C&J Energy Services, Inc. (Form: 10-K, Received: 02/27/2019 16:29:52)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)



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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018



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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 000-55404

C&J Energy Services, Inc.

(Exact name of registrant as specified in its charter)



Delaware		81-4808566
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3990 Rogerdale Rd. Houston, Texas 77042 (Address of principal executive offices)

(713) 325-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of exchange on which registered

Common stock, Par value $0.01 per share		The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Warrants, each exercisable to purchase one share of Common Stock, $0.01 par value per share

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

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 ý No ¨

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 ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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	ý	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨

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 Act). Yes ¨ No ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 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 ý No ¨

The aggregate market value of the registrant’s common stock held by non-affiliates on June 30, 2018 (the last business day of the registrant’s most recently completed second fiscal quarter) based upon the closing price on the New York Stock Exchange on that date was approximately $1.4 billion.

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at February 22, 2019 , was 66,062,430.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2019 Annual Meeting of Stockholders, which will be filed with the United States Securities and Exchange Commission within 120 days of December 31, 2018 , are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	3

Item 1A.	Risk Factors	17

Item 1B.	Unresolved Staff Comments	30

Item 2.	Properties	30

Item 3.	Legal Proceedings	31

Item 4.	Mine Safety Disclosures	31

PART II

Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	32

Item 6.	Selected Financial Data	33

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 8.	Financial Statements and Supplementary Data	56

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	108

Item 9A.	Controls and Procedures	108

Item 9B.	Other Information	109

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	110

Item 11.	Executive Compensation	110

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	110

Item 13.	Certain Relationships and Related Transactions, and Director Independence	110

Item 14.	Principal Accounting Fees and Services	110

PART IV

Item 15.	Exhibits, Financial Statement Schedules	111

Item 16.	Form 10-K Summary	115
	Signatures	115

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) includes certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions that convey the uncertainty of future events or outcomes, and the negative thereof, are intended to identify forward-looking statements. Forward-looking statements, which are not generally historical in nature, include those that express a belief, expectation or intention regarding our future activities, plans and goals and our current expectations with respect to, among other things, our business strategy and our financial strategy.

Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following:


•	a decline in demand for our services, including due to supply of oil and gas, declining or perceived instability of commodity prices, overcapacity of supply, constrained pipeline capacity and other competitive factors affecting our industry;


•	the cyclical nature and volatility of the oil and gas industry, which impacts the level of drilling, completion and production activity and spending patterns by our customers;


•	a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling, completion and production activity;


•	pressure on pricing for our services, including due to competition and industry and/or economic conditions, which may impact, among other things, our ability to implement price increases or maintain pricing and margin on our services;


•	the loss of, or interruption or delay in operations by, one or more of our significant customers;


•	the failure by one or more of our significant customers to pay amounts when due, or at all;


•	changes in customer requirements in the markets we serve;


•	costs, delays, compliance requirements and other difficulties in executing our short and long-term business plans and growth strategies;


•	the effects of recent or future acquisitions on our business, including our ability to successfully integrate our operations and the costs incurred in doing so and the costs and potential liabilities associated with new or expanded areas of operational risks (such as offshore or international operations);


•	business growth outpacing the capabilities of our infrastructure;


•	the loss of, or interruption or delay in operations by, one or more of our key suppliers, including resulting from product defects, recalls or suspensions;


•	adverse weather conditions in oil or gas producing regions;


•	operating hazards inherent in our industry, including the possibility of accidents resulting in personal injury or death, property damage or environmental damage;


•	the effect of environmental and other governmental regulations on our operations, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our hydraulic fracturing services;


•	the incurrence of significant costs and liabilities resulting from litigation or governmental proceedings;


•	the incurrence of significant costs and liabilities or severe restrictions on our operations or the inability to perform certain operations or provide certain services resulting from a failure to comply, or our compliance with, new or existing regulations;


•	the effect of new or existing regulations, industry and/or commercial conditions on the availability of and costs for raw materials, consumables and equipment;


•	the loss of, or inability to attract, key management and other competent personnel;


•	a shortage of qualified workers;


•	our ability to implement new technologies and services;


•	damage to or malfunction of equipment;


•	our ability to maintain sufficient liquidity and/or obtain adequate financing to allow us to execute our business plan; and


•	our ability to comply with covenants under our debt facilities.

For additional information regarding known material factors that could affect our operating results and performance, please read (1) “Risk Factors” in Part I, Item 1A and (2) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report. Should one or more of these known material risks occur, or should the underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statement.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.

Item 1. Business

Corporate History

C&J Energy Services, Inc., a Delaware corporation (the “Successor” and together with its consolidated subsidiaries for periods subsequent to the Plan Effective Date (as defined below), “C&J” the “Company,” “we,” “us” or “our”) is a leading provider of well construction, intervention, completion, support and other complementary oilfield services and technologies. We provide our services to oil and gas exploration and production companies throughout the continental United States. We are a new well focused provider offering a diverse suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumping, cementing, coiled tubing, rig services, fluids management and other completion and well support services. We are headquartered in Houston, Texas and operate across all active onshore basins in the continental United States.

We were founded in Texas in 1997 as a partnership and converted to a Delaware corporation (“Old C&J”) in connection with our initial public offering, which was completed in 2011 with a listing on the New York Stock Exchange (“NYSE”) under the symbol “CJES.” From 2011 through mid-2015, we significantly invested in a number of strategic initiatives to grow our business, including through service line diversification, vertical integration, technological advancement and geographic expansion, including internationally. In 2015, Old C&J combined with the completion and production services business (the “C&P Business”) of Nabors Industries Ltd. (“Nabors”) in a transformative transaction (the “Nabors Merger”) that significantly expanded the Company’s Completion Services and Well Construction and Intervention Services businesses and added the Well Support Services division to the Company’s service offering. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&J Energy Services Ltd., a Bermuda corporation (the “Predecessor” and together with its consolidated subsidiaries for periods prior to the Plan Effective Date, the “Predecessor Companies”).

Due to a severe industry downturn, in July 2016, the Predecessor Companies voluntarily filed petitions for reorganization seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, with ancillary recognition proceedings filed in Canada and Bermuda (collectively, the “Chapter 11 Proceeding”).

The plan of reorganization (the “Restructuring Plan”) of the Predecessor Companies was confirmed in December 2016, and on January 6, 2017 (the “Plan Effective Date”), the Predecessor Companies substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. Pursuant to the Restructuring Plan, effective on the Plan Effective Date, the Predecessor’s equity was canceled, the Predecessor transferred all of its assets and operations to the Successor and the Predecessor was subsequently dissolved. The Predecessor’s common stock was ultimately delisted from the NYSE. On April 12, 2017, the Successor completed an underwritten public offering of common stock and its common stock began trading again on the NYSE under the symbol “CJ.”

Upon emergence from the Chapter 11 Proceeding, we adopted fresh start accounting ("Fresh Start"). For more information regarding the Chapter 11 Proceeding and adoption of Fresh Start accounting, see Note 14 - Chapter 11 Proceeding and Emergence and Note 15 - Fresh Start Accounting in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (this “Annual Report”).

The Successor is the successor issuer to the Predecessor for purposes of and pursuant to Rule 12g-3 of the Exchange Act. Accordingly, references to “C&J,” the “Company,” “we,” “us” or “our” in this Annual Report are to the Successor, together with our consolidated subsidiaries when referring to periods following the Plan Effective Date, and to the Predecessor Companies when referring to periods prior to the Plan Effective Date.

Our principal executive offices are located at 3990 Rogerdale Road, Houston, Texas 77042 and our main telephone number at that address is (713) 325-6000. Our website is available at www.cjenergy.com. We file annual, quarterly and current reports and other documents with the U.S. Securities and Exchange Commission (“SEC”) under the Exchange Act. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, reports and other information that we and other issuers file electronically with the SEC. We also make available free of charge through our website all reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information contained on or available through our website is not a part of or incorporated into this Annual Report or any other report that we may file with or furnish to the SEC.

Business Overview

From late 2011 through mid-2016, we executed an aggressive growth strategy that diversified the Company’s service offerings and geographic reach (including in such locations as the Middle East, the Americas, and Europe). With the change in our executive team and subsequent Chapter 11 Proceeding in 2016, we refocused our strategy and plans. Beginning in 2016 and into 2018, we divested our non-core businesses, including specialty chemicals, equipment manufacturing, directional drilling and artificial lift. Additionally, we shut down our emergent Middle East operations in 2016 (completing the liquidation in 2018), and sold our Canadian rig business in November 2017, in furtherance of our goal of becoming the leading oilfield services provider across our service offering in onshore basins in the continental United States.

In November 2017, we acquired O-Tex Holdings, Inc., a Texas corporation ("O-Tex"), for approximately $271.9 million, making us one of the largest oilfield cementers in the continental United States. In connection with this transaction, we also acquired the remaining 49.0% non-controlling interest in a partially owned O-Tex subsidiary for $1.25 million, which strengthened the data controls instrument business of our research and technology efforts (collectively, the "O-Tex Transaction"). O-Tex specialized in both primary and secondary downhole specialty cementing services in most major U.S. shale plays. The O-Tex Transaction strengthened our position as a leading oilfield services provider with a best-in-class well construction, intervention and completions platform.

In 2018, we focused on the continuous improvement of our organization, including advancing several ongoing initiatives purposed to strengthen our organization, optimize our business processes, ensure the quality of our operations, and gain greater efficiency over time. We also took a deliberate approach to increasing our core capabilities, adding capacity, growing our core service lines, and fully integrating the O-Tex asset base.

Our Reportable Segments and Strategy

During the first quarter of 2018, we revised our reportable segments. This revision eliminated the Other Services segment, which consisted of those smaller, non-core business lines that have since been divested, including our specialty chemical business, equipment manufacturing and repair business, and coiled tubing operations in the Middle East. In line with the discontinuance of these business lines, subsequent to the year ended December 31, 2016, financial information for the Other Services reportable segment is only presented for the corresponding prior year period. As a result of the revised reportable segment structure, we have restated the corresponding items of the segment information for all periods presented. As of December 31, 2018 , our reportable segments were:


•	Completion Services, which consists of the following business lines: (1) fracturing services; (2) cased-hole wireline and pumping services; and (3) completion support services, which includes our research and technology (“R&T”) department.


•	Well Construction and Intervention Services ("WC&I"), which consists of the following business lines: (1) cementing services and (2) coiled tubing services.


•	Well Support Services, which consists of the following business lines: (1) rig services; (2) fluids management services; and (3) specialty well site services.

During the first quarter of 2018, we decided to exit our directional drilling business and artificial lift business. We are in the process of divesting the assets and inventory associated with our directional drilling operations. We completed the sale of substantially all of the assets and inventory associated with the artificial lift business on July 2, 2018.

Each reportable segment is described in more detail below. Our results of operations in our core service lines are driven primarily by five interrelated, fluctuating variables: (1) the drilling, completion and production activities of our customers, which is primarily driven by oil and natural gas prices and directly affects the demand for our services; (2) the price we are able to charge for our services and equipment, which is primarily driven by the level of demand for our services and the supply of equipment capacity in the market; (3) the cost of materials, supplies and labor involved in providing our services, and our ability to pass those costs on to our customers; and (4) our activity, or “utilization” levels; and (5) the quality, safety and efficiency of our service execution.

Our management team monitors asset utilization, among other factors, for purposes of assessing our overall activity levels and customer demand. For our Completion Services segment, we measure our asset utilization levels primarily by the total number of days that our asset base works on a monthly basis, based on the available working days per month, which

excludes scheduled maintenance days. We generally consider an asset to be working such days that it is at or in transit to a job location, regardless of the number of hours worked or whether it generated any revenue during such time. In our Well Construction and Intervention Services segment, we measure our asset utilization levels for our cementing business primarily by the total number of days that our asset base works on a monthly basis, based on the available working days per month. In our coiled tubing business, we measure certain asset utilization levels by the hour to better understand measures between daylight and 24-hour operations. Both the financial and operating performance of our coiled tubing and cement units can vary in revenue and profitability from job to job depending on the type of service to be performed and the equipment, personnel and consumables required for the job, as well as competitive factors and market conditions in the region in which the services are performed. In our Well Support Services segment, we measure asset utilization levels primarily by the number of hours our assets work on a monthly basis, based on the available working days per month.

Our operating strategy is focused on maintaining high asset utilization levels to maximize revenue generation while controlling costs to gain a competitive advantage and drive returns. We believe that the safety, quality and efficiency of our service execution and our alignment with customers who recognize the value that we provide are central to our efforts to support utilization and grow our business. Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle. For additional information about factors impacting our business and results of operations, please see “Industry Trends and Outlook” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.

Completion Services

The core services provided through our Completion Services segment are fracturing and cased-hole wireline and pumping services. We utilize our in-house manufacturing capabilities, including our R&T department and data control instruments business, to offer a technologically advanced and efficiency focused range of completion techniques. The majority of revenue for this segment is generated by our fracturing business.

Fracturing . Our fleet is capable of handling the most technically demanding well completions in conventional and unconventional high-pressure formations. We leverage our R&T capabilities to provide customers with engineered frac designs, refracturing and other reservoir stimulation services that help regain production and increase well recovery. We also can provide our services using smaller frac fleets in response to customer demand for vertical fracs and restimulation services.

Cased-hole Wireline and Pumping . Through our cased-hole wireline and pumping services business, we are one of the leading providers of perforating, pumpdown, pipe recovery, pressure pumping, and wellsite make-up and pressure testing services. We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in some of the most active onshore basins in the United States and provide premium perforating services for both wireline and tubing-conveyed applications. Our in-house manufacturing capabilities through our R&T department allow us to manage costs and lead times with regard to hardware and perforating guns, switches and accessories, providing us with a competitive advantage and enabling higher returns.

Well Construction and Intervention Services

Cementing . Following the closing of the O-Tex Transaction, we are one of the largest providers of specialty cementing services in the United States. Our operations are supported by multiple full-service laboratory facilities with advanced capabilities.

Coiled Tubing. We offer a complete range of coiled tubing services to help customers accomplish a wide variety of goals in their horizontal completion, workover and well maintenance projects. The majority of our coiled tubing fleet consists of large diameter coil, meaning two inches or larger in diameter, which allows us to service wells with longer lateral lengths. Our coiled tubing services allow customers to complete projects quickly and safely across a wide spectrum of pressures, without having to shut in their wells.

Well Support Services

Our Well Support Services segment focuses on post-completion activities at the well site, and includes rig services, such as workover, fluids management, and other specialty well site services. Although we previously provided artificial lift applications through this segment, we completed the sale of substantially all of the assets and inventory associated with this

business on July 2, 2018. The majority of revenue for this segment is generated by our rig services business, and we consider our rig services and fluids management businesses to be our core service lines within this reportable segment.

Rig Services. As part of our services that help prolong the productive life of an oil or gas well, we operate one of the largest fleets in the United States. These rigs are involved in the routine repair and maintenance of oil and gas wells, re-drilling operations and plug and abandonment operations. Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending on the complexity of the workover. Maintenance services provided with our rig fleet are generally required throughout the life cycle of an oil or gas well. Examples of these maintenance services include routine mechanical repairs to the pumps, tubing and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance services are generally less complicated than completion and workover related services and require less time to perform. Our rig fleet is also used in the process of permanently shutting-in oil or gas wells that are at the end of their productive lives. These plugging and abandonment services generally require auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonment services is not significantly impacted by the demand for oil and gas because well operators are required by state regulations to plug wells that are no longer productive.

Fluids Management. We provide a full range of fluid services, including the storage, transportation and disposal of various fluids used in the drilling, completion and workover of oil and gas wells. Our fleet of trucks and trailers and portable tanks enable us to rapidly deploy our equipment across a broad geographic area. Included in our fleet of fluid trucks and trailers are specialized trucks and trailers that are optimized to transport condensate. We also own private salt water disposal wells. Demand and pricing for our fluids management services generally correspond to demand for our rig services.

Other Information About Our Business

Seasonality

Our operations are subject to seasonal factors and our overall financial results reflect the seasonal variations that impact activity in our core business lines. Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual capital spending budgets towards year end. Additionally, our operations are directly affected by weather conditions. During the winter months our customers may delay operations or we may not be able to operate or move our equipment between locations during periods of heavy snow, ice or rain, and during the spring some areas impose transportation restrictions due to the muddy conditions caused by the spring thaws. During the summer months, our operations may be impacted by tropical weather systems.

Sales and Marketing

Sales of our core business lines are primarily generated by the efforts of our sales force, working closely with our operations teams.

Sales and marketing activities are typically performed through our local operations in each geographic region, as well as through our corporate sales teams in Houston. For our other core business lines, we believe our local field sales personnel have a strong understanding of region-specific issues and customer operating procedures and, therefore, can effectively target marketing activities. We also have multiple corporate sales representatives that supplement our field sales efforts and focus on large accounts and selling technical services. Our sales representatives collaborate with our legal team to identify customer contracting needs in advance of potential operations, which we believe helps streamline our customer onboarding process. Our sales representatives work closely with our local managers and field sales personnel to target compelling market opportunities. Our ability to deliver integrated services through the life of the well and strong track record provides cross-selling and bundling opportunities with existing customers. We facilitate teamwork among our sales representatives by basing a portion of their compensation on aggregate company sales targets rather than individual sales targets. We believe this emphasis on teamwork enables us to better serve our existing customers and may also allow us to further expand our customer base, including through cross-selling and bundling opportunities.

We offer relatively short-term services that generally are cancelable at any time, and as such have no backlogs.

Customers

We serve a diverse group of independent and major national oil and gas companies that are active in our core areas of operations across the continental United States. We seek customers who value our technology, safety priorities and efficiency capabilities. We monitor the financial condition of our customers, their capital expenditure plans and other indications of their drilling, completion and production services activity. In particular, we seek to identify distressed customers and apply what we believe to be appropriate business and legal measures to protect us from any defaults or failures to pay.

Our top ten customers accounted for approximately 44.2% , 40.7% and 46.0% of our consolidated revenue for the years ended December 31, 2018 , 2017 and 2016 , respectively. There were no individual customers that accounted for more than 10.0% of our consolidated revenues during the years ended December 31, 2018 , 2017 and 2016 . If we were to lose any material customer or group of customers that were material in the aggregate, we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could have an adverse effect on our business until the equipment is redeployed at similar utilization or pricing levels.

Competition

We operate in highly competitive areas of the oilfield services industry with significant potential for excess capacity. Equipment can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in an oversupply of assets relative to activity in any particular area. Utilization and pricing for our services have from time to time been negatively affected by increases in supply relative to demand in our operating areas and geographic markets.

The demand for our services depends primarily on the level of spending by oil and gas companies for drilling, completion and production activities, which is affected by short-term and long-term trends in oil and natural gas prices and numerous other factors over which we have no control. Severe declines and sustained weakness and volatility in commodity prices may negatively impact the level of drilling, completion and production activity and capital expenditures by our customers, adversely affected the demand for our services. This, in turn, may negatively impact our ability to maintain adequate utilization of our asset base and to negotiate pricing at levels generating sufficient margins.

Our revenues and earnings are directly affected by changes in the utilization of our assets and pricing for our services, which fluctuate in direct response to changes in the level of drilling, completion and production activity by our customers. Pressure on pricing for our services, including due to competition and industry and/or economic conditions, may impact, among other things, our ability to maintain utilization and profitability. During periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results. Furthermore, even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset any rising costs. Also, we may not be able to successfully increase prices without adversely affecting our utilization levels. The inability to maintain our utilization and pricing levels, or to increase our prices as our costs increase, could have a material adverse effect on our business, financial position and results of operations.

Our competitors include many large and small energy service companies, including some of the largest integrated oilfield services companies that possess substantially greater financial and other resources than we do. Our larger competitors may be able to compete more effectively than we can, including by reducing prices to levels that we cannot sustain for our services. Our major competitors for both our Completion Services and Well Construction and Intervention Services segments include Halliburton, Schlumberger, BJ Services, Keane Group, RPC, Inc., FTS International, Inc., ProPetro Holding Corp., Basic Energy Services, Superior Energy Services, CalFrac Well Services, as well as a significant number of regional, predominantly private businesses. Our major competitors for our Well Support Services include Key Energy Services, Basic Energy Services, Superior Energy Services, Precision Drilling, Forbes Energy Services, Pioneer Energy Services and Ranger Energy Services, as well as a significant number of predominantly private, regional businesses.

Generally, we believe that the principal competitive factors in the markets that we serve are price, technical expertise, equipment capacity and quality, work force capability, safety record, reputation and experience. Although we believe our customers consider all of these factors, price is often the primary factor in determining which service provider is awarded work, particularly during times of weak or volatile commodity prices. Additionally, projects for certain of our core services are often awarded on a bid basis, which tends to further increase competition based primarily on price. During a downturn, our utilization and pricing levels may also be negatively impacted by predatory pricing from certain large competitors, who elect to operate at negative margins in attempt to gain or retain market share.

During healthier market conditions, we believe many of our customers choose to work with us based on our life-of-well capabilities, geographic footprint and scale, reputation for safety, the quality of our crews, equipment and services, and our value-added technology, although we must always be competitive in our pricing. We seek to differentiate ourselves from our major competitors by our operating philosophy, which is focused on delivering the highest quality customer service and equipment, safely and with superior execution and operating efficiency. As part of this strategy, we seek customers who are aligned with our strengths and want dedicated services, and we target high volume, high efficiency customers with service intensive, 24-hour work, which is where we believe we can differentiate our services from our competitors.

See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Outlook” for additional discussion of the market challenges within our industry.

Research & Technology, Intellectual Property

Over the last several years we have significantly invested in technological advancement, including the development of a state-of-the-art research and technology center staffed by a team of highly skilled engineers. Our efforts to date have been focused on developing innovative, fit-for-purpose solutions designed to enhance our service offerings, increase efficiencies, provide cost savings to our operations and add value for our customers. Our R&T initiatives generate monthly cost savings for our integrated completion services operations, which is central to our overall strategy of proactively managing our costs to maximize returns. Several of these investments provide value added products and services that, in addition to producing revenue, are creating increasing demand from key customers. In our day-to-day operations, we utilize equipment and products manufactured by our vertically integrated businesses which are managed through our R&T department, and we also sell such equipment and products to third-party customers in the global energy services industry. We believe that our focus on R&T provides a significant strategic benefit through the ability to develop and implement new technologies and quickly respond to changes in customer requirements and industry demand.

We seek patent and trademark protection for our technology when we deem it prudent, and we aggressively pursue protection of these rights. We believe our patents and trademarks are adequate for the conduct of our business and that no single patent or trademark is critical to our business. We also rely, to a significant extent, on the technical expertise and know-how of our personnel to maintain our competitive position.

See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional detail as to our investment in technological advancement.

Suppliers

We purchase raw materials (such as proppant, guar, acid, chemicals, completion fluids, cement and coiled tubing strings) and finished products (such as fluid ends, valves, power ends and pump consumables) used in our Completion Services segment and our Well Construction and Intervention Services segment and certain raw materials and finished products used in our Well Support Services segment from various third-party suppliers.

We are not materially dependent on any single supply source for the materials or products that are critical to our operations, and we believe that we would be able to make satisfactory alternative arrangements in the event of any interruption in the supply or recall of these materials and/or products by one of our suppliers. However, if alternative sources of supply are unavailable and we are unable to purchase the necessary materials and/or products needed for our business in a timely manner and in the quantities required, we may be delayed in providing our services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, in the past, our industry has faced sporadic guar and proppant shortages and trucking shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several of our competitors. Additionally, increasing costs of certain raw materials, such as guar, may negatively impact demand for our services or the profitability of our business operations.

During the year ended December 31, 2018 , one supplier from our Well Completions Services segment, Covia Corporation, supplied 7.2%, of our total Company's materials and/or products; but no single third-party supplier from our Well Construction and Intervention Services segment and Well Support Services segment supplied 5.0% or more of the Company's materials and/or products. In conjunction with the sale of our manufacturing business line, we also entered into a preferred supply agreement with a third-party to supply us with components and finished goods to repair and refurbish certain of our hydraulic fracturing equipment.

Quality, Health, Safety and Environmental ( “ QHSE ” ) Program

Our business involves the operation of extremely heavy and powerful equipment and the use of explosive and radioactive materials, among other hazards. If not well managed, these operations have the potential to result in serious injuries to our employees and/or third-parties and substantial damage to property or the environment. We commit significant resources towards employee safety and have a robust new hire program. We also have comprehensive QHSE-focused training programs designed to minimize accidents in the workplace and improve the safety, quality and efficiency of our operations. We believe that our QHSE policies, standards and procedures, which are reviewed internally for compliance with industry changes, provide a reliable framework to ensure our operations minimize the hazards inherent in our work and meet regulatory requirements and customer demands. Further, we are in the process of implementing a quality management system that will create standardization of processes throughout all facets of our business, support our risk mitigation strategy and help ensure compliance with our procedures and processes.

Our record and reputation for safety are important to all aspects of our business. In the oilfield services industry, a critical competitive factor in establishing and maintaining long-term customer relationships is having an experienced, skilled and well-trained work force. In recent years, many of our larger customers have placed an added emphasis on the safety records and quality management systems of their contractors. We strive to meet or exceed the safety and quality management requirements of our customers, and we believe our continued focus on safety will gain even further importance to our customers as the market continues to improve. Our reputation and proven safety record have allowed us to earn work certifications from several industry leaders that we believe have some of the most demanding safety requirements, including ConocoPhillips, ExxonMobil, Chevron and Royal Dutch Shell.

Risk Management and Insurance

Our operations are subject to hazards inherent in the oil and gas industry, including blowouts, explosions, cratering, fires, oil spills, surface and underground pollution and contamination, hazardous material spills, loss of well control, damage to or loss of the wellbore, formation or underground reservoir, damage or loss from the use of explosives and radioactive materials, and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment and facilities, loss of oil and natural gas production, suspension of operations or loss of license to conduct business, damage to or destruction of the environment and natural resources and damage to or destruction of the property of others. Additionally, our business involves, and so is subject to hazards associated with, the transportation of heavy equipment and materials, as well as heavily regulated explosive and radioactive materials. Regularly having a significant number of both commercial and non-commercial motor vehicles on the road creates a high risk of vehicle accidents that may result in personal injury or death, damage to or destruction of equipment and the property of others and hazardous material spills. The occurrence of a serious accident involving our employees, equipment and/or services, could result in C&J being named as a defendant in lawsuits asserting large claims for damages. C&J could also be liable to indemnify certain third-parties, specifically including its customers, for large claims for damages in situations where our employees, equipment and/or services were involved.

Despite our efforts to maintain high safety and security standards, we from time to time have suffered accidents, outages, breaches, and other incidents, and it is likely that we will experience the same in the future. In addition to the property and personal losses from these events, the frequency and severity of these incidents affect our operating costs and insurability, as well as our relationship with customers, employees and regulatory agencies. Any significant increase in the frequency or severity of these incidents, or the general level of compensatory payments, could adversely affect the cost of, or our ability to obtain, workers’ compensation and other forms of insurance, and could have other material adverse effects on our financial condition and results of operations. In addition, our business relies heavily on sophisticated information technology systems and infrastructure, the failure of which may cause disruptions to our operations. Any such failure, whether resulting from outages, employee error, cyber-attacks, or other similar events, may have an adverse impact on our financial condition.

We carry a variety of insurance coverages for our operations including coverage for workers’ compensation and employers liability, automobile liability, general liability, which also includes sudden and accidental pollution insurance, environmental liability, and property damage relating to catastrophic events, together with excess loss liability coverage. These insurance policies carry self-insured retention limits or deductibles on a per occurrence basis at levels we believe to be customary and reasonable. We have deductibles per occurrence for: workers’ compensation and employers liability claims of $1,000,000; automobile liability claims of $1,000,000; general liability claims, including sudden and accidental pollution claims, of $250,000, plus an additional annual aggregate deductible of $250,000; environmental liability claims of $500,000; and property damage for catastrophic events of $50,000. The excess loss liability coverage is subject to a self-insured retention of $5,000,000 for each occurrence and in the aggregate. We also carry coverage applicable to a number of cyber liabilities,

including cyber extortion, security failures, and network interruptions. These cyber liability coverages are subject to a self-insured retention of $100,000 for each occurrence.

With respect to the C&P Business that we acquired from Nabors in the Nabors Merger, and as a result of the settlement agreement negotiated with Nabors in connection the Chapter 11 Proceeding, we assumed, among other liabilities, all liabilities of the C&P Business to the extent arising out of or resulting from the operation of the C&P Business at any time before, at or after the closing of the Nabors Merger, including liability for death, personal injury and property damage resulting from or caused by the assets, products and services of the C&P Business, other than those liabilities specifically identified in the settlement agreement, as incorporated into the Restructuring Plan, for which Nabors maintains a continuing indemnification obligation. Please see “U.S. Department of Justice Criminal Investigation into Pre-Nabors Merger Incident” in Part I, Item 3 “Legal Proceedings” for additional information about the certain legal proceedings related to the C&P Business.

As discussed below, our Master Service Agreements (“MSAs”) with our customers generally provide, among other things, that our customers generally assume (without regard to fault) liability for underground pollution and pollution emanating from the wellbore as a result of an explosion, fire or blowout. We retain the risk for any liabilities which we cause, and which are not otherwise indemnified by our customers. This includes liability to indemnify our customer for certain liabilities. Our insurance coverage may be inadequate to cover our liabilities. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable or on terms as favorable as our current arrangements.

We strive to enter into MSAs with each of our customers before providing any services. Our sales and operations teams work closely with our legal team to identify and prioritize MSAs for negotiation, which we believe increases the efficiency of our risk management efforts. These MSAs delineate our and our customers’ respective warranty and indemnification obligations with respect to the services we provide. With respect to warranty issues, our MSAs typically provide that our obligations are limited to replacing any defective good or services, or in the alternative, providing the customer with a refund. Our MSAs typically provide for knock-for-knock indemnification for all bodily injuries and property losses arising from our work, which means that we and our customers assume (without regard to fault) liability for damages to our respective personnel and property. For catastrophic losses, our MSAs generally include industry-standard carve-outs from the knock-for-knock indemnities, pursuant to which our customers (typically the exploration and production companies) assume (without regard to fault) liability for (i) damage to the well bore, including the cost to re-drill; (ii) damage to the formation, underground strata and the reservoir; (iii) damages or claims arising from loss of control of a well or a blowout; and (iv) allegations of subsurface trespass. Additionally, our MSAs often provide carve-outs to the “without regard to fault” concept that would permit, for example, us to be held responsible for events of catastrophic loss to the extent they arise as a result of our gross negligence or willful misconduct. Our MSAs typically provide for industry-standard pollution indemnities, pursuant to which we assume liability for surface pollution associated with our equipment and originating above the surface (without regard to fault), and our customer assumes (without regard to fault) liability arising from all other pollution, including, without limitation, underground pollution and pollution emanating from the wellbore as a result of an explosion, fire or blowout. In certain circumstances, we agree to exceptions from our MSAs’ catastrophic loss and pollution indemnities to the extent incidents arise from our gross negligence or willful misconduct.

The description of insurance policies set forth above is a summary of certain material terms of our insurance policies currently in effect and may change in the future as a result of market and/or other conditions. Similarly, the summary of MSAs set forth above is a summary of the material terms of the typical MSA that we have in place, but does not reflect every MSA that is in effect or that we may enter into in the future, some of which may contain indemnity structures and risk allocations between our customers and us that are different and less favorable than those described here.

Employees

As of February 22, 2019 , we have 6,399 employees. The delivery of our core completion services requires personnel with specialized skills and experience who can perform physically demanding work. Due to the commodity price volatility often experienced in the energy services industry and the demanding nature of the work, workers often choose to pursue employment in fields that offer a less strenuous work environment. During periods of high demand for oil field services, there can be extreme competition amongst employers to attract and retain skilled workers, which often results in a shortage of qualified employees and attrition due to wage escalation by competitors. Additionally, in our Well Support Services segment we continue to experience labor shortages for qualified drivers with a commercial driver's license and workover rig operators for our rig services business.

Our employees are not represented by any labor unions or covered by collective bargaining agreements. We consider our relations with our employees to be generally good.

Government Regulations and Environmental, Health and Safety Matters

We are significantly affected by stringent and complex federal, state and local laws and regulations, including those governing worker health and safety, motor carrier operations, the transportation of explosives, the use, management and disposal of certain radioactive materials, the handling of hazardous materials and the emission or discharge of substances into the environment or otherwise relating to environmental protection. Regulations concerning equipment certification create an ongoing need for regular maintenance, which is incorporated into our daily operating procedures. The regulatory burden on the industry increases the cost of doing business and consequently affects profitability. Any failure by us to comply with such local, state and federal laws and regulations may result in governmental authorities taking actions against our business that could adversely impact our operations and financial condition, including the following:


•	issuance of administrative, civil and criminal penalties;


•	modification, denial or revocation of permits or other authorizations;


•	imposition of limitations on our operations through injunctions or other governmental actions; and


•	performance of site investigatory, remedial or other corrective actions.

Worker Health and Safety

We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and the public. OSHA has implemented stricter standards for worker exposure to silica, which would apply to use of sand as a proppant for hydraulic fracturing. These new standards require the oil and gas industry to implement engineering controls and work practices to limit exposures below the new limits by June 23, 2021.

Motor Carrier Operations

Among the services we provide, we operate as a motor carrier and therefore are subject to regulation by the United States Department of Transportation (“DOT”) and various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations; regulatory safety; hazardous materials labeling, placarding and marking; financial reporting; and certain mergers, consolidations and acquisitions. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive in any specific period and requiring onboard black box recorder devices or limits on vehicle weight and size. For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking a commercial driver’s license. Certain motor vehicle operators are required to register with the DOT. This registration requires an acceptable operating record. The DOT periodically conducts compliance reviews and may revoke registration privileges based on certain safety performance criteria, and a revocation could result in a suspension of operations. Since 2010, the DOT has pursued its Compliance, Safety, Accountability (“CSA”) program, in an effort to improve commercial truck and bus safety. A component of CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federal and state law enforcement personnel to determine a carrier’s safety performance. The SMS is intended to allow DOT to identify carriers with safety issues and intervene to address those problems.

Interstate motor carrier operations are subject to safety requirements prescribed by DOT. To a large degree, intrastate motor carrier operations are subject to safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations. DOT regulations also mandate drug testing of drivers. From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted.

Radioactive Materials

In addition, some of our operations utilize equipment that contains sealed, low-grade radioactive sources. Our activities involving the use of radioactive materials are regulated by the United States Nuclear Regulatory Commission (“NRC”) and state regulatory agencies under agreement with the NRC. Standards implemented by these regulatory agencies require us to obtain licenses or other approvals for the use of such radioactive materials. We believe that we have obtained these licenses and approvals as necessary and applicable. Numerous governmental agencies issue regulations to implement and enforce these laws, for which compliance is often costly and difficult. The violation of these laws and regulations may result in the denial or revocation of permits, issuance of corrective action orders, injunctions prohibiting some or all of our operations, assessment of administrative and civil penalties, and even criminal prosecution. In addition, releases of radioactive material could result in substantial remediation costs and potentially expose us to third-party property damage or personal injury claims.

Hazardous Substances

We generate wastes, including hazardous wastes, which are subject to the federal Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes. The U.S. Environmental Protection Agency (“EPA”), the NRC, and state agencies have limited the approved methods of disposal for some types of hazardous and nonhazardous wastes. RCRA currently excludes drilling fluids, produced waters and certain other wastes associated with the exploration, development or production of oil and natural gas from regulation as “hazardous waste.” Disposal of such non-hazardous oil and natural gas exploration, development and production wastes is usually regulated by state law. Other wastes handled at exploration and production sites or generated in the course of providing well services may not fall within this exclusion. Moreover, stricter standards for waste handling and disposal may be imposed on the oil and natural gas industry in the future. For example, in December 2016, the EPA and environmental groups entered into a consent decree to address the EPA’s alleged failure to timely assess its RCRA Subtitle D criteria regulations exempting certain exploration and production related oil and gas wastes from regulation as hazardous wastes under RCRA. The consent decree requires the EPA to propose a rulemaking no later than March 15, 2019 for revision of certain Subtitle D criteria regulations pertaining to oil and gas wastes or to sign a determination that revision of the regulations is not necessary. If the EPA proposes new rulemaking, the 2016 consent decree requires the EPA to take final action on such rules no later than July 15, 2021. Removal of RCRA’s exemption for exploration and production wastes has the potential to significantly increase waste disposal costs, which in turn will result in increased operating costs and could adversely impact our business and results of operations. The impact of future revisions to environmental laws and regulations cannot be predicted.

Naturally Occurring Radioactive Materials (“NORM”) may contaminate extraction and processing equipment used in the oil and natural gas industry. The waste resulting from such contamination is regulated by federal and state laws. Standards have been developed for: worker protection; treatment, storage, and disposal of NORM and NORM waste; management of NORM-contaminated waste piles, containers and tanks; and limitations on the relinquishment of NORM contaminated land for unrestricted use under RCRA and state laws. It is possible that we may incur costs or liabilities associated with elevated levels of NORM.

The Federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or the “Superfund” law), and comparable state statutes impose joint and several liability, without regard to fault or legality of the original conduct, on classes of persons who are considered to have been responsible for the release of a hazardous substance into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was released, and companies that disposed or arranged for disposal of hazardous substances at off-site locations such as landfills. Under CERCLA, these persons may be subject to strict, joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. We currently own, lease, or operate numerous properties and facilities that for many years have been used for industrial activities, including oil and natural gas related operations. Hazardous substances, wastes, or hydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations where such substances have been taken for recycling or disposal. In addition, some of these properties have been operated by third-parties or by previous owners whose treatment and disposal or release of hazardous substances, wastes, or hydrocarbons, was not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes and remediate contaminated property (including groundwater contamination), including instances where the prior owner or operator caused the contamination, or perform remedial plugging of disposal wells or waste pit closure operations to prevent future contamination. These laws and regulations may also expose us to liability for our acts that were in compliance with applicable laws at the time the acts were performed.

Water Discharges

The Federal Water Pollution Control Act (the “Clean Water Act”), and comparable state statutes impose restrictions and strict controls regarding the discharge of pollutants into state waters or waters of the United States. The discharge of pollutants into jurisdictional waters is prohibited unless the discharge is permitted by the EPA or applicable state agencies. The Clean Water Act also prohibits the discharge of dredge and fill material into regulated waters, including jurisdictional wetlands, unless authorized by an appropriately issued permit. In September 2015, the EPA and U.S. Army Corps of Engineers (the “Corps”) issued a new rule defining the scope of the EPA’s and the Corps’ jurisdiction over wetlands and other waters. On December 11, 2018, EPA and the Corps issued a proposed new rule that would differently revise the definition of waters of the United States and essentially replace the 2015 rule. According to the agencies, the proposed new rule is intended to increase CWA program predictability and consistency by increasing clarity as to the scope of ‘waters of the United States’ federally regulated under the Act. If finalized, this new definition of waters of the United States will likely be challenged and sought to be enjoined in federal court. Until that time, regulations are being implemented as they were prior to August 2015. A public hearing on this proposed rule was scheduled for January 23, 2019, but this hearing was postponed due to the shutdown of the federal government in early 2019. The process for obtaining permits has the potential to delay the development of natural gas and oil projects. Also, spill prevention, control and countermeasure regulations under federal law require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak.

In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Moreover, the Oil Pollution Act of 1990 (“OPA”) imposes a variety of requirements on responsible parties related to the prevention of oil spills and liability for damages, including natural resource damages, resulting from such spills in waters of the United States. A responsible party includes the owner or operator of an onshore facility. The Clean Water Act and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the OPA, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

The Safe Water Drinking Act (“SDWA”) regulates the underground injection of substances through the Underground Injection Control (“UIC”) program. Hydraulic fracturing generally is exempt from regulation under the UIC program, and the hydraulic fracturing process is typically regulated by state oil and gas commissions. However, the EPA has asserted that hydraulic fracturing with fluids containing diesel fuel is subject to regulation under the UIC program. In addition, in response to recent seismic events near underground injection wells used for the disposal of oil and gas-related wastewater, federal and some state agencies have begun investigating whether such wells have caused increased seismic activity, and some states have imposed volumetric injection limits, shut down or imposed moratorium on the use of such injection wells. If new regulatory initiatives are implemented that restrict or prohibit the use of underground injection wells in areas where we rely upon the use of such wells in our operations, our costs to operate may significantly increase and our ability to perform services may be delayed or limited, which could have an adverse effect on our results of operations and financial position.

Air Emissions

Some of our operations also result in emissions of regulated air pollutants. The federal Clean Air Act (“CAA”) and analogous state laws require permits for certain facilities that have the potential to emit substances into the atmosphere that could adversely affect environmental quality. These laws and their implementing regulations also impose generally applicable limitations on air emissions and require adherence to maintenance, work practice, reporting and record keeping, and other requirements. Failure to obtain a permit or to comply with permit or other regulatory requirements could result in the imposition of substantial administrative, civil and even criminal penalties. In addition, we or our customers could be required to shut down or retrofit existing equipment, leading to additional expenses and operational delays.

Many of these regulatory requirements, including New Source Performance Standards and Maximum Achievable Control Technology standards have been made more stringent over time as a result of stricter ambient air quality standards and other air quality protection goals adopted by the EPA. For example, in October 2015, the EPA lowered the National Ambient Air Quality Standard, (“NAAQS”) for ozone from 75 to 70 parts per billion for both the 8-hour primary and secondary standards. Subsequently, in November 2017, the EPA published a list of areas that are in compliance with the new ozone standards and separately in December 2017 issued responses to state recommendation for designating nonattainment areas. Remaining area designations were completed on July 17, 2018. State implementation of the revised NAAQS could result in stricter permitting requirements, delay or prohibit our ability to obtain such permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant.

Compliance with these and other air pollution control and permitting requirements has the potential to delay the development of oil and natural gas projects and increase costs for us and our customers. Although we do not believe our operations will be materially adversely affected by these requirements, our business could be materially affected if our customers’ operations are significantly affected by these or other similar requirements. These requirements could increase the cost of doing business for us and our customers, reduce the demand for the oil and gas our customers produce, and thus have an adverse effect on the demand for our products and services.

Climate Change

More stringent laws and regulations relating to climate change may be adopted in the future and could cause us to incur additional operating costs or reduce the demand for our services. The EPA has determined that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”) present an endangerment to the environment because emissions of such gases are, according to the EPA and many scientists, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, EPA has adopted regulations that restrict emissions of GHGs under existing provisions of the CAA, including rules that require preconstruction and operating permit reviews for GHG emissions from certain large stationary sources. In subsequent litigation, the U.S. Supreme Court upheld a portion of the EPA’s GHG stationary source program, but also invalidated a portion of it, holding that stationary sources already subject to the Prevention of Significant Deterioration ("PSD") or Title V program for non-GHG criteria pollutants remained subject to GHG requirements, but that sources subject to the PSD or Title V program only for GHGs could not be forced to comply with EPA’s GHG requirements. Upon remand, the D.C. Circuit issued an amended judgment, which, among other things, vacated the GHG regulations under review in that case to the extent they require a stationary source to obtain a PSD or Title V permit solely because the source emits or has the potential to emit GHGs above the applicable major source thresholds. In October 2016, the EPA issued a proposed rule to further revise its PSD and Title V regulations applicable to GHGs in accordance with these court rulings. This rulemaking process is ongoing. The EPA has also adopted rules requiring the monitoring and reporting of GHG emissions from specified GHG sources, including, among others, certain oil and natural gas production facilities, on an annual basis. More recently, in June 2016, the EPA issued final rules that establish new air emission controls for emissions of methane from certain equipment and processes in the oil and natural gas source category, including production, processing transmission and storage activities. The EPA’s final rule package includes first-time standards to address emissions of methane from equipment and processes across the source category, including hydraulically fractured oil and natural gas well completions. However, over the past year the EPA has taken several steps to delay implementation of these methane rules, and the agency proposed a rulemaking in June 2017 to stay the requirements for a period of two years and revisit implementation of the EPA’s methane rules in their entirety. EPA proposed revisions on September 11, 2018, intended to roll back parts of the 2016 rules. The EPA has not yet published a final rule but, as a result of these developments, future implementation of the EPA methane rules is uncertain at this time. In April 2018, a coalition of states filed a lawsuit in federal district court aiming to force the EPA to establish guidelines for limiting methane emissions from existing sources in the oil and natural gas sector; that lawsuit is pending. In addition, the EPA finalized rules to further reduce GHG emissions, primarily from coal-fired power plants, under its Clean Power Plan. However, on October 9, 2017, the EPA announced that it will repeal the Clean Power Plan and, on August 21, 2018, proposed the Affordable Clean Energy ("ACE") rule, which would establish emission guidelines for states to develop plans to address greenhouse gas emissions from existing coal-fired power plants. The ACE rule would replace the Clean Power Plan and the rulemaking process is ongoing. The Bureau of Land Management (“BLM”) also finalized similar rules in November 2016 which seek to limit methane emissions from new and existing oil and gas operations on federal lands through limitations on the venting and flaring of gas, as well as enhanced leak detection and repair requirements for certain equipment and processes. In September 2018, the BLM issued a rule that relaxes or rescinds certain requirements of these regulations; California and New Mexico have challenged the new rule in ongoing litigation. We do not believe our operations are currently subject to these requirements, but, to the extent fully implemented, our business could be affected if our customers’ operations become subject to these or other similar requirements. Moreover, these requirements could increase the cost of doing business for us and our customers, reduce the demand for the oil and gas our customers produce, and thus have a material adverse effect on the demand for our products and services.

In addition, while Congress has yet to pass legislation to reduce emissions of GHGs, and almost one-half of the states have established or joined GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. In addition, in 2015, the U.S. participated in the United Nations Conference on Climate Change, which led to the creation of the Paris Agreement. The Paris Agreement requires countries to review and “represent a progression” in their intended nationally determined contributions, which set GHG emission reduction goals, every five years beginning in 2020. However, in August 2017, the U.S. State Department officially informed the United Nations of the intent of the United States to withdraw from the Paris Agreement. The Paris Agreement has a four year exit process. The United States’ adherence to the exit process is uncertain and/or the terms on which the United States may reenter the Paris Agreement or a separately negotiated agreement are

unclear at this time. Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact our business, any new federal, regional or state restrictions on emissions of carbon dioxide or other GHGs that may be imposed in areas in which we conduct business could result in increased compliance costs or additional operating restrictions on our customers. Such restrictions could potentially make our customers’ products more expensive and thus reduce demand for such products, which in turn could have a material adverse effect on the demand for our services and our business. Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities, which could have a material adverse effect on our business and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the oil and natural gas our customers produce. Finally, it should be noted that many scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climatic changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events; if any such effects were to occur, they could have an adverse effect on our assets and operations.

Hydraulic Fracturing

Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense subsurface rock formations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. We commonly perform hydraulic fracturing services for our customers. Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but, as noted above, the EPA has asserted federal regulatory authority pursuant to the SDWA over certain hydraulic fracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to such activities. In addition, the EPA has taken certain actions noted above and issued final regulations under the CAA governing performance standards, including standards for the capture of air emissions released during hydraulic fracturing; and finalized rules in June 2016 to prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants, compliance with which is required by August 2019. Also, the BLM finalized rules in March 2015 that impose new or more stringent standards for performing hydraulic fracturing on federal and Native American lands. The BLM issued a final rule in December 2017 repealing its hydraulic fracturing rule, and this action has been challenged in federal court. Also, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources. The final report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources “under some circumstances,” noting that the following hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits.

In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements, well construction and temporary or permanent bans on hydraulic fracturing in certain areas. For example, in May 2013, the Texas Railroad Commission adopted new rules governing well casing, cementing and other standards for ensuring that hydraulic fracturing operations do not contaminate nearby water resources. In light of concerns about seismic activity being triggered by the injection of produced waters into underground wells, certain regulators are also considering additional requirements related to seismic safety for hydraulic fracturing activities. A 2015 U.S. Geological Survey report identified eight states with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction. Any regulation that restricts the ability to dispose of produced waters or increases the cost of doing business could cause curtailed or decreased demand for our services and have a material adverse effect on our business. Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general or hydraulic fracturing in particular. We believe that we follow applicable standard industry practices and legal requirements for groundwater protection in our hydraulic fracturing activities. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or costly to perform hydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas exploration and production activities and, therefore, adversely affect demand for our services and our business. Such laws or regulations could also materially increase our costs of compliance and doing business. The Endangered Species Act was established to protect endangered and threatened species. Pursuant to that act, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species or its habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. The U.S. Fish and Wildlife Service must also

designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development. If our customers were to have areas within their business and operations designated as critical or suitable habitat or a protected species, it could decrease demand for our services and have a material adverse effect on our business.

There have been no material incidents or citations related to our hydraulic fracturing operations in the past five years. During that period, we have not been involved in any litigation over alleged environmental violations, have not been ordered to pay any material monetary fine or penalty with respect to alleged environmental violations, and are not currently facing any type of governmental enforcement action or other regulatory proceeding involving alleged environmental violations related to our hydraulic fracturing operations. In addition, pursuant to our MSAs, we are generally liable for only surface pollution, not underground or flowback pollution, which our customers are generally liable for and for which we are typically indemnified by our customers.

We maintain insurance against some risks associated with underground contamination that may occur as a result of well services activities. However, this insurance is limited to activities at the well site and may not continue to be available or may not be available at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could have a materially adverse effect on our financial condition and results of operations.

Overall, we do not anticipate that compliance with existing environmental laws and regulations will have a material effect on our financial condition or results of operations. It is possible, however, that substantial costs for compliance or penalties for non-compliance may be incurred in the future. Moreover, it is possible that other developments, such as the adoption of stricter environmental laws, regulations, and enforcement policies, could result in additional costs or liabilities that we cannot currently quantify.

Item 1A. Risk Factors

We face many challenges and risks in the industry in which we operate. Before investing in our common stock you should carefully consider each of the following risk factors and all of the other information set forth in this Annual Report, including under the section titled “Cautionary Note Regarding Forward-Looking Statements”, and in our other reports filed with the SEC, and the documents and other information incorporated by reference herein and therein, for a detailed discussion of known material factors which could materially affect our business, financial condition or future results. The risks and uncertainties described are not the only ones we face. Additional risk factors not presently known to us or which we currently consider immaterial may also adversely affect our business, financial condition or future results. If any of these risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business and Financial Condition

Our business is cyclical and dependent upon conditions in the oil and natural gas industry that impact the level of exploration, development and production of oil and natural gas and capital expenditures by oil and natural gas companies. Our customers’ willingness to undertake drilling, completion and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors that are beyond our control. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flow.

We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. If these expenditures decline, our business will suffer. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cycles and is influenced by a combination of long-term, short-term and cyclical trends. Our customers’ willingness to conduct drilling, completion and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as:


•	the supply of and demand for oil and natural gas;


•	the current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices;


•	the supply of and demand for hydraulic fracturing and other well service equipment in the continental United States;


•	the level of global and domestic oil and natural gas inventories;


•	the cost of exploring for, developing, producing and delivering oil and natural gas;


•	the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil;


•	public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate hydraulic fracturing activities;


•	the expected rates of decline of current oil and natural gas production;


•	lead times associated with acquiring equipment and products and availability of personnel;


•	regulation of drilling activity;


•	the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids;


•	the discovery and development rates of new oil and natural gas reserves;


•	available pipeline and other transportation capacity;


•	weather conditions, including hurricanes that can affect oil and natural gas operations over a wide area;


•	political instability in oil and natural gas producing countries, including governmental shutdowns;


•	domestic and worldwide economic conditions;


•	technical advances affecting energy consumption;


•	the price and availability of alternative fuels; and


•	merger and divestiture activity among oil and natural gas producers.

Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decline) generally leads to decreased spending by our customers, which in turn negatively impacts drilling, completion and production activity. In particular, the demand for new or existing drilling, completion and production work is driven by available investment capital for such work. When these capital investments decline, our customers’ demand for our services declines. Because these types of services can be easily “started” and “stopped,” and oil and natural gas producers generally tend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services compared with demand for other types of energy services. Any negative impact on the spending patterns of our customers may cause lower pricing and utilization for our core service lines, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Spending by exploration and production companies can also be impacted by conditions in the capital markets. Limitations on the availability of capital, or higher costs of capital, for financing expenditures may cause exploration and production companies to make additional reductions to capital budgets in the future even if oil prices remain at current levels or natural gas prices increase from current levels. Any such cuts in spending may cause our customers to curtail their drilling programs, including completion and production activities and any discretionary spending on well services, which may result in a reduction in the demand for our services, the rates we can charge and the utilization of our assets. Moreover, reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could also have a material adverse impact on our business, even in a stronger oil and natural gas price environment.

Fluctuations in oil and natural gas prices could adversely affect drilling, completion and production activities by oil and natural gas companies and our revenues, cash flows and profitability. If oil and natural gas prices remain volatile, or if oil or natural gas prices decline, the demand for our services could be adversely affected.

The demand for our services depends on the level of spending by oil and gas companies for drilling, completion and production activities, which are affected by short-term and long-term trends in oil and natural gas prices, including current and anticipated oil and natural gas prices. Oil and natural gas prices, as well as the level of drilling, completion and production activities, historically have been extremely volatile and are expected to continue to be so. For example, during 2018, NYMEX crude oil prices averaged approximately $65.00 per barrel, and during 2018 NYMEX crude oil prices ranged from approximately $76.00 to $43.00 per barrel. During periods of declining oil and natural gas prices, or when pricing remains depressed, we have experienced significant declines in drilling, completion and production activities across our customer base, which in turn resulted in reduced demand and increased competition and pricing pressure to varying degrees across our service lines and operating areas. If the prices of oil and natural gas continue to be weak and volatile, our business, financial condition, results of operations, cash flows and prospects may be materially and adversely affected.

Worldwide military, political and economic events, including initiatives by OPEC, affect both the demand for, and the supply of, oil and natural gas. Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacity and other factors that will be beyond our control may also affect the supply of, demand for, and price of oil and natural gas. Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decrease) affects the spending patterns of our customers and may result in the drilling of fewer new wells or lower completion and production spending on existing wells. This, in turn, could result in lower demand for our services and cause lower pricing and utilization levels for our services. If oil and natural gas prices decline, or if there is a further reduction in drilling and completion activities, the demand for our services and our results of operations could be materially and adversely affected.

The oilfield services industry is highly competitive with significant potential for excess capacity. We may not be able to meet the specific needs of oil and natural gas exploration and production companies at competitive prices which could adversely affect our business and operating results.

The oilfield services industry is highly competitive. The principal competitive factors in our markets are generally price, technical expertise, the availability and condition of equipment, work force capability, safety record, reputation and experience. We compete with large national and multi-national companies that have longer operating histories, greater financial resources and greater name recognition than we do and who can operate and have operated at a loss in the regions in which we operate. Additionally, some of our competitors provide a broader array of services and/or have a stronger presence in more geographic markets. Our reputation for safety and quality may not be sufficient to enable us to maintain our competitive position, and our competitors may be able to respond more quickly to new or emerging technologies and services and changes in customer requirements. As a result of competition, we may lose market share or be unable to maintain or increase prices for our present services or to acquire additional business opportunities, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Increases in market capacity can lead to active price competition, which could adversely affect our business and utilization levels.

Significant increases in overall market capacity have caused active price competition and led to lower pricing and utilization levels for our services. Completion and well servicing equipment, such as hydraulic fracturing fleets, can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in an oversupply of equipment in an area. For example, natural gas prices declined sharply in 2009 and remained depressed through 2015, which resulted in reduced drilling activity in natural gas shale plays. This drove many oilfield services companies operating in those areas to relocate their equipment to more oil- and liquids-rich shale plays, such as the Eagle Ford Shale and Permian Basin. As drilling activity and completion capacity migrated into the oil- and liquids-rich regions from the gas-rich

regions, the increase in supply relative to demand negatively impacted pricing and utilization of our services, particularly for hydraulic fracturing services. Furthermore, as we entered 2015, we experienced a slowdown in activity across our customer base as operators reacted to the rapid decline in commodity prices that began during the fourth quarter of 2014. The entire year proved to be extremely challenging for the North American oilfield services industry due to the sustained weakness and volatility in oil prices at levels that caused severe reductions in drilling, completion and production activities, which in turn resulted in reduced demand and increased competition and pricing pressure to varying degrees across our service lines and operating areas.

We may be unable to implement price increases or maintain existing prices on our core services.

We generate revenue from our core service lines, many of which are provided on a spot market basis. Pressure on pricing for our core services, including due to competition and industry and/or economic conditions, may impact, among other things, our ability to implement price increases or maintain pricing on our core services. We operate in a very competitive industry and, as a result, we may not always be successful in raising, or maintaining our existing prices. Additionally, during periods of increased market demand, a significant amount of new service capacity, including hydraulic fracturing equipment, may enter the market, which also puts pressure on the pricing of our services and limits our ability to increase or maintain prices. Furthermore, during periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our profitability.

Even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset such rising costs. Also, we may not be able to successfully increase prices without adversely affecting our activity levels. The inability to maintain our prices or to increase our prices as costs increase could have a material adverse effect on our business, financial position and results of operations.

Reliance upon a few large customers may adversely affect our revenue and operating results.

Our top ten customers represented approximately 44.2% , 40.7% and 46.0% of our consolidated revenue for the years ended December 31, 2017, 2016 and 2015, respectively. It is likely that we will continue to derive a significant portion of our revenue from a relatively small number of customers in the future. If a major customer fails to pay us, revenue would be impacted, and our operating results and financial condition could be harmed. Additionally, if we were to lose any material customer, we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could have a material adverse effect on our business until the equipment is redeployed at similar utilization or pricing levels.

Weather conditions could materially impair our business.

Our operations and the operations of our customers may be adversely affected by seasonal weather conditions, severe weather events and natural disasters. For example, prolonged periods of drought, hurricanes, tropical storms, heavy snow, ice or rain may result in customer delays and other disruptions to our services. Repercussions of adverse weather conditions may include:


•	curtailment of services;


•	weather-related damage to facilities and equipment, resulting in suspension of operations;


•	inability to deliver equipment, personnel and products to job sites in accordance with contract schedules;


•	increase in the price of insurance; and


•	loss of productivity.

These constraints could also delay our operations, reduce our revenue and materially increase our operating and capital costs.

Our operations are subject to hazards inherent in the oilfield services industry.

Risks inherent to our industry, such as equipment defects, vehicle accidents, explosions and uncontrollable flows of gas or well fluids, can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to, or destruction of property, equipment and the environment. For example, transportation of heavy equipment creates the potential for our trucks to become involved in roadway accidents, which in turn could result in personal injury or property damages lawsuits being filed against us. In addition, our hydraulic fracturing and well completion services could become a source of spills or releases of fluids, including chemicals used during hydraulic fracturing activities, at the site where such services are performed, or could result in the discharge of such fluids into underground formations that were not targeted for fracturing or well completion activities, such as potable aquifers. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damages and could result in a variety of claims, losses and remedial obligations that could have a material

adverse effect on our business and results of operations. The existence, frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to purchase our services if they view our safety record as unacceptable, which could cause us to lose customers and substantial revenue.

Our operational personnel have experienced accidents which have, in some instances, resulted in serious injuries. Our safety procedures may not always prevent such damages. Our insurance coverage may be inadequate to cover our liabilities. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable or on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, a claim in excess of the insurance coverage limits maintained by us or a claim at a time when we are not able to obtain liability insurance could have a material adverse effect on our ability to conduct normal business operations and on our financial condition, results of operations and cash flows.

Unsatisfactory safety performance may negatively affect our customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues.

Our ability to retain existing customers and attract new business is dependent on many factors, including our ability to demonstrate that we can reliably and safely operate our business in a manner that is consistent with applicable laws, rules and permits, which legal requirements are subject to change. Existing and potential customers consider the safety record of their third-party service providers to be of high importance in their decision to engage such providers. If one or more accidents were to occur at one of our operating sites, the affected customer may seek to terminate or cancel its use of our facilities or services and may be less likely to continue to use our services, which could cause us to lose substantial revenues. Furthermore, our ability to attract new customers may be impaired if they elect not to engage us because they view our safety record as unacceptable. In addition, it is possible that we will experience multiple or particularly severe accidents in the future, causing our safety record to deteriorate. This may be more likely as we continue to grow, if we experience high employee turnover or labor shortage, or hire inexperienced personnel to bolster our staffing needs.

We may be unable to employ a sufficient number of key employees, technical personnel and other skilled and qualified workers.

The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work. As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a different work environment. Our ability to be productive and profitable depends upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force. At times, demand for skilled workers in our geographic area of operations is high, and the supply is limited. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we pay, or both. If either of these events were to occur, our capacity and profitability could be diminished, and our growth potential could be impaired.

We depend heavily on the efforts of our executive officers, managers and other key employees to manage our operations. The unexpected loss or unavailability of key members of management or technical personnel may have a material adverse effect on our business, financial condition, prospects or results of operations.

Delays in deliveries of key raw materials or increases in the cost of key raw materials could harm our business, results of operations and financial condition.

We have established relationships with a limited number of suppliers of our raw materials (such as proppant, guar, chemicals or coiled tubing) and finished products (such as fluid-handling equipment). Should any of our current suppliers be unable to provide the necessary raw materials or finished products or otherwise fail to deliver the products in a timely manner and in the quantities required, any resulting delays in the provision of services could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, increasing costs of certain raw materials, including guar, may negatively impact demand for our services or the profitability of our business operations. In the past, our industry faced sporadic shortages associated with hydraulic fracturing operations, such as proppant and guar, requiring work stoppages, which adversely impacted the operating results of several competitors. We may not be able to mitigate any future shortages of raw materials, including proppants.

We may be adversely affected by uncertainty in the global financial markets and the deterioration of the financial condition of our customers.

Our future results may be impacted by the uncertainty caused by an economic downturn, volatility or deterioration in the debt and equity capital markets, inflation, deflation or other adverse economic conditions that may negatively affect us or parties with whom we do business resulting in a reduction in our customers’ spending and their non-payment or inability to perform obligations owed to us, such as the failure of customers to honor their commitments or the failure of major suppliers to complete orders. Additionally, during times when the natural gas or crude oil markets weaken, our customers are more likely to experience financial difficulties, including being unable to access debt or equity financing, which could result in a reduction in our customers’ spending for our services. In addition, in the course of our business we hold accounts receivable from our customers. In the event of the financial distress or bankruptcy of a customer, we could lose all or a portion of such outstanding accounts receivable associated with that customer. Further, if a customer was to enter into bankruptcy, it could also result in the cancellation of all or a portion of our service contracts with such customer at significant expense or loss of expected revenues to us.

Our assets require significant amounts of capital for maintenance, upgrades and refurbishment and may require significant capital expenditures for new equipment.

Our hydraulic fracturing fleets and other completion service-related equipment require significant capital investment in maintenance, upgrades and refurbishment to maintain their competitiveness. The costs of components and labor required to maintain our fleets have increased in the past and may increase in the future with increases in demand, which will require us to incur additional costs to make our remaining active fleets operational. Our fleets and other equipment typically do not generate revenue while they are undergoing maintenance, refurbishment or upgrades. Any maintenance, upgrade or refurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities. Further, such projects may require proportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms. To the extent we are unable to fund such projects, we may have less equipment available for service or our equipment may not be attractive to potential or current customers. Additionally, competition or advances in technology within our industry may require us to update or replace existing fleets or build or acquire new fleets. Such demands on our capital or reductions in demand for our hydraulic fracturing fleets and other completion service related equipment and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our business, liquidity position, financial condition, prospects and results of operations and may increase the cost to make our inactive fleets operational.

We participate in a capital-intensive industry, and we may not be able to finance future growth of our operations or future acquisitions, which could adversely affect our operations and financial position.

The successful execution of our growth strategy depends on our ability to generate sufficient cash flows and our access to capital, both of which are impacted by numerous factors beyond our control, including financial, business, economic and other factors, such as volatility in commodity prices and pressure from competitors. Disruptions in the capital and credit markets, in particular with respect to companies in the energy sector, could limit our ability to access these markets or may significantly increase our cost to borrow. Continued low commodity prices, among other factors, have caused some lenders to increase interest rates, enact tighter lending standards which we may not satisfy as a result of our debt level or otherwise, refuse to refinance existing debt at maturity on favorable terms or at all, and in certain instances have reduced or ceased to provide funding to borrowers.

If we are unable to generate sufficient cash flows or to access the capital and credit markets on favorable terms or at all, we may be unable to continue growing our business, conduct necessary corporate activities, take advantage of business opportunities that arise or engage in activities that may be in our long-term best interest, which may adversely impact our ability to sustain or improve our current level of profitability. Furthermore, any failure to make scheduled payments of interest and principal on our outstanding indebtedness could harm our ability to incur additional indebtedness on acceptable terms or at all, and also could constitute an event of default under our Credit Facility. Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects, and we could be forced into bankruptcy or liquidation.

Disruptions in the capital and credit markets, continued low commodity prices, our debt level and other factors may restrict our ability to raise capital on favorable terms, or at all.

Disruptions in the capital and credit markets, in particular with respect to companies in the energy sector, could limit our ability to access these markets or may significantly increase our cost to borrow. Continued low commodity prices, among other factors, have caused some lenders to increase interest rates, enact tighter lending standards which we may not satisfy as a result of our debt level or otherwise, refuse to refinance existing debt at maturity on favorable terms, or at all, and in

certain instances have reduced or ceased to provide funding to borrowers. If we are unable to access the capital and credit markets on favorable terms or at all, it could adversely affect our business, financial condition and results of operations.

We are subject to restrictive covenants in our Credit Facility, which may restrict our operational flexibility.

The Credit Facility governing our indebtedness contains, and future debt agreements may contain, financial and other restrictive covenants that may limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general, conduct necessary corporate activities, take advantage of business opportunities that arise and/or to engage in activities that may be in our long-term best interests.

Specifically, our Credit Facility includes a Fixed Charge Coverage Ratio and minimum liquidity threshold covenants and restrictive covenants that limit our ability and that of our subsidiaries to, among other things:


•	sell or otherwise dispose of assets;


•	make certain restricted payments and investments;


•	create, incur, assume, suffer to exist or guarantee additional indebtedness;


•	create, incur, assume, or suffer to exist liens on our assets;


•	make capital expenditures, investments or acquisitions;


•	repurchase, redeem or retire our capital shares;


•	merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;


•	engage in specified transactions with subsidiaries and affiliates; and


•	pursue other corporate activities.

We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by restrictive covenants under the Credit Facility, which could: limit our ability to plan for, or react to, market conditions, to meet capital needs or otherwise restrict our activities or business plan; and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that would be in our interest.

Please see “Liquidity and Capital Resources - Description of Our Indebtedness - Credit Facility” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about the Credit Facility, including the financial and other restrictive covenants contained therein.

We may not be able to service our debt obligations in accordance with their terms.

On May 1, 2018, we entered into a new asset-based revolving credit agreement (the “Credit Facility”). Our ability to meet our debt service obligations under, and comply with the financial covenants contained in, our Credit Facility or future debt agreements depends on our future performance, which is affected by financial, business, economic and other factors, many of which are beyond our control, including volatility in commodity prices and pressure from competitors. Should our revenues decline, we may not be able to generate sufficient cash flow to pay our debt service obligations when due. Additionally, revenue, utilization and pricing level declines may result in our not being in compliance with one or more of the financial covenants under our Credit Facility or future debt agreements in future periods. Any failure to satisfy our debt obligations or to comply with the applicable financial covenants could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.

If we are unable to meet our debt service obligations or should we fail to comply with, or obtain relief from, the financial and other restrictive covenants contained in our Credit Facility or future debt agreements, we may trigger an event of default. Upon such an event of default, our lenders may refuse to fund borrowings and have the right to terminate their commitments and potentially accelerate all of our outstanding debt. If an event of default occurs and the lenders under our Credit Facility or future debt agreements accelerate the maturity of any loans or other debt outstanding. We may not be able to make all required payments or borrow sufficient funds to refinance such indebtedness. Even if new financing is available at that time it may not be on terms that are acceptable to us.

Any reduction of the borrowing base under our Credit Facility could require us to repay that portion of indebtedness that exceeds the new borrowing base under our Credit Facility earlier than anticipated, which could adversely impact our liquidity.

Our Credit Facility allows us to borrow amounts up to the lesser of $400 million and a borrowing base based on the value of our eligible accounts receivable, inventory and restricted cash. Currently, our borrowing base is $234.7 million . Reductions in accounts receivable and inventory due to events or market forces beyond our control could reduce the amount available to us under our Credit Facility and could result in a redetermination, and potentially a reduction, of our borrowing

bases under our Credit Facility. If our Credit Facility eventually becomes fully drawn, any reduction in the borrowing bases could require us to make mandatory prepayments under our Credit Facility to the extent existing indebtedness under the Credit Facility exceeds the borrowing base. We may have insufficient cash on hand to be able to make mandatory prepayments under our Credit Facility. Any failure to repay indebtedness in excess of our borrowing bases in accordance with the terms of the Credit Facility would constitute an event of default under the Credit Facility. Such event of default would permit our lenders to accelerate our outstanding debt, which if actually accelerated, would become immediately due and payable and could permit our secured lenders to foreclose on any of our assets securing indebtedness.

As a result of the implementation of our Restructuring Plan, we believe our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be subject to limitation under Section 382.

Under U.S. federal income tax law, a corporation is generally permitted to deduct from taxable income net operating losses (“NOLs”) carried forward from prior years. As of December 31, 2018, we reported consolidated federal NOL carryforwards of approximately $1.3 billion of which $454.8 million are pre-change NOL's subject to limitation. Our ability to utilize our NOL carryforwards to offset future taxable income and to reduce U.S. federal income tax liability is subject to certain requirements and restrictions. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. An ownership change generally occurs if one or more shareholders (or groups of shareholders) who are each deemed to own at least 5% of our stock have aggregate increases in their ownership of such stock of more than 50 percentage points over such stockholders’ lowest ownership percentage during the testing period (generally a rolling three year period). We believe we experienced an ownership change in January 2017 as a result of the implementation of the Restructuring Plan and that our pre-change NOLs are subject to limitation under Section 382 of the Code as a result. Such limitation may cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitation were not in effect and could cause our pre-change NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for state income tax purposes.

As a result of the implementation of our Restructuring Plan, NOLs and other tax attributes may be subject to reduction, causing less NOL or tax deductions to be available to offset future taxable income for U.S. federal income tax purposes.

As a result of consummating our Restructuring Plan, the obligations of the Predecessor with respect to the Original Credit Agreement (the “Old C&J Debt”) were canceled and discharged and certain lenders were issued common stock in the reorganized Company (See Note 14 - Chapter 11 Proceeding and Emergence ). This exchange may give rise to cancellation of debt income (“CODI”) to the extent that the fair market value of the common stock and other rights exchanged with the lenders is less than the adjusted issue price of the Old C&J Debt. Other settlements with holders of Claims under the Restructuring Plan may have resulted in satisfaction of debts for less than the amount of the liability resulting in CODI. The Code provides that CODI arising under a discharge in a Chapter 11 bankruptcy proceeding is excluded from taxable income. A taxpayer excluding CODI under these circumstances may be required to reduce certain tax attributes, such as NOLs and depreciable basis by an amount up to the amount of excluded CODI (the “Tax Attribute Reduction Rules”). As of December 31, 2018, there are a number of significant claims under the Restructuring Plan that remain outstanding. We will continue to monitor these claims and make estimates accordingly.

We are vulnerable to the potential difficulties associated with growth, mergers, acquisitions and expansion.

We believe that our future success depends on our ability to take advantage of and manage rapid growth, as well as the demands from increased responsibility on our management personnel. The following factors could present difficulties to us:


•	lack of sufficient executive-level personnel;


•	increased administrative burden;


•	long lead times associated with acquiring additional equipment;


•	ability to manage significant levels of idle equipment in sustained periods of depressed oil and natural gas prices;


•	ability to maintain the level of focused service attention that we have historically been able to provide to our customers; and


•	new or expanded areas of operational risk (such as offshore or international operations) and related costs and demands of any applicable regulatory compliance.

In addition, in the future we may seek to grow our business through acquisitions that enhance our existing operations. The success of any completed acquisition will depend on our ability to integrate effectively the acquired business into our existing operations. The process of integrating acquired businesses may involve unforeseen difficulties and may

require a disproportionate amount of our managerial and financial resources. Our operating results could be adversely affected if we do not successfully manage these potential difficulties in integrating the businesses we may acquire.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays as well as adversely affect demand for our support services.

Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but the EPA has asserted federal regulatory authority pursuant to the SDWA over certain hydraulic fracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to such activities. Also, in May 2014, the EPA published an advanced notice of proposed rulemaking under the Toxic Substances and Control Act (“TSCA”) that would require the disclosure of chemicals used in hydraulic fracturing fluids; however, to date no further action has been taken and additional rulemaking under TSCA appears unlikely at this time. In addition, in June 2016, the EPA finalized regulations that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants.

In December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources. The final report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under some circumstances,” noting that the following hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits. Since the report did not find a direct link between hydraulic fracturing itself and contamination of groundwater resources, this years-long study report does not appear to provide any basis for further regulation of hydraulic fracturing at the federal level.

Various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements, well construction, and temporary or permanent bans on hydraulic fracturing in certain areas. For example, in May 2013, the Texas Railroad Commission adopted new rules governing well casing, cementing and other standards for ensuring that hydraulic fracturing operations do not contaminate nearby water resources. In addition, state and federal regulatory agencies have recently focused on a possible connection between the disposal of wastewater in underground injection wells and the increased occurrence of seismic activity, and regulatory agencies at all levels are continuing to study the possible linkage between oil and gas activity and induced seismicity. In response to these concerns, regulators in some states are seeking to impose additional requirements on hydraulic fracturing fluid disposal practices, including restrictions on the operations of produced water disposal wells and imposing more stringent requirements on the permitting of such wells. The adoption and implementation of any new laws or regulations that restrict our ability to dispose of produced water gathered from our customer’s activities by limiting volumes, disposal rates, disposal well locations or otherwise, or requiring us to shut down disposal wells, could have a material adverse effect on our fluid transportation business, financial condition and results of operations.

Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general or hydraulic fracturing in particular. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or costly to perform hydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas exploration and production activities and, therefore, adversely affect demand for our services and our business. Such laws or regulations could also materially increase our costs of compliance and doing business.

The adoption of new laws or regulations imposing reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it more difficult to complete oil and natural gas wells in shale formations, increase our costs of compliance and adversely affect the hydraulic fracturing services that we render for our exploration and production customers. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA, fracturing activities could become subject to additional permitting requirements, and also to attendant permitting delays and potential increases in cost, which could adversely affect our business and results of operations.

Climate change legislation or regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for our services.

The EPA has determined that emissions of carbon dioxide, methane and other GHGs present an endangerment to the environment because emissions of such gases are contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA adopted regulations that restrict emissions of GHGs under existing provisions of the federal Clean Air Act.

From time to time the U.S. Congress has considered legislation to reduce emissions of GHGs, and almost one-half of the states have established GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal.

Any new federal, regional or state restrictions on emissions of GHGs that may be imposed in areas in which we conduct business could result in increased compliance costs or additional operating restrictions on our customers. Such actions could also potentially make our customers’ products more expensive and thus reduce demand for those products, which could have a material adverse effect on the demand for our services and our business. Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities, which could have a material adverse effect on our business and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the oil and natural gas our customers produce. Notwithstanding potential risks related to climate change, the International Energy Agency estimates that global energy demand will continue to rise and will not peak until after 2040 and that oil and gas will continue to represent a substantial percentage of global energy use over that time. Finally, many scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such effects were to occur, they could have an adverse effect on our results of operations if they were to damage our equipment or facilities.

We are subject to extensive and costly environmental, and occupational health and safety laws, and regulations that may require us to take actions that will adversely affect our results of operations.

Our business is significantly affected by stringent and complex federal, state and local laws and regulations governing the emission or discharge of substances into the environment, protection of the environment and worker health and safety. Any failure by us to comply with such environmental and occupational health and safety laws and regulations may result in governmental authorities taking actions against our business that could adversely impact our operations and financial condition, including the following:


•	issuance of administrative, civil and criminal penalties;


•	modification, denial or revocation of permits or other authorizations;


•	imposition of limitations on our operations or orders prohibiting our operations altogether; and


•	performance of site investigatory, remedial or other corrective actions.

As part of our business, we handle, transport, and dispose of a variety of fluids and substances used by our customers in connection with their oil and natural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. The generation, handling, transportation, and disposal of these fluids, substances, and wastes are regulated by a number of laws, including CERCLA, RCRA, Clean Water Act, SDWA and analogous state laws. Under RCRA, the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes are regulated. RCRA currently exempts many exploration and production wastes from classification as hazardous waste. However, these oil and gas exploration and production wastes may still be regulated under state solid waste laws and regulations, and it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous waste in the future.

Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to liability for governmental penalties, third-party claims, cleanup costs associated with releases of such materials, damages to natural resources, and other damages, as well as potentially impair our ability to conduct our operations. Moreover, certain of these environmental laws impose joint and several, strict liability even though our conduct in performing such activities was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third-parties was the basis for such liability. In addition, environmental laws and

regulations are subject to frequent change and if existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to make significant unanticipated capital and operating expenditures.

Anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us.

We typically enter into agreements with our customers governing the provision of our services, which usually include certain indemnification provisions for losses resulting from operations. Such agreements may require each party to indemnify the other against certain claims regardless of the negligence or other fault of the indemnified party; however, many states place limitations on contractual indemnity agreements, particularly agreements that indemnify a party against the consequences of its own negligence. Furthermore, certain states, including Texas, New Mexico and Wyoming, have enacted statutes generally referred to as “oilfield anti-indemnity acts” expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements. Such anti-indemnity acts may restrict or void a party’s indemnification of us, which could have a material adverse effect on our business, financial condition, prospects and results of operations.

New technology may hurt our competitive position.

The energy service industry is subject to the introduction of new techniques and services using new technologies, some of which may be subject to patent protection. As competitors and others use or develop new technologies or technologies comparable to ours in the future, we may lose market share or be placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages or implement new technologies before we can. Additionally, we may be unable to implement new technologies or products at all, on a timely basis or at an acceptable cost. Limits on our ability to effectively use or implement new technologies may have a material adverse effect on our business, financial condition and results of operations.

We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights is uncertain.

We may become involved in dispute resolution proceedings from time to time to protect and enforce our intellectual property rights. In these dispute resolution proceedings, a defendant may assert that our intellectual property rights are invalid or unenforceable. Third parties from time to time may also initiate dispute resolution proceedings against us by asserting that our businesses infringe, impair, misappropriate, dilute, or otherwise violate another party’s intellectual property rights. We may not prevail in any such dispute resolution proceedings, and our intellectual property rights may be found invalid or unenforceable or our products and services may be found to infringe, impair, misappropriate, dilute, or otherwise violate the intellectual property rights of others. The results or costs of any such dispute resolution proceedings may have an adverse effect on our business, operating results, and financial condition. Any dispute resolution proceeding concerning intellectual property could be protracted and costly, is inherently unpredictable, and could have an adverse effect on our business, regardless of its outcome.

Our success may be affected by the use and protection of our proprietary technology. There are limitations to our intellectual property rights and, thus, our right to exclude others from the use of such proprietary technology.

Our success may be affected by our development and implementation of new product designs and improvements and by our ability to protect, obtain, and maintain intellectual property assets related to these developments. We rely on a combination of patents and trade secret laws to establish and protect this proprietary technology. We have received patents and have filed patent applications with respect to certain aspects of our technology, and we generally rely on patent protection with respect to our proprietary technology, as well as a combination of trade secrets and copyright law, employee and third-party non-disclosure agreements, and other protective measures to protect intellectual property rights pertaining to our products and technologies. We cannot assure you that competitors will not infringe upon, misappropriate, violate, or challenge our intellectual property rights in the future. If we are not able to adequately protect or enforce our intellectual property rights, such intellectual property rights may not provide significant value to our business, results of operations, or financial condition.

Moreover, our rights in our confidential information, trade secrets, and confidential know-how will not prevent third parties from independently developing similar technologies or duplicating such technologies. Publicly available information (e.g., information in issued patents, published patent applications, and scientific literature) can be used by third parties to independently develop technology, and we cannot provide assurance that this independently developed technology will not be equivalent or superior to our proprietary technology. In addition, while we have patented some of our key technologies, we do not patent all of our proprietary technology, even when regarded as patentable. The process of seeking patent protection can be long and expensive. There can be no assurance that patents will be issued from currently pending or

future applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us.

We are subject to certain requirements of Section 404 of the Sarbanes-Oxley Act. If we fail to comply with the requirements of Section 404 or if we or our auditors identify and report material weaknesses in internal control over financial reporting, our investors may lose confidence in our reported information and our stock price may be negatively affected.

As of December 31, 2018, we are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act. Section 404 requires that we document and test our internal control over financial reporting and issue our management’s assessment of our internal control over financial reporting. This section also requires that our independent registered public accounting firm issue an attestation report on such internal control. If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we or our auditors identify and report material weaknesses in our internal control over financial reporting, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

Our operations are subject to cyber-attacks or other cyber incidents that could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

We rely heavily on digital technologies and services. We use these technologies for internal purposes, including data storage (which may include personal identification information of our employees as well as our proprietary business information and that of our customers, suppliers, investors and other stakeholders), processing, and transmissions, as well as in our interactions with customers and suppliers. Digital technologies are subject to the risk of cyber-attacks, security breaches and other cyber incidents, which could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks and other attacks and similar disruptions from the unauthorized use of or access to computer systems. If our systems for protecting against cybersecurity risks prove not to be sufficient, we could be adversely affected by, among other things: loss of or damage to intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate cybersecurity attacks. These risks could harm our reputation and our relationships with customers, suppliers, employees, and other third-parties, and may result in claims against us, including liability under laws that protect the privacy of personal information. In addition, these risks could have a material adverse effect on our business, results of operations and financial condition.

Adoption of fresh start accounting beginning in the first quarter of 2017 limits the comparability of our current and future financial condition and results of operations to our financial condition and results of operations for periods prior to our emergence from the Chapter 11 Proceeding.

Upon our emergence from the Chapter 11 Proceeding, we adopted fresh start accounting in accordance with the provisions set forth in Accounting Standards Codification Topic 852 - Reorganizations . Our consolidated financial statements also reflect all of the transactions contemplated by the Restructuring Plan. Accordingly, our financial condition and results of operations subsequent to emergence are not comparable to the financial condition or results of operations reflected in our historical financial statements prior to emergence.

More stringent trucking regulations may increase our costs and negatively impact our results of operations.

As part of the services we provide, we operate as a motor carrier and therefore are subject to regulation by the DOT, and by other various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations and regulatory safety, and hazardous materials labeling, placarding and marking. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. In addition, the trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive in any specific period, require onboard black box recorder devices or limits on vehicle weight and size. For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking a commercial driver’s license. Certain motor vehicle operators are required to register with the DOT. This registration requires an acceptable operating record. The DOT periodically conducts compliance reviews and may revoke registration privileges based on certain safety

performance criteria, and a revocation could result in a suspension of operations. Since 2010, the DOT has pursued its Compliance, Safety, Accountability (“CSA”) program, in an effort to improve commercial truck and bus safety. A component of CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federal and state law enforcement personnel to determine a carrier’s safety performance. The SMS is intended to allow DOT to identify carriers with safety issues and intervene to address those problems.

Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. To a large degree, intrastate motor carrier operations are subject to state safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations.

From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-bribery laws.

The United States Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries and partners from making, offering or authorizing improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Although we currently have no international operations, we previously did business and may do business in the future in countries or regions where strict compliance with anti-bribery laws may conflict with local customs and practices. Our employees, intermediaries, and partners may face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal or insurgent organizations, or private entities in the countries in which we operate or may operate in the future. As a result, we face the risk that an unauthorized payment or offer of payment could be made by one of our employees, intermediaries, or partners even if such parties are not always subject to our control or are not themselves subject to the FCPA or other anti-bribery laws to which we may be subject. We are committed to doing business in accordance with applicable anti-bribery laws and have implemented policies and procedures concerning compliance with such laws. Our existing safeguards and any future improvements, however, may prove to be less than effective, and our employees, intermediaries, and partners may engage in conduct for which we might be held responsible. Violations of the FCPA and other anti-bribery laws (either due to our acts, the acts of our intermediaries or partners, or our inadvertence) may result in criminal and civil sanctions and could subject us to other liabilities in the U.S. and elsewhere. Even allegations of such violations could disrupt our business and result in a material adverse effect on our business and operations.

Risks Related to Our Common Stock

The concentration of our capital stock ownership among our largest stockholders and their affiliates will limit your ability to influence corporate matters.

A large percentage of our shares of common stock are held by a relatively small number of investors whose interests may conflict. Consequently, these holders (each of whom we refer to as a “principal stockholder”) may have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership and the rights of our principal stockholders will limit your ability to influence corporate matters and, as a result, actions may be taken that you may not view as beneficial.

Furthermore, conflicts of interest could arise in the future between us, on the one hand, and our principal stockholders and their respective affiliates, including portfolio companies, on the other hand, concerning among other things, potential competitive business activities or business opportunities. Several of our principal stockholders are private equity firms or investment funds in the business of making investments in entities in a variety of industries. As a result, our principal stockholders’ existing and future portfolio companies may compete with us for investment or business opportunities. These conflicts of interest may not be resolved in our favor.

Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors, who are responsible for managing the direction of our operations and acquisition activities, hold positions of responsibility with other entities. The existing positions held by these directors may give rise to fiduciary or other duties that are in conflict with the duties they owe to us. These directors may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated. Due to these existing and potential future affiliations, they may present potential business opportunities to other entities prior to

presenting them to us, which could cause additional conflicts of interest. They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated and, as a result, they may elect not to present those opportunities to us. These conflicts may not be resolved in our favor.

Future sales or the availability for sale of substantial amounts of our common stock, or the perception that these sales may occur, could adversely affect the trading price of our common stock and could impair our ability to raise capital through future sales of equity securities.

Our Amended and Restated Certificate of Incorporation authorizes us to issue 1,000,000,000 shares of common stock, of which an estimated 66,062,430 shares were outstanding as of February 22, 2019 . This number includes 55,463,903 shares issued in connection with our emergence from bankruptcy. We also have 8,046,021 shares of common stock authorized for issuance as equity awards under the 2017 C&J Energy Services, Inc. Management Incentive Plan, of which 351,306 shares are issuable pursuant to outstanding options, 941,341 shares are issuable pursuant to our outstanding restricted share units, 607,715 shares are issuable pursuant to outstanding restricted stock awards and 396,455 shares are issuable pursuant to outstanding performance shares. In addition, as of February 22, 2019 , warrants to purchase up to 3,528,027 shares of our common stock were outstanding and immediately exercisable. Shares issued upon exercise of these warrants will generally be freely transferable without restriction or registration under the Securities Act pursuant to Section 1145 of the Bankruptcy Code.

A large percentage of our shares of common stock are held by a relatively small number of investors. We entered into a registration rights agreement (the “Registration Rights Agreement”) with certain of those investors in connection with our emergence from the Chapter 11 Proceeding pursuant to which we have filed a registration statement with the SEC to facilitate potential future sales of such shares by them. In addition, we filed a registration statement with the SEC following the closing of the O-Tex Transaction to register for sale the shares of Specified C&J Common Stock issued to the Stockholders pursuant to the Merger Agreement. Sales of a substantial number of shares of our common stock in the public markets, or even the perception that these sales might occur, could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.

We may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or other securities in connection with any such acquisitions and investments.

We cannot predict the effect that future sales of our common stock will have on the price at which our common stock trades or the size of future issuances of our common stock or the effect, if any, that future issuances will have on the market price of our common stock. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect the trading price of our common stock.

We have outstanding warrants that are exercisable for shares of common stock of the Company. The exercise of such equity instruments would have a dilutive effect to stockholders of the Company.

On January 6, 2017, we issued 1,180,083 warrants that are exercisable into shares of common stock of the Company at an initial exercise price of $27.95 per warrant. In addition, on July 26, 2017, we issued an additional 2,360,166 warrants with the same terms pursuant to the Warrant Agreement. The exercise of these warrants into common stock would have a dilutive effect to the holdings of our existing stockholders. As of February 22, 2019, warrants to purchase up to 3,528,027 shares of our common stock were outstanding and immediately exercisable. Shares issued upon exercise of these warrants will generally be freely transferable without restriction or registration under the Securities Act pursuant to Section 1145 of the Bankruptcy Code. The warrants will not expire until January 6, 2024 and may create an overhang on the market for, and have a negative effect on the market price of, our common stock.

There is no guarantee that outstanding warrants will continue to be in the money, and unexercised warrants may expire worthless. Further, the terms of such warrants may be amended.

If our stock price is below $27.95 per share, the warrants will have limited economic value, and they may expire worthless. In addition, the warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least a certain percentage of the then-outstanding warrants originally issued to make any change that adversely affects the interests of the holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least a certain percentage of the then outstanding warrants approve of such amendment.

Because we currently have no plans to pay regular dividends on our common stock for the foreseeable future, you may not receive any return on your investment unless you sell your common stock for a price greater than that which you paid for it.

We have no plans to pay regular dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock is limited by restrictive covenants in our Credit Facility and will be at the sole discretion of our Board and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, cash flows, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board deems relevant. In addition, any agreements governing our future indebtedness may restrict our ability to pay dividends on our common stock. As a result, you may not receive any return on your investment unless you sell your common stock for a price greater than that which you paid for it.

Certain provisions of our Certificate of Incorporation, Bylaws, Stockholders Agreement and our stockholder rights plan may make it difficult for stockholders to change the composition of our Board and may discourage, delay or prevent a merger or acquisition that some stockholders may consider beneficial.

Certain provisions of our Certificate of Incorporation and our Bylaws may have the effect of delaying or preventing changes in control if our Board determines that such changes in control are not in the best interests of the Company and our stockholders. The provisions in our Certificate of Incorporation and our Bylaws include, among other things, those that:


•	classify the Board;


•	limit removal of directors;


•	authorize our Board to issue preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;


•	establish advance notice procedures for nominating directors or presenting matters at stockholder meetings;


•	prohibit cumulative voting;


•	prohibit action by written consent; and


•	provide that only the Board may call special meetings of stockholders.

These provisions may prevent or discourage attempts to remove and replace incumbent directors. These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of our management.

We may issue preferred stock on terms that could adversely affect the voting power or value of our common stock.

Our Certificate of Incorporation authorizes our Board to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as the Board may determine. The terms of one or more classes or series of preferred stock could adversely affect the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease office space for our principal executive headquarters, which is located at 3990 Rogerdale Rd., Houston, Texas 77042, and for our research and technology facility at 10771 Westpark Dr., Houston, Texas 77042. We also own property for our maintenance facility at 1214 Gas Plant Rd., San Angelo, Texas 76904. In addition, we own or lease numerous other smaller facilities and administrative offices across the geographic regions in which we operate to support our ongoing operations, including district offices, local sales offices, yard facilities and temporary facilities to house employees in regions where infrastructure is limited. We do not believe that any one of these facilities is individually material to our operations. Our leased properties are subject to various lease terms and expirations.

We believe all properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient to conduct our operations. However, we continue to evaluate the purchase or lease of additional properties or the consolidation of our properties, as our business requires.

Item 3. Legal Proceedings

We are subject to various legal proceedings and claims incidental to or arising in the ordinary course of our business. Our management does not expect the outcome in any of these known legal proceedings, individually or collectively, to have a material adverse effect on our consolidated financial condition or results of operations.

U.S. Department of Justice Criminal Investigation into Pre-Nabors Merger Incident

There is a pending criminal investigation led by the Department of Justice in connection with a fatality that occurred at a facility we now own in Williston, North Dakota. The fatality occurred on October 3, 2014, prior to our acquisition of such facility and the ongoing business in connection with the Nabors Merger. We are cooperating fully with the investigation and expect to continue to do so. At this time, we cannot predict the outcome of the investigation.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Our common stock is traded on the NYSE under the symbol “CJ.” As of February 22, 2019 , we had 66,062,430 shares of common stock issued and outstanding, held by approximately 12 registered holders. The number of registered holders does not include holders that have common stock held for them in “street name,” meaning that the stock is held for their accounts by a broker or other nominee. In these instances, the brokers or other nominees are included in the number of registered holders, but the underlying holders of the common stock that hold such stock in “street name” are not.

On February 22, 2019 , the last reported sales price of our common stock on the NYSE was $17.62 per share.

We have not declared or paid any cash dividends on our common stock, and we do not anticipate declaring or paying any cash dividends to holders of our common stock in the foreseeable future. Payments of dividends, if any, will be at the discretion of our Board and will depend on our results of operations, financial condition, capital requirements and other factors deemed relevant by our Board. Additionally, covenants contained in our Credit Facility restrict the payment of cash dividends on our common stock. Please read Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Description of our Credit Agreement” in this Annual Report.

Recent Sales of Unregistered Securities

No equity securities of the Company were sold during the period covered by this report that were not registered under the Securities Act.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Repurchases of Equity Securities

The following table summarizes stock repurchase activity for the three months ended December 31, 2018 (in thousands, except average price paid per share).



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number (or approximate dollar value) of Shares that may yet be Purchased Under Such Program (a)
October 1—October 31	3 (b)	$	18.06	—	$	129,669
November 1—November 30	—	$	—	—	$	129,669
December 1—December 31	1,490 (c)	$	13.88	1,445	$	109,650

(a) On July 31, 2018, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to $150.0 million of the Company’s common stock, inclusive of commissions, over a twelve month period starting August 1, 2018. Repurchases may commence or be suspended at any time without notice. The program does not obligate the Company to purchase a specified number of shares of common stock during the period or at all, and may be modified or suspended at any time at the Company’s discretion. No assurance can be given that shares will be repurchased in the future.

(b) Represents shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. The value of such shares is based on the closing price of our common shares on the vesting date.

(c) Includes 45,278 shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. The value of such shares is based on the closing price of our common shares on the vesting date.

Item 6. Selected Financial Data

This section presents our selected consolidated financial data for the periods and as of the dates indicated. The selected historical consolidated financial data presented below is not intended to replace our historical consolidated financial statements. The following selected consolidated financial data should be read in conjunction with both Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report in order to understand those factors, such as the Nabors Merger, which may affect the comparability of the Selected Financial Data:



	Successor					Predecessor
	(In thousands except per share amounts)
	Years Ended December 31,
	2018			2017		2016			2015			2014

Revenue	$	2,222,089		$	1,638,739	$	971,142		$	1,748,889		$	1,607,944
Net income (loss)	$	(130,005	)	$	22,457	$	(944,289	)	$	(872,542	)	$	68,823
Net income (loss) per common share
Basic	$	(1.94	)	$	0.37	$	(7.98	)	$	(8.48	)	$	1.28
Diluted	$	(1.94	)	$	0.37	$	(7.98	)	$	(8.48	)	$	1.22
Total assets	$	1,424,454		$	1,608,857	$	1,361,682		$	2,198,991		$	1,612,746
Long-term debt and capital lease obligations, excluding current portion	$	—		$	—	$	—		$	1,108,123		$	349,875

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is intended to assist you in understanding our business and results of operations together with our present financial condition. This section should be read in conjunction with the audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including, without limitation, those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A “Risk Factors” of this Annual Report.

Business Overview

C&J Energy Services, Inc., a Delaware corporation (the “Successor” and together with its consolidated subsidiaries for periods subsequent to the Plan Effective Date, “C&J” “we”, “our” or the “Company”) is a leading provider of well construction, intervention, completion, support and other complementary oilfield services and technologies. We provide our services to oil and gas exploration and production companies throughout the continental United States. We are a new well focused provider offering a diverse suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumping, cementing, coiled tubing, rig services, fluids management and other completion and well support services. Based on internal estimates and publicly available data, we believe we are a market leader across most of our service lines, and our goal is to be the top service provider and a market leader for the U.S. land markets across all of our service lines. We are headquartered in Houston, Texas and operate across all active onshore basins in the continental United States.

Demand for our services, and therefore our operating and financial performance, is heavily influenced by drilling, completion and production activity by our customers, which is significantly impacted by commodity prices. Due to a severe industry downturn, the Predecessor Companies voluntarily filed petitions for reorganization seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code in 2016. We emerged in 2017 from the Chapter 11 Proceeding as the market was beginning to recover. See Part I, Item 1 “Business” of this Annual Report for an overview of our history, including additional information on our predecessor's bankruptcy filing, and business environment.

Operating Overview & Strategy

Our revenues and profits are generated by providing services and equipment to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. Our results of operations in our core service lines are driven primarily by five interrelated, fluctuating variables: (1) the drilling, completion and production activities of our customers, which is primarily driven by oil and natural gas prices and directly affects the demand for our services; (2) the price we are able to charge for our services and equipment, which is primarily driven by the level of demand for our services and the supply of equipment capacity in the market; (3) the cost of materials, supplies and labor involved in providing our services, and our ability to pass those costs on to our customers; (4) our activity, or “utilization” levels; and (5) the quality, safety and efficiency of our service execution.

However, asset utilization cannot be relied on as wholly indicative of our financial or operating performance due to variations in revenue and profitability from job to job, the type of service to be performed and the equipment, personnel and consumables required for the job, as well as competitive factors and market conditions in the region in which the services are performed. Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle.

Historically, our utilization levels have been highly correlated to U.S. onshore spending by our customers, which is heavily driven by the price of oil and natural gas. Generally, as capital spending by our customers increases, drilling, completion and production activity also increases, resulting in increased demand for our services, and therefore more days or hours worked (as the case may be). Conversely, when drilling, completion and production activity levels decline due to lower spending by our customers, we generally provide fewer services, which results in fewer days or hours worked (as the case may

be). Additionally, during periods of decreased spending by our customers, we may be required to discount our rates or provide other pricing concessions to remain competitive and support utilization, which negatively impacts our revenue and operating margins. During periods of pricing weakness for our services, we may not be able to reduce our costs accordingly, and our ability to achieve any cost reductions from our suppliers typically lags behind the decline in pricing for our services, which could further adversely affect our results. Furthermore, when demand for our services increases following a period of low demand, our ability to capitalize on such increased demand may be delayed while we reengage and redeploy equipment and crews that have been idled during a downturn. The mix of customers that we are working for, as well as our exposure to the spot market, also impacts our utilization. For additional information about factors impacting our business and results of operations, please see “Industry Trends and Outlook” in this Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

To help manage asset utilization and profitability in our operations, our management monitors revenue, Adjusted EBITDA by reportable segment and certain operational data indicative of utilization levels, which information is provided for each of our operating segments under “Reportable Segments” in this Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Management evaluates the financial performance of our reportable segments primarily based on each segment's Adjusted EBITDA because management believes Adjusted EBITDA provides important information about the activity and profitability of our lines of business within each reportable segment and aids us in analytical comparisons for purposes of, among other things, efficiently allocating our assets and resources. Adjusted EBITDA at the segment level is not considered to be a non-GAAP financial measure as it is our segment measure of profit or loss and is required to be disclosed under GAAP pursuant to ASC 280. Please read Note 7 - Segment Information in Part II, Item 8 “Financial Statements” of this Annual Report, for the definition and calculation of Adjusted EBITDA.

Results of Operations

The following is a comparison of our results of operations for the year ended December 31, 2018 , compared to the year ended December 31, 2017 , and a comparison of our results of operations for the year ended December 31, 2017 , compared to the year ended December 31, 2016 . The results for the Predecessor on January 1, 2017 reflect solely the impact of the application of fresh start accounting on that date and are therefore not included in the discussion of results of operations below.

Results for the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

The following table summarizes the change in our results of operations for the year ended December 31, 2018 , compared to the year ended December 31, 2017 :



	Years Ended December 31,
	2018			2017			$ Change
	(In thousands)
Completion Services:
Revenue	$	1,453,577		$	1,107,014		$	346,563
Operating income (loss)	$	124,451		$	132,889		$	(8,438	)

Well Construction and Intervention Services:
Revenue	$	375,667		$	149,497		$	226,170
Operating income (loss)	$	(120,780	)	$	5,267		$	(126,047	)

Well Support Services:
Revenue	$	392,845		$	382,228		$	10,617
Operating loss	$	(22,197	)	$	(22,334	)	$	137

Corporate / Elimination:
Operating loss	$	(112,447	)	$	(131,601	)	$	19,154

Combined:
Revenue	$	2,222,089		$	1,638,739		$	583,350

Costs and expenses:
Direct costs	1,724,707			1,288,092			436,615
Selling, general and administrative expenses	225,511			250,871			(25,360		)
Research and development	6,286			6,368			(82		)
Depreciation and amortization	224,867			140,650			84,217
Impairment Expense	146,015			—			146,015
(Gain) loss on disposal of assets	25,676			(31,463		)	57,139
Operating loss	(130,973		)	(15,779		)	(115,194		)
Other income (expense):
Interest expense, net	(3,899		)	(1,527		)	(2,372		)
Other income (expense), net	2,453			3			2,450
Total other expenses, net	(1,446		)	(1,524		)	78
Loss before income taxes	(132,419		)	(17,303		)	(115,116		)
Income tax benefit	(2,414		)	(39,760		)	37,346
Net income (loss)	$	(130,005	)	$	22,457		$	(152,462	)

Revenue

Revenue increased $583.4 million , or 35.6% , to $2.2 billion for the year ended December 31, 2018 , as compared to $1.6 billion for the year ended December 31, 2017 . The increase in revenue was primarily due to (i) an increase of $346.6 million of revenue in our Completion Services segment primarily as a result of our expanded fracturing services asset base, (ii) an increase of $226.2 million in our Well Construction and Intervention Services ("WC&I") segment primarily as a result of our expanded cementing business with the O-Tex Transaction during the fourth quarter of 2017 and (iii) an increase of $10.6 million in our Well Support Services segment primarily as a result of improving utilization and pricing levels, partially offset by the divestiture of our Canadian rig services business in the fourth quarter of 2017.

Direct Costs

Direct costs increased $436.6 million , or 33.9% , to $1.7 billion for the year ended December 31, 2018 , as compared to $1.3 billion for the year ended December 31, 2017 . The increase in direct costs was primarily due to the operations of our expanded asset bases and improved utilization which resulted in additional labor and consumable costs, as well as our expanded cementing business with the acquisition of O-Tex.

As a percentage of revenue, direct costs decreased to 77.6% for the year ended December 31, 2018 , as compared to 78.6% for the year ended December 31, 2017 . The decrease was primarily due to improved pricing for our services due to the more favorable market conditions as well as the divestiture of underperforming businesses and shutting down unprofitable districts.

Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")

SG&A decreased $25.4 million , or 10.1% , to $225.5 million for the year ended December 31, 2018 , as compared to $250.9 million for the year ended December 31, 2017 . The decrease in SG&A was primarily due to (i) an $11.2 million reduction in employee related costs (excluding O-Tex), (ii) a $10.8 million reduction in share-based compensation expense related to an accelerated vesting in the first quarter of 2017, (iii) a $7.9 million reduction in restructuring charges related to our Chapter 11 bankruptcy proceeding in the corresponding prior year period, (iv) a $3.6 million reduction in acquisition-related costs related to the O-Tex Transaction and (v) a $1.9 million reduction in legal expenses, offset by (i) an incremental $10.1 million increase in SG&A expenses as a result of the acquisition of O-Tex and (ii) a $4.2 million increase in severance expense and accelerated equity vesting associated with the departure of an executive officer.

Depreciation and Amortization Expense ("D&A")

D&A increased $84.2 million , or 59.9% , to $224.9 million for the year ended December 31, 2018 , as compared to $140.7 million for the same period in 2017 . The increase in D&A was primarily the result of increased capital expenditures associated with equipment placed into service during 2018 as well as the integration of the acquired O-Tex assets in the fourth quarter of 2017.

Impairment Expense

During the fourth quarter of 2018, a significant decline in our share price, which resulted in our market capitalization dropping below our book value of equity, as well as an overall decrease in commodity prices were deemed triggering events that led to a test for goodwill impairment. Based on the results of the test, we recorded impairment expense of $146.0 million for the year ended December 31, 2018 , consisting of all of the goodwill associated with our WC&I reporting unit.

Gain (loss) on disposal of assets

Loss on disposal of assets increased $57.1 million , or 181.6% to $25.7 million for the year ended December 31, 2018 , as compared to a gain of $31.5 million for the same period in 2017 . The increase is primarily related to a charge of $21.4 million in 2018, in connection with the retirement of certain assets, primarily within the fracturing, coiled tubing and well support services asset groups, that were deemed to be obsolete with unfavorable economics for refurbishment based on prevailing customer preferences and current market conditions. During 2017, the $31.5 million gain on disposal of assets was primarily related to the sale of assets associated with our Canadian rig services business and the sale of our equipment manufacturing and repair business.

Income Taxes

We recorded an income tax benefit of $2.4 million for the year ended December 31, 2018 , at an effective rate of 1.8% , compared to an income tax benefit of $39.8 million for the year ended December 31, 2017 , at an effective rate of 229.8% . The decrease in the effective tax rate is primarily due to adjustments to maintain a full valuation allowance in 2018, compared with a partial release of valuation allowance in 2017, which provided the additional income tax benefit. In addition, in 2018, due to U.S. Tax Reform, we netted indefinite-lived deferred tax liabilities with certain indefinite-lived deferred tax assets, including net operating loss carryforwards generated after January 1, 2018 before applying the valuation allowance.

Results for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

The following table summarizes the change in our results of operations for the year ended December 31, 2017 , compared to the year ended December 31, 2016 (in thousands):



	Years Ended December 31,
	2017			2016			$ Change
	(In thousands)
Completion Services:
Revenue	$	1,107,014		$	515,939		$	591,075
Operating income (loss)	$	132,889		$	(232,031	)	$	364,920

Well Construction and Intervention Services:
Revenue	$	149,497		$	83,848		$	65,649
Operating income (loss)	$	5,267		$	(74,583	)	$	79,850

Well Support Services:
Revenue	$	382,228		$	363,768		$	18,460
Operating loss	$	(22,334	)	$	(377,707	)	$	355,373

Other Support Services:
Revenue	$	—		$	7,587		$	(7,587	)
Operating loss	$	—		$	(51,778	)	$	51,778

Corporate / Elimination:
Operating loss	$	(131,601	)	$	(133,909	)	$	2,308

Combined:
Revenue	$	1,638,739		$	971,142		$	667,597
Costs and expenses:
Direct costs	1,288,092			947,255			340,837
Selling, general and administrative expenses	250,871			229,267			21,604
Research and development	6,368			7,718			(1,350		)
Depreciation and amortization	140,650			217,440			(76,790		)
Impairment Expense	—			436,395			(436,395		)
Gain (loss) on disposal of assets	(31,463		)	3,075			(34,538		)
Operating loss	(15,779		)	(870,008		)	854,229
Other income (expense):
Interest expense, net	(1,527		)	(157,465		)	155,938
Other income (expense), net	3			9,504			(9,501		)
Total other expenses, net	(1,524		)	(147,961		)	146,437
Losses before reorganization items and income taxes	(17,303		)	(1,017,969		)	1,000,666
Reorganization items	—			55,330			(55,330		)
Income tax expense	(39,760		)	(129,010		)	89,250
Net income (loss)	$	22,457		$	(944,289	)	$	966,746

Revenue

Revenue increased $667.6 million , or 68.7%, to $1.6 billion for the year ended December 31, 2017 , as compared to $971.1 million for the year ended December 31, 2016 . The increase in revenue was primarily due to (i) an increase of $591.1 million in our Completion Services segments a result of the continued strong demand for all of our completion services, which resulted in improved utilization and pricing across our asset base, (ii) an increase of $65.6 million in our WC&I Services segment primarily due to continued strong demand and utilization across our cementing and coiled tubing service lines and (iii) an increase of $18.5 million in our Well Support segment as a result of improvement in both our rig services and special services product lines, offset by a decrease of $7.6 million in our Other Services segment as a result of the segment being divested during the comparable prior year period.

Direct Costs

Direct costs increased $340.8 million , or 36.0%, to $1.3 billion for the year ended December 31, 2017 , as compared to $947.3 million for the year ended December 31, 2016 . The increase in direct costs was primarily due to the corresponding increase in revenue from our Completion and WC&I Services segments, which resulted in additional labor and consumable costs. Revenue has been positively impacted by overall increased utilization levels across our Completion Services, WC&I Services and Well Support Services segments which resulted from the improved market environment.

As a percentage of revenue, direct costs decreased to 78.6% for the year ended December 31, 2017 , as compared to 97.5% for the year ended December 31, 2016 . The decrease was primarily due to substantially improved pricing for our services due to the more favorable market conditions resulting from the increase in commodity prices.

Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")

SG&A increased $21.6 million , or 9.4%, to $250.9 million for the year ended December 31, 2017 , as compared to $229.3 million for the year ended December 31, 2016 . The increase in SG&A was primarily due to (i) a $40.8 million increase in compensation expense primarily as a result of (a) significant increases in operating performance throughout 2017 and (b) the reinstatement of certain previously reduced compensation programs during the first half of 2017, (ii) a $10.3 million increase in professional fee expense primarily as a result of efficiency initiatives within our finance and human resources departments and (iii) a $3.8 million increase in acquisition-related costs related to the O-Tex acquisition, partially offset by (i) a $19.2 million reduction in costs related to our restructuring activities and Chapter 11 Proceeding during the corresponding prior year period, (ii) a $9.2 million reduction in integration related costs incurred in the corresponding prior year primarily related to the planned implementation of the new ERP system and (iii) a $6.1 million reduction in severance costs as a result of headcount reductions in the corresponding prior year period.

Depreciation and Amortization Expense ("D&A")

D&A decreased $76.8 million , or 35.3%, to $140.7 million for the year ended December 31, 2017 , as compared to $217.4 million for the same period in 2016 . The decrease in D&A was primarily due to a lower value of the asset base as a result of the estimated fresh start adjustments on the Fresh Start Reporting Date to our property, plant and equipment ("PP&E") and other intangible assets.

Impairment Expense

Due to the severe downturn in the oil and gas industry, and the resulting weakness in demand for our services, we determined that it was necessary to test goodwill for impairment and to test PP&E and other intangible assets for recoverability throughout 2016.

Impairment expense for the year ended December 31, 2016 was $436.4 million , consisting of $314.3 million of goodwill impairment related to impairment of all remaining goodwill associated with our Well Support Services segment, along with $61.0 million related to other intangible assets and $61.1 million related to PP&E within each of our Completion Services, Well Support Services, and Other Services segments.

Gain (loss) on disposal of assets

Gain on disposal of assets increased $34.5 million to $31.5 million for the year ended December 31, 2017 , as compared to a loss of $3.1 million for the same period in 2016 . The increase is related to a $31.5 million gain on disposal of

assets during 2017, which was primarily related to the sale of assets associated with its Canadian rig services business and its divested equipment manufacturing and repair business.

Reorganization items

Reorganization items of $55.3 million for the year ended December 31, 2016 are primarily related to professional fees of $41.2 million, contract termination settlements of $20.3 million and revisions of estimated claims of $0.8 million, partially offset by $5.2 million in related party settlements and $1.8 million in vendor claims adjustments in connection with our Chapter 11 Proceeding.

Interest Expense, net

Interest expense decreased $155.9 million , or 99.0%, to $1.5 million for the year ended December 31, 2017 from $157.5 million for the year ended December 31, 2016 . The decrease is primarily due to the settlement of all outstanding borrowings of the Predecessor in accordance with the Restructuring Plan in addition to the prior year $91.9 million of accelerated amortization of original issue discount and deferred financing costs as a result of the Restructuring Support agreement.

Income Taxes

We recorded an income tax benefit of $39.8 million for the year ended December 31, 2017 , at an effective rate of 229.8% , compared to income tax benefit of $129.0 million for the year ended December 31, 2016 , at an effective rate of 12.0% . The increase in the effective tax rate is primarily due to adjustments to reduce valuation allowances previously applied against certain deferred tax assets, including net operating loss carryforwards. These adjustments were the result of the treatment of the O-Tex Transaction as a non-taxable transaction, resulting in the acquired assets and liabilities having carryover basis for tax purposes. At the closing of the transaction, an estimated deferred tax liability of approximately $31.3 million was recorded to account for the differences between the preliminary purchase price allocation and carryover tax basis.

Our Reportable Segments

As of December 31, 2018 , our reportable segments were:


•	Completion Services, which consists of the following businesses and service lines: (1) fracturing services; (2) cased-hole wireline and pumping services; and (3) completion support services, which includes our R&T department.


•	Well Construction and Intervention Services, which consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.


•	Well Support Services, which consists of the following businesses and service lines: (1) rig services; (2) fluids management services; and (3) other specialty well site services.

Our reportable segments are described in more detail below; for financial information about our reportable segments, including revenue from external customers and total assets by reportable segment, please see “ Note 11 - Segment Information ” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

Completion Services

The core services provided through our Completion Services segment are fracturing, cased-hole wireline and pumping services. Our completion support services are focused on supporting the efficiency, reliability and quality of our operations. Our R&T department provides in-house manufacturing capabilities that help to reduce operating cost and enable us to offer more technologically advanced and efficiency focused completion services, which we believe is a competitive differentiator. For example, through our R&T department we manufacture the data control instruments used in our fracturing operations and the perforating guns and addressable switches used in our wireline operations; these products are also available for sale to third-parties. The majority of revenue for this segment is generated by our fracturing business.

During the fourth quarter of 2018 , our fracturing business deployed, on average, approximately 650,000 hydraulic horsepower (“HHP”) out of our fleet of approximately 860,000 HHP as of December 31, 2018 . We exited the year with approximately 695,000 HHP deployed, consisting of sixteen horizontal and two vertical fleets. Our typical horizontal fleet size consists of 20 pumps, or approximately 40,000 HHP, and our typical vertical fleet size consists of 10 pumps, or approximately 20,000 HHP. In our cased-hole wireline and pumping business, during the fourth quarter of 2018, we deployed, on average, approximately 70 wireline trucks and 81 pumpdown units. Not all of our deployed assets are utilized fully, or at all, at any given time, due to, among other things, routine scheduled maintenance and downtime.

Revenue and profitability for the fourth quarter of 2018 decreased year-over-year and sequentially in our Completion Services segment due to customer budget exhaustion and lower utilization levels. Due to soft market conditions, we temporarily idled two horizontal equivalent fleets early in the fourth quarter. We focused on reallocating fleets on a dedicated basis to large, efficient customers and these two fleets were re-deployed to dedicated customers in early December, and we exited the fourth quarter at our third quarter exit rate of 695,000 HHP deployed. In our wireline and pumping businesses, lower customer activity levels from budget exhaustion, year-end seasonality and weather-driven delays resulted in both revenue and profitability for the fourth quarter of 2018 decreasing year-over-year and sequentially.

For the year ended December 31, 2018 , revenue from our Completion Services segment was $1.5 billion , representing approximately 65.4% of our total revenue, compared with revenue of $1.1 billion for the year ended December 31, 2017 , which represents a 31.3% year-over-year increase . Adjusted EBITDA from this segment for the year ended December 31, 2018 was $274.3 million , compared with $200.9 million of Adjusted EBITDA for the year ended December 31, 2017 , which represents a 36.5% year-over-year increase .



	Years Ended December 31,
	2018		2017
	(In thousands)
Revenue
Fracturing	$	1,002,664	$	777,147
Cased-hole Wireline & Pumping	420,708		315,999
Other	30,205		13,868
Total revenue	$	1,453,577	$	1,107,014

Adjusted EBITDA	$	274,261	$	200,936

Average active hydraulic fracturing horsepower	670,000		515,000
Total fracturing stages	18,544		15,189

Average active wireline trucks	69		72

Average active pumpdown units	78		61

Please see Note 11 - Segment Information ” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for the definition and calculation of Adjusted EBITDA.

Well Construction and Intervention Services

The core services provided through our Well Construction and Intervention Services segment are cementing and coiled tubing services. Although we previously provided directional drilling services through this segment, we ceased those operations during the first quarter of 2018, and we are in the process of selling the related assets and inventory. The majority of revenue for this segment is generated by our cementing business. During the fourth quarter of 2018, our cementing business deployed, on average, approximately 69 cementing units and in our coiled tubing business, we deployed, on average, approximately 17 coiled tubing units during the quarter. Our deployed assets may not be utilized fully, or at all, at any given time, due to, among other things, routine scheduled maintenance and downtime.

The deployment of additional assets and the acquisition of O-Tex caused both fourth quarter revenue and profitability in our Well Construction and Intervention Services segment to increase year-over-year; however, fourth quarter revenue and profitability decreased sequentially mostly due to customer budget exhaustion and year-end seasonality. These

conditions particularly impacted our cementing business, and we experienced unexpected customer shutdowns. On average, all of our large diameter coiled tubing units were deployed throughout the quarter, but overall activity levels decreased due to higher levels of year-end seasonality and an unfavorable job mix as completion-driven activity levels slowed at year-end.

For the year ended December 31, 2018 , revenue from our Well Construction and Intervention Services segment was $375.7 million , representing approximately 16.9% of our total revenue, compared with revenue of $149.5 million for the year ended December 31, 2017 , which represents a 151.3% year-over-year increase . Adjusted EBITDA from this segment for the year ended December 31, 2018 was $68.5 million , compared with $21.0 million of Adjusted EBITDA for the year ended December 31, 2017 , which represents a 226.7% year-over-year increase .



	Years Ended December 31,
	2018		2017
	(In thousands)
Revenue
Cementing	$	260,969	$	69,447
Coiled Tubing	114,617		78,138
Other	81		1,912
Total revenue	$	375,667	$	149,497

Adjusted EBITDA	$	68,452	$	20,952

Average active cementing units	71		33

Average active coiled tubing units	17		19

Please read Note 11 - Segment Information ” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for additional information about segment Adjusted EBITDA.

Well Support Services

Our Well Support Services segment focuses on post-completion activities at the well site, including rig services, such as workover and plug and abandonment, fluids management services, and other specialty well site services. Although we previously provided artificial lift applications through this segment, we completed the sale of substantially all of the assets and inventory associated with this business on July 2, 2018. Additionally, in 2017 and 2018 in response to the highly competitive landscape and reflecting our returns-focused strategy, we have continued to focus on operational rightsizing measures to better align these businesses with current market conditions. This strategy has resulted in closing facilities and idling unproductive equipment. For example, we divested our Canadian rig services business during the fourth quarter of 2017, we exited the condensate hauling business in South Texas during the first quarter of 2018, and we shut-down our East Texas rig services operations late in the second quarter of 2018. The majority of revenue for this segment is generated by our rig services business, and we consider rig services and fluids management to be the core businesses within this segment.

During the fourth quarter of 2018 , our rig services business deployed, on average, approximately 123 workover rigs per workday out of our average fleet of approximately 344 marketable workover rigs. In our fluids management business, we deployed, on average, approximately 645 fluid services trucks per workday and approximately 1,403 frac tanks per workday. In our fluids management business, we own 23 private salt water disposal wells for fluids disposal purposes. However, our deployed assets may not be utilized fully, or at all, at any given time, due to, among other things, routine scheduled maintenance and downtime.

Segment revenue and profitability for the fourth quarter increased both year-over-year and sequentially due to the deployment of additional assets in the U.S. and higher overall pricing for our services. The prior year period contained partial results from our Canadian rig services business that we divested in early November 2017, which diluted the 2018 year-over-year operating results improvement. In our rig services business, we deployed additional workover rigs into our core operating basins of California and West Texas, and we exited the fourth quarter with our highest deployed workover rig count of 2018. These improved results were partially offset by higher levels of year-end seasonality and select unexpected customer shutdowns in several of our core operating basins, especially in the Bakken and the Rocky Mountain regions. Special services revenue and profitability remained strong primarily due to increased fishing and rental activity in select basins. Our fluids management business benefited from the full implementation of several contract wins in the third quarter of 2018 for California operations,

which was partially offset by lower activity levels in South Texas due to unexpected downtime at certain saltwater disposal wells.

For the year ended December 31, 2018 , revenue from our Well Support Services segment was $392.8 million , representing approximately 17.7% of our total revenue, compared with revenue of $382.2 million for the year ended December 31, 2017 , which represents a 2.8% year-over-year increase . Adjusted EBITDA from this segment for the year ended December 31, 2018 was $39.7 million , compared with $9.2 million of Adjusted EBITDA for the year ended December 31, 2017 , which represents a 329.8% year-over-year increase .



	Years Ended December 31,
	2018		2017
	(In thousands)
Revenue
Rig Services	$	209,708	$	218,819
Fluids Management Services	137,200		122,949
Other Special Well Site Services	45,937		40,460
Total revenue	$	392,845	$	382,228

Adjusted EBITDA	$	39,686	$	9,233

Average active workover rigs	145		188
Total workover rig hours	374,444		452,948

Average active fluids management trucks	634		638
Total fluids management truck hours	1,259,254		1,281,024

Please read Note 11 - Segment Information ” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for additional information about segment Adjusted EBITDA.

Industry Trends and Outlook

We face many challenges and risks in the industry in which we operate. Although many factors contributing to these risks are beyond our ability to control, we continuously monitor these risks and have taken steps to mitigate them to the extent practicable. In addition, while we believe that we are well positioned to capitalize on available growth opportunities, we may not be able to achieve our business objectives and, consequently, our results of operations may be adversely affected. Please read the factors described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Part I, Item 1A of this Annual Report for additional information about the known material risks that we face.

General Industry Trends

The oil and gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including domestic and international supply and demand for oil and gas, current and expected future prices for oil and gas and the perceived stability and sustainability of those prices, production depletion rates and the resultant levels of cash flows generated and allocated by oil and gas companies to their drilling, completion and workover budgets. The oil and gas industry is also impacted by geopolitical factors, such as general domestic and international economic conditions, the actions of the OPEC oil cartel, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacity, weather conditions in the U.S., and other factors that are beyond our control.

Demand for our services tends to be volatile because it is a direct function of our customers’ willingness to make operating and capital expenditures to explore for, develop and produce hydrocarbons in the United States. Our customers’ willingness to undertake such activities and make such expenditures depends largely upon prevailing industry conditions, which are influenced by numerous factors that are beyond our control, including, among others, those described above. The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for customer activity levels. Perceived instability or weakness in oil and natural gas prices influences our customers to pause activity, curtail their operations, reduce their expenditures, and request pricing concessions to reduce their operating costs. In a lower oil and gas

price environment, demand for service and maintenance generally decreases as oil and gas producers decrease their activity and operating and capital expenditures. Because the type of services that we offer can be easily “started” and “stopped,” and oil and gas producers generally tend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services compared with demand for other types of energy services. Given the significant influence of oil and gas prices, customer activity levels historically have been, and are expected to continue to be, highly volatile. A prolonged low level of customer activity could adversely affect our financial condition and results of operations.

Competition and Demand for Our Services

Our revenue and profitability are directly affected by changes in utilization and pricing levels for our services, which fluctuate in direct response to changes in the level of drilling, completion and production activity by our customers. Declines in utilization or pricing for our services impact, among other things, our ability to maintain revenue and profitability. During periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results. Furthermore, even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset any rising costs. In an unfavorable pricing environment, we may decide to idle equipment rather than work at unsustainable pricing levels, although we may not be able to fully reduce our costs accordingly. Also, we may not be able to successfully increase prices without adversely affecting our utilization levels. The inability to maintain our utilization and pricing levels, or to increase our prices as costs increase, could have a material adverse effect on our business, financial position and results of operations.

We operate in highly competitive areas of the oilfield services industry with significant potential for excess capacity. With respect to all of our core services, the equipment can be moved with relative ease from one region to another in response to changes in customer activities and market conditions, which can result in an oversupply of equipment in high activity areas. Increases in supply relative to demand in our core operating areas and geographic markets could negatively impacted both pricing and utilization for our services and adversely affected our financial results.

See Part I, Item 1 “Business” for additional discussion of the market challenges within our industry.

Current Market Conditions and Outlook

The steady increase in oil prices from July 2017 through early October 2018 created a strong environment that incentivized our customers to increase their drilling and completion programs. During that time period, the price of oil averaged approximately $61.00 per barrel, a level that allowed many of our customers to generate adequate financial returns and incentivized them to increase drilling, completion and production activities in many domestic oil-producing basins. During that time period, the price of natural gas averaged $2.88 per Mcf, a level that has not encouraged a material increase in drilling and completion activities in natural gas focused basins. Our results for 2018 generally reflect our focus on large, efficient customers that have increased activity levels in the most prolific oil-producing basins in the Continental United States.

During the fourth quarter of 2018, the industry continued to experience concerns that growing oil production in West Texas may temporarily exceed the capacity of the region’s pipelines to transport oil from oil wells to oil refineries. We have a significant operating presence in West Texas and our financial results for the fourth quarter of 2018 were negatively impacted by lower activity levels in that basin. Additionally, many of our customers spent more than half of their capital expenditure budget in the first half of 2018, which resulted in higher levels of year-end budget exhaustion that negatively affected most of our businesses in almost all of our operating basins. Also, oil prices declined approximately 40% from a high of just over $76.00 per barrel in early October 2018 to a low of just under $43.00 per barrel in late December 2018, which contributed to higher levels of year-end seasonality and incentivized customers to delay planned expenditure into 2019. The timing of this oil price decline comes as many of our customer are formulating their 2019 capital spending plans, which we expect will have negative implications on activity levels and utilization of deployed equipment in 2019, especially in our new-well completion-oriented businesses.

We continue to monitor the market for our services and the competitive environment. Although the U.S. domestic rig count has increased off the historical low recorded in mid-2016, there are signs the drilling rig count could decline in early 2019 due to weakening oil prices and declining E&P capital expenditures. Additionally, increasing competition, logistical constraints and other factors, such as an oversupply of available equipment and lower overall pricing for our services, represent risks to our near-term financial results and may negatively impact our performance in many of our core businesses in 2019.

We will continue to manage our business in line with demand for our services and make adjustments as necessary to effectively respond to changes in market conditions, customer activity levels, pricing for our services and equipment, and utilization of our equipment and personnel. Our response to the industry's persistent uncertainty is to maintain sufficient

liquidity, preserve our conservative capital structure and closely monitor our discretionary spending. We take a measured approach to asset deployment, balancing our view of current and expected customer activity levels with a focus on generating positive returns for our shareholders. Our priorities remain to drive revenue by maximizing utilization, to improve margins through cost controls, to protect and grow our market share by focusing on the quality, safety and efficiency of our service execution, and to ensure that we are strategically positioned to capitalize on constructive market dynamics.

Completion Services Outlook

Our strategy of increasing our dedicated fleet count to large, existing customers should result in higher utilization and better financial performance in our fracturing business during the first quarter of 2019. Additionally, our spot horizontal fleet count has decreased back to lows not seen since the second quarter of 2018, and it is possible that we could have all of our deployed horizontal fleets dedicated by the end of the first quarter of 2019. With that said, the current market conditions remain volatile, and our primary focus remains to lower our overall cost structure and to more closely align with large, dedicated customers with deep inventories of work and proven track records of efficient operations, many of which we have created long-term relationships with over the past several years. In our wireline and pumping businesses, we expect a slow start to the first quarter as many of our customers in the Bakken and the Rocky Mountain regions have indicated they will not commence completion activities until the back half of the first quarter mostly due to inclement weather. We currently expect higher activity levels off year-end seasonal lows in many of our other operating regions such as West Texas and the Mid-Continent, but the expected slow start in the Northwest will offset financial improvement in our other operating basins during the first quarter of 2019.

Well Construction and Intervention Services Outlook

We currently expect that our Well Construction and Intervention Services segment will experience lower activity levels in the first quarter of 2019 primarily due to decreased completion activity and lower overall drilling rig count. Volatile market conditions and select customers releasing drilling rigs will most likely negatively impact our cementing business in the first quarter of 2019. With that said, we will remain focused on controlling costs, maintaining market share and high-grading our customer base by redeploying cementing units with existing customers that plan to maintain stable drilling rig counts in 2019. Despite strong customer demand and improving utilization in West Texas, we believe activity levels will decrease in our coiled tubing business in the first quarter of 2019 primarily due to unfavorable job mix from sluggish improvement in completion-driven activity in both South Texas and the Mid-Continent.

Well Support Services Outlook

We expect improvement in both revenue and profitability in our Well Support Services segment as we continue to benefit from higher activity levels and improved pricing from agreements implemented in late 2018. Additionally, we will continue to focus on deploying more assets with select customers in several of our core operating basins. Increased demand for workover and well maintenance activities should result in higher activity levels throughout the first quarter of 2019, excluding the potential negative impact from inclement weather that typically affects our Well Support Services segment in the first quarter. In our rig services business, we are focused on increasing profitable market share primarily in both California and West Texas due to our reputation of delivering superior service quality and safety and our ability to continue deploying upgraded, high-spec workover rigs. We have upgraded approximately forty-two high-spec workover rigs to date with fifteen of those delivered to customers in 2018, and we plan to deliver another eleven rigs to select customers in 2019. In our fluids management business, we plan to continue focusing on areas with improving fluids logistics and disposal demand, but potential growth opportunities will primarily be dependent upon asset availability and the easing of current labor constraints. Going forward, we will continue to focus on meeting improved customer demand and maintaining our strategy of aligning with customers who have deep inventories of work and who value our ability to safely deliver superior service quality, which should continue to result in increasing segment profitability and returns. That said, we are also exploring potential strategic opportunities for the Well Support Services business that would enable us to focus on growing our new well focused business.

Please see “Liquidity and Capital Resources” in this Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in addition to “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Part I, Item 1A of this Annual Report.

Regulations

The discussion set forth under Item 1. "Business - Government Regulations and Environmental, Health and Safety Matters" in our 2017 Annual Report is incorporated herein by reference.

On March 8, 2018, the President issued two Proclamations directing the imposition, effective March 23, 2018, of ad valorem tariffs of 25% on certain imported steel products and 10% on certain imported aluminum products from all countries, with the exception of Canada and Mexico. Subsequently, on March 22, 2018, the President issued two additional Proclamations that exempted, in addition to Canada and Mexico, several additional countries from the remedial tariff measures, as follows: (i) Argentina; (ii) Australia; (iii) Brazil; (iv) the 28 member countries of the European Union; and (v) South Korea. In Proclamations issued on April 30, 2018, the President: (i) permanently exempted South Korea from the imposition of tariffs on imported steel, while allowing tariffs to be imposed on imported aluminum; (ii) extended the steel and aluminum tariff exemptions for Argentina, Australia, and Brazil indefinitely to allow for continued negotiations; and (iii) extended the steel and aluminum tariff exemptions for Canada, Mexico, and the 28 member countries of the European Union to allow for continued negotiations, but only through May 31, 2018. In addition to possible country-based exemptions, the United States has established a protocol whereby individuals or entities using any of the affected steel or aluminum products in business activities, such as manufacturing, may request the exclusion of individual products from the imposition of tariffs. On May 31, 2018, the U.S. announced that it would also impose steel and aluminum tariffs on Canada, Mexico, and the 28 member countries of the European Union. In addition, Argentina, Australia, Brazil, and South Korea implemented measures to address the impairment to U.S. national security attributable to steel and aluminum imports that were deemed satisfactory to the United States. As a result, imports of steel and/or aluminum from these countries have been exempted from the imposition of tariff-based remedies, but, with the exception of Australia, the United States has implemented quantitative restrictions in the form of absolute quotas, meaning that imports in excess of the allotted quota will be disallowed.

Our R&T department is primarily engaged in the engineering and production of certain parts and components, such as perforating guns and addressable switches, which are used in the completion process. Certain of these items, particularly perforating guns used in our wireline operations, are manufactured using imported steel tubing, which is subject to a 25% tariff. We expect that, depending on the ultimate outcome of the country exemption and product exclusion processes described above, our raw material costs will increase and result in corresponding increases in the price of our finished goods. Further, in addition to the products manufactured by our R&T department, we expect that the costs of other high steel content products used in conjunction with our fracturing and coiled tubing operations, specifically power ends, fluid ends, treating iron and coiled tubing strings, will also increase as we expect the manufacturers of such goods to pass along the net effect the tariffs have on the cost of manufacturing such goods.

Liquidity and Capital Resources

Sources of Liquidity and Capital Resources

Our primary sources of liquidity have historically included, and we have funded our capital expenditures with, cash flows from operations, proceeds from public offerings of our common stock and borrowings under debt facilities. Our ability to generate future cash flows is subject to a number of variables, many of which are outside of our control, including the drilling, completion and production activity by our customers, which is highly dependent on oil and gas prices. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Outlook” for additional discussion of certain factors that impact our results and the market challenges within our industry. See “-Financial Condition and Cash Flows” below for information about net cash provided by or used in our operating, investing and financing activities.

We have maintained a strong balance sheet and a conservative capital structure. As of December 31, 2018 , we had a cash balance of $135.7 million and no borrowings drawn on our Credit Facility, which had $234.7 million of available borrowing capacity after taking into consideration outstanding letters of credit totaling $20.6 million . This resulted in total liquidity of $370.4 million as of December 31, 2018 . As of February 22, 2019 , we had a cash balance of approximately $84.9 million and no borrowings drawn on our Credit Facility, which had $234.7 million of available borrowing capacity after taking into consideration our current outstanding letters of credit totaling $20.6 million , resulting in total liquidity of approximately $319.6 million . Under the terms of our Credit Facility, the borrowing base is subject to monthly adjustments based on current levels of accounts receivable and inventory. For additional information about the Credit Facility, please see “Description of our Indebtedness” below and Note 3 - Debt in Part II, Item 8 “Financial Statements” of this Annual Report.

Our primary uses of cash are for operating costs, capital expenditures and other expenditures. The oilfield services business is capital-intensive, requiring significant investment to maintain, upgrade and purchase equipment to meet our customers’ needs and industry demand. Our capital expenditures consist primarily of:


•	growth capital expenditures, which are capital expenditures made to acquire additional equipment and other assets, increase our service lines, or advance other strategic initiatives for the purpose of growing our business; and


•	maintenance capital expenditures, which are capital expenditures related to our existing equipment, such as refurbishment and other activities to extend the useful life of partially or fully depreciated assets.

Capital expenditures totaled $311.1 million in 2018, primarily pertaining to the maintenance of deployed equipment, the refurbishment of previously stacked fracturing equipment and the building of new equipment for our Completion and Well Construction & Intervention Services segments. We decreased our 2018 capital expenditure budget in the second quarter from the initial estimated range of between $430.0 million and $450.0 million due to our decision to delay the refurbishment and future redeployment of three stacked horizontal frac fleets. We further decreased our capital expenditure budget in the third quarter due to less growth and maintenance capital spending in most of our core service lines as a result of lower activity levels and reduced customer demand.

On July 31, 2018, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to $150.0 million of the Company’s common stock over the twelve month period starting August 1, 2018, in open market or in privately negotiated transactions, subject to U.S. Securities and Exchange Commission regulations, stock market conditions, capital needs of the business, and other factors. Repurchases may be commenced or suspended at any time without notice. In 2018, the Company executed the repurchase of approximately 2.4 million shares at an average cost of $16.55 per share.

We expect to fund our 2019 capital expenditure program primarily with cash flows from operations and potential borrowings under our Credit Facility. The amount of indebtedness we have outstanding at any time could limit our ability to finance future growth and could adversely affect our operations and financial condition. Based on our existing operating performance, we currently believe that our cash flows from operations, cash on hand and borrowings under our Credit Facility will be sufficient to meet our operational and capital expenditure requirements over the next twelve months.

Financial Condition and Cash Flows

The net cash provided by or used in our operating, investing and financing activities is summarized below:



	Successor						Predecessor
	(In thousands)
	Years Ended December 31,
	2018			2017			2016
Cash flow provided by (used in):
Operating activities	$	342,064		$	94		$	(107,372	)
Investing activities	(276,160		)	(275,686		)	(26,927		)
Financing activities	(44,426		)	210,339			174,264
Effect of exchange rate on cash	381			(2,102		)	(1,282		)
Increase (decrease) in cash and cash equivalents	$	21,859		$	(67,355	)	$	38,683

Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $342.1 million for the year ended December 31, 2018 . The cash inflow was primarily from (i) adjustments for non-cash items of $416.2 million , (ii) $51.3 million of positive changes in other operating assets and liabilities primarily from the decrease of previous period investment in working capital, and (iii) $4.6 million related to state income and federal income tax refunds. This cash inflow was offset by a net loss of $130.0 million .

Net cash provided by operating activities was $0.1 million for the year ended December 31, 2017 . The cash inflow was primarily related to net income of $22.5 million , adjustments for non-cash items of $106.4 million , cash provided from the collection of accounts receivable assumed in the O-Tex acquisition and positive changes in other operating assets and liabilities, excluding accounts receivable, inventory, accounts payable and accrued expenses. This cash inflow was offset by $149.3 million of (i) increased investment in working capital (accounts receivable, inventory, accounts payable and accrued expenses) as a result of the increase in the demand primarily for our completion service lines and the resulting increase in revenue and direct costs for the year ended December 31, 2017 and (ii) cash used to satisfy obligations related to accounts payable and accrued liabilities assumed in the O-Tex acquisition.

Net cash used in operating activities was $107.4 million for the year ended December 31, 2016 . The use of cash was primarily related to a net loss of $944.3 million , offset by (i) adjustments for non-cash items of $713.5 million , (ii) cash

inflows of $101.3 million due to a decrease in our investment in working capital (accounts receivable, inventory, accounts payable and accrued expenses) as a result of the decrease in the demand for our services and the resulting decrease in revenue and direct costs during the year ended December 31, 2016 , (iii) a decrease in the use of cash related to accounts payable and accrued expenses during the third and fourth quarters of 2016 both resulting from the automatic stay associated with the Chapter 11 Proceeding and (iv) positive changes in other operating assets and liabilities, excluding accounts receivable, inventory, accounts payable and accrued expenses.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $276.2 million for the year ended December 31, 2018 . The use of cash was related to $311.1 million of capital expenditures primarily pertaining to the maintenance of deployed equipment, the refurbishment of previously stacked equipment and related reactivation costs for equipment redeployed in both the second and third quarters of 2018, and the building of new equipment for our Completion and WC&I segments. These amounts were offset by (i) $33.4 million of proceeds from the disposal of property, plant and equipment and non-core service lines and (ii) a $1.5 million refund from a purchase price adjustment related to the O-Tex acquisition.

Net cash used in investing activities was $275.7 million for the year ended December 31, 2017 . The use of cash was related to (i) $210.2 million of capital expenditures primarily pertaining to the refurbishment of stacked equipment and the construction of new-build frac pumps and refurbished ancillary equipment and (ii) $133.8 million related to the O-Tex Transaction. These amounts were offset by $68.3 million of proceeds from the divestiture of non-core business lines previously reported under our Other Services reportable segment and from the disposal of property plant and equipment.

Net cash used in investing activities was $26.9 million for the year ended December 31, 2016 . The use of cash was related to $57.9 million of capital expenditures primarily pertaining to the new ERP system and to costs incurred to extend the useful lives of our existing equipment, offset by $32.8 million of proceeds from the disposal of property plant and equipment.

Cash Flows Provided by Financing Activities

Net cash used by financing activities was $44.4 million for the year ended December 31, 2018 . The cash used was related to (i) $37.1 million for share repurchases in connection with our stock repurchase program, (ii) $3.9 million of settlement and employee tax withholding on restricted stock vestings and (iii) $3.5 million of cash paid for financing costs related to our Credit Facility.

Net cash provided by financing activities was $210.3 million for the year ended December 31, 2017 . The cash provided was primarily from $215.9 million of proceeds from the public offering of common stock, partially offset by (i) $3.8 million of employee tax withholding on restricted stock vesting and (ii) $1.7 million of cash paid for financing costs related to our Credit Facility.

Net cash provided by financing activities was $174.3 million for the year ended December 31, 2016 . The cash provided was primarily from (i) $174.0 million in proceeds from the Predecessor's revolving credit facility and (ii) $23.0 million in proceeds from the DIP Facility. These amounts were offset by (i) $13.3 million in payments on the Predecessor's revolving credit facility and term debt, (ii) $5.6 million for excess tax expense from share-based compensation, (iii) $2.4 million in payments related to capital lease obligations and (iv) $1.0 million of cash paid for financing costs related to our DIP Facility.

Description of our Indebtedness

Credit Facility

We and certain of our subsidiaries (the “Borrowers”) entered into an Asset-Based Revolving Credit Agreement with, among others, JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”), on May 1, 2018 (the "Credit Facility"). The maturity date of the Credit Facility is May 1, 2023. The Credit Facility replaces the Prior Credit Facility, which was canceled and discharged on May 1, 2018. For additional information about the Prior Credit Facility, please see Note 3 - Debt in Part II, Item 8 “Financial Statements” of this Annual Report.

The Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of (a) $400.0 million or (b) a borrowing base (the “Loan Cap”), which borrowing base is based upon the value of the Borrowers’ accounts receivable, inventory and restricted cash, subject to eligibility criteria and customary reserves which may be modified in the Agent’s permitted discretion. The Credit Facility also provides for the issuance of letters of credit, which would further

reduce borrowing capacity thereunder. If at any time the amount of loans and other extensions of credit outstanding under the Credit Facility exceed the borrowing base, the Borrowers may be required, among other things, to prepay outstanding loans immediately.

The Borrowers’ obligations under the Credit Facility are secured by liens on a substantial portion of the Borrowers’ personal property, subject to certain exclusions and limitations. Upon the occurrence of certain events, additional collateral, including a portion of the Borrowers’ real properties, may also be required to be pledged. Each of the Borrowers is jointly and severally liable for the obligations of the other Borrowers under the Credit Facility.

At the Borrowers’ election, interest on borrowings under the Credit Facility will be determined by reference to either LIBOR plus an applicable margin of between 1.50% and 2.00% or an “alternate base rate” plus an applicable margin of between 0.50% and 1.00%, in each case based on the Company’s total leverage ratio. Interest will be payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest period applicable to LIBOR-based loans and, in the case of an interest period longer than three months, quarterly, upon any prepayment and at final maturity. The Borrowers will also be required to pay a fee on the unused portion of the Credit Facility equal to (i) 0.50% per annum if average utilization is less than or equal to 25% or (ii) 0.375% per annum if average utilization is greater than 25%, in each case payable quarterly in arrears to the Agent.

The Credit Facility contains covenants that limit the Borrowers’ ability to incur additional indebtedness, grant liens, make loans, make acquisitions or investments, make distributions, merge into or consolidate with other persons, or engage in certain asset dispositions.

The Credit Facility also contains a financial covenant which requires us to maintain a monthly minimum fixed charge coverage ratio of 1.0:1.0 upon the occurrence of an event of default or on any date upon which the excess availability is less than the greater of (x) 12.5% of the Loan Cap and (y) $30.0 million. The fixed charge coverage ratio is generally defined in the Credit Facility as the ratio of (i) EBITDA minus certain capital expenditures and cash taxes paid to (ii) the sum of cash interest expenses, scheduled principal payments on borrowed money and certain distributions.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2018 :



Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(In thousands)
Service equipment and consumables	$	21,524	$	21,524	$	—	$	—	$	—
Operating leases	30,864		9,204		12,616		9,023		21
Credit Facility ⁽¹⁾	9,848		2,275		4,550		3,023		—
Administrative contracts	26,121		7,849		10,803		5,499		1,970
Total	$	88,357	$	40,852	$	27,969	$	17,545	$	1,991

⁽¹⁾ Represents unused commitment fees on unused portion of the Credit Facility and outstanding letters of credit. As of December 31, 2018, there were no amounts outstanding under the Credit Facility.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, as of December 31, 2018 .

Critical Accounting Policies

The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting standards have developed. Accounting standards generally do not involve a selection among alternatives, but involve the implementation and interpretation of existing standards, and the use of judgment applied to the specific set of circumstances existing in our business. We make every effort to properly comply with all applicable standards on or before their adoption, and we believe the proper implementation and consistent application of the accounting standards are critical.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies involve significant areas of management’s judgments and estimates in the preparation of our consolidated financial statements.

Accounts Receivable and Allowance for Doubtful Accounts . Accounts receivable are generally stated at the amount billed to customers. We provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments at either the contractual due dates or in the future.

Property, Plant and Equipment . Property, plant and equipment ("PP&E") are reported at cost less accumulated depreciation. Maintenance and repairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the value of the equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operating income. The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets.

PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain PP&E may not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interest expense. We determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. Our asset groups consist of well support services, fracturing services, cased-hole wireline and pumping services, cementing services and coiled tubing services. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group's major classifications.

Goodwill, Indefinite-Lived Intangible Assets and Definite-Lived Intangible Assets. Goodwill may be allocated across three reporting units: Completion Services, Well Construction and Intervention Services ("WC&I") and Well Support Services. At the reporting unit level, we test goodwill for impairment on an annual basis as of October 31 of each year, or when events or changes in circumstances, referred to as triggering events, indicate the carrying value of goodwill may not be recoverable and that a potential impairment exists. Judgment is used in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes and other external events may require more frequent assessments.

Before employing quantitative impairment testing methodologies, we may first evaluate the likelihood of impairment by considering qualitative factors relevant to each reporting unit, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If we first utilize a qualitative approach and determine that it is more likely than not that goodwill is impaired, quantitative testing methodologies are then applied. Otherwise, we conclude that no impairment has occurred. Quantitative impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. In connection with our adoption of ASU No. 2017-04, Simplifying the Test for Goodwill Impairment on January 1, 2018, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the amount of goodwill allocated to the reporting unit.

Critical assumptions include projected revenue growth, fleet count, utilization, gross profit rates, sales, general and administrative ("SG&A") rates, working capital fluctuations, capital expenditures, discount rates, terminal growth rates, and price-to-earnings multiples. Our market capitalization is also used to corroborate reporting unit valuations.

Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicate the carrying amount may not be recoverable.

Definite-lived intangible assets are amortized over their estimated useful lives and are reviewed for impairment when a triggering event occurs. With the exception of the C&J trade name, these intangibles, along with PP&E, are reviewed for impairment when a triggering event indicates that the asset group may have a net book value in excess of recoverable value. In these cases, we perform a recoverability test on our PP&E and definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generated from the use of these assets to the carrying amount of the assets for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the assets, an impairment does not exist, and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the assets, the assets are not recoverable and the amount of impairment must be determined by fair valuing the assets. The C&J trade name is a corporate asset and is reviewed for impairment upon the occurrence of a triggering event by comparing the carrying amount of the corporate assets with the remaining cash flows available, after taking into consideration the lower level asset groups that benefit from the C&J trade name.

Mergers and Acquisitions . In accordance with accounting guidance for business combinations, we allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets such as trade names and any other significant assets or liabilities. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain more information regarding asset valuations and liabilities assumed.

Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analysis. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies. If actual results are materially different than the assumptions we used to determine fair value of the assets and liabilities acquired through a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an impact on our net earnings.

See “ Note 10 - Acquisitions ” in Item 8 “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the acquisition-related information associated with mergers and acquisitions completed in the last three fiscal years.

Revenue Recognition . We adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and its related updates as codified under ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for the year ended December 31, 2018 reflect the application of ASC 606 guidance while the reported results for the corresponding prior year period were prepared under the previous guidance of ASC No. 605, Revenue Recognition ("ASC 605"). After reviewing our contracts and the revenue recognition guidance under ASC 606, there are no material differences between revenue recognition under ASC 605 and ASC 606. As a result, there is not a cumulative effect adjustment recorded to beginning retained earnings or recognition of any contract assets or liabilities upon adoption of ASC 606.

The adoption of ASC 606 represents a change in accounting principle that more closely aligns revenue recognition with the performance of our services and provides financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized in a manner reflecting the transfer of goods or services to customers based on consideration a company expects to receive. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. To achieve this core principle, ASC 606 requires we apply the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue when or as we satisfy a performance obligation. The five-step model requires management to exercise judgment when evaluating contracts and recognizing revenue.

Share-Based Compensation. Our share-based compensation plan provides the ability to grant equity awards to our employees, consultants and non-employee directors. As of December 31, 2018 , only nonqualified stock options, restricted shares, performance stock and restricted share units had been granted under such plans. The fair value of restricted share grants and restricted share units is based on the closing price of our common stock on the grant date. We values option grants based on the grant date fair value using the Black-Scholes option-pricing model, and we value performance awards with market conditions based on the grant date fair value using a Monte Carlo simulation, both of which require the use of subjective assumptions. We recognize share-based compensation expense on a straight-line basis over the requisite service period for the entire award and makes estimates of employee terminations and forfeiture rates which impacts the amount of compensation expense that is recorded over the requisite service period.

Income Taxes. We are subject to income and other similar taxes in all areas in which we operate. When recording income tax expense, certain estimates are required because: (a) income tax returns are generally filed months after the close of our annual accounting period; (b) tax returns are subject to audit by taxing authorities and audits can often take years to complete and settle; and (c) future events often impact the timing of when we recognize income tax expenses and benefits.

We account for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to projected future taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that a portion or all of the deferred tax assets will not be realized.

We have federal, state and international net operating losses ("NOLs") carried forward from tax years ending before January 1, 2018 that will expire in the years 2020 through 2038. Due to U.S. tax reform, any U.S. federal income tax losses incurred for tax years beginning after December 31, 2017 can be carried forward indefinitely with no carry back available. In addition, the taxable losses generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income generated in tax years beginning after December 31, 2018. After considering the scheduled reversal of deferred tax liabilities, projected future taxable income, the potential limitation on use of NOLs under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code") and tax planning strategies, we established a valuation allowance due to the uncertainty regarding the ultimate realization of the deferred tax assets associated with its NOL carryforwards.

As a result of the Chapter 11 Proceeding, on the Plan Effective Date, we believe we experienced an ownership change for purposes of Section 382 of the Code because of its Restructuring Plan. Consequently, our pre-change NOLs are subject to an annual limitation (See Note 14 - Chapter 11 Proceeding and Emergence for additional information, including definitions of capitalized defined terms, about the Chapter 11 Proceeding and emergence from the Chapter 11 Proceeding). The ownership change and resulting annual limitation on use of NOLs are not expected to result in the expiration of our NOL carryforwards if we are able to generate sufficient future taxable income within the carryforward periods. However, the limitation on the amount of NOLs available to offset taxable income in a specific year may result in the payment of income taxes before all NOLs have been utilized. Additionally, a subsequent ownership change may result in further limitation on the ability to utilize existing NOLs and other tax attributes, which could cause our pre-change NOL carryforwards to expire unused.

We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50.0% likely of being realized upon ultimate settlement with a taxing authority. Previously recognized uncertain tax positions are reversed in the first period in which it is more-likely-than-not that the tax position would be sustained upon examination. Income tax related interest and penalties, if applicable, are recorded as a component of the provision for income tax expense. For the year ended December 31, 2018 , we have an unrecognized tax benefit of $6.0 million related to an increase in the estimate of the reserve for unrecognized tax benefits relating to our uncertain tax positions, which is netted against our net operating loss carryforwards. The unrecognized tax benefit, or UTB, is related to a deduction for certain fees that were paid using shares of our common stock as part of the January 7, 2017 plan of reorganization. The recorded unrecognized tax benefit is equal to our estimate of the portion of the tax benefit that is less than 50% likely to be realized upon ultimate settlement with a taxing

authority.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU No. 2016-02 seeks to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. Unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, ASU No. 2016-02 will require both operating and finance leases to be recognized on the balance sheet. Additionally, the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements.

The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted. We adopted this new accounting standard on January 1, 2019 using the modified retrospective approach. Under this transition method, leases existing at, or entered into after the adoption date are required to be recognized and measured. We have elected to use the effective date as its date of initial application, consequently prior period amounts have not been adjusted and continue to be reflected in accordance with historical accounting. We elected the package of practical expedients which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We have also elected the practical expedient to combine the lease and non-lease components of a contract for all of our contracts, as well as the short-term lease recognition exemption.

The adoption of this standard will result in the initial recognition of approximately $25.0 million to $28.0 million of right-of-use assets and operating lease liabilities, with no related impact to consolidated stockholders' equity or net income (loss).

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. We are currently evaluating the impact this standard will have on our results of operations and financial position.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory, when the transfer occurs. The ASU is effective for the interim and annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, and early application is permitted. We adopted this new accounting standard on January 1, 2018, and upon adoption recognized a cumulative effect adjustment as a reduction to retained earnings of $13.2 million.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which establishes a one-step process for testing goodwill for impairment. This ASU is effective for the interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted. We early adopted this new accounting standard on January 1, 2018 and there no impact on our consolidated financial statements upon adoption. As part of our annual impairment assessment of goodwill during the fourth quarter of 2018, we applied this new accounting standard and recognized an impairment charge of $146.0 million for the year ended December 31, 2018.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02") , which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. This ASU is effective for the interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , ("ASU 2018-05"), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Act) pursuant to Staff Accounting Bulletin No. 18, which allows companies to

complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. We adopted this new accounting standard January 1, 2018, and there was no impact on our consolidated financial statements upon adoption.

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , ("ASU 2018-07"), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for the interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. We adopted this new accounting standard January 1, 2019, and there was no impact on our consolidated financial statements upon adoption.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-50): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective for the interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

Inflation

Inflation in the United States has been relatively low in recent years and did not have a material impact on our results of operations for the years ended December 31, 2018 , 2017 and 2016 . Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S. economy, and we tend to experience inflationary pressure on the cost of our equipment, materials and supplies as increasing oil and natural gas prices increase activity in our areas of operations .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risk to which we are exposed is commodity price risk, which is the risk related to increases in the prices of fuel, materials and supplies consumed in performing our services. We are also exposed to risks related to interest rate fluctuations and customer credit.

Commodity Price Risk . Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our stimulation services such as proppants, chemicals, guar, coiled tubing and fluid supplies. Our fuel costs consist primarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials (particularly guar and proppants) in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Historically, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities.

Interest Rate Risk . We are exposed to changes in interest rates on our floating rate borrowings under our Credit Facility. As of December 31, 2018 , we had no debt outstanding under our Credit Facility. The impact of a 1.0% increase in interest rates under the terms of the Credit Facility would have no impact on interest expense for the 2018 year.

Customer Credit Risk . Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts.

Item 8. Financial Statements and Supplementary Data

Index to

Consolidated Financial Statements




Management's Report on Internal Control Over Financial Reporting	57
Reports of Independent Registered Public Accounting Firms	58
Consolidated Balance Sheets as of December 31, 2018 and 2017	60
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017 (Successor), on January 1, 2017 (Predecessor) and for the Year Ended December 31, 2016 (Predecessor)	61
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018 and 2017 (Successor), on January 1, 2017 (Predecessor) and for the Year Ended December 31, 2016 (Predecessor)	62
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2018 and 2017 (Successor), on January 1, 2017 (Successor) and for the Year Ended December 31, 2016 (Predecessor)	63
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 (Successor), on January 1, 2017 (Predecessor) and for the Year Ended December 31, 2016 (Predecessor)	64
Notes to Consolidated Financial Statements	65

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management with the participation of the Company’s principal executive and financial officers assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 . In making this assessment, it used the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2018 .

The Company's internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in this Form 10-K.




/s/ Donald J. Gawick	/s/ Jan Kees van Gaalen	/s/ Michael S. Galvan
Donald J. Gawick President, Chief Executive Officer and Director (Principal Executive Officer)	Jan Kees van Gaalen Chief Financial Officer (Principal Financial Officer)	Michael S. Galvan Chief Accounting Officer and Treasurer (Principal Accounting Officer)

February 27, 2019

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

C&J Energy Services, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of C&J Energy Services, Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017 (Successor), and for the year ended 2016 (Predecessor), and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years ended December 31, 2018 and 2017 (Successor) and for the year ended 2016 (Predecessor), in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company's auditor since 2014.

Houston, Texas

February 27, 2019

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

C&J Energy Services, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited C&J Energy Services, Inc. ’s (the Company) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission . In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017 (Successor), and for the year ended December 31, 2016 (Predecessor), and related notes (collectively, the consolidated financial statements), and our report dated February 27, 2019 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Houston, Texas

February 27, 2019

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

C ONSOLIDATED B ALANCE S HEETS

(In thousands, except share data)



	December 31, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	135,746		$	113,887
Accounts receivable, net of allowance of $4,877 at December 31, 2018 and $4,269 at December 31, 2017	309,104			367,906
Inventories, net	62,633			77,793
Prepaid and other current assets	22,357			33,011
Total current assets	529,840			592,597
Property, plant and equipment, net of accumulated depreciation of $320,134 at December 31, 2018 and $133,755 at December 31, 2017	737,292			703,029
Other assets:
Goodwill	—			147,515
Intangible assets, net	115,072			123,837
Deferred financing costs, net of accumulated amortization of $2,932 at December 31, 2018 and $608 at December 31, 2017	4,574			3,379
Other noncurrent assets	37,676			38,500
Total assets	$	1,424,454		$	1,608,857
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	140,109		$	138,624
Payroll and related costs	48,873			52,812
Accrued expenses	55,430			67,414
Total current liabilities	244,412			258,850
Deferred tax liabilities	537			3,917
Other long-term liabilities	26,176			24,668
Total liabilities	271,125			287,435
Commitments and contingencies
Stockholders’ equity
Common stock, par value of $0.01, 1,000,000,000 shares authorized, 66,120,015 and 68,546,820 issued and outstanding at December 31, 2018 and December 31, 2017, respectively	661			686
Additional paid-in capital	1,273,524			1,298,859
Accumulated other comprehensive loss	(148		)	(580		)
Retained earnings (deficit)	(120,708		)	22,457
Total stockholders’ equity	1,153,329			1,321,422
Total liabilities and stockholders’ equity	$	1,424,454		$	1,608,857

See accompanying notes to consolidated financial statements

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

C ONSOLIDATED S TATEMENTS OF O PERATIONS

(In thousands, except per share data)



	Successor						Predecessor
	Years Ended December 31,						On January 1,			Year Ended December 31,
	2018			2017			2017			2016
Revenue	$	2,222,089		$	1,638,739		$	—		$	971,142
Costs and expenses:
Direct costs	1,724,707			1,288,092			—			947,255
Selling, general and administrative expenses	225,511			250,871			—			229,267
Research and development	6,286			6,368			—			7,718
Depreciation and amortization	224,867			140,650			—			217,440
Impairment expense	146,015			—			—			436,395
(Gain) loss on disposal of assets	25,676			(31,463		)	—			3,075
Operating loss	(130,973		)	(15,779		)	—			(870,008		)
Other income (expense):
Interest expense, net	(3,899		)	(1,527		)	—			(157,465		)
Other income (expense), net	2,453			3			—			9,504
Total other expense	(1,446		)	(1,524		)	—			(147,961		)
Loss before reorganization items and income taxes	(132,419		)	(17,303		)	—			(1,017,969		)
Reorganization items	—			—			(293,969		)	55,330
Income tax benefit	(2,414		)	(39,760		)	(4,613		)	(129,010		)
Net income (loss)	$	(130,005	)	$	22,457		$	298,582		$	(944,289	)
Net income (loss) per common share:
Basic	$	(1.94	)	$	0.37		$	2.52		$	(7.98	)
Diluted	$	(1.94	)	$	0.37		$	2.52		$	(7.98	)
Weighted average common shares outstanding:
Basic	66,897			61,208			118,633			118,305
Diluted	66,897			61,460			118,633			118,305

See accompanying notes to consolidated financial statements

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)



	Successor						Predecessor
	Years Ended December 31,						On January 1,		Year Ended December 31,
	2018			2017			2017		2016
Net income (loss)	$	(130,005	)	$	22,457		$	298,582	$	(944,289	)

Other comprehensive income (loss):
Foreign currency translation gain (loss), net of income tax (expense) benefit of $23, ($777) and ($31) at December 31, 2018, 2017 and 2016, respectively	432			(580		)	—		1,425
Comprehensive income (loss)	$	(129,573	)	$	21,877		$	298,582	$	(942,864	)

See accompanying notes to consolidated financial statements

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

C ONSOLIDATED S TATEMENTS OF C HANGES IN STOCKHOLDERS ’ E QUITY

(In thousands)



	Common Stock					Additional Paid-in Capital			Other Comprehensive Loss			Retained Earnings (Deficit)			Total
	Number of Shares		Amount, at $0.01 par value			Additional Paid-in Capital			Other Comprehensive Loss			Retained Earnings (Deficit)			Total
Balance, December 31, 2015 (Predecessor)	120,420		$	1,204		$	997,766		$	(4,025	)	$	(362,302	)	$	632,643
Forfeitures of restricted shares	(576	)	(6		)	6			—			—			—
Employee tax withholding on restricted shares vesting	(314	)	(3		)	(494		)	—			—			(497		)
Tax effect of share-based compensation	—		—			(5,592		)	—			—			(5,592		)
Share-based compensation	—		—			17,740			—			—			17,740
Net loss	—		—			—			—			(944,289		)	(944,289		)
Foreign currency translation gain, net of tax	—		—			—			1,425			—			1,425
Balance, December 31, 2016 (Predecessor)	119,530		$	1,195		$	1,009,426		$	(2,600	)	$	(1,306,591	)	$	(298,570	)
Cancellation of Predecessor equity	(119,530	)	(1,195		)	(1,009,426		)	2,600			1,306,591			298,570


Issuance of New Equity and New Warrants	40,000		400			725,464			—			—			725,864
Rights Offering	15,464		155			199,845			—			—			200,000
Balance January 1, 2017 (Successor)	55,464		$	555		$	925,309		$	—		$	—		$	925,864
Public offering of common stock, net of offering costs	7,050		71			215,849			—			—			215,920
Issuance of stock for business acquisition	4,420		44			138,122			—			—			138,166
Issuance of restricted stock, net of forfeitures	1,718		17			(17		)	—			—			—
Exercise of warrants	2		—			—			—			—			—
Employee tax withholding on restricted stock vesting	(107	)	(1		)	(3,841		)	—			—			(3,842		)
Share-based compensation	—		—			23,437			—			—			23,437
Net income	—		—			—			—			22,457			22,457
Foreign currency translation loss, net of tax	—		—			—			(580		)	—			(580		)
Balance December 31, 2017 (Successor)	68,547		$	686		$	1,298,859		$	(580	)	$	22,457		$	1,321,422
Cumulative effect from change in accounting principle	—		—			—			—			(13,160		)	(13,160		)
Issuance of restricted stock, net of forfeitures	203		2			(2		)	—			—			—
Shares repurchased and retired	(2,438	)	(25		)	(40,326		)	—			—			(40,351		)
Settlement and employee tax withholding on restricted stock vesting	(192	)	(2		)	(3,852		)	—			—			(3,854		)
Share-based compensation	—		—			18,845			—			—			18,845
Net loss	—		—			—			—			(130,005		)	(130,005		)
Foreign currency translation gain, net of tax	—		—			—			432			—			432
Balance December 31, 2018 (Successor)	66,120		$	661		$	1,273,524		$	(148	)	$	(120,708	)	$	1,153,329

See accompanying notes to consolidated financial statements

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

C ONSOLIDATED S TATEMENTS OF C ASH F LOWS

(In thousands)



	Successor						Predecessor
	Years Ended December 31,						On January 1,			Year Ended December 31,
	2018			2017			2017			2016
Cash flows from operating activities:
Net income (loss)	$	(130,005	)	$	22,457		$	298,582		$	(944,289	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	224,867			140,650			—			217,440
Impairment expense	146,015			—			—			436,395
Inventory write-down	—			—			—			35,350
Deferred income taxes	(2,986		)	(31,244		)	(4,613		)	(129,533		)
Provision for doubtful accounts	1,489			4,444			—			1,735
(Gain) loss on disposal of assets	25,676			(31,463		)	—			3,075
Share-based compensation expense	18,845			23,437			—			17,740
Amortization of financing costs and original issue discount	2,324			608			—			100,724
Reorganization items, net	—			—			(315,626		)	30,611
Changes in operating assets and liabilities:
Accounts receivable	55,478			(203,101		)	—			137,075
Inventories	8,937			(26,072		)	—			4,244
Prepaid expenses and other current assets	12,663			16,013			—			24,447
Accounts payable	(5,183		)	41,801			—			(75,016		)
Payroll and related costs and accrued expenses	(21,097		)	38,104			(1,436		)	35,028
Liabilities subject to compromise	—			—			(33,000		)	—
Income taxes receivable	4,552			1,714						3,604
Other	489			2,746			—			(6,002		)
Net cash provided by (used in) operating activities	342,064			94			(56,093		)	(107,372		)
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment	(311,059		)	(210,186		)	—			(57,909		)
Proceeds from disposal of property, plant and equipment and non-core service lines	33,399			68,250			—			32,809
Business acquisitions and purchase price adjustment	1,500			(133,750		)	—			(1,827		)
Net cash used in investing activities	(276,160		)	(275,686		)	—			(26,927		)
Cash flows from financing activities:
Proceeds from revolving debt	—			—			—			174,000
Payments on revolving debt and term loans	—			—			—			(13,250		)
DIP Facility proceeds (payments)	—			—			(25,000		)	23,000
Payments of capital lease obligations	—			—			—			(2,388		)
Financing costs	(3,519		)	(1,739		)	(2,248		)	(1,009		)
Proceeds from issuance of common stock, net of offering costs	—			215,920			200,000			—
Settlement and employee tax withholding on restricted stock vesting	(3,854		)	(3,842		)	—			(497		)
Excess tax expense from share-based compensation	—			—			—			(5,592		)
Shares repurchased and retired	(37,053		)	—			—			—
Net cash provided by financing activities	(44,426		)	210,339			172,752			174,264
Effect of exchange rate on cash	381			(2,102		)	—			(1,282		)
Net increase (decrease) in cash and cash equivalents	21,859			(67,355		)	116,659			38,683
Cash and cash equivalents, beginning of year	113,887			181,242			64,583			25,900
Cash and cash equivalents, end of year	$	135,746		$	113,887		$	181,242		$	64,583

See accompanying notes to consolidated financial statements

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization, Nature of Business and Summary of Significant Accounting Policies

C&J Energy Services, Inc., a Delaware corporation (the “Successor” and together with its consolidated subsidiaries for periods subsequent to the Plan Effective Date (as defined below), “C&J” or the “Company”), is a leading provider of new well construction, well completion, well support and other complementary oilfield services to oil and gas exploration and production ("E&P") companies throughout the continental United States. The Company offers a comprehensive suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumping, cementing, coiled tubing, rig services, fluids management, and other completion and well support services. The Company is headquartered in Houston, Texas, and operates across all active onshore basins in the continental United States.

C&J’s business was founded in Texas in 1997 as a partnership and converted to a Delaware corporation (“Old C&J”) in connection with an initial public offering which was completed in 2011 with a listing on the New York Stock Exchange (“NYSE”) under the symbol “CJES.” Beginning in 2011 through mid-2015, the Company significantly invested in a number of strategic initiatives to strengthen, expand and diversify its business, including through service line diversification, vertical integration and technological advancement. In 2015, Old C&J combined with the completion and production services business (the “C&P Business”) of Nabors Industries Ltd. (“Nabors”) in a transformative transaction (the “Nabors Merger”) that significantly expanded the Company’s Completion Services and Well Construction and Intervention Services businesses and added the Well Support Services division to the Company’s service offering. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&J Energy Services Ltd., a Bermuda corporation (the “Predecessor” and together with its consolidated subsidiaries for periods prior to the Plan Effective Date, the “Predecessor Companies,” or the “Company”).

Due to the severe industry downturn, on July 20, 2016 (the "Petition Date"), the Predecessor Companies voluntarily filed petitions for reorganization seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"), with ancillary recognition proceedings filed in Canada and Bermuda (collectively, the "Chapter 11 Proceeding").

Upon emergence from the Chapter 11 Proceeding, the Company adopted fresh start accounting ("Fresh Start"). For more information regarding the Chapter 11 Proceeding and adoption of Fresh Start accounting, see Note 14 - Chapter 11 Proceeding and Emergence and Note 15 - Fresh Start Accounting .

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all of the accounts of C&J and its consolidated subsidiaries. All significant inter-company transactions and account balances have been eliminated upon consolidation.

As discussed above the Company adopted Fresh Start accounting in accordance with the provisions set forth in ASC 852 with respect to the accounting and financial statement disclosures. Accordingly, the Company's consolidated financial statements and notes prior to January 1, 2017, ("Fresh Start Reporting Date") are not comparable to the consolidated financial statements as of January 1, 2017 and periods subsequent to January 1, 2017.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Use of Estimates . The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are used in, but are not limited to, determining the following: allowance for doubtful accounts, valuation of long-lived assets including intangibles, goodwill, useful lives used in depreciation and amortization, inventory reserves, income taxes, share-based compensation and liabilities subject to compromise under the provisions of ASC 852 Fresh Start. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, or as additional information is obtained and as the Company’s operating environment changes.

Cash and Cash Equivalents. For purposes of the consolidated statement of cash flows, cash is defined as cash on-hand, demand deposits, and short-term investments with initial maturities of three months or less. The Company maintains its cash and cash equivalents in various financial institutions, which at times may exceed federally insured amounts. Management believes that this risk is not significant. Cash balances related to the Company's captive insurance subsidiaries, which totaled $19.7 million and $23.8 million at December 31, 2018 and December 31, 2017 , respectively, are included in cash and cash equivalents in the consolidated balance sheets, and the Company expects to use these cash balances to fund the operations of the captive insurance subsidiaries and to settle future anticipated claims.

Accounts Receivable and Allowance for Doubtful Accounts . Accounts receivable are generally stated at the amount billed to customers. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments at either the contractual due dates or in the future. At December 31, 2018 and 2017 , the allowance for doubtful accounts totaled $4.9 million and $4.3 million, respectively. Bad debt expense of $1.5 million, $4.4 million and $1.7 million was included in direct costs on the consolidated statements of operations for the years ended December 31, 2018 , 2017 and 2016 , respectively.

Inventories . Inventories are carried at the lower of cost or net realizable value. Inventories for the Company consist of raw materials, work-in-process and finished goods, including equipment parts, chemicals, proppants, supplies and materials for the Company's operations.

Consistent with FASB requirements under ASC 852 , an entity adopting Fresh Start may generally set new accounting policies for the successor independent of those followed by the predecessor. The entity emerging from bankruptcy typically is not required to demonstrate preferability for its new accounting policies, as the successor entity represents a new entity for financial reporting purposes.

During January 2017, the Company implemented a new computer system that provides financial reporting, inventory management and fixed asset management capabilities (the "new ERP system") to enhance functionality and to support the Company's existing and future operations. The new ERP system utilizes the weighted average cost flow method for determining inventory cost ("Weighted Average"), which replaced the first-in, first-out basis ("FIFO") method utilized by the Predecessor's legacy system. The Weighted Average and FIFO methods are both allowable under U.S. GAAP. As of the Fresh Start Reporting Date, the Company began utilizing the Weighted Average method for determining inventory cost. Inventory cost for the periods prior to the Fresh Start Reporting Date are presented under the FIFO method.

Inventories consisted of the following:



	As of December 31,
	2018			2017
	(In thousands)
Raw materials	$	2,333		$	5,302
Work-in-process	1,684			1,329
Finished goods	69,418			74,552
Total inventory	73,435			81,183
Inventory reserve	(10,802		)	(3,390		)
Inventory, net	$	62,633		$	77,793

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets, which range from three to 25 years. Depreciation expense was $216.1 million, $136.5 million, and $206.7 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. Major classifications of PP&E and their respective useful lives are as follows:



	Estimated Useful Lives	As of December 31,
	Estimated Useful Lives	2018			2017
		(In thousands)
Land	Indefinite	$	37,821		$	38,385
Building and leasehold improvements	5-25 years	71,738			79,985
Office furniture, fixtures and equipment	3-5 years	36,360			34,672
Machinery and equipment	3-10 years	793,079			577,922
Transportation equipment	3-10 years	57,937			23,352
		996,935			754,316
Less: accumulated depreciation		(320,134		)	(133,755		)
		676,801			620,561
Construction in progress		60,491			82,468
Property, plant and equipment, net		$	737,292		$	703,029

PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain PP&E may not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interest expense. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. The Company's asset groups consist of well support services, fracturing services, cased-hole wireline and pumping services, cementing services and coiled tubing services. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group's major classifications.

During the fourth quarter of 2018, in connection with the Company's annual test for goodwill impairment discussed below, the Company deemed the deficit of the Well Support Services reporting unit book value of equity over its concluded fair value of equity to be a triggering event requiring recoverability testing of the asset groups within this reporting unit. Based on the results of the recoverability test, undiscounted net cash flows were in excess of the carrying amount of the related assets, and no impairment was indicated.

In 2016, the Company concluded that the effects from the sharp fall in commodity prices during the second half of 2014 and throughout 2015 constituted a triggering event that resulted in a significant slowdown in activity across the Company’s customer base, which in turn increased competition and put pressure on pricing for its services throughout 2016. As a result of the triggering event that continued throughout 2015 and 2016, PP&E recoverability testing was performed during those two years. During 2016, the recoverability testing for the asset groups coiled tubing, cementing, and subsequently divested businesses including directional drilling, artificial lift applications and international coiled tubing yielded an estimated undiscounted net cash flow that was less than the carrying amount of the related assets. The estimated fair value for each respective asset group was compared to its carrying value, and impairment expense of $61.1 million was recognized during 2016 and allocated across each respective asset group's major classification. The impairment charge was primarily related to underutilized equipment. The fair value of these assets was based on the projected present value of future cash flows that these

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assets are expected to generate. No impairment charge related to the Company's PP&E was recorded for the years ended December 31, 2018 and 2017.

During the fourth quarter of 2018, the Company retired certain assets, primarily within the fracturing, coiled tubing and well support services asset groups, that were deemed to be obsolete with unfavorable economics for refurbishment based on prevailing customer preferences and current market conditions. The year ended December 31, 2018 includes a charge of $21.4 million related to these retirements and was included within (gain) loss on disposal of assets on the consolidated statements of operations. During 2017, the Company recorded a $31.5 million gain on disposal of assets, which was primarily related to the sale of assets associated with its Canadian rig services business and its divested equipment manufacturing business.

Judgment is used in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes and other external events may require more frequent assessments. During the fourth quarter of 2018, a significant decline in the Company's share price, which resulted in the Company's market capitalization dropping below its book value of equity, as well as an overall decrease in commodity prices were deemed triggering events that led to a test for goodwill impairment. See Note 3 - Goodwill and Other Intangible Assets for further discussion on impairment testing results .

Before employing quantitative impairment testing methodologies, the Company may first evaluate the likelihood of impairment by considering qualitative factors relevant to each reporting unit, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If the Company first utilizes a qualitative approach and determines that it is more likely than not that goodwill is impaired, quantitative testing methodologies are then applied. Otherwise, the Company concludes that no impairment has occurred. Quantitative impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. In connection with the Company's adoption of ASU No. 2017-04, Simplifying the Test for Goodwill Impairment on January 1, 2018, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the amount of goodwill allocated to the reporting unit.

Quantitative impairment testing involves the use of a blended income and market approach. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected revenue growth, fleet count, utilization, gross profit rates, sales, general and administrative ("SG&A") rates, working capital fluctuations, capital expenditures, discount rates, terminal growth rates, and price-to-earnings multiples. The Company’s market capitalization is also used to corroborate reporting unit valuations.

Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicate the carrying amount may not be recoverable. As of December 31, 2018 and 2017, the Company had no indefinite-lived intangible assets.

Definite-lived intangible assets are amortized over their estimated useful lives and are reviewed for impairment when a triggering event occurs. With the exception of the C&J trade name, these intangibles, along with PP&E, are reviewed for impairment when a triggering event indicates that the asset group may have a net book value in excess of recoverable value. In these cases, the Company performs a recoverability test on its PP&E and definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generated from the use of these assets to the carrying amount of the assets for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the assets, an impairment does not exist, and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the assets, the assets are not recoverable and the amount of impairment must be determined by fair valuing the assets. The C&J trade name is a corporate asset and is reviewed for impairment upon the occurrence of a triggering event by comparing the carrying amount of the corporate assets with the remaining cash flows available, after taking into consideration the lower level asset groups that benefit from the C&J trade name.

For further discussion of the application of this accounting policy regarding impairments, please see Note 3 -

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets .

Deferred Financing Costs . Costs incurred to obtain revolver based financing are capitalized and amortized over the term of the loan using the effective interest method. Costs incurred to obtain non-revolver based debt financing are presented on the balance sheet as a direct deduction from the carrying amount of the term debt, consistent with debt discounts, and accreted over the term of the loan using the effective interest method. These costs are classified within interest expense on the consolidated statements of operations and were $2.3 million , $0.6 million and $100.7 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. Accumulated amortization of deferred financing costs was $2.9 million and $0.6 million at December 31, 2018 and 2017 , respectively.

Revenue Recognition . The Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and its related updates as codified under ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for the year ended December 31, 2018 reflect the application of ASC 606 guidance while the reported results for the corresponding prior year period were prepared under the previous guidance of ASC No. 605, Revenue Recognition ("ASC 605"). After reviewing the Company's contracts and the revenue recognition guidance under ASC 606, there are no material differences between revenue recognition under ASC 605 and ASC 606. As a result, there is not a cumulative effect adjustment recorded to beginning retained earnings or recognition of any contract assets or liabilities upon adoption of ASC 606.

The adoption of ASC 606 represents a change in accounting principle that more closely aligns revenue recognition with the performance of the Company's services and provides financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized in a manner reflecting the transfer of goods or services to customers based on consideration a company expects to receive. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. To achieve this core principle, ASC 606 requires the Company to apply the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation. The five-step model requires management to exercise judgment when evaluating contracts and recognizing revenue.

Identify the Contract and Determine Transaction Price

The Company typically provides its services (i) under term pricing agreements; (ii) under contracts that include dedicated fleet or unit arrangements; (iii) on a spot market basis; and (iv) under term contracts that include “take-or-pay” provisions.

Under term pricing agreements, the Company and customer agree to set pricing for a specified period of time. The agreed-upon pricing is subject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties. These agreements typically do not feature provisions obligating either party to commit to a certain utilization level. Additionally, these agreements typically allow either party to terminate the agreement for its convenience without incurring a termination penalty.

Under dedicated fleets or unit arrangements, customers typically commit to targeted utilization levels based on a specified number of fracturing stages per calendar month or fulfilling the customer's requirements, in either instance at agreed-upon pricing. These agreements typically do not feature obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties. These contracts also typically allow for termination for either party's convenience with a brief notice period and may feature a termination penalty in the event the customer terminates the contract for its convenience.

Rates for services performed on a spot market basis are based on an agreed-upon spot market rate for each stage the Company fractures.

Under term contracts with “take-or-pay” provisions, the Company’s customers are typically obligated to pay on a monthly basis for a specified quantity of services, whether or not those services are actually utilized. To the extent customers use more than the specified contracted minimums, the Company will charge a pre-agreed amount for the provision of such additional services, which amounts are typically subject to periodic review. In addition, these contracts typically feature a termination penalty in the event the customer terminates the contract for its convenience.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

"Take-or-pay" provisions are considered stand ready performance obligations. The Company recognizes "take-or-pay" revenues using a time-based measure of progress, as the Company cannot reasonably estimate if and when the customer will require the use of the Company’s fleet to provide the fracturing services; likewise, the customer can benefit when a well needs fracturing services from the fleet which is standing by to provide such services.

Identify and Satisfy the Performance Obligations

The majority of the Company’s performance obligations are satisfied over time. The Company has determined this best represents the transfer of value from its services to the customer as performance by the Company helps to enhance a customer controlled asset (e.g., unplugging a well, enabling a well to produce oil or natural gas). Measurement of the satisfaction of the performance obligation is measured using the output method, which is typically evidenced by a field ticket. A field ticket includes items such as services performed, consumables used, and man hours incurred to complete the job for the customer. Each field ticket is used to invoice customers. Payment terms for invoices issued are in accordance with a master services agreement with each customer, which typically require payment within 30 days of the invoice issuance.

A portion of the Company’s contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved. Examples of variable consideration include the number of hours that will be incurred and the amount of consumables (such as chemicals and proppants) that will be used to complete a job.

In the course of providing services to its customers, the Company may use consumables; for example, in the Company’s fracturing business, chemicals and proppants are used in the fracturing service for the customer. ASC 606 requires that goods or services promised to a customer be identified separately when they are distinct within the contract. However, the consumables are used to complete the service for the customer and are not beneficial to the customer on their own. As such, the consumables are not a separate performance obligation, but instead are combined with the other services within the context of the contract and accounted for as a single performance obligation.

Remaining Performance Obligations

The Company invoices its customers for the services provided at contractual rates multiplied by the applicable unit of measurement, including volume of consumables used and hours incurred. In accordance with ASC 606, the Company has elected the “Right to Invoice” practical expedient for all contracts, which allows the Company to invoice its customers in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. With this election, the Company is not required to disclose information about the variable consideration related to its remaining performance obligations. For those contracts with a term of more than one year, the Company had approximately $25.0 million of unsatisfied performance obligations as of December 31, 2018, which will be recognized as services are performed over the remaining contractual terms.

Contract Balances

Accounts receivable as presented on the Company’s consolidated balance sheets represent amounts due from customers for services provided. Bad debt expense of $1.5 million , $4.4 million and $1.7 million was included as a component of direct costs on the consolidated statements of operations for the years ended December 31, 2018 , 2017 and 2016 , respectively.

The Company does not have any contracts in which it performs services for customers and payment for those services are contingent upon a future event (e.g., satisfaction of another performance obligation). As such, there are no contingent revenues or other contract assets recorded in the financial statements.

The Company does not have any significant contract costs to obtain or fulfill contracts with customers; as such, no amounts are recognized on the consolidated balance sheet.

The following is a description of the Company’s core service lines separated by reportable segments from which the Company generates its revenue. For additional detailed information regarding reportable segments, see Note 7 - Segment Information .

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Completion Services Segment

Fracturing Services Revenue. Through its fracturing service line, the Company provides fracturing services (i) under term pricing agreements; (ii) under contracts that include dedicated fleet arrangements; (iii) on a spot market basis; or (iv) under term contracts that include "take-or-pay" provisions. Revenue is typically recognized, and customers are invoiced upon the completion of each job, which can consist of one or more fracturing stages. Once a job has been completed, a field ticket is generated that includes charges for the services performed and the consumables (such as chemicals and proppants) used during the course of service. The field tickets may also include charges any additional equipment used on the job and other miscellaneous consumables.

Cased-hole Wireline & Pumping Services Revenue. Through its cased-hole wireline & pumping services business, the Company provides cased-hole wireline, pumping, wireline logging, perforating, well site make-up and pressure testing and other complementary services, typically on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates. Revenue is recognized based on a field ticket issued upon the completion of the job.

Other Completion Services Revenue. The Company generates revenue from its research and technology ("R&T") department, which is primarily engaged in the engineering and production of certain parts and components, such as perforating guns and addressable switches, which are used in the completion process. For R&T, the performance obligation is satisfied at a point in time.

The Company recognizes revenue at the point in time in which each order of parts and components are delivered to and accepted by the customer because the customer obtains control along with the risks and rewards of ownership of the products at such time. Once delivered, the Company has the right to invoice the customer.

Well Construction and Intervention Services Segment

Cementing Services Revenue. The Company provides cementing services on a spot market or project basis. Jobs for these services are typically short-term in nature and are generally completed in a few hours. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates or agreed-upon job pricing for a particular project. Revenue is recognized, and customers are invoiced upon the completion of each job based on a field ticket, which includes charges for the service performed and the consumables used during the course of service.

Coiled Tubing Services Revenue. The Company provides a range of coiled tubing services primarily used for fracturing plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue is recognized upon completion of each day’s work based upon a completed field ticket. The field ticket includes charges for the services performed and the consumables used during the course of service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates or pursuant to pricing agreements.

Well Support Services Segment

Rig Services Revenue. Through its rig service line, the Company provides workover and well servicing rigs that are primarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plug and abandonment operations. These services are provided on an hourly basis at prices that approximate spot market rates. Revenue is recognized, and a field ticket is generated upon the earliest of the completion of a job or at the end of each day. A rig services job can last anywhere from a few hours to multiple days depending on the type of work being performed. The field ticket includes the base hourly rate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate. The field ticket may also include charges for the mobilization and set-up of equipment.

Fluids Management Services Revenue. Through its fluids management service line, the Company primarily provides storage, transportation and disposal services for fluids used in the drilling, completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour, or per load basis, or on the basis of quantities sold or disposed. Revenue is recognized upon the completion of each job or load, or delivered product, based on a completed field ticket.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Special Well Site Services Revenue. Through its other special well site service line, the Company primarily provides fishing, contract labor and tool rental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis of rental days per month. Revenue is recognized based on a field ticket issued upon the completion of each job or on a monthly billing for rental services provided.

Disaggregation of Revenue

The following tables disaggregate revenue by the Company's reportable segments, core service lines and geography:



	Year Ended December 31, 2018
	Completion Services		WC&I		Well Support Services		Total
	(In thousands)
Product Service Line
Fracturing	$	1,002,664	$	—	$	—	$	1,002,664
Cased-hole Wireline & Pumping	420,708		—		—		420,708
Cementing	—		260,969		—		260,969
Coiled Tubing	—		114,617		—		114,617
Rig Services	—		—		209,708		209,708
Fluids Management	—		—		137,200		137,200
Other	30,205		81		45,937		76,223
	$	1,453,577	$	375,667	$	392,845	$	2,222,089
Geography
West Texas	$	591,697	$	209,537	$	100,843	$	902,077
South Texas / South East	435,037		49,374		35,321		519,732
Rockies / Bakken	173,055		21,969		35,588		230,612
California	22,052		—		186,823		208,875
Mid-Con	161,104		47,518		30,999		239,621
North East	63,356		47,269		2,581		113,206
Other	7,276		—		690		7,966
	$	1,453,577	$	375,667	$	392,845	$	2,222,089

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Year Ended December 31, 2017
	Completion Services		WC&I		Well Support Services		Total
	(In thousands)
Product Service Line
Fracturing	$	777,147	$	—	$	—	$	777,147
Cased-hole Wireline & Pumping	315,999		—		—		315,999
Cementing	—		69,447		—		69,447
Coiled Tubing	—		78,138		—		78,138
Rig Services	—		—		218,819		218,819
Fluids Management	—		—		122,949		122,949
Other	13,868		1,912		40,460		56,240
	$	1,107,014	$	149,497	$	382,228	$	1,638,739
Geography
West Texas	$	461,533	$	60,302	$	85,931	$	607,766
South Texas / South East	284,760		42,550		40,139		367,449
Rockies / Bakken	182,488		1,461		37,789		221,738
California	15,830		—		148,406		164,236
Mid-Con	83,253		14,647		27,276		125,176
North East	74,800		30,537		5,919		111,256
Other	4,350		—		36,768		41,118
	$	1,107,014	$	149,497	$	382,228	$	1,638,739



	Year Ended December 31, 2016
	Completion Services		WC&I		Well Support Services		Other Services		Total
	(In thousands)
Product Service Line
Fracturing	$	353,929	$	—	$	—	$	—	$	353,929
Cased-hole Wireline & Pumping	159,317		—		—		—		159,317
Cementing	—		27,259		—		—		27,259
Coiled Tubing	—		55,829		—		—		55,829
Rig Services	—		—		197,003		—		197,003
Fluids Management	—		—		132,486		—		132,486
Other	2,693		760		34,279		7,587		45,319
	$	515,939	$	83,848	$	363,768	$	7,587	$	971,142
Geography
West Texas	$	242,539	$	20,050	$	77,393	$	882	$	340,864
South Texas / South East	67,167		35,439		56,457		91		159,154
Rockies / Bakken	94,123		—		37,030		—		131,153
California	7,523		—		118,973		—		126,496
Mid-Con	52,870		7,517		27,466		6,614		94,467
North East	50,149		20,842		10,520		—		81,511
Other	1,568		—		35,929		—		37,497
	$	515,939	$	83,848	$	363,768	$	7,587	$	971,142

Share-Based Compensation . The Company’s share-based compensation plan provides the ability to grant equity awards to the Company’s employees, consultants and non-employee directors. As of December 31, 2018 , only nonqualified stock options, restricted shares, performance stock and restricted share units had been granted under such plans. The fair value of restricted share grants and restricted share units is based on the closing price of C&J’s common stock on the grant date. The Company values option grants based on the grant date fair value using the Black-Scholes option-pricing model, and the

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company values performance awards with market conditions based on the grant date fair value using a Monte Carlo simulation, both of which require the use of subjective assumptions. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for the entire award and makes estimates of employee terminations and forfeiture rates which impacts the amount of compensation expense that is recorded over the requisite service period. Further information regarding the Company’s share-based compensation arrangements and the related accounting treatment can be found in Note 5 - Stockholders' Equity .

Fair Value of Financial Instruments. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable. The recorded values of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values given the short-term nature of these instruments.

Equity Method Investments . The Company has investments in joint ventures which are accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over operating and financial policies of the joint venture. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings and losses of these investments. The Company eliminates all significant intercompany transactions, including the intercompany portion of transactions with equity method investees, from the consolidated financial results.

The carrying value of the Company's equity method investments at December 31, 2018 and 2017 . was $1.7 million and $2.8 million, respectively, and is included in other noncurrent assets on the consolidated balance sheets. The Company’s share of the net income (loss) from the unconsolidated affiliates was approximately ($1.1) million, ($0.1) million and ($5.7) million the years ended December 31, 2018 , 2017 and 2016 , respectively, and is included in other income (expense), net, on the consolidated statements of operations.

Income Taxes . The Company is subject to income and other similar taxes in all areas in which they operate. When recording income tax expense, certain estimates are required because: (a) income tax returns are generally filed months after the close of the Company's annual accounting period; (b) tax returns are subject to audit by taxing authorities and audits can often take years to complete and settle; and (c) future events often impact the timing of when the Company recognizes income tax expenses and benefits.

The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to cumulative losses in recent years, projected future taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that a portion or all of the deferred tax assets will not be realized.

The Company has federal, state and international net operating losses ("NOLs") carried forward from tax years ending before January 1, 2018 that will expire in the years 2020 through 2038. Due to U.S. tax reform, any U.S. federal income tax losses incurred for tax years beginning after December 31, 2017 can be carried forward indefinitely with no carry back available. In addition, the taxable losses generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income generated in tax years beginning after December 31, 2018. After considering the scheduled reversal of deferred tax liabilities, projected future taxable income, the potential limitation on use of NOLs under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code") and tax planning strategies, the Company established a valuation allowance due to the uncertainty regarding the ultimate realization of the deferred tax assets associated with its NOL carryforwards.

As a result of the Chapter 11 Proceeding, on the Plan Effective Date, the Company believes it experienced an ownership change for purposes of Section 382 of the Code because of its Restructuring Plan and that consequently its pre-change NOLs are subject to an annual limitation (See Note 14 - Chapter 11 Proceeding and Emergence for additional information, including definitions of capitalized defined terms, about the Chapter 11 Proceeding and emergence from the Chapter 11 Proceeding). The ownership change and resulting annual limitation on use of NOLs are not expected to result in

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the expiration of the Company's NOL carryforwards if it is able to generate sufficient future taxable income within the carryforward periods. However, the limitation on the amount of NOLs available to offset taxable income in a specific year may result in the payment of income taxes before all NOLs have been utilized. Additionally, a subsequent ownership change may result in further limitation on the ability to utilize existing NOLs and other tax attributes, which could cause the Company's pre-change NOL carryforwards to expire unused.

The Company recognizes the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. Previously recognized uncertain tax positions are reversed in the first period in which it is more-likely-than-not that the tax position would be sustained upon examination. Income tax related interest and penalties, if applicable, are recorded as a component of the provision for income tax expense. For the year ended December 31, 2018 , the Company has an unrecognized income tax benefit of $6.0 million related to an increase in the estimate of the reserve for unrecognized tax benefits relating to uncertain tax positions, which is netted against net operating loss carry-forwards. The unrecognized tax benefit, or UTB, is related to a deduction for certain fees that were paid using shares of C&J common stock. These fees were associated with the January 7, 2017 plan of reorganization. The recorded unrecognized tax benefit is equal to management's estimate of the portion of the tax benefit that is less than 50% likely to be realized upon ultimate settlement with a taxing authority.

Earnings Per Share . Basic earnings (loss) per share is based on the weighted average number of common shares (“common shares”) outstanding during the applicable period and excludes shares subject to outstanding stock options, warrants and shares of restricted stock. Diluted earnings per share is computed based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to outstanding stock options, warrants and restricted stock.

The following is a reconciliation of the components of the basic and diluted earnings (loss) per share calculations for the applicable periods:



	Successor					Predecessor
	Years Ended December 31,
	2018			2017		2016
	(In thousands, except per share amounts)
Numerator:
Net income (loss) attributed to common stockholders	$	(130,005	)	$	22,457	$	(944,289	)
Denominator:
Weighted average common shares outstanding - basic	66,897			61,208		118,305
Effect of potentially dilutive securities:
Stock options	—			—		—
Restricted stock	—			4		—
Warrants	—			248		—
Weighted average common shares outstanding - diluted	66,897			61,460		118,305
Net income (loss) per common share:
Basic	$	(1.94	)	$	0.37	$	(7.98	)
Diluted	$	(1.94	)	$	0.37	$	(7.98	)

A summary of securities excluded from the computation of basic and diluted earnings per share is presented below for the applicable periods:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Successor		Predecessor
	Years Ended December 31,
	2018	2017	2016
	(In thousands)
Basic earnings per share:
Unvested restricted stock	1,144	537	1,529
Diluted earnings per share:
Anti-dilutive stock options	351	235	4,808
Anti-dilutive warrants	2,959	—	—
Anti-dilutive restricted stock	1,219	524	1,490
Potentially dilutive securities excluded as anti-dilutive	4,529	759	6,298

On January 6, 2017, the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan, all of the existing shares of the Predecessor common equity that were used in the above earnings per share calculations of the Predecessor were canceled as of the Plan Effective Date.

Recent Accounting Pronouncements .

The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted. The Company adopted this new accounting standard on January 1, 2019 using the modified retrospective approach. Under this transition method, leases existing at, or entered into after the adoption date are required to be recognized and measured. The Company has elected to use the effective date as its date of initial application, consequently prior period amounts have not been adjusted and continue to be reflected in accordance with historical accounting. The Company elected the package of practical expedients which permits them not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has also elected the practical expedient to combine the lease and non-lease components of a contract for all of its contracts, as well as the short-term lease recognition exemption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory, when the transfer occurs. The ASU 2016-16 is effective for the interim and annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, and early application is permitted. The Company adopted this new accounting standard on January 1, 2018, and upon adoption recognized a cumulative effect adjustment as a reduction to retained earnings of $13.2 million.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which establishes a one-step process for testing goodwill for impairment. The ASU 2017-04 is effective for the interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company early adopted this new accounting standard on January 1, 2018, and there was no impact on its consolidated financial statements upon adoption. As part of C&J's annual impairment assessment of goodwill during the fourth quarter of 2018, the Company applied this new accounting standard and recognized an impairment charge of $146.0 million for the year ended December 31, 2018.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02") , which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for the interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ("ASU 2018-05"), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the "Tax Act") pursuant to Staff Accounting Bulletin No. 18, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Company adopted this new accounting standard January 1, 2018, and there was no impact on its consolidated financial statements upon adoption.

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. The ASU 2018-07 is effective for the interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company adopted this new accounting standard January 1, 2019, and there was no impact on its consolidated financial statements upon adoption.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures, such as additional disclosures related to the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for the interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-50): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for the interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Debt

Credit Facility

The Company and certain of its subsidiaries (the “Borrowers”) entered into an asset-based revolving credit agreement with, among others, JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”), on May 1, 2018 (the “Credit Facility”). This facility replaced the Prior Credit Facility discussed below.

The Credit Facility also provides for the issuance of letters of credit, which would further reduce borrowing capacity thereunder. The maturity date of the Credit Facility is May 1, 2023.

If at any time the amount of loans and other extensions of credit outstanding under the Credit Facility exceed the borrowing base, the Borrowers may be required, among other things, to prepay outstanding loans immediately.

At the Borrowers’ election, interest on borrowings under the Credit Facility will be determined by reference to either LIBOR plus an applicable margin of between 1.5% and 2.0% or an “alternate base rate” plus an applicable margin of between 0.5% and 1.0%, in each case based on the Company’s total leverage ratio. Interest will be payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest period applicable to LIBOR-based loans and, in the case of an interest period longer than three months, quarterly, upon any prepayment and at final maturity. The Borrowers will also be required to pay a fee on the unused portion of the Credit Facility equal to (i) 0.5% per annum if average utilization is less than or equal to 25% or (ii) 0.375% per annum if average utilization is greater than 25%, in each case payable quarterly in arrears to the Agent.

The Credit Facility also contains a financial covenant which requires the Company to maintain a monthly minimum fixed charge coverage ratio of 1.0:1.0 upon the occurrence of an event of default or on any date upon which the excess availability is less than the greater of (x) 12.5% of the Loan Cap and (y) $30.0 million. The fixed charge coverage ratio is generally defined in the Credit Facility as the ratio of (i) EBITDA minus certain capital expenditures and cash taxes paid to (ii) the sum of cash interest expenses, scheduled principal payments on borrowed money and certain distributions.

As of December 31, 2018, the Company was in compliance with all financial covenants of the Credit Facility.

Prior Credit Facility

On January 6, 2017, in connection with the emergence from bankruptcy, the Company entered into a revolving credit and security agreement with PNC Bank, National Association, as administrative agent, which was subsequently amended and restated on May 4, 2017 (the “Prior Credit Facility”). The Prior Credit Facility was canceled and discharged on May 1, 2018.

The Prior Credit Facility allowed the Company and certain of its subsidiaries (the “Prior Borrowers”), to incur revolving loans in an aggregate amount up to the lesser of $200.0 million and a borrowing base, which borrowing base was based upon the value of the Prior Borrowers’ accounts receivable and inventory, subject to eligibility criteria and customary reserves which may have been modified in the Agent’s permitted discretion. The Prior Credit Facility also provided for the issuance of letters of credit, which would further reduce borrowing capacity thereunder. The maturity date of the Prior Credit Facility was May 4, 2022.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If at any time the amount of loans and other extensions of credit outstanding under the Prior Credit Facility exceeded the borrowing base, the Prior Borrowers may have been required, among other things, to prepay outstanding loans immediately.

The Prior Borrowers’ obligations under the Prior Credit Facility were secured by liens on a substantial portion of the Prior Borrowers’ personal property, subject to certain exclusions and limitations. Upon the occurrence of certain events, additional collateral, including a portion of the Prior Borrowers’ real properties, may also have been required to be pledged. Each of the Prior Borrowers was jointly and severally liable for the obligations of the other Prior Borrowers under the Prior Credit Facility.

At the Prior Borrowers’ election, interest on borrowings under the Prior Credit Facility would have been determined by reference to either LIBOR plus an applicable margin of 2.0% or an “alternate base rate” plus an applicable margin of 1.0%. Beginning after the fiscal month ending on or about September 30, 2017, these margins were subject to a monthly step-up of 0.25% in the event that average excess availability under the Prior Credit Facility was less than 37.5% of the total commitment, and a monthly step-down of 0.25% in the event that average excess availability under the Prior Credit Facility was equal to or greater than 62.5% of the total commitment. Interest was payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest period applicable to LIBOR-based loans. The Prior Borrowers were also required to pay a fee on the unused portion of the Prior Credit Facility equal to (i) 0.75% in the event that utilization was less than 25% of the total commitment, (ii) 0.50% in the event utilization was equal to or greater than 25% of the total commitment but less than 50% of the total commitment and (iii) 0.375% in the event that utilization was equal to or greater than 50% of the total commitment.

The Prior Credit Facility contained covenants that limited the Prior Borrowers’ ability to incur additional indebtedness, grant liens, make loans or investments, make distributions, merge into or consolidate with other persons, make capital expenditures or engage in certain asset dispositions including a sale of all or substantially all of the Company’s assets.

The Prior Credit Facility also contained a financial covenant that required the Company to maintain a monthly minimum fixed charge coverage ratio of 1.0:1.0 if, as of any month-end, liquidity was less than $40.0 million.

The fixed charge coverage ratio was generally defined in the Prior Credit Facility as the ratio of (i) EBITDA minus certain capital expenditures and cash taxes paid to (ii) the sum of cash interest expenses, scheduled principal payments on borrowed money and certain distributions.

In connection with the cancellation and discharge of the Prior Credit Facility, the Company accelerated the amortization of $1.5 million in deferred financing costs during the second quarter of 2018.

Capital Lease Obligations

In October 2016, the Company entered into amended lease agreements related to the Company’s corporate headquarters and its R&T facility, both originally entered into during 2013 and accounted for as capital leases. The Company determined that both amended lease agreements qualified as a new operating lease under ASC 840 - Leases , which resulted in accounting for the amended leases as a sale-leaseback pursuant to the requirements of ASC 840. The conversion from capital lease to operating lease accounting treatment resulted in the deferral of $6.3 million of gain. As a result of the adoption of Fresh Start Accounting, the Company accelerated the recognition of the deferred gain balance through the Fresh Start adjustments. As of December 31, 2018 , the Company had no capital lease obligations.

Interest Expense

For the years ended December 31, 2018 , 2017 and 2016, interest expense consisted of the following:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Successor						Predecessor
	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Credit Facility	$	2,128		$	1,779		$	—
DIP Facility	—			—			2,087
Original Credit Agreement	—			—			53,596
Capital leases	—			471			1,206
Accretion of original issue discount	—			—			4,193
Amortization of deferred financing costs	2,324			608			4,590
Original issue discount accelerated amortization	—			—			48,221
Deferred financing costs accelerated amortization	—			—			43,720
Interest income and other	(553		)	(1,331		)	(148		)
Interest expense, net	$	3,899		$	1,527		$	157,465

As of June 30, 2016, based on the negotiations between the Company and the lenders, it became evident that the restructuring of the Company's capital structure would not include a restructuring of the Company's Revolving Credit Facility, the Five-Year Term Loans and the Seven-Year Term Loans, and these debt obligations, as demand obligations, would not be paid in the ordinary course of business over the term of these loans. As a result, during the second quarter of 2016, the Company accelerated the amortization of the associated original issue discount and deferred financing costs, fully amortizing these amounts as of June 30, 2016. In addition, the Company did not accrue interest that it believed was not probable of being treated as an allowed claim in the Chapter 11 Proceeding. For the year ended December 31, 2016, the Company did not accrue interest totaling $60.5 million under the Credit Agreement subsequent to the Petition Date.

Note 3 - Goodwill and Other Intangible Assets

On November 30, 2017, the Company acquired all of the outstanding equity interests of O-Tex Holdings, Inc., and its operating subsidiaries ("O-Tex"). See Note 10 - Acquisitions for further discussion on the O-Tex transaction. As of December 31, 2018, all off the goodwill recorded on the Company's consolidated balance sheet was related to the O-Tex transaction and was recorded within the WC&I reporting unit.

2018

The Company early adopted ASU No. 2017-04, which establishes a one-step process for testing goodwill for impairment. During December 2018, and prior to the completion of the Company's annual test for goodwill impairment as of October 31, 2018, significant volatility in the equity markets and overall decrease in commodity prices led to a decline in the Company's market capitalization. This decline in market capitalization, when compared to C&J's book value of equity, was significant enough to be considered a triggering event, leading to a test for goodwill impairment as of December 31, 2018. The Company chose to bypass a qualitative approach and instead opted to employ the detailed Step 1 impairment testing methodologies discussed below.

Income approach

The income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the WC&I reporting unit, the future cash flows were projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows took into account known market conditions as of December 31, 2018, and management’s anticipated business outlook.

A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5%.

The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 16.0%. These assumptions were derived from unobservable inputs and reflect management’s judgments and assumptions.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Market approach

The market approach impairment testing methodology is based upon the guideline public company method and the guideline transaction method. The application of the guideline public company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparable competitor data, price-to-earnings multiples were derived, and a range of price-to-earnings multiples was determined for the WC&I reporting unit. The selected market multiple for the guideline public company method was 4.25x for the WC&I reporting unit. The application of the guideline transaction method was based upon valuation multiples derived from actual transactions for comparable companies. Based on this, valuation multiples are derived from historical data of selected transactions, then evaluated and adjusted, if necessary, based on the strengths and weaknesses of the subject company relative to the derived market data. The selected market multiple for the guideline transaction method was 4.0x for the WC&I reporting unit.

The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce the estimated fair value of the reporting unit below its carrying value. Earnings estimates were derived from unobservable inputs that require significant estimates, judgments and assumptions as described in the income approach.

The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the market approach. The concluded fair value for the WC&I reporting unit consisted of a weighted average, with a 60.0% weight under the income approach and a 40.0% weight under the market approach. The concluded fair values for the Completion Services and Well Support Services reporting units were each derived using the market approach. As a way to validate the estimated reporting units' fair values, the total market capitalization of the Company was compared to the total estimated fair value of all reporting units, and an implied control premium was derived. Market data in support of the implied control premium was used in this reconciliation to corroborate the estimated reporting unit fair values.

The results of the Step 1 impairment testing for the WC&I reporting unit concluded that the fair value of the reporting unit was below its carrying value by an amount slightly in excess of the goodwill balance. As a result, the Company recognized impairment expense of $146.0 million during 2018, representing the entire balance of goodwill.

2016

During the first quarter of 2016, utilization and commodity price levels continued to fall towards unprecedented levels and the resulting negative impact on the Company’s results of operations, coupled with the sustained decrease in the Company’s stock price, were deemed triggering events that led to an interim period test for goodwill impairment. The Company chose to bypass a qualitative approach and instead opted to employ the detailed Step 1 impairment testing methodologies discussed below.

Income approach

The income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the Completion Services and Well Support Services reporting units, the future cash flows were projected based on estimates of projected revenue growth, fleet and rig count, utilization, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. For the Other Services reporting unit, the future cash flows were projected based primarily on estimates of future demand for manufactured and refurbished equipment as well as parts and service, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. Forecasted cash flows for the three reporting units took into account known market conditions as of March 31, 2016, and management’s anticipated business outlook, both of which had been impacted by the sustained decline in commodity prices.

A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5% for all three reporting units, including an estimated inflation factor.

The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 14.5% for Completion Services, 14.0% for Well Support Services, and 16.0% for Other Services reporting units. These assumptions were derived from unobservable inputs and reflect management’s judgments and assumptions.

Market approach

The market approach impairment testing methodology is based upon the guideline public company method. The application of the guideline public company method was based upon selected public companies operating within the same

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

industry as the Company. Based on this set of comparable competitor data, price-to-earnings multiples were derived, and a range of price-to-earnings multiples was determined for each reporting unit. Selected market multiples were 10.6x for Completion Services, 10.5x for Well Support Services and 11.0x for Other Services reporting units.

The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce the estimated fair value of any of the three reporting units below their respective carrying values. Earnings estimates were derived from unobservable inputs that require significant estimates, judgments and assumptions as described in the income approach.

The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the market approach. The concluded fair value for the Completion Services and Well Support Services reporting units consisted of a weighted average, with an 80.0% weight under the income approach and a 20.0% weight under the market approach. The concluded fair value for the Other Services reporting unit consisted of a weighted average with a 50.0% weight under the income approach and a 50.0% weight under the market approach.

The results of the Step 1 impairment testing indicated potential impairment in the Well Support Services reporting unit. The goodwill associated with both the Completion Services and Other Services reporting units was completely impaired during the third quarter of 2015. As a way to validate the estimated reporting unit fair values, the total market capitalization of the Company was compared to the total estimated fair value of all reporting units, and an implied control premium was derived. Market data in support of the implied control premium was used in this reconciliation to corroborate the estimated reporting unit fair values.

Step 2 of the goodwill impairment testing for the Well Support Services reporting units was performed during the first quarter of 2016, and the results concluded that there was no value remaining to be allocated to the goodwill associated with this reporting unit. As a result, the Company recognized impairment expense of $314.3 million during 2016.

As of December 31, 2018, there was no goodwill remaining across the Company's three reporting units. The changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 are as follows:



	WC&I
	(In thousands)
As of January 1, 2017	$	—
O-Tex acquisition	147,515
As of December 31, 2017	$	147,515
Purchase price adjustment	(1,500		)
Impairment expense	(146,015		)
As of December 31, 2018	$	—

Indefinite-Lived Intangible Assets

As of December 31, 2016, the Company had approximately $6.0 million of intangible assets with indefinite useful lives, which were subject to annual impairment tests or more frequently if events or circumstances indicate the carrying amount may not be recoverable.

The Company’s intangible assets associated with intellectual property, research and development (“IPR&D”) consisted of technology that was still in the testing phase; however, given the continued market downturn management made the decision to postpone these projects. Based on the Company's evaluation, it was determined that the IPR&D carry value of $6.0 million was impaired and written down to zero as of December 31, 2016.

As of December 31, 2018 , the balance of indefinite-lived intangible assets was zero.

Definite-Lived Intangible Assets

The Company reviews definite-lived intangible assets, along with PP&E, for impairment when a triggering event indicates that the asset may have a net book value in excess of recoverable value.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2018, in connection with the Company's test for goodwill, the Company deemed the deficit of the Well Support Services reporting unit's book value of equity over its concluded fair value of equity to be a triggering event that provided indicators that its definite-lived intangible assets may be impaired for the asset groups within the reporting unit. Recoverability testing was performed for the well support services asset group and yielded an estimated undiscounted net cash flow that was in excess of the carrying amount of the related assets, and no impairment was indicated.

During 2016, management determined the sustained low commodity price levels coupled with the sustained decrease in the Company’s share price were deemed triggering events that provided indicators that its definite-lived intangible assets may be impaired. The Company performed a recoverability test on all of its definite-lived intangible assets and PP&E by comparing the estimated future net undiscounted cash flows expected to be generated from the use of these assets to the carrying amounts of the assets for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the assets, an impairment does not exist, and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the assets, the assets are not recoverable, and the amount of impairment must be determined by fair valuing the assets.

Recoverability testing through June 30, 2016 resulted in the determination that certain intangible assets associated with the Company’s wireline and artificial lift lines of business were not recoverable. The fair value of the wireline and artificial lift assets was determined to be approximately $38.2 million and zero, respectively, resulting in impairment expense of $50.4 million and $4.6 million, respectively. For the year ended December 31, 2016, the Company recorded $55.0 million of impairment expense, as the intangible assets assessed were determined not to be recoverable.

The changes in the carrying amounts of other intangible assets for the year ended December 31, 2018 are as follows:



	Amortization Period	December 31, 2017			Amortization Expense			December 31, 2018
		(In thousands)
Customer relationships	8-15 years	$	58,100		$	—		$	58,100
Trade name	10-15 years	68,300			—			68,300
Non-compete	4-5 years	1,600			—			1,600
		128,000			—			128,000
Less: accumulated amortization		(4,163		)	(8,765		)	(12,928		)
Intangible assets, net		$	123,837		$	(8,765	)	$	115,072

Amortization expense for the years ended December 31, 2018 , 2017 and 2016 totaled $8.8 million, $4.2 million and $10.8 million, respectively.

Estimated amortization expense for each of the next five years and thereafter is as follows:



Years Ending December 31,	(In thousands)
2019	$	8,747
2020	8,747
2021	8,747
2022	8,720
2023	8,427
Thereafter	71,684
	$	115,072

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act ("U.S. Tax Reform") was enacted by the U.S. federal government. The legislation significantly changed U.S. income tax law, by among other things, lowering the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, implementing a territorial tax system and imposing a one-time toll charge on deemed repatriated earnings of foreign subsidiaries. In addition, there are many new provisions, including changes to expensing of qualified tangible property, the deductions for executive compensation and interest expense, a global intangible low-tax income provision, the base erosion anti-abuse tax, and a deduction for foreign-derived intangible income. The Company's consolidated financial statements for the year ended December 31, 2017 were impacted by the corporate income tax rate reduction going from 35% to 21%. This rate reduction required the revaluation of the Company's deferred tax assets and liabilities as of the U.S. Tax Reform enactment date. The revaluation reflects an assumption that the new federal corporate income tax rate will remain in place for the years in which temporary differences are expected to reverse. The Company recorded a reduction to the provisional tax benefit for the impact of the U.S. Tax Reform of approximately $160.0 million, with a corresponding reduction in the recorded valuation allowance of approximately $162.3 million. The provisional tax benefit is primarily comprised of the remeasurement of U.S. federal deferred tax assets and liabilities resulting from the permanent reduction of the statutory corporate tax rate to 21% from 35%, after taking into account any mandatory one-time tax on the accumulated earnings of its foreign subsidiaries. The amount of this one-time tax was not material. In 2018, C&J completed its determination of the accounting implications of U.S. Tax Reform and determined there were no additional material adjustments required.

The provision for income taxes consisted of the following:



	Successor						Predecessor
	Years Ended December 31,						On January 1,			Year Ended December 31,
	2018			2017			2017			2016
	(In thousands)						(In thousands)
Current provision:
Federal	$	(54	)	$	(8,475	)	$	—		$	2,047
State	626			(162		)	—			(1,588		)
Foreign	—			121			—			64
Total current provision	572			(8,516		)	—			523
Deferred (benefit) provision:
Federal	(2,986		)	(28,950		)	(4,613		)	(122,302		)
State	—			(2,294		)	—			(8,864		)
Foreign	—			—			—			1,633
Total deferred provision	(2,986		)	(31,244		)	(4,613		)	(129,533		)
Provision for income taxes	$	(2,414	)	$	(39,760	)	$	(4,613	)	$	(129,010	)

The following table reconciles the statutory tax rates to the Company’s effective tax rate:



	Successor				Predecessor
	Years Ended December 31,
	2018		2017		2016
Federal statutory rate	21.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	0.2	%	8.0	%	0.3	%
Effect of foreign losses	—	%	9.8	%	(2.0	)%
Impairment	(22.7	)%	—	%	(8.8	)%
Changes in uncertain tax positions	—	%	37.7	%	(0.6	)%
Effects of the plan of reorganization	—	%	1,114.9	%	(1.3	)%
Valuation allowance	5.0	%	(959.3	)%	(10.9	)%
Other	(1.7	)%	(16.3	)%	0.3	%
Effective income tax rate	1.8	%	229.8	%	12.0	%

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s deferred tax assets and liabilities consisted of the following:



	As of December 31,
	2018			2017
	(In thousands)
Deferred tax assets:
Accrued liabilities	$	5,464		$	2,100
Allowance for doubtful accounts	1,046			1,791
Stock-based compensation	263			2,570
Inventory reserve	2,672			1,883
Net operating losses	301,992			276,239
163j interest limitation	25,478			41,342
Amortization of goodwill and intangible assets	2,845			4,101
Other	2,991			4,379
Total deferred tax assets	342,751			334,405
Deferred tax liabilities:
Prepaid assets	(4,160		)	(4,438		)
Depreciation on property, plant and equipment	(79,996		)	(37,784		)
Other	(468		)	(643		)
Total deferred tax liabilities	(84,624		)	(42,865		)
Valuation allowances	(258,664		)	(295,457		)
Net deferred tax liability	$	(537	)	$	(3,917	)

The Company has Federal NOLs of $1.3 billion of which approximately $1.1 billion of U.S. federal net operating loss carryforwards (“NOLs”) which, if not utilized, will begin to expire in the year 2035. The Company also generated a U.S. federal NOL carryforward of $209.9 million which can be carried forward indefinitely. The Company has state NOLs of approximately $609.4 million which, if not utilized, will expire in various years between 2020 and 2038. Additionally, the Company has approximately $21.1 million of NOLs in other jurisdictions which, if not utilized, will expire in various years between 2020 and 2038. As of December 31, 2018 , the Company has recorded a net deferred tax asset of approximately $302.0 million relating to NOLs, and an offsetting valuation allowance has been provided for these NOLs due to uncertainty regarding the ultimate realization of the deferred tax assets associated with the NOL carryforwards prior to expiration. Additionally, the Company has foreign operating loss carryforwards of approximately $920.6 million for which the realization of a tax benefit is considered remote. Due to the remote likelihood of utilizing these foreign NOLs, neither the deferred tax asset nor the offsetting valuation allowance has been recorded, and neither is presented in the table above.

The Company's ability to utilize its U.S. NOL carryforwards to offset future taxable income and to reduce U.S. federal income tax liability is subject to certain requirements and restrictions. In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. An ownership change generally occurs if one or more shareholders (or groups of shareholders) who are each deemed to own at least 5% of the Company's stock have aggregate increases in their ownership of such stock of more than 50 percentage points over such stockholders’ lowest ownership percentage during the testing period (generally a rolling three year period). The Company believes it experienced an ownership change in January 2017 as a result of the implementation of the Restructuring Plan. As a result, the Company's pre-change NOLs are subject to limitation under Section 382 of the Code. Such limitation may cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitation were not in effect. The Company does not believe that the ownership change created a restriction, which, by itself, could cause its pre-change NOLs to expire unused. As of December 31, 2018, management’s assessment that a full valuation allowance is appropriate due to uncertainty about ultimate realization of the deferred tax assets was determined before consideration of a Section 382 limitation. Similar rules and limitations may apply for state income tax purposes. The Company remains subject to ongoing testing for future ownership changes based on shareholder ownership that may create a more restrictive Section 382 limitation on the NOLs in subsequent reporting periods.

The Company’s U.S. federal income tax returns for the tax years 2015 through 2017 remain open to examination by the Internal Revenue Service under the applicable U.S. federal statute of limitations provisions. The various states in which the Company is subject to income tax are generally open to examination for the tax years after 2014.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of unrecognized tax benefit balances is as follows:



	Years Ended December 31,
	2018		2017
	(In thousands)
Balance at beginning of year	$	—	$	6,525
Additions based on tax positions related to the current year	6,030		—
Reductions for tax positions of prior years	—		(6,525		)
Balance at end of year	$	6,030	$	—

As of December 31, 2018, the Company had an unrecognized tax benefit balance of $6.0 million related to a deduction for certain fees that were paid using shares of C&J common stock. These fees were associated with the January 7, 2017 plan of reorganization. The recorded unrecognized tax benefit is equal to management's estimate of the portion of the tax benefit that is less than 50% likely to be realized upon ultimate settlement with a taxing authority. The unrecognized tax benefit is reflected in C&J's consolidated financial statements as a reduction to its net operating loss carryover and associated deferred tax asset before the offsetting impact from the valuation allowance. Given the Company's existing net deferred tax asset and valuation allowance, the uncertain tax benefit had not impact to C&J's consolidated financial statements.

The Company classifies interest and penalties within the provision for income taxes. The Company had no interest and penalties in the provision for income taxes for each of the years ended December 31, 2018 , 2017 and 2016 .

Note 5 - Stockholders' Equity

Stock Repurchase

On July 31, 2018, C&J’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to $150.0 million of the Company’s common stock over a twelve month period starting August 1, 2018. Repurchases may commence or be suspended at any time without notice. The program does not obligate the Company to purchase a specified number of shares of common stock during the period or at all and may be modified or suspended at any time at the Company’s discretion.

During 2018, C&J executed $40.4 million of total stock repurchases at an average price of $16.55 per share, representing a total of approximately 2.4 million shares of the Company's common stock.

Share-Based Compensation

Pursuant to the Restructuring Plan, the Company adopted the C&J Energy Services, Inc. 2017 Management Incentive Plan (as amended from time to time, the “MIP”) as of the Plan Effective Date.

The MIP provides for the grant of share-based awards to the Company’s employees, consultants and non-employee directors. The following types of awards are available for issuance under the MIP: incentive stock options and nonqualified stock options, share appreciation rights, restricted shares, restricted share units, dividend equivalent rights, performance stock, share awards, other share-based awards and substitute awards. As of December 31, 2018 , only nonqualified stock options, restricted shares, performance stock and restricted share units have been awarded under the MIP.

A total of approximately 8.0 million shares of common stock were originally authorized and approved for issuance under the MIP. The number of shares of common stock available for issuance under the MIP is subject to adjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporate event or transaction. The number of shares of common stock available for issuance may also increase due to the termination of an award granted under the MIP or by expiration, forfeiture, cancellation or otherwise without the issuance of the common stock.

Restricted Share Units

Restricted Share Units ("RSU's") represent the right to receive shares of common stock or the cash value of one share of common stock in the future at the discretion of the Company's compensation committee. The value of the Company’s

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outstanding RSU's is based on the closing price of the Company’s common stock on the NYSE on the date of grant. RSU's granted that are intended to be settled in cash ("Cash RSU's") are classified as liabilities and are remeasured at each reporting date until settlement. The Company does not have any outstanding Cash RSU's.

For the year ended December 31, 2018 , the Company granted approximately 0.9 million RSU's to employees under the MIP, at a fair market value of $14.59 per RSU. RSU awards granted to employees during 2018 will vest over three years of continuous service from the grant date, with one-third vesting on each of the first, second and third anniversaries.

A summary of the status and changes during the year ended December 31, 2018 of the Company’s non-vested RSU's is presented below:



	RSU's	Weighted Average Grant-Date Fair Value
	(In thousands)
Non-vested at December 31, 2017	—	$	—
Granted	950	14.59
Forfeited	—	—
Vested	—	—
Non-vested at December 31, 2018	950	$	14.59

As of December 31, 2018 , the Company had approximately $12.2 million in unrecognized compensation cost related to RSU's to be expensed over a weighted average remaining service period of 2.95 years.

Stock Options

The fair value of each option award granted under the MIP is estimated on the date of grant using the Black-Scholes option-pricing model. Determination of the fair value was a matter of judgment and often involved the use of significant estimates and assumptions. Additionally, due to the Company’s lack of historical volume of option activity, the expected term of options granted was derived using the “plain vanilla” method. Expected volatilities were based on comparable public company data, with consideration given to the Company’s limited historical data. The Company makes estimates with respect to employee termination and forfeiture rates of the options within the valuation model. The risk-free rate is based on the approximate U.S. Treasury yield rate in effect at the time of grant. During the year ended December 31, 2017, approximately 0.4 million nonqualified stock options were granted under the MIP to certain of the Company's executive officers at a fair market value ranging from $16.55 to $22.19 per nonqualified stock option. Stock options granted during the first quarter of 2017 will expire on the tenth anniversary of the grant date and will vest over three years of continuous service from the grant date, with 34% vesting immediately upon the grant date, and 22% on each of the first, second and third anniversaries of the grant date. Stock options granted during the fourth quarter of 2017 will expire on the tenth anniversary of the grant date and will vest over three years of continuous service from the grant date, with one-third vesting on each of the first, second and third anniversaries of the grant date. No stock options were granted by the Company during 2018.

The following table presents the assumptions used in determining the fair value of option awards granted during the year ended December 31, 2017.



		Year Ended
		December 31, 2017
Expected volatility		50.1% - 53.2%
Expected dividends		None
Exercise price		$30.83 - $42.65
Expected term (in years)		5.7 - 6.0
Risk-free rate		2.03% - 2.24%

The weighted average grant date fair value of options granted for the year ended December 31, 2017 was $20.66.

A summary of the Company’s stock option activity for the year ended December 31, 2018 is presented below.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding at December 31, 2016 (Predecessor)	4,416		$	13.18	3.86	$	—
Canceled	(4,416	)	13.18		3.86
Outstanding at January 1, 2017 (Successor)	—		$	—	—	$	—
Granted	351		39.43		—
Exercised	—		—		—
Forfeited	—		—		—
Outstanding at December 31, 2017 (Successor)	351		$	39.43	9.34	$	253
Granted	—		$	—	—
Exercised	—		—		—
Forfeited	—		—		—
Outstanding at December 31, 2018 (Successor)	351		$	39.43	8.34	$	—
Exercisable at December 31, 2018 (Successor)	198		$	40.39	8.27	$	—

As of December 31, 2018 , the Company had approximately $2.1 million in unrecognized compensation cost related to outstanding stock options to be expensed over a weighted average remaining service period of 1.5 years.

Restricted Stock

The value of the Company’s outstanding restricted stock is based on the closing price of the Company’s common stock on the NYSE on the date of grant. During 2018, approximately 0.1 million shares of restricted stock were granted to employees and non-employee directors under the MIP, at fair market values ranging from $15.00 to $23.60 per share of restricted stock. Restricted stock awards granted to employees during 2018 will vest over three years of continuous service from the grant date, with one-third vesting on each of the first, second and third anniversaries. Restricted stock awards granted to non-employee directors will vest in full on the first anniversary of the date of grant, subject to each director's continued service. During the year ended December 31, 2017, approximately 1.7 million shares of restricted stock were granted to employees and non-employee directors under the MIP, at fair market values ranging from $31.52 to $44.90 per share of restricted stock. Restricted stock awards granted to employees during the first quarter of 2017 will vest over three years of continuous service from the grant date, with 34% having vested immediately upon the grant date, and 22% on each of the first, second and third anniversaries of the grant date. Restricted stock awards granted to employees during the fourth quarter of 2017 will vest over three years of continuous service from the grant date, with one-third vesting on each of the first, second and third anniversaries. Restricted stock awards granted to non-employee directors during the fourth quarter of 2017 vested in full on the first anniversary date of the grant.

To the extent permitted by law, the recipient of an award of restricted stock will generally have most of the rights of a stockholder with respect to the underlying common stock, including the right to vote the common stock and to receive all dividends or other distributions made with respect to the common stock. Dividends on restricted stock will be deferred until the lapsing of the restrictions imposed on the stock and will be held by the Company for the account of the recipient (either in cash or to be reinvested in restricted stock) until such time. Payment of the deferred dividends and accrued interest, if any, shall be made upon the lapsing of restrictions on the restricted stock, and any dividends deferred in respect of any restricted stock shall be forfeited upon the forfeiture of such restricted stock. As of December 31, 2018 , the Company had not issued any dividends.

A summary of the status and changes during the year ended December 31, 2018 of the Company’s shares of non-vested restricted stock is presented below:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Shares		Weighted Average Grant-Date Fair Value
	(In thousands)
Non-vested at December 31, 2016 (Predecessor)	898		$	15.34
Canceled	(898	)	(15.34		)
Non-vested at January 1, 2017 (Successor)	—		$	—
Granted	1,664		37.92
Forfeited	(38	)	43.00
Vested	(288	)	43.83
Non-vested at December 31, 2017 (Successor)	1,338		$	36.51
Granted	46		15.40
Forfeited	(226	)	33.68
Vested	(402	)	38.08
Non-vested at December 31, 2018 (Successor)	756		35.24

As of December 31, 2018 , the Company had approximately $21.1 million in unrecognized compensation cost related to restricted stock to be expensed over a weighted average remaining service period of 1.6 years.

Performance Stock

During the fourth quarter of 2018, the Company granted approximately 0.3 million shares of performance stock under the MIP to certain of the Company's executive officers at a fair market value of approximately $17.99 per share. During the fourth quarter of 2017, the Company granted approximately 0.1 million shares of performance stock under the MIP to certain of the Company's executive officers at a fair market value of $37.20 per share of restricted stock. The performance stock cliff vests at the end of a three year performance period, and the participants may earn between 0% and 200% of the target number of the shares granted based on actual stock price performance upon comparison to a peer group. The vesting of these awards is subject to each employee's continued employment. The Company values equity awards with market conditions at the grant date using a Monte Carlo simulation model which simulates many possible future outcomes.

The following table presents the assumptions used in determining the fair value of the performance stock granted during the years ended December 31, 2018 and 2017.



	Years Ended December 31,
	2018	2017
Expected volatility, including peer group	28.9% - 68.4%	30.8% - 81.6%
Expected dividends	None	None
30 calendar day volume weighted average stock price, including peer group	$6.88 - $111.49	$2.13 - $133.20
Expected term (in years)	3.0	3.0
Risk-free rate	2.74%	1.94% - 1.95%

A summary of the status and changes during the year ended December 31, 2018 of the Company’s performance stock is presented below:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Performance Stock		Weighted Average Grant-Date Fair Value
	(In thousands)
Non-vested at January 1, 2017	—		$	—
Granted	92		37.20
Non-vested at December 31, 2017	92		$	37.20
Granted	312		17.99
Vested	(8	)	37.20
Non-vested at December 31, 2018	396		$	22.06

As of December 31, 2018 , the Company had approximately $7.5 million in unrecognized compensation cost related to performance stock to be expensed over a weighted average remaining service period of 2.7 years.

Share-based compensation expense was $18.8 million and $23.4 million for the years ended December 31, 2018 and 2017, respectively, and is included in selling, general and administrative expenses, direct costs and research and development on the consolidated statements of operations. Due to the valuation allowance that has been provided for NOLs as a result of the uncertainty regarding the ultimate realization of the Company's deferred tax assets, there was no income tax benefit recognized in the consolidated statements of operations in connection with share-based compensation expense for the years ended December 31, 2018 and 2017.

Predecessor Equity Plans

In connection with the Nabors Merger, the Company approved and adopted the C&J Energy Services 2015 Long Term Incentive Plan (the “2015 LTIP”), effective as of March 23, 2015, contingent upon the consummation of the Nabors Merger. The 2015 LTIP served as an assumption of the Old C&J 2012 Long-Term Incentive Plan, (the “2012 LTIP”), with certain non-material revisions made and no increase in the number of shares remaining available for issuance under the 2012 LTIP. Prior to the adoption of the 2015 LTIP, all share-based awards granted to Old C&J employees, consultants and non-employee directors were granted under the 2012 LTIP and, following the 2015 LTIP’s adoption, no further awards were granted under the 2012 LTIP. Awards that were previously outstanding under the 2012 LTIP would have continued to remain outstanding under the 2015 LTIP, as adjusted to reflect the Nabors Merger. At the closing of the Nabors Merger, restricted shares and stock option awards were granted under the 2015 LTIP to certain employees of the C&P Business and approximately 0.4 million C&J common shares underlying those awards were deemed part of the consideration paid to Nabors for the Nabors Merger.

The 2015 LTIP provided for the grant of share-based awards to the Company’s employees, consultants and non-employee directors. The following types of awards were available for issuance under the 2015 LTIP: incentive stock options and nonqualified stock options, share appreciation rights, restricted shares, restricted share units, dividend equivalent rights, performance stock and share awards. As of December 31, 2016, only nonqualified stock options and restricted shares were awarded under the 2015 LTIP and 2012 LTIP. No grants were issued during the year ended December 31, 2016.

Approximately 11.3 million shares were available for issuance under the 2015 LTIP as of December 31, 2016. The number of common shares available for issuance under the 2015 LTIP was subject to adjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporate event or transaction.

A total of 4.3 million common shares were originally authorized and approved for issuance under the 2012 LTIP and on June 4, 2015, the shareholders of the Company approved the First Amendment to the 2015 LTIP, which increased the number of common shares that may be issued under the 2015 LTIP by approximately 3.6 million shares. The shareholders of the Company approved the Second Amendment to the 2015 LTIP in February 2016, which increased the number of common shares that may be issued by approximately 6.0 million shares. Including the add-back of approximately 0.9 million restricted shares and 0.7 million options canceled or expired under the 2012 LTIP and 2015 LTIP during 2016, approximately 11.3 million shares were available for issuance under the 2015 LTIP as of December 31, 2016. The number of common shares available for issuance under the 2015 LTIP was subject to adjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

structure or any similar corporate event or transaction. The number of common shares available for issuance were also subject to increase due to the termination of an award granted under the 2015 LTIP, the 2012 LTIP or the Prior Plans (as defined below), by expiration, forfeiture, cancellation or otherwise without the issuance of the common shares. The 2015 LTIP was terminated as described in Note 14 - Chapter 11 Proceeding and Emergence , pursuant to the Restructuring Plan, the liquidation of C&J Energy Services Ltd. was completed under the laws of Bermuda, and all of the existing shares of the Predecessor's common equity were canceled as of the Effective Date. Also, on the Effective Date, the Successor issued the New Warrants to the holders of the canceled Predecessor common shares, provided that such class of holders voted to accept the Restructuring Plan.

Stock Options

The fair value of each option award granted under the 2015 LTIP, the 2012 LTIP and the Prior Plans was estimated on the date of grant using the Black-Scholes option-pricing model. Option awards were generally granted with an exercise price equal to the market price of the Company’s common shares on the grant date. Due to the Company’s lack of historical volume of option activity, the expected term of options granted was derived using the “plain vanilla” method. In addition, expected volatilities were based on comparable public company data, with consideration given to the Company’s limited historical data. The Company made estimates with respect to employee termination and forfeiture rates of the options within the valuation model. The risk-free rate was based on the approximate U.S. Treasury yield rate in effect at the time of grant. No options were granted during the year ended December 31, 2016.

A summary of the Company’s stock option activity through December 31, 2016 is presented below.



	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding at December 31, 2015	5,119		$	11.82	4.41	$	2,874
Granted	—		—		—
Exercised	—		—		—
Forfeited	(703	)	3.19		—
Outstanding at December 31, 2016	4,416		$	13.18	3.86

Restricted Shares

Historically, restricted shares were valued based on the closing price of the Company’s common shares on the NYSE on the date of grant. During the year ended December 31, 2016 there were no restricted shares granted to employees and non-employee directors under the 2015 LTIP.

To the extent permitted by law, the recipient of an award of restricted shares had all of the rights of a shareholder with respect to the underlying common shares, including the right to vote the common shares and to receive all dividends or other distributions made with respect to the common shares. Dividends on restricted shares would have been deferred until the lapsing of the restrictions imposed on the shares and would be held by the Company for the account of the recipient (either in cash or to be reinvested in restricted shares) until such time. Payment of the deferred dividends and accrued interest, if any, would have been made upon the lapsing of restrictions on the restricted shares, and any dividends deferred in respect of any restricted shares would be forfeited upon the forfeiture of such restricted shares. As of December 31, 2016, the Company did not issue any dividends

A summary of the status and changes during the year ended December 31, 2016 of the Company’s shares of non-vested restricted shares is presented below:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Shares		Weighted Average Grant-Date Fair Value
	(In thousands)
Non-vested at December 31, 2015	3,271		$	15.70
Granted	—		—
Forfeited	(576	)	15.30
Vested	(1,797	)	15.92
Non-vested at December 31, 2016	898		$	15.34

As of December 31, 2016, there was $8.9 million of total unrecognized compensation cost related to restricted shares. That cost was expected to be recognized over a weighted-average period of 1.42 years.

As of December 31, 2016, the Company had 5.3 million stock options and restricted shares outstanding to employees and non-employee directors, 0.3 million of which were issued under the 2006 Plan, 3.9 million were issued under the 2010 Plan, 0.2 million were issued under the 2012 Plan and the remaining 0.9 million were issued under the 2015 Plan.

Share-based compensation expense was $17.7 million for the year ended December 31, 2016, and is included in selling, general and administrative expenses, direct costs and research and development on the consolidated statements of operations. The total income tax benefit recognized in the consolidated statements of operations in connection with share-based compensation expense was approximately $6.2 million for the year ended December 31, 2016.

Note 6 - Related Party Transactions

The Company obtained support services from vendors which are affiliated with one of its employees. For the year ended December 31, 2018 , purchases from these vendors totaled $0.2 million. There were no amounts due to these vendors as of December 31, 2018 . Purchases from these vendors for the year ended December 31, 2017 totaled $0.9 million and amounts due to these vendors were $0.3 million. There were no purchases from these vendors for the years ended December 31, 2016.

The Company obtained support services from Nabors Corporate Services, Inc., on a transitional basis, for the processing of payroll, benefits and certain administrative services of the C&P business in normal course following the completion of the Nabors Merger. There were no obligations incurred to Nabors Corporate Services during 2017. During 2016 and prior to the Confirmation Date, the Company, the Official Committee of Unsecured Creditors of CJ Holding Co, the Steering Committee of Lenders under the Credit Agreement and the DIP Facility, and Nabors entered into a mediated settlement agreement that was subsequently approved by the Bankruptcy Court whereby, among other things, Nabors was awarded two allowed proofs of claim totaling $13.3 million. As of December 31, 2016, the allowed proofs of claim were included in liabilities subject to compromise on the consolidated balance sheet. As a result of the Company's emergence from the Chapter 11 Proceeding and the cancellation of the Predecessor common shares, Nabors Corporate Services is no longer considered a related party.

The Company leased certain properties from Nabors, and Nabors leased certain properties from the Company. For the year ended December 31, 2016, the Company incurred obligations to Nabors of approximately $0.6 million under the leases, and Nabors incurred obligations to C&J of approximately $0.5 million and $0.1 million under the leases for each of the years ended December 31, 2017 and 2016. Amounts payable to Nabors at December 31, 2017 were $0.9 million. As a result of the Company's emergence from the Chapter 11 Proceeding and the cancellation of the Predecessor common shares, Nabors Corporate Services is no longer considered a related party.

The Company provided certain services to Shehtah Nabors LP, a Nabors partnership with a third-party, pursuant to a Management Agreement and a Cash Flow Sharing Agreement (collectively, “Shehtah Agreements”). Nabors incurred obligations to the Company of approximately $1.8 million under the Shehtah Agreements during 2016. There were no amounts due to the Company under the Shehtah Agreements at December 31, 2016. The Company did not provide services to Shehtah during 2017. As a result of the Company's emergence from the Chapter 11 Proceeding and the cancellation of the Predecessor common shares, Nabors Corporate Services is no longer considered a related party.

The Company utilizes the services of certain saltwater disposal wells owned by Pyote Water Solutions, LLC, Pyote Water Systems, LLC, Pyote Water Systems II, LLC and Pyote Water Systems III, LLC (together “Pyote”) used in the disposal of certain fluids associated with oil and gas production. A former member of the Company's Board of Directors, who served from

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 24, 2015 until December 16, 2016, holds the position of President and Chief Manager of Pyote and serves as Chairman of the Board of Governors of Pyote. Amounts invoiced from Pyote totaled approximately $0.8 million for the year ended December 31, 2016. Amounts payable to this vendor at December 31, 2016 were less than $0.1 million. In addition, the Company provides certain workover rig services, fluid hauling services and plug and abandonment services to Pyote. No services were provided to Pyote during 2016. There were no amounts due to the Company from Pyote at December 31, 2016. Subsequent to the departure of the member of the Company's Board of Directors in 2016, Pyote was no longer a related party.

The Company obtains office space, equipment rentals, tool repair services and other supplies from vendors affiliated with several employees. For the years ended December 31, 2018, 2017 and 2016, purchases totaled $0.1 million, $0.5 million and $0.5 million, respectively. Amounts payable to these vendors at December 31, 2018, 2017 and 2016 were less than $0.1 million.

The Company has an unconsolidated equity method investment with a vendor that provided the Company with raw material for its discontinued specialty chemical business. For the years ended December 31, 2016, purchases from this vendor were $1.7 million. There were no purchases from this vendor for the year ended December 31, 2018 and 2017. There were no amounts payable to this vendor as of December 31, 2018 and 2017.

Note 7 - Business Concentrations

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited because the Company performs credit evaluations, sets credit limits, and monitors the payment patterns of its customers. Cash balances on deposits with financial institutions, at times, may exceed federally insured limits. The Company regularly monitors the institutions’ financial condition.

The Company’s top ten customers accounted for approximately 44.2% , 40.7% and 46.0% of the Company’s consolidated revenue for the years ended December 31, 2018 , 2017 and 2016 , respectively. For the years ended December 31, 2018 , 2017 and 2016 , no individual customer accounted for 10.0% or more of the Company's consolidated revenue.

Note 8 - Commitments and Contingencies

Environmental Regulations & Liabilities

The Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for the protection of the environment. These laws and regulations can change from time to time and may have retroactive effectiveness and impose new obligations on the Company. The Company continues to monitor the status of these laws and regulations. However, the Company cannot predict the future impact of such standards and requirements on its business.

Environmental risk is inherent to the Company's business and the Company maintains insurance coverage to mitigate its exposure to environmental liabilities. Currently, the Company is not aware of any environmental violations or liabilities that would have a material adverse effect upon its consolidated financial position, liquidity or capital resources. However, management does recognize that by the very nature of its business, material costs could be incurred from time to time to maintain compliance or in response to an environmental incident. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company’s liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.

Litigation

The Company is, and from time to time may be, involved in claims and litigation arising in the ordinary course of business. Because there are inherent uncertainties in the ultimate outcome of such matters, it is difficult to determine or otherwise predict with any certainty the ultimate outcome of any pending or potential claims or litigation against the Company; however, management believes that the outcome of those matters that are presently known to the Company will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contingent Consideration Liability

On May 18, 2015, the Company acquired all of the outstanding equity interests of ESP Completion Technologies LLC, a manufacturer of wellheads, artificial lift completion tools and electric submersible pumps for approximately $34.0 million and including a contingent consideration liability valued at approximately $14.4 million at the date of the acquisition. If the acquiree was able to achieve certain levels of EBITDA over a three-year period, the Company would be obligated to make future tiered payments of up to $29.5 million. The contingent consideration liability was remeasured on a fair value basis each quarter until it expired in 2018. As of December 31, 2017, and through its expiration in 2018, the earn-out was estimated to have zero fair value and no amounts were paid upon expiration.

Operating Leases

The Company leases certain property and equipment under non-cancelable operating leases. The remaining terms of the operating leases generally range from 1 to 6 years .

Lease expense under all operating leases totaled $12.4 million , $10.6 million and $10.0 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. As of December 31, 2018 , the future minimum lease payments under non-cancelable operating leases were as follows:



Years Ending December 31,	(In thousands)
2019	$	9,204
2020	6,962
2021	5,654
2022	5,185
2023	3,838
Thereafter	21
	$	30,864

Note 9 - Employee Benefit Plans

The Company maintains a contributory profit sharing plan under a 401(k) arrangement which covers all employees meeting certain eligibility requirements. Eligible employees can make annual contributions to the plan up to the maximum amount allowed by current federal regulations, but no more than 80.0% of compensation as noted in the plan document. The Company’s 401(k) contributions for the years ended December 31, 2018 and 2017 totaled $11.7 million and $3.3 million , respectively. Due to the continued market downturn and the Company's Chapter 11 Proceeding during 2016, no 401(k) contributions were made by the Company throughout 2016.

Note 10 - Acquisitions

Acquisition of O-Tex

On November 30, 2017, the Company acquired all of the outstanding equity interest of O-Tex for approximately $271.9 million, consisting of cash of approximately $132.5 million and 4.42 million shares of the Company's common stock with a fair value of $138.2 million. The Company also acquired the remaining 49.0% non-controlling interest in an O-Tex subsidiary for $1.3 million.

During the second quarter of 2018, C&J and the seller agreed to a working capital adjustment of $1.5 million in favor of C&J, which was accounted for as a reduction to the purchase price of O-Tex.

O-Tex specializes in both primary and secondary downhole specialty cementing services in most major U.S. shale plays. This strategic transaction immediately expands C&J’s cementing business with enhanced capabilities and strengthens the Company’s position as a leading oilfield services provider with a best-in-class well construction, intervention and completions platform.

The O-Tex transaction was accounted for using the acquisition method of accounting for business combinations. In applying the acquisition method of accounting, the Company was required to determine the accounting acquirer which was

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deemed to be the party possessing the controlling financial interest. The Company determined that C&J possessed the controlling financial interest.

The purchase price was allocated to the net assets acquired based upon their estimated fair values, as shown below. The estimated fair values of certain assets and liabilities, including property plant and equipment, other intangible assets, and contingencies required significant judgments and estimates.

All of the goodwill associated with the O-Tex transaction was allocated to the WC&I reporting unit. As part of the Company's test for goodwill impairment, all of the goodwill was impaired and written down to zero as of December 31, 2018. See Note 3 - Goodwill and Other Intangible Assets for further discussion.

The purchase price was initially allocated to the net assets acquired during the fourth quarter of 2017 and subsequently adjusted within the measurement period during 2018 based upon the revised estimated fair values, as follows:



	(In thousands)
Current assets	$	45,895
Property and equipment	64,496
Goodwill	146,015
Other intangible assets	71,500
Total assets acquired	$	327,906

Current liabilities	$	17,442
Deferred income taxes	31,301
Other liabilities	8,746
Total liabilities assumed	$	57,489
Net assets acquired	$	270,417

The fair value and gross contractual amount of accounts receivable acquired on November 30, 2017 was $30.0 million and $30.1 million, respectively. Based on the age of certain accounts receivable, a portion of the gross contractual amount was estimated to be uncollectible.

Property, plant and equipment assets acquired consist of the following fair values and ranges of estimated useful lives. As with fair value estimates, the determination of estimated useful lives requires judgments and assumptions.



	Estimated Useful Lives	Estimated Fair Value
		(In thousands)
Land	Indefinite	$	2,010
Building and leasehold improvements	5-25	5,700
Office furniture, fixtures and equipment	3-5	946
Machinery & Equipment	2-10	52,880
Construction in progress		2,960
Property, plant and equipment		$	64,496

Other intangibles were assessed a fair value of $71.5 million with a weighted average amortization period of approximately 14.8 years. These intangible assets consist of customer relationships of $58.1 million, amortizable over 15 years, trade name of $11.8 million, amortizable over 15 years, and non-compete agreements of $1.6 million, amortizable over five years. The amount allocated to goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill was allocated to the Company's WC&I reporting unit. The goodwill recognized as a result of the O-Tex transaction was primarily attributable to the expected increased economies of scale, enhanced capabilities and resources, and an expanded geographic footprint. The tax deductible portion of goodwill and other intangibles is $4.4 million and $10.7 million, respectively.

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company treated the O-Tex acquisition as a non-taxable transaction. Such treatment resulted in the acquired assets and liabilities having carryover basis for tax purposes. An estimated deferred tax liability in the amount of $31.3 million was recorded to account for the differences between the purchase price allocation and carryover tax basis.

Acquisition-related costs associated with the O-Tex transaction were expensed as incurred and totaled $4.4 million for the year ended December 31, 2017, and are included in selling, general and administrative expenses.

The results of operations for O-Tex were included in C&J's consolidated financial statements subsequent to the November 30, 2017 acquisition date through December 31, 2017 and included revenue of $16.2 million and net income of $0.4 million. The following unaudited pro forma results of operations have been prepared as though the O-Tex transaction was completed on January 1, 2016. Pro forma amounts are based on the purchase price allocation of the acquisition and are not necessarily indicative of results that may be reported in the future:



	Years Ended December 31,
	2017			2016
	(In thousands)
Revenues	$	1,797,231		$	1,067,075
Net loss	$	(7,520	)	$	(939,454	)

Note 11 - Segment Information

In accordance with ASC No. 280 - Segment Reporting ("ASC 280"), the Company routinely evaluates whether its separate operating and reportable segments have changed. This determination is made based on the following factors: (1) the Company’s chief operating decision maker (“CODM”) is currently managing each operating segment as a separate business and evaluating the performance of each segment and making resource allocation decisions distinctly and expects to do so for the foreseeable future, and (2) discrete financial information for each operating segment is available.

Prior to and as of the year ended December 31, 2017, the Company’s reportable segments were: (i) Completion Services and (ii) Well Support Services. Due to the significant expansion of C&J's cementing business, during the first quarter of 2018 the CODM revised the approach in which performance evaluation and resource allocation decisions are made. Discrete financial information was created to provide the segment information necessary for the CODM to manage the Company under the revised operating segment structure. As a result of this change, the Company revised its reportable segments in the first quarter of 2018 to the following: (i) Completion Services, (ii) WC&I and (iii) Well Support Services. This segment structure reflects the financial information and reports used by the Company’s management, including its CODM, to make decisions regarding the Company’s business, including performance evaluation and resource allocation decisions. As a result of the revised reportable segment structure, the Company has restated the corresponding segment information for all periods presented. In line with the discontinuance of the small, ancillary service lines and divisions in the Other Services reportable segment, subsequent to the year ended December 31, 2016, financial information for the Other Services reportable segment is only presented for the corresponding prior year period.

The following is a brief description of the Company's reportable segments:

Completion Services

The Company’s Completion Services segment consists of the following businesses and service lines: (1) fracturing services; (2) cased-hole wireline and pumping services; and (3) completion support services, which includes the Company's R&T department.

Well Construction and Intervention Services

The Company’s WC&I segment consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services. During the first quarter of 2018, the Company exited its directional drilling business.

Well Support Services

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s Well Support Services segment consists of the following businesses and service lines: (1) rig services; (2) fluids management services; and (3) other specialty well site services. During the first quarter of 2018, the Company exited its artificial lift business.

The following tables set forth certain financial information with respect to the Company’s reportable segments.



	Completion Services			WC&I			Well Support Services			Other			Corporate / Elimination			Total
	(In thousands)
Year Ended December 31, 2018 (Successor)
Revenue from external customers	$	1,453,577		$	375,667		$	392,845		$	—		$	—		$	2,222,089
Inter-segment revenues	618			—			315			—			(933		)	—
Depreciation and amortization	122,338			40,622			55,924			—			5,983			224,867
Operating income (loss)	124,451			(120,780		)	(22,197		)	—			(112,447		)	(130,973		)
Net income (loss)	126,257			(120,558		)	(22,306		)	—			(113,398		)	(130,005		)
Adjusted EBITDA	274,261			68,452			39,686			—			(98,718		)	283,681
Capital expenditures	245,987			41,371			18,095			—			5,606			311,059
As of December 31, 2018 (Successor)
Total assets	$	713,738		$	249,712		$	233,650		$	—		$	227,354		$	1,424,454
Goodwill	—			—			—			—			—			—
Year Ended December 31, 2017 (Successor)
Revenue from external customers	$	1,107,014		$	149,497		$	382,228		$	—		$	—		$	1,638,739
Inter-segment revenues	1,410			64			1,437			—			(2,911		)	—
Depreciation and amortization	73,254			13,657			49,582			—			4,157			140,650
Operating loss	132,889			5,267			(22,334		)	—			(131,601		)	(15,779		)
Net loss	128,036			34,230			(20,140		)	—			(119,669		)	22,457
Adjusted EBITDA	200,936			20,952			9,233			—			(100,259		)	130,862
Capital expenditures	170,167			14,413			24,368			—			1,238			210,186
As of December 31, 2017 (Successor)
Total assets	$	718,433		$	407,185		$	278,955		$	—		$	204,284		$	1,608,857
Goodwill	—			147,515			—			—			—			147,515
Year Ended December 31, 2016 (Predecessor)
Revenue from external customers	$	515,939		$	83,848		$	363,768		$	7,587		$	—		$	971,142
Inter-segment revenues	1,375			368			148			29,115			(31,006		)	—
Depreciation and amortization	127,191			14,551			73,600			2,307			(209		)	217,440
Operating loss	(232,031		)	(74,583		)	(377,707		)	(51,778		)	(133,909		)	(870,008		)
Net loss	(232,296		)	(74,504		)	(373,499		)	(57,077		)	(206,913		)	(944,289		)
Adjusted EBITDA	(37,185		)	(4,439		)	19,456			(5,777		)	(66,897		)	(94,842		)
Capital expenditures	13,543			3,575			14,799			8,451			17,541			57,909
As of December 31, 2016 (Predecessor)
Total assets	$	674,393		$	71,456		$	477,257		$	50,682		$	87,894		$	1,361,682
Goodwill	—			—			—			—			—			—

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The CODM and the rest of management evaluates reportable segment performance and allocates resources based on total earnings (loss) before net interest expense, income taxes, depreciation and amortization, other income (expense), net gain or (loss) on disposal of assets, acquisition-related costs, and non-routine items (“Adjusted EBITDA”), because Adjusted EBITDA is considered an important measure of each reportable segment’s performance. Adjusted EBITDA at the segment level is not considered to be a non-GAAP financial measure as it is the Company's segment measure of profit or loss and is required to be disclosed under GAAP pursuant to ASC 280.

Management believes that the disclosure of Adjusted EBITDA on a consolidated basis allows investors to make a direct comparison to competitors, without regard to differences in capital and financing structure. Investors should be aware, however, that there are limitations inherent in using Adjusted EBITDA as a measure of overall profitability because it excludes significant expense items. An improving trend in Adjusted EBITDA may not be indicative of an improvement in the Company’s profitability. To compensate for the limitations in utilizing Adjusted EBITDA as an operating measure, management also uses U.S. GAAP measures of performance, including operating income (loss) and net income (loss), to evaluate performance, but only with respect to the Company as a whole and not on a reportable segment basis.

As required under Item 10(e) of Regulation S-K of the Securities Exchange Act of 1934, as amended, included below is a reconciliation of consolidated Adjusted EBITDA, a non-GAAP financial measure, from net income (loss), which is the nearest comparable U.S. GAAP financial measure on a consolidated basis for the years ended December 31, 2018 , 2017 and 2016 .



	Successor						Predecessor
	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Net income (loss)	$	(130,005	)	$	22,457		$	(944,289	)
Depreciation and amortization	224,867			140,650			217,440
Impairment expense	146,015			—			436,395
(Gain) loss on disposal of assets	25,676			(31,463		)	3,075
Interest expense, net	3,899			1,527			157,465
Other (income) expense, net	(2,453		)	(3		)	(9,504		)
Income tax benefit	(2,414		)	(39,760		)	(129,010		)
Severance and business divestiture costs	7,461			5,954			34,179
Inventory reserve	6,131			—			35,350
Restructuring costs	3,330			11,236			30,401
Acquisition-related and other transaction costs	970			4,606			10,534
Share-based compensation expense acceleration	204			15,658			7,792
Reorganization costs	—			—			55,330
Adjusted EBITDA	$	283,681		$	130,862		$	(94,842	)

Note 12 - Quarterly Financial Data (unaudited)

Summarized quarterly financial data for the years ended December 31, 2018 and 2017 are presented below:

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Quarters Ended
	March 31, 2018		June 30, 2018		September 30, 2018		December 31, 2018
	(In thousands, except per share data)
Revenue	$	553,000	$	610,521	$	567,924	$	490,644
Operating income (loss)	20,342		30,894		9,376		(191,583		)
Income (loss) before income taxes	20,534		27,603		8,929		(189,484		)
Net income (loss)	20,594		28,496		10,433		(189,527		)
Net income (loss) per common share:
Basic	$	0.31	$	0.42	$	0.16	$	(2.87	)
Diluted	$	0.31	$	0.42	$	0.16	$	(2.87	)



	Quarters Ended
	March 31, 2017			June 30, 2017			September 30, 2017		December 31, 2017
	(In thousands, except per share data)
Revenue	$	314,194		$	390,143		$	442,652	$	491,750
Operating income (loss)	(36,408		)	(13,244		)	6,412		27,462
Income (loss) before income taxes	(35,537		)	(15,114		)	7,357		25,991
Net income (loss)	(32,301		)	(12,721		)	10,484		56,995
Net income (loss) per common share:
Basic	$	(0.58	)	$	(0.20	)	$	0.17	$	0.89
Diluted	$	(0.58	)	$	(0.20	)	$	0.17	$	0.88

Note 13 - Supplemental Cash Flow Disclosures

Listed below are supplemental cash flow disclosures for the year ended December 31, 2018 , 2017 and 2016 :



	Successor						Predecessor
	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Cash paid for interest	$	(1,444	)	$	(926	)	$	(19,153	)
Cash refunded from income taxes	$	4,008		$	10,561		$	14,943
Cash paid for reorganization items	$	—		$	—		$	(24,719	)
Non-cash investing and financing activity:
Change in accrued capital expenditures	$	4,828		$	202		$	(3,182	)
Non-cash consideration for business acquisition	$	—		$	138,166		$	—

Note 14 - Chapter 11 Proceeding and Emergence

Overview

On July 8, 2016, the Debtors, including C&J Corporate Services (Bermuda) Ltd. (together with the Predecessor, the “Bermudian Entities”), C&J Energy Production Services-Canada Ltd. and Mobile Data Technologies Ltd. (together, the “Canadian Entities”), entered into a Restructuring Support and Lock-Up Agreement (the “Restructuring Support Agreement”), with certain lenders (the “Supporting Lenders”) holding approximately 90.0% of the secured claims and interests arising under the Credit Agreement, dated as of March 24, 2015 (as amended and otherwise modified, the “Original Credit Agreement”). The Restructuring Support Agreement contemplated the implementation of a financial restructuring of the Company, including the elimination of all amounts owed under the Original Credit Agreement through a complete debt-to-

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

equity conversion and a re-investment in the Company through an equity rights offering. This financial restructuring was effectuated through the Restructuring Plan under Chapter 11 of the Bankruptcy Code.

To implement the Restructuring Support Agreement, on July 20, 2016 (the “Petition Date”), the Debtors filed voluntary petitions for reorganization (the “Bankruptcy Petitions”) seeking relief under the provisions of Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court in the Southern District of Texas, Houston Division (the “Bankruptcy Court”), and also commenced ancillary proceedings in Canada on behalf of the Canadian Entities and a provisional liquidation proceeding in Bermuda on behalf of the Bermudian Entities. The Chapter 11 Proceeding was being administered under the caption “ In re: CJ Holding Co., et al., Case No. 16-33590 ”. Throughout the Chapter 11 Proceeding, the Debtors continued operations and management of their assets in the ordinary course as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

In accordance with the Restructuring Support Agreement, the Debtors filed the Restructuring Plan and related disclosure statement (the “Disclosure Statement”) with the Bankruptcy Court on August 19, 2016, with a first amendment to the Restructuring Plan filed on September 28, 2016 and a second amendment filed on November 3, 2016. On November 4, 2016, the Bankruptcy Court approved the Disclosure Statement, finding that the Disclosure Statement contained adequate information as required by the Bankruptcy Code. The Debtors then launched a solicitation of acceptances of the Restructuring Plan, as required by the Bankruptcy Code. On December 16, 2016, an order confirming the Restructuring Plan was entered by the Bankruptcy Court. On the Plan Effective Date, the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan, as of the Plan Effective Date, the Successor was formed, the Predecessor's equity was canceled, the Predecessor transferred all of its assets and operations to the Successor and the Predecessor was subsequently dissolved. As a result, the Successor became the successor issuer to the Predecessor.

The key terms of the restructuring included in the Restructuring Plan were as follows:


•	Debt-to-equity Conversion: As of the Plan Effective Date, the Supporting Lenders were issued new common equity (“New Equity”) in the Successor, as the ultimate parent company of the reorganized Debtors, and all of the existing shares of the Predecessor's common equity were canceled.

•

The Rights Offering, Backstop Commitment: The Company offered its secured lenders the right to purchase New Equity in an amount of up to $200.0 million as part of the approved Restructuring Plan (the “Rights Offering”). Certain of the Supporting Lenders (the “Backstop Parties”) agreed to backstop the full amount pursuant to a Backstop Commitment Agreement, in exchange for a commitment premium of 5.0% of the $200.0 million committed amount payable in New Equity to the Backstop Parties (the “Backstop Fee”). The Rights Offering was consummated on the Plan Effective Date and the shares were issued at a price that reflects a discount of 20.0% to the Restructuring Plan value, which was $750.0 million.

•

DIP Facility: Certain of the Supporting Lenders (the “DIP Lenders”) provided a superpriority secured delayed draw term loan facility to the Predecessor in an aggregate principal amount of up to $100.0 million (the “DIP Facility”). As further discussed below, on July 25, 2016, the Bankruptcy Court entered an order approving the Debtors’ entry into the DIP Facility on an interim basis, pending a final hearing. On July 29, 2016, the Debtors entered into a superpriority secured debtor-in-possession credit agreement, among the Debtors, the DIP Lenders and Cortland Capital Market Services LLC, as Administrative Agent (the “DIP Credit Agreement”), which set forth the terms and conditions of the DIP Facility. On September 25, 2016, the Bankruptcy Court entered a final order approving entry into the DIP Facility and DIP Credit Agreement. The Company repaid all amounts outstanding under the DIP Facility on the Plan Effective Date using proceeds from the Rights Offering.

•

The New Credit Facility: The Successor and certain of its subsidiaries, as borrowers (the “Borrowers”), entered into a revolving credit and security agreement (the “New Credit Facility”) dated the Plan Effective Date with a maturity date of January 6, 2021, with PNC Bank, National Association, as administrative agent (the “Agent”). The Borrowers subsequently amended and restated the New Credit Facility in full pursuant to an amended and restated credit and security agreement (the “Amended Credit Facility”) dated May 4, 2017, with the Agent and the lenders party thereto. The Amended Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of $200.0 million and a borrowing base, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory. The Amended

100

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Facility also provides for the issuance of letters of credit, which would reduce borrowing capacity thereunder. The maturity date of the Amended Credit Facility was May 4, 2022.

•

The New Warrants: As of the Plan Effective Date, the Company agreed to issue new seven-year warrants exercisable on a net-share settled basis into up to 6.0% of the New Equity at a strike price of $27.95 per warrant (the “New Warrants”). New Warrants representing up to 2.0% of the New Equity were issued to existing holders of Predecessor common equity as a result of such holders voting as a class to accept the Restructuring Plan, and the remaining New Warrants representing up to 4.0% of the New Equity were issued to a third-party who acquired them from the representative for the Debtors' general unsecured creditors.

•

Distributions: The DIP Lenders received payment in full in cash on the Plan Effective Date from cash on hand and proceeds from the Rights Offering. The Supporting Lenders received all of the New Equity, subject to dilution on account of the Management Incentive Plan (as defined below), the Rights Offering, the Backstop Fee and the New Warrants, along with all of the subscription rights under the Rights Offering. Under the Restructuring Plan, mineral contractor claimants have or will be paid in full in the ordinary course of business. Additionally, subject to the terms of the Restructuring Plan, certain other unsecured claimants will share in a $33.0 million cash recovery pool, plus a portion of the New Warrants, as described above.


•	Management Incentive Plan: 10.0% of the New Equity was reserved for a management incentive program to be issued to management of the Company after the Plan Effective Date from time to time at the discretion of the board of the reorganized Company (the “Management Incentive Plan”). See Note 5 - Stockholders' Equity for additional information regarding the Management Incentive Plan.


•	Governance: The board of the Successor was appointed by the Supporting Lenders and includes the Successor's Chief Executive Officer.

Liabilities Subject to Compromise

As of December 31, 2016, the Company had segregated liabilities and obligations whose treatment and satisfaction were dependent on the outcome of its reorganization under the Chapter 11 Proceeding and had classified these items as liabilities subject to compromise. Generally, all actions to enforce or otherwise effect repayment of pre-petition liabilities of the Debtors, as well as all pending litigation against the Debtors, were subject to the Chapter 11 Proceeding. Liabilities subject to compromise includes only those liabilities that are obligations of the Debtors and excludes the obligations of the Predecessor's non-debtor subsidiaries.

Principal and accrued interest owed to the Supporting Lenders as of the Petition Date were settled via the issuance of New Equity under the Restructuring Plan. Interest expense incurred subsequent to the Petition Date was not accrued since it was not treated as an allowed claim under the Restructuring Plan. For the year ended December 31, 2016, the Company did not accrue interest totaling $60.5 million under the Original Credit Agreement subsequent to the Petition Date.

As of December 31, 2016, the Company classified the entire principal balance of the Revolving Credit Facility, the Five-Year Term Loans and the Seven-Year Term Loans (see Note 2 - Debt for defined terms), as well as interest that was accrued but unpaid as of the Petition Date, as liabilities subject to compromise in accordance with ASC 852 - Reorganizations. The components of liabilities subject to compromise were as follows:



	December 31, 2016
	(In thousands)
Revolving Credit Facility	$	284,400
Five-Year Term Loans	569,250
Seven-Year Term Loans	480,150
Total debt subject to compromise	1,333,800
Accrued interest on debt subject to compromise	37,516
Accounts payable and other estimated allowed claims	60,780
Related party payables	13,250
Total liabilities subject to compromise	$	1,445,346

101

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reorganization Items

The Company classifies all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 Proceeding as reorganization items in its consolidated statements of operations. In addition, the Company reports professional fees and related costs associated with and incurred during the Chapter 11 Proceeding as reorganization items. The components of reorganization items are as follows:



	Year Ended December 31, 2016			On January 1, 2017
	(In thousands)
Gain on settlement of liabilities subject to compromise	$	—		$	666,399
Net loss on fresh start fair value adjustments	—			(358,557		)
Professional fees	(41,240		)	(13,435		)
Contract termination settlements	(20,383		)	—
Revision of estimated claims	(782		)	—
Related party settlement	5,226			—
Vendor claims adjustment	1,849			(438		)
Total reorganization items	$	(55,330	)	$	293,969

While the Company's emergence from bankruptcy is complete, certain administrative activities will continue under the authority of the Bankruptcy Court until all disputed claims or other matters have been concluded.

Note 15 - Fresh Start Accounting

The Company adopted fresh start accounting under the provisions of ASC 852 on the Plan Effective Date in connection with the Company's emergence from bankruptcy. Although the effective date of the Restructuring Plan was January 6, 2017, the Company accounted for the consummation of the Restructuring Plan as if it had occurred on the Fresh Start Reporting Date, January 1, 2017 and implemented Fresh Start reporting as of that date. The adoption of Fresh Start accounting resulted in a new reporting entity, the Successor, for financial reporting purposes. The presentation is analogous to that of a new business entity such that on the Plan Effective Date the Successor's consolidated financial statements reflect a new capital structure with no beginning retained earnings or deficit and a new basis in the identifiable assets and liabilities assumed which includes the elimination of Predecessor accumulated depreciation and accumulated amortization. Upon the Company's emergence from the Chapter 11 Proceeding, the Company qualified for and adopted Fresh Start accounting in accordance with the provisions set forth in ASC 852 based on the following two conditions: (i) holders of existing voting shares of the Predecessor immediately before the Plan Effective Date received less than 50.0% of the voting shares of the Successor and (ii) the reorganization value of the Successor was less than its post-petition liabilities and estimated allowed claims.

As part of Fresh Start accounting, the Company was required to determine the reorganization value of the Successor upon emergence from the Chapter 11 Proceeding. Reorganization value approximates the fair value of the entity, before considering liabilities, and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. The fair value of the Successor's assets was determined with the assistance of a third-party valuation expert who used available comparable market data and quotations, discounted cash flow analysis, and other methods in determining the appropriate asset fair values. The reorganization value was allocated to the Company's individual assets based on their estimated fair values.

Enterprise value, which was used to derive reorganization value, represents the estimated fair value of an entity’s capital structure which generally consists of long term debt and stockholders’ equity. The Successor’s enterprise value was approved by the Bankruptcy Court in support of the Restructuring Plan and was not to exceed $750.0 million, which represented the mid-point of a determined range of $600.0 million to $900.0 million. The Successor's enterprise value of $750.0 million was based upon $725.9 million of New Equity and New Warrants as approved by the Bankruptcy Court and $24.1 million of other liabilities that were not eliminated or discharged under the Restructuring Plan. The Successor's enterprise value was determined with the assistance of a separate third-party valuation expert who used available comparable market data and quotations, discounted cash flow analysis and other internal financial information and projections. This enterprise value combined with the Company’s Rights Offering was the basis for deriving equity value. The Company’s estimates of fair value are inherently subject to significant uncertainties and contingencies beyond its control. Accordingly,

102

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

there can be no assurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially. Moreover, the market value of the Company’s common stock subsequent to its emergence from bankruptcy may differ materially from the equity valuation derived for accounting purposes.

Machinery and Equipment

The fair value of machinery and equipment was estimated with the assistance of the third-party valuation expert, and the market approach, the cost approach, and the income approach were considered for each individual asset. The market approach and the cost approach were the primary approaches that were relied upon to value these assets. Although the income approach was not applied to value the machinery and equipment assets individually, the Company did consider the earnings of the reporting unit within which each of these assets reside. Because more than one approach was used to develop a valuation, the various approaches were reconciled to determine a final value conclusion.

Under the cost approach, the valuation estimate was based upon a determination of replacement cost new ("RCN"), reproduction cost new ("CRN"), or a combination of both. Once the RCN and CRN estimates were adjusted for physical and functional conditions, they were then compared to market data and other indications of value, where available, to confirm results obtained by the cost approach. Where direct RCN estimates were not available or deemed inappropriate, the CRN for machinery and equipment was estimated using the indirect, or trending, method in which percentage changes in applicable price indices were applied to historical costs to convert them into indications of current costs. To estimate the CRN amounts, inflation indices from established external sources were then applied to historical costs to estimate the CRN for each such asset.

The Company also developed a cost approach when market information was not available, or a market approach was deemed inappropriate. In doing so, an indicated value was derived by deducting physical deterioration from the RCN or CRN of each identifiable asset. Physical deterioration is the loss in value or usefulness of a property due to the using up or expiration of its useful life caused by wear and tear, deterioration, exposure to various elements, physical stresses, and similar factors.

Under the market approach, the valuation estimate was based upon an analysis of recent sales transactions for comparable assets and took into account physical, functional and economic conditions. Where comparable sales transactions could not be reasonably obtained, the Company utilized the percent of cost technique under the market approach, which takes into consideration general sales, sales listings, and auction data for each major asset category. This information was then used in conjunction with each asset’s effective age to develop ratios between the sales price and RCN or CRN of similar asset types. A market-based depreciation curve was then developed and applied to asset categories where sufficient sales and auction information existed.

Economic obsolescence related to machinery and equipment was also considered and was applied to stacked and underutilized assets based upon the status of the asset. Economic obsolescence was also considered in situations in which the earnings of the applicable business segment in which the assets are employed suggest economic obsolescence. When penalizing assets for economic obsolescence, an additional economic obsolescence penalty was levied, while considering scrap value to be the floor value for an asset.

Land, Buildings and Leasehold Improvements

The fair value estimates of the real property assets were estimated with the assistance of the third-party valuation expert, and the market approach, the cost approach, and the income approach were considered for each of the Company's significant real property assets. The Company primarily relied upon the market and cost approaches.

In valuing the fee simple interest in the land, the Company utilized the sales comparison approach under the market approach. The sales comparison approach estimates value based upon the price in which other purchasers and sellers have agreed to transact for comparable properties. This approach is based on the principle of substitution, which states that the limits of prices, rents and rates tend to be set by the prevailing prices, rents and rates of equally desirable substitutes. In conducting the sales comparison approach, data was gathered on comparable properties and adjustments were made for factors including market conditions, size, access/frontage, zoning, location, and conditions of sale. Greatest weight was typically given to the comparable sales in proximity and similar in size to each of the owned sites.

In valuing the fee simple interest in buildings and leasehold improvements, the Company utilized the direct and indirect methods of the cost approach. For the direct method cost approach analysis, the Company first had to determine the RCN. In order to estimate the RCN of the buildings and leasehold improvements, various factors were considered including building size, year built, number of stories, and the breakout of the space, property history, maintenance history, and insurable

103

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value costs. For the indirect method cost approach, the Company first had to estimate a CRN for leasehold improvements being valued via the indirect, or trending, method of the cost approach. To estimate the CRN amounts, the Company applied published inflation indices obtained from third-party sources to each asset’s historical cost to convert the known cost into an indication of current cost.

Once the RCN and CRN of the buildings and leasehold improvements was computed, the Company estimated an allowance for physical depreciation for the buildings and leasehold improvements based upon their respective age.

Intangible Assets

The financial information used to estimate the fair values of intangible assets was consistent with the information used in estimating the Company’s enterprise value. Tradenames were valued primarily utilizing the relief from royalty method of the income approach. Significant inputs and assumptions included remaining useful lives, the forecasted revenue streams, applicable royalty rates, tax rates, and applicable discount rates. Customer relationships were considered in the analysis, but based on the valuation under the excess earnings methodology, no value was attributed to customer relationships.

The following table reconciles the enterprise value to the estimated fair value of the Successor common stock as of the Fresh Start Reporting Date:



	(In thousands)
Enterprise value	$	750,000
Add: Cash and cash equivalents	181,242
Less: Emergence costs settled in cash post-emergence	(5,378		)
Fair value of New Equity and New Warrants, including Rights Offering	925,864
Less: Rights Offering proceeds	(200,000		)
Less: Fair value of New Warrants	(20,385		)
Fair value of Successor common stock, prior to Rights Offering	$	705,479

Shares outstanding on January 1, 2017, prior to Rights Offering shares	39,999,997
Per share value	$	17.64

The following table reconciles the enterprise value to the reorganization value of the Successor assets on the Effective Date:



	(In thousands)
Enterprise value	$	750,000
Add: Cash and cash equivalents	181,242
Less: Emergence costs settled in cash post-emergence	(5,378		)
Add: Other current liabilities	165,501
Add: Other long-term liabilities and deferred tax liabilities	22,666
Reorganization value of Successor assets	$	1,114,031

The following table summarizes the impact of the reorganization and the Fresh Start accounting adjustments on the Company's consolidated balance sheet on the Fresh Start Reporting Date. The reorganization value has been allocated to the assets acquired based upon their estimated fair values, as shown below. The estimated fair values of certain assets and liabilities, including property, plant and equipment, other intangible assets, taxes (including uncertain tax positions), and contingencies required significant judgments and estimates:

104

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Predecessor			Reorganization Adjustments				Fresh Start Adjustments				Successor
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	64,583		$	116,659		(a)	$	—			$	181,242
Accounts receivable	137,222			—				—				137,222
Inventories, net	54,471			—				—				54,471
Prepaid and other current assets	37,392			—				—				37,392
Deferred tax assets	6,020			—				—				6,020
Total current assets	299,688			116,659				—				416,347
Property, plant and equipment, net	950,811			—				(350,314		)	(h)	600,497
Other assets:
Intangible assets, net	76,057			—				(15,657		)	(h)	60,400
Deferred financing costs	—			2,248			(b)	—				2,248
Other noncurrent assets	35,045			—				(506		)	(h)	34,539
Total assets	$	1,361,601		$	118,907			$	(366,477	)		$	1,114,031
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	75,193		$	16,848		(c)	$	—			$	92,041
Payroll and related costs	18,287			—				—				18,287
Accrued expenses	59,129			(5,985		)	(c)	—				53,144
DIP Facility	25,000			(25,000		)	(d)	—				—
Other current liabilities	3,026			—				(997		)	(i)	2,029
Total current liabilities	180,635			(14,137		)		(997		)		165,501
Deferred tax liabilities	15,613			—				(4,613		)	(j)	11,000
Other long-term liabilities	18,577			—				(6,911		)	(i)	11,666
Total liabilities not subject to compromise	214,825			(14,137		)		(12,521		)		188,167
Liabilities subject to compromise	1,445,346			(1,445,346		)	(e)	—				—
Commitments and contingencies
Stockholders' equity:
Common stock	1,195			(640		)	(f)	—				555
Additional paid-in capital	1,009,426			926,504			(f)	(1,010,621		)	(k)	925,309
Accumulated other comprehensive loss	(2,600		)	—				2,600			(k)	—
Retained earnings (deficit)	(1,306,591		)	652,526			(g)	654,065			(l)	—
Total stockholders' equity (deficit)	(298,570		)	1,578,390				(353,956		)	(l)	925,864
Total liabilities and stockholders' equity	$	1,361,601		$	118,907			$	(366,477	)		$	1,114,031

Reorganization adjustments

(a) Represents the reorganization adjustment to cash and cash equivalents:

105

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	(In thousands)
Cash settlement of general unsecured and other reinstated claims	$	(33,898	)
Payment of professional fees and success fees paid	(21,657		)
Repayment of DIP Facility borrowing and accrued interest	(25,538		)
Proceeds from the Rights Offering	200,000
Payment of deferred financing costs related to the New Credit Facility	(2,248		)
Net impact to cash and cash equivalents	$	116,659

(b) Represents deferred loan costs associated with the closing of the New Credit Facility.



	(In thousands)
Accounts payable:
Pre-petition liabilities related to contract cures, 503(b)(9) claims and critical vendors	$	16,848

Accrued expenses:
Settlement of professional fees	$	(10,135	)
Reinstate liability for acquisition holdback	4,100
Settlement of accrued interest related to the DIP Facility	(538		)
Other accrued expenses	588
Net impact to accrued expenses	$	(5,985	)

(d) Represents the repayment of the DIP Facility.

(e) Represents the settlement of liabilities subject to compromise in accordance with the Restructuring Plan:



	(In thousands)
Fair value of Successor common stock	$	(705,479	)
Fair value of New Warrants issued per the Restructuring Plan	(20,385		)
Fair value of reinstated accounts payable and accrued liabilities to be settled in cash	(20,083		)
General unsecured creditor claims settled in cash	(33,000		)
Gain on settlement of liabilities subject to compromise	(666,399		)
Net impact to liabilities subject to compromise	$	(1,445,346	)

(f) Represents the reorganization adjustments to common stock and additional paid in capital:



	(In thousands)
Common stock:
Cancellation of Predecessor common shares	$	(1,195	)
Issuance of Successor common stock	555
Net impact to common stock	$	(640	)

Additional paid in capital:
Fair value of Successor common stock	$	705,479
Fair value of New Warrants issued per the Restructuring Plan	20,385
Proceeds from the Rights Offering	200,000
Cancellation of Predecessor common shares	1,195
Issuance of Successor common stock	(555		)
Net impact to additional paid in capital	$	926,504

106

C&J ENERGY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(g) Represents the reorganization adjustments to retained deficit:



	(In thousands)
Gain on settlement of liabilities subject to compromise	$	666,399
Accrual of success fee	(13,435		)
Adjustment for other expenses	(438		)
Net impact to retained deficit	$	652,526

Fresh Start adjustments

(h) Represents the Fresh Start accounting adjustments based upon the individual asset fair values.

(i) Represents the accelerated recognition of deferred gain balances of the Predecessor.

(j) Represents the tax effect of the above Fresh Start accounting adjustments.

(k) Represents the adjustment to Predecessor additional paid-in capital as a result of the elimination of Predecessor retained deficit and accumulated other comprehensive loss in accordance with ASC 852 .

(l) Represents the income statement impacts of the revaluation loss of $354.0 million, after tax, and the elimination of the resulting retained deficit balance in accordance with ASC 852.

107

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) under the Exchange Act, the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of the end of the period covered by this Annual Report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files under the Exchange Act is accumulated and communicated to its management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective to accomplish their objectives as of December 31, 2018 .

Management’s Report Regarding Internal Control. Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles . As of December 31, 2018 , management , including the Company’s Chief Executive Officer and Chief Financial Officer , assessed the effectiveness of its internal control over financial reporting. Based on their assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2018 . Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management’s report on internal control over financial reporting is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

Changes in Internal Controls Over Financial Reporting. There have been no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

108

Item 9B. Other Information

None.

109

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information About Our Directors and Executive Officers

The information required by this item is incorporated by reference to our definitive proxy statement for our 2019 Annual Meeting of Stockholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31, 2018 .

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

110

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

Our Consolidated Financial Statements and accompanying footnotes are included under Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

(a)(2) Financial Statements Schedules

All other schedules have been omitted because they are either not applicable, not required or the information called for therein appears in the consolidated financial statements or notes thereto or will be filed within the required timeframe.

(a)(2) Exhibits

The following documents are included as exhibits to this Annual Report:




Exhibit No.		Description of Exhibit.

2.1		Second Amended Joint Plan of Reorganization (as Modified) of CJ Holding Company, et al., Pursuant to Chapter 11 of the Bankruptcy Code, dated December 15, 2016 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by C&J Energy Services Ltd. on December 22, 2016).
2.2		Agreement and Plan of Merger dated as of October 25, 2017, among C&J Energy Services, Inc., Caymus Merger Sub, Inc., O-Tex Holdings, Inc., O-Tex Sellers Representative LLC and the Stockholders set forth therein (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on October 26, 2017).
3.1		Amended and Restated Certificate of Incorporation of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K12G3 filed on January 6, 2017).
3.2		Amended and Restated Bylaws of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K12G3 filed on January 6, 2017).
3.3		Certificate of Designation of Series A Participating Cumulative Preferred Stock of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017).
3.4		Certificate of Elimination of Series A Participating Cumulative Preferred Stock of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 9, 2017).
4.1		Form of specimen Warrant certificate (incorporated by reference to Exhibit A of Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017).
4.2		Warrant Agreement, dated as of January 6, 2017, by and between C&J Energy Services, Inc. and American Stock Transfer & Trust Company, LLC, as warrant agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017).
4.3		Stockholders Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017).
4.4		Amendment No. 1 to Stockholders Agreement, dated as of February 27, 2017, by and among C&J Energy Services, Inc. and the parties thereto (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K filed on March 2, 2017).
4.5		Registration Rights Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017).
4.6		Rights Agreement, dated as of January 6, 2017, between C&J Energy Services, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, which includes the Form of Certificate of Designation of Series A Participating Cumulative Preferred Stock of C&J Energy Services, Inc. as Exhibit A, the Summary of Terms of Rights Agreement as Exhibit B and the Form of Right Certificate as Exhibit C (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017).

111



4.7		Amendment No. 1 to the Rights Agreement, dated as of November 7, 2017 between C&J Energy Services, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 9, 2017).
10.1		Amended and Restated Revolving Credit and Security Agreement, dated as of May 4, 2017, by and among C&J Energy Services, Inc., the lenders party thereto and PNC Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form10-Q filed on May 10, 2017).
10.2		Asset-Based Revolving Credit Agreement, dated as of May 1, 2018, among C&J Energy Services, Inc., CJ Holding Co., C&J Spec-Rent Services, Inc., C&J Well Services, Inc., KVS Transportation, Inc., Tiger Cased Hole Services, Inc., each guarantor from time to time party hereto, each lender from time to time party hereto and JPMorgan Chase Bank, N.A., as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 3, 2018).
10.3+		C&J Energy Services, Inc. 2017 Management Incentive Plan. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 13, 2017).
10.4+		First Amendment to the C&J Energy Services, Inc. 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
10.5+		Restricted Share Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
10.6+		Restricted Share Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
10.7+		Restricted Share Agreement (Non-Employee Directors) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
10.8+		Nonqualified Stock Option Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
10.9+		Nonqualified Stock Option Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017).
*10.10+		Performance Share Agreement under the 2017 Management Incentive Plan.
*10.11+		Performance Share Agreement (C&J Employment Agreement - Tier I) under the 2017 Management Incentive Plan.
*10.12+		Performance Share Agreement (C&J Employment Agreement - Tier II) under the 2017 Management Incentive Plan.
*10.13+		Restricted Share Unit Agreement (C&J Employment Agreement - Tier I) under the 2017 Management Incentive Plan.
*10.14+		Restricted Share Unit Agreement (C&J Employment Agreement - Tier II) under the 2017 Management Incentive Plan.
*10.15+		Cash Retention Award Agreement (C&J Employment Agreement - Tier I) under the 2017 Management Incentive Plan.
*10.16+		Cash Retention Award Agreement (C&J Employment Agreement - Tier II) under the 2017 Management Incentive Plan.
10.17		Form of Lockup Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 1, 2017).
*10.18+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Energy Services, Inc. and Michael Galvan.

112



*10.19+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Energy Services, Inc. and Sterling Renshaw.
10.20+		Employment Agreement by and between C&J Energy Services, Inc. and Vic Joyce (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 19, 2017).
10.21+		Employment Agreement dated effective September 17, 2018 by and between C&J Spec-Rent Services, Inc. and Jan Kees van Gaalen (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K/A filed on September 18, 2018).
10.22+		Amended and Restated Employment Agreement dated effective October 25, 2018 by and between C&J Spec-Rent Services, Inc. and Patrick Bixenman (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 25, 2018).
10.23+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Spec-Rent Services, Inc. and Donald Gawick (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 17, 2018).
10.24+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Spec-Rent Services, Inc. and Danielle Hunter (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 17, 2018 ).
*10.25+		Employment Agreement, effective as of December 11, 2018, by and between C&J Energy Services, Inc. and William Driver.
*10.26+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Energy Services, Inc. and Timothy Wallace.
*10.27+		Amended and Restated Employment Agreement, effective as of December 11, 2018, by and between C&J Energy Services, Inc. and Ed Keppler.
10.28+		Waiver and Release Agreement with Mark Cashiola, dated March 20, 2018 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 22, 2018).
14.1		Corporate Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Registrant’s Current Report on Form 8-K filed on December 19, 2017).
14.2		Financial Code of Ethics (incorporated by reference to Exhibit 14.2 to the Registrant’s Current Report on Form 8-K filed on December 19, 2017).
* 21.1		List of Subsidiaries of C&J Energy Services, Inc.
* 23.1		Consent of KPMG LLP
* 31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
* 31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
** 32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
** 32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002



*§101.INS		XBRL Instance Document
*§101.SCH		XBRL Taxonomy Extension Schema Document
* §101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
* §101.LAB		XBRL Taxonomy Extension Label Linkbase Document
* §101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
* §101.DEF		XBRL Taxonomy Extension Definition Linkbase Document



*	Filed herewith

113



**	Furnished, herewith in accordance with Item 601(b)(32) of Regulation S-K. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.



+	Management contract or compensatory plan or arrangement

114

Item 16. Form 10-K Summary.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, this 27th day of February, 2019 .




C&J Energy Services, Inc.

By:		/s/ Donald J. Gawick
		Donald J. Gawick
		Chief Executive Officer, President and Director
		(Principal Executive Officer)

By:		/s/ Jan Kees van Gaalen
		Jan Kees van Gaalen
		Chief Financial Officer
		(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

115




Signatures and Capacities		Date

By:	/s/ Donald J. Gawick	February 27, 2019
	Donald J. Gawick, President and Chief Executive Officer and Director
	(Principal Executive Officer)

By:	/s/ Jan Kees van Gaalen	February 27, 2019
	Jan Kees van Gaalen, Chief Financial Officer
	(Principal Financial Officer)

By:	/s/ Michael S. Galvan	February 27, 2019
	Michael S. Galvan, Chief Accounting Officer and Treasurer
	(Principal Accounting Officer)

By:	/s/ Patrick Murray	February 27, 2019
	Patrick Murray, Director and Chairman of the Board

By:	/s/ Stuart Brightman	February 27, 2019
	Stuart Brightman, Director

By:	/s/ John Kennedy	February 27, 2019
	John Kennedy, Director

By:	/s/ Steven Mueller	February 27, 2019
	Steven Mueller, Director

By:	/s/ Michael Roemer	February 27, 2019
	Michael Roemer, Director

By:	/s/ Michael Zawadzki	February 27, 2019
	Michael Zawadzki, Director

116

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

PERFORMANCE SHARE AGREEMENT

C&J Energy Services, Inc., a Delaware corporation (the “Company”), hereby awards to you (the “Grantee”), as of the date (the “Date of Grant”) set forth on your Bank of America Merrill Lynch “Benefits Online” equity award account (the “Equity Account”), an award of restricted shares subject to performance-based vesting (“Performance-Shares”), consisting of the target number of Performance Shares (the “Target Performance Shares”) set forth in your Equity Account with respect to the Award on that Date of Grant (the “Award”), pursuant to the C&J Energy Services, Inc. 2017 Management Incentive Plan, as may be amended from time to time (the “Plan”). Each Performance Share represents the right to receive one Share; provided, that, depending on the level of performance determined to be attained with respect to the performance conditions described in Section 4, the number of Shares that may be earned hereunder may range from 0% to 200% of the Target Performance Shares then credited to your Equity Account (the “Earned Performance Shares”), which Earned Performance Shares are also subject to satisfaction of the applicable Time-Based Vesting Schedule. The Award is subject to the terms of this Performance Share Agreement (this “Agreement”) and the Plan. The Performance Shares granted hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Date of Grant, pursuant to the terms herein, and shall be subject to the execution and return of this Agreement by the Grantee through the electronic signature and/or web-based approval and notice process authorized by the Company. Capitalized terms used but not defined in this Agreement shall have the meaning attributed to such terms under the Plan, unless the context requires otherwise or unless otherwise provided herein. By executing this Agreement, the Grantee acknowledges that his or her agreement to the covenants set forth in Section 8 is a material inducement to the Company in granting this Award to the Grantee.

The terms and conditions of the Performance Shares granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:

1. No Right to Continued Employee Status or Consultant Service

Nothing contained in this Agreement shall confer upon the Grantee the right to the continuation of his or her Employee status, or, in the case of a Consultant, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or, as applicable, any of its Subsidiaries or other Affiliates to terminate the Grantee’s Business Relationship (as defined in Section 8) at any time.

2. Coordination with Employment Agreement

The parties hereby acknowledge that the Grantee is a party to an employment agreement between the Grantee and the Company (the “Employment Agreement”), which may include provisions governing the treatment of stock options, restricted shares or other equity-based awards granted to the Grantee prior to the effectiveness of this Agreement. The parties acknowledge and agree that to the extent that the Employment Agreement includes provisions in respect of the treatment of stock options, restricted shares or other equity-based awards in the event of termination of employment, a change of control, or other similar event, (i) notwithstanding anything contained in this Agreement to the contrary, such provisions in this Agreement shall govern the treatment of the Performance Shares covered by the Award granted under this Agreement; and (ii) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of this Agreement shall control; provided , however , that to the extent the Employment Agreement includes a definition of “Cause”, “Good Reason”, or “Change of Control”, such term as used in this Agreement shall have the meaning assigned to it in the Employment Agreement. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares or other equity-based awards in the event of termination of employment, a change of control, or other similar event, then the terms of this Agreement shall govern the treatment of the Performance Shares granted hereunder. Nothing herein (including nothing contained in Section 8 herein) will replace any of the Grantee’s obligations to the Company or its Subsidiaries or Affiliates with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation, as all provisions of Section 8 herein are in addition to all commitments and obligations the Grantee has to the Company and any of its Subsidiaries or Affiliates, including all commitments and obligations created by contract, statute and common law.

3. Restrictions; Forfeiture

The Performance Shares are restricted in the sense that they may be forfeited to the Company (the “Forfeiture Restrictions”). You hereby agree that if the Performance Shares are forfeited, as provided in Section 4, the Company shall have the right to deliver the Performance Shares to the Company and/or the Company’s transfer agent for, at the Company’s election, cancellation or transfer to the Company.

4. Vesting Requirements; Effect of Termination of Service

Subject to the terms and conditions of this Agreement and the Plan, the Forfeiture Restrictions on the Performance Shares will lapse and the Performance Shares will vest and become earned subject to the satisfaction of both the time-based vesting schedule set forth herein and the performance-based vesting schedule set forth herein. You will be deemed to satisfy the time-based vesting schedule if you remain continuously employed or continuously provide services to the Company or any of its Affiliates from the Date of Grant through [____________] (the “Time-Based Vesting Schedule”). In addition, the performance-based vesting schedule will be deemed satisfied to the extent the performance goals set forth in Appendix A attached hereto (the “Performance-Based Vesting Schedule”) are satisfied.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination without Cause by the Company or by the Grantee for “Good Reason” (as defined below), then the Time-Based Vesting Schedule will be deemed satisfied with respect to all Performance Shares unvested as of the date of such Termination and such Performance Shares shall continue to vest in accordance with the Performance-Based Vesting Schedule and will become earned and eligible for settlement in accordance with Section 6 within sixty (60) days following the end of the Performance Period subject to the satisfaction of the applicable performance goals.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination due to death or Disability, then the Time-Based Vesting Schedule shall be deemed satisfied with respect to all unvested Performance Shares, and such Performance Shares shall be deemed earned and vested at the Target Level (as defined in Appendix A ) with respect to the Performance-Based Vesting Schedule.

Except as otherwise provided in this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates, then those Performance Shares for which the Grantee has not satisfied the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule as of the date of such Termination shall become null and void and shall be deemed forfeited by the Grantee and, for the avoidance of doubt, the right of the Grantee to earn or receive further vesting of the Performance Shares under the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule shall terminate.

Notwithstanding anything contained herein to the contrary, upon the occurrence of a Change of Control and to the extent the Grantee remains continuously employed by or in a service relationship with the Company or any of its Affiliates until the date of such Change of Control, the Time-Based Vesting Schedule will be deemed satisfied for all Performance Shares unvested as of the consummation of such Change of Control, and such Performance Shares shall be deemed earned and vested at the Target Level (as defined in Appendix A) with respect to the Performance-Based Vesting Schedule, and such Performance Shares will become eligible for settlement in accordance with Section 6 within sixty (60) days following the date of such Change of Control.

Unless otherwise provided herein, for purposes of this Agreement, “Good Reason” shall mean (i) any material reduction in the Grantee’s authority or responsibility other than (A) by reason of the Grantee’s Disability or (B) a Termination for Cause, (ii) permanent relocation of the primary place of the Grantee’s employment more than fifty (50) miles outside of Grantee’s primary place of employment or (iii) a material reduction in the Grantee’s then-effective base salary; provided that, if the Grantee, as of the date of determination, is party to an effective services, severance or employment agreement with the Company or any Subsidiary, “Good Reason” shall have the meaning, if any, specified in such agreement.

5. Restrictions on Transfer

(a) The Performance Shares subject to this Award may not be sold, transferred, assigned, pledged or otherwise disposed of or hypothecated (the “Transfer Restrictions”) while the Performance Shares are subject to the Forfeiture Restrictions. The Transfer Restrictions shall lapse for each Earned Performance Share upon Grantee’s satisfaction of both the Performance-Based Vesting Schedule and the Time-Based Vesting Schedule applicable to such Earned Performance Share.

(b) The foregoing Transfer Restrictions shall not prohibit the sale, transfer or other disposition of such Performance Shares pursuant to a definitive agreement executed by the Company in connection with a Corporate Transaction.

6. Escrow, Delivery of Shares and Restrictive Legend

(a) Certificates or evidence of book-entry Shares representing the Performance Shares shall be issued and held by the Company in escrow and shall remain in the custody of the Company until their delivery to the Grantee or nominee as set forth herein, subject to the Grantee’s delivery of any document which the Committee or Company may, in its discretion, require as a condition to the delivery of Shares to the Grantee or his or her estate, including, but not limited to delivery of a share power, duly endorsed in blank, relating to the Performance Shares.

(b) Certificates or evidence of book-entry Shares representing the Performance Shares which have vested and become Earned Performance Shares and for which the Transfer Restrictions have lapsed pursuant to Section 4 of this Agreement will be delivered to or otherwise made available to the Grantee (or, at the discretion of the Grantee, joint in the names of the Grantee and the Grantee’s spouse) or to the Grantee’s nominee at such person’s request.

(c) The certificates, if any, representing the Earned Performance Shares acquired pursuant to this Award shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or under applicable state and Federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange unless an exemption to such registration or qualification is available and satisfied. The Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(d) Notwithstanding anything contained in the Agreement to the contrary, each Earned Performance Share for which the Time-Based Vesting Schedule and Performance-Based Vesting Schedule has been satisfied shall be settled under this Section 6 as soon as practicable following the end of the Performance Period but in no event later than the day that is sixty (60) days after the last day of the Performance Period.

7. Rights as Shareholder

Upon the issuance and delivery of the Performance Shares to the Grantee and the entry of the Grantee’s name as a shareholder of record on the books of the Company, the Grantee shall be, unless and until such Performance Shares are forfeited pursuant to Section 3 of this Agreement or sold or otherwise disposed of pursuant to Section 5 of this Agreement, entitled to all rights of a common shareholder of the Company, including, without limitation, the right to vote such Performance Shares and the right to receive all dividends or other distributions paid or made with respect thereto; provided , however , that any cash dividends or distributions declared or paid on the Performance Shares by the Company shall be deferred and paid to the Grantee at the same time as the Performance Shares in respect of which such dividends or distributions were made vest and are earned pursuant to this Agreement; provided , further , that any Shares distributed as a dividend or otherwise with respect of any Performance Shares shall be subject to the same Time-Based Vesting Schedule and Performance-Based Vesting Schedule and be subject to the same Transfer Restrictions, and evidenced in the same manner, as such Performance Shares.

8. Prohibited Activities

The Grantee acknowledges and agrees that this Agreement further aligns the Grantee’s interests with the Company’s long-term business interests and that the restrictions contained in this Section 8 are reasonably related to the protection of such business interests, including the preservation of the Company’s goodwill and the protection of the Confidential or Proprietary Information that Grantee has obtained or will obtain in the course of his or her future Business Relationship with the Company. The Grantee further acknowledges and agrees that his or her entry into this Agreement gives rise to an expectation by the Company that the Grantee, as the recipient of the equity securities of the Company and ancillary to this Agreement to provide the Grantee with such securities and Confidential or Proprietary Information during the period of his or her Business Relationship with the Company, will not interfere with or otherwise damage the Company Business, either during the period of the Grantee’s Business Relationship with the Company or thereafter. As an express incentive for the Company to enter into this Agreement and in order to further the Company’s legitimate business interests and interest in granting the Award and entering into this Agreement, the Grantee agrees to the following covenants:

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential or Proprietary Information (other than in the course of the Grantee’s service to the Company or any Subsidiary or other Affiliate, if the Grantee is an Employee, Director or Consultant to the Company or any Subsidiary or other Affiliate) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 5 (a “Prohibited Transfer”) or z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, ridicules, disparages or is otherwise derogatory of the Company or any Subsidiary or other Affiliate, or any employee, officer, director, member or shareholder of any of them (a “Prohibited Disparagement”).

(b)

Return of Property . Upon the Grantee’s Termination for whatever reason, or upon request of the Company or any Subsidiary or other Affiliate prior to the Grantee’s Termination, the Grantee shall promptly deliver to the requesting entity all materials, documents and other property of the Company or any Subsidiary or other Affiliate, including originals and copies of all documents and records (both paper and electronic), computer hardware and software programs, computer files (and all other electronically stored information), media, equipment and other materials containing any of the Company’s, Subsidiary’s, Affiliate’s or any customer’s Confidential or Proprietary Information or any summaries, extracts or derivative works thereof. Such property includes but is not limited to all materials constituting or reflecting Confidential or Proprietary Information.

(c)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company, its Subsidiaries and other Affiliates by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (v) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (w) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Prohibited Transfer, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 8 hereof, (collectively items (v) – (z), “Prohibited Actions”) then, subject to Section 8(c)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any of the following actions:


(i)	The Company may terminate this Award and immediately cancel the Performance Shares for which the Transfer Restrictions have not yet lapsed; and

(ii)

If such Prohibited Action occurs during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination, the Company may recover from the Grantee, and the Grantee shall pay over to the Company, with respect to any Performance Shares on which the Transfer Restrictions lapsed during the period of two (2) years prior to the earlier of the occurrence of the Prohibited Action or the Grantee’s Termination (A) with respect to any such Shares that the Grantee continues to own as of the Forfeiture Notice Date, an amount equal to the aggregate Fair Market Value of such Shares on the Forfeiture Notice Date; and (B) with respect to any such Shares that the Grantee no longer owns as of the Forfeiture Notice Date, an amount equal to either (x) if such Shares were disposed of in an open market transaction, the proceeds received from the disposition of the Shares, or (y) if such Shares were disposed of other than in an open market transaction, the aggregate Fair Market Value of the Shares as of the Forfeiture Notice Date. If the Grantee does not pay such amount over to the Company within twenty (20) days of demand, such amount shall thereafter bear interest at the maximum rate permitted by law and the Grantee shall be liable for all of the Company’s costs of collection, including but not limited to, reasonable legal fees.

(iii)

Notwithstanding anything to the contrary, in the event that a Change of Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change of Control, the Company may take the actions set forth in Sections 8(c)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(d)

Other Remedies . The Grantee specifically acknowledges and agrees that the remedy at law for any breach of this Section 8 will be inadequate and that the Company, in addition to any other relief available to it, shall be entitled at the discretion of the Board to seek temporary and permanent injunctive relief without the necessity of proving actual damage or posting any bond whatsoever. In the event that the provisions of this Section 8 should ever be deemed to exceed the limitation provided by applicable law, then the Grantee and the Company agree that such provisions shall be reformed to set forth the maximum limitations permitted.


(e)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:

(i)

“ Business Relationship ” shall mean service to the Company or any Subsidiary or other Affiliate, or a corporation or parent or subsidiary of such corporation assuming or substituting a new Award for this Award, in the capacity of an Employee, Director or Consultant, as applicable. Without limiting the scope of the preceding sentence, it is expressly provided that the Grantee’s Business Relationship shall be considered to have Terminated at the time of the termination of the “Subsidiary” or “Affiliate” status under the Plan of the entity or other organization that employs the Grantee or to which the Grantee provides services as a Consultant. Any question as to whether and when there has been a Termination of the Grantee’s Business Relationship, and the cause of such Termination, shall be determined by the Committee and its determination shall be final.

(ii)

“ Company Business ” shall mean any business in which the Company or any Subsidiary or other Affiliate is: (x) engaged in during the term of the Grantee’s Business Relationship; or (y) any business in which the Company or any Subsidiary or other Affiliate has undertaken material substantive steps to engage within the twelve (12) month period prior to such Termination, so long as with respect to both prongs (x) and (y) of this sentence, the Grantee had responsibilities with respect to, or Confidential or Proprietary Information about, such business (or anticipated business) prior to the Termination. Without limiting the foregoing, the Company Business shall be deemed to include the well completion and servicing business (including, without limitation, hydraulic fracturing, coiled tubing, pressure pumping, wireline, cementing, pressure testing, pump-down, perforating, pipe recovery and other complementary services), petroleum engineering services (including without limitation services in connection with hydraulic fracture stimulation and reservoir engineering), directional drilling and production services.

(iii)

“ Confidential or Proprietary Information ” shall mean confidential, competitively valuable and/or proprietary information of the Company, its Subsidiaries and other Affiliates and/or its and their Customers (to the extent such information of Customers is provided to the Company, its Subsidiaries or other Affiliates with an expectation of confidentiality), including without limitation all intangible, trade secret and/or intellectual property of the Company, its Subsidiaries and other Affiliates, and all copies, summaries, extracts or derivative works thereof, whether developed prior to the date hereof or hereafter, and whether with the assistance of the Grantee or otherwise. Without limiting the foregoing, Confidential or Proprietary Information shall be deemed to include (u) the Company’s, its Subsidiary’s and other Affiliate’s proprietary computer software, databases and non-public lists of Customers, prospects, candidates, and employees; employee applications; skills inventory sheets and similar summaries of employee qualifications as well as employee compensation; Customer ordering habits, billing rates, buying preferences, and short term needs; sales reports and analysis; (v) employee reports and analysis; Customer job orders and profit margin data; businesses processes, methods of operation and sales techniques; (w) statistical information regarding the Company, its Subsidiaries and other Affiliates; (x) financial information of the Company, its Subsidiaries, other Affiliates and its and their Customers that is not publicly available; (y) specially negotiated terms and pricing with vendors and Customers; and (z) research and development, business projects, strategic business plans and other strategic information and strategies; products and solution services offered to Customers.


(iv)	“ Customer ” shall mean anyone who is a customer of the Company, any Subsidiary or other Affiliate within the Restricted Area during the period of the Grantee’s Business Relationship and as of the Grantee’s Termination.

(v)

“ Permitted Disclosures ” shall mean the disclosure of Confidential or Proprietary Information (v) made with the prior written consent by the Board, (w) required to be made by law or legal process, (x) in a good faith report of possible violations of applicable law to any governmental agency or entity, (y) that is protected under the whistleblower provisions of applicable law, or (z) otherwise permitted as set forth in Section 9 below.

(vi)

“ Restricted Area ” shall mean: (a) during the portion of the Restricted Period prior to the Termination, those geographic areas where the Company or any Subsidiary or other Affiliate conducts the Company Business; and (b) during the portion of the Restricted Period that follows the Termination, those geographic areas within a 100-mile radius of those areas where the Grantee: (X) was based on behalf of the Company, a Subsidiary or other Affiliate; or (Y) performed services on behalf of the Company, a Subsidiary or other Affiliate. For the avoidance of doubt, the Restricted Area shall include (but not be limited to) the applicable areas within the States of Arkansas, Colorado, Idaho, Kansas, Mississippi, Montana, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming, and the following parishes within the State of Louisiana: Bienville, Bossier, Caddo, Caldwell, Claiborne, DeSoto, Harrison, Iberia, Jackson, Lafayette, Lincoln, Natchitoches, Red River, Sabine, St. Helena, St. Martin, Webster, and Winn.


(vii)	“ Restrictive Agreement ” shall mean any agreement between the Company, or any Subsidiary or other Affiliate, and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.

9. Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:

(a)

nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (A) made (x) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (y) solely for the purpose of reporting or investigating a suspected violation of law; (B) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (C) protected under the whistleblower provisions of applicable law;

(b)

in the event Grantee files a lawsuit for retaliation by the Company or any Subsidiary or other Affiliate for the Grantee’s reporting of a suspected violation of law, the Grantee may (i) disclose a trade secret to Grantee’s attorney and (ii) use the trade secret information in the court proceeding related to such lawsuit, in each case, if Grantee (A) files any document containing such trade secret under seal; and (B) does not otherwise disclose such trade secret, except pursuant to court order; and

(c)

nothing herein or any other agreement between Grantee and the Company or any Subsidiary or other Affiliate shall prevent the Grantee from lawfully, and without obtaining prior authorization from the Company or any Subsidiary or other Affiliate: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “SEC”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. This Agreement shall not be construed or applied to require the Grantee to obtain prior authorization from the Company or any Subsidiary or other Affiliate before engaging in any of the foregoing conduct referenced in this Section 8, or to notify the Company or any Subsidiary or other Affiliate of having engaged in any such conduct.

10. Taxation

The Grantee understands that, unless a timely election is made pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), when the Performance Shares are no longer subject to a substantial risk of forfeiture (i.e., generally when the Performance Shares vest), the Grantee will be obligated to recognize income, for Federal, state and local income tax purposes, as applicable, in an amount equal to the Fair Market Value of the Shares, determined as of the date the Performance Shares are no longer subject to a substantial risk of forfeiture. The acceptance of the Shares by the Grantee shall constitute an agreement by the Grantee to report such income in accordance with then applicable law and to cooperate with the Company and its Subsidiaries in establishing the amount of such income and corresponding deduction to the Company and/or its Subsidiaries for its income tax purposes.

The Grantee is responsible for all tax obligations that arise in connection with the Performance Shares. The Company may withhold from any amount payable to the Grantee an amount sufficient to cover any Federal, state, foreign or local withholding taxes which may become required with respect to the vesting of the Performance Shares (“ Tax Obligations ”) or take any other action it deems necessary to satisfy any income or other tax withholding requirements as a result of the vesting of the Award. The Company shall have the right to require the payment of any such taxes and require that the Grantee furnish information deemed necessary by the Company to meet any tax reporting obligation as a condition to issuing and releasing any Shares pursuant to the Award. The Committee, in its discretion (which such discretion, if the Grantee is a “statutory insider” within the meaning of Section 16(a) of the Exchange Act, may not be delegated to management), may allow the Grantee to pay his or her Tax Obligations in connection with the vesting of the Performance Shares by (x) making a cash payment to the Company, (y) permitting the surrender or net withholding of a portion of the Shares that have become vested, or (z) surrendering Shares owned by the Grantee prior to vesting of the Award, in each case having an aggregate Fair Market Value equal to the Tax Obligations; provided, that if the Shares are not listed for trading on a national stock exchange when the Tax Obligations become due, the Grantee may cause the Company to purchase (or withhold) a number of Shares otherwise issuable to the Grantee having a Fair Market Value sufficient to satisfy the Tax Obligations.

The Grantee hereby acknowledges that, with respect to the grant of Performance Shares pursuant to this Award, he or she may file an election with the Internal Revenue Service, within thirty (30) days of the Date of Grant, under Section 83(b) of the Code to be taxed on the Fair Market Value of the Performance Shares as of the Date of Grant. The Grantee will seek the advice of his own tax advisors as to the advisability of making such a Section 83(b) election, the potential consequences of making such an election, the requirements for making such an election, and the other tax consequences of his Award under Federal, state, and any other laws that may be applicable. The Company and its agents have not and are not providing any tax advice to the Grantee.

11. Securities Laws

Upon the acquisition of the Performance Shares, the Grantee will make such written representations, warranties, and agreements as the Committee may reasonably request in order to comply with securities laws or with this Agreement. The obligation of the Company to issue and deliver the Performance Shares granted hereunder shall be subject to all applicable laws, rules and regulations, and such approvals by governmental agencies as may be required. The Grantee hereby agrees not to offer, sell or otherwise attempt to dispose of any Shares issued to the Grantee pursuant to this Agreement in any way which would: (x) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law or the laws of any other county) or to amend or supplement any such filing or (y) violate or cause the Company to violate the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, or any other Federal, state or local law, or the laws of any other country.

12. Notices

Unless otherwise provided herein, any notices or other communication given or made pursuant to this Agreement or the Plan shall be in writing and shall be deemed to have been duly given (i) as of the date delivered, if personally delivered (including receipted courier service) or overnight delivery service, with confirmation of receipt; (ii) on the date the delivering party receives confirmation, if delivered by facsimile to the number indicated or by email to the address indicated or through an electronic administrative system designated by the Company; (iii) one (1) business day after being sent by reputable commercial overnight delivery service courier, with confirmation of receipt; or (iv) three (3) business days after being mailed by registered or certified mail, return receipt requested, postage prepaid and addressed (a) if to the Company, to the Company’s Legal Department and (b) if to the Grantee, at the most recent address, facsimile number or email contained in the Company’s records.

13. Agreement Subject to Plan and Applicable Law

This Award is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. The Plan shall control in the event there shall be any conflict between the Plan and this Agreement, and it shall control as to any matters not contained in this Agreement. The Committee shall have authority to make constructions of this Agreement, and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

This Award shall be governed by the laws of the State of Delaware, without regard to the conflicts of law principles thereof. Delaware has a substantial relationship to the parties and transaction reflected herein and, in signing below, the Grantee acknowledges and agrees that there is a reasonable basis for the choice of Delaware law, as Delaware law is known to the parties and well-developed with respect to the subject matters of this Agreement. The designation of Delaware law and the interpretation and application of this Agreement consistent with principles of Delaware law assures uniformity, certainty and predictability in the application of the Agreement and the Plan through which the Award is granted. The Grantee hereby consents to personal jurisdiction in any action brought in any court, Federal or state, within the State of Texas having subject matter jurisdiction in the matter.

14. Headings and Capitalized Terms

Unless otherwise provided herein, capitalized terms used herein that are defined in the Plan and not defined herein shall have the meanings set forth in the Plan. Headings are for convenience only and are not deemed to be part of this Agreement. Unless otherwise indicated, any reference to a Section herein is a reference to a Section of this Agreement.

15. Severability and Reformation

If any provision of this Agreement (or part thereof) shall be determined by a court of law to be unenforceable for any reason, such unenforceability shall not affect the enforceability of any of the remaining provisions hereof (or parts thereof), as such unenforceable provision (or part thereof) shall be severable and this Agreement, to the fullest extent lawful, shall be reformed and construed as if such unenforceable provision, or part thereof, had never been contained herein, and such provision or part thereof shall be reformed or construed so that it would be enforceable to the maximum extent legally possible.

16. Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.

17. Entire Agreement

This Agreement supersedes all prior written and oral agreements and understandings among the parties as to its subject matter and constitutes the entire agreement of the parties with respect to the subject matter hereof, except to the extent that the Plan may be considered to address the subject matter hereof. Notwithstanding the foregoing, this Agreement shall be in addition to, and shall not supersede or replace, any other Restrictive Agreements. If there is any conflict between this Agreement and the Plan, then the applicable terms of the Plan shall govern.

18. Waiver

Waiver by any party of any breach of this Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right whether or not of the same or a similar nature. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.

APPENDIX A

PERFORMANCE VESTING REQUIREMENTS

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

PERFORMANCE SHARE AGREEMENT

(C&J Employment Agreement – Tier I)

The terms and conditions of the Performance Shares granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:

1. No Right to Continued Employee Status or Consultant Service

2. Coordination with Employment Agreement

provisions in respect of the treatment of stock options, restricted stock units, restricted shares, performance shares or other equity-based awards in the event of termination of employment, a change of control, or other similar event, (i) notwithstanding anything contained in this Agreement to the contrary, such provisions in the Employment Agreement shall govern the treatment of the Performance Shares covered by the Award granted under this Agreement; and (ii) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted stock units, restricted shares, performance shares or other equity-based awards in the event of termination of employment, a change of control, or other similar event, then the terms of this Agreement shall govern the treatment of the Performance Shares granted hereunder. Nothing herein (including nothing contained in Section 8 herein) will replace any of the Grantee’s obligations to the Company or its Subsidiaries or Affiliates with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation, as all provisions of Section 8 herein are in addition to all commitments and obligations the Grantee has to the Company and any of its Subsidiaries or Affiliates, including all commitments and obligations created by contract, statute and common law.

3. Restrictions; Forfeiture

4. Vesting Requirements; Effect of Termination of Service

Subject to the terms and conditions of this Agreement and the Plan, the Forfeiture Restrictions on the Performance Shares will lapse and the Performance Shares will vest and become earned subject to the satisfaction of both the time-based vesting schedule set forth herein and the performance-based vesting schedule set forth herein. You will be deemed to satisfy the time-based vesting schedule if you remain continuously employed or continuously provide services to the Company or any of its Affiliates from the Date of Grant through [__________] (the “Time-Based Vesting Schedule”). In addition, the performance-based vesting schedule will be deemed satisfied to the extent the performance goals set forth in Appendix A attached hereto (the “Performance-Based Vesting Schedule”) are satisfied.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination without Cause (as defined in Section 8(g)) by the Company or by the Grantee for Good Reason (as defined in Section 8(g)), then (A) to the extent that the Termination Date (as defined in Section 8(g)) occurs within the first half of the Performance Period (as defined in Appendix A), the Time-Based Vesting Schedule shall be deemed satisfied with respect to all unvested Performance Shares, and such Performance Shares shall be deemed earned and vested at the Target Level (as defined in Appendix A) with respect to the Performance-Based Vesting Schedule or (B) to the extent that the Termination Date occurs within the second half of the Performance Period, the Time-Based Vesting Schedule will be deemed satisfied with respect to all Performance Shares unvested as of the Termination Date and such Performance Shares shall become earned and eligible for settlement in accordance with Section 6 within sixty (60) days following the Termination

Date subject to the satisfaction of the applicable performance goals based on actual performance with respect to the Performance-Based Vesting Schedule measured through the Termination Date.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination due to death or Disability (as defined in Section 8(g)), then the Time-Based Vesting Schedule shall be deemed satisfied with respect to all unvested Performance Shares, and such Performance Shares shall be deemed earned and vested at the Target Level with respect to the Performance-Based Vesting Schedule and shall be eligible for settlement in accordance with Section 6 within sixty (60) days following the Termination Date.

Except as otherwise provided in this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates, then those Performance Shares for which the Grantee has not satisfied the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule as of the Termination Date shall become null and void and shall be deemed forfeited by the Grantee and, for the avoidance of doubt, the right of the Grantee to earn or receive further vesting of the Performance Shares under the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule shall terminate.

Notwithstanding anything contained herein to the contrary, upon the occurrence of a Change of Control (as defined in Section 8(g)) and to the extent the Grantee remains continuously employed by or in a service relationship with the Company or any of its Affiliates until the date of such Change of Control, the Time-Based Vesting Schedule will be deemed satisfied for all Performance Shares unvested as of the consummation of such Change of Control, and such Performance Shares shall be deemed earned and vested at the Target Level with respect to the Performance-Based Vesting Schedule, and such Performance Shares will become eligible for settlement in accordance with Section 6 within sixty (60) days following the date of such Change of Control.

5. Restrictions on Transfer

6. Escrow, Delivery of Shares and Restrictive Legend

(d) Notwithstanding anything contained in the Agreement to the contrary, each Earned Performance Share for which the Time-Based Vesting Schedule and Performance-Based Vesting Schedule has been satisfied shall be settled under this Section 6 as soon as practicable following the end of the Performance Period (or, if applicable, such shorter period as set forth in this Agreement) but in no event later than the day that is sixty (60) days after the last day of the Performance Period (or, if applicable, such shorter period as set forth in this Agreement).

7. Rights as Shareholder

8. Prohibited Activities

the Grantee with such securities and Confidential or Proprietary Information during the period of his or her Business Relationship with the Company, will not interfere with or otherwise damage the Company Business, either during the period of the Grantee’s Business Relationship with the Company or thereafter. As an express incentive for the Company to enter into this Agreement and in order to further the Company’s legitimate business interests and interest in granting the Award and entering into this Agreement, the Grantee agrees to the following covenants:

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential or Proprietary Information (other than in the course of the Grantee’s service to the Company or any Subsidiary or other Affiliate, if the Grantee is an Employee, Director or Consultant of or to the Company or any Subsidiary or other Affiliate) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 5 (a “Prohibited Transfer”) or z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, ridicules, disparages or is otherwise derogatory of the Company or any Subsidiary or other Affiliate, or any employee, officer, director, member or shareholder of any of them (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

Exception Within Certain States . Notwithstanding the restrictions contained in Section 8(b) within those areas of the State of Oklahoma that are within the Restricted Area (the “Oklahoma Restricted Area”), the restrictions in Section 8(b) shall not apply after the Termination Date; provided, however, that at no point during the Restricted Period shall the Grantee: (x) within the Oklahoma Restricted Area, solicit goods, services or a combination of goods and services from any established customer of the Company, or another member of the Company Group for which the Grantee had performed services or (y) directly or indirectly, solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfere with or raid the employees of any member of the Company Group. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 8(b) shall not apply following the Termination Date, and during the portion of the Restricted Period that follows the Termination Date, Section 8(b) shall be applied within the States of California and North Dakota only to prohibit the Grantee from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfering with or raiding the employees of any member of the Company Group.

(d)

(e)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company, its Subsidiaries and other Affiliates by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (t) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (u) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (v) the Grantee engages in any Prohibited Transfer, or (w) the Grantee engages in any Prohibited Solicitation during the Restricted Period or breaches or violates any non-solicitation obligations under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Competitive Activity during the Restricted Period or breaches or violates any non-competition obligations under any Restrictive Agreement to which the Grantee is a party, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 8 hereof, (collectively items (t) – (z), “Prohibited Actions”) then, subject to Section 8(e)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any of the following actions:


(i)	The Company may terminate this Award and immediately cancel the Performance Shares for which the Transfer Restrictions have not yet lapsed; and

(ii)

market transaction, the proceeds received from the disposition of the Shares, or (y) if such Shares were disposed of other than in an open market transaction, the aggregate Fair Market Value of the Shares as of the Forfeiture Notice Date. If the Grantee does not pay such amount over to the Company within twenty (20) days of demand, such amount shall thereafter bear interest at the maximum rate permitted by law and the Grantee shall be liable for all of the Company’s costs of collection, including but not limited to, reasonable legal fees.

(iii)

Notwithstanding anything to the contrary, in the event that a Change of Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change of Control, the Company may take the actions set forth in Sections 8(e)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(f)


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:

(i)

(ii)

“ Cause ” shall mean the Grantee’s (A) willful and continued failure to substantially perform, without proper legal justification (and not due to Disability), his or her duties and responsibilities to the Company or any other member of the Company Group; (B) any material breach of any written agreement between the Grantee and the Company or any other member of the Company Group (including this Agreement); (C) any

material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct, or workplace rules established by any member of the Company Group and applicable to the Grantee; (D) any conduct in connection with such Grantee’s performance of his or her duties or services to the Company or any other member of the Company Group that is (x) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (y) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (E) commission of, or indictment, conviction, admission, or plea of guilty or nolo contendere for or to, a charge of any felony (or state law equivalent) or any crime involving moral turpitude; provided that, in the case of any Grantee who, as of the date of determination, is party to the Employment Agreement or an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Cause” shall have the meaning, if any, specified in such agreement.


(iii)	“ Change in Control ” means the occurrence of any of the following events after the Date of Grant:

any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Holder, acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities; provided, however, that if the Company engages in a merger or consolidation in which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity;

a change in the composition of the Board such that the “Continuing Directors” cease for any reason, other than due to ordinary course retirement, death, disability, term limit or any director refreshment or similar policy, to constitute at least seventy percent (70%) of the Board. The “Continuing Directors” shall mean those members of the Board who either: (x) were directors on the Date of Grant; or (y) were subsequently elected by, or on the nomination or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Board who were or become Continuing Directors;


C.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


D.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


E.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

provided, however, if a Change in Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A, a transaction or event described in paragraph (A), (B), (C), (D) or (E) shall constitute a Change in Control only if such transaction or event constitutes a “change in control event” as defined in Treasury Regulation Section l .409A-3(i)(5).

(iv)

“ Company Business ” shall mean (A) any business in which any member of the Company Group is engaged during the term of the Grantee’s Business Relationship and for which the Grantee has (or has had) responsibilities or about which the Grantee obtained Confidential Information; provided, however , the definition of “Company Business” shall not include any business in which the Company Group no longer engages or no longer has any plans to engage in as of the Termination Date; and (B) any other business in which any member of the Company Group has undertaken material steps to engage within the twelve (12) month period prior to the Termination Date, so long as the Grantee had material responsibility for, or Confidential Information about, such anticipated business. Without limiting the foregoing, the definition of “Company Business” shall be deemed to include the businesses of well construction and intervention services (including cementing and coiled tubing services), well completion services (including hydraulic fracturing and related stimulation services, cased-hole wireline, pressure pumping and pump-down, perforating, pressure testing, and logging services), and well support services (including workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(v)

registered under the Exchange Act in any entity engaged in the Company Business, provided that neither the Grantee nor his or her affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation and (y) those equity investments owned by the Grantee as of the date of this Agreement as previously disclosed in writing by the Grantee to and agreed by the Company.

(vi)

“ Confidential Information ” shall mean all trade secrets and other confidential, proprietary, or non-public information in any form (tangible or intangible) that relates to the Company, or any other member of the Company Group, including all: (A) proprietary computer software or databases; (B) non-public lists of customers, prospects, candidates, and employees; employee applications; skills inventory sheets and similar summaries of employee qualifications; customer ordering habits, billing rates, buying preferences, and short term needs; sales reports and analysis; (C) employee reports and analysis; customer job orders and profit margin data; businesses processes, methods of operation and sales techniques; (D) statistical information, financial information that is not publicly available; (E) specially negotiated terms and pricing with vendors and customers; (F) research and development, business projects, strategic business plans and other strategic information and strategies, and products and solution services offered to customers; (G) intellectual property of any member of the Company Group and all summaries, extracts, or derivative works thereof; and (H) all other information that gives any member of the Company Group a competitive advantage by virtue of not being known by its competitors. Moreover, “Confidential Information” includes confidential information of the Company Group’s suppliers, licensors, licensees, customers or other third parties that have supplied such information to a member of the Company Group, subject to a duty on the part of such member of the Company Group to maintain the confidentiality of such information.

(vii)

“ Disability ” shall mean a physical or mental impairment that renders the Grantee incapable of performing the Grantee’s essential duties pursuant to the Business Relationship (after accounting for reasonable accommodation, if applicable and required by applicable law) for a period in excess of six (6) months during any consecutive twelve (12) month period; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Disability” shall have the meaning, if any, specified in such agreement.

(viii)

“ Good Reason ” shall mean the Grantee’s resignation from the Business Relationship within one hundred twenty (120) days of the initial occurrence of any one of the following events (without the Grantee’s consent), provided that the Grantee provided written notice to Spec-Rent of such event within thirty (30) days after the initial occurrence of such event and Spec-Rent did not remedy the condition that has been the subject of such written notice within thirty (30) days after its receipt of such notice: (A) any material reduction in the Grantee’s authority, duties or responsibilities,

including the Grantee’s removal from the position and title with the Company specified in the Employment Agreement, in each instance other than (x) by reason of the Grantee’s Disability or (y) as a result of any member of the Company Group’s actions arising from or following any allegation that: (1) the Grantee’s conduct has caused (or could reasonably be expected to cause) material damage to any member of the Company Group, or (2) the Grantee has committed an act or omission that constitutes Cause; (B) a reduction in the Grantee’s then-effective base salary (other than in connection with an immaterial reduction that applies to all similarly situated executives or that occurs as a result of, or following an allegation that (x) Grantee’s conduct has caused (or reasonably could be expected to cause) material damage to any member of the Company Group or (y) the Grantee committed an act or omission that constitutes Cause; provided that, if the Grantee, as of the date of determination, is party to the Employment Agreement or an effective services, severance or employment agreement with the Company or any other member of the Company Group, “Good Reason” shall have the meaning, if any, specified in such agreement.

(ix)

(x)

“ Prohibited Solicitation ” shall mean, on the Grantee’s own behalf or on behalf of any other Person, soliciting, raiding, enticing or inducing, directly or indirectly, any employee of the Company or any other Person who is under contract with the Company (or other member of the Company Group) to (A) terminate such Person’s employment by, or contractual relationship with, such member of the Company Group, (B) refrain from extending or renewing the same contract (upon the same or new terms), (C) refrain from rendering services to or for any member of the Company Group, or (D) become employed by or enter into a service relationship with a competitor of any member of the Company Group.

(xi)

“ Restricted Area ” shall mean: (A) during the portion of the Restricted Period prior to the Termination Date, the world; and (B) during the portion of the Restricted Period that occurs following the Termination Date, those geographic areas specified on Appendix B, and any additional areas in which any member of the Company Group has taken material steps as of the Termination Date, with the Grantee’s assistance, in preparation of conducting the Company Business.


(xii)	“ Restrictive Agreement ” shall mean any agreement between the Company, or any Subsidiary or other Affiliate, and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xiii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.

9. Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:

(a)

(b)

(c)

10. Taxation

The Grantee understands that, unless a timely election is made pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), when the Performance Shares are no longer

subject to a substantial risk of forfeiture (i.e., generally when the Performance Shares vest), the Grantee will be obligated to recognize income, for Federal, state and local income tax purposes, as applicable, in an amount equal to the Fair Market Value of the Shares, determined as of the date the Performance Shares are no longer subject to a substantial risk of forfeiture. The acceptance of the Shares by the Grantee shall constitute an agreement by the Grantee to report such income in accordance with then applicable law and to cooperate with the Company and its Subsidiaries in establishing the amount of such income and corresponding deduction to the Company and/or its Subsidiaries for its income tax purposes.

11. Securities Laws

or (y) violate or cause the Company to violate the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, or any other Federal, state or local law, or the laws of any other country.

12. Notices

13. Agreement Subject to Plan and Applicable Law

14. Headings and Capitalized Terms

15. Severability and Reformation

provisions hereof (or parts thereof), as such unenforceable provision (or part thereof) shall be severable and this Agreement, to the fullest extent lawful, shall be reformed and construed as if such unenforceable provision, or part thereof, had never been contained herein, and such provision or part thereof shall be reformed or construed so that it would be enforceable to the maximum extent legally possible.

16. Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.

17. Entire Agreement

This Agreement and the Employment Agreement supersede all prior written and oral agreements and understandings among the parties as to its subject matter and constitute the entire agreement of the parties with respect to the subject matter hereof, except to the extent that the Plan may be considered to address the subject matter hereof. Notwithstanding the foregoing, this Agreement shall be in addition to, and shall not supersede or replace, any other Restrictive Agreements. If there is any conflict between this Agreement and the Plan, then the applicable terms of the Plan shall govern.

18. Waiver

APPENDIX A

PERFORMANCE VESTING REQUIREMENTS

APPENDIX A

APPENDIX B

RESTRICTED AREA LIST

A-2

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

PERFORMANCE SHARE AGREEMENT

(C&J Employment Agreement – Tier II)

The terms and conditions of the Performance Shares granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:

1. No Right to Continued Employee Status or Consultant Service

2. Coordination with Employment Agreement ⁽¹⁾

The parties hereby acknowledge that the Grantee is a party to an employment agreement between the Grantee and C&J Spec-Rent Services, Inc. (the “Employment Agreement”), which may include provisions governing the treatment of stock options, restricted shares or other equity-based awards granted to the Grantee prior to the effectiveness of this Agreement. The parties acknowledge and agree that to the extent that the Employment Agreement includes provisions in respect of the treatment of stock options, restricted shares

or other equity-based awards in the event of termination of employment, a change of control, or other similar event, (i) notwithstanding anything contained in this Agreement to the contrary, such provisions in the Employment Agreement shall govern the treatment of the Performance Shares covered by the Award granted under this Agreement; and (ii) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares or other equity-based awards in the event of termination of employment, a change of control, or other similar event, then the terms of this Agreement shall govern the treatment of the Performance Shares granted hereunder. Nothing herein (including nothing contained in Section 8 herein) will replace any of the Grantee’s obligations to the Company or its Subsidiaries or Affiliates with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation, as all provisions of Section 8 herein are in addition to all commitments and obligations the Grantee has to the Company and any of its Subsidiaries or Affiliates, including all commitments and obligations created by contract, statute and common law.

3. Restrictions; Forfeiture

4. Vesting Requirements; Effect of Termination of Service

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination without Cause (as defined in Section 8(g)) by the Company, then the Time-Based Vesting Schedule will be deemed satisfied with respect to a number of unvested Performance Shares equal to the result of (A) the total number of Performance Shares multiplied by (B) a fraction, the numerator of which is the number of full months (counting the month in which the Termination Date occurs as a full month) in which the Grantee was employed during the Performance Period (as defined in Appendix A) and the denominator of which is the number of full months in the Performance Period and such reduced number of Performance Shares shall continue to

⁽¹⁾ So long as the Amended and Restated Employment Agreement dated effective October 25, 2018 by and between C&J Spec-Rent Services, Inc. and Patrick Bixenman is in effect (without further amendment), this Agreement, not such Amended and Restated Employment Agreement, will govern and control the treatment of any awards granted to Mr. Bixenman under this Agreement.

vest in accordance with the Performance-Based Vesting Schedule and will become earned and eligible for settlement in accordance with Section 6 within sixty (60) days following the Termination Date subject to the satisfaction of the applicable performance goals based on actual performance with respect to the Performance-Based Vesting Schedule measured through the Termination Date.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination due to death or Disability (as defined in Section 8(g)), then the Time-Based Vesting Schedule shall be deemed satisfied with respect to all unvested Performance Shares, and such Performance Shares shall be deemed earned and vested at the Target Level (as defined in Appendix A) with respect to the Performance-Based Vesting Schedule and shall be eligible for settlement in accordance with Section 6 within sixty (60) days following the Termination Date.

Except as otherwise provided in this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates, then those Performance Shares for which the Grantee has not satisfied the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule as of the Termination Date (as defined in Section 8(g)) shall become null and void and shall be deemed forfeited by the Grantee and, for the avoidance of doubt, the right of the Grantee to earn or receive further vesting of the Performance Shares under the Time-Based Vesting Schedule or the Performance-Based Vesting Schedule shall terminate.

Notwithstanding anything contained herein to the contrary, upon the Grantee’s Termination without Cause by the Company that occurs within one year following a Change of Control, the Time-Based Vesting Schedule will be deemed satisfied for a number of unvested Performance Shares equal to the result of (A) the total number of Performance Shares multiplied by (B) a fraction, the numerator of which is the number of full months (counting the month in which the Termination Date occurs as a full month) in which the Grantee was employed during the Performance Period and the denominator of which is the number of full months in the Performance Period, and such reduced number of Performance Shares shall be deemed earned and vested at the Target Level with respect to the Performance-Based Vesting Schedule, and such Performance Shares will become eligible for settlement in accordance with Section 6 within sixty (60) days following the Termination Date.

5. Restrictions on Transfer

6. Escrow, Delivery of Shares and Restrictive Legend

(d) Notwithstanding anything contained in the Agreement to the contrary, each Earned Performance Share for which the Time-Based Vesting Schedule and Performance-Based Vesting Schedule has been satisfied shall be settled under this Section 6 as soon as practicable following the end of the Performance Period (or, if applicable, such shorter period as set forth in this Agreement) but in no event later than the day that is sixty (60) days after the last day of the Performance Period (or, if applicable, such shorter period as set forth in this Agreement).

7. Rights as Shareholder

Time-Based Vesting Schedule and Performance-Based Vesting Schedule and be subject to the same Transfer Restrictions, and evidenced in the same manner, as such Performance Shares.

8. Prohibited Activities

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential or Proprietary Information (other than in the course of the Grantee’s service to the Company or any Subsidiary or other Affiliate, if the Grantee is an Employee, Director or Consultant of or to the Company or any Subsidiary or other Affiliate) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 5 (a “Prohibited Transfer”) or z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, ridicules, disparages or is otherwise derogatory of the Company or any Subsidiary or other Affiliate, or any employee, officer, director, member or shareholder of any of them (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfere with or raid the employees of any member of the Company Group. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 8(b) shall not apply following the Termination Date, and during the portion of the Restricted Period that follows the Termination Date, Section 8(b) shall be applied within the States of California and North Dakota only to prohibit the Grantee from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfering with or raiding the employees of any member of the Company Group.

(d)

(e)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company, its Subsidiaries and other Affiliates by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (t) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (u) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (v) the Grantee engages in any Prohibited Transfer, or (w) the Grantee engages in any Prohibited Solicitation during the Restricted Period or breaches or violates any non-solicitation obligations under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Competitive Activity during the Restricted Period or breaches or violates any non-competition obligations under any Restrictive Agreement to which the Grantee is a party, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 8 hereof, (collectively items (t) – (z), “Prohibited Actions”) then, subject to Section 8(e)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any of the following actions:


(i)	The Company may terminate this Award and immediately cancel the Performance Shares for which the Transfer Restrictions have not yet lapsed; and

(ii)

(iii)

Notwithstanding anything to the contrary, in the event that a Change of Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change of Control, the Company may take the actions set forth in Sections 8(e)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(f)


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:


(i)	“ Business Relationship ” shall mean service to the Company or any Subsidiary or other Affiliate, or a corporation or parent or subsidiary of such corporation assuming or substituting a new Award for this Award, in the capacity of an Employee, Director or Consultant, as applicable. Without limiting the scope of the preceding sentence, it is

expressly provided that the Grantee’s Business Relationship shall be considered to have Terminated at the time of the termination of the “Subsidiary” or “Affiliate” status under the Plan of the entity or other organization that employs the Grantee or to which the Grantee provides services as a Consultant. Any question as to whether and when there has been a Termination of the Grantee’s Business Relationship, and the cause of such Termination, shall be determined by the Committee and its determination shall be final.

(ii)


(iii)	“ Change in Control ” means the occurrence of any of the following events after the Date of Grant:


ii.	a change in the composition of the Board such that the “Continuing Directors” cease for any reason, other than due to ordinary course retirement, death, disability, term

limit or any director refreshment or similar policy, to constitute at least seventy percent (70%) of the Board. The “Continuing Directors” shall mean those members of the Board who either: (x) were directors on the Date of Grant; or (y) were subsequently elected by, or on the nomination or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Board who were or become Continuing Directors;


iii.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


iv.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


v.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;


(iv)	provided, however, if a Change in Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A, a transaction or event described in paragraph (A), (B), (C), (D) or (E) shall constitute a Change in Control only if such transaction or event constitutes a “change in control event” as defined in Treasury Regulation Section l .409A-3(i)(5).

(v)

(vi)

“ Competitive Activity ” shall mean carrying on or engaging in the Company Business in the Restricted Area in competition with any member of the Company Group, including carrying on or engaging in any activities in which the Grantee, in the Restricted Area during the Restricted Period, directly or indirectly, (A) owns, manages, operates, controls, or is an officer or director of any Person (other than a member of the Company Group) that engages in the Company Business, or (B) joins, becomes an employee or consultant of, or otherwise connected with any Person (other than a member of the Company Group) that engages in the Company Business in any capacity (with respect to the this clause (B)) in which the Grantee’s duties are the same or similar to those duties performed by the Grantee for any member of the Company Group; provided, however, that, notwithstanding the forgoing, the Grantee or any of his or her affiliates may own (x) less than five percent (5%) of any equity security registered under the Exchange Act in any entity engaged in the Company Business, provided that neither the Grantee nor his or her affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation and (y) those equity investments owned by the Grantee as of the date of this Agreement as previously disclosed in writing by the Grantee to and agreed by the Company.

(vii)


(viii)	“ Disability ” shall mean a physical or mental impairment that renders the Grantee incapable of performing the Grantee’s essential duties pursuant to the Business Relationship (after accounting for reasonable accommodation, if applicable and

required by applicable law) for a period in excess of six (6) months during any consecutive twelve (12) month period; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Disability” shall have the meaning, if any, specified in such agreement.

(ix)

(x)

(xi)


(xii)	“ Restrictive Agreement ” shall mean any agreement between the Company, or any Subsidiary or other Affiliate, and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xiii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.

9. Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:


(a)	nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally

or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (A) made (x) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (y) solely for the purpose of reporting or investigating a suspected violation of law; (B) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (C) protected under the whistleblower provisions of applicable law;

(b)

(c)

10. Taxation

11. Securities Laws

governmental agencies as may be required. The Grantee hereby agrees not to offer, sell or otherwise attempt to dispose of any Shares issued to the Grantee pursuant to this Agreement in any way which would: (x) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law or the laws of any other county) or to amend or supplement any such filing or (y) violate or cause the Company to violate the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, or any other Federal, state or local law, or the laws of any other country.

12. Notices

13. Agreement Subject to Plan and Applicable Law

14. Headings and Capitalized Terms

15. Severability and Reformation

16. Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.

17. Entire Agreement

18. Waiver

APPENDIX A

PERFORMANCE VESTING REQUIREMENTS

APPENDIX A

APPENDIX B

RESTRICTED AREA LIST

APPENDIX B

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

RESTRICTED SHARE UNIT AGREEMENT

(C&J Employment Agreement – Tier I)

C&J Energy Services, Inc., a Delaware corporation (the “Company”), hereby awards to you (the “Grantee”), as of the date (the “Date of Grant”) set forth on your Bank of America Merrill Lynch “Benefits Online” equity award account (the “Equity Account”), an award of restricted share units (the “Award”), consisting of the number of restricted share units set forth in your Equity Account on that Date of Grant (the “RSUs”), pursuant to the C&J Energy Services, Inc. 2017 Management Incentive Plan, as may be amended from time to time (the “Plan”). The Award is subject to the terms of this Restricted Share Unit Agreement (this “Agreement”) and the Plan. Each RSU represents the right to receive, in the sole discretion of the Committee, one Share or a cash amount equal to the Fair Market Value of one Share. The RSUs granted hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Date of Grant, pursuant to the terms herein, and shall be subject to the execution and return of this Agreement by the Grantee through the electronic signature and/or web-based approval and notice process authorized by the Company. Capitalized terms used but not defined in this Agreement shall have the meaning attributed to such terms under the Plan, unless the context requires otherwise. By executing this Agreement, the Grantee acknowledges that his or her agreement to the covenants set forth in Section 7 is a material inducement to the Company in granting this Award to the Grantee.

The terms and conditions of the RSUs granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:


1.	No Right to Continued Employee Status or Consultant Service

Nothing contained in this Agreement shall confer upon the Grantee the right to the continuation of his or her Employee status, or, in the case of a Consultant, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or, as applicable, any of its Subsidiaries or other Affiliates (collectively, the “Company Group”) to terminate the Grantee’s Business Relationship (as defined in Section 7) at any time.


2.	Coordination with Employment Agreement

the Award granted under this Agreement; and (b) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares, RSUs or other equity-based awards in the event of termination of employment, a change in control, or other similar event, then the terms of this Agreement shall govern the treatment of the RSUs granted hereunder. Nothing herein (including nothing contained in Section 7 herein) will replace any of the Grantee’s obligations to the Company or any other member of the Company Group with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation as all provisions of Section 7 herein are in addition to all commitments and obligations the Grantee has to the Company Group, including all commitments and obligations created by contract, statute and common law.


3.	Vesting; Forfeiture; Effect of Termination of Service

If the Grantee continuously maintains his or her Business Relationship from the Date of Grant and abides by the terms hereof, then the RSUs will vest in accordance with the following vesting schedule (the “Vesting Schedule”):



Vesting Date	Cumulative Vested Percentage

Notwithstanding anything contained herein to the contrary, all unvested RSUs shall immediately vest in full upon the Grantee’s Termination by the Company (or applicable member of the Company Group) for a reason other than Cause (as defined in Section 7(g)), by the Grantee for Good Reason (as defined in Section 7(g)), or by reason of Disability (as defined in Section 7(g)) or death. Except as otherwise provided in the Employment Agreement, this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates for any reason prior to the Vesting Dates set forth above, the right of the Grantee to receive further vesting of the RSUs under this Award shall terminate and, for the avoidance of doubt, the Grantee shall not receive vesting of the RSUs on the remaining Vesting Dates and all RSUs that have not vested as of the Termination Date (as defined in Section 7(g)) shall be deemed to be forfeited by the Grantee.


4.	Restrictions on Transfer

(a) The RSUs subject to this Award may not be sold, transferred, assigned or otherwise disposed of, and may not be pledged or otherwise hypothecated (the “Transfer Restrictions”) while the RSUs are subject to forfeiture to the Company pursuant to Section 3. The Transfer Restrictions shall lapse on the same schedule under which the RSUs vest pursuant to the Vesting Schedule.

(b) The foregoing Transfer Restrictions shall not prohibit the sale, transfer or other disposition of such RSUs pursuant to a definitive agreement executed by the Company in connection with a Corporate Transaction.


5.	Delivery of Shares and Restrictive Legend

(a) As soon as administratively practicable following the vesting of RSUs pursuant to Section 3, but in no event later than the day that is sixty (60) days after the applicable vesting date, the Company shall deliver to the Grantee, in the sole discretion of the Committee: (i) a number of Shares equal to the number of RSUs that vest on such vesting date, (ii) a cash amount equal to the product of the Fair Market Value of a Share on such vesting date and the number of RSUs that vest on such vesting date or (iii) any combination of the foregoing, in settlement of the RSUs that vest on such vesting date. The value of Shares shall not bear any interest owing to the passage of time nor shall any action taken pursuant to or in accordance with this Agreement be construed to create a trust or a funded or secured obligation of any kind. The RSUs granted pursuant to this Agreement do not and shall not entitle the Grantee to any rights of a holder of Shares prior to the date that Shares are issued to the Grantee in settlement of the Award. The Grantee’s rights with respect to the RSUs shall remain forfeitable at all times prior to the date on which rights become vested in accordance with Section 2.

(b) Certificates or evidence of book-entry for Shares, if any, to be issued in settlement of vested RSUs will be delivered to or otherwise made available to the Grantee (or, at the discretion of the Grantee, joint in the names of the Grantee and the Grantee’s spouse) or to the Grantee’s nominee at such person’s request.

(c) The certificates, if any, for Shares to be issued in settlement of vested RSUs shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange unless an exemption to such registration or qualification is available and satisfied. The Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.


6.	Rights as Shareholder; Dividend Equivalent Rights

(a) The Grantee shall have no rights as a shareholder of the Company with respect to any Shares that may become deliverable hereunder unless and until the Grantee has become the holder of record of such Shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such Shares, except as otherwise specifically provided for in the Plan or this Agreement (including Section 6(b)).

(b) Each RSU subject to this Award is hereby granted in tandem with a corresponding Dividend Equivalent Right (“DER”), which DER shall remain outstanding from the Date of Grant until the earlier of the settlement or forfeiture of the RSU to which the DER corresponds. Each vested DER entitles the Grantee to receive payments, subject to and in accordance with this Agreement, in an amount equal to any dividends paid by the Company in respect of the Share underlying the RSU to which such DER relates. The Company shall establish, with respect to each RSU, a separate DER bookkeeping account for such RSU (a “DER

Account”), which shall be credited (without interest) on the applicable dividend payment dates with an amount equal to any dividends paid during the period that such RSU remains outstanding with respect to the Share underlying the RSU to which such DER relates. Upon the vesting of an RSU, the DER (and the DER Account) with respect to such vested RSU shall also become vested. Similarly, upon the forfeiture of a RSU, the DER (and the DER Account) with respect to such forfeited RSU shall also be forfeited. DERs shall not entitle the Grantee to any payments relating to dividends paid after the earlier to occur of the date that the applicable RSU is settled in accordance with Section 5(a) or the forfeiture of the RSU underlying such DER. Payments with respect to vested DERs shall be made as soon as practicable, and within 60 days, after the date that such DER vests. The Grantee shall not be entitled to receive any interest with respect to the payment of DERs


7.	Prohibited Activities

The Grantee acknowledges and agrees that this Agreement further aligns the Grantee’s interests with the Company Group’s long-term business interests and that the restrictions contained in this Section 7 are reasonably related to the protection of such business interests, including the preservation of the Company Group’s goodwill and the protection of the Confidential Information that the Grantee has obtained or will obtain in the course of his or her future Business Relationship with any member of the Company Group. The Grantee further acknowledges and agrees that his or her entry into this Agreement gives rise to an expectation by the Company that the Grantee, as the recipient of the equity securities of the Company and ancillary to this Agreement to provide the Grantee with such securities and Confidential Information during the period of his or her Business Relationship with the Company Group, will not interfere with or otherwise damage the Company Business, either during the period of the Grantee’s Business Relationship with any member of the Company Group or thereafter, as set forth herein. As an express incentive for the Company to enter into this Agreement and in order to further the Company’s legitimate business interests and interest in granting the Award and entering into this Agreement, the Grantee agrees to the following covenants:

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential Information (other than in the course of the Grantee’s service to the Company or any other member of the Company Group, if the Grantee is an Employee, Director or Consultant of or to the Company or any other member of the Company Group) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 4 (a “Prohibited Transfer”), or (z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, disparages or is derogatory about, or which injures the reputation of, the Company Group or any employee, officer, director, or agent of any member of the Company Group (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

Exception Within Certain States . Notwithstanding the restrictions contained in Section 7(b), within those areas of the State of Oklahoma that are within the Restricted Area (the “Oklahoma Restricted Area”), the restrictions in Section 7(b) shall not apply after the Termination Date; provided, however, that at no point during the Restricted Period shall the Grantee: (x) within the Oklahoma Restricted Area, solicit goods, services or a combination of goods and services from any established customer of the Company, or another member of the Company Group for which the Grantee had performed services or (y) directly or indirectly, solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfere with or raid the employees of any member of the Company Group. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 7(b) shall not apply following the Termination Date, and during the portion of the Restricted Period that follows the Termination Date, Section 7(b) shall be applied within the States of California and North Dakota only to prohibit the Grantee from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfering with or raiding the employees of any member of the Company Group.

(d)

Return of Property . Upon the Grantee’s Termination for any reason and upon request by any member of the Company Group, the Grantee shall promptly deliver to the requesting entity all materials, documents and other property of the Company or any other member of the Company Group, including originals and copies of all documents and records (both paper and electronic), computer hardware and software programs, computer files (and all other electronically stored information), media, equipment and other materials containing any Confidential Information, any summaries, extracts or derivative works thereof, or any other materials that reflect, contain or are derived from Confidential Information.

(e)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company Group by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (v) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (w) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Prohibited Transfer, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 7 hereof, (collectively items (v) – (z), “Prohibited Actions”) then, subject to Section 7(e)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any the following actions:


(i)	The Company may terminate this Award and immediately cancel the RSUs for which the Transfer Restrictions have not yet lapsed; and

(ii)

If such Prohibited Action occurs during the Restricted Period, the Company may recover from the Grantee, and the Grantee shall pay to the Company, with respect to any RSUs on which the Transfer Restrictions lapsed during the period of two (2) years prior to the earlier of the occurrence of the Prohibited Action or the Termination Date the following: (A) with respect to any such Shares that the Grantee continues to own as of the Forfeiture Notice Date, an amount equal to the aggregate Fair Market Value of such Shares on the Forfeiture Notice Date; and (B) with respect to any such Shares that the Grantee no longer owns as of the Forfeiture Notice Date, an amount equal to either (x) if such Shares were disposed of in an open market transaction, the proceeds received from the disposition of the Shares, or (y) if such Shares were disposed of other than in an open market transaction, the aggregate Fair Market Value of the Shares as of the Forfeiture Notice Date. If the Grantee does not pay such amount over to the Company within twenty (20) days of demand, such amount shall thereafter bear interest at the maximum rate permitted by law and the Grantee shall be liable for all of the Company’s costs of collection, including but not limited to, reasonable legal fees.

(iii)

Notwithstanding anything to the contrary, in the event that a Change in Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change in Control such that as a result of such termination, the Grantee is no longer in any Business Relationship with any member of the Company Group, the Company may take the actions set forth in Sections 7(e)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(f)

Other Remedies . The Grantee specifically acknowledges and agrees that the remedy at law for any breach of this Section 7 will be inadequate and that the Company and each other member of the Company Group, in addition to any other relief available to it, shall be entitled to seek specific performance and injunctive relief as remedies for such breach or any threatened breach without the necessity of proving actual damage or posting any bond whatsoever. Such remedies shall not be deemed the exclusive remedies for a breach of any terms under this Section 7 but shall be in addition to all remedies available at law or in equity to the Company and the other members of the Company Group, including the recovery of damages from the Grantee and the Grantee’s agents involved in such breach.


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:


(i)	“ Business Relationship ” shall mean service to the Company or any other member of the Company Group, or a corporation or parent or subsidiary of such member of the Company Group assuming or substituting a new Award for this Award, in the capacity of an

Employee, Director or Consultant, as applicable. Without limiting the scope of the preceding sentence, it is expressly provided that the Grantee’s Business Relationship shall be considered to have Terminated at the time of the termination of the “Subsidiary” or “Affiliate” status under the Plan of the entity or other organization that employs the Grantee or to which the Grantee provides services as a Consultant. Any question as to whether and when there has been a Termination of the Grantee’s Business Relationship, and the cause of such Termination, shall be determined by the Committee and its determination shall be final.

(ii)

“ Cause ” shall mean the Grantee’s (A) willful and continued failure to substantially perform, without proper legal justification (and not due to Disability), his or her duties and responsibilities required under the Employment Agreement or under any other written agreement between the Grantee and the Company or any other member of the Company Group, or otherwise reasonably required by the Board to be undertaken; (B) any material breach of the Employment Agreement or any other written agreement between the Grantee and the Company or any other member of the Company Group (including this Agreement); (C) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct, or workplace rules established by any member of the Company Group and applicable to the Grantee; (D) any conduct in connection with such Grantee’s performance of his or her duties or services to the Company or any other member of the Company Group that is (x) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (y) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (E) commission of, or indictment, conviction, admission, or plea of guilty or nolo contendere for or to, a charge of any felony (or state law equivalent) or any crime involving moral turpitude; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Cause” shall have the meaning, if any, specified in such agreement.


(iii)	“ Change in Control ” shall mean the occurrence of any of the following events after the Date of Grant:


C.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


D.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


E.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

(iv)

(including workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(v)

(vi)


(vii)	“ Disability ” shall mean a physical or mental impairment that renders the Grantee incapable of performing the Grantee’s essential duties pursuant to the Business Relationship (after accounting for reasonable accommodation, if applicable and required by applicable law)

for a period in excess of six (6) months during any consecutive twelve (12) month period; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Disability” shall have the meaning, if any, specified in such agreement.

(viii)

“ Good Reason ” shall mean the Grantee’s resignation from the Business Relationship, within one hundred twenty (120) days of the initial occurrence of any one of the following events (without the Grantee’s consent): (A) any material reduction in the Grantee’s authority, duties or responsibilities, including the Grantee’s removal from the position and title with the Company specified in the Employment Agreement, in each instance other than (x) by reason of the Grantee’s Disability or (y) as a result of any member of the Company Group’s actions arising from or following any allegation that: (1) the Grantee’s conduct has caused (or could reasonably be expected to cause) material damage to any member of the Company Group, or (2) the Grantee has committed an act or omission that constitutes Cause; (B) a reduction in the Grantee’s then-effective base salary (other than in connection with an immaterial reduction that applies to all similarly situated executives or that occurs as a result of, or following an allegation that, (x) Grantee’s conduct has caused (or could reasonably be expected to cause) material damage to any member of the Company Group or (y) the Grantee committed an act or omission that constitutes Cause; provided that, if the Grantee, as of the date of determination, is party to the Employment Agreement or another effective services, severance or employment agreement with the Company or any other member of the Company Group, “Good Reason” shall have the meaning, if any, specified in such agreement.

(ix)

“ Permitted Disclosures ” shall mean the disclosure of Confidential Information (A) made with the prior written consent by the Board, (B) required to be made by law or legal process, (C) in a good faith report of possible violations of applicable law to any governmental agency or entity, (D) that is protected under the whistleblower provisions of applicable law, or (E) otherwise permitted as set forth in Section 8 below.

(x)


(xi)	“ Restricted Area ” shall mean: (A) during the portion of the Restricted Period prior to the Termination Date, the world; and (B) during the portion of the Restricted Period that occurs following the Termination Date, those geographic areas specified on Exhibit A,

and any additional areas in which any member of the Company Group has taken material steps as of the Termination Date, with the Grantee’s assistance, in preparation of conducting the Company Business.


(xii)	“ Restrictive Agreement ” shall mean any agreement between any member of the Company Group and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xiii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.


8.	Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:

(a)

nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

(b)

in the event the Grantee files a lawsuit for retaliation by the Company or any other member of the Company Group for the Grantee’s reporting of a suspected violation of law, the Grantee may (i) disclose a trade secret to the Grantee’s attorney and (ii) use the trade secret information in the court proceeding related to such lawsuit, in each case, if the Grantee (A) files any document containing such trade secret under seal; and (B) does not otherwise disclose such trade secret, except pursuant to court order; and

(c)

nothing herein or any other agreement between the Grantee and the Company or any other member of the Company Group shall prevent the Grantee from lawfully, and without obtaining prior authorization from any member of the Company Group: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “SEC”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. This Agreement shall not be construed or applied to require the Grantee to obtain prior authorization from any member

of the Company Group before engaging in any of the foregoing conduct referenced in this Section 8, or to notify the Company or any other member of the Company Group of having engaged in any such conduct.


9.	Taxation

The Grantee understands that, at the time of vesting or settlement of the RSUs, the Grantee will be obligated to recognize income, for federal, state and local income tax purposes, as applicable, in an amount equal to the Fair Market Value of the Shares (or the corresponding amount of cash), determined as of the date the RSUs are vested or settled. The acceptance of the RSUs by the Grantee shall constitute an agreement by the Grantee to report such income in accordance with then applicable law and to cooperate with the Company Group in establishing the amount of such income and corresponding deduction to the Company and/or any other member of the Company Group for its income tax purposes.

The Grantee is responsible for all tax obligations that arise in connection with the RSUs. The Company may withhold from any amount payable to the Grantee an amount sufficient to cover any federal, state, foreign or local withholding taxes which may become required with respect to the vesting or settlement of the RSUs (“ Tax Obligations ”) or take any other action it deems necessary to satisfy any income or other tax withholding requirements as a result of the vesting or settlement of the Award. The Company shall have the right to require the payment of any such taxes and require that the Grantee furnish information deemed necessary by the Company to meet any tax reporting obligation as a condition to issuing and releasing any Shares pursuant to the Award. The Committee, in its discretion (which such discretion, if the Grantee is a “statutory insider” within the meaning of Section 16(a) of the Exchange Act, may not be delegated to management), may allow the Grantee to pay his or her Tax Obligations in connection with the vesting or settlement of the RSUs by (x) making a cash payment to the Company, (y) permitting the surrender or net withholding of a portion of the Shares (or the corresponding amount of cash) to be delivered in settlement of the RSUs, or (z) surrendering Shares owned by the Grantee prior to settlement of the Award, in each case having an aggregate Fair Market Value equal to the Tax Obligations; provided, that if the Shares are not listed for trading on a national stock exchange when the Tax Obligations become due, the Grantee may cause the Company to purchase (or withhold) a number of Shares (or the corresponding amount of cash) otherwise deliverable to the Grantee having a Fair Market Value sufficient to satisfy the Tax Obligations.

The Grantee will seek the advice of his own tax advisors as to the tax consequences of the Grantee’s Award under Federal, state, and any other laws that may be applicable. The Company and its agents have not and are not providing any tax advice to the Grantee.


10.	Securities Laws

issued to the Grantee pursuant to this Agreement in any way which would: (x) require the Company to file any registration statement with the SEC (or any similar filing under state law or the laws of any other county) or to amend or supplement any such filing or (y) violate or cause the Company to violate the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, or any other federal, state or local law, or the laws of any other country.


11.	Notices


12.	Agreement Subject to Plan; Dispute Resolution Program; Applicable Law

This Award is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. The Plan shall control in the event there shall be any conflict between the Plan and this Agreement, and it shall control as to any matters not contained in this Agreement. The Committee shall have authority to interpret this Agreement, and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

The Grantee and the Company acknowledge and agree that in the event the Grantee is an employee of any member of the Company Group, the Grantee and the Company have agreed to the dispute resolution procedures set forth in C&J Energy Services, Ltd.’s Employee Dispute Resolution Program (“DRP”), as in effect from time to time, and any dispute between such Grantee and the Company (or any other member of the Company Group) arising out of, or relating to, this Agreement or the Grantee’s employment with any member of the Company Group shall be resolved pursuant to the dispute resolution procedures set forth in the DRP.

consents to personal jurisdiction in any action brought in any court, federal or state, within Harris County, Texas having subject matter jurisdiction in the matter.


13.	Headings and Capitalized Terms


14.	Severability and Reformation


15.	Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.


16.	Entire Agreement


17.	Waiver

18. Section 409A

Nevertheless, to the extent that the Committee determines that the RSUs may not be exempt from the Nonqualified Deferred Compensation Rules, then, if the Grantee is deemed to be a “specified employee” within the meaning of the Nonqualified Deferred Compensation Rules, as determined by the Committee, at a time when the Grantee becomes eligible for settlement of the RSUs upon his “separation from service” within the meaning of the Nonqualified Deferred Compensation Rules, then to the extent necessary to prevent any accelerated or additional tax under the Nonqualified Deferred Compensation Rules, such settlement will be delayed until the earlier of: (a) the date that is six months following the Grantee’s separation from service and (b) the Grantee’s death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the RSUs provided under this Agreement are exempt from or compliant with the Nonqualified Deferred Compensation Rules and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with the Nonqualified Deferred Compensation Rules.

EXHIBIT A

RESTRICTED AREA

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

RESTRICTED SHARE UNIT AGREEMENT

(C&J Employment Agreement – Tier II)

C&J Energy Services, Inc., a Delaware corporation (the “Company”), hereby awards to you (the “Grantee”), as of the date (the “Date of Grant”) set forth on your Bank of America Merrill Lynch “Benefits Online” equity award account (the “Equity Account”), an award of restricted share units (the “Award”), consisting of the number of restricted share units set forth in your Equity Account on that Date of Grant (the “RSUs”), pursuant to the C&J Energy Services, Inc. 2017 Management Incentive Plan, as may be amended from time to time (the “Plan”). The Award is subject to the terms of this Restricted Share Unit Agreement (this “Agreement”) and the Plan. Each RSU represents the right to receive, in the sole discretion of the Committee, one Share or a cash amount equal to the Fair Market Value of one Share. The RSUs granted hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Date of Grant, pursuant to the terms herein, and shall be subject to the execution and return of this Agreement by the Grantee through the electronic signature and/or web-based approval and notice process authorized by the Company. Capitalized terms used but not defined in this Agreement shall have the meaning attributed to such terms under the Plan, unless the context requires otherwise. By executing this Agreement, the Grantee acknowledges that his or her agreement to the covenants set forth in Section 7 is a material inducement to the Company in granting this Award to the Grantee.

The terms and conditions of the RSUs granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:


1.	No Right to Continued Employee Status or Consultant Service

Nothing contained in this Agreement shall confer upon the Grantee the right to the continuation of his or her Employee status, or, in the case of a Consultant, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or, as applicable, any of its Subsidiaries or other Affiliates (collectively, the “Company Group”) to terminate the Grantee’s Business Relationship (as defined in Section 7) at any time.


2.	Coordination with Employment Agreement ⁽¹⁾

granted to the Grantee prior to the effectiveness of this Agreement. The parties acknowledge and agree that to the extent that the Employment Agreement includes provisions in respect of the treatment of stock options, restricted shares, RSUs or other equity-based awards in the event of termination of employment, a change in control, or other similar event, (a) notwithstanding anything contained in this Agreement to the contrary, such provisions in the Employment Agreement shall govern the treatment of the RSUs covered by the Award granted under this Agreement; and (b) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares, RSUs or other equity-based awards in the event of termination of employment, a change in control, or other similar event, then the terms of this Agreement shall govern the treatment of the RSUs granted hereunder. Nothing herein (including nothing contained in Section 7 herein) will replace any of the Grantee’s obligations to the Company or any other member of the Company Group with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation as all provisions of Section 7 herein are in addition to all commitments and obligations the Grantee has to the Company Group, including all commitments and obligations created by contract, statute and common law.


3.	Vesting; Forfeiture; Effect of Termination of Service



Vesting Date	Cumulative Vested Percentage

Notwithstanding anything contained herein to the contrary, all unvested RSUs shall immediately vest in full upon the Grantee’s Termination by the Company (or applicable member of the Company Group) for a reason other than Cause (as defined in Section 7(g)) or by reason of Disability (as defined in Section 7(g)) or death. Except as otherwise provided in the Employment Agreement, this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates for any reason prior to the Vesting Dates set forth above, the right of the Grantee to receive further vesting of the RSUs under this Award shall terminate and, for the avoidance of doubt, the Grantee shall not receive vesting of the RSUs on the remaining Vesting Dates and all RSUs that have not vested as of the Termination Date (as defined in Section 7(g)) shall be deemed to be forfeited by the Grantee.


4.	Restrictions on Transfer

subject to forfeiture to the Company pursuant to Section 3. The Transfer Restrictions shall lapse on the same schedule under which the RSUs vest pursuant to the Vesting Schedule.


5.	Delivery of Shares and Restrictive Legend


6.	Rights as Shareholder; Dividend Equivalent Rights

to receive payments, subject to and in accordance with this Agreement, in an amount equal to any dividends paid by the Company in respect of the Share underlying the RSU to which such DER relates. The Company shall establish, with respect to each RSU, a separate DER bookkeeping account for such RSU (a “DER Account”), which shall be credited (without interest) on the applicable dividend payment dates with an amount equal to any dividends paid during the period that such RSU remains outstanding with respect to the Share underlying the RSU to which such DER relates. Upon the vesting of an RSU, the DER (and the DER Account) with respect to such vested RSU shall also become vested. Similarly, upon the forfeiture of a RSU, the DER (and the DER Account) with respect to such forfeited RSU shall also be forfeited. DERs shall not entitle the Grantee to any payments relating to dividends paid after the earlier to occur of the date that the applicable RSU is settled in accordance with Section 5(a) or the forfeiture of the RSU underlying such DER. Payments with respect to vested DERs shall be made as soon as practicable, and within 60 days, after the date that such DER vests. The Grantee shall not be entitled to receive any interest with respect to the payment of DERs


7.	Prohibited Activities

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential Information (other than in the course of the Grantee’s service to the Company or any other member of the Company Group, if the Grantee is an Employee, Director or Consultant of or to the Company or any other member of the Company Group) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 4 (a “Prohibited Transfer”), or (z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, disparages or is derogatory about, or which injures the reputation of, the Company Group or any employee, officer, director, or agent of any member of the Company Group (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the

Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

(d)

(e)

entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any the following actions:


(i)	The Company may terminate this Award and immediately cancel the RSUs for which the Transfer Restrictions have not yet lapsed; and

(ii)

(iii)

(f)


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:

(i)

“ Business Relationship ” shall mean service to the Company or any other member of the Company Group, or a corporation or parent or subsidiary of such member of the Company Group assuming or substituting a new Award for this Award, in the capacity of an Employee, Director or Consultant, as applicable. Without limiting the scope of the preceding sentence, it is expressly provided that the Grantee’s Business Relationship shall be considered to have Terminated at the time of the termination of the “Subsidiary” or “Affiliate” status under the Plan of the entity or other organization that employs the Grantee or to which the Grantee provides services as a Consultant. Any question as to whether and when there has been a Termination of the Grantee’s Business Relationship, and the cause of such Termination, shall be determined by the Committee and its determination shall be final.

(ii)

“ Cause ” shall mean the Grantee’s (A) willful and continued failure to substantially perform, without proper legal justification (and not due to Disability), his or her duties and responsibilities required under the Employment Agreement or under any other written agreement between the Grantee and the Company or any other member of the Company Group, or otherwise reasonably required by the Board to be undertaken; (B) any material breach of the Employment Agreement or any other written agreement between the Grantee and the Company or any other member of the Company Group (including this Agreement); (C) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct, or workplace rules established by any member of the Company Group and applicable to the Grantee; (D) any conduct in connection with such Grantee’s performance of his or her duties or services to the Company or any other member of the Company Group that is (x) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (y) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (E) commission of, or indictment, conviction, admission, or plea of guilty or nolo contendere for or to, a charge of any felony (or state law equivalent) or any crime involving moral turpitude; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Cause” shall have the meaning, if any, specified in such agreement.


(iii)	“ Change in Control ” shall mean the occurrence of any of the following events after the Date of Grant:

which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity;


C.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


D.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


E.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

(iv)

fracturing and related stimulation services, cased-hole wireline, pressure pumping and pump-down, perforating, pressure testing, and logging services), and well support services (including workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(v)

(vi)

(vii)

(viii)

(ix)

(x)

“ Restricted Area ” shall mean: (A) during the portion of the Restricted Period prior to the Termination Date, the world; and (B) during the portion of the Restricted Period that occurs following the Termination Date, those geographic areas specified on Exhibit A, and any additional areas in which any member of the Company Group has taken material steps as of the Termination Date, with the Grantee’s assistance, in preparation of conducting the Company Business.


(xi)	“ Restrictive Agreement ” shall mean any agreement between any member of the Company Group and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.


8.	Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:


(a)	nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected

under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

(b)

(c)


9.	Taxation

The Grantee is responsible for all tax obligations that arise in connection with the RSUs. The Company may withhold from any amount payable to the Grantee an amount sufficient to cover any federal,

state, foreign or local withholding taxes which may become required with respect to the vesting or settlement of the RSUs (“ Tax Obligations ”) or take any other action it deems necessary to satisfy any income or other tax withholding requirements as a result of the vesting or settlement of the Award. The Company shall have the right to require the payment of any such taxes and require that the Grantee furnish information deemed necessary by the Company to meet any tax reporting obligation as a condition to issuing and releasing any Shares pursuant to the Award. The Committee, in its discretion (which such discretion, if the Grantee is a “statutory insider” within the meaning of Section 16(a) of the Exchange Act, may not be delegated to management), may allow the Grantee to pay his or her Tax Obligations in connection with the vesting or settlement of the RSUs by (x) making a cash payment to the Company, (y) permitting the surrender or net withholding of a portion of the Shares (or the corresponding amount of cash) to be delivered in settlement of the RSUs, or (z) surrendering Shares owned by the Grantee prior to settlement of the Award, in each case having an aggregate Fair Market Value equal to the Tax Obligations; provided, that if the Shares are not listed for trading on a national stock exchange when the Tax Obligations become due, the Grantee may cause the Company to purchase (or withhold) a number of Shares (or the corresponding amount of cash) otherwise deliverable to the Grantee having a Fair Market Value sufficient to satisfy the Tax Obligations.


10.	Securities Laws

Upon the acquisition of the RSUs or the Shares, if any, to be issued in settlement thereof, the Grantee will make such written representations, warranties, and agreements as the Committee may reasonably request in order to comply with securities laws or with this Agreement. The obligation of the Company to issue and deliver the RSUs granted hereunder or the Shares, if any, to be issued in settlement thereof shall be subject to all applicable laws, rules and regulations, and such approvals by governmental agencies as may be required. The Grantee hereby agrees not to offer, sell or otherwise attempt to dispose of any RSUs or Shares, if any, issued to the Grantee pursuant to this Agreement in any way which would: (x) require the Company to file any registration statement with the SEC (or any similar filing under state law or the laws of any other county) or to amend or supplement any such filing or (y) violate or cause the Company to violate the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, or any other federal, state or local law, or the laws of any other country.


11.	Notices

to the Company’s Legal Department and (b) if to the Grantee, at the most recent address, facsimile number or email contained in the Company’s records.


12.	Agreement Subject to Plan; Dispute Resolution Program; Applicable Law

This Award is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. The Plan shall control in the event there shall be any conflict between the Plan and this Agreement, and it shall control as to any matters not contained in this Agreement. The Committee shall have authority to interpret this Agreement, and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

This Award shall be governed by the laws of the State of Delaware, without regard to the conflicts of law principles thereof. Delaware has a substantial relationship to the parties and transaction reflected herein and, in signing below, the Grantee acknowledges and agrees that there is a reasonable basis for the choice of Delaware law, as Delaware law is known to the parties and well-developed with respect to the subject matters of this Agreement. The designation of Delaware law and the interpretation and application of this Agreement consistent with principles of Delaware law assures uniformity, certainty and predictability in the application of the Agreement and the Plan through which the Award is granted. The Grantee hereby consents to personal jurisdiction in any action brought in any court, federal or state, within Harris County, Texas having subject matter jurisdiction in the matter.


13.	Headings and Capitalized Terms


14.	Severability and Reformation


15.	Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.


16.	Entire Agreement


17.	Waiver

18. Section 409A

Notwithstanding anything herein or in the Plan to the contrary, the RSUs granted pursuant to this Agreement are intended to be exempt from the applicable requirements of the Nonqualified Deferred Compensation Rules and shall be limited, construed and interpreted in accordance with such intent. Nevertheless, to the extent that the Committee determines that the RSUs may not be exempt from the Nonqualified Deferred Compensation Rules, then, if the Grantee is deemed to be a “specified employee” within the meaning of the Nonqualified Deferred Compensation Rules, as determined by the Committee, at a time when the Grantee becomes eligible for settlement of the RSUs upon his “separation from service” within the meaning of the Nonqualified Deferred Compensation Rules, then to the extent necessary to prevent any accelerated or additional tax under the Nonqualified Deferred Compensation Rules, such settlement will be delayed until the earlier of: (a) the date that is six months following the Grantee’s separation from service and (b) the Grantee’s death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the RSUs provided under this Agreement are exempt from or compliant with the Nonqualified Deferred Compensation Rules and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with the Nonqualified Deferred Compensation Rules.

EXHIBIT A

RESTRICTED AREA

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

CASH RETENTION AWARD AGREEMENT

(C&J Employment Agreement – Tier I)

C&J Energy Services, Inc., a Delaware corporation (the “Company”), hereby awards to you (the “Grantee”), as of the date (the “Date of Grant”) set forth on your Bank of America Merrill Lynch “Benefits Online” equity award account (the “Equity Account”), a cash retention award (the “Award”), in the amount set forth in your Equity Account on that Date of Grant, pursuant to the C&J Energy Services, Inc. 2017 Management Incentive Plan, as may be amended from time to time (the “Plan”). The Award is subject to the terms of this Cash Retention Award Agreement (this “Agreement”) and the Plan. The Award is subject to the execution and return of this Agreement by the Grantee through the electronic signature and/or web-based approval and notice process authorized by the Company. Capitalized terms used but not defined in this Agreement shall have the meaning attributed to such terms under the Plan, unless the context requires otherwise. By executing this Agreement, the Grantee acknowledges that his or her agreement to the covenants set forth in Section 6 is a material inducement to the Company in granting this Award to the Grantee.

The terms and conditions of the Award granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:


1.	No Right to Continued Employee Status or Consultant Service

Nothing contained in this Agreement shall confer upon the Grantee the right to the continuation of his or her Employee status, or, in the case of a Consultant, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or, as applicable, any of its Subsidiaries or other Affiliates (collectively, the “Company Group”) to terminate the Grantee’s Business Relationship (as defined in Section 6) at any time.


2.	Coordination with Employment Agreement

The parties hereby acknowledge that the Grantee is a party to an employment agreement between the Grantee and C&J Spec-Rent Services, Inc. (“Spec-Rent”) (the “Employment Agreement”), which may include provisions governing the treatment of stock options, restricted shares, restricted stock units, other equity-based awards or other long-term incentive awards granted to the Grantee prior to the effectiveness of this Agreement. The parties acknowledge and agree that to the extent that the Employment Agreement includes provisions in respect of the treatment of stock options, restricted shares, restricted stock units, other equity-based awards or other long-term incentive awards in the event of termination of employment, a change in control, or other similar event, (a) notwithstanding anything contained in this Agreement to the contrary, such provisions in the Employment Agreement shall govern the treatment of the Award granted under this Agreement; and (b) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares, restricted stock units, other equity-based awards or other long-term incentive awards in the event of termination of employment, a change in control, or other similar event, then the terms of this Agreement shall govern the treatment of the Award granted hereunder. Nothing herein (including nothing contained in Section 6 herein) will replace any of the Grantee’s obligations to the Company or any other member of the Company Group with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation as all provisions of Section 6 herein are in addition to all commitments and obligations the Grantee has to the Company Group, including all commitments and obligations created by contract, statute and common law.


3.	Vesting; Forfeiture; Effect of Termination of Service

If the Grantee continuously maintains his or her Business Relationship from the Date of Grant and abides by the terms hereof, then the Award will vest in accordance with the following vesting schedule (the “Vesting Schedule”):



Vesting Date	Cumulative Vested Percentage

Notwithstanding anything contained herein to the contrary, all unvested installments of the Award shall immediately vest in full upon the Grantee’s Termination by the Company (or applicable member of the Company Group) for a reason other than Cause (as defined in Section 6(g)), by the Grantee for Good Reason (as defined in Section 6(g)), or by reason of Disability (as defined in Section 6(g)) or death. Except as otherwise provided in the Employment Agreement, this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates for any reason prior to the Vesting Dates set forth above, the right of the Grantee to receive further vesting of the Award shall terminate and, for the avoidance of doubt, the Grantee shall not receive vesting of the Award on the remaining Vesting Dates and all installments that have not vested as of the Termination Date (as defined in Section 6(g)) shall be deemed to be forfeited by the Grantee.


4.	Restrictions on Transfer

(a) The Award may not be sold, transferred, assigned or otherwise disposed of, and may not be pledged or otherwise hypothecated (the “Transfer Restrictions”) while the Award is subject to forfeiture to the Company pursuant to Section 3. The Transfer Restrictions shall lapse on the same schedule under which the Award vests pursuant to the Vesting Schedule.

(b) The foregoing Transfer Restrictions shall not prohibit the sale, transfer or other disposition of the Award pursuant to a definitive agreement executed by the Company in connection with a Corporate Transaction.


5.	Settlement

As soon as administratively practicable following the vesting of any installment of the Award pursuant to Section 3, but in no event later than the day that is sixty (60) days after the applicable vesting date, the Company shall make a cash payment to the Grantee.


6.	Prohibited Activities

The Grantee acknowledges and agrees that this Agreement further aligns the Grantee’s interests with the Company Group’s long-term business interests and that the restrictions contained in this Section 6 are reasonably related to the protection of such business interests, including the preservation of the Company Group’s goodwill and the protection of the Confidential Information that the Grantee has obtained or will obtain in the course of his or her future Business Relationship with any member of the Company Group. The Grantee further acknowledges and agrees that his or her entry into this Agreement gives rise to an expectation by the Company that the Grantee, as the recipient of the equity securities of the Company and ancillary to this Agreement to provide the Grantee with such securities and Confidential Information during the period of his or her Business Relationship with the Company Group, will not interfere with or otherwise damage the Company Business, either during the period of the Grantee’s Business Relationship with any member of the Company Group or thereafter, as set forth herein. As an express incentive for the Company to enter into this Agreement and in order to further the Company’s legitimate business interests and interest in granting the Award and entering into this Agreement, the Grantee agrees to the following covenants:

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential Information (other than in the course of the Grantee’s service to the Company or any other member of the Company Group, if the Grantee is an Employee, Director or Consultant of or to the Company or any other member of the Company Group) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 4 (a “Prohibited Transfer”), or (z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, disparages or is derogatory about, or which injures the reputation of, the Company Group or any employee, officer, director, or agent of any member of the Company Group (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

Exception Within Certain States . Notwithstanding the restrictions contained in Section 6(b), within those areas of the State of Oklahoma that are within the Restricted Area (the “Oklahoma Restricted Area”), the restrictions in Section 6(b) shall not apply after the Termination Date; provided, however, that at no point during the Restricted Period shall the Grantee: (x) within the Oklahoma Restricted Area, solicit goods, services or a combination of goods and services from any established customer of the Company, or another member of the Company Group for which the Grantee had performed services or (y) directly or indirectly, solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfere with or raid the employees of any member of the Company Group. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 6(b) shall not apply following the Termination Date, and during the portion of the Restricted Period that follows the Termination Date, Section 6(b) shall be applied within the States of California and North Dakota only to prohibit the Grantee from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfering with or raiding the employees of any member of the Company Group.

(d)

(e)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company Group by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (v) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (w) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Prohibited Transfer, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 6 hereof, (collectively items (v) – (z), “Prohibited Actions”) then, subject to Section 6(e)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any the following actions:


(i)	The Company may terminate this Award and immediately cancel the installments for which the Transfer Restrictions have not yet lapsed; and

(ii)

If such Prohibited Action occurs during the Restricted Period, the Company may recover from the Grantee, and the Grantee shall pay to the Company, with respect to any installments on which the Transfer Restrictions lapsed during the period of two (2) years prior to the earlier of the occurrence of the Prohibited Action or the Termination Date the following: an amount equal to the cash payment made to the Grantee in respect of any such installment. If the Grantee does not pay such amount over to the Company within twenty (20) days of demand, such amount shall thereafter bear interest at the maximum rate permitted by law and the Grantee shall be liable for all of the Company’s costs of collection, including but not limited to, reasonable legal fees.

(iii)

Notwithstanding anything to the contrary, in the event that a Change in Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change in Control such that as a result of such termination, the Grantee is no longer in any Business Relationship with any member of the Company Group, the Company may take the actions set forth in Sections 6(e)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(f)

Other Remedies . The Grantee specifically acknowledges and agrees that the remedy at law for any breach of this Section 6 will be inadequate and that the Company and each other member of the Company Group, in addition to any other relief available to it, shall be entitled to seek specific performance and injunctive relief as remedies for such breach or any threatened breach without the necessity of proving actual damage or posting any bond whatsoever. Such remedies shall not be deemed the exclusive remedies for a breach of any terms under this Section 6 but shall be in addition to all remedies available at law or in equity to the Company and the other members of the Company Group, including the recovery of damages from the Grantee and the Grantee’s agents involved in such breach.


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:

(i)

(ii)

“ Cause ” shall mean the Grantee’s (A) willful and continued failure to substantially perform, without proper legal justification (and not due to Disability), his or her duties and responsibilities required under the Employment Agreement or under any other written agreement between the Grantee and the Company or any other member of the Company Group, or otherwise reasonably required by the Board to be undertaken; (B) any material breach of the Employment Agreement or any other written agreement between the Grantee and the Company or any other member of the Company Group (including this Agreement); (C) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct, or workplace rules established by any member of the Company Group and applicable to the Grantee; (D) any conduct in connection with such Grantee’s performance of his or her duties or services to the Company or any other member of the Company Group that is (x) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (y) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (E) commission of, or indictment, conviction, admission, or plea of guilty or nolo contendere for or to, a charge of any felony (or state law equivalent) or any crime involving moral turpitude; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Cause” shall have the meaning, if any, specified in such agreement.


(iii)	“ Change in Control ” shall mean the occurrence of any of the following events after the Date of Grant:


C.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


D.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


E.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

(iv)

(v)

(vi)

(vii)

(viii)

“ Good Reason ” shall mean the Grantee’s resignation from the Business Relationship within one hundred twenty (120) days of the initial occurrence of any one of the following events (without the Grantee’s consent): (A) any material reduction in the Grantee’s authority, duties or responsibilities, including the Grantee’s removal from the position and title with the Company specified in the Employment Agreement, in each instance other than (x) by reason of the Grantee’s Disability or (y) as a result of any member of the Company Group’s actions arising from or following any allegation that: (1) the Grantee’s conduct has caused (or could reasonably be expected to cause) material damage to any member of the Company Group, or (2) the Grantee has committed an act or omission that constitutes Cause; (B) a reduction in the Grantee’s then-effective base salary (other than in connection with an immaterial reduction that applies to all similarly situated executives or that occurs as a result of, or following an allegation that, (x) Grantee’s conduct has caused (or could reasonably be expected to cause) material damage to any member of the Company Group or (y) the Grantee committed an act or omission that constitutes Cause; provided that, if the Grantee, as of the date of determination, is party to the Employment Agreement or another effective services, severance or employment agreement with the Company or any other member of the Company Group, “Good Reason” shall have the meaning, if any, specified in such agreement.

(ix)

(x)

(xi)

“ Restricted Area ” shall mean: (A) during the portion of the Restricted Period prior to the Termination Date, the world; and (B) during the portion of the Restricted Period that occurs following the Termination Date, those geographic areas specified on Exhibit A, and any additional areas in which any member of the Company Group has taken material steps as of the Termination Date, with the Grantee’s assistance, in preparation of conducting the Company Business.


(xii)	“ Restrictive Agreement ” shall mean any agreement between any member of the Company Group and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xiii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.


7.	Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:

(a)

nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

(b)

(c)


8.	Taxation

The Company is authorized to withhold from any payment under the Award or from any compensation or other amount owing to the Grantee the amount of any applicable taxes payable in respect of the Award, and to take such other action as may be necessary in the opinion of the Company to satisfy its withholding obligations for the payment of such taxes. The Grantee will seek the advice of his own tax advisors as to the tax consequences of the Grantee’s Award under Federal, state, and any other laws that may be applicable. The Company and its agents have not and are not providing any tax advice to the Grantee.


9.	Notices


10.	Agreement Subject to Plan; Dispute Resolution Program; Applicable Law

This Award is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. The Plan shall control in the event there shall be any conflict between the Plan and this Agreement, and it shall control as to any matters not contained in this Agreement. The Committee shall have authority to interpret this Agreement, and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

This Award shall be governed by the laws of the State of Delaware, without regard to the conflicts of law principles thereof. Delaware has a substantial relationship to the parties and transaction reflected herein and, in signing below, the Grantee acknowledges and agrees that there is a reasonable basis for the choice of Delaware law, as Delaware law is known to the parties and well-developed with respect to the subject matters of this Agreement. The designation of Delaware law and the interpretation and application of this Agreement consistent with principles of Delaware law assures uniformity, certainty and predictability in the application of the Agreement and the Plan through which the Award is granted. The Grantee hereby consents to personal jurisdiction in any action brought in any court, federal or state, within Harris County, Texas having subject matter jurisdiction in the matter.


11.	Headings and Capitalized Terms


12.	Severability and Reformation


13.	Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.


14.	Entire Agreement


15.	Waiver

16. Section 409A

Notwithstanding anything herein or in the Plan to the contrary, the Award and the payment of cash under this Agreement is intended to be exempt from the applicable requirements of the Nonqualified Deferred Compensation Rules and shall be limited, construed and interpreted in accordance with such intent. Nevertheless, to the extent that the Committee determines that the Award may not be exempt from the Nonqualified Deferred Compensation Rules, then, if the Grantee is deemed to be a “specified employee” within the meaning of the Nonqualified Deferred Compensation Rules, as determined by the Committee, at a time when the Grantee becomes eligible for payment of the Award upon his “separation from service” within the meaning of the Nonqualified Deferred Compensation Rules, then to the extent necessary to prevent any accelerated or additional tax under the Nonqualified Deferred Compensation Rules, such settlement will be delayed until the earlier of: (a) the date that is six months following the Grantee’s separation from service and (b) the Grantee’s death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the Award or the payment of cash under this Agreement is exempt from or compliant with the Nonqualified Deferred Compensation Rules and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with the Nonqualified Deferred Compensation Rules.

EXHIBIT A

RESTRICTED AREA

C & J ENERGY SERVICES, INC.

2017 MANAGEMENT INCENTIVE PLAN

CASH RETENTION AWARD AGREEMENT

(C&J Employment Agreement – Tier II)

C&J Energy Services, Inc., a Delaware corporation (the “Company”), hereby awards to you (the “Grantee”), as of the date (the “Date of Grant”) set forth on your Bank of America Merrill Lynch “Benefits Online” equity award account (the “Equity Account”), a cash retention award (the “Award”), in the amount set forth in your Equity Account on that Date of Grant, pursuant to the C&J Energy Services, Inc. 2017 Management Incentive Plan, as may be amended from time to time (the “Plan”). The Award is subject to the terms of this Cash Retention Award Agreement (this “Agreement”) and the Plan. The Award is subject to the execution and return of this Agreement by the Grantee through the electronic signature and/or web-based approval and notice process authorized by the Company. Capitalized terms used but not defined in this Agreement shall have the meaning attributed to such terms under the Plan, unless the context requires otherwise. By executing this Agreement, the Grantee acknowledges that his or her agreement to the covenants set forth in Section 6 is a material inducement to the Company in granting this Award to the Grantee.

The terms and conditions of the Award granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows:


1.	No Right to Continued Employee Status or Consultant Service

Nothing contained in this Agreement shall confer upon the Grantee the right to the continuation of his or her Employee status, or, in the case of a Consultant, to the continuation of his or her service arrangement, or in either case to interfere with the right of the Company or, as applicable, any of its Subsidiaries or other Affiliates (collectively, the “Company Group”) to terminate the Grantee’s Business Relationship (as defined in Section 6) at any time.


2.	Coordination with Employment Agreement ⁽¹⁾

The parties hereby acknowledge that the Grantee is a party to an employment agreement between the Grantee and C&J Spec-Rent Services, Inc. (the “Employment Agreement”), which may include provisions governing the treatment of stock options, restricted shares, restricted stock units, other equity-based awards or other long-term incentive awards granted to the Grantee prior to the effectiveness of this Agreement. The parties acknowledge and agree that to the extent that the Employment Agreement includes provisions in respect of the treatment of stock options, restricted shares, restricted stock units, other equity-based awards

or other long-term incentive awards in the event of termination of employment, a change in control, or other similar event, (a) notwithstanding anything contained in this Agreement to the contrary, such provisions in the Employment Agreement shall govern the treatment of the Award granted under this Agreement; and (b) if, and to the extent, such provisions in the Employment Agreement conflict with the provisions in this Agreement, the terms of the Employment Agreement shall control. For the avoidance of doubt, if the Employment Agreement is silent regarding matters concerning the treatment of stock options, restricted shares, restricted stock units, other equity-based awards or other long-term incentive awards in the event of termination of employment, a change in control, or other similar event, then the terms of this Agreement shall govern the treatment of the Award granted hereunder. Nothing herein (including nothing contained in Section 6 herein) will replace any of the Grantee’s obligations to the Company or any other member of the Company Group with respect to confidentiality, non-disclosure, return of property, non-competition or non-solicitation as all provisions of Section 6 herein are in addition to all commitments and obligations the Grantee has to the Company Group, including all commitments and obligations created by contract, statute and common law.


3.	Vesting; Forfeiture; Effect of Termination of Service



Vesting Date	Cumulative Vested Percentage

Notwithstanding anything contained herein to the contrary, all unvested installments of the Award shall immediately vest in full upon the Grantee’s Termination by the Company (or applicable member of the Company Group) for a reason other than Cause (as defined in Section 6(g)) or by reason of Disability (as defined in Section 6(g)) or death. Except as otherwise provided in the Employment Agreement, this Agreement or as otherwise determined by the Committee, if the Grantee’s Business Relationship Terminates for any reason prior to the Vesting Dates set forth above, the right of the Grantee to receive further vesting of the Award shall terminate and, for the avoidance of doubt, the Grantee shall not receive vesting of the Award on the remaining Vesting Dates and all installments that have not vested as of the Termination Date (as defined in Section 6(g)) shall be deemed to be forfeited by the Grantee.


4.	Restrictions on Transfer


5.	Settlement


6.	Prohibited Activities

The Grantee acknowledges and agrees that this Agreement further aligns the Grantee’s interests with the Company Group’s long-term business interests and that the restrictions contained in this Section 6 are reasonably related to the protection of such business interests, including the preservation of the Company Group’s goodwill and the protection of the Confidential Information that the Grantee has obtained or will obtain in the course of his or her future Business Relationship with any member of the Company Group. The Grantee further acknowledges and agrees that his or her entry into this Agreement gives rise to an expectation by the Company that the Grantee, as the recipient of the equity securities of the Company and ancillary to this Agreement to provide the Grantee with such securities and Confidential Information during the period of his or her Business Relationship with the Company Group, will not interfere with or otherwise damage the Company Business, either during the period of the Grantee’s Business Relationship with any member of the Company Group or thereafter, as set forth herein. As an express incentive for the Company to enter into this Agreement and in order to further the Company’s legitimate business interests and interest in granting the Award and entering into this Agreement, the Grantee agrees to the following covenants:

(a)

Prohibition against Certain Activities . The Grantee agrees that the Grantee will not at any time: (x) disclose or furnish to any other Person or use for the Grantee’s own or any other Person’s account any Confidential Information (other than in the course of the Grantee’s service to the Company or any other member of the Company Group, if the Grantee is an Employee, Director or Consultant of or to the Company or any other member of the Company Group) except for Permitted Disclosures (a “Prohibited Disclosure or Use”), or (y) commit a breach of the provisions of Section 4 (a “Prohibited Transfer”), or (z) make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, disparages or is derogatory about, or which injures the reputation of, the Company Group or any employee, officer, director, or agent of any member of the Company Group (a “Prohibited Disparagement”).


(b)	Non-Competition and Non-Solicitation. In addition, the Grantee agrees that the Grantee will not during the period of the Grantee’s Business Relationship or within two (2) years following the Grantee’s Termination (the “Restricted Period”): (y) engage in any Prohibited Solicitation or (z) engage in any Competitive Activity.

(c)

view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfere with or raid the employees of any member of the Company Group. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 6(b) shall not apply following the Termination Date, and during the portion of the Restricted Period that follows the Termination Date, Section 6(b) shall be applied within the States of California and North Dakota only to prohibit the Grantee from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company (or any other member of the Company Group by which the Grantee had been employed), or otherwise directly or indirectly interfering with or raiding the employees of any member of the Company Group.

(d)

(e)

Right to Cancellation and Recovery . The Grantee understands and agrees that the Company has granted this Award to the Grantee to reward the Grantee for the Grantee’s future efforts and loyalty to the Company Group by giving the Grantee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if (v) the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party, or (w) the Grantee engages in any Prohibited Disparagement or breaches or violates the Grantee’s obligations relating to non-disparagement under any Restrictive Agreement to which the Grantee is a party, or (x) the Grantee engages in any Prohibited Transfer, or (y) the Grantee is Terminated for Cause, or (z) the Grantee violates Section 6 hereof, (collectively items (v) – (z), “Prohibited Actions”) then, subject to Section 6(e)(iii) below, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, exercisable by written notice (the date of such notice, the “Forfeiture Notice Date”) to take any the following actions:


(i)	The Company may terminate this Award and immediately cancel the installments for which the Transfer Restrictions have not yet lapsed; and


(ii)	If such Prohibited Action occurs during the Restricted Period, the Company may recover from the Grantee, and the Grantee shall pay to the Company, with respect to any installments on which the Transfer Restrictions lapsed during the period of two (2) years prior to the earlier of the occurrence of the Prohibited Action or the Termination Date the

following: an amount equal to the cash payment made to the Grantee in respect of any such installment. If the Grantee does not pay such amount over to the Company within twenty (20) days of demand, such amount shall thereafter bear interest at the maximum rate permitted by law and the Grantee shall be liable for all of the Company’s costs of collection, including but not limited to, reasonable legal fees.

(iii)

Notwithstanding anything to the contrary, in the event that a Change in Control has occurred and the Grantee is Terminated without Cause within the twelve (12) months following the Change in Control such that as a result of such termination, the Grantee is no longer in any Business Relationship with any member of the Company Group, the Company may take the actions set forth in Sections 6(e)(i) and (ii) only if the Grantee engages in any Prohibited Disclosure or Use or breaches or violates the Grantee’s obligations relating to the non-disclosure or non-use of confidential or proprietary information under any Restrictive Agreement to which the Grantee is a party.

(f)


(g)	Certain Definitions . For purposes of this Agreement, the following terms shall have the meaning set forth below:

(i)


(ii)	“ Cause ” shall mean the Grantee’s (A) willful and continued failure to substantially perform, without proper legal justification (and not due to Disability), his or her duties and responsibilities required under the Employment Agreement or under any other written agreement between the Grantee and the Company or any other member of the Company

Group, or otherwise reasonably required by the Board to be undertaken; (B) any material breach of the Employment Agreement or any other written agreement between the Grantee and the Company or any other member of the Company Group (including this Agreement); (C) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct, or workplace rules established by any member of the Company Group and applicable to the Grantee; (D) any conduct in connection with such Grantee’s performance of his or her duties or services to the Company or any other member of the Company Group that is (x) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (y) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (E) commission of, or indictment, conviction, admission, or plea of guilty or nolo contendere for or to, a charge of any felony (or state law equivalent) or any crime involving moral turpitude; provided that, in the case of any Grantee who, as of the date of determination, is party to an effective written services, severance or employment agreement with the Company or any other member of the Company Group, “Cause” shall have the meaning, if any, specified in such agreement.


(iii)	“ Change in Control ” shall mean the occurrence of any of the following events after the Date of Grant:


C.	the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction

own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;


D.	the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or


E.	the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

(iv)

(v)

(5%) of any equity security registered under the Exchange Act in any entity engaged in the Company Business, provided that neither the Grantee nor his or her affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation and (y) those equity investments owned by the Grantee as of the date of this Agreement as previously disclosed in writing by the Grantee to and agreed by the Company.

(vi)

(vii)

(viii)


(ix)	“ Prohibited Solicitation ” shall mean, on the Grantee’s own behalf or on behalf of any other Person, soliciting, raiding, enticing or inducing, directly or indirectly, any employee

of the Company or any other Person who is under contract with the Company (or other member of the Company Group) to (A) terminate such Person’s employment by, or contractual relationship with, such member of the Company Group, (B) refrain from extending or renewing the same contract (upon the same or new terms), (C) refrain from rendering services to or for any member of the Company Group, or (D) become employed by or enter into a service relationship with a competitor of any member of the Company Group.

(x)

“ Restricted Area ” shall mean: (A) during the portion of the Restricted Period prior to the Termination Date, the world; and (B) during the portion of the Restricted Period that occurs following the Termination Date, those geographic areas specified on Exhibit A, and any additional areas in which any member of the Company Group has taken material steps as of the Termination Date, with the Grantee’s assistance, in preparation of conducting the Company Business.


(xi)	“ Restrictive Agreement ” shall mean any agreement between any member of the Company Group and the Grantee that contains non-competition, non-solicitation, non-hire, non-disparagement, return-of-property or confidentiality restrictions applicable to the Grantee.


(xii)	“ Termination Date ” shall mean the date on which the Grantee’s Business Relationship terminates for any reason.


7.	Permitted Disclosures

Notwithstanding anything in this Agreement to the contrary:

(a)

nothing herein shall prevent the Grantee from making a good faith report of possible violations of applicable law to any governmental agency or entity or making disclosures that are protected under the whistleblower provisions of applicable law, and the Grantee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

(b)


(c)	nothing herein or any other agreement between the Grantee and the Company or any other member of the Company Group shall prevent the Grantee from lawfully, and without obtaining

prior authorization from any member of the Company Group: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “SEC”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. This Agreement shall not be construed or applied to require the Grantee to obtain prior authorization from any member of the Company Group before engaging in any of the foregoing conduct referenced in this Section 7, or to notify the Company or any other member of the Company Group of having engaged in any such conduct.


8.	Taxation


9.	Notices


10.	Agreement Subject to Plan; Dispute Resolution Program; Applicable Law

This Award is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of the Plan is attached hereto. The Plan shall control in the event there shall be any conflict between the Plan and this Agreement, and it shall control as to any matters not contained in this Agreement. The Committee shall have authority to interpret this Agreement, and to correct any defect or supply any omission or reconcile any

inconsistency in this Agreement, and to prescribe rules and regulations relating to the administration of this Award and other Awards granted under the Plan.

This Award shall be governed by the laws of the State of Delaware, without regard to the conflicts of law principles thereof. Delaware has a substantial relationship to the parties and transaction reflected herein and, in signing below, the Grantee acknowledges and agrees that there is a reasonable basis for the choice of Delaware law, as Delaware law is known to the parties and well-developed with respect to the subject matters of this Agreement. The designation of Delaware law and the interpretation and application of this Agreement consistent with principles of Delaware law assures uniformity, certainty and predictability in the application of the Agreement and the Plan through which the Award is granted. The Grantee hereby consents to personal jurisdiction in any action brought in any court, federal or state, within Harris County, Texas having subject matter jurisdiction in the matter.


11.	Headings and Capitalized Terms


12.	Severability and Reformation


13.	Binding Effect

This Agreement shall be binding upon the parties hereto, together with their personal executors, administrator, successors, personal representatives, heirs and permitted assigns.


14.	Entire Agreement


15.	Waiver

16. Section 409A

EXHIBIT A

RESTRICTED AREA

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “ Agreement ”) is entered into effective as of December 11, 2018 (the “ Effective Date ”), by and between C&J Spec-Rent Services, Inc., an Indiana company (the “ Company ”), and Michael Galvan (“ Executive ”).

RECITALS

WHEREAS , prior to the parties’ entry into this Agreement, the Company has employed Executive pursuant to the terms of that certain Employment Agreement entered into effective as of May 5, 2017 between Executive and C&J Energy Services, Inc. (the “ Original Agreement ”);

WHEREAS , the Company and Executive desire to amend and restate the terms of Executive’s employment with the Company and enter into this Agreement, which shall supersede and replace the Original Agreement in its entirety; and

WHEREAS , both the Company and Executive have read and understood the terms of this Agreement, and have been afforded a reasonable opportunity to review this Agreement with their respective legal counsel.

NOW, THEREFORE , in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows, effective as of the Effective Date:

Article I
DEFINITIONS

1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified or referred to in this Section 1.1 :

(a) “ Accrued Obligation ” shall mean (i) Executive’s Base Salary earned but unpaid through the Date of Termination and (ii) any unreimbursed business expenses properly incurred by Executive prior to the Date of Termination so long as Executive timely submitted all documentation for reimbursement as required by applicable Company policies.

(b) “ Board ” shall mean the Board of Directors of C&J Energy Services, Inc., a Delaware corporation (the “ Parent ”), and the parent company of the Company.

(c) “ Business ” shall mean (i) any business in which any member of the Company Group is engaged during the Term and for which Executive has (or has had) responsibilities or about which Executive has obtained Confidential Information; provided, however, the definition of “Business” shall not include any business in which the Company Group no longer engages or has any plans to engage in as of the end of the Term; and (ii) any other business in which any member of the Company Group has undertaken material steps to engage within the twelve (12) month period prior to the end of the Term, so long as Executive had material responsibility for, or Confidential Information about, such anticipated business. Without limiting the foregoing, the definition of “Business” shall be deemed to include the Company Group’s core

businesses: well construction and intervention services (including cementing and coiled tubing services), well completion services (including hydraulic fracturing and related stimulation services, cased-hole wireline, pressure pumping and pump-down, perforating, pressure testing, and logging services), and well support services (including workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(d) “ Cause ” shall mean Executive’s (i) willful and continued failure to substantially perform, without proper legal justification (and not due to Permanent Disability), the duties and responsibilities required hereunder or under any other written agreement between Executive and the Company or any other member of the Company Group, or otherwise reasonably required by the Board to be undertaken; (ii) any material breach of this Agreement or any other material written agreement between Executive and the Company or any other member of the Company Group, including the representations and covenants set forth herein; (iii) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct or workplace rules established by any member of the Company Group and applicable to Executive; (iv) any conduct in connection with Executive’s employment duties or responsibilities that is (A) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (B) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (v) commission of, or indictment, conviction, admission or plea of guilty or nolo contendere for or to a charge of any felony (or state law equivalent) or any crime involving moral turpitude.

(e) “ Change of Control ” shall mean the occurrence of any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a Permitted Holder (as defined in Section 1.1(l) ), acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Parent representing more than fifty percent (50%) of the combined voting power of the Parent’s then outstanding securities; provided , however , that if the Company engages in a merger or consolidation in which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity;

(ii) a change in the composition of the Board such that the “Continuing Directors” cease for any reason, other than due to ordinary course retirement, death, disability, term limit or any director refreshment or similar policy, to constitute at least seventy percent (70%) of the Board. The “ Continuing Directors ” shall mean those members of the Board who either: (A) were directors on the Effective Date; or (B) were subsequently elected by, or on the nomination or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Board who were or become Continuing Directors;

(iii) the consummation of a merger, reorganization or consolidation of the Parent with any corporation, including a reverse or forward triangular merger, where the Parent’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;

(iv) the consummation or a transaction that implements in whole or in part a resolution of the Parent’s shareholders authorizing a complete liquidation or dissolution of the Parent; or

(v) the sale or disposition (other than a pledge or similar encumbrance) by the Parent of all or substantially all of the assets of the Parent or the Company Group, other than to a Permitted Holder or Permitted Holders;

provided , however , if a Change of Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A, a transaction or event described in paragraph (i), (ii), (iii) or (iv) shall constitute a Change of Control only if such transaction or event constitutes a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5).

(f) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(g) “ Company Group ” shall mean the Parent and each of its Subsidiaries.

(h) “ Date of Termination ” shall mean the effective date of termination of Executive’s employment hereunder, as specified in the applicable Notice of Termination.

(i) “ Notice of Termination ” shall mean a notice from one party to this Agreement to the other party that indicates such party’s intent to terminate Executive’s employment hereunder, and which specifies the provision of this Agreement pursuant to which such termination will occur.

(j) “ Permanent Disability ” shall mean a physical or mental impairment that renders Executive incapable of materially performing Executive’s duties hereunder (after accounting for reasonable accommodation, if applicable and required by applicable law) for a period in excess of six (6) months during any consecutive twelve (12) month period.

(k) “ Permitted Holder ” shall mean (i) any trustee or other fiduciary holding securities of the Parent under an employee benefit plan of any member of the Company Group, (ii) any Subsidiary of the Parent that is at least 80% owned by the Parent, and (iii) any corporation, partnership, limited liability company or other entity owned, directly or indirectly, by the shareholders of the Parent in substantially the same proportions as their ownership of securities of the Parent.

(l) “ Protected Period ” shall mean the period beginning on the effective date of a Change of Control and ending on the one (1) year anniversary of the effective date of such Change of Control.

(m) “ Release Expiration Date ” shall mean the date that is twenty-one (21) days following the date upon which the Company timely delivers to Executive the

Release (which shall occur no later than seven (7) days after the Date of Termination), or in the event that such termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967, as amended), the date that is forty-five (45) days following such delivery date. The “ Release ” shall mean an agreement providing for the release of claims against the Company Group in a form acceptable to the Company.

(n) “ Restricted Area ” shall mean (i) during the portion of the Prohibited Period that occurs while Executive is employed by any member of the Company Group, the world and, (ii) during the portion of the Prohibited Period that occurs following the Date of Termination, those geographic areas where the Company or any other member of the Company Group conducted the Business during the Term and for which Executive had direct or indirect, material responsibilities. Without limiting the foregoing, the Restricted Area shall include those geographic areas specified on Exhibit A , and any additional areas in which any member of the Company Group has taken material steps as of the Date of Termination, with Executive’s assistance, in preparation of conducting the Business.

(o) “ Section 409A ” shall mean Section 409A of the Code and the final Department of Treasury regulations and other interpretive guidance issued thereunder.

(p) “ Subsidiary ” shall mean any business entity with respect to which the Parent owns or controls, directly or indirectly, not less than a majority of the equity securities of such entity, or otherwise possesses, with by virtue of security ownership or contract, the power to elect a majority of the board of directors or other governing body or officers thereof.

ARTICLE II
DUTIES

2.1 Duties . During the Term (as defined in Section 3.1 ), Executive shall serve as Senior Vice President – Chief Accounting Officer of the Parent, or in such other position(s) as the Board or the Parent’s Chief Executive Officer shall determine. Executive shall comply with the policies of the Company Group as may be in effect from time to time for executive officers, including the Company Group’s policies regarding confidentiality, ownership of intellectual property, drug testing, trading in securities of the Parent, discrimination and harassment, and lawful and ethical conduct. Executive shall have such duties, authorities and responsibilities as the Board or the Parent’s Chief Executive Officer shall designate that are consistent with Executive’s position.

2.2 Extent of Duties . During the Term, Executive shall devote substantially all of Executive’s business time, energy and efforts to the affairs of the Parent and other members of the Company Group as the Parent, acting through its Board and the Parent’s Chief Executive Officer, shall deem necessary in the discharge of Executive’s duties hereunder. Executive shall not engage, directly or indirectly, in any other business or businesses, whether or not similar to that of the Company Group, except with the consent of the Chairman of the Board or as otherwise permitted by this Section 2.2 . Executive agrees to serve in the position(s) referred to in Section 2.1 and to perform diligently and to the best of Executive’s abilities the duties and services appertaining to such offices, as well as such additional duties and services appropriate

to such offices which the parties mutually may agree upon from time to time. Notwithstanding the foregoing, nothing herein shall prevent Executive from participating in social, civic, charitable, religious, business, educational or professional associations, or the passive management of Executive’s personal investments, so long as such activities do not materially detract from Executive’s ability to perform Executive’s duties under this Agreement or otherwise violate the provisions of this Agreement. Without limiting the foregoing, in the event that Executive desires to participate personally in any business opportunity that is related to the business of any member of the Company Group, Executive shall not participate in such opportunity without first making full written disclosure to the Board of such opportunity and the scope of Executive’s proposed involvement and seeking necessary approvals under the Parent’s corporate policies in effect at such time.

ARTICLE III
TERMS OF EMPLOYMENT

3.1 Employment Period . Unless sooner terminated pursuant to the terms and conditions of this Agreement, Executive’s employment pursuant to this Agreement shall commence on the Effective Date and end on the first anniversary of the Effective Date (such period, the “ Initial Period ”); provided , however , that on the first anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, if Executive’s employment under this Agreement has not been terminated pursuant to Article IV , the term of this Agreement shall automatically extend for an additional year (each one-year term, an “ Extension Period ”) unless on or before the date that is ninety (90) days prior to the end of the then-existing Initial Term or Extension Period, as applicable, the Company or Executive provides the other party hereto written notice (a “ Notice of Non-Renewal ”) that the term will not be so extended. The period from the Effective Date through the expiration of this Agreement or, if sooner, the termination of Executive’s employment pursuant to this Agreement, regardless of the time or reason for such termination, is referred to herein as the “ Term .”

3.2 Annualized Base Salary . As compensation for services rendered under this Agreement, Executive shall be entitled to receive an annualized base salary (before tax withholdings and other deductions) of $290,000 (“ Base Salary ”). Executive’s Base Salary shall be reviewed by the Board from time to time and, in the Board’s sole discretion, may be modified (such determined amount as in effect at any time, the “ Effective Base Salary ”). Executive’s base salary shall be payable in substantially equal installments in accordance with the practice and policies of the Company as may exist from time to time (but no less frequently than monthly).

3.3 Cash Incentive Awards .

(a) Annual Bonus . For each complete year that Executive is employed with the Company hereunder during the Term (each such year, a “ Bonus Year ”), Executive shall be eligible to receive an annual cash bonus award (each, an “ Annual Bonus ”) under the Parent’s short-term incentive plan (as may be in effect from time to time, the “ STIP ”), subject to and conditioned on the Parent’s overall performance and financial results together with any other terms and conditions of the STIP that may be established by the Board or the Compensation Committee of the Board (the “ Compensation Committee ”) for that Bonus Year (generally and collectively, the “ STI Performance Plan ”). Unless otherwise established by the Board or the Compensation Committee, the incentive opportunity available to Executive shall be based on a target value of 50% of the

annualized rate of Executive’s Effective Base Salary in effect at the time of determination. Notwithstanding the foregoing, (i) unless the Compensation Committee determines otherwise, Executive shall not be entitled to any payment of an Annual Bonus for any Bonus Year in which the Parent does not achieve the vesting requirements and other conditions set forth in the applicable STI Performance Plan, as determined by the Compensation Committee in its sole discretion; (ii) the actual amount of each Annual Bonus, if any, paid to Executive is subject to determination in the sole discretion of the Compensation Committee; (iii) Executive shall not be entitled to any Annual Bonus if Executive’s employment under this Agreement is terminated by the Company for Cause prior to the date of payment of such Annual Bonus; and, (iv) subject to the exceptions set forth herein, Executive shall not be entitled to any Annual Bonus for any Bonus Year if Executive is not employed by the Company on the date the Compensation Committee approves payment of such Annual Bonus. It is expected but not guaranteed that payment of the Annual Bonus, if any, will be approved in connection with the finalization of the Parent’s annual financial statements for the Bonus Year to which it relates and paid as promptly as practicable following such approval but in no event later than December 31 of the year following the applicable Bonus Year. The Compensation Committee may, in its sole discretion, determine that up to 50% of the value of any Annual Bonus shall be paid in equity of the Parent and the remainder of such Annual Bonus be paid in cash. For each Bonus Year during the Term, the Compensation Committee will review the STIP and establish the structure, terms and conditions (including performance objectives, metrics, goals and incentive opportunities) of the STI Performance Plan and the target value of the incentive opportunity (“ Effective STI Bonus Target ”) provided to Executive for the Bonus Year as it deems appropriate.

(b) Discretionary Bonus . In addition to the Annual Bonus, Executive may be eligible to receive additional short- and long-term incentive cash bonus awards in the sole discretion of the Board or the Compensation Committee (each a “ Discretionary Bonus ” and, together with the Annual Bonus, “ Bonuses ”). The frequency, amount, terms and conditions of any Discretionary Bonus shall be left to the exclusive discretion of the Board or the Compensation Committee.

3.4 Benefits . During the Term, the Company agrees to make available to Executive and Executive’s eligible family members the employment benefits that the Parent or another member of the Company Group, as applicable, makes available to similarly situated employees and their respective eligible family members, subject to the terms and conditions of the applicable benefit programs and plans. Executive and Executive’s eligible family members shall be eligible to participate in any and all employee benefit plans (including medical and dental insurance, retirement plans, disability insurance and life insurance) as may be implemented by the Parent (or another member of the Company Group, as applicable) from time to time for its similarly situated employees and their families. Such employment benefits shall be governed by the applicable plan documents, insurance policies, or employment policies, and may be at any time modified, suspended, discontinued, or revoked in the sole discretion of the Parent (or another member of the Company Group, as applicable) in accordance with the terms of the applicable documents or policies. In addition to such benefits, the Company agrees to provide, or cause to be provided, the following benefits upon satisfaction by Executive of any eligibility requirements, subject to the following limitations:

(a) Sick-Leave Benefits and Disability Insurance . During the Term, to the extent made available to other similarly situated employees of the Company, Executive shall be eligible for paid sick leave benefits payable at Executive’s then Effective Base Salary rate during Executive’s absence due to illness or other incapacity; provided , however , that any sick-leave benefits will be reduced by the amount, if any, of workers’ compensation, Social Security entitlement, or disability or other wage replacement benefits, if any, paid or provided to Executive in connection with such illness or incapacity.

(b) Vacation . During the Term, Executive shall be eligible for vacation consistent with Company policy in effect from time to time, and will be eligible for at least twenty (20) business days of paid vacation per complete calendar year (“ Vacation Days ”), which Vacation Days shall accrue and may be used pursuant to the Company’s vacation policies as may exist from time to time.

3.5 Equity Incentive Awards . During the Term, Executive shall be eligible to receive annual equity awards (“ Equity Awards ”) under the Parent’s long-term incentive plan, with such Equity Awards of a nature and type and in such amounts as determined in the sole discretion of the Board or the Compensation Committee. Unless otherwise established by the Board or the Compensation Committee, the Equity Awards granted to Executive each year, if any, shall have an aggregate target value of 80% of the annualized rate of Executive’s Effective Base Salary at the time the grant is approved; provided , however, that the actual value of such Equity Awards, shall be determined in the sole discretion of the Board or the Compensation Committee at the time of grant. All such Equity Awards shall be subject to the vesting requirements and other terms and conditions determined by the Board or the Compensation Committee and the award agreements pursuant to which they are granted, as may be modified by this Agreement.

3.6 Other Benefits .

(a) Perquisites . During the Term, Executive shall be eligible to receive fringe benefits and perquisites as determined from time to time by the Company, which are commensurate with Executive’s position, title and duties with the Company or other member of the Company Group, as determined by the Company Group from time to time and subject to all applicable benefit and insurance policies, terms and conditions. Available perquisites shall specifically include provision for an automobile or automobile allowance for Executive’s business and personal use, and related fuel coverage; provided , however , that the provision of an automobile or automobile allowance to Executive shall not preclude Executive from receiving reimbursement under Company policies and practices for reasonable business expenses in connection with Executive’s use of other transportation for hire.

(b) Reimbursement of Business Expenses . Executive is authorized to incur ordinary, necessary, and reasonable business expenses in connection with the performance of Executive’s duties, responsibilities, and authorities under this Agreement and for the promotion of the Company Group’s business and activities during the Term, including expenses for necessary travel and entertainment and other items of expense required in the normal and routine course of Executive’s employment under this Agreement. The Company will reimburse Executive from time to time for all such business expenses actually incurred pursuant to and in conformity with this paragraph

and the policies and practices of the Company then in effect relative to the reimbursement of business expenses.

ARTICLE IV
TERMINATION

4.1 Termination of Employment .

(a) Termination by the Company for Cause . The Company may terminate Executive’s employment under this Agreement for Cause at any time without any further liability to Executive, other than the obligations specified in Section 4.3(a) . If the Company wishes to terminate Executive’s employment hereunder for Cause, it shall give Executive a Notice of Termination and Executive’s employment under this Agreement shall terminate immediately upon provision of such notice.

(b) Termination by Executive for Any Reason . Executive may terminate Executive’s employment under this Agreement for any reason or no reason at all. Any termination of Executive’s employment by Executive for any reason (other than Executive’s death or Permanent Disability) shall be made by the provision of at least thirty (30) days’ prior written notice to the Company in accordance with Section 4.2 ; provided, however, that if Executive has provided notice to the Company of Executive’s termination of employment, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for Executive’s termination of employment nor be construed or interpreted as a termination of employment by the Company without Cause). Termination of Executive’s employment under this Agreement by Executive for any reason will relieve the Company of any further liability to Executive other than the obligations specified in Section 4.3(c)4.3(a) . For the avoidance of doubt, if Executive’s employment is terminated as a result of Executive’s issuance of a Notice of Non-Renewal pursuant to Section 3.1 , then the Company also will be relieved of any further liability to Executive other than the obligations specified in Section 4.3(a) .

(c) Termination by the Company Without Cause . The Company may terminate Executive’s employment under this Agreement without Cause at any time. Any termination of Executive’s employment by the Company without Cause (and not due to Executive’s death or Permanent Disability) shall be made by the provision of at least fourteen (14) days’ prior written notice to Executive in accordance with Section 4.2 ; provided , however , that the Company may, in its sole discretion, elect to pay Executive for all or any part of the notice period in lieu of providing prior written notice, calculated based on the annualized rate of Executive’s Effective Base Salary at the time of termination. Termination of Executive’s employment under this Agreement by the Company without Cause (and not due to Executive’s death or Permanent Disability, and other than during a Protected Period) will cause Executive to become eligible for the benefits specified in Section 4.3(b) .

(d) Change of Control Termination . A termination of Executive’s employment by the Company without Cause (and not due to Executive’s death or

Permanent Disability) during a Protected Period, will cause Executive to become eligible for the benefits specified in Section 4.3(c) .

(e) Termination on Death or Permanent Disability . Executive’s employment under this Agreement shall automatically terminate on Executive’s death or upon the delivery to Executive of a Notice of Termination stating the Company’s determination of Executive’s Permanent Disability in accordance with Section 4.2 . Termination of Executive’s employment under this Agreement upon Executive’s death or Permanent Disability will cause Executive (or Executive’s estate, as applicable) to become eligible for the benefits specified in Section 4.3(d) .

4.2 Notice of Termination . Any termination of Executive’s employment by the Company or Executive pursuant to Section 4.1 (other than upon Executive’s death) shall be communicated by a Notice of Termination to the other party hereto. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Permanent Disability, as set forth in Section 4.1(a) or (e) , as applicable, shall not waive any right of Executive or the Company under this Agreement or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

4.3 Obligations of the Company Upon Termination .

(a) Terminations Not Giving Rise to Severance . If Executive’s employment hereunder terminates: (i) due to the Company’s termination of Executive’s employment for Cause; (ii) due to Executive termination of Executive’s employment for any reason; or (iii) upon the expiration of the then-existing Initial Period or Extension Period, as applicable, following (and as the result of) the Company’s issuance of a Notice of Non-Renewal such that such termination following the Company’s issuance of a Notice of Non-Renewal occurs (x) outside of a Protected Period and (y) without any member of the Company Group first having offered Executive employment (or continued employment) commencing following the end of the then-applicable Initial Period or Extension Period, as applicable, then Executive shall be entitled only to the payment of the Accrued Obligation.

(b) Terminations Outside of a Protected Period Giving Rise to Severance Eligibility . If, at any time other than during a Protected Period, (x) the Company terminates Executive’s employment under this Agreement other than for Cause (and not due to Executive’s death or Permanent Disability), or (y) Executive’s employment terminates upon the expiration of the then-existing Initial Period or Extension Period, as applicable, following (and as the result of) the Company’s issuance of a Notice of Non-Renewal and the circumstances described in Section 4.3(a)(iii)(y) have not been satisfied, then Executive shall be entitled to receive (i) payment of the Accrued Obligation and (ii) subject to the satisfaction of the STIP and applicable STI Performance Plan or other applicable terms and conditions, as described in Section 3.3 , any of Executive’s unpaid Bonuses with respect to a previous year or other performance period, as applicable, completed prior to the Date of Termination (without regard to any requirement that Executive remain employed through the date of determination, date of approval or date of payment of such Bonuses, as may be applicable). In addition, subject to Executive’s (x) delivery to the Company by the Release Expiration Date (and non-

revocation in any time provided to do so) of an executed Release and (y) compliance with Articles V , VI , and VII herein, Executive shall also be eligible to receive:

a lump sum payment of an amount equal to the Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(b)(iii), shall be prorated and calculated as follows: (A) if the Date of Termination occurs within the first half of the Bonus Year, then calculated based on the Effective STI Bonus Target multiplied by Executive’s base earnings during the Bonus Year through the Date of Termination, and (B) if the Date of Termination occurs within the latter half of the Bonus Year, then calculated based on Executive’s base earnings during the Bonus Year through the Date of Termination multiplied and measured by the Company’s actual performance during the Bonus Year through the Date of Termination under the applicable STI Performance Plan;

ii.

any and all outstanding Equity Awards granted to Executive under any plan not previously vested shall become fully vested, without proration, with any unexercised options as of the Date of Termination remaining exercisable for the full term thereof; provided , however , that with respect to any Equity Award that is subject to performance-based vesting conditions, the number of securities subject to the Equity Award shall be reduced on a pro rata basis to the result of (A) the total number of target securities subject to the Equity Award multiplied by (B) a fraction, the numerator of which is the number of full months in which Executive was employed under this Agreement (counting the month in which the Date of Termination occurs as a full month) and the denominator of which is the number of full months in the performance period applicable to the Equity Award, and such reduced number of securities shall become vested and will be calculated, settled and delivered (if at all) subject to and based on the actual performance and achievement of the applicable performance metrics calculated as of the Date of Termination;

iii.

a lump sum payment of an amount equal to one (1) times the sum of (A) the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination and (B) the target value of Executive’s Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(b)(v) , shall be calculated without proration based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;

iv.

of the Company Group, as applicable) as of the Date of Termination elected continuation coverage under such group health plans as in effect, and at the applicable COBRA rates, as of the Date of Termination, without regard to whether Executive and Executive’s dependents actually elected such coverage or whether actual COBRA coverage is applicable for the above-referenced time period; and

a lump sum payment equal to (as applicable): (A) 100% of the value of Executive’s Vacation Days (which, for purposes of this Agreement, shall be calculated as 1/365 ^th of Executive’s annualized Base Salary multiplied by each applicable Vacation Day for which Executive is being paid) for the year in which the Date of Termination occurs if the Date of Termination occurs in the first quarter of the calendar year, (B) 75% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the second quarter of the calendar year, (C) 50% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the third quarter of the calendar year, or (D) 25% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the fourth quarter of the calendar year.

(c) Change of Control Termination . If, during a Protected Period: (A) the Company terminates Executive’s employment under this Agreement other than for Cause (and not due to Executive’s death or Permanent Disability), or (B) Executive’s employment under this Agreement ends upon the expiration of the then-existing Initial Period or Extension Period, as applicable, following (and as the result of) the Company’s issuance of a Notice of Non-Renewal , then Executive shall be entitled to receive (i) payment of the Accrued Obligation and (ii) subject to the satisfaction of the STIP and applicable STI Performance Plan or other applicable terms and conditions, as described in Section 3.3 , any of Executive’s unpaid Bonuses with respect to a previous year or other performance period, as applicable, completed prior to the Date of Termination (without regard to any requirement that Executive remain employed through the date of determination, date of approval or date of payment of such Bonuses, as may be applicable). In addition, subject to Executive’s (x) delivery to the Company by the Release Expiration Date (and non-revocation in any time provided to do so) of an executed Release and (y) compliance with Articles V , VI , and VII , Executive shall also be eligible to receive:

a lump sum payment of an amount equal to the Annual Bonus for the Bonus Year in which the Date of Termination occurs at the target level, which, for the purposes of this Section 4.3(c)(iii) , shall be calculated, without proration, based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;


ii.	any and all outstanding Equity Awards granted to Executive under any plan not previously vested shall become fully vested, without proration,

with any unexercised options as of the Date of Termination remaining exercisable for the full term thereof; provided , however , that with respect to any Equity Award that is subject to performance-based vesting conditions, the number of securities subject to such Equity Award shall be reduced on a pro rata basis to the result of (A) the total number of target securities subject to the Equity Award multiplied by (B) a fraction, the numerator of which is the number of full months in which Executive was employed under this Agreement (counting the month in which the Date of Termination occurs as a full month) and the denominator of which is the number of full months in the performance period applicable to the Equity Award, and such reduced number of securities shall become vested and will be calculated, settled and delivered (if at all) at the prorated target level without regard to any performance goal otherwise applicable thereto;

iii.

a lump sum payment of an amount equal to one (1) times the sum of (A) the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination and (B) the target value of Executive’s Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(c)(v) , shall be calculated without proration, based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;

iv.

a lump sum payment of an amount equal to all COBRA premiums that would be payable during the period beginning on the Date of Termination and ending on the date that is eighteen (18) months after the Date of Termination, assuming Executive and Executive’s dependents who were enrolled in the group health plans of the Parent (or other member of the Company Group, as applicable) as of the Date of Termination elected continuation coverage under such group health plans as in effect, and at the applicable COBRA rates, as of the Date of Termination, without regard to whether Executive and Executive’s dependents actually elected such coverage or whether actual COBRA coverage is applicable for the above-referenced time period; and

iii.

a lump sum payment equal to (as applicable): (A) 100% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the first quarter of the calendar year, (B) 75% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the second quarter of the calendar year, (C) 50% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the third quarter of the calendar year, or (D) 25% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the fourth quarter of the calendar year.

(d) Termination on Death or Permanent Disability . If Executive’s employment hereunder is terminated by reason of Executive’s death or by the Company due to Executive’s Permanent Disability, the Company shall have no further obligations to Executive, other than for (%4) payment of the Accrued Obligation; (%4) subject to the satisfaction of the STIP and applicable STI Performance Plan or other applicable terms and conditions, as described in Section 3.3 , any of Executive’s unpaid Bonuses with respect to a previous year or other performance period, as applicable, completed prior to the Date of Termination (without regard to any requirement that Executive remain employed through the date of determination, date of approval or date of payment of such Bonuses, as may be applicable); and (%4) the timely payment or provision of any and all benefit obligations provided under Section 3.4 , which under their terms are available in the event of Executive’s death or Permanent Disability. In addition, subject to Executive’s (or Executive’s estate) delivery to the Company by the Release Expiration Date (and non-revocation in any time provided to do so) of an executed Release, Executive (or Executive’s estate, if applicable) shall also be eligible to receive:

iv.

a lump sum payment of an amount equal to the Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(d)(iv) , shall be prorated and calculated as follows: (A) if the Date of Termination occurs within the first half of the Bonus Year, then calculated based on the Effective STI Bonus Target multiplied by Executive’s base earnings during the Bonus Year through the Date of Termination, and (B) if the Date of Termination occurs within the latter half of the Bonus Year, then calculated based on Executive’s base earnings during the Bonus Year through the Date of Termination multiplied and measured by the Company’s actual performance during the Bonus Year through the Date of Termination under the applicable STI Performance Plan;

ii.

a lump sum payment equal to Executive’s Effective Base Salary as in effect on the Date of Termination for (as applicable): (A) 100% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the first quarter of the calendar year, (B) 75% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the second quarter of the calendar year, (C) 50% of the value of Executive’s Vacation Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the third quarter of the calendar year, or (D) 25% of the value of Executive’s Vacation

Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the fourth quarter of the calendar year.

4.4 Payment Timing . Except as otherwise provided in Section 10.12 , the Company shall pay Executive the amounts specified in Sections 4.3(a) , (b)(i) , (c)(i) or (d)(i) , within thirty (30) days after the Date of Termination or such earlier time as may be required by applicable law. In addition, subject to Executive’s timely execution and non-revocation of the Release and compliance with Articles V , VI and VII the Company shall pay Executive the amounts specified in Sections 4.3(b)(iii) , (b)(v) , (b)(vi) , (b)(vii) , (c)(iii) , (c)(v) , (c)(vi) , (c)(vii) , (d)(iv) or (d)(vi) , as applicable, on or before the first business day that is on or after the date that is sixty (60) days after the Date of Termination. Any other amounts payable by the Company under Sections 4.3 (b)(ii) , (b)(iv) , (c)(ii) , (c)(iv) , (d)(ii) , (d)(iii) or (d)(v) , as applicable, are payable pursuant to the respective Section(s) of this Agreement.

4.5 Limitations on Severance Payment and Other Payments or Benefits .

(a) Limitation on Payments . Notwithstanding any provision of this Agreement, if any portion of the payments or benefits under this Agreement, or under any other agreement between Executive and any member of the Company Group or plan of any member of the Company Group (in the aggregate, “ Total Payments ”), would constitute an “excess parachute payment” and would, but for this Section 4.5 , result in the imposition on Executive of an excise tax under Section 4999 of the Code (the “ Excise Tax ”), then the Total Payments to be made to Executive shall either be (%4) delivered in full, or (%4) delivered in such reduced amount in the manner determined in accordance with Section 4.5(b) so that no portion of such Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

(b) Determination of Limit . Within forty (40) days following a Date of Termination or notice by one party to the other of its belief that there is a payment or benefit due Executive that would result in an excess parachute payment, Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of a nationally recognized accounting firm or tax counsel (the “ National Advisor ”) selected by the Company (which may be a regular accounting firm or outside counsel to the Company), which opinion sets forth (%4) the amount of the Base Period Income (as defined below), (%4) the amount and present value of the Total Payments, (%4) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to Section 4.5(a) , and (%4) the net after-tax proceeds to Executive, taking into account applicable federal, state and local income taxes and the Excise Tax if (x) the Total Payments were reduced in accordance with Section 4.5(a) and (y) the Total Payments were not so reduced. The opinion of the National Advisor shall be addressed to the Company and Executive and shall be binding upon the Company and Executive. If such National Advisor’s opinion determines that Section 4.5(a)(ii) applies, then the Agreement Benefits (as defined below) hereunder or any other payment or benefit determined by such counsel to be includable in Total Payments shall be reduced or eliminated so that, under the bases of calculations set forth in such opinion, there will be no excess parachute payment. In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the

following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).

(c) Definitions and Assumptions . For purposes of this Agreement: (%4) the terms “ excess parachute payment ” and “parachute payments ” shall have the meanings assigned to them in Section 280G of the Code, and such “parachute payments” shall be valued as provided therein; (%4) present value shall be calculated in accordance with Section 280G(d)(4) of the Code; (%4) the term “ Base Period Income ” means an amount equal to Executive’s “annualized includible compensation for the base period” as defined in Section 280G(d)(1) of the Code; (%4) “ Agreement Benefits ” shall mean the payments and benefits to be paid or provided pursuant to this Agreement; (%4) for purposes of the opinion of the National Advisor, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code, which determination shall be evidenced in a certificate of such auditors addressed to the Company and Executive; and (%4) Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of Executive’s domicile (determined in both cases in the calendar year in which the Date of Termination occurs or the notice described in Section 4.5(b) above is given, whichever is earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

(d) Reasonableness of Compensation . The Company agrees that it shall instruct the National Advisor to take into account the value of any reasonable compensation for services to be rendered by Executive in connection with making determinations with respect to Section 280G or Section 4999 of the Code, including the non-competition provisions applicable to Executive under Article VII and any other non-competition provisions that may apply to Executive. The Company agrees to fully cooperate in the valuation of any such services, including any non-competition provisions, and agrees to retain, at the Company’s expense, a recognized valuation firm to make a determination of the value of the non-competition provisions. If the National Advisor so requests in connection with the opinion required by this Section 4.5 , Executive and the Company shall obtain, at the Company’s expense, and the National Advisor may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by Executive solely with respect to its status under Section 280G of the Code.

(e) Changes to Sections of the Code . This Section 4.5 shall be amended to comply with any amendment or successor provision to Sections 280G or 4999 of the Code. If such provisions are repealed without successor, then this Section 4.5 shall be cancelled without further effect.

4.6 Resignation Upon Termination . Upon any termination of Executive’s employment with the Company, and without further action on the part of Executive or any member of the Company Group, Executive shall be deemed to have resigned (a) as an executive officer, principal officer or other officer of the Parent and any of any other member of the Company Group for which Executive served in such capacity; (b) from the board of directors or board of managers (or similar governing body) of any member of the Company Group, and from the board of directors or board of managers (or similar governing body) of any corporation, limited liability entity, unlimited liability entity or other entity in which any member of the Company Group holds an equity interest and with respect to which board of directors or board of managers (or similar governing body) Executive serves as the designee or other representative of any member of the Company Group.

ARTICLE V
CONFIDENTIAL INFORMATION

5.1 Confidential Information . Executive acknowledges that Executive will receive Confidential Information in Executive’s position with the Company, and during Executive’s employment hereunder. For the purposes of Articles V , VI , VII , VIII and IX , the “Company” shall be deemed to include the Company and each other member of the Company Group.

5.2 Scope of Confidential Information . Executive acknowledges that the Company has developed, and will during the term of Executive’s employment continue to develop, confidential information, competitively valuable information, and other intangible or “intellectual property” in connection with its business, some or all of which is proprietary to the Company, (collectively, the “ Confidential Information ”). Without limiting the generality of the preceding sentence, Executive expressly recognizes and agrees that, subject to the remainder of this Section 5.2 , the following items, and all copies, summaries, extracts or derivative works thereof, are entitled to trade secret protection and constitute Confidential Information under this Agreement, whether developed prior to the date hereof or thereafter, and whether with the assistance of Executive or otherwise: (%4) the Company’s confidential or proprietary computer software, databases and lists of customers, prospects, candidates, and employees; employee applications; skills inventory sheets and similar summaries of employee qualifications, as well as employee compensation; customer ordering habits, billing rates, buying preferences, and short term needs; sales reports and analysis; (%4) employee reports and analyses; customer job orders and profit margin data; businesses processes, methods of operation and sales techniques; (%4) statistical information regarding the Company; (%4) financial information of the Company and its customers that is not publicly available; (%4) negotiated terms and pricing with vendors and customers; (%4) research and development, business projects, strategic business plans, and strategies; products and solution services offered to customers; and (%4) any other non-public information of the Company that gives the Company a competitive advantage by virtue of it not being generally known. Notwithstanding the foregoing, Confidential Information shall not include (a) any information which is or becomes publicly available, other than as a result of the wrongful action of Executive or Executive’s agents; (b) any information independently developed by Executive subsequent to the date that Executive is no longer employed or engaged by the Company; (c) any information made available to Executive following the termination of Executive’s employment from a third party not bound by a confidentiality agreement with, or other obligation with respect to confidentiality to, the Company or (d) any information as to which the Company specifically waives its rights hereunder pursuant to an instrument in writing.

5.3 Agreement to Provide Confidential Information to Executive . The Company promises to provide some or all of the Confidential Information described above to Executive, without regard to the duration of Executive’s continued employment with the Company. Executive agrees that the Confidential Information belongs to the Company, is subject to the terms of this Agreement, and is not Executive’s property.

5.4 Works Made for Hire . Executive recognizes and agrees that all original works of authorship, and all inventions, discoveries, improvements and other results of creative thinking or discovery by Executive during the term of Executive’s employment, whether the result of individual efforts or in acts in concert with others, arising in the scope of Executive’s employment, utilizing in any way any of the Confidential Information or Company property, or otherwise relating to the Company’s business (collectively, the “ Created Works ”), are and shall be “works made for hire” within the meaning of the United States copyright laws, to the extent applicable thereto, and in all events shall be the sole and exclusive property of the Company. Without limiting the generality of the foregoing, the Created Works shall include all computer software, written materials, business processes or plans, compilations, programs, improvements, inventions, notes, copyrightable works made, fixed, conceived, or acquired by Executive in the scope of Executive’s employment, utilizing in any way any Confidential Information, or otherwise relating to the Company’s business. No part of the definition of Created Works is intended to exclude the Created Works from being included among the items constituting Confidential Information.

5.5 Agreement to Return Confidential Information and Company Property . At any time upon demand by the Company, and within five (5) days of the termination of Executive’s employment for any reason, regardless of which party initiates such termination, Executive shall return all property of the Company to the Company, including all computer files and other electronically stored information and all copies of all or any part of all documents, files and other materials that constitute or reflect Confidential Information or any summaries, extracts or derivative works thereof, in good condition. Such property includes any documents, files and other materials that constitute or reflect Confidential Information, including Created Works constituting or reflecting Confidential Information, and any of the Company’s tools of trade.

5.6 Assignment of Created Works . To the extent for any reason any Created Works (or any element thereof) are not eligible for work-for-hire treatment, Executive hereby irrevocably and fully assigns to the Company all of Executive’s right, title and interest in and to the Created Works and all aspects thereof, including all rights to renewals, extensions, causes of action, reproduce, prepare derivative works, distribute, display, perform, transfer, make, use and sell, and waives all related moral rights. Executive will, from time to time during the term of this Agreement and thereafter, and at any time upon the request of the Company, execute and deliver any documents, agreements, certificates or other instruments affirming, giving effect to or otherwise perfecting the Company’s rights in the Created Works and will provide such cooperation as the Company shall reasonably request in connection with the protection, exploitation or perfection of its rights therein anywhere in the world.

officers and agents as Executive’s agent and attorney-in-fact, to act for and in Executive’s behalf and stead to execute and file any such application or applications or other documents and to do all other lawfully permitted acts to further the prosecution and issuance of patent, copyright or trademark registrations or any other legal protection thereon with the same legal force and effect as if executed by Executive.

5.8 Disclosure of Inventions . Executive will promptly and without reservation fully disclose in writing any Created Works to the Company both during the Term and thereafter.

ARTICLE VI
NON-DISCLOSURE, NON-DISPARAGEMENT

6.1 Non-Disclosure .

(a) General Duty . Executive agrees that Executive will not directly or indirectly use any Confidential Information, including the Company’s confidential or proprietary information, trade secrets or Created Works, for Executive’s own benefit or for the benefit of any third party. Executive agrees that Executive will not directly or indirectly disclose any Confidential Information, including the Company’s confidential or proprietary information, trade secrets, or Created Works, to any person or entity who is not an employee of the Company unless previously authorized to do so by the Company.

(b) Non-Disparagement . Executive agrees that Executive will not make any statement that is intended to become public, or that should reasonably be expected to become public, and that ridicules, disparages or is otherwise derogatory of the Company or any employee, officer, director, member or shareholder of the Company.

(c) Special Exceptions; Permitted Disclosures . Nothing herein shall be construed to prevent disclosure of Confidential Information, or Executive from making any statement, as may be required by applicable law, regulation, or order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. Further, nothing herein shall prevent Executive from making a good faith report of possible violations of applicable law to any governmental agency or from making disclosures that are protected under the whistleblower provisions of applicable law. Pursuant to the federal Defend Trade Secrets Act, Executive shall not be held criminally or civilly liable for the disclosure of a trade secret that is: (A) made (x) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (y) solely for the purpose of reporting or investigating a suspected violation of law; (B) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (C) protected under the whistleblower provisions of applicable law. In the event Executive files a lawsuit for retaliation by any member of the Company Group for Executive's reporting of a suspected violation of law, Executive may (i) disclose a trade secret to Executive's attorney and (ii) use the trade secret information in the court proceeding related to such lawsuit, in each case, if Executive (A) files any document containing such trade secret under seal; and (B) does not otherwise disclose such trade secret, except pursuant to court order. For the avoidance of doubt, nothing herein or in any other agreement between Executive and the Company or any other member of the Company Group shall prevent Executive from lawfully, and without

obtaining prior authorization from the Company or any other member of the Company Group: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “ SEC ”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “ Governmental Authorities ”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. This Agreement shall not be construed or applied to require Employee to obtain prior authorization from the Company or any other member of the Company Group before engaging in any of the foregoing conduct referenced in this Section 6.1(c) , or to notify the Company of having engaged in any such conduct.

6.2 Nature of Business .

(a) Acknowledgment of Competitive Business . Executive acknowledges and agrees that the Company is engaged in a highly competitive industry and must protect its Confidential Information against unauthorized use or disclosure that would irreparably harm the Company’s interests. Executive recognizes that the disclosure by the Company to Executive of certain of its Confidential Information will be necessary and useful to Executive in the performance of Executive’s job duties for the Company under this Agreement. As a result, Executive will have access to Confidential Information that could be used by the Company’s competitors in a manner which would irreparably harm the Company’s competitive position in the marketplace.

(b) Acknowledgment of Need for Protection . Executive further acknowledges and agrees that it would be virtually impossible for Executive to ignore all knowledge of the Company’s Confidential Information if Executive were to engage in competition with the Company. It is, therefore, reasonable and proper for the Company to protect against the intentional or inadvertent use of such Confidential Information. Accordingly, Executive agrees that restrictions on competition and soliciting the Company’s customers or employees during Executive’s employment under this Agreement and for a reasonable period of time thereafter are appropriate and necessary for the protection of the Company’s Confidential Information, goodwill, and other legitimate business interests.

ARTICLE VII
NON-SOLICITATION AND NON-COMPETITION

7.1 Non-Solicitation and Non-Competition . Ancillary to the agreements to provide Executive with the Confidential Information as set forth above, and in order to aid in the enforcement of those agreements and as a condition of Executive’s employment hereunder, Executive agrees that, during the Term and for a period of two (2) years after the termination of Executive’s employment with the Company (or, in the event Executive is entitled to the payments and benefits described in Section 4.3(c) hereof, for a period of one (1) year after

termination of Executive’s employment with the Company) (as applicable, the “ Prohibited Period ”), Executive will:

(a) refrain from carrying on or engaging in the Business in the Restricted Area. Executive agrees and covenants that, because the following conduct would effectively constitute carrying on or engaging in the Business, Executive will not, and Executive will cause Executive’s affiliates not to, in the Restricted Area during the Prohibited Period: directly or indirectly, own, manage, operate, join, become an employee of, control or participate in or be connected with any business, individual, partnership, firm, corporation or other entity which engages in the Business;

(b) refrain from, and cause Executive’s affiliates to refrain from, soliciting or causing to be solicited any customer of the Company that was a customer of the Company in the Restricted Area during the period when Executive was employed by the Company; and

(c) refrain from, and cause Executive’s affiliates to refrain from, engaging or employing or soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company.

7.2 Exception for Equity Ownership . Notwithstanding the restrictions contained in Section 7.1 , Executive or any of Executive’s affiliates may own (a) less than five percent (5%) of any equity security registered under the Exchange Act, in any entity engaged in the Business, provided that neither Executive nor Executive’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such entity and is not involved in the management of such entity, and (b) those equity investments owned by Executive as of the date of this Agreement as previously disclosed in writing to and agreed by the Board.

7.3 Exception Within Certain States . Notwithstanding the restrictions contained in Section 7.1 , within those areas of the State of Oklahoma that are within the Restricted Area (the “ Oklahoma Restricted Area ”), the restrictions in Sections 7.1(a) and 7.1(b) shall not apply after Executive’s employment with the Company has ended but before the Prohibited Period has expired; provided , however , that at no point during the Prohibited Period shall Executive, within the Oklahoma Restricted Area, solicit goods, services or a combination of goods and services from any established customer of the Company. Further, within those areas of the States of California or North Dakota that are within the Restricted Area, the restrictions contained in Section 7.1(a) and Section 7.1(b) shall not apply following the date that Executive is no longer employed by the Company and, during such period, Section 7.1(c) shall be applied within the States of California and North Dakota only to prohibit Executive from, directly or indirectly, soliciting or contacting with a view to the engagement or employment of, any person who is an officer or employee of the Company or otherwise directly or indirectly interfering with or raiding the Company’s employees.

ARTICLE VIII
SURVIVAL OF COVENANTS, ENFORCEMENT OF COVENANTS AND REMEDIES

of action of Executive against the Company whether predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of those covenants.

8.2 Enforcement of Covenants . Executive acknowledges and agrees that Executive’s covenants in Articles V , VI and VII are, among other things, ancillary to the otherwise enforceable agreements to provide Executive with Confidential Information and are supported by independent, valuable consideration. Executive further acknowledges and agrees that the limitations as to time, geographical area, and scope of activity to be restrained by those covenants are reasonable and acceptable to Executive in all respects and do not impose any greater restraint than is reasonably necessary to protect the Company’s goodwill and other legitimate business interests. Executive further agrees that if, at some later date, a court or arbitrator of competent jurisdiction determines that any of the covenants in Article V , VI or VII are unreasonable, any such covenants shall be reformed by the court or arbitrator and enforced to the maximum extent permitted under the law.

8.3 Remedies . In the event of actual or threatened breach by Executive of any of Executive’s covenants in Articles V , VI , and VII , the Company shall be entitled to equitable relief by temporary restraining order, temporary injunction, or permanent injunction or otherwise, in addition to all other legal and equitable relief to which it may be entitled, including any and all monetary damages that the Company may incur as a result of said breach, violation, or threatened breach or violation. For the avoidance of doubt, nothing shall restrict the Company from pursuing any relief otherwise provided for by this Agreement. The Company may pursue any remedy available to it concurrently or consecutively in any order as to any breach, violation, or threatened breach or violation, and the pursuit of one of such remedies at any time will not be deemed an election of remedies or waiver of the right to pursue any other of such remedies as to such breach, violation, or threatened breach or violation, or as to any other breach, violation, or threatened breach or violation. In addition to the above, in the event that a final determination concludes that Executive has materially breached any of Executive’s covenants in Article V , VI or VII , the Company will be entitled to reimbursement by Executive of all cash severance payments paid by the Company under (a) Sections 4.3(b)(iii) , (b)(v) , (b)(vi) and (b)(vii) , or (b) Sections 4.3(c)(iii) , (c)(v) , (c)(vi) , and (c)(vii) , as applicable, of this Agreement. In the event of an alleged material breach by Executive of any of Executive’s covenants in Article V , VI or VII , as determined in good faith by the Board, the Company may suspend the payments of cash severance then owing to Executive under Sections 4.3(b)(iii) , (b)(v), (b)(vi) , (b)(vii) , (c)(iii) , (c)(v) , (c)(vi) , or (c)(vii) , as applicable, of this Agreement without resort to judicial intervention or arbitration until such breach is cured (if curable); provided , however , that if it is later determined, whether by arbitration or otherwise by the Board, that Executive was not in breach of any such covenants, the Company shall promptly pay to Executive all such suspended payments and benefits, as well as reimbursement of all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by Executive in defending any such claim or action in accordance with Section 10.10 ; and provided further , however , that any cure and payments upon cure and any payments upon a determination that no breach occurred will be made no later than the deadline under Section 409A that is applicable to disputed payments and refusals to pay.

then the Company shall promptly on written request, indemnify Executive, advance expenses (including reasonable attorneys’ fees) to Executive and defend Executive to the fullest extent permitted by applicable law, including making such findings and determinations and taking any and all such actions as the Company may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification, advancement or defense. Such agreement by the Company shall not be deemed to impair any other obligation of the Company respecting Executive’s indemnification or defense otherwise arising out of this or any other agreement or promise of the Company under any statute. In no event will the Company indemnify, advance expenses to, or defend Executive from any claim relating to or arising out of any misconduct by Executive, including fraud, or any breach by Executive of any representation or warranty in this Agreement.

ARTICLE IX
COMPLIANCE

9.1 Compliance with Applicable Laws and Policies . Executive acknowledges and agrees that Executive will comply with all applicable laws and policies, including the Parent’s Corporate Code of Business Conduct and Ethics, Financial Code of Ethics, Insider Trading Policy and Anti-Corruption Policy, and will not, directly or indirectly, take any action, or fail to take any action, that would violate any such laws or policies or would cause the Company to be in violation of any such laws or policies.

9.2 Duty of Loyalty . Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and to do no act that would injure the business, interests, or reputation of the Company. In keeping with these duties, Executive shall make full disclosure to the Company of all business opportunities pertaining to the Company’s business and shall not appropriate for Executive’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.

ARTICLE X
MISCELLANEOUS

10.1 Entire Agreement . This Agreement and the DRP (as defined below) constitute the entire agreement between the parties concerning this Agreement’s subject matter and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter (including the Original Agreement).

10.2 Modification; Amendment . This Agreement may not be modified or amended in any respect except by an instrument in writing signed by the party against whom such modification or amendment is sought to be enforced. No modification or amendment may be enforced against the Company unless such modification or amendment is in writing and authorized by the Board.

10.3 No Waiver . The waiver by either party of a breach of any term of this Agreement shall not operate or be construed as a waiver of a subsequent breach of the same provision by either party or of the breach of any other term or provision of this Agreement.

10.4 Governing Law . This Agreement shall be construed in accordance with the laws of the State of Texas, without giving effect to any conflicts of law principles that would cause the application of the laws of any jurisdiction other than the State of Texas.

10.5 Executive’s Representations . Executive represents and warrants that Executive is free to enter into this Agreement and to perform each of the terms and covenants of it. Executive represents and warrants that Executive is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that Executive’s execution and performance of this Agreement is not a violation or breach of any other agreement between Executive and any other person or entity. Executive further promises not to provide the Company or any other member of the Company Group with any confidential, proprietary, or legally protected information belonging to any former employer or other third-party, and Executive promises that in no circumstances will Executive use or disclose such information in the course of providing services for any member of the Company Group. Executive acknowledges and agrees that • Executive is not relying upon any determination by the Company, any other members of the Company Group, or any of their respective employees, directors, officers, attorneys or agents (collectively, the “ Company Parties ”) regarding the tax effects associated with Executive’s execution of this Agreement and • in deciding to enter into this Agreement, Executive is relying on Executive’s own judgment and the judgment of the professionals of Executive’s choice with whom Executive has consulted. Executive hereby releases, acquits and forever discharges the Company Parties from all actions, causes of action, suits, debts, obligations, liabilities, claims, damages, losses, costs and expenses of any nature whatsoever, whether known or unknown, on account of or arising out of, or in any way related to the tax effects associated with Executive’s execution of this Agreement.

10.6 Notices . All notices and other communications under this Agreement shall be in writing and shall be given in person or by either personal delivery, facsimile with confirmation of receipt, overnight delivery, or first class mail, certified or registered with return receipt requested, with postal or delivery charges prepaid, and shall be deemed to have been duly given when delivered personally, on the day on which confirmation of receipt is provided if given by facsimile provided that if a notice is sent by facsimile transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, or three days after mailing first class, certified or registered with return receipt requested, (i) if to the Company, to the Parent’s headquarters, attention General Counsel, and (ii) if to Executive, to Executive’s address on file in the Company’s records.

10.7 Tax Withholding . The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

10.8 Severability . If any provision of this Agreement (or any portion thereof) is held to be illegal, invalid, or unenforceable, • this Agreement shall be considered divisible, • such provision (or any portion thereof) shall be deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and • in all other respects this Agreement shall remain in full force and effect.

10.9 Assignment . The Company, its successors, and assigns may in their sole discretion assign this Agreement to any person or entity, with or without Executive’s consent, provided , however , that the Company Group shall remain liable for all compensation obligations to Executive under this Agreement. This Agreement thereafter shall bind, and inure to the benefit of, the Company’s successor or assign. Executive shall not assign either this Agreement or any right or obligation arising thereunder.

10.10 Employee Dispute Resolution Program . The parties acknowledge and agree that the parties have agreed to the dispute resolution procedures set forth in the Parent’s Employee Dispute Resolution Program (“ DRP ”), as in effect from time to time, and any dispute between the parties arising out of, or relating to, this Agreement or Executive’s employment shall be resolved pursuant to the dispute resolution procedures set forth in the DRP.

10.11 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

10.12 Section 409A .

(a) General. Any compensation or benefits made to Executive under the terms of this Agreement may constitute nonqualified deferred compensation for purposes of Section 409A. Accordingly, notwithstanding any provision contained herein, this Agreement shall be interpreted in a manner that is consistent with Section 409A. In the event that any provision of this Agreement conflicts with Section 409A, such provision is to that extent superseded by the applicable Section 409A standards for nonqualified deferred compensation plans to satisfy the requirements of Section 409A.

(b) General Suspension of Payments. Notwithstanding any contrary provisions in this Agreement, if Executive is a “specified employee,” as such term is defined within the meaning of Section 409A, as determined by policies established by the Board, any payments or benefits which are classified as “nonqualified deferred compensation” for purposes of Section 409A and are payable or provided as a result of Executive’s termination of employment that would otherwise be paid or provided within six (6) months and one (1) day of such termination (other than due to death or “disability”, as such term is defined within the meaning of Section 409A) shall instead be paid or provided on the earlier of (%4) six (6) months and two (2) days following Executive’s termination, (%4) the date of Executive’s death, or (%4) any date that otherwise complies with Section 409A. In the event that Executive is entitled to receive payments during the suspension period provided under this Section 10.12(b), Executive shall receive the accumulated benefits that would have been paid or provided under this Agreement within the six (6) month and one (1) day suspension period on the earliest day that would be permitted under Section 409A.

(c) Separation from Service . For all purposes of this Agreement, Executive’s employment with the Company shall be considered to have terminated when Executive incurs a “separation from service” with the Company within the meaning of Section 409A; provided , however , that whether such a separation from service has occurred shall be determined based upon a reasonably anticipated permanent reduction in the level of bona fide services to be performed to no more than twenty percent (20%) of the average level of bona fide services provided in the immediately preceding thirty-six (36) months.

available reimbursements for any other calendar year; (%4) Executive shall file a claim for all reimbursement payments not later than thirty (30) days following the end of the calendar year during which the expenses were incurred, (%4) the Company shall make such reimbursement payments within thirty (30) days following the date Executive delivers written notice of the expenses to the Company; and (%4) Executive’s right to such reimbursement payments shall not be subject to liquidation or exchange for any other payment or benefit.

(e) Separate Payments . For purposes of Section 409A, any right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments so that each payment is designated as a separate payment for purposes of Section 409A, and any rights and benefits under this Agreement shall be treated as rights to separate payments for purposes of Section 409A.

(f) Amendment. In the event that the Company determines that any amounts payable hereunder will be taxable to Executive under Section 409A prior to payment to Executive, then the Company may (%4) adopt amendments to this Agreement, including amendments with retroactive effect, that the Company determines necessary or appropriate to preserve the intended tax treatment of the benefits provided hereunder or (%4) take such other actions as the Company determines necessary or appropriate to avoid the imposition of tax under Section 409A.

10.13 Prior Employment Agreement Superseded . Upon the Effective Date, any and all prior employment agreements between the Company or any other member of the Company Group shall be of no further force or effect, and this Agreement shall supersede all such prior agreements. For the avoidance of doubt, in entering into this Agreement, Executive expressly acknowledges and agrees that this Agreement supersedes and replaces the Original Agreement in its entirety, and: (i) Executive has received all wages, bonuses, benefits, and other compensation to which Executive has been entitled (and to which Executive ever could be entitled) pursuant to the Original Agreement; (ii) the Company and each other member of the Company Group has fully and finally satisfied all obligations that they had, and ever could have, pursuant to the Original Agreement; and (iii) Executive has voluntarily waived any rights under the Original Agreement to assert that Good Reason (as defined in the Original Agreement) existed under the Original Agreement such that Executive was eligible for potential severance pay or benefits pursuant to the Original Agreement.

10.14 Limitation . Subject to the termination provisions contained herein, this Agreement shall not confer any right or impose any obligation on any member of the Company Group to continue the employment of Executive in any capacity or limit the right of any member of the Company Group or Executive to terminate Executive’s employment.

10.15 Third-Party Beneficiaries . Each member of the Company Group shall be a third-party beneficiary of Executive’s obligations under Articles V , VI , VII , VIII and IX and shall be entitled to enforce such obligations as if a party hereto.

requires otherwise, all references herein to an agreement, instrument or other document shall be deemed to refer to such agreement, instrument or other document as amended, supplemented, modified and restated from time to time to the extent permitted by the provisions thereof. All references to “dollars” or “$” in this Agreement refer to United States dollars. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Exhibits attached hereto, and not to any particular provision hereof. The word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the day and year indicated above.

COMPANY:

C&J SPEC-RENT SERVICES, INC.

By: /s/DANIELLE HUNTER

Name: Danielle Hunter

Title: EVP – General Counsel

EXECUTIVE:

/s/MICHAEL GALVAN

Michael Galvan

12/18/18

Signature Date

Signature Page to Amended and Restated Employment Agreement

Exhibit A

RESTRICTED AREA

State of Alabama

State of Arizona

State of Arkansas

State of California

State of Colorado

State of Idaho

State of Kansas

State of Louisiana Parishes of:

Bienville

Bossier

Caddo

Caldwell

Claiborne

DeSoto

Harrison

Jackson

Lincoln

Natchitoches

Red River

Sabine

St. Helena

Webster

Winn

State of Mississippi

State of Montana

State of Nebraska

State of New Mexico

State of New York

State of North Dakota

State of Ohio

State of Oklahoma

State of Pennsylvania

State of South Dakota

State of Texas

State of Utah

State of Virginia

State of West Virginia

State of Wyoming

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

RECITALS

WHEREAS , prior to the parties’ entry into this Agreement, the Company has employed Executive pursuant to the terms of that certain Employment Agreement entered into effective as of August 16, 2017 between Executive and C&J Energy Services, Inc. (the “ Original Agreement ”);

NOW, THEREFORE , in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows, effective as of the Effective Date:

Article I
DEFINITIONS

1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified or referred to in this Section 1.1 :

(a) “ Accrued Obligation ” shall mean (%4) Executive’s Base Salary earned but unpaid through the Date of Termination and (ii) any unreimbursed business expenses properly incurred by Executive prior to the Date of Termination so long as Executive timely submitted all documentation for reimbursement as required by applicable Company policies.

(b) “ Board ” shall mean the Board of Directors of C&J Energy Services, Inc., a Delaware corporation (the “ Parent ”), and the parent company of the Company.

(c) “ Business ” shall mean (%4) any business in which any member of the Company Group is engaged during the Term and for which Executive has (or has had) responsibilities or about which Executive has obtained Confidential Information; provided, however, the definition of “Business” shall not include any business in which the Company Group no longer engages or has any plans to engage in as of the end of the Term; and (%4) any other business in which any member of the Company Group has undertaken material steps to engage within the twelve (12) month period prior to the end of the Term, so long as Executive had material responsibility for, or Confidential Information about, such anticipated business. Without limiting the foregoing, the definition of “Business” shall be deemed to include the Company Group’s core

(d) “ Cause ” shall mean Executive’s (%4) willful and continued failure to substantially perform, without proper legal justification (and not due to Permanent Disability), the duties and responsibilities required hereunder or under any other written agreement between Executive and the Company or any other member of the Company Group, or otherwise reasonably required by the Board to be undertaken; (%4) any material breach of this Agreement or any other material written agreement between Executive and the Company or any other member of the Company Group, including the representations and covenants set forth herein; (%4) any material violation of any law applicable to the workplace or employment relationship or material failure to abide by lawful and material instructions, policies, codes of conduct or workplace rules established by any member of the Company Group and applicable to Executive; (iv) any conduct in connection with Executive’s employment duties or responsibilities that is (A) unlawful or grossly negligent and has a material adverse effect on any member of the Company Group or its business, or (B) fraudulent or dishonest and results, or is intended to result, in personal gain or enrichment at the material expense of any member of the Company Group; or (v) commission of, or indictment, conviction, admission or plea of guilty or nolo contendere for or to a charge of any felony (or state law equivalent) or any crime involving moral turpitude.

(e) “ Change of Control ” shall mean the occurrence of any of the following events:

(iv) the consummation or a transaction that implements in whole or in part a resolution of the Parent’s shareholders authorizing a complete liquidation or dissolution of the Parent; or

(f) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(g) “ Company Group ” shall mean the Parent and each of its Subsidiaries.

(h) “ Date of Termination ” shall mean the effective date of termination of Executive’s employment hereunder, as specified in the applicable Notice of Termination.

(k) “ Permitted Holder ” shall mean (%4) any trustee or other fiduciary holding securities of the Parent under an employee benefit plan of any member of the Company Group, (%4) any Subsidiary of the Parent that is at least 80% owned by the Parent, and (%4) any corporation, partnership, limited liability company or other entity owned, directly or indirectly, by the shareholders of the Parent in substantially the same proportions as their ownership of securities of the Parent.

(l) “ Protected Period ” shall mean the period beginning on the effective date of a Change of Control and ending on the one (1) year anniversary of the effective date of such Change of Control.

(m) “ Release Expiration Date ” shall mean the date that is twenty-one (21) days following the date upon which the Company timely delivers to Executive the

(o) “ Section 409A ” shall mean Section 409A of the Code and the final Department of Treasury regulations and other interpretive guidance issued thereunder.

ARTICLE II
DUTIES

2.1 Duties . During the Term (as defined in Section 3.1 ), Executive shall serve as President – Well Support Services of the Parent, or in such other position(s) as the Board or the Parent’s Chief Executive Officer shall determine. Executive shall comply with the policies of the Company Group as may be in effect from time to time for executive officers, including the Company Group’s policies regarding confidentiality, ownership of intellectual property, drug testing, trading in securities of the Parent, discrimination and harassment, and lawful and ethical conduct. Executive shall have such duties, authorities and responsibilities as the Board or the Parent’s Chief Executive Officer shall designate that are consistent with Executive’s position.

the foregoing, nothing herein shall prevent Executive from participating in social, civic, charitable, religious, business, educational or professional associations, or the passive management of Executive’s personal investments, so long as such activities do not materially detract from Executive’s ability to perform Executive’s duties under this Agreement or otherwise violate the provisions of this Agreement. Without limiting the foregoing, in the event that Executive desires to participate personally in any business opportunity that is related to the business of any member of the Company Group, Executive shall not participate in such opportunity without first making full written disclosure to the Board of such opportunity and the scope of Executive’s proposed involvement and seeking necessary approvals under the Parent’s corporate policies in effect at such time.

ARTICLE III
TERMS OF EMPLOYMENT

3.2 Annualized Base Salary . As compensation for services rendered under this Agreement, Executive shall be entitled to receive an annualized base salary (before tax withholdings and other deductions) of $350,000 (“ Base Salary ”). Executive’s Base Salary shall be reviewed by the Board from time to time and, in the Board’s sole discretion, may be modified (such determined amount as in effect at any time, the “ Effective Base Salary ”). Executive’s base salary shall be payable in substantially equal installments in accordance with the practice and policies of the Company as may exist from time to time (but no less frequently than monthly).

3.3 Cash Incentive Awards .

Notwithstanding the foregoing, (i) unless the Compensation Committee determines otherwise, Executive shall not be entitled to any payment of an Annual Bonus for any Bonus Year in which the Parent does not achieve the vesting requirements and other conditions set forth in the applicable STI Performance Plan, as determined by the Compensation Committee in its sole discretion; (ii) the actual amount of each Annual Bonus, if any, paid to Executive is subject to determination in the sole discretion of the Compensation Committee; (iii) Executive shall not be entitled to any Annual Bonus if Executive’s employment under this Agreement is terminated by the Company for Cause prior to the date of payment of such Annual Bonus; and, (iv) subject to the exceptions set forth herein, Executive shall not be entitled to any Annual Bonus for any Bonus Year if Executive is not employed by the Company on the date the Compensation Committee approves payment of such Annual Bonus. It is expected but not guaranteed that payment of the Annual Bonus, if any, will be approved in connection with the finalization of the Parent’s annual financial statements for the Bonus Year to which it relates and paid as promptly as practicable following such approval but in no event later than December 31 of the year following the applicable Bonus Year. The Compensation Committee may, in its sole discretion, determine that up to 50% of the value of any Annual Bonus shall be paid in equity of the Parent and the remainder of such Annual Bonus be paid in cash. For each Bonus Year during the Term, the Compensation Committee will review the STIP and establish the structure, terms and conditions (including performance objectives, metrics, goals and incentive opportunities) of the STI Performance Plan and the target value of the incentive opportunity (“ Effective STI Bonus Target ”) provided to Executive for the Bonus Year as it deems appropriate.

(a) Sick-Leave Benefits and Disability Insurance . During the Term, to the extent made available to other similarly situated employees of the Company, Executive

shall be eligible for paid sick leave benefits payable at Executive’s then Effective Base Salary rate during Executive’s absence due to illness or other incapacity; provided , however , that any sick-leave benefits will be reduced by the amount, if any, of workers’ compensation, Social Security entitlement, or disability or other wage replacement benefits, if any, paid or provided to Executive in connection with such illness or incapacity.

3.5 Equity Incentive Awards . During the Term, Executive shall be eligible to receive annual equity awards (“ Equity Awards ”) under the Parent’s long-term incentive plan, with such Equity Awards of a nature and type and in such amounts as determined in the sole discretion of the Board or the Compensation Committee. Unless otherwise established by the Board or the Compensation Committee, the Equity Awards granted to Executive each year, if any, shall have an aggregate target value of 200% of the annualized rate of Executive’s Effective Base Salary at the time the grant is approved; provided , however, that the actual value of such Equity Awards, shall be determined in the sole discretion of the Board or the Compensation Committee at the time of grant. All such Equity Awards shall be subject to the vesting requirements and other terms and conditions determined by the Board or the Compensation Committee and the award agreements pursuant to which they are granted, as may be modified by this Agreement.

3.6 Other Benefits .

ARTICLE IV
TERMINATION

4.1 Termination of Employment .

(d) Change of Control Termination . A termination of Executive’s employment by the Company without Cause (and not due to Executive’s death or Permanent Disability) during a Protected Period, will cause Executive to become eligible for the benefits specified in Section 4.3(c) .

4.3 Obligations of the Company Upon Termination .

ii.

iii.

iv.

a lump sum payment of an amount equal to all Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), premiums that would be payable during the period beginning on the Date of Termination and ending on the date that is twelve (12) months after the Date of Termination, assuming Executive and Executive’s dependents who were enrolled in the group health plans of the Parent (or other member of the Company Group, as applicable) as of the Date of Termination elected continuation coverage under such group health plans as in effect, and at the applicable COBRA rates, as of the Date of Termination, without

regard to whether Executive and Executive’s dependents actually elected such coverage or whether actual COBRA coverage is applicable for the above-referenced time period; and


ii.	any and all outstanding Equity Awards granted to Executive under any plan not previously vested shall become fully vested, without proration, with any unexercised options as of the Date of Termination remaining exercisable for the full term thereof; provided , however , that with respect to any Equity Award that is subject to performance-based vesting

conditions, the number of securities subject to such Equity Award shall be reduced on a pro rata basis to the result of (A) the total number of target securities subject to the Equity Award multiplied by (B) a fraction, the numerator of which is the number of full months in which Executive was employed under this Agreement (counting the month in which the Date of Termination occurs as a full month) and the denominator of which is the number of full months in the performance period applicable to the Equity Award, and such reduced number of securities shall become vested and will be calculated, settled and delivered (if at all) at the prorated target level without regard to any performance goal otherwise applicable thereto;

iii.

a lump sum payment of an amount equal to one (1) times the sum of (A) the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination and (B) the target value of Executive’s Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(c)(v) , shall be calculated without proration, based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;

iv.

iii.

to Executive, other than for (%4) payment of the Accrued Obligation; (%4) subject to the satisfaction of the STIP and applicable STI Performance Plan or other applicable terms and conditions, as described in Section 3.3 , any of Executive’s unpaid Bonuses with respect to a previous year or other performance period, as applicable, completed prior to the Date of Termination (without regard to any requirement that Executive remain employed through the date of determination, date of approval or date of payment of such Bonuses, as may be applicable); and (%4) the timely payment or provision of any and all benefit obligations provided under Section 3.4 , which under their terms are available in the event of Executive’s death or Permanent Disability. In addition, subject to Executive’s (or Executive’s estate) delivery to the Company by the Release Expiration Date (and non-revocation in any time provided to do so) of an executed Release, Executive (or Executive’s estate, if applicable) shall also be eligible to receive:

iv.

ii.

4.5 Limitations on Severance Payment and Other Payments or Benefits .

a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).

4.6 Resignation Upon Termination . Upon any termination of Executive’s employment with the Company, and without further action on the part of Executive or any

member of the Company Group, Executive shall be deemed to have resigned (a) as an executive officer, principal officer or other officer of the Parent and any of any other member of the Company Group for which Executive served in such capacity; (b) from the board of directors or board of managers (or similar governing body) of any member of the Company Group, and from the board of directors or board of managers (or similar governing body) of any corporation, limited liability entity, unlimited liability entity or other entity in which any member of the Company Group holds an equity interest and with respect to which board of directors or board of managers (or similar governing body) Executive serves as the designee or other representative of any member of the Company Group.

ARTICLE V
CONFIDENTIAL INFORMATION

5.3 Agreement to Provide Confidential Information to Executive . The Company promises to provide some or all of the Confidential Information described above to Executive,

without regard to the duration of Executive’s continued employment with the Company. Executive agrees that the Confidential Information belongs to the Company, is subject to the terms of this Agreement, and is not Executive’s property.

5.7 Power of Attorney . If the Company is unable, after reasonable effort, to secure Executive’s signature on any application for patent, copyright, trademark or other analogous registration or other documents regarding any legal protection relating to a Created Work, whether because of Executive’s physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney-in-fact, to act for and in Executive’s behalf and stead to execute and file any such application or applications or other documents and to do

all other lawfully permitted acts to further the prosecution and issuance of patent, copyright or trademark registrations or any other legal protection thereon with the same legal force and effect as if executed by Executive.

5.8 Disclosure of Inventions . Executive will promptly and without reservation fully disclose in writing any Created Works to the Company both during the Term and thereafter.

ARTICLE VI
NON-DISCLOSURE, NON-DISPARAGEMENT

6.1 Non-Disclosure .

information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “ SEC ”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “ Governmental Authorities ”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. This Agreement shall not be construed or applied to require Employee to obtain prior authorization from the Company or any other member of the Company Group before engaging in any of the foregoing conduct referenced in this Section 6.1(c) , or to notify the Company of having engaged in any such conduct.

6.2 Nature of Business .

ARTICLE VII
NON-SOLICITATION AND NON-COMPETITION

ARTICLE VIII
SURVIVAL OF COVENANTS, ENFORCEMENT OF COVENANTS AND REMEDIES

8.1 Survival of Covenants . Executive acknowledges and agrees that Executive’s covenants in Articles V , VI and VII , and those provisions necessary to interpret and enforce them, shall survive the termination of this Agreement, and the existence of any claim or cause of action of Executive against the Company whether predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of those covenants.

8.4 Indemnification . In any situation where, under applicable law, the Company has the power to indemnify, advance expenses to and defend Executive in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys’ fees) arising from bona fide claims of any nature related to or arising out of Executive’s activities as an agent, employee, officer or director of the Company or in any other capacity on behalf of or at the request of the Company, then the Company shall promptly on written request, indemnify Executive, advance expenses (including reasonable attorneys’ fees) to Executive and defend Executive to the fullest extent permitted by applicable law, including making such findings and determinations and taking any

and all such actions as the Company may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification, advancement or defense. Such agreement by the Company shall not be deemed to impair any other obligation of the Company respecting Executive’s indemnification or defense otherwise arising out of this or any other agreement or promise of the Company under any statute. In no event will the Company indemnify, advance expenses to, or defend Executive from any claim relating to or arising out of any misconduct by Executive, including fraud, or any breach by Executive of any representation or warranty in this Agreement.

ARTICLE IX
COMPLIANCE

ARTICLE X
MISCELLANEOUS

10.5 Executive’s Representations . Executive represents and warrants that Executive is free to enter into this Agreement and to perform each of the terms and covenants of it. Executive

represents and warrants that Executive is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that Executive’s execution and performance of this Agreement is not a violation or breach of any other agreement between Executive and any other person or entity. Executive further promises not to provide the Company or any other member of the Company Group with any confidential, proprietary, or legally protected information belonging to any former employer or other third-party, and Executive promises that in no circumstances will Executive use or disclose such information in the course of providing services for any member of the Company Group. Executive acknowledges and agrees that • Executive is not relying upon any determination by the Company, any other members of the Company Group, or any of their respective employees, directors, officers, attorneys or agents (collectively, the “ Company Parties ”) regarding the tax effects associated with Executive’s execution of this Agreement and • in deciding to enter into this Agreement, Executive is relying on Executive’s own judgment and the judgment of the professionals of Executive’s choice with whom Executive has consulted. Executive hereby releases, acquits and forever discharges the Company Parties from all actions, causes of action, suits, debts, obligations, liabilities, claims, damages, losses, costs and expenses of any nature whatsoever, whether known or unknown, on account of or arising out of, or in any way related to the tax effects associated with Executive’s execution of this Agreement.

10.10 Employee Dispute Resolution Program . The parties acknowledge and agree that the parties have agreed to the dispute resolution procedures set forth in the Parent’s Employee

Dispute Resolution Program (“ DRP ”), as in effect from time to time, and any dispute between the parties arising out of, or relating to, this Agreement or Executive’s employment shall be resolved pursuant to the dispute resolution procedures set forth in the DRP.

10.11 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

10.12 Section 409A .

(d) Reimbursement Payments. The following rules shall apply to payments of any amounts under this Agreement that are treated as “reimbursement payments” under Section 409A, including any payments provided under Section 4.3 : (%4) the amount of expenses eligible for reimbursement in one calendar year shall not limit the available reimbursements for any other calendar year; (%4) Executive shall file a claim for all reimbursement payments not later than thirty (30) days following the end of the

calendar year during which the expenses were incurred, (%4) the Company shall make such reimbursement payments within thirty (30) days following the date Executive delivers written notice of the expenses to the Company; and (%4) Executive’s right to such reimbursement payments shall not be subject to liquidation or exchange for any other payment or benefit.

modified and restated from time to time to the extent permitted by the provisions thereof. All references to “dollars” or “$” in this Agreement refer to United States dollars. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Exhibits attached hereto, and not to any particular provision hereof. The word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the day and year indicated above.

COMPANY:

C&J SPEC-RENT SERVICES, INC.

By: /s/DANIELLE HUNTER

Name: Danielle Hunter

Title: EVP – General Counsel

EXECUTIVE:

/s/STERLING RENSHAW

Sterling Renshaw

01/03/19

Signature Date

Exhibit A

RESTRICTED AREA

State of Alabama

State of Arizona

State of Arkansas

State of California

State of Colorado

State of Idaho

State of Kansas

State of Louisiana Parishes of:

Bienville

Bossier

Caddo

Caldwell

Claiborne

DeSoto

Harrison

Jackson

Lincoln

Natchitoches

Red River

Sabine

St. Helena

Webster

Winn

State of Mississippi

State of Montana

State of Nebraska

State of New Mexico

State of New York

State of North Dakota

State of Ohio

State of Oklahoma

State of Pennsylvania

State of South Dakota

State of Texas

State of Utah

State of Virginia

State of West Virginia

State of Wyoming

Signature Page to Amended and Restated Employment Agreement

EMPLOYMENT AGREEMENT

This Employment Agreement (this “ Agreement ”) is entered into effective as of December 11, 2018 (the “ Effective Date ”), by and between C&J Spec-Rent Services, Inc., an Indiana company (the “ Company ”), and William Driver (“ Executive ”).

RECITALS

WHEREAS , the Company desires to retain the experience, abilities and service of Executive;

WHEREAS , Executive wishes to be employed by the Company under the conditions of employment specified in this Agreement; and

NOW, THEREFORE , in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows, effective as of the Effective Date:

Article I
DEFINITIONS

1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified or referred to in this Section 1.1 :

(b) “ Board ” shall mean the Board of Directors of C&J Energy Services, Inc., a Delaware corporation (the “ Parent ”), and the parent company of the Company.

workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(e) “ Change of Control ” shall mean the occurrence of any of the following events:

own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;

(iv) the consummation or a transaction that implements in whole or in part a resolution of the Parent’s shareholders authorizing a complete liquidation or dissolution of the Parent; or

(f) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(g) “ Company Group ” shall mean the Parent and each of its Subsidiaries.

(h) “ Date of Termination ” shall mean the effective date of termination of Executive’s employment hereunder, as specified in the applicable Notice of Termination.

(l) “ Protected Period ” shall mean the period beginning on the effective date of a Change of Control and ending on the one (1) year anniversary of the effective date of such Change of Control.

Age Discrimination in Employment Act of 1967, as amended), the date that is forty-five (45) days following such delivery date. The “ Release ” shall mean an agreement providing for the release of claims against the Company Group in a form acceptable to the Company.

(o) “ Section 409A ” shall mean Section 409A of the Code and the final Department of Treasury regulations and other interpretive guidance issued thereunder.

ARTICLE II
DUTIES

2.1 Duties . During the Term (as defined in Section 3.1 ), Executive shall serve as President of the Well Construction, Intervention and Completion Services division of the Parent, or in such other position(s) as the Board or the Parent’s Chief Executive Officer shall determine. Executive shall comply with the policies of the Company Group as may be in effect from time to time for executive officers, including the Company Group’s policies regarding confidentiality, ownership of intellectual property, drug testing, trading in securities of the Parent, discrimination and harassment, and lawful and ethical conduct. Executive shall have such duties, authorities and responsibilities as the Board or the Parent’s Chief Executive Officer shall designate that are consistent with Executive’s position.

management of Executive’s personal investments, so long as such activities do not materially detract from Executive’s ability to perform Executive’s duties under this Agreement or otherwise violate the provisions of this Agreement. Without limiting the foregoing, in the event that Executive desires to participate personally in any business opportunity that is related to the business of any member of the Company Group, Executive shall not participate in such opportunity without first making full written disclosure to the Board of such opportunity and the scope of Executive’s proposed involvement and seeking necessary approvals under the Parent’s corporate policies in effect at such time.

ARTICLE III
TERMS OF EMPLOYMENT

3.2 Annualized Base Salary . As compensation for services rendered under this Agreement, Executive shall be entitled to receive an annualized base salary (before tax withholdings and other deductions) of $365,000 (“ Base Salary ”). Executive’s Base Salary shall be reviewed by the Board from time to time and, in the Board’s sole discretion, may be modified (such determined amount as in effect at any time, the “ Effective Base Salary ”). Executive’s base salary shall be payable in substantially equal installments in accordance with the practice and policies of the Company as may exist from time to time (but no less frequently than monthly).

3.3 Cash Incentive Awards .

Bonus Year in which the Parent does not achieve the vesting requirements and other conditions set forth in the applicable STI Performance Plan, as determined by the Compensation Committee in its sole discretion; (ii) the actual amount of each Annual Bonus, if any, paid to Executive is subject to determination in the sole discretion of the Compensation Committee; (iii) Executive shall not be entitled to any Annual Bonus if Executive’s employment under this Agreement is terminated by the Company for Cause prior to the date of payment of such Annual Bonus; and, (iv) subject to the exceptions set forth herein, Executive shall not be entitled to any Annual Bonus for any Bonus Year if Executive is not employed by the Company on the date the Compensation Committee approves payment of such Annual Bonus. It is expected but not guaranteed that payment of the Annual Bonus, if any, will be approved in connection with the finalization of the Parent’s annual financial statements for the Bonus Year to which it relates and paid as promptly as practicable following such approval but in no event later than December 31 of the year following the applicable Bonus Year. The Compensation Committee may, in its sole discretion, determine that up to 50% of the value of any Annual Bonus shall be paid in equity of the Parent and the remainder of such Annual Bonus be paid in cash. For each Bonus Year during the Term, the Compensation Committee will review the STIP and establish the structure, terms and conditions (including performance objectives, metrics, goals and incentive opportunities) of the STI Performance Plan and the target value of the incentive opportunity (“ Effective STI Bonus Target ”) provided to Executive for the Bonus Year as it deems appropriate.

however , that any sick-leave benefits will be reduced by the amount, if any, of workers’ compensation, Social Security entitlement, or disability or other wage replacement benefits, if any, paid or provided to Executive in connection with such illness or incapacity.

3.5 Equity Incentive Awards . During the Term, Executive shall be eligible to receive annual equity awards (“ Equity Awards ”) under the Parent’s long-term incentive plan, with such Equity Awards of a nature and type and in such amounts as determined in the sole discretion of the Board or the Compensation Committee. Unless otherwise established by the Board or the Compensation Committee, the Equity Awards granted to Executive each year, if any, shall have an aggregate target value of 200% of the annualized rate of Executive’s Effective Base Salary at the time the grant is approved; provided , however, that the actual value of such Equity Awards, shall be determined in the sole discretion of the Board or the Compensation Committee at the time of grant. All such Equity Awards shall be subject to the vesting requirements and other terms and conditions determined by the Board or the Compensation Committee and the award agreements pursuant to which they are granted, as may be modified by this Agreement.

3.6 Other Benefits .

ARTICLE IV
TERMINATION

4.1 Termination of Employment .

4.3 Obligations of the Company Upon Termination .

ii.

iii.

iv.

regard to whether Executive and Executive’s dependents actually elected such coverage or whether actual COBRA coverage is applicable for the above-referenced time period; and


ii.	any and all outstanding Equity Awards granted to Executive under any plan not previously vested shall become fully vested, without proration, with any unexercised options as of the Date of Termination remaining exercisable for the full term thereof; provided , however , that with respect to any Equity Award that is subject to performance-based vesting

iii.

a lump sum payment of an amount equal to one (1) times the sum of (A) the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination and (B) the target value of Executive’s Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(c)(v) , shall be calculated without proration, based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;

iv.

iii.

iv.

ii.

4.5 Limitations on Severance Payment and Other Payments or Benefits .

4.6 Resignation Upon Termination . Upon any termination of Executive’s employment with the Company, and without further action on the part of Executive or any

ARTICLE V
CONFIDENTIAL INFORMATION

5.3 Agreement to Provide Confidential Information to Executive . The Company promises to provide some or all of the Confidential Information described above to Executive,

5.8 Disclosure of Inventions . Executive will promptly and without reservation fully disclose in writing any Created Works to the Company both during the Term and thereafter.

ARTICLE VI
NON-DISCLOSURE, NON-DISPARAGEMENT

6.1 Non-Disclosure .

6.2 Nature of Business .

ARTICLE VII
NON-SOLICITATION AND NON-COMPETITION

ARTICLE VIII
SURVIVAL OF COVENANTS, ENFORCEMENT OF COVENANTS AND REMEDIES

ARTICLE IX
COMPLIANCE

ARTICLE X
MISCELLANEOUS

10.5 Executive’s Representations . Executive represents and warrants that Executive is free to enter into this Agreement and to perform each of the terms and covenants of it. Executive

10.10 Employee Dispute Resolution Program . The parties acknowledge and agree that the parties have agreed to the dispute resolution procedures set forth in the Parent’s Employee

10.11 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

10.12 Section 409A .

10.16 Titles and Headings; Construction . Titles and headings to Sections hereof are for the purpose of reference only and shall in no way limit, define or otherwise affect the provisions hereof. Any and all Exhibits or Attachments referred to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes. Unless the context requires otherwise, all references herein to an agreement, instrument or other document shall be deemed to refer to such agreement, instrument or other document as amended, supplemented, modified and restated from time to time to the extent permitted by the provisions thereof. All references to “dollars” or “$” in this Agreement refer to United States dollars. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Exhibits attached hereto, and not to any particular provision hereof. The word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting

language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

[ Signature Page Follows ]

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the day and year indicated above.

COMPANY:

C&J SPEC-RENT SERVICES, INC.

By: /s/DANIELLE HUNTER

Name: Danielle Hunter

Title: EVP – General Counsel

EXECUTIVE:

/s/WILLIAM DRIVER

William Driver

12/12/18

Signature Date

Exhibit A

RESTRICTED AREA

State of Alabama

State of Arizona

State of Arkansas

State of California

State of Colorado

State of Idaho

State of Kansas

State of Louisiana Parishes of:

Bienville

Bossier

Caddo

Caldwell

Claiborne

DeSoto

Harrison

Jackson

Lincoln

Natchitoches

Red River

Sabine

St. Helena

Webster

Winn

State of Mississippi

State of Montana

State of Nebraska

State of New Mexico

State of New York

State of North Dakota

State of Ohio

State of Oklahoma

State of Pennsylvania

State of South Dakota

State of Texas

State of Utah

State of Virginia

State of West Virginia

State of Wyoming

Signature Page to Employment Agreement

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

RECITALS

WHEREAS , prior to the parties’ entry into this Agreement, the Company has employed Executive pursuant to the terms of that certain Employment Agreement entered into effective as of October 6, 2016 between Executive and C&J Energy Services, Ltd., as amended by that certain First Amendment to Employment Agreement effective as of November 30, 2016 (the “ Original Agreement ”);

NOW, THEREFORE , in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows, effective as of the Effective Date:

Article I
DEFINITIONS

1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified or referred to in this Section 1.1 :

(b) “ Board ” shall mean the Board of Directors of C&J Energy Services, Inc., a Delaware corporation (the “ Parent ”), and the parent company of the Company.

definition of “Business” shall be deemed to include the Company Group’s core businesses: well construction and intervention services (including cementing and coiled tubing services), well completion services (including hydraulic fracturing and related stimulation services, cased-hole wireline, pressure pumping and pump-down, perforating, pressure testing, and logging services), and well support services (including workover, plug and abandonment and other related and specialty rig services, and fluid hauling, storage and disposal services).

(e) “ Change of Control ” shall mean the occurrence of any of the following events:

or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Board who were or become Continuing Directors;

(iv) the consummation or a transaction that implements in whole or in part a resolution of the Parent’s shareholders authorizing a complete liquidation or dissolution of the Parent; or

(f) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(g) “ Company Group ” shall mean the Parent and each of its Subsidiaries.

(h) “ Date of Termination ” shall mean the effective date of termination of Executive’s employment hereunder, as specified in the applicable Notice of Termination.

(l) “ Protected Period ” shall mean the period beginning on the effective date of a Change of Control and ending on the one (1) year anniversary of the effective date of such Change of Control.

(m) “ Release Expiration Date ” shall mean the date that is twenty-one (21) days following the date upon which the Company timely delivers to Executive the Release (which shall occur no later than seven (7) days after the Date of Termination), or in the event that such termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967, as amended), the date that is forty-five (45) days following such delivery date. The “ Release ” shall mean an agreement providing for the release of claims against the Company Group in a form acceptable to the Company.

(o) “ Section 409A ” shall mean Section 409A of the Code and the final Department of Treasury regulations and other interpretive guidance issued thereunder.

ARTICLE II
DUTIES

2.1 Duties . During the Term (as defined in Section 3.1 ), Executive shall serve as President – Strategic Planning of the Parent, or in such other position(s) as the Board or the Parent’s Chief Executive Officer shall determine. Executive shall comply with the policies of the Company Group as may be in effect from time to time for executive officers, including the Company Group’s policies regarding confidentiality, ownership of intellectual property, drug testing, trading in securities of the Parent, discrimination and harassment, and lawful and ethical conduct. Executive shall have such duties, authorities and responsibilities as the Board or the Parent’s Chief Executive Officer shall designate that are consistent with Executive’s position.

services appertaining to such offices, as well as such additional duties and services appropriate to such offices which the parties mutually may agree upon from time to time. Notwithstanding the foregoing, nothing herein shall prevent Executive from participating in social, civic, charitable, religious, business, educational or professional associations, or the passive management of Executive’s personal investments, so long as such activities do not materially detract from Executive’s ability to perform Executive’s duties under this Agreement or otherwise violate the provisions of this Agreement. Without limiting the foregoing, in the event that Executive desires to participate personally in any business opportunity that is related to the business of any member of the Company Group, Executive shall not participate in such opportunity without first making full written disclosure to the Board of such opportunity and the scope of Executive’s proposed involvement and seeking necessary approvals under the Parent’s corporate policies in effect at such time.

ARTICLE III
TERMS OF EMPLOYMENT

3.2 Annualized Base Salary . As compensation for services rendered under this Agreement, Executive shall be entitled to receive an annualized base salary (before tax withholdings and other deductions) of $365,000 (“ Base Salary ”). Executive’s Base Salary shall be reviewed by the Board from time to time and, in the Board’s sole discretion, may be modified (such determined amount as in effect at any time, the “ Effective Base Salary ”). Executive’s base salary shall be payable in substantially equal installments in accordance with the practice and policies of the Company as may exist from time to time (but no less frequently than monthly).

3.3 Cash Incentive Awards .

opportunity available to Executive shall be based on a target value of 65% of the annualized rate of Executive’s Effective Base Salary in effect at the time of determination. Notwithstanding the foregoing, (i) unless the Compensation Committee determines otherwise, Executive shall not be entitled to any payment of an Annual Bonus for any Bonus Year in which the Parent does not achieve the vesting requirements and other conditions set forth in the applicable STI Performance Plan, as determined by the Compensation Committee in its sole discretion; (ii) the actual amount of each Annual Bonus, if any, paid to Executive is subject to determination in the sole discretion of the Compensation Committee; (iii) Executive shall not be entitled to any Annual Bonus if Executive’s employment under this Agreement is terminated by the Company for Cause prior to the date of payment of such Annual Bonus; and, (iv) subject to the exceptions set forth herein, Executive shall not be entitled to any Annual Bonus for any Bonus Year if Executive is not employed by the Company on the date the Compensation Committee approves payment of such Annual Bonus. It is expected but not guaranteed that payment of the Annual Bonus, if any, will be approved in connection with the finalization of the Parent’s annual financial statements for the Bonus Year to which it relates and paid as promptly as practicable following such approval but in no event later than December 31 of the year following the applicable Bonus Year. The Compensation Committee may, in its sole discretion, determine that up to 50% of the value of any Annual Bonus shall be paid in equity of the Parent and the remainder of such Annual Bonus be paid in cash. For each Bonus Year during the Term, the Compensation Committee will review the STIP and establish the structure, terms and conditions (including performance objectives, metrics, goals and incentive opportunities) of the STI Performance Plan and the target value of the incentive opportunity (“ Effective STI Bonus Target ”) provided to Executive for the Bonus Year as it deems appropriate.

3.5 Equity Incentive Awards . During the Term, Executive shall be eligible to receive annual equity awards (“ Equity Awards ”) under the Parent’s long-term incentive plan, with such Equity Awards of a nature and type and in such amounts as determined in the sole discretion of the Board or the Compensation Committee. Unless otherwise established by the Board or the Compensation Committee, the Equity Awards granted to Executive each year, if any, shall have an aggregate target value of 200% of the annualized rate of Executive’s Effective Base Salary at the time the grant is approved; provided , however, that the actual value of such Equity Awards, shall be determined in the sole discretion of the Board or the Compensation Committee at the time of grant. All such Equity Awards shall be subject to the vesting requirements and other terms and conditions determined by the Board or the Compensation Committee and the award agreements pursuant to which they are granted, as may be modified by this Agreement.

3.6 Other Benefits .

and the policies and practices of the Company then in effect relative to the reimbursement of business expenses.

ARTICLE IV
TERMINATION

4.1 Termination of Employment .

(d) Change of Control Termination . A termination of Executive’s employment by the Company without Cause (and not due to Executive’s death or

Permanent Disability) during a Protected Period, will cause Executive to become eligible for the benefits specified in Section 4.3(c) .

4.3 Obligations of the Company Upon Termination .

revocation in any time provided to do so) of an executed Release and (y) compliance with Articles V , VI , and VII herein, Executive shall also be eligible to receive:

ii.

iii.

iv.


ii.	any and all outstanding Equity Awards granted to Executive under any plan not previously vested shall become fully vested, without proration,

iii.

a lump sum payment of an amount equal to one (1) times the sum of (A) the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination and (B) the target value of Executive’s Annual Bonus for the Bonus Year in which the Date of Termination occurs, which, for the purposes of this Section 4.3(c)(v) , shall be calculated without proration, based on the Effective STI Bonus Target established for Executive for the Bonus Year in which the Date of Termination occurs multiplied by the annualized rate of Executive’s Effective Base Salary as in effect on the Date of Termination;

iv.

iii.

iv.

ii.

Days for the year in which the Date of Termination occurs if the Date of Termination occurs in the fourth quarter of the calendar year.

4.5 Limitations on Severance Payment and Other Payments or Benefits .

ARTICLE V
CONFIDENTIAL INFORMATION

5.8 Disclosure of Inventions . Executive will promptly and without reservation fully disclose in writing any Created Works to the Company both during the Term and thereafter.

ARTICLE VI
NON-DISCLOSURE, NON-DISPARAGEMENT

6.1 Non-Disclosure .

6.2 Nature of Business .

ARTICLE VII
NON-SOLICITATION AND NON-COMPETITION

termination of Executive’s employment with the Company) (as applicable, the “ Prohibited Period ”), Executive will:

ARTICLE VIII
SURVIVAL OF COVENANTS, ENFORCEMENT OF COVENANTS AND REMEDIES

of action of Executive against the Company whether predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of those covenants.

ARTICLE IX
COMPLIANCE

ARTICLE X
MISCELLANEOUS

10.11 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

10.12 Section 409A .

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the day and year indicated above.

COMPANY:

C&J SPEC-RENT SERVICES, INC.

By: /s/DANIELLE HUNTER

Name: Danielle Hunter

Title: EVP – General Counsel

EXECUTIVE:

/s/TIMOTHY WALLACE

Timothy Wallace

12/18/18

Signature Date

Exhibit A

RESTRICTED AREA

State of Alabama

State of Arizona

State of Arkansas

State of California

State of Colorado

State of Idaho

State of Kansas

State of Louisiana Parishes of:

Bienville

Bossier

Caddo

Caldwell

Claiborne

DeSoto

Harrison

Jackson

Lincoln

Natchitoches

Red River

Sabine

St. Helena

Webster

Winn

State of Mississippi

State of Montana

State of Nebraska

State of New Mexico

State of New York

State of North Dakota

State of Ohio

State of Oklahoma

State of Pennsylvania

State of South Dakota

State of Texas

State of Utah

State of Virginia

State of West Virginia

State of Wyoming

Signature Page to Amended and Restated Employment Agreement

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

RECITALS

WHEREAS , prior to the parties’ entry into this Agreement, the Company has employed Executive pursuant to the terms of that certain Employment Agreement entered into effective as of June 23, 2016 between Executive and C&J Energy Services, Ltd., as amended by that certain First Amendment to Employment Agreement effective as of November 30, 2016 (the “ Original Agreement ”);