Keane Group, Inc. (Form: 10-Q/A, Received: 08/19/2019 16:27:29)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)



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

For the quarterly period ended March 31, 2019



☐	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 001-37988

Keane Group, Inc.

(Exact Name of Registrant as Specified in its Charter)



Delaware				38-4016639
(State or Other Jurisdiction of Incorporation or Organization)				(I.R.S. Employer Identification No.)

1800 Post Oak Boulevard	Suite 450	Houston	TX	77056
(Address of Principal Executive Offices)				(Zip Code)

(713) 960-0381

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)



Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange On Which Registered
Common Stock, $0.01, par value	FRAC	New York Stock Exchange

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 ☒ 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 and post such files). Yes ☒ No ☐

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	☒	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 to not 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 ☒

As of May 6, 2019, the registrant had 104,864,208 shares of common stock outstanding.

Explanatory Note

Keane Group, Inc. (the "Company") is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q (this "Amendment") for the quarter ended March 31, 2019, which was originally filed with the Securities and Exchange Commission ("SEC") on May 7, 2019 (the "Original Filing"). In response to an SEC comment letter dated August 12, 2019, this Amendment makes certain revisions to the cover page and Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Original Filing to reflect the following revisions:


•	detail the three reconciliations of our non-GAAP measures of adjusted net income from Net Income, adjusted EBITDA from Net Income and adjusted gross profit from gross profit; and


•	revise measures of gross profit in Results of Operation to reflect revenues net of all costs of services, including applicable depreciation and amortization.

In addition, as required by Rule 12b-15 under the Securities Act of 1934, as amended, new certifications by the Company's principal executive officer and principal financial officer are filed as exhibits to this Amendment under Part II, "Item 6. Exhibits" hereof.

Except for the foregoing amended information or where otherwise noted, this Amendment does not reflect events that occurred after the Original Filing or modify or update those disclosures affected by subsequent events.

This Amendment should be read in conjunction with the Original Filing.

The Company is concurrently filing an amendment to its Form 10-K for the year ended December 31, 2018 filed on February 27, 2019 (the "10-K Amendment") to reflect changes in Part II, "Item 6. Selected Financial Data" and Part II, "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and an amendment to its Form 10-Q for the quarter ended June 30, 2019 filed on July 31, 2019 (the "10-Q Amendment") to conform to changes made to the results of operations included in the 10-K Amendment and this Amendment. The 10-K Amendment and 10-Q Amendment being filed concurrently with this Amendment to modify certain line items of the results of operations, revising the gross profit measures to reflect revenues net of all cost of services, including applicable depreciation and amortization, and breaking out reconciliations of non-GAAP measures to most directly comparable GAAP measures.

TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION	4

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4

PART II.	OTHER INFORMATION	20

Item 6.	Exhibits	20

	Signatures	21

PART I

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Keane Group, Inc.'s (the "Company", "Keane", "KGI" or "our") financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related condensed footnotes included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" in this Quarterly Report on Form 10-Q, as well as our 2018 Annual Report on Form 10-K for the year ended December 31, 2018.

EXECUTIVE OVERVIEW

Organization

We are one of the largest pure-play providers of integrated well completion services in the U.S., with a focus on complex, technically demanding completion solutions. Our primary service offerings include horizontal and vertical fracturing, wireline perforation and logging and engineered solutions. Our total capacity includes approximately 1.4 million hydraulic horsepower. From our 29 currently deployable hydraulic fracturing fleets ("fleets"), 34 wireline trucks, 24 cementing units and other ancillary assets located in the Permian Basin, the Marcellus/Utica Shale, the Bakken Formation, the SCOOP/STACK Formation and other active oil and gas basins, we pride ourselves on providing industry-leading completion services with a strict focus on health, safety and environmental stewardship and cost-effective customer-centric solutions. We distinguish ourselves through three key principles, which include (i) our partnerships with high-quality customers, (ii) our intense focus on safety and efficiency and (iii) our focus on value creation for all our stakeholders.

We provide our services in conjunction with onshore well development, in addition to stimulation operations on existing wells, to well-capitalized oil and gas exploration and production ("E&P") customers, with some of the highest quality and safety standards in the industry and long-term development programs that enable us to maximize operational efficiencies and the return on our assets. We believe our integrated approach and proven capabilities enable us to deliver cost-effective solutions for increasingly complex and technically demanding well completion requirements, which include longer lateral segments, higher pressure rates and proppant intensity and multiple fracturing stages in challenging high-pressure formations. In addition, our technical team and engineering center, which is located in The Woodlands, Texas, provides us with the ability to supplement our service offerings with engineered solutions specifically tailored to address customers' completion requirements and unique challenges.

We are organized into two reportable segments, consisting of Completion Services, which includes our hydraulic fracturing, wireline divisions and ancillary services; and Other Services, which exclusively includes our cementing division. We evaluate the performance of these segments based on equipment utilization, revenue, segment gross profit and gross margin. Segment gross profit is a key metric that we use to evaluate segment operating performance and to determine resource allocation between segments. We define segment gross profit as segment revenue less segment direct and indirect cost of services, excluding depreciation and amortization. Additionally, our operations management make rapid and informed decisions, such as price adjustments that offset commodity inflation and align with market rates, decisions to strategically deploy our existing and new fleets and real-time supply chain management decisions, by utilizing top line revenue, together with individual direct and indirect costs on a per stage and per fleet basis.

Financial results

Revenue during the first quarter of 2019 totaled $421.7 million, a decrease of 18% compared to revenue during the first quarter of 2018 of $513.0 million. The net decline in consolidated revenue during the first quarter of 2019, as compared with the first quarter of 2018, was driven primarily by a decrease in fleet utilization with 21 fully-utilized hydraulic fracturing fleets during the first quarter of 2019, as compared to 26 fully-utilized hydraulic fracturing fleets during the first quarter of 2018, combined with pricing pressures driven by macroeconomic market conditions within the first quarter of 2019. This decrease in utilization was primarily driven by our customers shifting their focus to capital discipline through reduced activity levels and pricing. Despite pricing pressures, we retained our core customer base through the execution of our strategy of aligning with high quality and efficient customers under dedicated

agreements. Offsetting these declines was a sharp increase in operational performance, with increased pumping times, evidenced by revenue per fully-utilized fleet remaining flat during the first quarter of 2019, as compared with the first quarter of 2018. Our increased operational performance offset the revenue per stage decrease resulting from pricing concessions, lower commodity revenue from deflation sharing with certain customers and additional customers moving to direct sourcing of proppant. Also partially offsetting the declines during the first quarter of 2019 was the addition of a new dedicated agreement with an existing customer to support activity in the SCOOP / STACK Formation.

Consistent with our efforts to maintain and grow our supply of key commodities and skilled workforce, as influenced by market capacity, we continued to secure key contracts with suppliers and continued to position labor rates to facilitate retaining skilled employees and attracting new talent, while reducing staffing levels to align with current and forecasted activity levels.

We reported operating loss of $15.9 million during the three months ended March 31, 2019, as compared to operating income of $14.9 million during the three months ended March 31, 2018.

We reported net loss of $21.8 million, or $0.21 per basic and diluted share, during the three months ended March 31, 2019, compared to net loss of $8.2 million, or $0.07 per basic and diluted share, during the three months ended March 31, 2018. The following tables reconcile net income (loss) to Adjusted Net Income (Loss) Adjusted EBITDA, net income (loss) to Adjusted EBITDA, and gross profit (loss) to Adjusted Gross Profit (Loss) for the three months ended March 31, 2019 and 2018.



	(Thousands of Dollars) Three Months Ended March 31, 2019
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	17,967	$	(2,170	)	$	(37,603	)	$	(21,806	)
Non-cash stock compensation⁽¹⁾	—		—			3,973			3,973
Other⁽²⁾	—		—			4,120			4,120
Adjusted Net Income (Loss)	$	17,967	$	(2,170	)	$	(29,510	)	$	(13,713	)
Per share data
Net loss per share, basic									$	(0.21	)
Net loss per share, diluted									$	(0.21	)
Adjusted net loss per share, basic									$	(0.13	)
Adjusted net loss per share, diluted									$	(0.13	)

⁽¹⁾

Represents non-cash amortization of equity awards issued under Keane Group, Inc.'s Equity and Incentive Award Plan (the "Equity Plan"). According to the Equity Plan, the Compensation Committee of the Board of Directors can approve awards in the form of restricted stock, restricted stock units, and/or other deferred compensation. Consistent with prior policy, amortization of awards is made ratably over the vesting periods, beginning with the grant date, based on the total fair value determined on grant date and recorded in selling, general and administrative expenses.


⁽²⁾	Represents legal contingencies, which is recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Three Months Ended March 31, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	54,265	$	(2,177	)	$	(60,331	)	$	(8,243	)
Acquisition, integration and expansion⁽¹⁾	—		—			13,254			13,254
Offering-related expense⁽²⁾	—		—			12,969			12,969
Non-cash stock compensation⁽³⁾	—		—			3,073			3,073
Adjusted Net Income (Loss)	$	54,265	$	(2,177	)	$	(31,035	)	$	21,053
Per share data
Net loss per share, basic									$	(0.07	)
Net loss per share, diluted									$	(0.07	)
Adjusted net income per share, basic									$	0.19
Adjusted net income per share, diluted									$	0.19


⁽¹⁾	Represents adjustment to the contingent value right liability associated with the acquisition of RockPile Energy Services, LLC and its subsidiaries from RockPile Energy Holdings, LLC based on the final agreed-upon settlement.


⁽²⁾	Represents primarily professional fees and other miscellaneous expenses to consummate the secondary common stock offering completed in January 2018. These expenses were recorded in selling, general and administrative expenses, as Keane did not receive any proceeds in the offering to offset the expenses.


⁽³⁾	Represents non-cash amortization of equity awards issued under the Equity Plan, which is recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Three Months Ended March 31, 2019
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	17,967	$	(2,170	)	$	(37,603	)	$	(21,806	)
Depreciation and amortization	66,747		873			3,856			71,476
Interest expense, net	—		—			5,395			5,395
Income tax expense	—		—			974			974
EBITDA	$	84,714	$	(1,297	)	$	(27,378	)	$	56,039
Plus Management Adjustments:
Non-cash stock compensation⁽¹⁾	—		—			3,973			3,973
Other⁽²⁾	—		—			4,120			4,120
Adjusted EBITDA	$	84,714	$	(1,297	)	$	(19,285	)	$	64,132

⁽¹⁾

Represents non-cash amortization of equity awards issued under the Equity Plan. According to the Equity Plan, the Compensation Committee of the Board of Directors can approve awards in the form of restricted stock, restricted stock units, and/or other deferred compensation. Consistent with prior policy, amortization of awards is made ratably over the vesting periods, beginning with the grant date, based on the total fair value determined on grant date and recorded in selling, general and administrative expenses.


⁽²⁾	Represents legal contingencies, which is recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Three Months Ended March 31, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net Income (Loss)	$	54,265	$	(2,177	)	$	(60,331	)	$	(8,243	)
Depreciation and amortization	55,180		1,398			3,473			60,051
Interest expense, net	—		—			6,990			6,990
Income tax expense	—		—			3,168			3,168
EBITDA	$	109,445	$	(779	)	$	(46,700	)	$	61,966
Plus Management Adjustments:
Acquisition, integration and expansion⁽¹⁾	—		—			13,254			13,254
Offering-related expense⁽²⁾	—		—			12,969			12,969
Non-cash stock compensation⁽³⁾	—		—			3,073			3,073
Adjusted EBITDA	$	109,445	$	(779	)	$	(17,404	)	$	91,262


⁽¹⁾	Represents adjustment to the contingent value right liability associated with the acquisition of RockPile Energy Services, LLC and its subsidiaries from RockPile Energy Holdings, LLC based on the final agreed-upon settlement.


⁽²⁾	Represents primarily professional fees and other miscellaneous expenses to consummate the secondary common stock offering completed in January 2018. These expenses were recorded in selling, general and administrative expenses, as Keane did not receive any proceeds in the offering to offset the expenses.


⁽³⁾	Represents non-cash amortization of equity awards issued under the Equity Plan, which is recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Three Months Ended March 31, 2019
	Completion Services		Other Services			Total
Gross profit (loss)	$	18,558	$	(2,170	)	$	16,388
Depreciation and amortization	66,747		873			67,620
Gross profit (loss) excluding depreciation and amortization	$	85,305	$	(1,297	)	$	84,008
Total management adjustments	—		—			—
Adjusted Gross Profit (Loss)	$	85,305	$	(1,297	)	$	84,008



	(Thousands of Dollars) Three Months Ended March 31, 2018
	Completion Services		Other Services			Total
Gross profit (loss)	$	55,207	$	(2,177	)	$	53,030
Depreciation and amortization	55,180		1,398			56,578
Gross profit (loss) excluding depreciation and amortization:	$	110,387	$	(779	)	$	109,608
Total management adjustments	—		—			—
Adjusted Gross Profit (Loss)	$	110,387	$	(779	)	$	109,608

Business outlook

Throughout a majority of 2018, market conditions for completion services were positive, including tightness in supply and demand for completion services equipment and supportive commodity prices. However, beginning in late 2018, the industry faced growing headwinds, including E&P capital budget exhaustion, early achievement of E&P production targets, price differentials and normal seasonality resulting in softness in demand for completion services. At the same time, the price of crude oil experienced a significant and rapid decline beginning in November 2018, exacerbating the

negative impacts on completion services activity. Together, these factors led to lower activity levels, delays in the 2019 budgeting cycle for many E&P companies and an imbalance of hydraulic fracturing equipment supply.

Since the beginning of 2019, crude oil prices have improved from a low of $42.53 per barrel in late-December 2018 to mid-$60.00s per barrel in April 2019. Improved crude oil prices, combined with budget resets and the alleviation of seasonal and other temporary headwinds have resulted in a stabilization in pricing for completion services. While the improvement in commodity prices has resulted in a general improvement in activity, the market remains highly competitive. We currently believe we have strong visibility on utilization for approximately two-thirds of our fleets in 2019, providing a strong baseload upon which to build.

Financial markets, liquidity, and capital resources

At March 31, 2019, we had a cash balance of approximately $83.7 million. We also had $171.3 million available under our asset-based revolving credit facility as of March 31, 2019, which, with our cash balance, we believe provides us with sufficient liquidity for at least the next 12 months, including capital expenditures and working capital investments.

For additional information on market conditions and our liquidity and capital resources, see "Liquidity and Capital Resources" and "Business Environment and Results of Operations" herein.

Leveraging technology for commercial advantage

In order to generate actionable insights, we must acquire, integrate, access and utilize vast sources of the right data in an effective manner. We are developing advanced analytical techniques to gain a deep understanding of our operations, our customers, our end-to-end supply chain and key economic drivers at both a macro and precision level. In addition, we are in the process of transforming our enterprise resource planning system, which will enable our employees to work more efficiently and effectively.

Cybersecurity

We are subject to cybersecurity risks, the mitigation of which is one of our major strategic focuses. Maintaining appropriate protective controls and processes to facilitate data privacy is important to achieving our purpose and core values. We recently engaged an external independent advisor to assess our current enterprise-wide cyber-risk management framework and make recommendations to enhance our cyber-based risk management. In response to this assessment, we are augmenting our cybersecurity program by establishing a cybersecurity steering committee to assist our audit committee in providing oversight over our cybersecurity matters, further enhancing our proactive protective measures and incident response capabilities and deploying an ongoing information communication program to engage all of our employees in participating and supporting our cybersecurity and privacy efforts. As cybersecurity incidents continue to evolve, we are committed to protecting our value to all of our stakeholders, by expending the additional resources necessary to continue modifying and enhancing our protective measures, incident response capabilities and disclosure controls.

BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS

We provide our services in several of the most active basins in the U.S., including the Permian Basin, the Marcellus Shale/Utica Shale, the SCOOP/STACK Formation and the Bakken Formation. These regions are expected to account for approximately 60% of all horizontal wells anticipated to be drilled during 2019 through 2025. In addition, the high density of our operations in the basins in which we are most active provides us the opportunity to leverage our fixed costs and to quickly respond with what we believe are highly efficient, integrated solutions that are best suited to address customer requirements.

In particular, we are one of the largest providers in the Permian Basin and the Marcellus Shale/Utica Shale, the most prolific and cost-competitive oil and natural gas basins in the U.S. According to Spears & Associates, the Permian Basin and the Marcellus Shale/Utica Shale are expected to account for 55% of total active rigs in the U.S. during 2019 through 2025 based on forecasted rig counts. These basins have experienced a recovery in activity since the spring of 2016, with a 214% increase in rig count from their combined May 2016 low of 170 to 534 as of March 31, 2019.

Activity within our business segments is significantly impacted by spending on upstream exploration, development, and production programs by our customers. Also impacting our activity is the status of the global economy, which impacts oil and natural gas consumption.

Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, global oil supply, the world economy, the availability of credit, government regulation and global stability, which together drive worldwide drilling activity. Our financial performance is significantly affected by rig and well count in North America, as well as oil and natural gas prices, which are summarized in the tables below.

The following table shows the average oil and natural gas prices for West Texas Intermediate ("WTI") and Henry Hub natural gas:



	Three Months Ended March 31,				Year Ended December 31,
	2019		2018		2018
Oil price - WTI⁽¹⁾	$	54.83	$	62.89	$	64.94
Natural gas price - Henry Hub⁽²⁾	2.92		3.08		3.17
⁽¹⁾Oil price measured in dollars per barrel ⁽²⁾ Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu

The historical average U.S. rig counts based on the weekly Baker Hughes Incorporated rig count information were as follows:



	Three Months Ended March 31,		Year Ended December 31,
Product Type	2019	2018	2018
Oil	848	781	841
Natural Gas	195	185	190
Other	—	—	1
Total	1,043	966	1,032



	Three Months Ended March 31,		Year Ended December 31,
Drilling Type	2019	2018	2018
Horizontal	919	833	900
Vertical	61	63	63
Directional	63	70	69
Total	1,043	966	1,032

Our customers' cash flows, in most instances, depend upon the revenue they generate from the sale of oil and natural gas. Lower oil and natural gas prices usually translate into lower E&P budgets.

The U.S. energy industry experienced a significant downturn in the second half of 2014 through early 2016, driven primarily by global oversupply and a decline in commodity prices. From early 2016 through late 2018, the U.S. generally experienced a recovery in commodity prices and drilling and completion activity. Over this timeframe, the U.S. active rig count increased from a trough of 404 rigs in May 2016 to a peak of 1,083 rigs in December 2018, driving significant demand for our completion services.

During the third quarter of 2018, U.S. drilling and completion activity began to slow, driven primarily by producer budget exhaustion and pipeline takeaway constraints in the Permian Basin. Additionally, early in the fourth quarter of 2018, WTI crude oil prices began to experience a significant and rapid decline, reducing from $76.41 per barrel in early-October 2018 to $42.53 per barrel in late-December 2018, which added further negative pressure for U.S. drilling and completion activity and created an oversupply of completion services equipment in the market.

Since the start of 2019, many of the transitory issues have been resolved and WTI crude oil prices have recovered from their lows, with WTI crude oil prices reaching $60.14 per barrel as of March 29, 2019. However, supply and demand for completion services remains challenged, resulting in adverse pricing and utilization impacts and ongoing commodity price volatility. Serving as offsets to these ongoing pressures are our high-quality customer base and dedicated contract model, which provides visibility to a baseload of activity for 2019.

The United States Energy Information Administration ("EIA") projects that the average WTI spot price will increase through 2020 due to growing demand. As of April 2019, global liquids demand is expected to average 101.4 million and 102.8 million barrels per day in 2019 and 2020, respectively. The EIA anticipates continued growth in the long-term U.S. domestic demand for natural gas, supported by various factors, including (i) increased likelihood of favorable regulatory and legislative initiatives, (ii) increased

acceptance of natural gas as a clean and abundant domestic fuel source and (iii) the emergence of low-cost natural gas shale developments. As of April 2019, natural gas demand in North America is expected to average 84.6 billion and 84.8 billion cubic feet per day in 2019 and 2020, respectively.

We intend to address the anticipated sector-wide challenges in 2019 through (i) partnering and growing with well-capitalized customers under dedicated agreements, as evidenced by the dedicated agreement we were awarded with an existing customer to support activity in the SCOOP / STACK Formation in the first quarter of 2019, (ii) allocating our assets to maximize utilization and returns, (iii) maximizing profitability of our fully-utilized fleets through leading-edge pricing and efficiencies, (iv) investing in technology to further drive efficiencies and differentiation of service offerings, (v) leveraging our flexible and scalable logistics infrastructure to provide assurance of supply at lowest landed cost and (vi) maintaining our conservative and flexible capital position to support continued growth and maintenance of our active equipment.

RESULTS OF OPERATIONS IN 2019 COMPARED TO 2018

Three Months Ended March 31, 2019 Compared with Three Months Ended March 31, 2018



	Three Months Ended March 31,
(Thousands of Dollars)							As a % of Revenue				Variance
Description	2019			2018			2019		2018		$			%
Completion Services	$	411,975		$	507,451		98	%	99	%	$	(95,476	)	(19	%)
Other Services	9,679			5,565			2	%	1	%	4,114			74	%
Revenue	421,654			513,016			100	%	100	%	(91,362		)	(18	%)
Completion Services	326,670			397,064			77	%	77	%	(70,394		)	(18	%)
Other Services	10,976			6,344			3	%	1	%	4,632			73	%
Costs of services	337,646			403,408			80	%	79	%	(65,762		)	(16	%)
Completion Services	66,747			55,180			16	%	11	%	11,567			21	%
Other Services	873			1,398			0	%	0	%	(525		)	(38	%)
Depreciation and amortization	67,620			56,578			16	%	11	%	11,042			20	%
Completion Services	18,558			55,207			4	%	11	%	(36,649		)	(66	%)
Other Services	(2,170		)	(2,177		)	(1	%)	0	%	7			0	%
Gross profit	16,388			53,030			4	%	10	%	(36,642		)	(69	%)
Depreciation and amortization - selling, general and administrative	3,856			3,473			1	%	1	%	383			11	%
Selling, general and administrative expenses	27,936			33,884			7	%	7	%	(5,948		)	(18	%)
Loss on disposal of assets	481			769			0	%	0	%	(288		)	(37	%)
Operating income (loss)	(15,885		)	14,904			(4	%)	3	%	(30,789		)	(207	%)
Other income (expenses), net	448			(12,989		)	0	%	(3	%)	13,437			(103	%)
Interest expense	(5,395		)	(6,990		)	(1	%)	(1	%)	1,595			(23	%)
Total other expenses	(4,947		)	(19,979		)	(1	%)	(4	%)	15,032			(75	%)
Income tax expense	(974		)	(3,168		)	0	%	(1	%)	2,194			(69	%)
Net income (loss)	$	(21,806	)	$	(8,243	)	(5	%)	(2	%)	$	(13,563	)	165	%

Revenue: Total revenue is comprised of revenue from Completion Services and Other Services. Revenue during the three months ended March 31, 2019 decreased by $91.4 million, or 18%, to $421.7 million from $513.0 million during the three months ended March 31, 2018. This change in revenue by reportable segment is discussed below.

Completion Services: Completion Services segment revenue decreased by $95.5 million, or 19%, to $412.0 million during the three months ended March 31, 2019 from $507.5 million during the three months ended March 31, 2018. This change was primarily attributable to a 19% reduction in our average number of fully-utilized fleets, to 21 fully-utilized fleets during the three months ended March 31, 2019 from 26 fully-utilized fleets during the three months ended March 31, 2018, as a result of reduced activity levels reflective of the market environment. Despite reduction in activity levels and pricing, annualized revenue per fully-utilized fleet during the three months ended March 31, 2019 and 2018 remained flat. This was due to a sharp increase in operational performance, with increased pumping times, which fully offset the revenue per stage decrease resulting from pricing concessions, lower commodity revenue from deflation sharing with certain customers and additional customers moving to direct sourcing of proppant.

Other Services: Other Services segment revenue increased by $4.1 million, or 74%, to $9.7 million during the three months ended March 31, 2019 from $5.6 million during the three months ended March 31, 2018. This change in revenue was

primarily attributable to the ramp up of our cement division in North Dakota and the Permian Basin. Late in the first quarter of 2019, a portion of the cementing division was temporarily idled due to unfavorable market conditions.

Cost of services: Cost of services during the three months ended March 31, 2019 increased as a percentage of revenue to 80% during the three months ended March 31, 2019 from 79% during the three months ended March 31, 2018. The decrease in cost of services in Completion Services to $326.7 million during the three months ended March 31, 2019 from $397.1 million during the three months ended March 31, 2018 was primarily due to lower utilization, operating 21 fully-utilized hydraulic fracturing fleets during the three months ended March 31, 2019 compared to 26 fully-utilized hydraulic fracturing fleets during the three months ended March 31, 2018 and deflation on key input costs. The increase in cost of services in Other Services to $11.0 million during the three months ended March 31, 2019 from $6.3 million during the three months ended March 31, 2018 was driven by the ramp up of our cementing division in North Dakota and the Permian Basin.

Cost of services, as a percentage of total revenue is presented below:



	Three Months Ended March 31,
Description	2019		2018		% Change
Segment cost of services as a percentage of segment revenue:
Completion Services	79	%	78	%	1	%
Other Services	113	%	114	%	(1	)%
Total cost of services as a percentage of total revenue	80	%	79	%	1	%

Depreciation and amortization: In aggregate, depreciation and amortization expense as a percentage of revenues was 17% and 12% during the three months ended March 31, 2019 and 2018, respectively, an increase as a percentage of revenue of 5%. Total depreciation expense increased by $11.4 million, or 19%, to $71.5 million during the three months ended March 31, 2019 from $60.1 million during the three months ended March 31, 2018. This change was primarily attributable to depreciation of additional equipment purchased and equipment acquired in the asset acquisition from Refinery Specialties, Incorporated subsequent to the first quarter of 2018, in addition to depreciation related to maintenance capital expenditures.

Selling, general and administrative expense: Selling, general and administrative ("SG&A") expense as a percentage of revenues was 7% during the three months ended March 31, 2019 and 2018. Total management adjustments were $8.1 million during the three months ended March 31, 2019, consisting of $4.1 million of legal contingencies and $4.0 million of non-cash stock compensation expense for the restricted stock units and stock options awarded to certain of our employees. Management adjustments were $16.1 million during the three months ended March 31, 2018, consisting of $13.0 million of transaction costs related to the secondary offering in January 2018 and $3.1 million of non-cash compensation expense for the restricted stock units and stock options awarded to certain of our employees. Excluding these management adjustments, SG&A expense as a percentage of revenue was 5% and 3% during the three months ended March 31, 2019 and 2018, respectively, an increase as a percentage of revenue of 2%.

Loss on disposal of assets: Loss on disposal of assets decreased by $0.3 million, or 37%, to a loss of $0.5 million during the three months ended March 31, 2019 from a loss of $0.8 million during the three months ended March 31, 2018. This change was primarily attributable to the disposals of additional hydraulic fracturing pump components during the three months ended March 31, 2019, as compared to during the three months ended March 31, 2018, combined with divestitures of various trailers, vehicles and other immaterial assets during the three months ended March 31, 2019.

Other income (expense), net: Other income (expense), net, increased by $13.4 million to net income of $0.4 million during the three months ended March 31, 2019 from a net expense of $13.0 million during the three months ended March 31, 2018, due to the $13.2 million adjustment to the CVR liability in the three months ended March 31, 2018, based on the cash settlement in early April 2018.

Interest expense, net: Interest expense, net of interest income, decreased by $1.6 million, or 23%, to $5.4 million during the three months ended March 31, 2019 from $7.0 million during the three months ended March 31, 2018. This change was primarily attributable to a $1.0 million decrease in interest on our 2018 Term Loan Facility (as defined below) due to more favorable interest rates than under our pre-existing 2017 term loan facility and a $0.4 million decrease in deferred financing fees related to the 2018 Term Loan Facility due to changes in interest rates.

Effective tax rate: Our effective tax rate on continuing operations for the three months ended March 31, 2019 was 4.68%. The difference between the effective tax rate and the U.S. federal statutory rate is due to state taxes and change in valuation allowance. As a result of market conditions and their corresponding impact on our business outlook, we determined that a valuation allowance was appropriate as it is not more likely than not that we will not utilize our net deferred tax assets. The remaining tax impact not offset by a valuation allowance is related to tax amortization on our indefinite-lived intangible assets, state tax deferred liabilities and current state income taxes.

Net loss: Net loss was $21.8 million during the three months ended March 31, 2019, as compared with net loss of $8.2 million during the three months ended March 31, 2018. The activity in our net results during the three months ended March 31, 2019 and 2018 were due to the changes in revenue and expenses discussed above.

ENVIRONMENTAL MATTERS

We are subject to numerous environmental, legal and regulatory requirements related to our operations worldwide. For information related to environmental matters, see Note (11) Commitments and Contingencies to the unaudited condensed consolidated financial statements in Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

LIQUIDITY AND CAPITAL RESOURCES

Liquidity represents a company's ability to adjust its future cash flows to meet its needs and opportunities, both expected and unexpected.

As of March 31, 2019, we had $83.7 million of cash and $339.8 million of debt, exclusive of leases, compared to $80.2 million of cash and $340.7 million of debt, exclusive of leases, as of December 31, 2018. During the three months ended March 31, 2019 and 2018, we incurred capital expenditures of $50.0 million and $48.3 million, respectively, which is inclusive of the net change in non-cash capital expenditures within accounts payable.



	(Thousands of Dollars)
	Three Months Ended March 31,
	2019			2018
Net cash provided by operating activities	$	58,389		$	34,175
Net cash used in investing activities	(49,686		)	(29,829		)
Net cash used in financing activities	(5,132		)	(4,920		)

Significant sources and uses of cash during the three months ended March 31, 2019

Sources of cash:


•	Operating activities:

–

Net cash generated by operating activities during the three months ended March 31, 2019 of $58.4 million was the result of the utilization of 91% of our deployed fleets and our thoroughness in receiving collections from our customers and controlling costs. We continue to focus on maintaining operational and spend efficiencies, resulting in positive working capital and net operating cash to support our capital expenditures and other investing initiatives.

Uses of cash:


•	Investing activities:


–	Capital expenditures during the three months ended March 31, 2019 of $50.0 million was primarily associated with maintenance capital spend on active fleets and capital spend on strategic projects. This activity primarily related to our Completion Services segment.


•	Financing activities:


–	Cash used to repay our debt facilities, excluding leases and interest, during the three months ended March 31, 2019 was $0.9 million.


–	Cash used to repay our finance leases during the three months ended March 31, 2019 was $1.4 million.


–	Shares repurchased and retired related to share-based compensation during the three months ended March 31, 2019 totaled $2.9 million.

Significant sources and uses of cash during the three months ended March 31, 2018

Sources of cash:


•	Operating activities:


–	Net cash generated by operating activities during the three months ended March 31, 2018 of $34.2 million was primarily driven by higher utilization of our combined asset base and gross profit in our Completion Services segment.

Uses of cash:


•	Investing activities:


–	Capital expenditures during the three months ended March 31, 2018 of $48.3 million was primarily associated with maintenance capital spend on active fleets and deposits on new equipment. This activity primarily related to our Completion Services segment.


•	Financing activities:


–	Cash used to repay our debt facilities, excluding leases and interest, during the three months ended March 31, 2018 was $0.7 million.


–	Cash used to repay our finance leases during the three months ended March 31, 2018 was $0.8 million.


–	Shares repurchased and retired related to share-based compensation during the three months ended March 31, 2018 totaled $3.3 million.

Future sources and use of cash

Capital expenditures for 2019 are projected to be primarily related to maintenance capital spend to support our existing active fleets, wireline trucks and cementing units. We anticipate our capital expenditures will be funded by cash flows from operations. We currently estimate that our capital expenditures for 2019 will range between $130.0 million and $150.0 million.

Debt service, exclusive of leases, for the year ended December 31, 2019 is projected to be $26.5 million. We anticipate our debt service will be funded by cash flows from operations.

Effective February 25, 2019, our Board of Directors authorized a reset of capacity on our existing stock repurchase program back to $100 million. Additionally, the program's expiration date was extended to December 2019 from a previous expiration date of September 2019.

Other factors affecting liquidity

Financial position in current market. As of March 31, 2019, we had $83.7 million of cash and a total of $171.3 million available under our revolving credit facility. As of March 31, 2019, we were compliant with all financial and non-financial covenants in our bank agreements. Furthermore, we have no material adverse change provisions in our bank agreements, and our debt maturities extend over a long period of time. We currently believe that our cash on hand, cash flow generated from operations and availability under our revolving credit facility will provide sufficient liquidity for at least the next 12 months, including for capital expenditures, debt service, working capital investments, contingent liabilities and stock repurchases.

Guarantee agreements. In the normal course of business, we have agreements with a financial institution under which $2.5 million of letters of credit were outstanding as of March 31, 2019.

Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. The majority of our trade receivables have payment terms of 30 days. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers' cash flow from operations and their access to the credit markets. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our liquidity, consolidated results of operations and consolidated financial condition.

Contractual Obligations

In the normal course of business, we enter into various contractual obligations that impact or could impact our liquidity. The table below contains our known contractual commitments as of March 31, 2019.



(Thousands of Dollars) Contractual obligations	Total		2019		2020-2022		2023-2025		2026+
Long-term debt, including current portion⁽¹⁾	$	347,375	$	2,625	$	10,500	$	334,250	$	—
Estimated interest payments⁽²⁾	128,898		16,398		63,227		49,273		—
Finance lease obligations⁽³⁾	14,230		7,477		6,725		28		—
Operating lease obligations⁽⁴⁾	61,230		17,845		28,055		6,169		9,161
Purchase commitments⁽⁵⁾	121,471		66,693		53,278		1,500		—
Equity-method investment⁽⁶⁾	1,913		1,913		—		—		—
Legal contingency⁽⁷⁾	5,107		5,107		—		—		—
	$	680,224	$	118,058	$	161,785	$	391,220	$	9,161


⁽¹⁾	Long-term debt excludes interest payments on each obligation and represents our obligations under our 2018 Term Loan Facility. In addition, these amounts exclude $7.5 million of unamortized debt discount and debt issuance costs.


⁽²⁾	Estimated interest payments are based on debt balances outstanding as of March 31, 2019 and include interest related to the 2018 Term Loan Facility. Interest rates used for variable rate debt are based on the prevailing current London Interbank Offer Rate ("LIBOR").


⁽³⁾	Finance lease obligations consist of obligations on our finance leases of hydraulic fracturing equipment and ancillary equipment with CIT Finance LLC, light weight vehicles with ARI Financial Services Inc. and Enterprise FM Trust, and Peterbilt tractors with Stonebriar Commercial Finance LLC and includes interest payments.


⁽⁴⁾	Operating lease obligations are related to our real estate, rail cars with Anderson Rail Group, Compass Rail VIII, SMBC Rail Services and Trinity Industries Leasing Company, and light duty vehicles with ARI Financial Services Inc, Enterprise FM Trust and PNC Bank.


⁽⁵⁾	Purchase commitments primarily relate to our agreements with vendors for sand purchases and deposits on equipment. The purchase commitments to sand suppliers represent our annual obligations to purchase a minimum amount of sand from vendors. If the minimum purchase requirement is not met, the shortfall at the end of the year is settled in cash or, in some cases, carried forward to the next year.


⁽⁶⁾	See Notes (11) Commitments and Contingencies and (12) Related Party Transactions of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for further details on our equity-method investment.


⁽⁷⁾	The legal contingency is related to the settlement of two claims captioned Vu Tran, et al. v. Keane and Keane Frac ND, LLC & Keane Group Holdings, LLC v. Ceramifrac Proppants, LLC See Note (11) Commitments and Contingencies of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for further details.

Principal Debt Agreements

2017 ABL Facility

Structure. As of March 31, 2019, the Company's asset-based revolving credit facility obtained on February 17, 2017 and as amended on December 22, 2017 (the "2017 ABL Facility") provided for a $300.0 million revolving credit facility (with a $20.0 million subfacility for letters of credit), subject to a borrowing base in accordance with the terms agreed between us and the lenders. In addition, subject to approval by the applicable lenders and other customary conditions, the 2017 ABL Facility allows for an additional increase in commitments of up to $150.0 million. The 2017 ABL Facility is subject to customary fees, guarantees of subsidiaries, restrictions and covenants, including certain restricted payments.

Maturity. The loans arising under the initial commitments under the 2017 ABL Facility mature on December 22, 2022. The loans arising under any tranche of extended loans or additional commitments mature as specified in the applicable extension amendment or increase joinder, respectively.

Interest. Pursuant to the terms of the 2017 ABL Facility, amounts outstanding under the 2017 ABL Facility bear interest at a rate per annum equal to, at Keane Group Holdings LLC and its subsidiaries' ("Keane Group") option, (a) the base rate, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 1.00%, (y) if the average excess availability is greater than or equal to 33% but less than 66%, 0.75% or (z) if the average excess availability is greater than or equal to 66%, 0.50%, or (b) the adjusted LIBOR rate for such interest period, plus an applicable margin equal to (x) if the average excess availability is less than 33%, 2.00%, (y) if the average excess availability is greater than or equal to 33% but less than 66%, 1.75% or (z) if the average excess availability is greater than or equal to 66%, 1.50%. The average excess availability is set on the first day of each full fiscal quarter ending after December, 22, 2017. On or after June 22, 2018, at any time when consolidated EBITDA as of the then most recently ended four fiscal quarters for which financial statements are required to be delivered is greater than or equal to $250.0 million, the applicable margin will be reduced by 0.25%; provided that if consolidated EBITDA is less than $250.0 million as of a later four consecutive fiscal quarters, the applicable margin will revert to the levels set forth above.

2018 Term Loan Facility

On May 25, 2018, Keane Group and the 2018 Term Loan Guarantors (as defined below) entered into the 2018 Term Loan Facility with each lender from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent. The proceeds of the 2018 Term Loan Facility were used to refinance Keane Group's then-existing term loan facility and to repay related fees and expenses, with the excess proceeds used to fund general corporate purposes.

Structure. The 2018 Term Loan Facility provides for a term loan facility in an initial aggregate principal amount of $350.0 million (the loans incurred under the 2018 Term Loan Facility, the "2018 Term Loans"). As of March 31, 2019, there was $347.4 million principal amount of 2018 Term Loans outstanding. In addition, subject to certain customary conditions, the 2018 Term Loan Facility allows for additional incremental term loans to be incurred thereunder in an amount equal to the sum of (a) $200.0 million plus the aggregate principal amount of voluntary prepayments of 2018 Term Loans made on or prior to the date of determination (less amounts incurred in reliance on the capacity described in this subclause (a)), plus (b) an unlimited amount, subject to, (x) in the case of debt secured on a pari passu basis with the 2018 Term Loans, immediately after giving effect to the incurrence thereof, a first lien net leverage ratio being less than or equal to 2.00:1.00, (y) in the case of debt secured on a junior basis with the 2018 Term Loans, immediately after giving effect to the incurrence thereof, a secured net leverage ratio being less than or equal to 3.00:1.00 and (z) in the case of unsecured debt, immediately after giving effect to the incurrence thereof, a total net leverage ratio being less than or equal to 3.50:1.00.

Maturity. May 25, 2025 or, if earlier, the stated maturity date of any other term loans or term commitments.

Amortization. The 2018 Term Loans amortize in quarterly installments equal to 1.00% per annum of the aggregate principal amount of all initial term loans outstanding.

Interest. The 2018 Term Loans bear interest at a rate per annum equal to, at Keane Group's option, (a) the base rate plus 2.75%, or (b) the adjusted LIBOR for such interest period (subject to a 1.00% floor) plus 3.75%, subject to, on and after the fiscal quarter ending September 30, 2018, a pricing grid with three 0.25% per annum step-ups and one 0.25% per annum step-down determined based on total net leverage for the relevant period. Following a payment event of default, the 2018 Term Loans bear interest at the rate otherwise applicable to such 2018 Term Loans at such time plus an additional 2.00% per annum during the continuance of such event of default.

Prepayments. The 2018 Term Loan Facility is required to be prepaid with: (a) 100% of the net cash proceeds of certain asset sales, casualty events and other dispositions, subject to the terms of an intercreditor agreement between the agent for the 2018 Term Loan Facility and the agent for the 2017 ABL Facility and certain exceptions; (b) 100% of the net cash proceeds of debt incurrences or issuances (other than debt incurrences permitted under the 2018 Term Loan Facility, which exclusion is not applicable to permitted refinancing debt) and (c) 50% (subject to step-downs to 25% and 0%, upon and during achievement of certain total net leverage ratios) of excess cash flow in excess of a certain amount, minus certain voluntary prepayments made under the 2018 Term Loan Facility or other debt secured on a pari passu basis with the 2018 Term Loans and voluntary prepayments of loans under the 2017 ABL Facility to the extent the commitments under the 2017 ABL Facility are permanently reduced by such prepayments.

Guarantees. Subject to certain exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility, the amounts outstanding under the 2018 Term Loan Facility are guaranteed by the Company, Keane Frac, LP, KS Drilling, LLC, KGH Intermediate Holdco I, LLC, KGH Intermediate Holdco II, LLC, and Keane Frac GP, LLC, and each subsidiary of the Company that

will be required to execute and deliver a facility guaranty in the future pursuant to the terms of the 2018 Term Loan Facility (collectively, the "2018 Term Loan Guarantors").

Security. Subject to certain exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility, the obligations under the 2018 Term Loan Facility are secured by (a) a first-priority security interest in and lien on substantially all of the assets of Keane Group and the 2018 Term Loan Guarantors to the extent not constituting ABL Facility Priority Collateral (as defined below) and (b) a second-priority security interest in and lien on substantially all of the accounts receivable, inventory, and frac iron equipment, and certain other assets and property related to the foregoing including certain chattel paper, investment property, documents, letter of credit rights, payment intangibles, general intangibles, commercial tort claims, books and records and supporting obligations of the borrowers and guarantors under the 2017 ABL Facility (the "ABL Facility Priority Collateral").

Fees. Certain customary fees are payable to the lenders and the agents under the 2018 Term Loan Facility.

Restricted Payment Covenant. The 2018 Term Loan Facility includes a covenant restricting the ability of the Company and its restricted subsidiaries to pay dividends and make certain other restricted payments, subject to certain exceptions. The 2018 Term Loan Facility provides that the Company and its restricted subsidiaries may, among things, make cash dividends and other restricted payments in an aggregate amount during the life of the facility not to exceed (a) $100.0 million, plus (b) the amount of net proceeds received by Keane Group from the funding of the 2018 Term Loans in excess of the of such net proceeds required to finance the refinancing of the pre-existing term loan facility and pay fees and expenses related thereto and to the entry into the 2018 Term Loan Facility, plus (c) an unlimited amount so long as, after giving effect to such restricted payment, the total net leverage ratio would not exceed 2.00:1.00. In addition, the Company and its restricted subsidiaries may make restricted payments utilizing the Cumulative Credit (as defined below), subject to certain conditions including, if any portion of the Cumulative Credit utilized is comprised of amounts under clause (b) of the definition thereof below, the pro forma total net leverage ratio being no greater than 2.50:1.00.

"Cumulative Credit," generally, is defined as an amount equal to (a) $25.0 million, (b) 50% of consolidated net income of the Company and its restricted subsidiaries on a cumulative basis from April 1, 2018 (which cumulative amount shall not be less than zero), plus (c) other customary additions, and reduced by the amount of Cumulative Credit used prior to such time (whether for restricted payments, junior debt payments or investments).

Affirmative and Negative Covenants. The 2018 Term Loan Facility contains various affirmative and negative covenants (in each case, subject to customary exceptions as set forth in the definitive documentation for the 2018 Term Loan Facility). The 2018 Term Loan Facility does not contain any financial maintenance covenants.

Events of Default. The 2018 Term Loan Facility contains customary events of default (subject to exceptions, thresholds and grace periods as set forth in the definitive documentation for the 2018 Term Loan Facility).

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet financing arrangements, transactions or special purpose entities.

Related Party Transactions

Our Board of Directors has adopted a written policy and procedures (the "Related Party Policy") for the review, approval and ratification of the related party transactions by the independent members of the audit and risk committee of our Board of Directors. For purposes of the Related Party Policy, a "Related Party Transaction" is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the aggregate amount involved will or may be reasonably expected to exceed $120,000 in any fiscal year, (2) the Company or any of its subsidiaries is a participant and (3) any Related Party (as defined herein) has or will have a direct or indirect material interest. All Related Party Transactions will be reviewed in accordance with the standards set forth in the Related Party Policy after full disclosure of the Related Party's interests in the transaction.

The Related Party Policy defines "Related Party" as any person who is, or, at any time since the beginning of the Company's last fiscal year, was (1) an executive officer, director or nominee for election as a director of the Company or any of its subsidiaries, (2) a person with greater than five percent (5%) beneficial interest in the Company, (3) an immediate family member of any of the individuals or entities identified in (1) or (2) of this paragraph and (4) any firm, corporation or other entity in which any of the foregoing individuals or entities is employed or is a general partner or principal or in a similar position or in which such person or entity has a five percent (5%) or greater beneficial interest. Immediate family members include a person's spouse, parents, stepparents,

children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person's home, other than a tenant or employee.

For further details about our transactions with Related Parties, see Note (12) Related Party Transactions of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements and related notes to the unaudited condensed consolidated financial statements included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

A critical accounting estimate is one that requires a high level of subjective judgment by management and has a material impact to our financial condition or results of operations. This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included within Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)" of our quarterly report on Form 10-Q, as well as our consolidated and combined financial statements and related notes included in Part II, "Item 8. Financial Statements and Supplementary Data" and Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2018 Annual Report on Form 10-K for the year ended December 31, 2018.

We believe the following is a new critical accounting policy used in the preparation of our unaudited condensed consolidated financial statements.

(a) Leases

Per ASU 2016-02, "Leases (Topic 842)," lessees can classify leases as finance leases or operating leases, while lessors can classify leases as sales-type, direct financing or operating leases. All leases, with the exception of short-term leases, are capitalized on the balance sheet by recording a lease liability, which represents our obligation to make lease payments arising from the lease, along with a corresponding right-of-use asset, which represents our right to use the underlying asset being leased. For leases in which we are the lessee, we use a collateralized incremental borrowing rate to calculate the lease liability, as in most cases we do not know the lessor's implicit rate in the lease. Establishing our lease obligations on our unaudited condensed consolidated balance sheets require judgmental assessments of the term lengths of each and the interest rate yield curve that best represents the collateralized incremental borrowing rate to apply to each lease. We engage third-party specialists to assist us in determining the collateralized incremental borrowing rate yield curve. Errors in determining the lease term lengths and/or selecting the best representative collateralized incremental borrowing rate can have a material adverse effect on our unaudited condensed consolidated financial statements. For further details about our leases, see Note (10) Leases of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

(b) New Accounting Pronouncements

For discussion on the potential impact of new accounting pronouncements issued but not yet adopted, see Note (14) New Accounting Pronouncements of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

NON-GAAP FINANCIAL MEASURES

From time to time in our financial reports, we will use certain non-GAAP financial measures to provide supplemental information that we believe is useful to analysts and investors to evaluate our ongoing results of operations, when considered alongside other GAAP measures such as net income, operating income and gross profit. These non-GAAP measures exclude the financial impact of items management does not consider in assessing our ongoing operating performance, and thereby facilitates review of our operating performance on a period-to-period basis. Other companies may have different capital structures, and comparability to our results of operations may be impacted by the effects of acquisition accounting on our depreciation and amortization. As a result of the effects of these factors and factors specific to other companies, we believe Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Gross Profit (Loss) provide helpful information to analysts and investors to facilitate a comparison of our operating performance to that of other companies.

Adjusted Net Income (Loss) is defined as net income (loss) adjusted to eliminate certain items management does not consider in assessing ongoing performance. Adjusted EBITDA is defined as net income (loss) adjusted to eliminate the impact of interest, income taxes, depreciation and amortization, along with certain items management does not consider in assessing ongoing performance. Adjusted Gross Profit (Loss) is defined as gross profit (loss) adjusted to eliminate the impact of depreciation and amortization, along with cost of services that management does not consider in assessing ongoing performance.

PART II

Item 6. Exhibits

The exhibits listed in the exhibit index of the Original Filing and the exhibits listed in the exhibit index of this Amendment are filed with, or incorporated by reference, in this report. We are filing the following documents as exhibits to this Amendment.

Incorporated by Reference

Exhibit
Number

Exhibit Description

Filed/
Furnished
Herewith

Form

File No.

Exhibit

Filing
Date

31.1

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 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.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on August 19, 2019.



	Keane Group, Inc. (Registrant)

	By:	/s/ Phung Ngo-Burns
		Phung Ngo-Burns
		Chief Accounting Officer and Duly Authorized Officer

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

EXCHANGE ACT RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert W. Drummond, certify that:

1. I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Keane Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 19, 2019	By:	/s/ Robert W. Drummond
		Robert W. Drummond
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

EXCHANGE ACT RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory L. Powell, certify that:

1. I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Keane Group, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 19, 2019	By:	/s/ Gregory L. Powell
		Gregory L. Powell
		President and Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL

FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Robert W. Drummond, the Chief Executive Officer of Keane Group, Inc. (the “Company”), and Gregory L. Powell, the President and Chief Financial Officer of the Company, hereby certify that, to their knowledge:

1. This Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 19, 2019	By:	/s/ Robert W. Drummond
		Robert W. Drummond
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 19, 2019	By:	/s/ Gregory L. Powell
		Gregory L. Powell
		President and Chief Financial Officer
		(Principal Financial Officer)