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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q

(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
☐
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
NexTier Oilfield Solutions 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.)
3990 Rogerdale Rd. Houston Texas 77042
(Address of Principal Executive Offices) (Zip Code)
(713) 325-6000
(Registrant's Telephone Number, Including Area Code)
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 NEX 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 not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒  
As of May 3, 2021, the registrant had 215,527,369 shares of common stock outstanding.


TABLE OF CONTENTS
PART I.
FINANCIAL INFORMATION
3
Item 1.
4
5
6
7
8
10
Item 2.
28
Item 3.
36
Item 4.
37
PART II.
38
Item 1.
38
Item 1A.
38
Item 2.
38
Item 3.
38
Item 4.
38
Item 5.
39
Item 6.
40
41



REFERENCES WITHIN THIS QUARTERLY REPORT
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to (i) the terms “Company,” “NexTier,” “we,” “us” and “our” refer to NexTier Oilfield Solutions Inc. and its consolidated subsidiaries; (ii) the term “Keane Group” refers to Keane Group Holdings, LLC and its consolidated subsidiaries; (iii) the term “Keane Investor” refers to Keane Investor Holdings LLC; (iv) the term “Cerberus” refers to Cerberus Capital Management, L.P. and its controlled affiliates and investment funds; (v) the term “C&J” refers to C&J Energy Services, Inc.; (vi) the term “C&J Merger” refers to the consummation of the transactions described in that certain Agreement and Plan of Merger, dated as of June 16, 2019 (the “Merger Agreement”), by and among the C&J, us and King Merger Sub Corp., one of our wholly owned subsidiaries. As used in this Quarterly Report on Form 10-Q, capacity in the hydraulic fracturing business refers to the total number of hydraulic horsepower, regardless of whether such hydraulic horsepower is active and deployed, active and not deployed or inactive. While the equipment and amount of hydraulic horsepower required for a customer project varies, we calculate our total number of fleets, as used in this Quarterly Report on Form 10-Q, by dividing our total hydraulic horsepower by approximately 48,000 hydraulic horsepower.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Our forward-looking statements are generally accompanied by words such as "may," "should," "expect," "believe," "plan," "anticipate," "could," "intend," "target," "goal," "project," "contemplate," "believe," "estimate," "predict," "potential," or "continue," or the negative of these terms or other similar expressions. Any forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date on which we make them and are based upon our historical performance and on current plans, estimates and expectations. Except as required by law, we have no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
•the impact of the current COVID-19 pandemic and the evolving response thereto, including the impact of social distancing, shelter-in-place, shutdowns of non-essential businesses and similar measures imposed or undertaken by governments, private businesses or others;
•changing regional, national or global economic conditions, including oil and gas supply and demand;
•our business strategy;
•our plans, objectives, expectations and intentions;
•the competitive nature of the industry in which we conduct our business, including pricing pressures;
•our future operating results;
•crude oil and natural gas commodity prices;
•demand for services in our industry;
•the impact of pipeline and storage capacity constraints;
•the impact of adverse weather conditions;
•the effects of government regulation and administrative or political policies;
•changes in tax laws;
•legal proceedings, liability claims and effect of external investigations;
•the effect of a loss of, or the financial distress of, one or more customers;
•our ability to obtain or renew customer contracts;
•the effect of a loss of, or interruption in operations of, one or more key suppliers;
•our ability to maintain the right level of commitments under our supply agreements;
•the market price and availability of materials or equipment;
•the impact of new technology;
•our ability to employ a sufficient number of skilled and qualified workers;
•our ability to obtain permits, approvals and authorizations from governmental and third parties;
•planned acquisitions, divestitures, and future capital expenditures;
3

•our ability to maintain effective information technology systems;
•our ability to maintain an effective system of internal controls over financial reporting;
•our ability to service our debt obligations;
•financial strategy, liquidity or capital required for our ongoing operations and acquisitions, and our ability to raise additional capital;
•the market volatility of our stock;
•our ability or intention to pay dividends or to effectuate repurchases of our common stock;
•the impact of ownership by Cerberus (through Keane Investor); and
•the impact of our corporate governance structure.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020, and in the section entitled Part II, "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, circumstances, plans, intentions or expectations reflected in any forward-looking statements will be achieved or occur. Actual results, events or circumstances could differ materially from those described in such forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make, except as specifically set forth herein.
This Quarterly Report on Form 10-Q includes market and industry data and certain other statistical information based on third-party sources including independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, we have not independently verified the accuracy or completeness of this information. Some data is also based on our own good faith estimates, which are supported by our management's knowledge of and experience in the markets and businesses in which we operate.
While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed above and in Part II, "Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q.
PART I
Item 1. Condensed Consolidated Financial Statements (Unaudited)
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands)
March 31,
2021 		December 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$ 271,639  $ 275,990 
Trade and other accounts receivable, net
163,540  122,584 
Inventories, net
31,621  30,068 
Assets held for sale
—  126 
Prepaid and other current assets
21,220  58,011 
Total current assets
488,020  486,779 
Operating lease right-of-use assets
29,273  37,157 
Finance lease right-of-use assets
772  1,132 
Property and equipment (net of accumulated depreciation of $947,755 and $929,290)
456,712  470,711 
Goodwill
104,198  104,198 
Intangible assets (net of accumulated amortization of $50,021 and $46,496)
47,779  51,182 
Other noncurrent assets
6,274  6,729 
Total assets
$ 1,133,028  $ 1,157,888 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$ 88,464  $ 61,259 
Accrued expenses
125,266  134,230 
Customer contract liabilities
12,000  266 
Current maturities of long-term operating lease liabilities
14,637  18,551 
Current maturities of long-term finance lease liabilities
441  606 
Current maturities of long-term debt
2,310  2,252 
Other current liabilities
2,710  2,993 
Total current liabilities
245,828  220,157 
Long-term operating lease liabilities, less current maturities
24,351  24,232 
Long-term finance lease liabilities, less current maturities
293  504 
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities
332,779  333,288 
Other noncurrent liabilities
20,449  22,419 
Total noncurrent liabilities
377,872  380,443 
Total liabilities
623,700  600,600 
Stockholders' equity
Common stock, par value $0.01 per share (authorized 500,000 shares, issued and outstanding 215,344 and 214,440 shares, respectively)
2,153  2,144 
Paid-in capital in excess of par value
994,179  989,995 
Retained deficit
(476,243) (421,741)
Accumulated other comprehensive loss
(10,761) (13,110)
Total stockholders' equity
509,328  557,288 
Total liabilities and stockholders' equity
$ 1,133,028  $ 1,157,888 
See accompanying notes to unaudited condensed consolidated financial statements.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Amounts in thousands, except for per share amounts)
(Unaudited)
Three Months Ended
March 31,
2021 2020
Revenue $ 228,402  $ 627,625 
Operating costs and expenses:
Cost of services(1)
217,777  512,226 
Depreciation and amortization 45,868  85,821 
Selling, general and administrative expenses 16,069  56,884 
Merger and integration —  12,182 
Gain on disposal of assets (4,592) (7,962)
Impairment expense —  34,327 
Total operating costs and expenses
275,122  693,478 
Operating loss (46,720) (65,853)
Other income (expense):
Other income (expense), net (2,719) 416 
Interest expense, net (4,206) (6,066)
Total other expense (6,925) (5,650)
Loss before income taxes (53,645) (71,503)
Income tax expense (857) (253)
Net loss (54,502) (71,756)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments 337  1,107 
Hedging activities 1,346  (2,961)
Total comprehensive loss $ (52,819) $ (73,610)
Net loss per share:
Basic net loss per share $ (0.25) $ (0.34)
Diluted net loss per share (0.25) (0.34)
Weighted-average shares outstanding: basic 215,110  212,842 
Weighted-average shares outstanding: diluted 215,110  212,842 
(1) Cost of services during the three months ended March 31, 2021 and March 31, 2020 exclude depreciation of $41.3 million and $81.3 million, respectively.
See accompanying notes to unaudited condensed consolidated financial statements.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Amounts in thousands)
(Unaudited)
`
Common stock Paid-in capital in excess of par value Retained deficit Accumulated other comprehensive loss Total
Balance as of December 31, 2020 $ 2,144  $ 989,995  $ (421,741) $ (13,110) $ 557,288 
Stock-based compensation 10  5,193  —  —  5,203 
Shares repurchased and retired related to stock-based compensation (1) (1,009) —  —  (1,010)
Other comprehensive income —  —  —  2,349  2,349 
Net loss —  —  (54,502) —  (54,502)
Balance as of March 31, 2021 $ 2,153  $ 994,179  $ (476,243) $ (10,761) $ 509,328 




Common stock Paid-in capital in excess of par value Retained deficit Accumulated other comprehensive loss Total
Balance as of December 31, 2019 $ 2,124  $ 966,762  $ (73,333) $ (8,781) $ 886,772 
Stock-based compensation(1)
11  6,869  —  —  6,880 
Shares repurchased and retired related to stock-based compensation (2) (1,149) —  —  (1,151)
Other comprehensive loss —  —  —  (1,513) (1,513)
Credit losses standard implementation —  —  (1,525) —  (1,525)
Net loss —  —  (71,756) —  (71,756)
Balance as of March 31, 2020 $ 2,133  $ 972,482  $ (146,614) $ (10,294) $ 817,707 

See accompanying notes to unaudited condensed consolidated financial statements.


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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

Three Months Ended
March 31,
2021 2020
Cash flows from operating activities:
Net loss $ (54,502) $ (71,756)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization
45,868  85,821 
Amortization of deferred financing fees
624  551 
Gain on disposal of assets (4,592) (7,962)
Loss on impairment of assets
—  34,327 
Unrealized (gain) loss on derivative recognized in other comprehensive loss 1,346  (2,961)
Loss on financial instrument and derivatives, net 3,575  341 
Stock-based compensation
5,203  6,880 
Changes in operating assets and liabilities:
Increase in trade and other accounts receivable, net (40,955) (30,833)
Decrease (increase) in inventories (2,364) 5,647 
Decrease (increase) in prepaid and other current assets (467) 4,888 
Decrease in other assets 8,652  4,958 
Increase in accounts payable 18,188  27,694 
Decrease in accrued expenses
(8,972) (8,478)
Increase in customer contract liabilities 11,734  2,940 
Decrease in other liabilities (6,564) (3,570)
Net cash provided by (used in) operating activities (23,226) 48,487 
Cash flows from investing activities:
Proceeds from sale of business
—  53,259 
Purchase of property and equipment
(22,462) (40,798)
Advances of deposit on equipment
(662) (1,775)
Implementation of software
(166) (2,600)
Proceeds from disposal of assets
9,528  5,973 
Proceeds from settlement of WSS Notes and make-whole derivative 34,350  — 
Proceeds from insurance recoveries
—  58 
Net cash provided by investing activities 20,588  14,117 
Cash flows from financing activities:
Proceeds from asset-based revolver
—  175,000 
Payments on the term loan facility and asset-based revolver
(875) (875)
Payments on finance leases
(165) (2,278)
Shares repurchased and retired related to stock-based compensation
(1,010) (1,151)
Net cash provided by (used in) financing activities (2,050) 170,696 
Non-cash effect of foreign translation adjustments 337  1,107 
Net increase (decrease) in cash, cash equivalents (4,351) 234,407 
Cash and cash equivalents, beginning 275,990  255,015 
Cash and cash equivalents, ending $ 271,639  $ 489,422 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense, net $ 5,041  $ 5,724 
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

Income taxes —  2 
Non-cash investing and financing activities:
Change in accrued capital expenditures
$ (9,017) $ (29,900)
Non-cash additions to operating right-of-use assets 822  1,970 
Non-cash additions to operating lease liabilities, including current maturities (512) (1,970)
See accompanying notes to unaudited condensed consolidated financial statements.

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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements

(1)    Basis of Presentation and Nature of Operations
The accompanying unaudited condensed consolidated financial statements were prepared using United States Generally Accepted Accounting Principles ("GAAP") and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the "SEC") on February 24, 2021.
The Company’s accounting policies are in accordance with GAAP. The preparation of financial statements in conformity with these accounting principles requires the Company to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (2) the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from the Company’s estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment and intangible assets; allowances for doubtful accounts; inventory reserves; acquisition accounting; contingent liabilities; and the valuation of property and equipment, intangible assets, equity issued as consideration in an acquisition, income taxes, stock-based incentive plan awards and derivatives.
Management believes the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company's financial position as of March 31, 2021 and the results of its operations and cash flows for the three months ended March 31, 2021 and 2020. Such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated.
On October 31, 2019, the Company completed its merger (the “C&J Merger”) with C&J Energy Services, Inc. (“C&J”) and changed its name to "NexTier Oilfield Solutions Inc." Merger and integration related costs were recognized separately from the acquisition of assets and assumptions of liabilities in the C&J Merger. Merger costs consist of legal and professional fees and pre-merger notification fees. Integration costs consist of expenses incurred to integrate C&J’s operations, aligning accounting processes and procedures, and integrating its enterprise resource planning system with those of the Company. All of these costs are recorded within merger and integration costs on the Company’s unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note (3) Mergers and Acquisitions in Part I, "Item 8. Financial Statements and Supplementary" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for further information.
In addition, on March 9, 2020, the Company completed the divestiture of its Well Support Services Segment ("WSS Sale"). For more details regarding the WSS Sale, refer to Note (13) Business Segments.
(2)    Summary of Significant Accounting Policies
(a) Business Combinations and Asset Acquisitions
Business combinations are accounted for using the acquisition method of accounting in accordance with the Accounting Standards Codification (“ASC”) 805, “Business Combinations”, as amended by Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business.” The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, using discounted cash flows and other applicable valuation techniques. Any acquisition-related costs incurred by the Company are expensed as incurred. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill if the definition of a business is met. Operating results of an acquired business are included in the Company’s results of operations from the date of acquisition.
Asset acquisitions are measured based on their cost to the Company, including transaction costs. Asset acquisition costs, or the consideration transferred by the Company, are assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash the Company paid to the seller, as well as transaction costs incurred. Consideration given in the form of non-monetary assets, liabilities incurred or equity interests issued is measured based on either the cost to the Company or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated relative fair values. Goodwill is not recognized in an asset acquisition.
(b) Revenue Recognition
The majority of the Company’s performance obligations are satisfied over time. The Company has determined this best represents the transfer of value from its services to the customer as performance by the Company helps to enhance a customer controlled asset (e.g., unplugging a well, enabling a well to produce oil or natural gas). Measurement of the satisfaction of the
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
performance obligation is measured using the output method, which is typically evidenced by a field ticket. A field ticket includes items such as services performed, consumables used, and man hours incurred to complete the job for the customer. Each field ticket is used to invoice customers. Payment terms for invoices issued are in accordance with a master services agreement with each customer, which typically require payment within 30 to 45 days of the invoice issuance.
A portion of the Company’s contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved. Examples of variable consideration include the number of hours that will be incurred and the amount of consumables (such as chemicals and proppants) that will be used to complete a job.
Remaining Performance Obligations
The Company invoices its customers for the services provided at contractual rates multiplied by the applicable unit of measurement, including volume of consumables used and hours incurred. In accordance with ASC 606, the Company has elected the “Right to Invoice” practical expedient for all contracts, which allows the Company to invoice its customers in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. With this election, the Company is not required to disclose information about the variable consideration related to its remaining performance obligations. The Company has also elected the practical expedient to expense immediately mobilization costs, as the amortization period would always be less than one year. For those contracts with a term of more than one year, the Company had approximately $20.1 million of unsatisfied performance obligations as of March 31, 2021, which will be recognized as services are performed over the remaining contractual terms.
The Company’s obligations for refunds as well as the warranties and related obligations stated in its contracts with its customers are standard to the industry and are related to the correction of any defectiveness in the execution of its performance obligations.
Contract Balances
In line with industry practice, the Company bills its customers for its services in arrears, typically when the stage or well is completed or at month-end. The majority of the Company’s jobs are completed in less than 30 days. Furthermore, it is currently not standard practice for the Company to execute contracts with prepayment features. Payment terms after invoicing are typically 30 to 45 days.
The Company does not have any significant contract costs to obtain or fulfill contracts with customers; as such, no amounts are recognized on the consolidated balance sheet. Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the consolidated statements of operations and comprehensive income (loss) and net cash provided by operating activities in the consolidated statements of cash flows.
The following is a description of the Company’s core service lines separated by reportable segments from which the Company generates its revenue. For additional detailed information regarding reportable segments, see Note (13) Business Segments.
Revenue from the Company’s Completion Services, Well Construction and Intervention (“WC&I”), and Well Support Services segments are recognized as follows:
Completion Services
The Company provides hydraulic fracturing, wireline and pumpdown services pursuant to contractual arrangements, such as term contracts and pricing agreements. Revenue from these services are earned as services are rendered, which is generally on a per stage or fixed monthly rate. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied over time, the amount to which the Company has the right to invoice has been determined and collectability of amounts subject to invoice is probable. Contract fulfillment costs, such as mobilization costs and shipping and handling costs, are expensed as incurred and are recorded in cost of services in the consolidated statements of operations and comprehensive income (loss). To the extent fulfillment costs are considered separate performance obligations that are billable to the customer, the amounts billed are recorded as revenue in the consolidated statements of operations and comprehensive income (loss).
Once a stage has been completed, a field ticket is created that includes charges for the service performed and the chemicals and proppant consumed during the course of the service. The field ticket may also include charges for the mobilization of the
11

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
equipment to the location, any additional equipment used on the job and other miscellaneous items. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.
Well Construction and Intervention
The Company provides cementing services pursuant to contractual arrangements, such as term contracts, or on a spot market basis. Revenue is recognized upon the completion of each performance obligation, which for cementing services, represents the portion of the well cemented: surface casing, intermediate casing or production liner. The performance obligations are satisfied over time. Jobs for these services are typically short term in nature, with most jobs completed in a day. Once the well has been cemented, a field ticket is created that includes charges for the services performed and the consumables used during the course of service. The field ticket represents the amounts to which the Company has the right to invoice and to recognize as revenue.
The Company provides a range of coiled tubing services primarily used for fracturing plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue is recognized upon completion of each day’s work based upon a completed field ticket. The field ticket includes charges for the services performed and the consumables used during the course of service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates, at times, or pursuant to pricing agreements.
Historical Segment: Well Support Services Segment
On March 9, 2020, the Company completed the divestiture of its Well Support Services Segment. For additional information, see Note (13) Business Segments. Through its rig services line, the Company had provided workover and well servicing rigs that were primarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plug and abandonment operations. These services were provided on an hourly basis at prices that approximate spot market rates. A field ticket was generated and revenue is recognized upon the earliest of the completion of a job or at the end of each day. A rig services job can last anywhere from a few hours to multiple days depending on the type of work being performed. The field ticket includes the base hourly rate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate. The field ticket may also include charges for the mobilization and set-up of equipment.
Through its fluids management service line, the Company used to provide storage, transportation and disposal services for fluids used in the drilling, completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour, or per load basis, or on the basis of quantities sold or disposed. Revenue is recognized upon the completion of each job or load, or delivered product, based on a completed field ticket.
Through its other special well site service line, the Company used to provide fishing, contract labor and tool rental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis of rental days per month. Revenue is recognized based on a field ticket issued upon the completion of each job or on a monthly billing for rental services provided.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
Disaggregation of Revenue
Revenue activities during the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31, 2021
(Thousands of Dollars)
Completion Services WC&I Well Support Services Total
Geography
Northeast $ 50,108  $ 5,806  $ —  $ 55,914 
Central 34,900  —  —  34,900 
West Texas 106,666  12,478  —  119,144 
West 4,888  1,137  —  6,025 
International 12,419  —  —  12,419 
$ 208,981  $ 19,421  $ —  $ 228,402 

Three Months Ended March 31, 2020
(Thousands of Dollars)
Completion Services WC&I Well Support Services Total
Geography
Northeast $ 77,425  $ 7,630  $ —  $ 85,055 
Central 76,831  6,900  —  83,731 
West Texas 264,499  33,632  8,373  306,504 
West 83,687  8,663  49,556  141,906 
International 10,429  —  —  10,429 
$ 512,871  $ 56,825  $ 57,929  $ 627,625 
(c) Long-Lived Assets with Definite Lives
Property and equipment, inclusive of equipment under finance lease, are generally stated at cost.
Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 13 months to 40 years. Management determines the estimate of the useful lives and salvage values of property and equipment on expected utilization, technological change and effectiveness of its maintenance programs. Depreciation methods, useful lives and residual values are reviewed annually or as needed based on activities related to specific assets. When components of an item of property and equipment are identifiable and have different useful lives, they are accounted for separately as major components of property and equipment.
Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized net within operating costs and expenses in the consolidated statements of operations and comprehensive income (loss).

13

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
Major classifications of property and equipment and their respective useful lives are as follows:
Land
Indefinite life
Building and leasehold improvements
13 months – 40 years
Machinery and equipment
13 months – 10 years
Office furniture, fixtures and equipment
3 years – 5 years
Leasehold improvements are assigned a useful life equal to the term of the related lease. Depreciation methods, useful lives and residual values are reviewed annually.
Leasehold improvements are assigned a useful life equal to the term of the related lease, or its expected period of use.
In the first quarter of 2021, the Company reassessed the estimated useful lives of select machinery and equipment, concluding that due to a decrease in service intensity for select machinery and equipment driven by operational parameters required to maximize natural gas substitution and longer major component lives attributable to equipment health monitoring and predictive maintenance from our proprietary digital NexHub platform and data science efforts, the useful lives of select machinery and equipment should be increased by 1-2 years depending on the specific asset class. In accordance with ASC 250, “Accounting Changes and Error Corrections,” the change in the estimated useful lives of the Company’s property and equipment was accounted for as a change in accounting estimate, on a prospective basis, effective January 1, 2021. This change resulted in a decrease in depreciation expense and decrease in net loss during the quarter ended March 31, 2021 of $12.1 million in the consolidated statement of operations and comprehensive income (loss).
Amortization on definite-lived intangible assets is calculated on the straight-line method over the estimated useful lives of the assets, which range from 2 to 15 years.
Property and equipment and definite-lived intangible assets (“Long-lived Assets”) are evaluated on a quarterly basis to identify events or changes in circumstances, referred to as triggering events that indicate the carrying value of certain property and equipment may not be recoverable or upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of Long-lived Asset is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. The Company's asset groups consist of fracturing services, wireline, cementing, and coiled tubing, except for an entity level asset group for Long-lived Assets that do not have identifiable independent cash flows. Estimates of undiscounted future net cash flows of assets groups are projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows take into account known market conditions as of the assessment date, and management’s anticipated business outlook. A terminal period is used to reflect an estimate of stable, perpetual growth. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the asset groups, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related asset groups. The impairment loss is then allocated across the asset group's major classifications.
During the first quarter of 2020, management determined the reductions in commodity prices driven by the potential impact of the novel COVID-19 pandemic and global supply and demand dynamics coupled with the sustained decrease in the Company’s share price were deemed triggering events. As a result of the triggering event, recoverability testing was performed and it was determined that the estimated undiscounted future net cash flow for all asset groups was greater than the carrying amount of their related assets and no impairment loss was recorded.
The Company did not recognize any impairment charges related to the Company’s long-lived assets for the three months ended March 31, 2021 or 2020.
(d) Leases
In accordance with ASU 2016-02, the Company considers any contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration to be a lease. The Company determines whether the
14

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
contract into which it has entered is a lease at the lease commencement date. Rental arrangements with term lengths of one month or less are expensed as incurred, but not recognized as qualifying leases.
For lessees, leases can be classified as finance leases or operating leases, while for lessors, leases can be classified as sales-type leases, direct financing leases or operating leases. As lessee, all leases, with the exception of short-term leases, are capitalized on the balance sheet by recording a lease liability, which represents the Company's obligation to make lease payments arising from the lease and a right-of-use asset, which represents the Company's right to use the underlying asset being leased.
For leases in which the Company is the lessee, the Company uses a collateralized incremental borrowing rate to calculate the lease liability, as for most leases, the implicit rate in the lease is unknown. The collateralized incremental borrowing rate is based on a yield curve over various term lengths that approximates the borrowing rate the Company would receive if it collateralized its lease arrangements with all of its assets. For leases in which the Company is the lessor, the Company uses the rate implicit in the lease.
For finance leases, the Company amortizes the right-of-use asset on a straight-line basis over the earlier of the useful life of the right-of-use asset or the end of the lease term and records this amortization in rent expense on the consolidated statements of operations and comprehensive loss. The Company adjusts the lease liability to reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The incurred interest expense is recorded in interest expense on the consolidated statements of operations and comprehensive loss. For operating leases, the Company recognizes one single lease cost, comprised of the lease payments and amortization of any associated initial direct costs, within rent expense on the consolidated statements of operations and comprehensive loss. Variable lease costs not included in the determination of the lease liability at the commencement of a lease are recognized in the period when the specified target that triggers the variable lease payments becomes probable.
In accordance with ASC 842, the Company has made the following elections for its lease accounting:
•all short-term leases with term lengths of 12 months or less will not be capitalized; the underlying class of assets to which the Company has applied this expedient is primarily its apartment leases;
•for non-revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one lease component and accounted for under ASC 842; and
•for revenue contracts containing both lease and non-lease components, both components will be combined and accounted for as one component and accounted for under ASC 606.
(e) Derivative Instruments and Hedging Activities
The Company utilizes interest rate derivatives to manage interest rate risk associated with its floating-rate borrowings. The Company recognizes all derivative instruments as either assets or liabilities on the consolidated balance sheets at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income (loss) until the hedged item affects earnings.

The Company only enters into derivative contracts that it intends to designate as hedges for the variability of cash flows to be received or paid related to a recognized asset or liability (i.e. cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
The Company discontinues hedge accounting prospectively, when it determines that the derivative is no longer highly effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the originally forecasted transaction is no longer probable of occurring or if management decides to remove the designation of the cash flow hedge. The net derivative instrument gain or loss related to a discontinued cash flow hedge shall continue to be reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the originally hedged transaction affects earnings, unless it is probable that the forecasted transaction will not occur by the end of the
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
originally specified time period. When it is probable that the originally forecasted transaction will not occur by the end of the originally specified time period, the Company recognizes immediately, in earnings, any gains and losses related to the hedging relationship that were recognized in accumulated other comprehensive income (loss). In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the consolidated balance sheets and recognizes any subsequent changes in the derivative’s fair value in earnings.
In addition, we evaluate the terms of our operating agreements and other contracts, if any, to determine whether they contain embedded components that are required to be bifurcated and accounted for separately as derivative financial instruments. For additional detailed information regarding derivatives, see Note (7) Derivatives.
(f) Stock-based compensation
The Company recognizes compensation expense for restricted stock awards, restricted stock units to be settled in common stock (“RSUs”), performance-based RSU award (“PSUs”), and non-qualified stock options (“stock options”) based on the fair value of the awards at the date of grant. The fair value of restricted stock awards and RSUs is determined based on the number of shares or RSUs granted and the closing price of the Company’s common stock on the date of grant. The fair value of stock options is determined by applying the Black-Scholes model to the grant-date market value of the underlying common shares of the Company. The fair value of PSUs with market conditions is determined using a Monte Carlo simulation method. The Company has elected to recognize forfeiture credits for these awards as they are incurred, as this method best reflects actual stock-based compensation expense.
Compensation expense from time-based restricted stock awards, RSUs, PSUs, and stock options is amortized on a straight-line basis over the requisite service period, which is generally the vesting period.
Tax deductions on the stock-based compensation awards are not realized until the awards are vested or exercised. The Company recognizes deferred tax assets for stock-based compensation awards that will result in future deductions on its income tax returns, based on the amount of tax deduction for stock-based compensation recognized at the statutory tax rate in the jurisdiction in which the Company will receive a tax deduction. If the tax deduction for a stock-based award is greater than the cumulative GAAP compensation expense for that award upon realization of a tax deduction, an excess tax benefit will be recognized and recorded as a favorable impact on the effective tax rate. If the tax deduction for an award is less than the cumulative GAAP compensation expense for that award upon realization of the tax deduction, a tax shortfall will be recognized and recorded as an unfavorable impact on the effective tax rate. Any excess tax benefits or shortfalls will be recorded as discrete, adjustments in the period in which they occur. The cash flows resulting from any excess tax benefit will be classified as financing cash flows in the condensed consolidated statements of cash flows.
The Company provides its employees with the option to settle income tax obligations arising from the vesting of their restricted or deferred stock-based compensation awards by withholding shares equal to such income tax obligations. Shares acquired from employees in connection with the settlement of the employees’ income tax obligations are accounted for as treasury shares that are subsequently retired. Restricted stock awards, RSUs, and PSUs are not considered issued and outstanding for purposes of earnings per share calculations until vested.
For additional information, see Note (9) Stock-Based Compensation.
(3)    Goodwill
Goodwill is allocated across three reporting units: Completion Services, Well Construction and Intervention Services and Well Support Services reporting units. At the reporting unit level, the Company tests goodwill for impairment on an annual basis as of October 31 of each year, or when events or changes in circumstances, referred to as triggering events, indicate the carrying value of goodwill may not be recoverable and that a potential impairment exists.
Judgment is used in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes, and other external events may require more frequent assessments.
During the first quarter of 2020, a significant decline in the Company's share price, which resulted in the Company's market capitalization dropping below the book value of equity, as well as reductions in commodity prices driven by the potential impact of the COVID-19 pandemic and global supply and demand dynamics were deemed triggering events that led to a test for goodwill impairment. The impairment testing methodologies for the first quarter 2020 are discussed below.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
Income approach
The income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the Completions and Well Construction and Intervention reporting units, the future cash flows were projected based on estimates of projected revenue growth, unit count, utilization, pricing, gross profit rates, SG&A rates, working capital fluctuations and capital expenditures. Forecasted cash flows took into account known market conditions as of March 31, 2020, and management’s anticipated business outlook. A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5%. The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 19.9% for the Completions reporting unit and 22.4% for the Well Construction and Intervention reporting unit. These assumptions were derived from both observable and unobservable inputs and combined reflect management’s judgments and assumptions.
Market approach
    The market approach impairment testing methodology is based upon the guideline public company method and the guideline transaction method. The application of the guideline public company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparable competitor data, operational multiples were derived for the reporting units weighted based on management’s assessment of reliability. The selected market multiples for the guideline public company method were forward-looking enterprise value to revenue and enterprise value to EBITDA multiples, with multiples ranging from 0.5x to 0.6x for revenues and from 3.3x to 6.2x for EBITDA. The application of the guideline transaction method was based upon valuation multiples derived from actual control transactions for comparable companies. Based on this, valuation multiples are derived from historical data of selected transactions, then evaluated and adjusted, if necessary, based on the strengths and weaknesses of the subject reporting unit relative to each acquired guideline company. The selected market multiples for the guideline transaction method were enterprise value to revenue and enterprise value to book value of invested capital, with multiples ranging from 0.7x to 2.1x for revenues and from 0.6x to 1.3x for book value of invested capital.
    The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce the estimated fair value of the reporting unit below its carrying value. Earnings estimates were derived from unobservable inputs that require significant estimates, judgments and assumptions as described in the income approach.
Reconciliation of value and goodwill impairment conclusion
    The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the market approach. The concluded fair value for both reporting units consisted of a weighted average, with a 40.0% weighted under the income approach and 60.0% weight under the market approach. Market data in support of the implied control premium were used in this reconciliation to corroborate the estimated reporting unit fair values with the Company's overall market-indicated value. The results of the Step 1 impairment testing for goodwill resulted in the Company recognizing an impairment expense of $32.6 million during the first quarter of 2020, consisting of $32.2 million related to the Completions Services reporting unit and $0.4 million representing the entire balance of goodwill for the Well Construction and Intervention reporting unit.
During the first quarter of 2021, the Company assessed and determined there were no triggering events.        
(4)    Inventories, net
Inventories, net, consisted of the following as of March 31, 2021 and December 31, 2020:
(Thousands of Dollars)
March 31,
2021 		December 31,
2020
Sand, including freight $ 6,054  $ 5,096 
Chemicals and consumables 2,889  2,993 
Materials and supplies 22,678  21,979 
Total inventory, net $ 31,621  $ 30,068 
Inventories are reported net of obsolescence reserves of $4.5 million and $4.4 million as of March 31, 2021 and December 31, 2020, respectively. The Company recognized $0.1 million and $1.2 million of obsolescence expense during the three months ended March 31, 2021 and 2020, respectively.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
(5)    Long-Term Debt
Long-term debt at March 31, 2021 and December 31, 2020 consisted of the following:
(Thousands of Dollars)
March 31,
2021 		December 31,
2020
2018 Term Loan Facility
$ 340,375  $ 341,250 
Less: Unamortized debt discount and debt issuance costs
(5,286) (5,710)
Total debt, net of unamortized debt discount and debt issuance costs
335,089  335,540 
Less: Current portion
(2,310) (2,252)
Long-term debt, net of unamortized debt discount and debt issuance costs
$ 332,779  $ 333,288 
Below is a summary of the Company’s credit facilities outstanding as of March 31, 2021:
(Thousands of Dollars)
2019 ABL Facility 2018 Term Loan Facility
Original facility size $ 450,000  $ 350,000 
Outstanding balance $ —  $ 340,375 
Letters of credit issued $ 28,490  $ — 
Available borrowing base commitment $ 81,436 
n/a
Interest Rate(1)
LIBOR or base rate plus applicable margin
LIBOR or base rate plus applicable margin
Maturity Date
October 31, 2024
May 25, 2025
(1)    London Interbank Offer Rate (“LIBOR”) is subject to a 1.00% floor
    Maturities of the 2018 Term Loan Facility for the next five years are presented below:
(Thousands of Dollars)
Year-end December 31,
2021 $ 2,625 
2022 3,500 
2023 3,500 
2024 3,500 
2025 327,250 
$ 340,375 
ABL Revolving Credit Facility
On October 31, 2019, the Company entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (“2019 ABL Facility”), modifying the Company’s pre-existing asset-based revolving credit facility (“2017 ABL Facility”). Deferred charges associated with the 2019 ABL Facility were capitalized and totaled $1.2 million. In connection with the modification of the 2017 ABL Facility, the Company wrote off $0.5 million of deferred financing costs. The remaining deferred financing costs related to the 2017 ABL Facility will be amortized over the life of the 2019 ABL Facility. Unamortized deferred charges associated with the 2019 and 2017 ABL Facilities were $2.9 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively, and are recorded in other noncurrent assets on the consolidated balance sheets. During the first quarter of 2020, the Company provided notice to the lenders to borrow a total of $175 million under the 2019 ABL Facility. The interest rates for the $150.0 million LIBOR borrowing and $25.0 million Base Rate borrowing were 2.125% and 3.75%, respectively. During the second quarter of 2020, the Company repaid the $150.0 million LIBOR borrowing and the $25.0 million Base Rate borrowing and did not incur any penalties.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
(6) Significant Risks and Uncertainties
Subsequent to the sale of the Well Support Services segment, the Company operates in two reportable segments: Completion Services and Well Construction and Intervention with significant concentration in the Completion Services segment. During the three months ended March 31, 2021 and 2020, sales to Completion Services customers represented 91% and 82% of the Company's consolidated revenue, respectively.
    The Company depends on its customers' willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas onshore in the U.S. This activity is driven by many factors, including current and expected crude oil and natural gas prices. 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 some recovery in commodity prices and drilling and completion activity. Over this time frame, 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 the Company's completion services.
In late 2019 and early 2020, and in response to the oversupply of hydraulic fracturing equipment, an increasing number of horsepower retirements were announced, removing a significant base of equipment from the market. Despite some of these announcements, the oversupply of hydraulic fracturing equipment persisted, resulting in a continuation of highly competitive market conditions into 2020. 
In late first quarter of 2020, the industry faced sudden and unprecedented circumstances, including major shocks to both supply and demand. COVID-19 has resulted in significant demand destruction for oil products, driven by a significant slowdown in economic activity throughout the U.S. and abroad.
This resulted in a rapid and significant decline in crude oil prices and an increasingly utilized storage network, limiting distribution outlets and optionality for production and further exacerbating price declines. U.S. exploration and production companies responded with drastic reductions in budgets and outright completion stoppages. As a result, from the first quarter of 2020 to the first quarter of 2021, the average U.S. active rig count decreased by approximately 50% to 393 rigs.
This backdrop has drastically impacted the demand for U.S. completions services and resulted in increased uncertainty. U.S. rig count activity as of the end of first quarter of 2021 has increased approximately 71% versus the trough in U.S. rig count activity realized in August 2020. Completions activity has improved relative to the trough in activity experienced around late May and early June 2020, supply and demand dynamics are improving, and the market remains highly competitive. The magnitude, cadence, and lasting power of activity improvement is uncertain and dependent on a range of factors including COVID-19 demand resolution.
     Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. The Company had one significant customer during both the three months ended March 31, 2021 and three months ended March 31, 2020. For the three months ended March 31, 2021 and 2020, revenue from the Company's significant customers accounted for 10% and 17% of the Company's consolidated revenue, respectively.
For the three months ended March 31, 2021, purchases from the Company's top supplier represented approximately 7% of the Company's overall purchases. For the three months ended March 31, 2020, purchases from the Company's top supplier represented approximately 5% of the Company's overall purchases.
(7) Derivatives
    The Company uses interest-rate-related derivative instruments to manage its variability of cash flows associated with changes in interest rates on its variable-rate debt.
    On March 9, 2020, the Company sold its Well Support Services segment to Basic Energy Services, Inc. (“Basic”) for $93.7 million of total proceeds, including $59.4 million in cash, before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close, and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, (“WSS Notes”) previously issued by Basic. On July 29, 2020, the Company agreed to use the escrowed amount in the final settlement of the working capital reconciliation. Under the terms of the agreement, the WSS Notes were accompanied by a make-whole guarantee at par value, which guaranteed the payment of $34.4 million to NexTier after the WSS Notes were held to the one-year anniversary of March 9, 2021. The cash equivalent make-whole was issued under a fund guarantee by Ascribe III Investments LLC, a private equity investment firm with approximately $1.0 billion in assets under management. In the event of a Basic restructuring or a credit rating downgrade in conjunction with a change in control prior to the one-year anniversary, the make-
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
whole guarantee accelerates the WSS Notes to par value of $34.4 million. NexTier was entitled to semi-annual interest payments on the WSS Notes based on the 10.75% annual coupon throughout the holding period. The Company identified the make-whole guarantee as an embedded derivative and bifurcated the valuation of the WSS Note and the make-whole guarantee. The Company elected the fair value option for the WSS Notes at the inception of the transaction. The fair value on the date of the transaction for the make-whole derivative and WSS Notes was $12.2 million and $22.2 million, respectively, and resulted in a gain on divestiture of $8.7 million. The fair value of the WSS Notes and the make-whole guarantee are measured at the end of each reporting period. Gains and losses recognized in relation to these instruments are recognized in net income. The fair value of the WSS Notes and make-whole guarantee were recorded in Other Current Assets. See Note (13) Business Segments for further discussion.
On March 31, 2021, the Company received a $34.4 million cash payment from Ascribe in full settlement of the WSS Notes and the make-whole guarantee. At the time of the cash payment, the WSS Notes and make-whole guarantee had a fair value of $33.6 million, resulting in a realized gain on settlement of $0.8 million recorded in Other Income.
    On May 25, 2018, the Company, and certain subsidiaries of the Company as guarantors, entered into a term loan facility (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 2018 Term Loan Facility has an initial aggregate principal amount of $350.0 million and proceeds were used to repay the Company's pre-existing 2017 term loan facility. The 2018 Term Loan Facility has a variable interest rate based on the London Interbank Offer Rate ("LIBOR"), subject to a 1.0% floor. In June 2018, the Company executed a new off-market interest rate swap effective through March 31, 2025 to hedge 50% of its expected LIBOR exposure matching the swap to the 1-month LIBOR, 1% floor, of the 2018 Term Loan Facility, and terminated the pre-existing interest rate swaps. After completing all appropriate accounting treatment, including the $3.5 million of deferred gains in accumulated other comprehensive loss for the pre-existing interest rate, the new interest rate swap was designated in a new cash flow hedge relationship.
    The following tables present the fair value of the Company's derivative instruments on a gross and net basis as of the periods shown below:
(Thousands of Dollars)
Derivatives
designated as
hedging
instruments 		Derivatives
not
designated as
hedging
instruments 		Gross Amounts
of Recognized
Assets and
Liabilities
Gross
Amounts
Offset in the
Balance
Sheet(1)
Net Amounts
Presented in
the Balance
Sheet(2)
As of March 31, 2021:
Other current liability $ (2,856) $ — $ (2,856) $ — $ (2,856)
Other noncurrent liability
(6,208) — (6,208) — (6,208)
As of December 31, 2020:
Other current asset $ — $ 27,243 $ 27,243 $ — $ 27,243
Other current liability
(2,861) — (2,861) — (2,861)
Other noncurrent liability
(8,260) — (8,260) — (8,260)
(1) Agreements are in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.
(2) There are no amounts subject to an enforceable master netting arrangement that are not netted in these amounts. There are no amounts of related financial collateral received or pledged.
The following table presents gains and losses for the Company's interest rate derivatives designated as cash flow hedges (in thousands of dollars):
Three Months Ended
March 31,
2021 2020 Location
Amount of gain (loss) recognized in total other comprehensive loss on derivative $ 1,346  $ (2,961) OCI
Amount of loss reclassified from accumulated other comprehensive loss into earnings (666) (341) Interest Expense
The gain (loss) recognized in other comprehensive loss for the derivative instrument is presented within hedging activities in the unaudited condensed consolidated statements of operations and comprehensive loss.
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Notes to the Unaudited Condensed Consolidated Financial Statements
There were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness. Based on recorded values as of March 31, 2021, $2.7 million of net losses will be reclassified from accumulated other comprehensive loss into earnings within the next 12 months.
The Company realized a gain on the final cash settlement of the WSS Notes and make-whole derivative of $0.8 million for the three months ended March 31, 2021, while recognizing a gain on the change in fair market value of the WSS Notes and make-whole derivative of $0.1 million for the three months ended March 31, 2020. These gains are recorded within other income (expense) on the consolidated statements of operations and comprehensive income (loss).
See Note (8) Fair Value Measurements and Financial Information for discussion on fair value measurements related to the Company's derivative instruments.
(8) Fair Value Measurements and Financial Information
The Company discloses the required fair values of financial instruments in its assets and liabilities under the hierarchy guidelines, in accordance with GAAP. As of March 31, 2021, the Company's financial instruments consisted of cash and cash equivalents, accounts receivable, equity security investments, accounts payable, accrued expenses, derivative instruments, long-term debt and lease obligations. As of March 31, 2021 and December 31, 2020, the carrying values of the Company's financial instruments, included in its condensed consolidated balance sheets, approximated or equaled their fair values.
Recurring Fair Value Measurement
As of March 31, 2021 the Company has two financial instruments measured at fair value on a recurring basis which are its interest rate derivative, see Note (7) Derivatives above, and its equity security investment. The equity security investment is composed primarily of common equity shares in a publicly traded company, acquired at a fair value of $5.3 million. During the three months ended March 31, 2021, the Company recognized an unrealized loss of $4.0 million on its equity security investment, which is recorded within other income (expense) on the consolidated statements of operations and comprehensive income (loss).
As of December 31, 2020, the Company had four financial instrument measured on a recurring basis which was its interest rate derivative, make-whole derivative, WSS Notes, see Note (7) Derivatives above, and equity security investment. The interest rate derivative, make-whole derivative, WSS Notes, and the equity security investment are presented within other current assets in the condensed consolidated balance sheets.
The fair market value of the financial instruments reflected on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 were determined using industry-standard models that consider various assumptions, including current market and contractual rates for the underlying instrument, time value, implied volatilities, nonperformance risk as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.
The following tables present the placement in the fair value hierarchy of assets and liabilities that were measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020 (in thousands of dollars):
Fair value measurements at reporting date using
March 31, 2021 Level 1 Level 2 Level 3
Assets:
 Equity security investment $ 3,892 $ 3,892 $ — $ —
Liabilities:
Interest rate derivative
$ (9,064) $ — $ (9,064) $ —
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Notes to the Unaudited Condensed Consolidated Financial Statements
Fair value measurements at reporting date using
December 31, 2020 Level 1 Level 2 Level 3
Assets:
Make-whole derivative $ 27,243 $ — $ 27,243 $ —
WSS Note 6,322 — 6,322 —
Equity security investment 11,263 11,263 — —
Liabilities:
Interest rate derivative
$ (11,121) $ — $ (11,121) $ —

Non-Recurring Fair Value Measurement
In the first quarter of 2020, the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics represented triggering events that may indicate that the carrying value of the Company's indefinite-lived assets and long-lived assets may not be recoverable as of March 31, 2020. During the third quarter of 2020, the Company assessed and determined the sustained reductions in commodity prices and continuing market economic disruptions as a triggering event. See Note (3) Goodwill.
During the first quarter of 2021, the Company assessed and determined there were no triggering events.
Credit Risk
The Company's financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, derivative contracts and trade receivables.
The Company's cash balances on deposit with financial institutions totaled $271.6 million and $276.0 million as of March 31, 2021 and December 31, 2020, respectively, which exceeded Federal Deposit Insurance Corporation insured limits. The Company regularly monitors these institutions' financial condition.
The credit risk from the derivative contracts derives from the potential failure of the counterparty to perform under the terms of the derivative contracts. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties, whose Standard & Poor's credit rating is higher than BBB. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.
The majority of the Company's trade receivables have payment terms of 30 to 45 days. Significant customers are those that individually account for 10% or more of the Company's consolidated revenue or total accounts receivable. As of March 31, 2021, trade receivables from two customers individually represented 10% or more and collectively represented 24% of the Company's total trade receivables. As of December 31, 2020, trade receivables from the Company's top customer individually represented 17% of the Company's total trade receivables. The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers. The Company has a process in place to collect all receivables within 30 to 45 days of aging. As of March 31, 2021, the Company had $1.7 million in allowance for credit losses. As of December 31, 2020, the Company had $2.7 million in allowance for credit losses, including the increase of $1.5 million from the adoption of ASU 2016-13. The Company wrote-off $1.2 million and $1.6 million of bad debts during the three months ended March 31, 2021 and March 31, 2020, respectively.
(9) Stock-Based Compensation
Effective as of October 31, 2019, the Company (i) amended and restated the Keane Group, Inc. Equity and Incentive Award Plan under the name NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (“Equity and Incentive Award Plan”), and (ii) assumed and amended and restated the C&J Energy Services, Inc. 2017 Management Incentive Plan under the name NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan ( “Management Incentive Plan”, and collectively with the Equity and Incentive Award Plan, the “Equity Award Plans”). As part of the C&J Merger, the Company assumed the award agreements outstanding under the Management Incentive Plan on the terms set forth in the Merger agreement.
As of March 31, 2021, the Company has four types of stock-based compensation under its Equity Award Plans: (i) restricted stock awards issued to independent directors and certain executives and employees, (ii) restricted stock units issued to executive
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Notes to the Unaudited Condensed Consolidated Financial Statements
officers and key management employees, (iii) non-qualified stock options issued to executive officers and (iv) performance-based stock units issued to executive officers and key management employees.
The following table summarizes stock-based compensation costs for the three months ended March 31, 2021 and 2020 (in thousands of dollars):
Three Months Ended March 31,
2021 2020
Restricted stock awards
$ 335  $ 425 
Restricted stock time-based unit awards
3,265  5,160 
Non-qualified stock options
74  236 
Restricted stock performance-based unit awards
1,529  1,059 
Equity-based compensation cost
5,203  6,880 
Tax Benefit
(1,249) (1,651)
Equity-based compensation cost, net of tax
$ 3,954  $ 5,229 
Performance-based RSU awards
During the first quarter of 2021, the Company issued 550,889 of performance based RSUs to executive officers under its Equity Award Plans, with an estimated value of 3.2 million, based on a 100% target value. The performance RSUs issued by the Company have service and performance conditions. The number of shares that may be earned at the end of the vesting period ranges from 0% to 200% of the target award amount, if the performance criteria is met. These performance-based RSUs will be settled in the Company's common stock and are classified as equity awards. The compensation expense associated with these performance-based RSUs will be amortized into earnings on a straight-line basis. As of March 31, 2021, total unamortized compensation cost related to unvested performance-based RSUs was $3.0 million, which the Company expects to recognize over the weighted-average period of 2.75 years.
(10) Earnings per Share
Basic income or (loss) per share is based on the weighted average number of common shares outstanding during the period. Diluted income or (loss) per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect, such as stock awards from the Equity Awards Plans, had been issued. Anti-dilutive securities represent potentially dilutive securities which are excluded from the computation of diluted income or (loss) per share as their impact would be anti-dilutive.
A reconciliation of the numerators and denominators used for the basic and diluted net income (loss) per share computations is as follows:
        
Three Months Ended March 31,
2021 2020
Numerator:
Net loss $ (54,502) $ (71,756)
Denominator:
Basic weighted-average common shares outstanding(1)
215,110  212,842 
Dilutive effect of restricted stock awards granted to Board of Directors 274  114 
Dilutive effect of time-based restricted stock awards granted under the Equity Plan 740  871 
Dilutive effect of performance-based restricted stock awards granted under the Equity Plan 1,221  1,034 
Diluted weighted-average common shares outstanding(1)
$ 217,345  $ 214,861 
(1) As a result of the net loss incurred by the Company for the three months ended March 31, 2021 and 2020, the calculation of diluted net loss per share gives no consideration to the potentially anti-dilutive securities shown in the above reconciliation, and as such is the same as basic net loss per share.
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NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
(11) Commitments and Contingencies
As of March 31, 2021 and December 31, 2020, the Company had $5.5 million and $4.9 million of deposits on equipment, including deposits acquired through the C&J Merger, respectively. Outstanding purchase commitments on equipment were $71.5 million and $23.4 million, as of March 31, 2021 and December 31, 2020, respectively.
Aggregate minimum commitments under long-term raw material supply contracts for the next five years as of March 31, 2021 are listed below:
(Thousands of Dollars)
2021 $ 22,429 
2022 17,718 
2023 7,500 
2024 1,190 
2025 — 
$ 48,837 
Litigation
From time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions, as is typical of the industry. These claims include, but are not limited to, contract claims, environmental claims, employment related claims, claims alleging injury or claims related to operational issues. The Company's assessment of the likely outcome of litigation matters is based on its judgment of a number of factors, including experience with similar matters, past history, precedents, relevant financial information and other evidence and facts specific to the matter. In accordance with GAAP, the Company accrues for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on the Company's best estimate of the expected liability. The Company may increase or decrease its legal accruals in the future, on a matter-by-matter basis, to account for developments in such matters. Notwithstanding the uncertainty as to the final outcome and based upon the information currently available to it, the Company does not currently believe these matters in aggregate will have a material adverse effect on its financial position or results of operations.
Environmental
The Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. The Company cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. The Company continues to monitor the status of these laws and regulations. Currently, the Company has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management does recognize that by the very nature of the Company's business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company's liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or through indemnification.
Regulatory Audits
Prior to the consummation of the C&J Merger, the Company and C&J had been notified by certain state taxing authorities that these taxing authorities would be conducting routine sales and use tax audits of certain wholly owned operating subsidiaries of the Company for tax periods ranging from January 2011 through December 2019. As of December 31, 2020, the Company had recorded estimates of potential assessments for each audit totaling in the aggregate approximately $33.0 million. For one audit, in particular, the Company disagreed with many aspects of the state’s assessment and began to contest the state’s position through administrative procedures. During the three months ended March 31, 2021, the Company obtained additional information that resulted in a reduction of the Company's accrual related to this tax audit by $13.3 million, which was recorded in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. In addition, this accrual does not take into account the potential for refund claims relating to such periods that are also pending disposition. The Company will continue to defend its position vigorously through all available procedures including litigation, if necessary.
24

(12) Related Party Transactions
Cerberus Operations and Advisory Company, Cerberus Capital Management, L.P., and Cerberus Technology Solutions LLC, affiliates of the Company's principal equity holder, provide certain consulting services to the Company. The Company paid $0.1 million and $0.7 million during the three months ended March 31, 2021 and 2020, respectively, for these services.
(13) Business Segments
In accordance with Accounting Standard Codification (“ASC”) No. 280, Segment Reporting (“ASC 280”), the Company routinely evaluates whether its separate segments have changed. This determination is made based on the following factors: (1) the Company’s chief operating decision maker (“CODM”) is currently managing each operating segment as a separate business and evaluating the performance of each segment and making resource allocation decisions distinctly and expects to do so for the foreseeable future, and (2) discrete financial information for each operating segment is available.
In 2019, due to the transformative nature of the C&J Merger, the CODM changed the way in which the Company is managed, including the level at which to make performance evaluation and resource allocation decisions. Discrete financial information was created to provide the segment information necessary for the CODM to manage the Company under the revised operating segment structure. On March 9, 2020, the Company announced it had completed the divestiture of its Well Support Services segment. As a result of the changes to operating segments, the Company revised its reportable segments subsequent to the completion of the C&J Merger and Well Support Services segment divestiture. For the period from after the C&J merger and prior to the WSS divestiture, the Company’s revised reportable segments were: (i) Completion Services, (ii) Well Construction and Intervention (“WC&I”) and (iii) Well Support Services. Subsequent to the WSS divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services. This segment structure reflects the financial information and reports used by the Company’s management, specifically including its CODM, to make decisions regarding the Company’s business, including performance evaluation and resource allocation decisions. As a result of the revised reportable segment structure subsequent to the C&J merger, the Company has restated the corresponding items of segment information for all periods presented.
The following is a description of each reportable segment:
Completion Services
 The Company’s Completion Services segment consists of the following businesses and service lines: (1) fracturing services; (2) wireline and pumpdown services; and (3) completion support services, which includes the Company's research and technology department.
Well Construction and Intervention Services
 The Company’s WC&I Services segment consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.
 Historical Segment: Well Support Services
 The Company’s Well Support Services segment consisted of the following businesses and service lines: (1) rig services; (2) fluids management services; and (3) other specialty well site services. On March 9, 2020, the Company completed the divestiture of its Well Support Services segment for $93.7 million of total proceeds, including $59.4 million in cash, before transaction costs, escrowed amounts, and subject to customary working capital adjustments, for a net of $53.3 million received at close, and $34.4 million of par value Senior Secured Notes, with 10.75% coupon rate, ("WSS Notes") previously issued by Basic. This resulted in a gain on divestiture of $8.7 million. The gain is recorded within (Gain) Loss on Disposal of Assets on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Income per share for the three months ended March 31, 2020 attributable to the divested Well Support Services segment was less than $0.01. On July 29, 2020, the Company received the escrowed cash amount in final settlement for working capital reconciliation.
On March 31, 2021 the Company received a $34.4 million cash payment from Ascribe in full settlement of the WSS Notes and the make-whole guarantee. At the time of the cash payment, the WSS Notes and make-whole guarantee had a fair value of $33.6 million, resulting in a realized gain on settlement of $0.8 million recorded in other income (expense) on the consolidated statements of operations and comprehensive income (loss).
25

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
The following tables present financial information with respect to the Company’s segments. Corporate and Other represents costs not directly associated with a segment, such as interest expense, income taxes and corporate overhead. Corporate assets include cash, deferred financing costs, derivatives and entity-level machinery equipment.
(Thousands of Dollars)
Three Months Ended March 31,
2021 2020
Operations by business segment
Revenue:
Completion Services $ 208,981  $ 512,871 
WC&I 19,421  56,825 
Well Support Services —  57,929 
Total revenue $ 228,402  $ 627,625 
Adjusted gross profit:
Completion Services(1)
$ 15,414  $ 97,876 
WC&I(1)
1,676  8,784 
Well Support Services(1)
—  12,338 
Total adjusted gross profit $ 17,090  $ 118,998 
Operating income (loss):
Completion Services $ (25,107) $ (13,102)
WC&I (879) 3,011 
Well Support Services —  10,940 
Corporate and Other (20,734) (66,702)
Total operating income (loss) $ (46,720) $ (65,853)
Depreciation and amortization:
Completion Services $ 37,579  $ 75,540 
WC&I 3,672  4,273 
Well Support Services —  1,527 
Corporate and Other 4,617  4,481 
Total depreciation and amortization $ 45,868  $ 85,821 
Net income (loss):
Completion Services $ (25,107) $ (13,102)
WC&I (879) 3,011 
Well Support Services —  10,940 
Corporate and Other (28,516) (72,605)
Total net income (loss) $ (54,502) $ (71,756)
(1)    Adjusted gross profit (loss) at the segment level is not considered to be a non-GAAP financial measure as it is the Company's segment measure of profitability and is required to be disclosed under GAAP pursuant to ASC 280. Adjusted gross profit (loss) is defined as revenue less cost of services, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance. 
26

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2021
Completion Services
WC&I
Well Support Services
Total
Revenue
$ 208,981  $ 19,421  $ —  $ 228,402 
Cost of Services
199,680  18,097  —  217,777 
Gross profit excluding depreciation and amortization
9,301  1,324  —  10,625 
Management adjustments associated with cost of services(1)
6,113  352  —  6,465 
Adjusted gross profit $ 15,414  $ 1,676  $ —  $ 17,090 
(1)    Adjustments relate to market-driven severance, leased facility closures, and restructuring costs incurred as a result of significant declines in crude oil prices resulting from demand destruction from the COVID-19 pandemic and global oversupply.
Three Months Ended March 31, 2020
Completion Services
WC&I
Well Support Services
Total
Revenue
$ 512,871  $ 56,825  $ 57,929  $ 627,625 
Cost of Services
417,382  49,253  45,591  512,226 
Gross profit excluding depreciation and amortization
95,489  7,572  12,338  115,399 
Management adjustments associated with cost of services(2)
2,387  1,212  —  3,599 
Adjusted gross profit $ 97,876  $ 8,784  $ 12,338  $ 118,998 
(2)    Adjustments relate to market-driven severance and restructuring costs incurred as a result of significant declines in crude oil prices resulting from demand destruction from the COVID-19 pandemic and global oversupply.
(Thousands of Dollars)
March 31, 2021 December 31, 2020
Total assets by segment:
Completion Services
$ 699,782  $ 689,814 
WC&I
63,751  62,959 
Well Support Services
—  — 
Corporate and Other
369,495  405,115 
Total assets
$ 1,133,028  $ 1,157,888 
Goodwill by segment:
Completion Services
$ 104,198  $ 104,198 
WC&I
—  — 
Well Support Services
—  — 
Corporate and Other
—  — 
Total goodwill
$ 104,198  $ 104,198 
27

NEXTIER OILFIELD SOLUTIONS INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
(14) New Accounting Pronouncements
(a) Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard on January 1, 2021 and there was no impact on the financial statements.
(b) Recently Issued Accounting Standards
In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU 2021-10 expands on the US GAAP guidance on contract modifications and hedge accounting related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This standard is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10 ‘Codification Improvements”. ASU 2020-10 improves the clarity and consistency of various provisions in the Codification. The Company does not expect ASU 2020-10 to have any impact on the its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06 "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06"). ASU 2020-06 simplifies the guidance on the issuer's accounting for convertible debt instruments and convertible preferred stock. The Company does not expect ASU 2020-06 to have any impact on the Company's consolidated financial statements.
In June 2020, the FASB issued ASU 2020-05, "Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities," which provides a limited deferral of the effective dates of "Revenue from Contracts with Customers (ASC 606)" and "Leases (ASC 842)" to provide immediate, near-term relief for certain entities for whom these updates are either currently effective or imminently effective. The Company does not expect ASU 2020-05 to have any impact on the Company's consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This standard is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)," which clarifies the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. This standard is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This standard is effective for fiscal years beginning after December 15, 2021 and the adoption is not expected to have any impact on the Company's consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the 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, 2020.
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ORGANIZATIONAL OVERVIEW
NexTier Oilfield Solutions Inc. is an industry-leading U.S. land oilfield focused service company, with a diverse set of well completion and production services across a variety of active and demanding basins. We have a history of growth through acquisition, including the October 31, 2019 C&J Merger. After this business combination, we were organized into three reportable segments:
•Completion Services, which consists of the following businesses and services lines: (1) hydraulic fracturing; (2) wireline and pumpdown services; and (3) completion support services, which includes our innovation centers and activities.
•Well Construction and Intervention Services, which consists of the following businesses and service lines: (1) cementing services and (2) coiled tubing services.
•Well Support Services, which consists of the following businesses and service lines: (1) rig services; (2) fluids management; and (3) other special well site services.
    Our Well Support Services segment was divested in a transaction that closed on March 9, 2020. It focused on post-completion activities at the well site, including rig services, such as workover and plug and abandonment, fluids management services, and other specialty well site services. Subsequent to the Well Support Services divestiture, the Company's reportable segments were (i) Completion Services, and (ii) Well Construction and Intervention (“WC&I”) Services.
This history impacts the comparability of our operational results from year to year. Additional information on these transactions can be found in Note (13) Business Segments.
OPERATIONAL OVERVIEW
We provide our services in several of the most active basins in the United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford and the Bakken/Rockies.
Total North America rig count during the first quarter of 2021 averaged 393 rigs, reflecting an increase of approximately 27% as compared to the fourth quarter 2020 average of 311 rigs and a decrease of approximately 50% as compared to the first quarter 2020 average of 785 rigs. The increase as compared to the fourth quarter 2020 average was driven by an improvement in economic activity, supportive commodity prices, and modest continued improvements in completions supply/demand dynamics. The decrease as compared to the first quarter of 2020 was primarily driven by impacts associated with the COVID-19 demand destruction and the associated significant decline in crude oil prices. North America rig count exited the first quarter of 2021 at 417 rigs.
The decrease in North America rig count experienced throughout 2020 reflects E&P companies significantly reducing 2020 capital budgets in response to increasing macro uncertainty related to the COVID-19 pandemic and significantly lower crude oil prices. We estimate the market reached a trough of 50 or fewer fully-utilized completions crews in late-May or early-June 2020. Beginning in June 2020, conditions began to improve, as shut-in production was brought back on-line.
A majority of the Company's activity is in the Permian Basin which outperformed the total North American rig count during the first quarter of 2021 as compared to the fourth quarter of 2020, where the average rig count increase was 32% as compared to the total North America average rig count increase of 27%.
Activity within our business segments is significantly influenced by spending on upstream exploration, development and production programs by our customers. Also driving our activity is the status of the global economy, which is a major factor on oil and natural gas demand. 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.
Continued discipline from the Organization of Petroleum Exporting Countries plus (OPEC+) combined with accelerating vaccine rollouts around the world gives us cautious optimism for global economy and oil demand recovery in 2021. Prior to the weather-related events on the U.S. Gulf Coast discussed below, we saw a modest increase in overall demand, as commodity prices remained constructive. In response, we began responsibly ramping up our operations, including the addition of one hydraulic fracturing fleet early in the first quarter of 2021.
Beginning in mid-February 2021, Winter Storm Uri had a broad impact on the U.S. Gulf Coast and in particular across the entire state of Texas, resulting in widespread utility disruptions. Approximately two-thirds of our operations were shut down for nearly 10 days. However, we successfully returned to pre-storm operation levels in late February. After the storm, and once our customers were up and running, we have seen modest activity growth in the final weeks of the quarter that appears to be continuing into the second quarter.
29

Continued improvement in activity is dependent on macro conditions, including commodity prices, continued resolution of the COVID-19 pandemic, seasonality and potential lasting changes that a prolonged or resurging pandemic may have on supply and demand worldwide.
We believe that there is competitive value in providing integrated solutions that align the incentives of operators and service providers. We are pursuing opportunities to leverage our investment in our digital program and diesel substitution technologies (such as duel fuel capabilities), to provide a service strategy targeted at achieving emissions reductions, both for us and our customers. NexTier has been developing and building its digital program for some time, and our digital platform has been applied to all of our operating fleets. We are also working toward a natural gas treatment and delivery solution, including natural gas sourcing, compression, transport, decompression, and treatment services, that will power NexTier’s fleet with field gas or compressed natural gas. This service solution seeks to address wellsites where there is not a reliable nearby gas supply, and thus, the full benefit and value of dual fuel or other lower emissions technologies may not otherwise be fully realized. Our integrated natural gas treatment and delivery solution is expected to become operational in the second half of 2021. This integrated strategy will provide our customers with a streamlined approach to driving more sustainable, cost effective operations at the wellsite.
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 our innovation centers, provide us with the ability to supplement our service offerings with engineered solutions specifically tailored to address customers’ completion requirements and unique challenges.
We believe that the safety, quality and efficiency of our service execution and our alignment with customers who recognize the value that we provide are central to our efforts to support utilization and grow our business. Historically, our utilization levels have been highly correlated to U.S. onshore spending by our customers, which is heavily driven by the price of oil and natural gas. Generally, as capital spending by our customers increases, drilling, completion and production activity also increases, resulting in increased demand for our services, and therefore more days or hours worked (as the case may be). Conversely, when drilling, completion and production activity levels decline due to lower spending by our customers, we generally provide fewer services, which results in fewer days or hours worked (as the case may be). Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle. Additionally, during periods of decreased spending by our customers, we may be required to discount our rates or provide other pricing concessions to remain competitive and support deployed equipment utilization, which negatively impacts our revenue and operating margins. During periods of pricing weakness for our services, we may not be able to reduce our costs accordingly, and our ability to achieve any cost reductions from our suppliers typically lags behind the decline in pricing for our services, which could further adversely affect our results. Furthermore, when demand for our services increases following a period of low demand, our ability to capitalize on such increased demand may be delayed while we reengage and redeploy equipment and crews that have been idled during a downturn. The mix of customers that we are working for, as well as limited periods of exposure to the spot market, also impacts our deployed equipment utilization.

We have begun to see some improvement in utilization and pricing, especially with our duel fuel equipment.
    
Operating Effectively Through the COVID-19 Pandemic
We have continued our measures focused on the safety of our partners, employees, and the communities in which we operate, while at the same time seeking to mitigate the impact on our financial position and operations. We continue to encourage our workforce to practice safe behaviors in the workplace and while away from work to help prevent community spread of COVID-19.
We recognize that the COVID-19 pandemic and related disruptions also impact our suppliers. To date, we have generally been able to obtain the equipment, parts and supplies necessary to support our operations on a timely basis. Contingency plans remain in place in the event of significant impacts from COVID-19 infection resurgences, but there are no guarantees that such plans will be sufficient. Additional information regarding the actions we've taken since the onset of the COVID-19 pandemic and the increased risks to our business related to the COVID-19 pandemic can be found in our Annual Report on Form 10-K for the year ended December 31, 2020.


30

RESULTS OF OPERATIONS IN 2021 COMPARED TO 2020
The following is a comparison of our results of operations for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Results for the three months ended March 31, 2020 include the financial and operating results of Well Support Services segment through March 8, 2020.
Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020
Three Months Ended March 31,
(Thousands of Dollars)
As a % of Revenue
Variance 
Description
2021 2020 2021 2020 $ %
Completion Services $ 208,981  $ 512,871  91  % 82  % $ (303,890) (59  %)
WC&I 19,421  56,825  9  % 9  % (37,404) (66  %)
Well Support Services
—  57,929  0  % 9  % (57,929) (100  %)
Revenue
228,402  627,625  100  % 100  % (399,223) (64  %)
Completion Services 199,680  417,382  87  % 67  % (217,702) (52  %)
WC&I 18,097  49,253  8  % 8  % (31,156) (63  %)
Well Support Services
—  45,591  0  % 7  % (45,591) (100  %)
Costs of services
217,777  512,226  95  % 82  % (294,449) (57  %)
Depreciation and amortization
45,868  85,821  20  % 14  % (39,953) (47  %)
Selling, general and administrative expenses
16,069  56,884  7  % 9  % (40,815) (72  %)
Merger and integration
—  12,182  0  % 2  % (12,182) (100  %)
(Gain) loss on disposal of assets
(4,592) (7,962) (2  %) (1  %) 3,370  (42  %)
Impairment
—  34,327  0  % 5  % (34,327) (100  %)
Operating income (loss) (46,720) (65,853) (20  %) (10  %) 19,133  (29  %)
Other income (expense), net
(2,719) 416  (1  %) 0  % (3,135) (754  %)
Interest expense
(4,206) (6,066) (2  %) (1  %) 1,860  31  %
Total other income (expense)
(6,925) (5,650) (3  %) (1  %) (1,275) 23  %
Income tax expense (857) (253) 0  % 0  % (604) 239  %
Net income (loss) $ (54,502) $ (71,756) (24  %) (11  %) $ 17,254  (24  %)
Revenue:     Total revenue is comprised of revenue from our Completion Services, Well Construction and Intervention Services, and Well Support Services segments. Revenue during the three months ended March 31, 2021 decreased by $399.2 million, or 64%, to $228.4 million from $627.6 million during the three months ended March 31, 2020. This change in revenue by reportable segment is discussed below.
Completion Services:     Revenue for Completion Services during the three months ended March 31, 2021 decreased by $303.9 million, or 59%, to $209.0 million from $512.9 million during the three months ended March 31, 2020. The segment revenue decrease is primarily attributable to a 44% decrease in fully utilized fracturing fleets, decreases in our wireline and pump down services activity, and price reductions in all operating basins resulting from lower commodity prices and the continued impacts of the COVID-19 pandemic reducing global oil demand. Fracturing Services decreased to 15 fully utilized fleets during the three months ended March 31, 2021 from 27 fully utilized fleets during the three months ended March 31, 2020. Despite gaps in our fracturing calendar and continued suppressed market conditions, strong operational performance resulted in high stage efficiencies to partially offset lower pricing.
Well Construction and Intervention Services:     Well Construction and Intervention Services segment revenue decreased $37.4 million, or 66%, to $19.4 million during the three months ended March 31, 2021 from $56.8 million during
31

the three months ended March 31, 2020. The decrease in revenue is mostly attributable to price reductions and less activity in both our cementing and coil tubing services resulting from lower market activity and customer demand.
Well Support Services: Well Support Services segment revenue was $57.9 million during the three months ended March 31, 2020, with no comparison for the same period during the three months ended March 31, 2021.
Cost of Services:     Cost of services during the three months ended March 31, 2021 decreased by $294.4 million, or 57%, to $217.8 million from $512.2 million during the three months ended March 31, 2020. The reduction is primarily due to significantly less activity and lower utilization, as explained in Revenue above.
Equipment Utilization:     Depreciation and amortization expense decreased $40.0 million, or 47%, to $45.9 million during the three months ended March 31, 2021 from $85.8 million, during the three months ended March 31, 2020. The decrease in depreciation and amortization is due to more equipment nearing the end of its useful lives in addition to the change in estimated useful life of equipment, which consisted mostly of increases to the expected life of our fracturing equipment. Gain (loss) on disposal of assets had a variance of $3.4 million, or 42%, to a gain of $4.6 million during the three months ended March 31, 2021 from a gain of $8.0 million during the three months ended March 31, 2020
Selling, general and administrative expense:      Selling, general and administrative (“SG&A”) expense, which represents costs associated with managing and supporting our operations, decreased by $40.8 million, or 72%, to $16.1 million during the three months ended March 31, 2021 from $56.9 million during the three months ended March 31, 2020, primarily due to the $13.3 million accrual reduction for our regulatory audit estimate and our business transformation results to structurally drive out costs and increase efficiencies in our support function processes.
Merger and integration expense:     Merger and integration expense decreased by $12.2 million, or (100%), to $0.0 million during the three months ended March 31, 2021 from $12.2 million during the three months ended March 31, 2020 primarily due to the completion of our merger and integration related expenses and full capture of our targeted run-rate cost synergies in 2020.
Effective tax rate: Our effective tax rate on continuing operations for the three months ended March 31, 2021 was (1.6)% for $0.9 million of recorded income tax expense. The difference between the effective tax rate and the U.S. federal statutory rate is due to foreign withholding taxes, change in valuation allowance and discrete tax effect related to indefinite-lived assets. After considering all available positive and negative evidence, we determined that it is unlikely that we will utilize our net deferred tax assets in the foreseeable future and continued to maintain a full valuation allowance.
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)
March 31, 2021 December 31, 2020
Cash and cash equivalents $ 271,639  $ 275,990 
Debt, net of unamortized deferred financing costs and unamortized debt discount 335,089  335,540 
(Thousands of Dollars)
Three Months Ended March 31,
2021 2020
Net cash provided by (used in) operating activities $ (23,226) $ 48,487 
Net cash provided by investing activities 20,588  14,117 
Net cash provided by (used in) financing activities (2,050) 170,696 
32

Significant sources and uses of cash during the three months ended March 31, 2021
Sources of cash:
•Investing activities:
–Net cash provided by investing activities for the three months ended March 31, 2021 of $20.6 million, consisted primarily of $34.4 million in cash received from the WSS notes, partially offset by capital expenditures.
Uses of cash:
•Operating activities:
–Net cash used in operating activities during the three months ended March 31, 2021 of $23.2 million. We continue to closely monitor our discretionary spending to focus on working capital and net operating cash to support our capital expenditures and other investing activities.
•Financing activities:
–Cash used to repay our debt facilities, excluding leases and interest, during the three months ended March 31, 2021 was $0.9 million.
–Cash used to repay our finance leases during the three months ended March 31, 2021 was $0.2 million.
–Shares repurchased and retired related to payroll tax withholdings on our share-based compensation for the three months ended March 31, 2021 totaled $1.0 million.
Significant sources and uses of cash during the three months ended March 31, 2020
Sources of cash:
•Operating activities:
–Net cash generated by operating activities during the three months ended March 31, 2020 of $48.5 million was the result of 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.
•Investing activities:
–Net cash provided in investing activities for the three months ended March 31, 2020 of $14.1 million, consisting primarily of the cash received as part of the sale of the Well Support Services business segment, net of capital expenditures.
•Financing activities:
–Cash provided by the 2019 ABL Facility (defined below) in the amount of $175 million. This increase in cash is due to the proceeds received when the Company drew down $175 million from its 2019 ABL Facility. This action was a proactive measure to increase the Company's cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.
Uses of cash:
–Cash used to repay our debt facilities, excluding leases and interest, during the three months ended March 31, 2020 was $0.9 million.
–Cash used to repay our finance leases during the three months ended March 31, 2020 was $2.3 million.
–Shares repurchased and retired related to payroll tax withholdings on our share-based compensation for the three months ended March 31, 2020 totaled 1.2 million.
33

Future sources and use of cash
We currently estimate that our capital expenditures for the first half of 2021 range between $55 million and $65 million.
    Debt service for the year ended December 31, 2021 is projected to be $23.1 million, of which $0.6 million is related to finance leases, excluding buyout payments. We anticipate our debt service will be funded by cash flows from operations. Our leverage ratio, as calculated pursuant to the terms of our debt agreement, is 8.49x for the twelve rolling months ended March 31, 2021. We anticipate our debt service will be funded by cash flows from operations.
    Other factors affecting liquidity
Financial position in current market. As of March 31, 2021, we had $271.6 million of cash and a total of $81.4 million available under our revolving credit facility. As of March 31, 2021, we were compliant with all financial and non-financial covenants in our bank agreements. Furthermore, our debt maturities extend over a long period of time. Despite the current uncertainty in global markets resulting from the COVID-19 pandemic, 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, and contingent liabilities.
Guarantee agreements. In the normal course of business, we have agreements with financial institutions as part of our 2019 ABL Facility under which $28.5 million of letters of credit were outstanding as of March 31, 2021.
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 to 45 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. The economic impact of the COVID-19 pandemic and the resulting actions taken to control the further spread of the virus may exacerbate these delays or failures to pay in the future. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have an adverse effect on our liquidity, consolidated results of operations and consolidated financial condition.
    Purchase Commitments. In the normal course of business, we enter into various contractual obligations that impact or could impact our liquidity. The Company has a number of purchase commitments that primarily relate to our agreements with vendors for sand purchases, other commodities/services and deposits on equipment. The purchase commitments to these vendors include obligations to purchase a minimum amount of product/services; provided that, if the minimum purchase requirement is not met, the shortfall at the end of the applicable period is settled in cash or, in some cases, carried forward to the next period. We also have a variety of operating lease obligations related to our real estate, rail cars, and light duty vehicles. See Part II, "Item 1A. Risk Factors." for additional information on the risks related to these purchase commitments.

Principal Debt Agreements
2019 ABL Facility
We, and certain of our other subsidiaries as additional borrowers and guarantors, are parties to a Second Amended and Restated Asset-Based Revolving Credit Agreement (the “2019 ABL Facility”) that matures on October 31, 2024. This facility provides for, among other things, a $450.0 million revolving credit facility (with a $100.0 million subfacility for letters of credit), subject to a borrowing base in accordance with the terms agreed between us and the lenders. As of March 31, 2021, we had no outstanding principal amounts under the 2019 ABL Facility.
The 2019 ABL Facility is subject to customary fees, guarantees of subsidiaries, events of default, restrictions and covenants, including certain restricted payments and a consolidated fixed charge coverage ratio test. As of March 31, 2021, the Company was in compliance with all covenants.
2018 Term Loan Facility
    We are party to a term loan facility and certain of our subsidiaries are guarantors (the "2018 Term Loan Facility") that matures on May 25, 2025.     As of March 31, 2021, there was $340.4 million principal amount of term loans outstanding (the "2018 Term Loans") at an interest rate of LIBOR plus an applicable margin, which is currently at 4.00%. The 2018 Term Loan Facility is subject to customary fees, guarantees of subsidiaries, events of default, restrictions and covenants, including certain restricted payments. As of March 31, 2021, the Company was in compliance with all covenants.
34

Off-Balance Sheet Arrangements
We do not have any material off-balance sheet financing arrangements, transactions or special purpose entities.
Significant 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 this 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 Annual Report on Form 10-K Report on Form 10-K for the year ended December 31, 2020.
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)."

35

Item 3. Quantitative and Qualitative Disclosure About Market Risk
Interest Rate Risk. As of March 31, 2021, we had variable-rate debt outstanding, the exposure to which we manage with our interest-rate-related derivative instrument. We held no derivative instruments that increased our exposure to market risks for foreign currency rates, commodity prices or other market price risks. We are exposed to changes in interest rates on our floating rate borrowings under our 2019 ABL Facility and 2018 Term Loan. As of March 31, 2021, we had $340.4 million aggregate principal amount outstanding under the 2018 Term Loan. The impact of a 1.0% increase in interest rates under the terms of the 2018 Term Loan would have a $0.9 million impact on interest expense for the three months ending March 31, 2021.
Commodity Price Risk. Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our stimulation services such as proppant, chemicals and guar. Our fuel costs consist primarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials (particularly guar and proppant) in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Depending on market conditions, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We generally do not engage in commodity price hedging activities. However, we have purchase commitments with certain vendors to supply a majority of the proppant used in our operations. Some of these agreements are take-or-pay agreements with minimum purchase obligations. As a result of future decreases in the market price of proppants, we could be required to purchase goods and pay prices in excess of market prices at the time of purchase. For further quantitative disclosure about our market risk related to our variable-rate debt, interest-rate-related derivative instrument and purchase commitments, see Part I, "Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations".
Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. As a result of the COVID-19 pandemic, we have seen an increase in collection time related to trade receivables. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts. For certain additional information regarding credit risk related to derivative instruments we hold, see Note (7) Derivatives of Part I, "Item 1. Condensed Consolidated Financial Statements (Unaudited)."


36

Item 4. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (the "SEC") rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
37

PART II

Item 1. Legal Proceedings
    As is typical of the industry, the Company is, from time to time and in the ordinary course of business, involved in routine litigation or subject to disputes or claims related to its business activities. It is the Company's opinion that although the amount of liability with respect to certain of these known legal proceedings and claims cannot be ascertained at this time, any resulting liability will not have a material adverse effect individually or in the aggregate on the Company's financial condition, cash flows or results of operations; however, there can be no assurance as to the ultimate outcome of these matters.

Item 1A. Risk Factors
The statements in this section describe the known material risks to our business and should be considered carefully. There have been no material changes from the risk factors previously disclosed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities
None.
(b) Use of Proceeds
None.
(c) Purchases of Equity Securities
Issuer Purchases of Equity Securities
Settlement Period
(a) Total Number of Shares Purchased(1)
(b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
January 1, 2021 through January 31, 2021 250,166 $3.45 — $—
February 1, 2021 through February 28, 2021 57,629 $3.78 — $—
March 1, 2021 through March 31, 2021 14,550 $4.88 — $—
Total 322,345 $3.57 — $—
(1)    Consists of shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. The value of such shares is based on the closing price of our common shares on the vesting date.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
38

Not applicable.

Item 5. Other Information
None.


39

Item 6. Exhibits
The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Exhibit
Number 		Exhibit Description
10.1*
31.1*
31.2*
32.1**
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.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Filed herewith.
** Furnished herewith.


40

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 5, 2021.
NexTier Oilfield Solutions Inc.
(Registrant)
By: /s/ Phung Ngo-Burns
Phung Ngo-Burns
Principal Accounting Officer and Duly Authorized Officer

41

NEXTIER OILFIELD SOLUTIONS INC.
EQUITY AND INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (this “Agreement”) is made and entered into as of January 4, 2021 (the “Grant Date”), by and between NexTier Oilfield Solutions Inc., a Delaware corporation (the “Company”), and Robert Drummond (the “Participant”). Capitalized terms not otherwise defined herein or in Appendix A shall have the meanings provided in the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (as it may be amended from time to time, the “Plan”).

W I T N E S S E T H:

WHEREAS, the Company maintains the Plan; and

WHEREAS, the Company desires to grant Restricted Stock Units to the Participant pursuant to the terms of the Plan and the terms set forth herein (the “Equity Grant”);

WHEREAS, on December 7, 2020, an amendment to the Plan was approved and adopted to increase the maximum number of shares of Common Stock subject to the Plan (such amendment, the “December Plan Amendment”), with such amendment subject to shareholder approval; and

WHEREAS, on April 29, 2021, an amendment and restatement of the Plan to be effective as of January 1, 2021 (subject to shareholder approval) was approved and adopted, which incorporated prior amendments to (i) increase the maximum number of shares of Common Stock subject to the Plan, and (ii) increase the maximum number of shares of Common Stock that may be subject to Awards granted under the Plan to any one participant in any calendar year, and further amended the Plan to clarify how Performance Awards are calculated as part of such individual participant calendar limit (the “January Plan Amendment”).

Participant acknowledges that the Equity Grant is provided to advance the goodwill of the Company as of the Grant Date and that this Agreement is valid and enforceable against Participant regardless of whether the equity vests. Participant further acknowledges that the restrictive covenants contained herein are reasonable and necessary to protect the goodwill and interests of the Company and the Company’s interests in providing the Equity Grant and Confidential Information to the Participant.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.    Grant. Subject to the conditions set forth in the Plan and this Agreement, the Company grants to the Participant 999,821 Restricted Stock Units.

2.    Vesting.

(a)    The Participant shall become vested in the Restricted Stock Units, in installments, on the dates indicated in the following table:




Vesting Date Percentage of Vested Restricted Stock Units
January 4, 2022 34%
January 4, 2023 33%
January 4, 2024 33%

(b)    In the event of the Participant’s Termination (x) by the Company without Cause (other than as a result of death or disability) or (y) by the Participant for Good Reason: (i) if such Termination occurs within the twelve (12) month period following a Change in Control (a “CIC Period”), then upon the date of such Termination the Participant shall become one hundred percent (100%) vested in the Restricted Stock Units, and (ii) if such termination occurs other than within a CIC Period, then upon the date of such Termination the Participant shall become vested in the portion of the Restricted Stock Units that would have become vested had the Participant remained employed for a period of twelve (12) month following the date of Termination.

(c)    In the event of the Participant’s Termination (i) due to the Participant's death or (ii) by the Company due to the Participant's Disability, the Participant shall become vested in the portion of the Restricted Stock Units that would have become vested had the Participant remained employed for a period of twelve (12) month following the date of Termination.

(d)    Except as otherwise provided in this Agreement, upon the Participant’s Termination for any reason, the portion of the Restricted Stock Units in which the Participant has not become vested shall be cancelled, and forfeited by the Participant, without consideration.

(e)    Notwithstanding any provision of this Agreement to the contrary, upon the Participant’s Termination by the Company for Cause, the Restricted Stock Units, including any portion in which the Participant had previously become vested, shall be cancelled, and forfeited by the Participant, without consideration.

(f)    Notwithstanding any provision of this Agreement to the contrary,

(1)    this Agreement is contingent upon and subject to approval of the December Plan Amendment and the January Plan Amendment (which amendments are expected to be presented to shareholders as part of an amended and restated version of the Plan) by the Company’s shareholders pursuant to the rules of the Applicable Exchange at the Company’s annual meeting of shareholders held in 2021 (as it may be adjourned or postponed) (such approval of the Amended Plan, the “Required Shareholder Approval”),

(2)    in the event that the Required Shareholder Approval is not obtained for any reason, this Agreement shall be null and void and the Participant shall have no rights or interest of any kind with respect to the Restricted Stock Units or associated DERs, including any portion which had previously vested, and

(3)    if an event occurs prior to the receipt of the Required Shareholder Approval that would otherwise result in the vesting of Restricted Stock Units subject to this Agreement, no shares in respect of such Restricted Stock Units shall be issued, and no payments with respect to DERs associated with such Restricted Stock Units shall be made, unless and until the Required Shareholder Approval has been obtained.

3.    Award Settlement. Subject to Section 2(f), the Company shall deliver to the Participant (or, in the event of the Participant’s prior death, the Participant’s beneficiary), one (1) share of Common Stock for each Restricted Stock Unit in which the Participant becomes vested in accordance with this Agreement. Subject to Section 2(f), delivery of such Common Stock shall be made as soon as reasonably practicable following the date the Participant


becomes vested in the Restricted Stock Unit, but in no event later than the fifteenth (15th) day of the third month following the end of the calendar year in which the Participant became vested in such Restricted Stock Unit.

4.    Shareholder Rights.

(a)    The Participant shall have no rights, as a shareholder with respect to shares of Common Stock underlying a Restricted Stock Unit until the Restricted Stock Unit has vested and a share of Common Stock has been issued in settlement thereof and, if applicable, the Participant has satisfied any other conditions imposed by the Committee.

(b)    Each Restricted Stock Unit subject to this Award is hereby granted in tandem with a corresponding Dividend Equivalent Right (“DER”), which DER shall remain outstanding from the Date of Grant until the earlier of the settlement or forfeiture of the Restricted Stock Unit to which the DER corresponds. Each vested DER entitles the Participant to receive payments, subject to and in accordance with this Agreement, in an amount equal to any dividends paid by the Company in respect of the Share underlying the Restricted Stock Unit to which such DER relates. The Company shall establish, with respect to each Restricted Stock Unit, a separate DER bookkeeping account for such Restricted Stock Unit (a “DER Account”), which shall be credited (without interest) on the applicable dividend payment dates with an amount equal to any dividends paid during the period that such Restricted Stock Unit remains outstanding with respect to the Share underlying the Restricted Stock Unit to which such DER relates. Upon the vesting of a Restricted Stock Unit, the DER (and the DER Account) with respect to such vested Restricted Stock Unit shall also become vested. Similarly, upon the forfeiture of a Restricted Stock Unit, the DER (and the DER Account) with respect to such forfeited Restricted Stock Unit shall also be forfeited. DERs shall not entitle the Participant to any payments relating to dividends paid after the earlier to occur of the date that the applicable Restricted Stock Unit is settled in accordance with Section 4(a) or the forfeiture of the Restricted Stock Unit underlying such DER. Subject to Section 2(f), payments with respect to vested DERs shall be made as soon as practicable, and within 60 days, after the date that such DER vests. The Participant shall not be entitled to receive any interest with respect to the payment of DERs

5.    Transferability. Except as permitted by the Committee, in its sole discretion, the Restricted Stock Units may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution or, subject to the consent of the Committee, pursuant to a DRO, unless and until the Restricted Stock Units have been settled and the shares of Common Stock underlying the Restricted Stock Units have been issued, and all restrictions applicable to such shares have lapsed, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

6.    Covenants Against Competition, Non-Solicitation and Use of Intellectual Property.

(a)    Non-Competition Covenant. Participant agrees that he/she will not, during his/her employment or work with the Company and during the Restricted Period in the Restricted Territory (each as defined below), directly or indirectly, (i) provide services that are the same or substantially similar to the services and/or duties Participant performed for the Company for any individual, entity or company in a Competitive Business (as defined below); (ii) perform duties in a position that would allow the Participant to use Company Confidential Information (as defined below) that Participant obtained during employment and/or work with the Company for any company, individual or entity that is engaged in (or has committed plans to engage in) a Competitive Business; or (iii) hold any direct or beneficial material economic interest in any entity that directly or indirectly engages in or proposes to engage in any Competitive Business. Notwithstanding the foregoing, nothing in this Agreement shall prevent Participant from (a) owning, for passive investment purposes not intended to circumvent this Agreement, one percent (1%) or less of the publicly traded common equity securities of any company engaged in a Competitive Business, or (b) if Participant is a licensed attorney, engaging in the practice of law to the extent such services do not violate Participant’s other obligations hereunder or Participant’s professional responsibilities to the Company.


A “Competitive Business” is defined as well completion services and products that the Company was engaged in during Participant’s employment or engagement with the Company or had initiated substantial plans to engage in during Participant’s employment or engagement with the Company (including, but not limited to, horizontal and vertical fracturing, wireline perforation and logging and engineered solutions and cementing).

The “Restricted Period” is the period commencing on the Grant Date and extending for a period of one (1) year following the date Participant ceases work or employment with the Company (regardless of the reason for termination), or such longer restricted period imposed under an individualized employment or similar agreement between Participant and the Company or as extended per the terms herein. The “Restricted Territory” is any geographic area or basin where the Participant performed services for the Company or had responsibilities related to services for the Company during his/her employment.

(b)    Covenant against Solicitation. Participant agrees that during the Restricted Period, Participant shall not, directly or indirectly (or directly or indirectly assist any individual or entity to): (i) solicit, divert with the intention to take away, or attempt to divert with the intention to take away, the business or patronage of, or business opportunity with, any individual or entity who or which either is, or during the twelve (12) months immediately prior to the date of Participant’s termination of services or employment with the Company was, a customer or supplier of the Company with whom Participant worked with or acquired confidential information about during employment with the Company; (ii) perform services for, solicit services or business from or contact for business purposes any client or potential client with whom the Participant worked with or acquired confidential information about during his/her employment; (iii) interfere with, disrupt, or attempt to interfere with or disrupt, or encourage or assist others to disrupt or interfere with, the relationship, contractual or otherwise, between the Company and any of its customers, suppliers, lessors, consultants, independent contractors, agents, employees or any other person or entity with whom Participant worked with or acquired confidential information about during employment with the Company; or (iv) solicit, communicate regarding job placement or hiring, or contact with a view toward engagement or hiring any person that is, or was during the twelve (12) months immediately prior to the date of Participant’s termination of employment or services with the Company, any employee or contractor of the Company with whom Participant worked with, managed or who performed services with in the same division(s) as Participant.

Notwithstanding the foregoing, to the extent a Participant who is a resident in Oklahoma is no longer employed by the Company, the restrictions of Section 6(a) and Section 6(b)(i), (ii) and (iii) shall not apply in the State of Oklahoma. Instead, the restrictions on the Participant’s conduct within the Restricted Territory located in the State of Oklahoma is revised to prohibit the Oklahoma resident’s activities as follows: the Participant will not directly solicit the sale of goods, services or a combination of goods and services from established customers of the Company.

(c)    Non-Disclosure of Confidential Information. Participant acknowledges that Participant has received and will receive Confidential Information after the signing of this Agreement regarding the Company and its business. “Confidential Information” includes, without limitation, (i) information relating to the finances, business plans, cost models and marketing or growth strategies of the Company; (ii) identities and specifications of the Company; (iii) specifications regarding customers, prospective customers, suppliers, subcontractors, and employees of the Company; (iv) pricing of services and its profit margins; (v) processes, technologies, and technological and other developments; (vi) methods and specialized equipment; and, (vii) any other business or technical information or trade secret of the Company that is proprietary and confidential and represents a valuable, special and unique asset of the Company. Participant agrees not to disclose Confidential Information, either during or after employment, for any purpose other than in the best interests of the Company. Participant acknowledges and reaffirms that Participant is subject to the provisions relating to confidential information set forth in the Company’s Participant Handbook and other Company policies. Participant retains rights under the U.S. Defend Trade Secrets Act of 2016 (“DTSA”) which provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (a)(i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law, or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the


attorney of the individual and use the trade secret information in the court proceeding, if the individual (x) files any document containing the trade secret under seal and (y) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement is intended to limit any rights under DTSA.
(d)    Assignment of Inventions and Intellectual Property

(1)    Participant acknowledges that: (a) because Participant possesses substantial technical expertise and skill with respect to the Company, the Company desires and needs to obtain exclusive ownership of each (A) invention, whether or not patentable (“Invention”) and any interest and rights therein, created, conceived, or developed by Participant, either solely or in conjunction with others, within the scope of Participant’s employment or services with the Company (whether prior to or after the Effective Date), that relates in any way to, or is useful in any manner to, the Company’s business and (B) any Invention created, conceived or developed by Participant, either solely or in conjunction with others, that is based upon or uses the Company’s confidential information (collectively, “Company Inventions”); (b) the Company shall be at a substantial competitive disadvantage if the Company fails to acquire exclusive ownership of each Company Invention; and (c) the provisions of this Section 6 are reasonable and necessary to provide the Company with exclusive ownership of all of its Company Inventions.

(2)    Participant hereby irrevocably assigns and promises to convey to the Company: (a) each Invention and warrants each shall belong exclusively to the Company from conception; (b) all Company Inventions that are writings, specially commissioned works, and other works of authorship or copyright are works made for hire and are the exclusive property of the Company, including any copyrights, patents, or other intellectual property rights pertaining thereto; and (c) with respect to any such Inventions that are not works made for hire or owned by the Company as a matter of law, Participant hereby irrevocably assigns to the Company all of Participant’s right, title, and interest, including all copyright, patent, and other intellectual property rights, to or in such Company Inventions.

(3)    At all times following the Effective Date, Participant agrees to assist, and execute all documents and do all things necessary to vest the Company or its designee with full title in any Company Invention and to obtain any and all intellectual property rights in any Company Inventions, including patent, trademark and copyright protection.

(e)    Reasonableness of Restrictions. Participant acknowledges that the restrictions contained in this Section 6 are reasonable and necessary to protect the legitimate business interests and goodwill of the Company and that any breach or threatened breach by Participant of any provision contained in this Section 6 shall result in immediate irreparable injury to the Company for which a remedy at law would be inadequate. Participant further acknowledges that the restrictions contained in this Section 6 shall not prevent Participant from earning a livelihood during the applicable period of restriction. Accordingly, Participant acknowledges that, in addition to any other remedies available to the Company in the event of any breach or threatened breach by Participant of any provision of this Section 6, the Company shall be entitled to a temporary, preliminary and permanent injunctive or other equitable relief in a court of competent jurisdiction (without being obligated to post a bond or other collateral) and to an equitable accounting of all earnings, profits and other benefits arising, directly or indirectly, from such violation. Participant further acknowledges that in the event of breach of the restrictions in Sections 6(a) and 6(b) or if the Company is required to file a lawsuit to enforce this Agreement, the Restricted Period in Sections 6(a) and 6(b) will be extended for greater of (i) the period of time from the date of termination of employment to the date of the filing of the lawsuit; or, (ii) the period of time from the date of termination of employment to the date of the last violation of the obligations under this Agreement, regardless of whether the covenants are reformed.

(f)    Representations and Warranties with Regard to Restrictive Covenants

(1)    Participant represents and warrants that Participant has read and given careful consideration to all of the terms and provisions of this Agreement and acknowledges that (a) the terms and provision of this Agreement, including the location and period of time for which restrictions herein apply, are reasonable and necessary for the reasonable and proper protection of the Confidential Information,


goodwill and other legitimate business interests of the Company, and (b) any material breach or violation of the terms of this Agreement would constitute an act of unfair competition with the Company.

(2)     Participant acknowledges that: (a) the Equity Grant will be made in reliance on Participant’s representations to abide by and be bound by the terms and provisions of this Agreement, and without Participant’s representations, the Equity Grant would not have been made to Participant; and (b) the covenants in this Agreement are independent covenants and the existence of any claim by Participant against the Company arising out of Participant’s employment, the termination of Participant’s employment or otherwise shall not excuse any breach by Participant of any covenant in this Agreement.

7.    Taxes. The Participant has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. In accordance with the terms of the Plan, the Participant may elect to satisfy any applicable tax withholding obligations arising from the vesting or settlement of the Restricted Stock Units by having the Company withhold a portion of the shares of Common Stock to be delivered to the Participant upon settlement of the Restricted Stock Units or by delivering to the Company vested shares of Common Stock owned by the Participant, that in either case have a Fair Market Value equal to the sums required to be withheld; provided that, the number of shares of Common Stock which may be withheld in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities hereunder shall be limited to the number of shares of Common Stock which have a Fair Market Value on the date of withholding equal to the aggregate amount of such tax liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

8.    Incorporation by Reference. The terms and provisions of the Plan are incorporated herein by reference, and the Participant hereby acknowledges receiving a copy of the Plan and represents that the Participant is familiar with the terms and provisions thereof. The Participant accepts this Award subject to all of the terms and conditions of the Plan. In the event of a conflict or inconsistency between the terms of the Plan and the terms of this Agreement, the Plan shall govern and control. Further, the terms and provisions of the Participant’s employment agreement, if any, are incorporated herein by reference. In the event of a conflict or inconsistency between the terms of the Participant’s employment agreement and this Agreement, the Participant’s employment agreement shall govern and control.

9.    Securities Laws and Representations. The Participant acknowledges that the Plan is intended to conform to the extent necessary with all applicable federal, state and foreign securities laws (including the Securities Act and the Exchange Act) and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission or any other governmental regulatory body. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the shares are to be issued, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Without limiting the foregoing, the Restricted Stock Units are being granted to the Participant, upon settlement of the Restricted Stock Units any shares of Common Stock shall be issued to the Participant, and this Agreement is being made by the Company in reliance upon the following express representations and warranties of the Participant. The Participant acknowledges, represents and warrants that:

(a)    The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act of 1933 (the “Securities Act”) and in this connection the Company is relying in part on the Participant’s representations set forth in herein;

(b)    Any shares of Common Stock issued to the Participant upon settlement of the Restricted Stock Units must be held indefinitely by the Participant unless (i) an exemption from the registration requirements of the Securities Act is available for the resale of such shares of Common Stock or (ii) the Company files an additional


registration statement (or a “re-offer prospectus”) with regard to the resale of such shares of Common Stock and the Company is under no obligation to continue in effect a Form S-8 Registration Statement or to otherwise register the resale of such shares of Common Stock (or to file a “re-offer prospectus”); and

(c)    The exemption from registration under Rule 144 shall not be available under current law unless (i) a public trading market then exists for the Common Stock, (ii) adequate information concerning the Company is then available to the public, and (iii) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and that any sale of shares of Common Stock issued to the Participant upon settlement of the Restricted Stock Units may be made only in limited amounts in accordance with, such terms and conditions.

10.    Captions. The captions in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.

11.    Entire Agreement. This Agreement together with the Plan, as either of the foregoing may be amended or supplemented in accordance with their terms, constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein, and supersedes all prior communications, representations and negotiations in respect thereto, except restrictive covenants contained in other agreements containing separate consideration, which shall survive and continue in accordance with their terms.

12.    Successors and Assigns. The terms of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. The rights and obligations of Participant under this Agreement, being personal, may not be assigned or delegated without the prior written consent of the Company. The Company may assign its rights and obligations to another entity which shall succeed to all or substantially all of the assets and business of the Company.

13.    Amendments and Waivers. Subject to the provisions of the Plan, the provisions of this Agreement may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of each of the parties hereto. The rights and remedies of the Company are cumulative and not alternative. Neither the failure nor any delay by the Company in exercising any right, power, or privilege under this Agreement shall operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.

14.    Severability. In the event that any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Without limiting the generality of the foregoing, if any provision of this Agreement shall be found to be illegal, invalid or otherwise unenforceable, the court making such determination shall have the power to reduce the duration, scope, and/or area of such provision to the maximum and/or broadest duration, scope, and/or area permissible by law, and in its reduced form such provision shall then be enforceable.

15.    Signature in Counterparts. This Agreement may be signed in counterparts, each which shall constitute an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Participant agrees to accept all documents and notices via electronic delivery via email, internet or other means and in lieu of paper documents. Participant further agrees to participate in electronic exchange of signatures via click through, electronic signatures or other means.

16.    Notices. Any notice required to be given or delivered to the Company under the terms of the Plan or this Agreement shall be in writing and addressed to the General Counsel and the Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address (including email address) listed in the Company’s personnel files or to such other address as the Participant may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery, three days after deposit in the United States


mail by certified or registered mail (return receipt requested), one business day after deposit with any return receipt express courier (prepaid), or one business day after transmission by facsimile or email.

17.    Governing Law. Any and all actions or controversies arising out of Section 6 of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, without regard to the conflict of law principles thereof. The remainder of the Agreement, including all provisions related to the Equity Grant, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of Delaware to be applied.

18.    Consent to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally agrees that any action, suit or proceeding, at law or equity, arising out of or relating to the Plan, this Agreement or any agreements or transactions contemplated hereby shall only be brought in any federal court of the Southern District of Texas or any state court located in Harris County, State of Texas, and hereby irrevocably and unconditionally expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and hereby irrevocably and unconditionally waives (by way of motion, as a defense or otherwise), to the fullest extent of the law, any and all jurisdictional, venue and convenience objections or defenses that such party may have in such action, suit or proceeding. Each party hereby irrevocably and unconditionally consents to the service of process of any of the aforementioned courts.

19.    Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF. THE PARTIES HERETO AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND WOULD NOT ENTER INTO THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.

20.    No Employment Rights. The Participant understands and agrees that this Agreement does not impact in any way the right of the Company or its Subsidiaries to terminate or change the terms of the employment of the Participant at any time for any reason whatsoever, with or without cause, nor confer upon any right to continue in the employ of the Company or any of its Subsidiaries.

21.    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the Restricted Stock Units and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

22.    Claw-Back Policy. The Restricted Stock Units shall be subject to any claw-back policy implemented by the Company.

23.    Waiver of Class Actions in Employment Disputes. Participant agrees to waive all rights to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act (“FLSA”) collective action) in any civil court or arbitration proceeding, including but not limited to receiving or requesting notice from a pending collective action, to the extent permitted by law. Therefore, Participant agrees that he/she cannot file or opt-in to a collective action during employment, unless agreed upon by Participant and the Company in writing. In no way does this provision serve to preclude Participant from bringing an unfair labor practices claim against the Company pursuant to the National Labor Relations Act.

PARTICIPANT UNDERSTANDS THAT THIS AGREEMENT RESTRICTS HIS/HER RIGHT TO SUE THE COMPANY, LIMITS PARTICIPANT’S RIGHTS TO PARTICIPATE IN ANY CLASS OR COLLECTIVE ACTIONS, AND APPLIES TO ANY EMPLOYMENT DISPUTE(S) INCLUDING THOSE THAT OCCURRED BEFORE THE DATE SET FORTH ABOVE.


PARTICIPANT HAS SIGNED THIS AGREEMENT ON THE DATE SET FORTH ABOVE. BY SIGNING BELOW, PARTICIPANT REPRESENTS AND WARRANTS THAT PARTICIPANT HAS READ AND GIVEN CAREFUL CONSIDERATION TO ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND ACKNOWLEDGES AND ACCEPTS THE TERMS AND OBLIGATIONS THAT THIS AGREEMENT IMPOSES UPON PARTICIPANT WITHOUT RESERVATION.

[Signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first date set forth above.



NEXTIER OILFIELD SOLUTIONS INC.



By:         
Name:
Title:


PARTICIPANT:
        

Name: Drummond, Robert

Appendix A

Definitions

For purposes of this Agreement, the following definitions shall apply.

“Cause” shall mean (i) in the event that the Participant is subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “cause” (or words with similar meaning), Cause shall have the meaning set forth in such agreement, and (ii) in the event that the Participant is not subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “cause” (or words with similar meaning), Cause shall mean (a) the Participant’s indictment for, conviction of, or the entry of a plea of guilty or no contest to, a felony or any other crime involving dishonesty, moral turpitude or theft; (b) the Participant’s conduct in connection with the Participant’s duties or responsibilities with the Company that is fraudulent, unlawful or grossly negligent; (c) the Participant’s willful misconduct; (d) the Participant’s contravention of specific lawful directions related to a material duty or responsibility which is directed to be undertaken from the Board or the person to whom the Participant reports; (e) the Participant’s material breach of the Participant’s obligations under the Plan, this Agreement or any other agreement between the Participant and the Company and its Subsidiaries; (f) any acts of dishonesty by the Participant resulting or intending to result in personal gain or enrichment at the expense of the Company, its Subsidiaries or Affiliates; or (g) the Participant’s failure to comply with a material policy of the Company, its Subsidiaries or Affiliates.

“Change in Control” shall mean the occurrence of any of the following events after the Date of Grant:

A.    any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Holder, acquires “beneficial ownership” (within the meaning


of Rule 13d-3 under the Exchange Act) of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities; provided, however, that if the Company engages in a merger or consolidation in which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity;

B.    a change in the composition of the Board such that the “Continuing Directors” cease for any reason, other than due to ordinary course retirement, death, disability, term limit or any director refreshment or similar policy, to constitute at least seventy percent (70%) of the Board. The “Continuing Directors” shall mean those members of the Board who either: (x) were directors on the Date of Grant; or (y) were subsequently elected by, or on the nomination or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Board who were or become Continuing Directors;

C.    the consummation of a merger, reorganization or consolidation of the Company with any corporation, including without limitation, a reverse or forward triangular merger, where the Company’s shareholders immediately prior to such transaction own less than a majority of the voting securities of the surviving or resulting corporation or entity after the transaction;

D.    the consummation of a transaction that implements in whole or in part a resolution of the Company’s shareholders authorizing a complete liquidation or dissolution of the Company; or

E.    the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company, other than to a Permitted Holder or Permitted Holders;

provided, however, if a Change in Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A, a transaction or event described in paragraph (A), (B), (C), (D) or (E) shall constitute a Change in Control only if such transaction or event constitutes a “change in control event” as defined in Treasury Regulation Section l .409A-3(i)(5).

“Disability” means (i) in the event that the Participant is subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “disability” (or words with similar meaning), Disability shall have the meaning set forth in such agreement, and (ii) in the event that the Participant is not subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “disability” (or words with similar meaning), “disability” means a determination by the Company in accordance with applicable law that as a result of a physical or mental injury or illness, the Participant is unable to perform the essential functions of the Participant’s job with or without reasonable accommodation for a period of (i) ninety (90) consecutive days or (ii) one hundred twenty (120) days in any one (1) year period.

“DRO” shall mean any judgment, decree or order which relates to marital property rights of a spouse or former spouse and is made pursuant to applicable domestic relations law (including community property law), as such term is further described and used in the Plan.

“Good Reason” shall mean (i) in the event that the Participant is subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “good reason” (or words with similar meaning), Good Reason shall have the meaning set forth in such agreement, and (ii) in the event that the Participant is not subject to a written employment or similar individualized agreement with the Company and/or any of its Subsidiaries that defines “good reason” (or words with similar meaning), Good Reason shall mean the occurrence of any of the following, without the Participant’s consent: (a) a material diminution of the Participant’s title, duties or authority, or (b) a material reduction in the Participant’s base salary. Any event shall cease to constitute Good Reason unless within ninety (90) days after the Participant’s knowledge of the occurrence of such event that constitutes Good Reason the Participant has provided the Company with at least thirty (30) days’ written notice setting forth in reasonable specificity the events or facts that constitute Good Reason. If the Company timely cures the event giving rise to Good Reason for the Participant’s resignation, the notice of termination shall become null and void.



“Permitted Holder” shall mean (i) any trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company or any of its affiliates, (ii) any subsidiary of the Company that is at least 80% owned by the Company and (iii) any corporation, partnership, limited liability company or other entity owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of securities of the Company.


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 Quarterly Report on Form 10-Q of NexTier Oilfield Solutions 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) 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
(d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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: May 5, 2021 By:
/s/ Robert W. Drummond
Robert W. Drummond
Chief Executive Officer and Director
(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, Kenneth Pucheu, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of NexTier Oilfield Solutions 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) 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
(d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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: May 5, 2021 By:
/s/ Kenneth Pucheu
Kenneth Pucheu
Executive Vice 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 and Director of NexTier Oilfield Solutions Inc. (the “Company”), and Kenneth Pucheu, the Executive Vice President and Chief Financial Officer of the Company, hereby certify that, to their knowledge:
1. The Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 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: May 5, 2021 By:
/s/ Robert W. Drummond
Robert W. Drummond
Chief Executive Officer and Director
(Principal Executive Officer)
Date: May 5, 2021 By:
/s/ Kenneth Pucheu
Kenneth Pucheu
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)