The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Our second quarter represents the three month period endedJune 30 and our first half represents the six month period endedJune 30 . Unless otherwise noted, all currency amounts are stated inU.S. dollars. The reference to a "Note" herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 "Financial Statements." Overview We are a geographically diversified supplier providing products, as well as rentals and services. We operate our business through two reportable segments: Fluids Systems, which primarily serves the oil and natural gas exploration and production ("E&P") industry, and Mats and Integrated Services, which serves a variety of industries, including E&P, electrical transmission & distribution, pipeline, renewable energy, petrochemical, and construction industries. Our operating results, particularly for the Fluids Systems segment, depend on oil and natural gas drilling activity levels in the markets we serve and the nature of the drilling operations (including the depth and whether the wells are drilled vertically or horizontally), which governs the revenue potential of each well. Drilling activity levels, in turn, depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our operating results. While our revenue potential is driven by a number of factors including those described above, rig count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the second quarter and first half of 2020 as compared to the same periods of 2019 is as follows: Second Quarter 2020 vs 2019 2020 2019 Count % U.S. Rig Count 392 989 (597) (60) % Canada Rig Count 25 82 (57) (70) % North America Rig Count 417 1,071 (654) (61) % First Half 2020 vs 2019 2020 2019 Count % U.S. Rig Count 588 1,016 (428) (42) % Canada Rig Count 110 132 (22) (17) % North America Rig Count 698 1,148 (450) (39) %
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impact from the duration and magnitude of the ongoing health pandemic and related government responses are very difficult to predict. In response to the deterioratingU.S. land oil and natural gas market and reduced demand for our products and services as a result of the decline in oil prices and the COVID-19 pandemic, we initiated a number of actions late in the first quarter of 2020 aimed at conserving cash and protecting our liquidity, and continued these actions in the second quarter of 2020, including: •The implementation of cost reduction programs, including workforce reductions, employee furloughs, the suspension of the Company's matching contributions to itsU.S. defined contribution plan, and temporary salary reductions effectiveApril 1, 2020 for a significant portion ofU.S. employees, including a 15% cut to the salaries paid to executive officers and the annual cash retainers paid to all non-employee members of the Board of Directors; •The initiation of additional actions to further reduce the operational footprint of the Fluids Systems business inU.S. land, to better align our cost structure with expected declines in market activity levels; and •The elimination of all non-critical capital investments. As part of the cost reduction programs, we have reduced our global employee base by approximately 550 (25%) in the first half of 2020. We recognized$13.3 million of charges for inventory write-downs, severance costs, and facility exit costs in the first half of 2020, with$12.9 million in the Fluids Systems segment and$0.4 million in the Corporate office. The$12.9 million of Fluids Systems charges includes$9.0 million for inventory write-downs,$3.1 million in severance costs, and$0.8 million in facility closures and related exit costs. While we have taken certain actions to reduce our workforce and cost structure, our business contains high levels of fixed costs, including significant facility and personnel expenses. We continue to evaluate under-performing areas as well as opportunities to further enable a more efficient and scalable cost structure. In the absence of a longer-term increase in activity levels, we may incur future charges related to further cost reduction efforts or potential asset impairments, which may negatively impact our future results. Segment Overview Our Fluids Systems segment, which generated 78% of consolidated revenues for the first half of 2020, provides customized drilling, completion, and stimulation fluids solutions to E&P customers primarily inNorth America andEurope , theMiddle East andAfrica ("EMEA"), as well as certain countries inAsia Pacific andLatin America . International expansion, including the penetration of international oil companies ("IOCs") and national oil companies ("NOCs"), is a key element of our Fluids Systems strategy, which has historically helped to stabilize segment revenues while North American oil and natural gas exploration activities have fluctuated significantly. Revenues fromIOC and NOC customers represented approximately 44% of Fluids Systems segment revenues for the first half of 2020 compared to approximately 29% for the first half of 2019. In addition to our international expansion efforts, we have also expanded our presence in the deepwaterGulf of Mexico , capitalizing on our capabilities, infrastructure, and strong market position, as well as through product line extensions into adjacent product offerings, including completion fluids. Revenues for drilling and completion fluids from offshoreGulf of Mexico increased to$30 million for the first half of 2020 compared to$22 million for the first half of 2019. In response to the increasing market demand for cleaning products following the COVID-19 pandemic, we began leveraging our chemical blending capacity and technical expertise to begin producing a variety of disinfectants and cleaning products in the second quarter of 2020. While not significant, we began supplying our first customer order in the second quarter and continue to work with several other potential customers with plans to ramp up production over the next several months. Our Mats and Integrated Services segment, which generated 22% of consolidated revenues for the first half of 2020, provides composite mat rentals utilized for temporary worksite access, along with related site construction and services to customers in various markets including E&P, electrical transmission & distribution, pipeline, renewable energy, petrochemical, and construction industries acrossNorth America andEurope . We also sell composite mats to customers around the world. 17
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The expansion of our rental and service activities in non-E&P markets remains a
strategic priority for us due to the magnitude of this market growth
opportunity, as well as the market's relative stability compared to E&P. The
Mats and Integrated Services segment rental and service revenues from non-E&P
markets was approximately
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