Keane Group, Inc. (Form: 10-Q/A, Received: 08/19/2019 16:30:05)

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 June 30, 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	Texas	77056
(Address of Principal Executive Offices)				(Zip Code)

(713) 357-9490

(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 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 July 29, 2019, the registrant had 104,983,801 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 June 30, 2019, which was originally filed with the Securities and Exchange Commission ("SEC") on July 31, 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 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 March 31, 2019 filed on May 7, 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	25

Item 6.	Exhibits	25

	Signatures	26

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", "we" 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 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, including 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 movements 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.

Merger with C&J

On June 16, 2019, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with C&J Energy Services, Inc. ("C&J") and King Merger Sub Corp. ("Merger Sub").

The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, (a) Merger Sub will merge with and into C&J (the "Merger"), with C&J surviving and continuing as the surviving corporation in the Merger as a direct, wholly-owned subsidiary of Keane, and (b) at the effective time of the Merger, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately before the effective time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the surviving corporation and each outstanding share of common stock of C&J (other than shares beneficially owned by C&J) will

be converted into the right to receive 1.6149 shares of common stock of Keane, plus cash in lieu of any fractional shares that otherwise would have been issued. Immediately following the effective time, C&J shall be merged with and into King Merger Sub II LLC ("LLC Sub"), with LLC Sub continuing as the surviving entity as a direct, wholly-owned subsidiary of Keane.

At the effective time, Keane will be renamed and Keane common stock, including the shares to be issued in the Merger, will be listed on the New York Stock Exchange under a new ticker symbol. C&J and Keane estimate that holders of C&J common stock as of immediately prior to the effective time will hold, in the aggregate, approximately 50% of the issued and outstanding shares of common stock of the combined company (based on fully diluted shares outstanding of the combined company) immediately following the effective time, and holders of shares of Keane common stock as of immediately prior to the effective time will hold, in the aggregate, approximately 50% of the issued and outstanding shares of common stock of the combined company (based on fully diluted shares outstanding of the combined company) immediately following the effective time.

The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, among others, approval by the stockholders of Keane of the issuance of shares of Keane common stock and approval by the stockholders of C&J of the Merger Agreement, as well as the expiration or earlier termination of any applicable waiting period, and the receipt of certain regulatory approvals, including those under domestic antitrust and competition laws, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). In connection with the Merger, Keane and C&J each filed a Notification and Report Form under the HSR Act with the U.S. Federal Trade Commission and the DOJ on June 28, 2019. On July 18, 2019, the companies received notification of early termination of the waiting period under the HSR Act.

In accordance with the terms of the Merger Agreement, Keane Investor Holdings LLC ("Keane Investor"), which beneficially owns 51,668,175 shares of Keane common stock, has entered into a Support Agreement and Irrevocable Proxy (the "Support Agreement"), dated June 16, 2019, by and among Keane Investor, Cerberus Capital Management, L.P. ("Cerberus"), an affiliate of Keane Investor, and C&J. The Support Agreement places certain restrictions on the transfer of the shares of Keane held by Keane Investor and Cerberus, including, subject to certain exceptions, that for the period commencing at the effective time and continuing for forty-five days thereafter, Keane Investor and Cerberus shall not sell, transfer, assign, pledge, encumber or otherwise dispose of, directly or indirectly, their shares of Keane common stock or any other securities convertible into or exchangeable for Keane common stock. In addition, the Support Agreement includes covenants that, with limited exceptions, require Keane Investor (which owns approximately 49.2% of the outstanding shares of Keane common stock) to vote its shares in favor of the share issuance to C&J stockholders and against actions that may impair or impede the transactions contemplated by the Merger Agreement.

We filed a Registration Statement on Form S-4 (File No. 333-232662) with the SEC on July 16, 2019. We have agreed to operate our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the proposed Merger, subject to specific exceptions set forth in the Merger Agreement, and have agreed to certain other customary restrictions on operations, as set forth in the Merger Agreement.

Financial results

Revenue for the three months ended June 30, 2019 and 2018 was $427.7 million and $578.5 million, respectively. Revenue for the six months ended June 30, 2019 and 2018 was $849.4 million and $1.1 billion, respectively. The net decline in each comparative period was driven primarily by a decrease in rig count, fleet utilization, combined with pricing pressures from macroeconomic market conditions. This decrease in utilization was primarily from our customers shifting their focus to capital discipline through reduced activity levels and pricing. Despite pricing pressures, we retained our core customer base by aligning with high quality and efficient customers under dedicated agreements. Offsetting these declines increase in operational performance, with higher pumping times.

Gross profit for the three months ended June 30, 2019 and 2018 was $103.2 million and $130.8 million, respectively. Gross profit for the six months ended June 30, 2019 and 2018 was $187.2 million and $240.5 million, respectively. Gross profit drivers for 2019 had a favorable impact on operating margins, driven by deflation in key input costs. Consistent with our efforts to maintain and grow the supply of our key commodities and skilled workforce, as influenced by market demand, we continued to secure key contracts with suppliers, as well as position labor rates to facilitate retaining skilled employees and attracting new talent.

We reported net loss of $5.0 million, or $0.05 per basic and diluted share during the three months ended June 30, 2019, compared to net income of $30.7 million or $0.28 and $0.27, per basic and diluted share, respectively, during the three months ended June 30, 2018. We reported net loss of $26.8 million, or $0.26 per basic and diluted share during the six months ended June 30, 2019, compared to net income of $22.4 million or $0.20 per basic and diluted share, during the six months ended June 30, 2018. The following tables reconcile net income (loss) to Adjusted Net Income (Loss), net income (loss) to Adjusted EBITDA, and gross profit (loss) to Adjusted Gross Profit (Loss) for the three and six months ended June 30, 2019 and 2018.



	(Thousands of Dollars) Three Months Ended June 30, 2019
	Completion Services		Other Services		Corporate and Other			Total
Net income (loss)	$	36,856	$	468	$	(42,305	)	$	(4,981	)
Acquisition, integration and expansion⁽¹⁾	—		—		6,108			6,108
Non-cash stock compensation⁽²⁾	—		—		5,637			5,637
Other	—		—		(326		)	(326		)
Adjusted Net Income (Loss)	$	36,856	$	468	$	(30,886	)	$	6,438
Per share data
Net loss per share, basic								$	(0.05	)
Net loss per share, diluted								$	(0.05	)
Adjusted net income per share, basic								$	0.06
Adjusted net income per share, diluted								$	0.06


⁽¹⁾	Represents transaction costs related to the Merger with C&J Energy Services.

⁽²⁾

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



	(Thousands of Dollars) Three Months Ended June 30, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	75,694	$	(1,716	)	$	(43,311	)	$	30,667
Acquisition, integration and expansion⁽¹⁾	—		—			2,827			2,827
Non-cash stock compensation⁽²⁾	—		—			4,040			4,040
Other⁽³⁾	—		—			989			989
Adjusted Net Income (Loss)	$	75,694	$	(1,716	)	$	(35,455	)	$	38,523
Per share data
Net income per share, basic									$	0.28
Net income per share, diluted									$	0.27
Adjusted net income per share, basic									$	0.35
Adjusted net income per share, diluted									$	0.35


⁽¹⁾	Represents primarily a markdown to fair value of real estate pending for sale in Mathis, Texas acquired during the acquisition of a majority of the U.S. assets and assumed certain liabilities of Trican Well Service, L.P. (the "Acquired Trican Operations"). This loss was recorded in (gain) loss on disposal of assets.

⁽²⁾

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.


⁽³⁾	Represents primarily rating agency fees for establishing initial ratings in connection with entering into a new $350 million senior secured term facility. These expenses were recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Six Months Ended June 30, 2019
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	54,823	$	(1,702	)	$	(79,908	)	$	(26,787	)
Acquisition, integration and expansion⁽¹⁾	—		—			6,108			6,108
Non-cash stock compensation⁽²⁾	—		—			9,610			9,610
Other⁽³⁾	—		—			3,794			3,794
Adjusted Net Income (Loss)	$	54,823	$	(1,702	)	$	(60,396	)	$	(7,275	)
Per share data
Net loss per share, basic									$	(0.26	)
Net loss per share, diluted									$	(0.26	)
Adjusted net income per share, basic									$	(0.07	)
Adjusted net income per share, diluted									$	(0.07	)


⁽¹⁾	Represents transaction costs related to the Merger with C&J Energy Services.

⁽²⁾


⁽³⁾	Represents legal contingencies, which is recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Six Months Ended June 30, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	129,959	$	(3,893	)	$	(103,642	)	$	22,424
Acquisition, integration and expansion⁽¹⁾	—		—			16,081			16,081
Offering-related expenses⁽²⁾						12,969			12,969
Non-cash stock compensation⁽³⁾	—		—			7,113			7,113
Other⁽⁴⁾	—		—			989			989
Adjusted Net Income (Loss)	$	129,959	$	(3,893	)	$	(66,490	)	$	59,576
Per share data
Net income per share, basic									$	0.20
Net income per share, diluted									$	0.20
Adjusted net income per share, basic									$	0.53
Adjusted net income per share, diluted									$	0.53


⁽¹⁾	Represents adjustment to the Contingent Value Right (CVR) liability based on the final agreed-upon settlement, which was recorded in other income (expense), net and a markdown to fair value of real estate pending for sale in Mathis, Texas acquired during the acquisition of the Acquired Trican Operations, which was recorded in (gain) loss on disposal of assets.


⁽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.


⁽⁴⁾	Represents primarily rating agency fees for establishing initial ratings in connection with entering into a new $350 million senior secured term facility. These expenses were recorded in selling, general and administrative expenses.




	Three Months Ended June 30, 2019
	Completion Services		Other Services		Corporate and Other			Total
Net income (loss)	$	36,856	$	468	$	(42,305	)	$	(4,981	)
Depreciation and amortization	65,672		631		3,583			69,886
Interest expense, net	—		—		5,477			5,477
Income tax expense	—		—		564			564
EBITDA	$	102,528	$	1,099	$	(32,681	)	$	70,946
Plus Management Adjustments:
Acquisition, integration and expansion⁽¹⁾	—		—		6,108			6,108
Non-cash stock compensation⁽²⁾	—		—		5,637			5,637
Other	—		—		(326		)	(326		)
Adjusted EBITDA	$	102,528	$	1,099	$	(21,262	)	$	82,364


⁽¹⁾	Represents transaction costs related to the Merger with C&J Energy Services.

⁽²⁾




	Three Months Ended June 30, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	75,694	$	(1,716	)	$	(43,311	)	$	30,667
Depreciation and amortization	54,618		1,319			3,467			59,404
Interest expense, net	—		—			14,317			14,317
Income tax expense	—		—			(936		)	(936		)
EBITDA	$	130,312	$	(397	)	$	(26,463	)	$	103,452
Plus Management Adjustments:
Acquisition, integration and expansion⁽¹⁾	—		—			2,827			2,827
Non-cash stock compensation ⁽²⁾	—		—			4,040			4,040
Other⁽³⁾	—		—			989			989
Adjusted EBITDA	$	130,312	$	(397	)	$	(18,607	)	$	111,308


⁽¹⁾	Represents primarily a markdown to fair value of real estate pending for sale in Mathis, Texas acquired during the acquisition of a majority of the U.S. assets and assumed certain liabilities of Trican Well Service, L.P. (the "Acquired Trican Operations"). This loss was recorded in (gain) loss on disposal of assets.

⁽²⁾


⁽³⁾	Represents primarily rating agency fees for establishing initial ratings in connection with entering into a new $350 million senior secured term facility. These expenses were recorded in selling, general and administrative expenses.




	Six Months Ended June 30, 2019
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	54,823	$	(1,702	)	$	(79,908	)	$	(26,787	)
Depreciation and amortization	132,419		1,504			7,439			141,362
Interest expense, net	—		—			10,872			10,872
Income tax expense	—		—			1,538			1,538
EBITDA	$	187,242	$	(198	)	$	(60,059	)	$	126,985
Plus Management Adjustments:
Acquisition, integration and expansion⁽¹⁾	—		—			6,108			6,108
Non-cash stock compensation⁽²⁾	—		—			9,610			9,610
Other⁽³⁾	—		—			3,794			3,794
Adjusted EBITDA	$	187,242	$	(198	)	$	(40,547	)	$	146,497


⁽¹⁾	Represents transaction costs related to the Merger with C&J Energy Services.

⁽²⁾


⁽³⁾	Represents legal contingencies, which is recorded in selling, general and administrative expenses.




	Six Months Ended June 30, 2018
	Completion Services		Other Services			Corporate and Other			Total
Net income (loss)	$	129,959	$	(3,893	)	$	(103,642	)	$	22,424
Depreciation and amortization	109,798		2,717			6,940			119,455
Interest expense, net	—		—			21,307			21,307
Income tax expense	—		—			2,232			2,232
EBITDA	$	239,757	$	(1,176	)	$	(73,163	)	$	165,418
Plus Management Adjustments:
Acquisition, integration and expansion⁽¹⁾	—		—			16,081			16,081
Offering-related expenses⁽²⁾	—		—			12,969			12,969
Non-cash stock compensation⁽³⁾	—		—			7,113			7,113
Other⁽⁴⁾	—		—			989			989
Adjusted EBITDA	$	239,757	$	(1,176	)	$	(36,011	)	$	202,570


⁽¹⁾	Represents adjustment to the Contingent Value Right (CVR) liability based on the final agreed-upon settlement, which was recorded in other income (expense), net and a markdown to fair value of real estate pending for sale in Mathis, Texas acquired during the acquisition of the Acquired Trican Operations, which was recorded in (gain) loss on disposal of assets.


⁽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.


⁽⁴⁾	Represents primarily rating agency fees for establishing initial ratings in connection with entering into a new $350 million senior secured term facility. These expenses were recorded in selling, general and administrative expenses.



	(Thousands of Dollars) Three Months Ended June 30, 2019
	Completion Services		Other Services		Total
Gross profit (loss)	$	36,459	$	468	$	36,927
Depreciation and amortization	65,672		631		66,303
Gross profit (loss) excluding depreciation and amortization:	$	102,131	$	1,099	$	103,230
Total management adjustments	—		—		—
Adjusted Gross Profit (Loss)	$	102,131	$	1,099	$	103,230



	(Thousands of Dollars) Three Months Ended June 30, 2018
	Completion Services		Other Services			Total
Gross profit (loss)	$	76,627	$	(1,716	)	$	74,911
Depreciation and amortization	54,618		1,319			55,937
Gross profit (loss) excluding depreciation and amortization:	$	131,245	$	(397	)	$	130,848
Total management adjustments	—		—			—
Adjusted Gross Profit (Loss)	$	131,245	$	(397	)	$	130,848



	(Thousands of Dollars) Six Months Ended June 30, 2019
	Completion Services		Other Services			Total
Gross profit (loss)	$	55,016	$	(1,701	)	$	53,315
Depreciation and amortization	132,419		1,504			133,923
Gross profit (loss) excluding depreciation and amortization:	$	187,435	$	(197	)	$	187,238
Total management adjustments	—		—			—
Adjusted Gross Profit (Loss)	$	187,435	$	(197	)	$	187,238



	(Thousands of Dollars) Six Months Ended June 30, 2018
	Completion Services		Other Services			Total
Gross profit (loss)	$	131,834	$	(3,893	)	$	127,941
Depreciation and amortization	109,798		2,717			112,515
Gross profit (loss) excluding depreciation and amortization:	$	241,632	$	(1,176	)	$	240,456
Total management adjustments	—		—			—
Adjusted Gross Profit (Loss)	$	241,632	$	(1,176	)	$	240,456

Financial markets, liquidity, and capital resources

As of June 30, 2019, we had a cash balance of approximately $117.1 million. We also had $173.5 million available under our asset-based revolving credit facility as of June 30, 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."

Current highlights

Safety


•	We achieved a rolling 12-month average total recordable incident rate of 0.36 during the second quarter of 2019, which remains substantially less than the industry average.

Strategic Initiatives and Opportunities


•	On June 17, 2019, Keane announced plans to merge with C&J in a transaction that will create one of the largest U.S. well completion services companies. The transaction remains on target to close in the fourth quarter of 2019.

Customer Partnerships


•	During the second quarter of 2019, Keane converted one spot hydraulic fracturing fleet to a dedicated agreement with a major operator in the Permian Basin, expanding our portfolio of blue chip customers under dedicated agreements. We remain focused on partnering with highly efficient customers with shared values.

Technology

•

Keane is advancing on its strategy of driving efficiency and enhancing safety through our multi-pronged approach to surface, digital and downhole technologies. In close collaboration with our customers and industry partners, Keane continues to invest in the development and deployment of a range of new technologies across integrated completions. Our focus on innovation is contributing to tangible results, as evidenced by increased pumping hours per fleet, reduction in non-productive time and cost savings during the second quarter of 2019.

Efficiency


•	Keane achieved record pump times during the second quarter of 2019, driven by execution, deployment of technology, and improvements in the frac calendar. Efficiency remains a key differentiator and why customers choose to partner with Keane.

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, West Texas Intermediate crude oil prices have improved from a low of $42.53 per barrel in late-December 2018 to $59.30 barrel as of July 15, 2019. Improved crude oil prices, combined with budget resets and the alleviation of seasonal and other temporary headwinds resulted in a stabilization in pricing for completion services. Effectively managing these external factors impacting the industry, Keane has performed well, achieving improving efficiencies and financial performance during the first two quarters of 2019.

Currently, completions activity and commodity prices remain dynamic, with many operators focused on capital discipline. We currently believe we have good visibility into continued strength in activity for the third quarter of 2019, and are carrying momentum into the back half of 2019. As of June 30, 2019, we have 23 fleets deployed, with most of them committed through at least 2019. Market dynamics can be quick to develop, particularly during the latter part of the year, including budget exhaustion and other seasonal factors. Keane is focused on remaining close to its customers, and will remain responsive to market conditions. However, to date, Keane has not received indication of any planned slowdown in activity from customers.

RESULTS OF OPERATIONS IN 2019 COMPARED TO 2018

Three Months Ended June 30, 2019 Compared with Three Months Ended June 30, 2018



	Three Months Ended June 30,
(Thousands of Dollars)							As a % of Revenue				Variance
Description	2019			2018			2019		2018		$			%
Completion Services	$	420,363		$	569,929		98	%	99	%	$	(149,566	)	(26	%)
Other Services	7,370			8,604			2	%	1	%	(1,234		)	(14	%)
Revenue	427,733			578,533			100	%	100	%	(150,800		)	(26	%)
Completion Services	318,232			438,684			74	%	76	%	(120,452		)	(27	%)
Other Services	6,271			9,001			1	%	2	%	(2,730		)	(30	%)
Costs of services	324,503			447,685			76	%	77	%	(123,182		)	(28	%)
Completion Services	65,672			54,618			15	%	9	%	11,054			20	%
Other Services	631			1,319			0	%	0	%	(688		)	(52	%)
Depreciation and amortization	66,303			55,937			16	%	10	%	10,366			19	%
Completion Services	36,459			76,627			9	%	13	%	(40,168		)	(52	%)
Other Services	468			(1,716		)	0	%	0	%	2,184			(127	%)
Gross profit (loss)	36,927			74,911			9	%	13	%	(37,984		)	(51	%)
Depreciation and amortization - selling, general and administrative	3,583			3,467			1	%	1	%	116			3	%
Selling, general and administrative expenses	32,571			24,125			8	%	4	%	8,446			35	%
(Gain) loss on disposal of assets	(330		)	3,287			0	%	1	%	(3,617		)	(110	%)
Operating income	1,103			44,032			0	%	8	%	(42,929		)	(97	%)
Other income (expenses), net	(43		)	16			0	%	0	%	(59		)	(369	%)
Interest expense	(5,477		)	(14,317		)	(1	%)	(2	%)	8,840			(62	%)
Total other expenses	(5,520		)	(14,301		)	(1	%)	(2	%)	8,781			(61	%)
Income tax expense	(564		)	936			0	%	0	%	(1,500		)	(160	%)
Net income (loss)	$	(4,981	)	$	30,667		(1	%)	5	%	$	(35,648	)	(116	%)

Gross Profit: Gross profit during the three months ended June 30, 2019 decreased by $38.0 million, or 51%, to $36.9 million from $74.9 million during the three months ended June 30, 2018. This change in gross profit by reportable segment is discussed below.

Completion Services: Gross profit for Completion Services decreased by $40.2 million, or 52%, to $36.5 million during the three months ended June 30, 2019 from $76.6 million during the three months ended June 30, 2018. Gross profit for Completion Services decreased primarily related to a decrease in our fully utilized fleet year over year and pricing pressures from market conditions.

Other Services: Gross profit (loss) for Other Services increased by $2.2 million, or 127%, to $0.5 million during the three months ended June 30, 2019 from $(1.7) million during the three months ended June 30, 2018. Gross profit (loss) for Other Services was driven by strong execution, in addition to our decision in the first quarter of 2019 to idle activity in one of our operating regions.

Equipment Utilization: In aggregate, depreciation and amortization expense as a percentage of revenues was 16% and 10% during the three months ended June 30, 2019 and 2018, respectively. Loss on disposal of assets decreased by $3.6 million, or 110%, to a gain of $0.3 million during the three months ended June 30, 2019 from a loss of $3.3 million during the three months ended June 30, 2018. The change in depreciation and amortization was primarily related to additional equipment purchases from an acquisition in late 2018, maintenance spend for fleet readiness, and other equipment used for enhancing safety and efficiency through our multi-faceted approach of surface, digital and downhole technologies. The decrease in loss is primarily related to loss generated in the second quarter of 2018 as a result of the Mathis facility sale for $2.7 million, combined with gains generated on the sale of tractors in second quarter of 2019.

Selling, general and administrative expense: Selling, general and administrative ("SG&A") expense as a percentage of revenues was 8% and 4% during the three months ended June 30, 2019 and 2018. SG&A includes certain one-time items such as $5.6 million of non-cash stock compensation expense and $6.1 million of transaction costs related to the Merger, offset by $0.3 million related to final adjustments related to prior legal matter.

Effective tax rate: Our effective tax rate on continuing operations for the three months ended June 30, 2019 was 12.77%. 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.

Six Months Ended June 30, 2019 Compared with Six Months Ended June 30, 2018



	Six Months Ended June 30,
(Thousands of Dollars)							As a % of Revenue				Variance
Description	2019			2018			2019		2018		$			%
Completion Services	$	832,338		$	1,077,380		98	%	99	%	$	(245,042	)	(23	%)
Other Services	17,049			14,169			2	%	1	%	2,880			20	%
Revenue	849,387			1,091,549			100	%	100	%	(242,162		)	(22	%)
Completion Services	644,903			835,748			76	%	77	%	(190,845		)	(23	%)
Other Services	17,246			15,345			2	%	1	%	1,901			12	%
Costs of services	662,149			851,093			78	%	78	%	(188,944		)	(22	%)
Completion Services	132,419			109,798			16	%	10	%	22,621			21	%
Other Services	1,504			2,717			0	%	0	%	(1,213		)	(45	%)
Depreciation and amortization	133,923			112,515			16	%	10	%	21,408			19	%
Completion Services	55,016			131,834			6	%	12	%	(76,818		)	(58	%)
Other Services	(1,701		)	(3,893		)	0	%	0	%	2,192			(56	%)
Gross profit (loss)	53,315			127,941			6	%	12	%	(74,626		)	(58	%)
Depreciation and amortization - selling, general and administrative	7,439			6,940			1	%	1	%	499			7	%
Selling, general and administrative expenses	60,507			58,009			7	%	5	%	2,498			4	%
Loss on disposal of assets	151			4,056			0	%	0	%	(3,905		)	(96	%)
Operating income (loss)	(14,782		)	58,937			(2	%)	5	%	(73,719		)	(125	%)
Other income (expenses), net	405			(12,973		)	0	%	(1	%)	13,378			(103	%)
Interest expense	(10,872		)	(21,307		)	(1	%)	(2	%)	10,435			(49	%)
Total other expenses	(10,467		)	(34,280		)	(1	%)	(3	%)	23,813			(69	%)
Income tax expense	(1,538		)	(2,232		)	0	%	0	%	694			(31	%)
Net income (loss)	$	(26,787	)	$	22,424		(3	%)	2	%	$	(49,211	)	(219	%)

Gross Profit: Gross profit during the six months ended June 30, 2019 decreased by $74.6 million, or 58%, to $53.3 million from $127.9 million during the six months ended June 30, 2018. This change in gross profit by reportable segment is discussed below.

Completion Services: Gross profit for Completion Services decreased by $76.8 million, or 58%, to $55.0 million during the six months ended June 30, 2019 from $131.8 million during the six months ended June 30, 2018. Gross profit for Completion Services decreased primarily related to a decrease in our fully utilized fleet year over year and pricing pressures from market conditions.

Other Services: Gross loss for Other Services decreased by $2.2 million, or 56%, to $(1.7) million during the six months ended June 30, 2019 from $(3.9) million during the six months ended June 30, 2018. Gross loss decrease for Other Services was driven by strong execution, in addition to our decision in the first quarter of 2019 to idle activity in one of our operating regions.

Equipment Utilization: In aggregate, depreciation and amortization expense as a percentage of revenues was 17% and 11% during the six months ended June 30, 2019 and 2018, respectively. Loss on disposal of assets decreased by $3.9 million, or 96%, to a loss of $0.2 million during the six months ended June 30, 2019 from a loss of $4.1 million during the six months ended June 30, 2018. The change in depreciation and amortization was primarily related to additional equipment purchases from an acquisition in late 2018, maintenance spend for fleet readiness, and other equipment used for enhancing safety and efficiency through our multi-faceted approach of surface, digital and downhole technologies. The decrease in loss is primarily related to loss generated in the second

quarter of 2018 as a result of the Mathis facility sale for $2.7 million, combined with gains generated on the sale of tractors in the second quarter of 2019.

Selling, general and administrative expense: SG&A expense as a percentage of revenues was 7% and 5% during the six months ended June 30, 2019 and 2018, respectively. SG&A includes certain one-time items such as $9.6 million of non-cash stock compensation expense, $6.1 million of transaction costs related to the Merger, and $3.8 million related to legal matters.

Other income (expense), net: Other income, net during the six months ended June 30, 2019 was $0.4 million. Other expense, net, during the six months ended June 30, 2018 was $13.0 million, primarily related to the adjustment to the contingent value right liability in the first quarter of 2018.

Effective tax rate: Our effective tax rate on continuing operations for the six months ended June 30, 2019 was 6.09%. 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.

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.



	(Thousands of Dollars)
	6/30/2019		12/31/2018
Cash	$	117,092	$	80,206
Net Debt	338,977		340,731



	(Thousands of Dollars)
	Six Months Ended June 30,
	2019			2018
Net cash provided by operating activities	$	141,925		$	143,425
Net cash used in investing activities	(97,342		)	(130,496		)
Net cash (used in) provided by financing activities	(7,668		)	587

Significant sources and uses of cash during the six months ended June 30, 2019


•	Operating activities:

–

Net cash generated by operating activities during the six months ended June 30, 3019 of $141.9 million was a result of the utilization of 94% 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 activities.

Uses of cash:


•	Investing activities:


–	Net cash used in investing activities for the six months ended June 30, 2019 of $97.3 million, consisting primarily of capital expenditures. This activity primarily related to our Completion Services segment.


•	Financing activities:


–	Cash used to repay our debt facilities, excluding leases and interest, during the six months ended June 30, 2019 was $1.7 million.


–	Cash used to repay our finance leases during the six months ended June 30, 2019 was $2.6 million.


–	Shares repurchased and retired related to share-based compensation during the six months ended June 30, 2019 totaled $3.4 million.

Significant sources and uses of cash during the six months ended June 30, 2018

Sources of cash:


•	Operating activities:


–	Net cash generated by operating activities during the six months ended June 30, 2018 of $143.4 million was primarily driven by higher utilization of our combined asset base and increased gross profit in our Completion Services segment.


•	Financing activities:


–	Cash provided by the 2018 term loan facility entered into by the Company, and certain subsidiaries of the Company as guarantors, with each lender from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent (the "2018 Term Loan Facility"), net of debt discount was $348.2 million.

Uses of cash:


•	Investing activities:


–	Net cash used in investing activities of $130.5 million was primarily associated with our newbuild and maintenance capital spend on active fleets. This activity primarily related to our Completion Services segment.


•	Financing activities:


–	Cash used to repay our debt facilities, including capital leases but excluding interest, during the six months ended June 30, 2018 was $285.0 million.


–	Cash used to pay debt issuance costs associated with our debt facilities was $7.2 million.


–	Shares repurchased and retired related to our stock repurchase program totaled $40.1 million.


–	Shares repurchased and retired related to payroll tax withholdings on our share-based compensation totaled $3.3 million.


–	The portion of the cash settlement of the contingent value right ("CVR") liability reflective of its acquisition-date fair value was $12.0 million. The remaining portion of the cash settlement of the CVR liability of $7.9 million is reflected in net cash provided by operating activities.

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 $140.0 million and $160.0 million.

Debt service, exclusive of leases, for the year ended December 31, 2019 is projected to be $27.0 million. Our leverage ratio, as calculated pursuant to the terms of our debt agreement, is 0.74x for the twelve rolling months ended June 30, 2019. 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. As of June 16, 2019, pursuant to the terms of the Merger Agreement, our existing stock repurchase program has been suspended.

Other factors affecting liquidity

Financial position in current market. As of June 30, 2019, we had $117.1 million of cash and a total of $173.5 million available under our revolving credit facility. As of June 30, 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 $2.8 million of letters of credit were outstanding as of June 30, 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 June 30, 2019:



(Thousands of Dollars) Contractual obligations	Total		2019		2020-2022		2023-2025		2026+
Long-term debt, including current portion⁽¹⁾	$	346,500	$	1,750	$	10,500	$	334,250	$	—
Estimated interest payments⁽²⁾	127,757		11,341		65,678		50,738		—
Finance lease obligations⁽³⁾	10,885		3,270		7,450		165		—
Operating lease obligations⁽⁴⁾	55,588		11,814		28,444		6,169		9,161
Purchase commitments⁽⁵⁾	101,602		46,724		53,278		1,600		—
Equity-method investment⁽⁶⁾	1,451		1,451		—		—		—
Legal contingency⁽⁷⁾	3,910		3,910		—		—		—
	$	647,693	$	80,260	$	165,350	$	392,922	$	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 June 30, 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 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 (12) Commitments and Contingencies and (13) 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 mainly related to the settlement of Keane Group Holdings, LLC v. Ceramifrac Proppants, LLC. See Note (12) 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 June 30, 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 June 30, 2019, there was $346.5 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 (13) 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 (11) Leases of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

(b) Income Taxes

The income tax expense on continuing operations for the six months ended June 30, 2019 resulted in an effective tax rate of 6.09%. The difference between the effective tax rate and the U.S. federal statutory rate is due to state taxes and change in valuation allowance.

After considering all available positive and negative evidence, we determined it is not more likely than not that we will not utilize our net deferred tax assets in the foreseeable future and continued to maintain a full valuation allowance. The net deferred tax liabilities as of June 30, 2019 were $0.2 million and were related to tax amortization on our indefinite-lived intangible assets and certain state deferred taxes.

The completion of the Merger may result in a change in our net deferred tax position. Any impact on the deferred tax position of an acquiring entity for accounting purposes caused by a business combination is recorded in the acquiring company's financial statements outside of acquisition accounting. This accounting requirement may result in a significant fluctuation in our effective tax rate. We currently do not have an estimate for the tax impact.

For discussion on the potential impact of new accounting pronouncements issued but not yet adopted, see Note (15) 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 - The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL 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. The Amendment No.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 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)