notes Indenture provides, subject to certain exceptions, that for so long as our common stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), a beneficial owner of the Convertible Notes is not entitled to receive shares of our common stock upon an optional conversion of any Convertible Notes during any period of time in which the aggregate number of shares of our common stock that may be acquired by such beneficial owner upon conversion of Convertible Notes shall, when added to the aggregate number of shares of our common stock deemed beneficially owned, directly or indirectly, by such beneficial owner and each person subject to aggregation of our common stock with such beneficial owner under Section 13 or Section 16 of the Exchange Act at such time, exceed 9.99% of the total issued and outstanding shares of our common stock. Certain of the holders of Convertible Notes opted out of this provision at the Effective Date.

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~~Senior~~of ~~Secured~~Convertible Notes ~~Indenture and Senior Secured Notes due 2025. We entered into an indenture~~shall, ~~dated~~when asadded ofto the ~~Effective~~aggregate ~~Date,~~number ~~among~~of ~~the~~shares ~~Company,~~of ~~the~~our ~~subsidiary~~common ~~guarantors~~stock ~~party~~deemed ~~thereto~~beneficially ~~and Wilmington Trust~~owned, ~~N.A.,~~directly asor ~~trustee~~indirectly, ~~as supplemented~~ by ~~the~~such ~~First~~beneficial ~~Supplemental~~owner ~~Indenture, dated March 4, 2021 (the “Senior Secured Notes Indenture”),~~ and ~~issued~~each ~~$78.1~~person ~~million~~subject ~~aggregate~~to ~~principal~~aggregation ~~amount~~ of ~~floating~~our ~~rate~~common ~~senior~~stock ~~secured~~with ~~notes~~such ~~due~~beneficial ~~2025~~owner ~~thereunder.~~under ~~The~~Section ~~Senior~~13 ~~Secured~~or ~~Notes~~Section ~~are~~16 ~~guaranteed on a senior secured basis by substantially all~~ of ~~our~~the ~~existing~~Exchange ~~domestic~~Act ~~subsidiaries,~~at ~~which~~such ~~also guarantee our obligations under the ABL Credit Facility~~time, ~~(the~~exceed ~~“Guarantors”)~~9.99% onof ~~a full and unconditional basis and are secured by a second lien on~~ the ~~accounts~~total ~~receivable~~issued and ~~inventory~~outstanding ~~and~~shares aof ~~first~~our ~~lien~~common onstock. ~~substantially~~Certain ~~all~~ of the ~~other~~holders ~~assets~~of ~~and~~Convertible ~~properties~~Notes ~~(including~~opted ~~the~~out ~~cash proceeds thereof)~~ of ~~the~~this ~~Company and the Guarantors~~provision.

~~The~~ Senior Secured Notes ~~will~~Indenture ~~mature on May 15, 2025~~ and ~~interest~~Senior ~~will~~Secured ~~accrue~~Notes atdue ~~the rate of LIBOR plus 9~~2025.5% ~~per~~We ~~annum,~~entered ~~with~~into aan ~~LIBOR~~indenture ~~rate~~dated ~~floor~~May ~~of 1.5%~~29, ~~payable~~2020 ~~quarterly~~among inthe ~~arrears on February 15~~Company, ~~May~~the ~~15,~~subsidiary ~~August~~guarantors 15party thereto and ~~November~~Wilmington 15Trust, ofN.A., ~~each~~as ~~year~~trustee, ~~commencing~~as onsupplemented ~~August~~by ~~15,~~the ~~2020.~~First ~~With~~Supplemental ~~respect~~Indenture todated ~~any~~March ~~interest~~3, ~~payment~~2021, ~~due~~and onthe orSecond ~~prior~~Supplemental toIndenture dated May 2911, 2021, ~~50% of~~ (the ~~interest~~“Senior ~~will~~Secured beNotes ~~payable~~Indenture”), inand ~~cash~~issued ~~and~~$78.1 ~~50%~~million ofaggregate ~~the~~principal ~~interest~~amount ~~will~~of befloating ~~paid~~rate ~~in-kind~~senior insecured ~~the~~notes ~~form~~due of2025 anthereunder. ~~increase~~The toSenior ~~the~~Secured ~~principal~~Notes ~~amount;~~are ~~however,~~guaranteed on a ~~majority~~senior insecured ~~interest~~basis ofby ~~the~~substantially ~~holders~~all of ~~the~~our ~~Senior~~existing ~~Secured~~domestic ~~Notes~~subsidiaries, ~~may~~which ~~elect~~also toguarantee ~~have~~our ~~100%~~obligations ofunder the ~~interest~~ABL ~~due~~Credit onFacility, or(the ~~prior~~“Guarantors”) toon ~~May~~a ~~29,~~full ~~2021~~and ~~payable~~unconditional ~~in-kind.~~basis ~~For~~and ~~all~~are ~~interest~~secured ~~periods~~by ~~commencing~~a second lien on orthe ~~after~~accounts ~~May~~receivable ~~15,~~and ~~2024,~~inventory ~~the~~and ~~interest~~a ~~rate~~first ~~for~~lien ~~the~~on ~~Senior~~substantially ~~Secured~~all ~~Notes~~of ~~will~~the beother aassets ~~rate~~and ~~equal~~properties to(including ~~LIBOR~~the ~~plus~~cash ~~10.5%,~~proceeds ~~with~~thereof) aof ~~LIBOR~~the ~~rate~~Company ~~floor~~and ofthe 1Guarantors.~~5%.~~

WeThe ~~may redeem all or part of the~~ Senior Secured Notes onwill ormature ~~after~~on ~~June~~May 115, ~~2021~~2025 atand ~~redemption~~accrue ~~prices~~interest ~~(expressed~~at asthe ~~percentages~~rate of ~~the~~LIBOR ~~principal~~plus ~~amount) equal to (i) 104~~9.5% ~~for~~per ~~the~~annum ~~twelve-month~~until ~~period~~May ~~beginning~~15, ~~on June 1~~2024, ~~2021;~~after ~~(ii)~~which ~~102% for~~ the ~~twelve-month~~rate ~~period~~will ~~beginning~~be onLIBOR ~~June~~plus ~~1, 2022; (iii) 101~~10.5% ~~for~~per ~~the twelve-month period beginning on June 1~~annum, ~~2023~~ and ~~(iv)~~in ~~100%~~both ~~for~~cases ~~the~~with ~~twelve-month~~a ~~period~~LIBOR ~~beginning~~rate ~~June~~floor of 1,.5% ~~2024~~ and atpayable ~~any~~quarterly ~~time~~in ~~thereafter,~~arrears ~~plus~~on ~~accrued and unpaid interest at~~ the ~~redemption~~15th ~~date.~~of ~~Notwithstanding~~each ~~the~~February, ~~foregoing~~May, ifAugust aand ~~change~~November of ~~control~~each ~~(as~~year. ~~defined~~The ininterest ~~the~~payments ~~Senior~~which ~~Secured~~were ~~Notes~~due ~~Indenture) occurs~~ prior to ~~June~~May 1,2021 ~~2022,~~were wepaid ~~may~~50% ~~elect~~in tocash ~~purchase~~and ~~all remaining outstanding Senior Secured Notes not tendered to us as described below at a redemption price equal to 103~~50% of the ~~principal amount thereof, plus accrued and unpaid~~ interest, ifwas ~~any,~~paid ~~thereon~~in-kind ~~to the applicable redemption date. If a change of control (as defined~~ in the ~~Senior~~form ~~Secured Notes Indenture) occurs, holders~~ of ~~the~~an ~~Senior~~increase ~~Secured Notes will have the right~~ to ~~require us to repurchase all or any part of their Senior Secured Notes at a purchase price equal to 101% of~~ the ~~aggregate~~ principal amount ~~of the Senior Secured Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date~~.

~~The~~We may redeem all or part of the Senior Secured Notes ~~Indenture~~at ~~contains~~redemption ~~covenants~~prices ~~that~~(expressed ~~limit,~~as ~~among~~percentages ~~other~~of ~~things,~~the ~~our~~principal ~~ability~~amount) ~~and~~equal to (i) 104% for the ~~ability~~twelve-month ofperiod ~~certain~~beginning ofon ~~our~~June ~~subsidiaries~~1, to2021; ~~incur,~~(ii) ~~assume~~102% orfor ~~guarantee~~the ~~additional~~twelve-month ~~indebtedness;~~period ~~pay~~beginning ~~dividends~~on orJune ~~distributions~~1, on2022; ~~capital~~(iii) ~~stock~~101% orfor ~~redeem~~the ortwelve-month ~~repurchase~~period ~~capital~~beginning ~~stock;~~on ~~make~~June ~~investments;~~1, ~~repay~~2023 ~~junior~~and ~~debt;~~(iv) ~~sell~~100% ~~stock~~for ofthe ~~our~~twelve-month ~~subsidiaries;~~period ~~transfer~~beginning orJune ~~sell~~1, ~~assets;~~2024 ~~enter~~and ~~into~~at ~~sale~~any time thereafter, plus accrued and ~~lease~~unpaid ~~back~~interest ~~transactions;~~at ~~create~~the ~~liens;~~redemption ~~enter~~date. ~~into~~Notwithstanding ~~transactions~~the ~~with~~foregoing, ~~affiliates;~~if ~~and~~a ~~enter~~change ~~into~~of ~~mergers~~control or(as ~~consolidations.~~defined ~~The~~in the Senior Secured Notes Indenture) ~~contains~~occurs aprior ~~minimum~~to ~~asset~~June ~~coverage~~1, ~~ratio~~2022, ofwe ~~1.5~~may elect to ~~1.0~~purchase all remaining outstanding Senior Secured Notes not tendered to us as ofdescribed ~~any~~below ~~June~~at 30a orredemption ~~December~~price ~~31,~~equal ~~beginning~~to ~~December~~103% 31of the principal amount thereof, ~~2020.~~plus Asaccrued ofand ~~December~~unpaid 31interest, ~~2020~~if any, thereon to the ~~asset~~applicable ~~coverage~~redemption ~~ratio,~~date. If a change of control (as ~~calculated~~defined ~~under~~in the Senior Secured Notes Indenture) occurs, ~~was~~holders ~~3.2~~of the Senior Secured Notes will have the right to 1require us to repurchase all or any part of their Senior Secured Notes at a purchase price equal to 101% of the aggregate principal amount of the Senior Secured Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date.0.

The Senior Secured Notes Indenture contains covenants that limit, among other things, our ability and the ability of certain of our subsidiaries, to incur, assume or guarantee additional indebtedness; pay dividends or distributions on capital stock or redeem or repurchase capital stock; make investments; repay junior debt; sell stock of our subsidiaries; transfer or sell assets; enter into sale and lease back transactions; create liens; enter into transactions with affiliates; and enter into mergers or consolidations. The Senior Secured Notes Indenture contains a minimum asset coverage ratio of 1.5 to 1.0 as of any June 30 or December 31, beginning December 31, 2020. As of June 30, 2021, the asset coverage ratio, as calculated under the Senior Secured Notes Indenture, was 3.0 to 1.0.

The Senior Secured Notes Indenture also provides for certain customary events of default, including, among others, nonpayment of principal or interest, breach of covenants, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, failure of a security document to create an effective security interest in collateral, bankruptcy and insolvency events, and cross acceleration, which would permit the principal, premium, if any, interest and other monetary obligations on all the then outstanding Senior Secured Notes to be declared due and payable immediately.

Pursuant to the Senior Secured Notes Indenture, we commenced and completed offers to purchase $2.6 million in aggregate principal amount of the Senior Secured Notes during the year ended December 31, 2020 at a purchase price equal to 100% of the principal amount, plus accrued and unpaid interest through, but not including, the respective purchase dates. During the ~~three~~six months ended ~~March~~June 3130, 2021, we completed additional qualifying asset sales and associated offers to purchase an aggregate $1.3.0 million in principal amount of the Senior Secured Notes and recognized $0.12 million of loss on extinguishment of debt associated with these repayments. As of ~~March~~June 3130, 2021, the aggregate principal amount of Senior Secured Notes outstanding is $7775.25 million.

Supplemental Guarantor Information

Our Senior Secured Notes are issued by Pioneer Energy Services Corp. (the “Parent Issuer”) and are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by all existing 100%-owned domestic subsidiaries (the “Guarantors”), except for Pioneer Services Holdings, LLC. The subsidiaries that generally operate our non-U.S. business concentrated in Colombia do not guarantee our Senior Secured Notes (and did not guarantee our Prepetition Senior Notes). The non-guarantor subsidiaries do not have any payment obligations under the Senior Secured Notes, the guarantees, or the

2735

(the “Guarantors”), except for Pioneer Services Holdings, LLC. The subsidiaries that generally operate our non-U.S. business concentrated in Colombia do not guarantee our Senior Secured Notes (and did not guarantee our Prepetition Senior Notes). The non-guarantor subsidiaries do not have any payment obligations under the Senior Secured Notes, the guarantees, or the Senior Secured Notes Indenture. In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, such non-guarantor subsidiary would be obligated to pay the holders of its debt and other liabilities, including its trade creditors, before it would be able to distribute any of its assets to us. As of ~~March~~June 3130, 2021, there were no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company.

The following tables present summarized financial information for the Parent Issuer and Guarantors, on a combined basis after the elimination of intercompany balances and transactions between the Parent Issuer and Guarantors and investments in any subsidiary that is a non-guarantor (amounts in thousands):

	March 31, 2021
	June 30, 2021
Current assets, excluding those due from non-guarantor subsidiaries	$	8685,~~885~~752
Current assets due from non-guarantor subsidiaries	28,~~213~~392
Property and equipment, net	~~136~~129,~~225~~830
Noncurrent assets, excluding property and equipment	1514,~~082~~464
Current liabilities	$	5554,~~650~~002
Long-term debt	~~149~~151,~~222~~709
Noncurrent liabilities, excluding long-term debt	76,~~017~~732

Three Months Ended March 31, 2021

Three months ended June 30, 2021

Six Months Ended June 30, 2021

Revenues

4749,~~675~~841

97,516

Operating costs

3738,~~251~~637

75,888

Loss from operations(1)

(56,~~502~~344)

(11,846)

Net loss(1)

(1312,~~038~~704)

(25,742)

(1) Includes intercompany lease income from non-guarantor subsidiary totaling $1.2 million and $2.4 million during the ~~period~~three and six months ended June 30, 2021, respectively.

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Results of Operations

As a result of our emergence from Chapter 11 on May 29, 2020, our financial results for the periods prior to the fresh start reporting date of May 31, 2020 are referred to as those of the “Predecessor,” and our financial results for the periods subsequent to May 31, 2020 are referred to as those of the “Successor.”

~~The~~Although ~~following~~the ~~table~~Successor ~~provides~~period(s) ~~certain~~and ~~information~~the ~~about~~Predecessor ~~our~~period(s) ~~operations~~are distinct reporting periods, ~~including~~we ~~details~~have combined the Successor and Predecessor period results during the three and six months ended June 30, 2020 in order to provide some comparability of ~~each~~such information to the corresponding Successor periods ended June 30, 2021. While this combined presentation is not presented according to generally accepted accounting principles in the United States of ~~our~~America ~~business~~(GAAP) ~~segments’~~and ~~revenues~~no comparable GAAP measures are presented, ~~operating~~management ~~costs~~believes that providing this financial information is the most relevant and ~~gross~~useful ~~margin~~method for making comparisons to the corresponding Successor periods ~~indicated~~as ~~(amounts~~reviewing the Successor period results in ~~thousands).~~isolation would not be useful in identifying trends in or reaching conclusions regarding our overall operating performance.

	Successor		Predecessor
	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Revenues:
Domestic drilling	$	22,483	$	35,891
International drilling	11,063		14,455
Drilling services	33,546		50,346
Well servicing	14,857		25,616
Wireline services	10,335		33,133
Coiled tubing services	—		5,227
Production services	25,192		63,976
Consolidated revenues	$	58,738	$	114,322
Operating costs:
Domestic drilling	$	15,459	$	23,865
International drilling	8,075		12,138
Drilling services	23,534		36,003
Well servicing	11,888		20,951
Wireline services	9,878		28,284
Coiled tubing services	26		6,784
Production services	21,792		56,019
Consolidated operating costs	$	45,326	$	92,022
Gross margin:
Domestic drilling	$	7,024	$	12,026
International drilling	2,988		2,317
Drilling services	10,012		14,343
Well servicing	2,969		4,665
Wireline services	457		4,849
Coiled tubing services	(26)		(1,557)
Production services	3,400		7,957
Consolidated gross margin	$	13,412	$	22,300
Consolidated:
Net loss	$	(16,942)	$	(69,104)
Adjusted EBITDA (1)	$	3,644	$	2,090

The following tables provide certain information about our operations, including details of each of our business segments’ revenues, operating costs and gross margin for the periods indicated (amounts in thousands).


	Successor				Predecessor			Combined (Non-GAAP)
	Three months ended June 30, 2021		One Month Ended June 30, 2020			Two Months Ended May 31, 2020			Three Months Ended June 30, 2020
Revenues:
Domestic drilling	$	23,414	$	5,866		$	17,450		$	23,316
International drilling	9,685		828			1,473			2,301
Drilling services	33,099		6,694			18,923			25,617
Well servicing	18,033		3,756			6,331			10,087
Wireline services	8,394		713			2,410			3,123
Coiled tubing services	—		—			384			384
Production services	26,427		4,469			9,125			13,594
Consolidated revenues	$	59,526	$	11,163		$	28,048		$	39,211

Operating costs:
Domestic drilling	$	17,405	$	3,646		$	9,236		$	12,882
International drilling	7,760		1,063			1,538			2,601
Drilling services	25,165		4,709			10,774			15,483
Well servicing	13,445		2,810			5,926			8,736
Wireline services	7,754		1,085			3,552			4,637
Coiled tubing services	33		139			1,773			1,912
Production services	21,232		4,034			11,251			15,285
Consolidated operating costs	$	46,397	$	8,743		$	22,025		$	30,768

Gross margin:
Domestic drilling	$	6,009	$	2,220		$	8,214		$	10,434
International drilling	1,925		(235)			(65)			(300)
Drilling services	7,934		1,985			8,149			10,134
Well servicing	4,588		946			405			1,351
Wireline services	640		(372)			(1,142)			(1,514)
Coiled tubing services	(33)		(139)			(1,389)			(1,528)
Production services	5,195		435			(2,126)			(1,691)
Consolidated gross margin	$	13,129	$	2,420		$	6,023		$	8,443











Consolidated:
Net loss	$	(14,619)	$	(9,817)		$	(35,121)		$	(44,938)
Adjusted EBITDA (1)	$	3,226	$	(1,280)		$	633		$	(647)


	Successor				Predecessor			Combined (Non-GAAP)
	Six Months Ended June 30, 2021		One Month Ended June 30, 2020			Five Months Ended May 31, 2020			Six Months Ended June 30, 2020
Revenues:
Domestic drilling	$	45,897	$	5,866		$	53,341		$	59,207
International drilling	20,748		828			15,928			16,756
Drilling services	66,645		6,694			69,269			75,963
Well servicing	32,890		3,756			31,947			35,703
Wireline services	18,729		713			35,543			36,256
Coiled tubing services	—		—			5,611			5,611
Production services	51,619		4,469			73,101			77,570
Consolidated revenues	$	118,264	$	11,163		$	142,370		$	153,533

Operating costs:
Domestic drilling	$	32,864	$	3,646		$	33,101		$	36,747
International drilling	15,835		1,063			13,676			14,739
Drilling services	48,699		4,709			46,777			51,486
Well servicing	25,333		2,810			26,877			29,687
Wireline services	17,632		1,085			31,836			32,921
Coiled tubing services	59		139			8,557			8,696
Production services	43,024		4,034			67,270			71,304
Consolidated operating costs	$	91,723	$	8,743		$	114,047		$	122,790

Gross margin:
Domestic drilling	$	13,033	$	2,220		$	20,240		$	22,460
International drilling	4,913		(235)			2,252			2,017
Drilling services	17,946		1,985			22,492			24,477
Well servicing	7,557		946			5,070			6,016
Wireline services	1,097		(372)			3,707			3,335
Coiled tubing services	(59)		(139)			(2,946)			(3,085)
Production services	8,595		435			5,831			6,266
Consolidated gross margin	$	26,541	$	2,420		$	28,323		$	30,743











Consolidated:
Net loss	$	(31,561)	$	(9,817)		$	(104,225)		$	(114,042)
Adjusted EBITDA (1)	$	6,870	$	(1,280)		$	2,723		$	1,443

(1) Adjusted EBITDA represents income (loss) before interest expense, income tax (expense) benefit, depreciation and amortization, prepetition restructuring charges, impairment, reorganization items, and loss on extinguishment of debt. Adjusted EBITDA is a non-GAAP measure that our management uses to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers. We believe that this measure is useful to investors and analysts in allowing for greater transparency of our core operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA should not be considered (a) in isolation of, or as a substitute for, net income (loss), (b) as an indication of cash flows from operating activities or (c) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. Adjusted EBITDA may not be comparable to other similarly titled measures reported by other companies.

2938

A reconciliation of net loss, as reported, to Adjusted EBITDA, and to consolidated gross margin, are set forth in the following ~~table~~tables (amounts in thousands):

	Successor		~~Successor~~		Predecessor			Combined(Non-GAAP)	~~Predecessor~~
			Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Three months ended June 30, 2021					One Month Ended June 30, 2020			Two Months Ended May 31, 2020		Three Months Ended June 30, 2020
Net loss	$	(14,619)	$	~~(16,942)~~		$	(9,817)		$	(6935,~~104~~121)	$	(44,938)
Depreciation and amortization	11,944		~~13,365~~			5,236			2113,~~984~~663		18,899
Prepetition restructuring charges	—		—			—			~~17,074~~(252)		(252)
Impairment	—		—			388			~~17,853~~—		388
Reorganization items, net	(239)		~~146~~			1,144			615,~~663~~240		16,384
Interest expense	6,698		~~6,534~~			2,215			84,~~651~~135		6,350
Loss on extinguishment of debt	109		83			—			—3,723		3,723
Income tax expense (benefit)			458						(1,031)
Income tax benefit	(667)					(446)			(755)		(1,201)
Adjusted EBITDA	3,226		~~3,644~~			(1,280)			~~2,090~~633		(647)
General and administrative	10,997		~~9,713~~			4,213			147,~~655~~392		11,605
Bad debt recovery (expense), net	(198)		~~(197)~~			(283)			~~727~~482		199
Gain on dispositions of property and equipment, net	(1,072)		~~(2,298)~~			(460)			(~~717~~272)		(732)
Other expense			2,550						5,545
Other expense (income)	176					230			(2,212)		(1,982)
Consolidated gross margin	$	13,129	$	~~13,412~~		$	2,420		$	226,~~300~~023	$	8,443

Consolidated gross margin — We experienced a significant decline in demand for all our service offerings beginning in March 2020 as a result of the economic downturn caused by the COVID-19 pandemic and adverse global oil production and pricing decisions made by OPEC and non-OPEC countries, as described in more detail in the earlier section entitled, “Market Conditions and Outlook.” Our consolidated gross margin decreased by $8.9 million, or 40%, for the three months ended March 31, 2021, as compared to the corresponding period in 2020 with our domestic drilling and wireline businesses experiencing a combined $9.4 million decrease in gross margin.


	Successor				Predecessor		Combined (Non-GAAP)
	Six Months Ended June 30, 2021		One Month Ended June 30, 2020		Five Months Ended May 31, 2020		Six Months Ended June 30, 2020

Net loss	$	(31,561)	$	(9,817)	$	(104,225)	$	(114,042)
Depreciation and amortization	25,309		5,236		35,647		40,883
Prepetition restructuring charges	—		—		16,822		16,822
Impairment	—		388		17,853		18,241
Reorganization items, net	(93)		1,144		21,903		23,047
Interest expense	13,232		2,215		12,294		14,509
Loss on extinguishment of debt	192		—		4,215		4,215

Income tax benefit	(209)		(446)		(1,786)		(2,232)
Adjusted EBITDA	6,870		(1,280)		2,723		1,443
General and administrative	20,710		4,213		22,047		26,260
Bad debt recovery (expense), net	(395)		(283)		1,209		926
Gain on dispositions of property and equipment, net	(3,370)		(460)		(989)		(1,449)


Other expense (income)	2,726		230		3,333		3,563
Consolidated gross margin	$	26,541	$	2,420	$	28,323	$	30,743

~~•Drilling~~Consolidated ~~Services~~gross margin — OnWe experienced a ~~percentage~~significant ~~basis,~~decline in demand for all our ~~drilling~~service ~~services~~offerings ~~revenues~~beginning in March 2020 as a result of the economic downturn caused by the COVID-19 pandemic and ~~operating~~adverse ~~costs~~global ~~decreased~~oil production and pricing decisions made by OPEC and non-OPEC countries, as described in ~~tandem~~more ~~for~~detail in the ~~three~~earlier ~~months~~section ~~ended~~entitled, ~~March~~“Market ~~31,~~Conditions and Outlook.” As commodity prices improved during 2021, asactivity ~~compared~~levels toacross all our businesses increased, particularly during the ~~corresponding~~second ~~period~~quarter inof ~~2020,~~2021. ~~declining~~Our byconsolidated ~~33%~~gross ~~and~~margin ~~35%~~increased $4.7 million, ~~respectively~~or 56%, ~~driven~~for ~~primarily~~the bythree amonths ~~20%~~ended ~~decrease~~June 30, in2021 ~~revenue~~and ~~days~~decreased $4.2 ~~The~~million, ~~following~~or ~~table~~14%, ~~provides~~for ~~operating~~the ~~statistics~~six ~~for~~months ~~each~~ended ofJune 30, ~~our~~2021, ~~drilling~~as ~~services~~compared ~~segments:~~to the corresponding periods in 2020.

	Successor			Predecessor
	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Domestic drilling:
Average number of drilling rigs	17			17
Utilization rate	68		%	89		%
Revenue days	1,034			1,382
Average revenues per day	$	21,744		$	25,970
Average operating costs per day	14,951			17,268
Average margin per day	$	6,793		$	8,702
International drilling:
Average number of drilling rigs	8			8
Utilization rate	44		%	43		%
Revenue days	319			315
Average revenues per day	$	34,680		$	45,889
Average operating costs per day	25,313			38,533
Average margin per day	$	9,367		$	7,356

~~Our~~•Drilling ~~domestic~~Services — Our drilling ~~average~~services revenues and ~~margin~~operating ~~per~~costs ~~day~~increased by 29% and 63% for the three months ended ~~March 31~~June 30, 2021 ~~decreased by 16% and 22%~~, respectively, as compared to the corresponding period in 2020, ~~primarily~~and ~~due~~decreased toby ~~the~~12% ~~decline~~and in5% ~~dayrates~~ for ~~contracts~~the ~~that~~six ~~were~~months ~~renewed~~ended orJune 30, ~~renegotiated during 2020~~2021, asrespectively. ~~well~~The asfollowing ~~the~~tables ~~impact~~provide ofoperating ~~increased~~statistics ~~amortization of deferred mobilization revenue and costs during 2020~~ for ~~rigs~~each ~~that~~of ~~were~~our ~~deployed~~drilling ~~under~~services ~~new contracts in the second half of 2019.~~ segments:


	Successor						Predecessor	Combined (Non-GAAP)
	Three months ended June 30, 2021			One Month Ended June 30, 2020				Two Months Ended May 31, 2020			Three Months Ended June 30, 2020
















Domestic drilling:
Average number of drilling rigs	17			17				17			17
Utilization rate	69		%	53		%		69		%	64		%
Revenue days	1,073			270				718			988

Average revenues per day	$	21,821		$	21,726			$	24,304		$	23,599
Average operating costs per day	16,221			13,504				12,864			13,038
Average margin per day	$	5,600		$	8,222			$	11,440		$	10,561

International drilling:
Average number of drilling rigs	8			8				8			8
Utilization rate	41		%	10		%		4		%	6		%
Revenue days	296			25				20			45

Average revenues per day	$	32,720		$	33,120			$	73,650		$	51,133
Average operating costs per day	26,216			42,520				76,900			57,800
Average margin per day	$	6,504		$	(9,400)			$	(3,250)		$	(6,667)

Our international drilling average margin per day improved 27% for the three months ended March 31, 2021 as compared to the corresponding period in 2020, despite only a 2% improvement in utilization over the same period. Average revenues and operating costs per day decreased by 24% and 34%, respectively, as certain customers terminated or suspended drilling contracts in 2020 in response to the decline in industry conditions. These contract terminations and suspensions in 2020 also resulted in an increase in rig demobilization activity, for which revenues and costs are higher than daywork activity, but for which there are no associated revenue days. The decrease in rig standby and demobilization costs for the three months ended March 31, 2021 as compared to the corresponding period in 2020 contributed to the improvement in average margin per day during 2021.


	Successor						Predecessor	Combined (Non-GAAP)
	Six Months Ended June 30, 2021			One Month Ended June 30, 2020				Five Months Ended May 31, 2020			Six Months Ended June 30, 2020
















Domestic drilling:
Average number of drilling rigs	17			17				17			17
Utilization rate	68		%	53		%		81		%	77		%
Revenue days	2,107			270				2,100			2,370

Average revenues per day	$	21,783		$	21,726			$	25,400		$	24,982
Average operating costs per day	15,598			13,504				15,762			15,505
Average margin per day	$	6,185		$	8,222			$	9,638		$	9,477

International drilling:
Average number of drilling rigs	8			8				8			8
Utilization rate	42		%	10		%		28		%	25		%
Revenue days	615			25				335			360

Average revenues per day	$	33,737		$	33,120			$	47,546		$	46,544
Average operating costs per day	25,748			42,520				40,824			40,942
Average margin per day	$	7,989		$	(9,400)			$	6,722		$	5,602

~~•Production~~Our ~~Services~~domestic —drilling ~~Our~~average revenues and ~~operating~~margin ~~costs~~per ~~from~~day ~~production services each decreased 61%~~ for the three and six months ended ~~March~~June 3130, 2021 decreased as compared to the corresponding ~~period~~periods in 2020 primarily due to the decline in dayrates for contracts that were renewed or renegotiated during 2020 and 2021, as well as the impact of increased amortization of deferred mobilization revenue and costs during 2020 for rigs that were deployed under new contracts in the second half of 2019. ~~The~~Additionally, ~~following~~average ~~table~~revenues ~~provides~~and ~~operating~~margin ~~statistics~~per day for ~~each~~the three and six months ended June 30, 2020 benefited from $1.6 million of early termination revenue recognized in May 2020 and the impact of rigs placed on standby in 2020. Beginning in late March 2020, rather than terminating their contracts with us, certain of our ~~production~~clients ~~services~~elected ~~segments:~~to temporarily stack three of our rigs, placing them on extended standby for a reduced revenue rate and the option to reactivate the rigs through the remainder of the contract term. Although these drilling rigs earn lower standby rates as compared to daywork rates, operating costs incurred are minimal, which reduces operating costs per day and benefits overall margin per day.

	Successor			Predecessor
	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Well servicing:
Average number of rigs	123			123
Utilization rate	35		%	51		%
Rig hours	29,858			44,232
Average revenue per hour	$	498		$	579
Wireline services:
Average number of units	74			93
Number of stages	2,591			6,070

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