C&J Energy Services, Ltd.
Annual Report 2015

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KC&J Energy Services Ltd. - CJESQFiled: February 29, 2016 (period: December 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K (Mark One)ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO Commission File Number: 001-35538 C&J Energy Services Ltd.(Exact name of registrant as specified in its charter) Bermuda 98-1188116(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) Crown House, 2nd Floor4 Par-la-Ville RdHamilton HM08 Bermuda(Address of principal executive offices)(441) 279-2900(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon shares, par value $0.01 New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ýIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ýIndicate 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 preceding12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted 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 andpost such files). Yes ý No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, tothe best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ýIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange ActLarge accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ (do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ýThe aggregate market value of the registrant’s common shares held by non-affiliates on June 30, 2015 (the last business day of the registrant’s most recently completed secondfiscal quarter) based upon the closing price on the New York Stock Exchange on that date was approximately $698.6 million.The number of shares of the registrant’s common shares, par value $0.01 per share, outstanding at February 22, 2016, was 120,207,209.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement for its 2016 Annual Meeting of Shareholders, which will be filed with the United States Securities and ExchangeCommission within 120 days of December 31, 2015, are incorporated by reference into Part III of this Annual Report on Form 10-K. Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTS PagePART I Item 1. Business 2 Item 1A. Risk Factors 15 Item 1B. Unresolved Staff Comments 15 Item 2. Properties 28 Item 3. Legal Proceedings 28 Item 4. Mine Safety Disclosures 29 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 30 Item 6. Selected Financial Data 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8. Financial Statements and Supplementary Data 57 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 98 Item 9A. Controls and Procedures 98 Item 9B. Other Information 98 PART III Item 10. Directors, Executive Officers and Corporate Governance 99 Item 11. Executive Compensation 99 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 99 Item 13. Certain Relationships and Related Transactions, and Director Independence 100 Item 14. Principal Accounting Fees and Services 100 PART IV Part 15. Exhibits, Financial Statement Schedules 101 Signatures 105 Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART ICAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K (this “Annual Report”) includes certain statements and information that may constitute “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities ExchangeAct of 1934, as amended (the “Exchange Act”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,”“forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions that conveythe uncertainty of future events or outcomes, and the negative thereof, are intended to identify forward-looking statements. Forward-looking statements,which are not generally historical in nature, include those that express a belief, expectation or intention regarding our future activities, plans and goals andour current expectations with respect to, among other things:•our operating cash flows, the availability of capital and our liquidity;•our ability to comply with the financial covenant metrics contained in our debt instruments;•our future revenue, income and operating performance;•our ability to sustain and improve our utilization, revenue and margins;•our ability to maintain acceptable pricing for our services, including in the spot market;•future capital expenditures;•our ability to finance equipment, working capital and capital expenditures;•our ability to execute our long-term growth strategy, including expansion into new geographic regions and business lines;•our plan to continue to seek international growth opportunities, and our ability to successfully execute and capitalize on such opportunities;•our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements;and•the timing and success of future acquisitions and other strategic initiatives and special projects.Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience andour present expectations or projections. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for ourexisting operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us,and other factors believed to be appropriate. Although management believes the expectations and assumptions reflected in these forward-looking statementsare reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full orat all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which arebeyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but arenot limited to, risks associated with the following:•a decline in demand for our services, including due to overcapacity and declining commodity prices and other competitive factors affecting ourindustry;•the cyclical nature and volatility of the oil and gas industry, which impacts the level of drilling, completion and production activity andspending patterns by the oil and gas exploration and production industry;•the inability to comply with the financial and other covenants and metrics in our debt agreements as a result of reduced revenue and financialperformance or our inability to raise sufficient funds through assets sales or equity issuances should we need to raise funds through suchmethods;1Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers andnegatively impacts drilling, completion and production activity and therefore impacts demand and pricing for our services and negativelyimpacts our results of operations, including potential impairment charges;•the loss of, or interruption or delay in operations by, one or more significant customers;•the failure to pay amounts when due, or at all, by one or more significant customers;•pressure on pricing for our core services, including due to competition and industry and/or economic conditions, which may, impact amongother things, our ability to implement price increases or maintain pricing on our core services;•an increase in interest rates;•changes in customer requirements in markets or industries we serve;•costs, delays, regulatory compliance requirements and other difficulties in executing our long-term growth strategy, including those related toexpansion into new geographic regions and new business lines;•the effects of future acquisitions on our business, including our ability to successfully integrate our operations and the costs incurred in doingso;•business growth outpacing the capabilities of our infrastructure;•adverse weather conditions in oil or gas producing regions;•the effect of environmental and other governmental regulations on our operations, including the risk that future changes in the regulation ofhydraulic fracturing could reduce or eliminate demand for our hydraulic fracturing services;•the incurrence of significant costs and liabilities resulting from litigation;•the incurrence of significant costs and liabilities resulting from our failure to comply, or our compliance with, new or existing environmentalregulations or an accidental release of hazardous substances into the environment;•expanding our operations overseas;•the loss of, or inability to attract new, key management personnel;•a shortage of qualified workers;•the loss of, or interruption or delay in operations by, one or more of our key suppliers;•operating hazards inherent in our industry, including the significant possibility of accidents resulting in personal injury or death, propertydamage or environmental damage; and•accidental damage to or malfunction of equipment.For additional information regarding known material factors that could affect our operating results and performance, please read (1) “RiskFactors” in Part I, Item 1A and (2) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this AnnualReport. Should one or more of these known material risks occur, or should the underlying assumptions prove incorrect, our actual results, performance,achievements or plans could differ materially from those expressed or implied in any forward-looking statement.Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake noobligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events orotherwise, except as required by law.2Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 1.Overview of Our BusinessC&J Energy Services Ltd. is a Bermuda exempt company listed on the New York Stock Exchange (“NYSE”) under the symbol “CJES.” Effective as ofMarch 24, 2015 (the "Effective Time"), we completed the combination of C&J Energy Services, Inc. (“Legacy C&J”) with the completion and productionservices business (the “C&P Business”) of Nabors Industries Ltd. (“Nabors”) pursuant to that certain Agreement and Plan of Merger (as amended, the “MergerAgreement”), dated as of June 25, 2014, by and among Legacy C&J, Nabors, Nabors Red Lion Limited (subsequently renamed C&J Energy Services Ltd.,“New C&J”), Nabors CJ Merger Co. and CJ Holding Co. Under the terms of the Merger Agreement, Nabors separated the C&P Business from the rest of itsoperations and consolidated this business under New C&J. A Delaware subsidiary of New C&J then merged with and into Legacy C&J, with Legacy C&Jcontinuing as the surviving corporation and a direct wholly owned subsidiary of New C&J (such transactions referred to herein collectively as the “Merger”).As of the Effective Time, common shares of Legacy C&J were converted into common shares of New C&J on a 1-for-1 basis, New C&J was renamed “C&JEnergy Services Ltd.” and its common shares began trading on the NYSE under the symbol "CJES", which was previously used by Legacy C&J followingcompletion of our initial public offering in 2011. After giving effect to the Merger, Nabors owned approximately 53% of our outstanding common shares,with Legacy C&J shareholders owning the remaining 47% of our outstanding common shares. As of February 23, 2016, Nabors owns approximately 52% ofour outstanding common shares.Pursuant to Rule 12g-3(a) under the Exchange Act, New C&J is the successor issuer to Legacy C&J following the closing of the Merger and is deemedto succeed to Legacy C&J’s reporting history under the Exchange Act. References to “C&J,” the “Company,” “we,” “us” or “our” in this Annual Report are toNew C&J, together with our consolidated subsidiaries when referring to periods following the completion of the Merger , and are to Legacy C&J , togetherwith our consolidated subsidiaries when referring to periods prior to the completion of the Merger. Results for periods prior to the completion of the Mergerreflect the financial and operating results of Legacy C&J, and do not include the financial and operating results of the C&P Business. Accordingly,comparisons between our consolidated results following the completion of the Merger and results from prior periods may not be meaningful.We are one of the largest, integrated providers of completion and production services in North America. We are led primarily by the individuals whoserved as Legacy C&J’s executive officers prior to the completion of the Merger. We provide a full range of well construction, well completions, well supportand other complementary oilfield services to oil and gas exploration and production companies primarily in North America. Our services, which are involvedin the entire life cycle of the well, include directional drilling, cementing, hydraulic fracturing, cased-hole wireline, coiled tubing, rig services, fluidsmanagement services and other special well site services. We operate in all of the major oil and gas producing regions of the continental United States andWestern Canada. For the last few years we have been working to establish an operational presence in key countries in the Middle East, and we currently havean office and operational facility in Dubai and an operational facility in Saudi Arabia.Our operating and financial performance is heavily influenced by drilling, completion and production activity by our customers in the upstreamindustry, and thus is significantly impacted by oil and natural gas prices. However, our performance also reflects the impact of our growth strategy, includingour investments in strategic initiatives designed to strengthen, expand and diversify our company through service line diversification, vertical integrationand technological advancement. In implementing our acquisition strategy, in addition to the Merger, we acquired an equipment manufacturing business in2011 and a data acquisition and control systems business in 2013. We utilize the equipment and products manufactured by these vertically integratedbusinesses in our day-to-day operations, and we also sell them to third-party customers in the global energy services industry. Additionally, in May 2015, weacquired a business that designs, manufactures and installs electrical submersible pump systems and accessories primarily for artificial lift applications, whichare primarily used during the completion and production lifecycle of a well. During 2013, we also began organically developing a specialty chemicalssupply business for completion and production services. We source many of the chemicals and fluids used in our hydraulic fracturing operations through thisbusiness, which provides cost savings to us and also gives us direct control over the design, development and supply of these products. Additionally, wehave taken a multi-faceted, integrated approach to developing our directional drilling capabilities. In April 2013, we acquired a provider of directionaldrilling technology and related downhole tools. Building on that technology, during the first half of 2014 we began manufacturing premium drilling motorsin-house and during the second quarter of 2014 we introduced our directional drilling services line to customers as a new service offering.Over the last several years we have also significantly invested in our research and technology capabilities, including the development of a state-of-the-art research and technology center with a team of engineers and support staff. We believe that one of the strategic benefits of this division is the ability todevelop and implement new technologies and respond to changes in customers’ requirements and industry demand. Our efforts to date have been focused ondeveloping innovative, fit-for-purpose solutions designed to enhance our core service offerings, increase completion efficiencies, provide cost savings to ouroperations and add value for our customers. Several of our research and technology initiatives are now generating monthly cost3Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.savings for our expanded, integrated completion services operations, which is central to our overall strategy of proactively managing our costs to maximizereturns. Additionally, several of these investments are already delivering value added products and services that, in addition to producing revenue, arecreating increasing demand from key customers. We believe these capabilities can also provide a competitive advantage as customers look for innovativemeans for extracting oil and gas in the most economical and efficient way possible.Our principal executive offices are located at Crown House, 2nd Floor, 4 Par-la-Ville Rd, Hamilton HM08 Bermuda and our main telephone number atthat address is (441) 279-2900. Our website is available at www.cjenergy.com. We make available free of charge through our website all reports filed with orfurnished to the U.S. Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Exchange Act, including our Annual Report onForm 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and all amendments to those reports, as soon asreasonably practicable after such material is electronically filed with or furnished to the SEC. Information contained on or available through our website isnot a part of or incorporated into this Annual Report or any other report that we may file with or furnish to the SEC.Our Operating Segments & StrategyWe operate in three reportable business segments:•Completion Services, which includes the hydraulic fracturing services, cased-hole wireline services, coiled tubing services and other wellstimulation services of both Legacy C&J and the C&P Business.•Well Support Services, which includes services acquired with the C&P Business, specifically including rig services, fluid management services andother special well site services.•Other Services, which include Legacy C&J’s smaller service lines and divisions, including directional drilling services, equipment manufacturingand repair, specialty chemicals sales, research and technology, and Middle East operations, as well as the C&P Business’ cementing services. Wemanage several of our vertically integrated business through our research and technology division, including our data acquisition and controlinstruments provider and artificial lift applications provider. Costs associated with general corporate activities and intersegment eliminations arealso included in this Other Services segment.Each segment is described in more detail below; for additional financial information about our segments, including revenue from external customersand total assets by segment, see Note 11 - Segment Information in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.Our operating and financial results for our core service lines, which are primarily included in our Completion Services segment and Well SupportServices segment, are driven primarily by deviations in four interrelated, fluctuating variables: (1) the drilling, completion and production activities of ourcustomers, which is driven by oil and natural gas prices and directly affects the demand for our services; (2) the price we are able to charge for our services,which is driven by the level of demand for our services and equipment capacity in the market; (3) the cost of products and labor involved in providing ourservices, and our ability to pass those costs on to our customers; and (4) our activity, or “utilization” levels, and service performance.Management evaluates the performance of our operating segments primarily based on Adjusted EBITDA because it provides important information tous about the activity and profitability of our service lines within each segment and aids us in analytical comparisons for purposes of, among other things,efficiently allocating our assets and resources. Adjusted EBITDA is a non-GAAP financial measure computed as total earnings before net interest expense,income taxes, depreciation and amortization, other income (expense), net, net gain or loss on disposal of assets, acquisition-related costs, and non-routineitems.Our operating strategy is focused on maintaining high asset utilization levels to maximize revenue generation while controlling cost to gain acompetitive advantage and drive returns. We believe that the quality and efficiency of our service execution and aligning with customers who recognize thevalue that C&J provides through efficiency gains are central to our efforts to support utilization and grow our business. Although our management teammonitors asset utilization, among other factors, for purposes of assessing our overall activity levels and customer demand, asset utilization cannot be reliedon as indicative of our financial and/or operational performance. Given the volatile and cyclical nature of activity drivers in the U.S. onshore oilfield servicesindustry, coupled with the varying prices we are able to charge for our services and the cost of providing those services, among other factors, operatingmargins can fluctuate widely depending on supply and demand at a given point in the cycle. For additional information about factors impacting our businessand results of operations, please see4Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.“Industry Trends and Outlook” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this AnnualReport.Completion ServicesOur Completion Services segment consists of the following service lines: (1) hydraulic fracturing; (2) cased-hole wireline, which includes wirelinelogging, perforating, pressure pumping ,well site make-up and pressure testing and other complementary services; and (3) coiled tubing and other wellstimulation services, including nitrogen, pressure pumping and thru-tubing services. The majority of revenue for this segment is generated by our hydraulicfracturing services line.Our Completion Services segment consists of over 1.2 million hydraulic horsepower, over 130 wireline units and over 40 coiled tubing units, havingsignificantly increased our asset base as a result of the Merger. However, not all of these assets are utilized fully or at all at any time, due to, among otherthings, scheduled maintenance and downtime. Additionally, in response to the continued deterioration in market conditions over the course of the year, weimplemented aggressive cost control measures and aligned our assets with industry demand, which included stacking or idling unproductive equipmentacross our asset base within each service line.For the year ended December 31, 2015, revenue from our Completion Services segment was $1.2 billion, representing approximately 70% of our totalrevenue, with net loss of $816.5 million and Adjusted EBITDA of $73.9 million.Well Support ServicesOur Well Support Services segment, which was acquired in the Merger as part of the C&P Business, consists of the following service lines: (1) rigservices, including providing workover and well servicing rigs that are involved in routine repair and maintenance, completions, re-drilling and plug andabandonment operations; (2) fluid management services, including manufacturing, transportation, storage and disposal services for fluids used in the drilling,completion and workover of oil and gas well; and (3) other special well site services. Our rig services line is the greatest driver of revenue for this segment.Our rig services line consists of a fleet of 519 workover rigs. Our workover services are designed to enhance the production of existing wells andgenerally are more complex and time consuming than normal maintenance services. Workover services can include deepening or extending wellbores intonew formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones,converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures.Workover services may last from a few days to several weeks, depending on the complexity of the workover. Maintenance services provided with our rig fleetare generally required throughout the life cycle of an oil or gas well. Examples of these maintenance services include routine mechanical repairs to thepumps, tubing and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellboresto identify and resolve production problems. Maintenance services are generally less complicated than completion and workover related services and requireless time to perform. Our rig fleet is also used in the process of permanently shutting-in oil or gas wells that are at the end of their productive lives. Theseplugging and abandonment services generally require auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonmentservices is not significantly impacted by the demand for oil and gas because well operators are required by state regulations to plug wells that are no longerproductive.Our fluid management services consists of a fleet of 1,425 fluid services trucks, 5,258 frac tanks and 30 salt water disposal wells, which supply, store,remove and dispose of specialized fluids utilized in completion and workover operations and are used in daily operations for producing wells. We providetransportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. Wealso provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal insaltwater disposal wells owned by us or a third party. Demand and pricing for our fluid management services generally correspond to demand for our rigservices.For the year ended December 31, 2015, revenue from our Well Support Services segment was $455.8 million, representing approximately 26% of ourtotal revenue, with net loss of $1.6 million and Adjusted EBITDA of $72.3 million.Other ServicesOur Other Services segment is comprised of our smaller service lines and divisions, including cementing services, directional drilling services,equipment manufacturing and repair, specialty chemical sales, Middle East operations, and our research and technology division. We manage several of ourvertically integrated business through our research and technology5Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.division, including our data acquisition and control instruments provider and our artificial lift applications provider. Also included in the Other Services areintersegment eliminations and costs associated with activities of a general corporate nature.Our Other Services segment contributed $76.1 million of revenue for the year ended December 31, 2015, representing approximately 4% of our totalrevenue, with net loss of $54.4 million and Adjusted EBITDA of ($99.4 million).Other Information About Our BusinessGeographic AreasAs a result of the Merger, we operate in all of the major oil and gas producing regions of the continental United States and Western Canada. During theyear ended December 31, 2015, approximately $1.7 billion, or 97.6%, of our consolidated revenue from external customers was derived from the UnitedStates, and the majority of our long-lived assets were located in the United States. We also generated approximately $40.7 million, or 2.3%, of our 2015consolidated revenue from operations in Canada, primarily as a result of the Canadian business that we acquired in the Merger, and approximately $2.3million, or 0.1% of our 2015 consolidated revenue, from coiled tubing operations in Saudi Arabia.During the year ended December 31, 2014, substantially all of our consolidated revenue from external customers was derived from the United States,and substantially all of our long-lived assets were located in the United States. In the second quarter of 2014, we positioned two of our coiled tubing units inSaudi Arabia to service our first international contract, which generated $1.0 million, or 0.1%, of our 2014 consolidated revenue.Over the past several years, we have focused on expanding our geographic reach, both domestically and internationally. With respect to ourinternational expansion, most of our efforts have been with respect to the Middle East and we have continued to invest in the infrastructure needed to supportthe development of operations in that region. In January 2014 we were awarded our first international contract to provide coiled tubing services on a trialbasis in Saudi Arabia. During the first half of 2014, we established coiled tubing equipment, crews and logistics on the ground in Saudi Arabia to service thiscontract. We mobilized on location for our customer in late June 2014 and we successfully completed our first coiled tubing job in July 2014. We completedthe scheduled work under this provisional contract in September 2015, but we have maintained a facility and employees in the country. We believe that thiscontract provided us with a valuable opportunity to demonstrate our services outside of the United States and we are optimistic that our efforts can lead, overtime, to a long-term relationship and additional opportunities with this customer. We also hope that by demonstrating our capabilities in the region we maybe able to secure additional opportunities with other customers in the Middle East. Although we are trying to obtain additional work with this customer andother key customers in the region, there is no guarantee that we will be successful in doing so. For certain risks attendant to our anticipated non-U.S.operations, please read “Risk Factors” in Part I, Item 1A of this Annual Report.SeasonalityOur operations are subject to seasonal factors and our overall financial results reflect the seasonal variations experienced in our core service lines.Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may be compounded as ourcustomers exhaust their annual capital spending budgets towards year end. Additionally, our operations are directly affected by weather conditions. Duringthe winter months our customers may delay operations or we may not be able to operate or move our equipment between locations during periods of heavysnow, ice or rain, and during the spring some areas impose transportation restrictions due to the muddy conditions caused by the spring thaws. During thesummer months, our operations may be impacted by tropical weather systems.Sales and MarketingSales of our core service lines in our Completion Services segment and Well Support Services segment are primarily generated by the efforts of oursales force. Due to the short lead time between ordering services and providing services, there is typically no sales backlog in our core service lines in ourCompletion Services segment and Well Support Services segment.Sales and marketing activities are typically performed through our local operations in each geographic region. We believe our local field salespersonnel have an excellent understanding of region-specific issues and customer operating procedures and, therefore, can effectively target marketingactivities. We also have multiple corporate sales representatives that supplement our field sales efforts and focus on large accounts and selling technicalservices. Our sales representatives work closely with our local managers and field sales personnel to target compelling market opportunities. We facilitateteamwork among our sales representatives by basing a portion of their compensation on aggregate company sales targets rather than individual sales targets.We believe this emphasis on teamwork enables us to better serve our existing customers and will also allow us to further expand our customer base.6Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CustomersWe serve a diverse group of independent and major national oil and gas companies that are active in our core areas of operations across the continentalU.S. and in Western Canada. One of the benefits of the Merger was the expansion and diversification of our customer base, as there was very little overlapbetween the top customers of Legacy C&J and the C&P Business. We monitor closely the financial condition of our customers, their capital expenditureplans and other indications of their drilling, completion and production services. In particular, we seek to identify distressed customers and apply what webelieve to be appropriate business measures to protect us from any defaults or failures to pay.Our top ten customers accounted for approximately 53.6%, 51.1% and 64.6% of our consolidated revenue for the years ended December 31, 2015,2014 and 2013, respectively. For the year ended December 31, 2015, revenue from Oxy USA, Inc. represented 15.5% of our consolidated revenue. For theyear ended December 31, 2014, revenue from Anadarko Petroleum Corporation individually represented 16.4% of our consolidated revenue. For the yearended December 31, 2013, revenue from Anadarko Petroleum Corporation and Apache Corporation individually represented 19.5% and 13.1%, respectively,of our consolidated revenue. Other than those listed above, no other customer accounted for more than 10% of our consolidated revenue in 2015, 2014 or2013. If we were to lose any material customer, we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could havean adverse effect on our business until the equipment is redeployed at similar utilization or pricing levels.CompetitionWe operate in highly competitive areas of the energy services industry with significant potential for excess capacity. Completion and well servicingequipment can be moved with relative ease from one region to another in response to changes in levels of activity and market conditions, which may result inan oversupply of equipment in an area. Additionally, the demand for our services depends primarily on the level of spending by oil and gas companies fordrilling, completion and production activities, which are affected by short-term and long-term trends in oil and natural gas prices and numerous other factorsover which we have no control. Utilization and pricing for our services have in the past been negatively affected by increases in supply relative to demand inour core operating areas and geographic markets.Our revenues and earnings are directly affected by changes in utilization and pricing levels for our services, which fluctuate in response to changes inthe level of drilling, completion and workover activity by our customers. Pressure on pricing for our core services, including due to competition and industryand/or economic conditions, has impacted, and is expected to continue to impact, among other things, our ability to maintain utilization and pricing for ourservices or implement price increases. During periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which couldfurther adversely affect our results. Furthermore, even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offsetany rising costs. Also, we may not be able to successfully increase prices without adversely affecting our utilization levels. The inability to maintain ourutilization and pricing levels, or to increase our prices as costs increase, could have a material adverse effect on our business, financial position and results ofoperations.Our competitors include many energy service companies, including some of the largest integrated energy services companies that possess substantiallygreater financial and other resources than we do. Our larger competitors’ greater resources could allow those competitors to compete more effectively than wecan, including by reducing prices for services. Our major competitors for our Completion Services include Halliburton, Schlumberger, Baker Hughes, CalFracWell Services, Trican, Weatherford International, RPC, Inc., Pumpco, a subsidiary of Superior Energy Services, Frac Tech, Basic Energy Services andUniversal (a subsidiary of Patterson-UTI Energy, Inc.), as well as a significant number of regional businesses. Our major competitors for our Well SupportServices include Halliburton, Schlumberger, Baker Hughes, Key Energy Services, Basic Energy Services, Superior Energy Services, Precision, Forbes,Pioneer, as well as a significant number of regional businesses.Generally, we believe that the principal competitive factors in the markets that we serve are price, technical expertise, equipment capacity, work forcecapability, safety record, reputation and experience. Although we believe our customers consider all of these factors, price is often the primary factor indetermining which service provider is awarded work, particularly during times of weak commodity prices as we experienced during 2015 and continue toexperience to date. Additionally, projects for certain of our core service lines are often awarded on a bid basis, which tends to further increase competitionbased primarily on price. While we must be competitive in our pricing, we believe many of our customers elect to work with us based on the safety,performance and quality of our crews, equipment and services. We seek to differentiate ourselves from our major competitors by our operating philosophy,which is focused on delivering the highest quality customer service and equipment, coupled with superior execution and operating efficiency. As part of thisstrategy, we target high7Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.volume, high efficiency customers with service intensive, 24-hour work, which is where we believe we can differentiate our services from our competitors.See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Outlook” foradditional discussion of the market challenges within our industry.Research & Technology, Intellectual Property Over the last several years we have significantly invested in our research and technology capabilities, formally commencing with the 2013establishment of new, state-of-the-art Research and Technology Center housing a team of engineers and support staff. We believe that one of the strategicbenefits of this division is the ability to develop and implement new technologies and enhancements. and respond to changes in customers’ requirements andindustry demand. Our efforts to date have been focused on developing innovative, fit-for-purpose solutions designed to enhance our core service offerings,increase completion efficiencies, provide cost savings to our operations and add value for our customers.As a result of these efforts, starting in 2014 and continuing through 2015, we introduced several new products and progressed on differentiatingtechnologies that we believe will provide a competitive advantage as our customers focus on extracting oil and gas in the most economical and efficientways possible. Some of our research and technology initiatives are now generating monthly cost savings for our expanded, integrated completion servicesoperations, which is central to our overall strategy of proactively managing our costs to maximize returns. Our equipment manufacturing division providesanother platform to integrate our strategic initiatives, implement technological developments and enhancements and capture additional cost savings.Additionally, several of these investments are delivering value added products and services that are creating increasing demand from key customers.We seek patent and trademark protections for our technology when we deem it prudent, and we aggressively pursue protection of these rights. Webelieve our patents and trademarks are adequate for the conduct of our business and that no single patent or trademark is critical to our business. In addition,we rely to a great extent on the technical expertise and know-how of our personnel to maintain our competitive position.SuppliersWe purchase raw materials (such as proppant, guar, fracturing fluids or coiled tubing) and finished products (such as fluid-handling equipment) used inour Completion Services segment and certain raw materials and finished products used in our Well Support Services segment from various third-partysuppliers, as well as from our other smaller businesses included in our Other Services segment.We are not dependent on any single supply source for these materials or products and we believe that we will be able to make satisfactory alternativearrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers. During the year ended December 31,2015, only our equipment manufacturing business and our specialty chemicals business supplied 5% or more of the materials and/or products used in ourCompletion Services segment, and no single supplier supplied 5% or more of the materials and/or products used in our Well Support Services segments.However, should we be unable to purchase the necessary materials and/or products, or otherwise be unable to procure the materials and/or products in atimely manner and in the quantities required, we may be delayed in providing our services, which could have a material adverse effect on our business,financial condition, results of operations and cash flows. For example, in the past, our industry faced sporadic proppant shortages and trucking shortagesassociated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several competitors.Additionally, increasing costs of certain raw materials may negatively impact demand for our services or the profitability of our business operations. Quality, Health, Safety and Environmental ("QHSE") ProgramOur business involves the operation of heavy and powerful equipment which can result in serious injuries to our employees and third parties andsubstantial damage to property. We commit substantial resources toward employee safety and QHSE management training programs, as well as our employeereview process. We have comprehensive QHSE-focused training programs designed to minimize accidents in the workplace and improve the efficiency of ouroperations. We believe that our QHSE policies and procedures provide a solid framework to ensure our operations minimize the hazards inherent in our workand meet regulatory requirements and customer demands.Our record and reputation for safety is important to all aspects of our business. In the energy services industry, an important competitive factor inestablishing and maintaining long-term customer relationships is having an experienced, skilled8Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and well-trained work force. In recent years, many of our larger customers have placed an added emphasis on the safety records and quality managementsystems of their contractors. We believe that these factors will gain further importance in the future.Risk Management and InsuranceOur operations are subject to hazards inherent in the oil and gas industry, including blowouts, explosions, cratering, fires, oil spills, hazardousmaterials spills, loss of well control, loss of or damage to the wellbore, formation or underground reservoir, damaged or lost equipment, and damage or lossfrom inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment andfacilities, loss of oil and natural gas production, suspension of operations, environmental and natural resources damage and damage to the property of others.Additionally, because our business involves the transportation of heavy equipment and materials, we may also experience traffic accidents which may resultin personal injury or death, damage to or destruction of equipment and the property of others and hazardous materials spills. If a serious accident were tooccur involving our employees, equipment and/or services, it could result in C&J being named as a defendant in lawsuits asserting large claims for damages.Despite our efforts to maintain high safety standards, we from time to time have suffered accidents, and it is likely that we will experience accidents inthe future. In addition to the property and personal losses from these accidents, the frequency and severity of these incidents affect our operating costs andinsurability, and our relationship with customers, employees and regulatory agencies. Any significant increase in the frequency or severity of these incidents,or the general level of compensatory payments, could adversely affect the cost of, or our ability to obtain, workers’ compensation and other forms ofinsurance, and could have other material adverse effects on our financial condition and results of operations.We maintain insurance policies for workers’ compensation, automobile liability, general liability, which also includes sudden and accidentalpollution insurance, and property damage relating to catastrophic events. These insurance policies carry self-insured retention limits or deductibles on a peroccurrence basis. We have deductibles per occurrence for: workers’ compensation of $1,000,000; automobile liability claims of $1,000,000; general liabilityclaims, including sudden and accidental pollution claims, of $250,000, plus an additional annual aggregate deductible of $250,000; and property damagefor catastrophic events of $25,000. However, under the terms of the Separation Agreement relating to the Merger, we assumed, among other liabilities, allliabilities of the C&P Business to the extent arising out of or resulting from the operation of the C&P Business at any time before, at or after the closing of theMerger, including liability for death, personal injury and property damage resulting from or caused by the assets, products and services of the C&P Business;other than those liabilities relating to or resulting from any demand, claim, investigation or litigation pending or asserted in writing as of the closing of theMerger. Any liability relating to or resulting from any claim or litigation asserted after the closing of the Merger, but where the underlying cause of actionarose prior to that time, would not be covered by our insurance policies.As discussed below, our Master Service Agreements (“MSAs”) with each of our customers provide, among other things, that our customers generallyassume (without regard to fault) liability for underground pollution and pollution emanating from the wellbore as a result of an explosion, fire or blowout.We retain the risk for any liability not indemnified by our customers in excess of our insurance coverage. Our insurance coverage may be inadequate to coverour liabilities. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable or onterms as favorable as our current arrangements.We enter into MSAs with each of our customers for our core service lines in our Completion Services segment and our Well Support Services segment.Our MSAs delineate our and our customers’ respective indemnification obligations with respect to the services we provide. Our MSAs typically provide forknock-for-knock indemnification for all losses, which means that we and our customers assume liability for damages to our respective personnel andproperty. For catastrophic losses, our MSAs generally include industry-standard carve-outs from the knock-for-knock indemnities, pursuant to which ourcustomers (typically the exploration and production company) assume liability for (i) damage to the hole, including the cost to re-drill; (ii) damage to theformation, underground strata and the reservoir; (iii) damages or claims arising from loss of control of a well or a blowout; and (iv) allegations of subsurfacetrespass. Additionally, our MSAs often provide that we can be held responsible for events of catastrophic loss only if they arise as a result of our grossnegligence or willful misconduct. Our MSAs typically provide for industry-standard pollution indemnities, pursuant to which we assume liability for surfacepollution associated with our equipment and originating above the surface, and our customer assumes (without regard to fault) liability arising from all otherpollution, including, without limitation, underground pollution and pollution emanating from the wellbore as a result of an explosion, fire or blowout.The description of insurance policies set forth above is a summary of certain material terms of our insurance policies currently in effect and maychange in the future as a result of market and/or other conditions. Similarly, the summary of MSAs set forth above is a summary of the material terms of thetypical MSA that we have in place and does not reflect every MSA9Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.that we have entered into or may enter into in the future, some of which may contain indemnity structures and risk allocations between our customers and usthat are different than those described here.EmployeesAs of February 22, 2016, we had 6,151 employees. We significantly increased our employee base as a result of combing Legacy C&J with the C&PBusiness, increasing overall headcount from 3,397 employees to 9,168 employees immediately following the closing of the Merger. However, due to thesevere deterioration in market conditions over the course of 2015, we reduced our headcount as part of our continuing effort to align our business with thereduction in demand for our services, as well as due to the elimination of duplicative positions as we implemented our integration strategy following theMerger.The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work.Subject to industry and local market conditions, the additional crew members needed for our core service lines in our Completion Services and Well SupportServices segments are generally available for hire on relatively short notice.Our employees are not represented by any labor unions or covered by collective bargaining agreements. We consider our relations with our employeesto be generally good.Government Regulations and Environmental MattersWe are significantly affected by stringent and complex federal, state and local laws and regulations, including those governing worker health andsafety, motor carrier operations, the transportation of explosives, the use, management and disposal of certain radioactive materials, the handling ofhazardous materials and the emission or discharge of substances into the environment or otherwise relating to environmental protection. Regulationsconcerning equipment certification create an ongoing need for regular maintenance, which is incorporated into our daily operating procedures. Any failureby us to comply with such local, state and federal laws and regulations may result in governmental authorities taking actions against our business that couldadversely impact our operations and financial condition, including the following: · issuance of administrative, civil and criminal penalties; · modification, denial or revocation of permits or other authorizations; · imposition of limitations on our operations through injunctions or other governmental actions; and · performance of site investigatory, remedial or other corrective actions.Worker Health and SafetyWe are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes that regulate theprotection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained abouthazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and thepublic. We believe that our operations are in substantial compliance with the OSHA requirements, including general industry standards, record keepingrequirements and monitoring of occupational exposure to regulated substances.Motor Carrier OperationsAmong the services we provide, we operate as a motor carrier and therefore are subject to regulation by the United States Department of Transportation(“DOT”) and various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motorcarrier operations; regulatory safety; hazardous materials labeling, placarding and marking; financial reporting; and certain mergers, consolidations andacquisitions. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and producthandling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry byrequiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Someof these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations which govern the amount oftime a driver may drive in any specific period and requiring onboard black box recorder devices or limits on vehicle weight and size.10Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Interstate motor carrier operations are subject to safety requirements prescribed by DOT. To a large degree, intrastate motor carrier operations aresubject to safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and stateregulations. DOT regulations also mandate drug testing of drivers. From time to time, various legislative proposals are introduced, including proposals toincrease federal, state or local taxes, including taxes on motor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannotpredict whether, or in what form, any increase in such taxes applicable to us will be enacted.Radioactive MaterialsIn addition, some of our operations utilize equipment that contains sealed, low-grade radioactive sources. Our activities involving the use ofradioactive materials are regulated by the United States Nuclear Regulatory Commission (“NRC”) and state regulatory agencies under agreement with theNRC. Standards implemented by these regulatory agencies require us to obtain licenses or other approvals for the use of such radioactive materials. Webelieve that we have obtained these licenses and approvals when necessary and that we are in substantial compliance with these requirements. Numerousgovernmental agencies issue regulations to implement and enforce these laws, for which compliance is often costly and difficult. The violation of these lawsand regulations may result in the denial or revocation of permits, issuance of corrective action orders, injunctions prohibiting some or all of our operations,assessment of administrative and civil penalties, and even criminal prosecution.Hazardous SubstancesWe generate wastes, including hazardous wastes, which are subject to the federal Resource Conservation and Recovery Act (“RCRA”), and comparablestate statutes. The U.S. Environmental Protection Agency (“EPA”), the NRC, and state agencies have limited the approved methods of disposal for some typesof hazardous and nonhazardous wastes. RCRA currently excludes drilling fluids, produced waters and certain other wastes associated with the exploration,development or production of oil and natural gas from regulation as “hazardous waste.” Disposal of such non-hazardous oil and natural gas exploration,development and production wastes is usually regulated by state law. Other wastes handled at exploration and production sites or generated in the course ofproviding well services may not fall within this exclusion. Moreover, stricter standards for waste handling and disposal may be imposed on the oil andnatural gas industry in the future. From time to time, legislation is proposed in Congress, or legal actions are initiated by environmental groups that, ifsuccessful, would revoke or alter the current exclusion of exploration, development and production wastes from the RCRA definition of “hazardous wastes,”thereby potentially subjecting such wastes to more stringent handling, disposal and cleanup requirements. If such efforts were successful, it could have asignificant impact on our operating costs as well as the oil and natural gas industry in general. The impact of future revisions to environmental laws andregulations cannot be predicted. Additionally, Naturally Occurring Radioactive Materials (“NORM”) may contaminate extraction and processing equipmentused in the oil and natural gas industry. The waste resulting from such contamination is regulated by federal and state laws. Standards have been developedfor: worker protection; treatment, storage, and disposal of NORM and NORM waste; management of NORM-contaminated waste piles, containers and tanks;and limitations on the relinquishment of NORM contaminated land for unrestricted use under RCRA and state laws. It is possible that we may incur costs orliabilities associated with elevated levels of NORM.The Federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or the “Superfund” law), and comparable statestatutes impose liability, without regard to fault or legality of the original conduct, on classes of persons that are considered to have contributed to the releaseof a hazardous substance into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substancewas released, and companies that disposed or arranged for disposal of hazardous substances at off-site locations such as landfills. Under CERCLA, thesepersons may be subject to strict, joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environmentand for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury andproperty damage allegedly caused by the hazardous substances released into the environment. We currently own, lease, or operate numerous properties andfacilities that for many years have been used for industrial activities, including oil and natural gas related operations. Hazardous substances, wastes, orhydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations where such substances have been takenfor recycling or disposal. In addition, some of these properties have been operated by third parties or by previous owners whose treatment and disposal orrelease of hazardous substances, wastes, or hydrocarbons, was not under our control. These properties and the substances disposed or released on them may besubject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes andremediate contaminated property (including groundwater contamination) ,including instances where the prior owner or operator caused the contamination, orperform remedial plugging of disposal wells or waste pit closure operations to prevent future contamination.11Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.These laws and regulations may also expose us to liability for our acts that were in compliance with applicable laws at the time the acts were performed.Water DischargesThe Federal Water Pollution Control Act (the “Clean Water Act”), and comparable state statutes impose restrictions and strict controls regarding thedischarge of pollutants into state waters or waters of the United States. The discharge of pollutants into jurisdictional waters is prohibited unless the dischargeis permitted by the EPA or applicable state agencies. The Clean Water Act also prohibits the discharge of dredge and fill material into regulated waters,including jurisdictional wetlands, unless authorized by an appropriately issued permit. In September 2015, a new EPA and U.S. Army Corps of Engineers (the“Corps”) rule defining the scope of the EPA’s and the Corps’ jurisdiction over wetlands and other waters became effective. To the extent the rule expands therange of properties subject to the Clean Water Act’s jurisdiction, we could face increased costs and delays with respect to obtaining permits for dredge and fillactivities in wetland areas. The rule has been challenged in court on the grounds that it unlawfully expands the reach of Clean Water Act programs, andimplementation of the rule has been stayed pending resolution of the court challenge. The process for obtaining permits has the potential to delay thedevelopment of natural gas and oil projects. Also, spill prevention, control and countermeasure regulations under federal law require appropriate containmentberms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak.In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm waterrunoff from certain types of facilities. Moreover, the Oil Pollution Act of 1990 (“OPA”) imposes a variety of requirements on responsible parties related to theprevention of oil spills and liability for damages, including natural resource damages, resulting from such spills in waters of the United States. A responsibleparty includes the owner or operator of an onshore facility. The Clean Water Act and analogous state laws provide for administrative, civil and criminalpenalties for unauthorized discharges and, together with the OPA, impose rigorous requirements for spill prevention and response planning, as well assubstantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.The Safe Water Drinking Act (“SDWA”) regulates the underground injection of substances through the Underground Injection Control (“UIC”)program. Hydraulic fracturing generally is exempt from regulation under the UIC program, and the hydraulic fracturing process is typically regulated by stateoil and gas commissions. However, the EPA has asserted that hydraulic fracturing with fluids containing diesel fuel is subject to regulation under the UICprogram. In addition, in response to recent seismic events near underground injection wells used for the disposal of oil and gas-related wastewater, federal andsome state agencies have begun investigating whether such wells have caused increased seismic activity, and some states have imposed volumetric injectionlimits, shut down or imposed moratorium on the use of such injection wells. If new regulatory initiatives are implemented that restrict or prohibit the use ofunderground injection wells in areas where we rely upon the use of such wells in our operations, our costs to operate may significantly increase and ourability to perform services may be delayed or limited, which could have an adverse effect on our results of operations and financial position.Air EmissionsSome of our operations also result in emissions of regulated air pollutants. The federal Clean Air Act (“CAA”) and analogous state laws require permitsfor certain facilities that have the potential to emit substances into the atmosphere that could adversely affect environmental quality. These laws and theirimplementing regulations also impose generally applicable limitations on air emissions and require adherence to maintenance, work practice, reporting andrecord keeping, and other requirements. Failure to obtain a permit or to comply with permit or other regulatory requirements could result in the imposition ofsubstantial administrative, civil and even criminal penalties. In addition, we or our customers could be required to shut down or retrofit existing equipment,leading to additional expenses and operational delays.Many of these regulatory requirements, including New Source Performance Standards (“NSPS”) and Maximum Achievable Control Technology(“MACT”) standards are expected to be made more stringent over time as a result of stricter ambient air quality standards and other air quality protectiongoals adopted by the EPA. For example, in October 2015, the EPA lowered the National Ambient Air Quality Standard, (“NAAQS”) for ozone from 75 to 70parts per billion for both the 8-hour primary and secondary standards. State implementation of the revised NAAQS could result in stricter permittingrequirements, delay or prohibit our ability to obtain such permits, and result in increased expenditures for pollution control equipment, the costs of whichcould be significant. In addition, in 2012, the EPA issued federal regulations requiring the reduction of volatile organic compound (“VOC”) emissions fromcertain fractured and refractured natural gas wells for which well completion operations are conducted and further requiring that most wells use reducedemission completions, also known as “green12Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.completions.” These regulations also establish specific new requirements regarding emissions from production related wet seal and reciprocatingcompressors, and from pneumatic controllers and storage vessels.Compliance with these and other air pollution control and permitting requirements has the potential to delay the development of oil and natural gasprojects and increase costs for us and our customers. Although we do not believe our operations will be materially adversely affected by these requirements,our business could be materially affected if our customers’ operations are significantly affected by these or other similar requirements. These requirementscould increase the cost of doing business for us and our customers, reduce the demand for the oil and gas our customers produce, and thus have an adverseeffect on the demand for our products and services.Climate ChangeMore stringent laws and regulations relating to climate change may be adopted in the future and could cause us to incur additional operating costs orreduce the demand for our services. The EPA has determined that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”) present anendangerment to the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth’s atmosphere and otherclimatic changes. Based on these findings, EPA has adopted regulations that restrict emissions of GHGs under existing provisions of the CAA, including rulesthat require preconstruction and operating permit reviews for GHG emissions from certain large stationary sources. The EPA has also adopted rules requiringthe monitoring and reporting of GHG emissions from specified GHG sources, including, among others, certain oil and natural gas production facilities, on anannual basis. More recently, in August 2015, the EPA announced proposed rules that would establish new air emission controls for emissions of methanefrom certain equipment and processes in the oil and natural gas source category, including production, processing, transmission and storage activities. TheEPA’s proposed rule package includes first-time standards to address emissions of methane from equipment and processes across the source category,including hydraulically fractured oil and natural gas well completions. The Bureau of Land Management (“BLM”) also proposed new rules in January 2016which seek to limit methane emissions from new and existing oil and gas operations on federal lands through limitations on the venting and flaring of gas, aswell as enhanced leak detection and repair requirements. We do not believe our operations are currently subject to these requirements, but our business couldbe affected if our customers’ operations become subject to these or other similar requirements. Moreover, these requirements could increase the cost of doingbusiness for us and our customers, reduce the demand for the oil and gas our customers produce, and thus have a material adverse effect on the demand for ourproducts and services.In addition, Congress has from time to time considered legislation to reduce emissions of GHGs, and almost one-half of the states have already takenlegal measures to reduce emissions of GHGs, primarily through the development of GHG emission inventories and/or regional GHG cap and trade programs.Most of these cap and trade programs work by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances.The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. Although itis not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact our business, any newfederal, regional or state restrictions on emissions of carbon dioxide or other GHGs that may be imposed in areas in which we conduct business could result inincreased compliance costs or additional operating restrictions on our customers. Such restrictions could potentially make our customers’ products moreexpensive and thus reduce demand for such products, which in turn could have a material adverse effect on the demand for our services and our business.Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climaticchanges that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events; if any sucheffects were to occur, they could have an adverse effect on our assets and operations.Hydraulic FracturingHydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense subsurface rockformations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surroundingrock and stimulate production. We commonly perform hydraulic fracturing services for our customers. Hydraulic fracturing typically is regulated by state oiland natural gas commissions, but, as noted above, the EPA has asserted federal regulatory authority pursuant to the SDWA over certain hydraulic fracturingactivities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to such activities. In addition, the EPA has taken thefollowing actions and issued final regulations under the CAA governing performance standards, including standards for the capture of air emissions releasedduring hydraulic fracturing; an advanced notice of proposed rule making in March 2014 under the Toxic Substances Control Act that would requirecompanies to disclose information regarding the chemicals used in hydraulic fracturing; and proposed rules in April 2015 to prohibit the discharge ofwastewater from13Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.hydraulic fracturing operations to publicly owned wastewater treatment plants. Also, the BLM finalized rules in March 2015 that impose new or morestringent standards for performing hydraulic fracturing on federal and American Indian lands. The U.S. District Court of Wyoming has temporarily stayedimplementation of this rule, though a final decision has not yet been issued.The White House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices and, in June2015, the EPA released its draft report on the potential impacts of hydraulic fracturing on drinking water resources. The report concluded that hydraulicfracturing activities have not led to widespread, systemic impacts on drinking water resources in the United States, although there are above and belowground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. The draft report is expected to be finalizedafter a public comment period and a formal review by the EPA’s Science Advisory Board. Other governmental agencies, including the U.S. Department ofEnergy and the U.S. Department of the Interior, are evaluating various other aspects of hydraulic fracturing. Depending on their results, these studies couldspur initiatives to further regulate hydraulic fracturing under the federal SDWA or other regulatory mechanisms.In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing throughadditional permit requirements, operational restrictions, disclosure requirements, well construction and temporary or permanent bans on hydraulic fracturingin certain areas. For example, in May 2013, the Texas Railroad Commission adopted new rules governing well casing, cementing and other standards forensuring that hydraulic fracturing operations do not contaminate nearby water resources. Local governments also may seek to adopt ordinances within theirjurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performanceof well drilling in general or hydraulic fracturing in particular. We believe that we follow applicable standard industry practices and legal requirements forgroundwater protection in our hydraulic fracturing activities. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturingare adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or costly to performhydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas exploration andproduction activities and, therefore, adversely affect demand for our services and our business. Such laws or regulations could also materially increase ourcosts of compliance and doing business.There have been no material incidents or citations related to our hydraulic fracturing operations in the past five years. During that period we have notbeen involved in any litigation over alleged environmental violations, have not been ordered to pay any material monetary fine or penalty with respect toalleged environmental violations, and are not currently facing any type of governmental enforcement action or other regulatory proceeding involvingalleged environmental violations related to our hydraulic fracturing operations. In addition, pursuant to our MSAs, we are generally liable for only surfacepollution, not underground or flowback pollution, which our customers are generally liable for and for which we are typically indemnified by our customers.We maintain insurance against some risks associated with underground contamination that may occur as a result of well services activities. However,this insurance is limited to activities at the well site and may not continue to be available or may not be available at premium levels that justify its purchase.The occurrence of a significant event not fully insured or indemnified against could have a materially adverse effect on our financial condition and results ofoperations.Overall, we do not anticipate that compliance with existing environmental laws and regulations will have a material effect on our financial conditionor results of operations. It is possible, however, that substantial costs for compliance or penalties for non-compliance may be incurred in the future. Moreover,it is possible that other developments, such as the adoption of stricter environmental laws, regulations, and enforcement policies, could result in additionalcosts or liabilities that we cannot currently quantify.14Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 1B. Unresolved Staff CommentsNone.Item 1A. Risk FactorsWe face many challenges and risks in the industry in which we operate. Before investing in our shares you should carefully consider each of thefollowing risk factors and all of the other information set forth in this Annual Report, including under the section titled “Cautionary Note RegardingForward-Looking Statements”, and in our other reports filed with the SEC, and the documents and other information incorporated by reference herein andtherein, for a detailed discussion of known material factors which could materially affect our business, financial condition or future results. The risks anduncertainties described are not the only ones we face. Additional risk factors not presently known to us or which we currently consider immaterial may alsoadversely affect our business, financial condition or future results. If any of these risks were actually to occur, our business, financial condition or results ofoperations could be materially adversely affected. In that case, the trading price of our shares could decline and you could lose all or part of yourinvestment.Risks Relating to Our BusinessOur business is cyclical and dependent upon conditions in the oil and natural gas industry, which impact the level of exploration, development andproduction of oil and natural gas and capital expenditures by oil and natural gas companies. Our customers’ willingness to undertake exploration andproduction activities depends largely upon prevailing industry conditions that are influenced by numerous factors which are beyond our control. Any ofthese factors could have a material adverse effect on our business, financial condition, results of operations and cash flow.We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. If theseexpenditures decline, our business will suffer. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cycles and isinfluenced by a combination of long-term, short-term and cyclical trends. Our customers’ willingness to conduct drilling, completion and productionactivities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as: •the supply of and demand for oil and natural gas, including current natural gas storage capacity and usage;•the ability or willingness of the Organization of Petroleum Exporting Countries ("OPEC") to set and maintain production levels for oil;•the current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices;•the supply of and demand for hydraulic fracturing and other well service equipment in the United States;•the cost of exploring for, developing, producing and delivering oil and natural gas;•public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulatehydraulic fracturing activities;•the expected rates of decline of current oil and natural gas production;•lead times associated with acquiring equipment and products and availability of personnel;•regulation of drilling activity;•the discovery and development rates of new oil and natural gas reserves;•available pipeline and other transportation capacity;•weather conditions, including hurricanes that can affect oil and natural gas operations over a wide area;•political instability in oil and natural gas producing countries;•domestic and worldwide economic conditions;•technical advances affecting energy consumption;•the price and availability of alternative fuels; and•merger and divestiture activity among oil and natural gas producers.Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decrease or remain depressed)generally leads to decreased spending by our customers, which in turn negatively impacts drilling, completion and production activity. In particular, thedemand for new or existing drilling, completion and production work is driven by available investment capital for such work. When these capitalinvestments decline, our customers’ demand for our services declines. Because these types of services can be easily “started” and “stopped,” and oil andnatural gas producers generally tend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more15Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.rapid decline in demand for our services compared with demand for other types of energy services. Any negative impact on the spending patterns of ourcustomers may cause lower pricing and utilization for our core service lines, which could have a material adverse effect on our business, financial condition,results of operations and cash flows.Spending by exploration and production companies can also be impacted by conditions in the capital markets. Limitations on the availability ofcapital, or higher costs of capital, for financing expenditures may cause exploration and production companies to make additional reductions to capitalbudgets in the future even if oil prices remain at current levels or natural gas prices increase from current levels. Any such cuts in spending may cause ourcustomers to curtail their drilling programs, including completion and production activities and any discretionary spending on well services, which mayresult in a reduction in the demand for our services, and the rates we can charge and the utilization of our assets. Moreover, reduced discovery rates of new oiland natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitationson exploration and drilling activity or other factors, could also have a material adverse impact on our business, even in a stronger oil and natural gas priceenvironment.Fluctuations in oil and natural gas prices could adversely affect drilling, completion and production activities by oil and natural gas companiesand our revenues, cash flows and profitability. If oil and natural gas prices remain volatile, or if oil or natural gas prices remain low or decline further, thedemand for our services could be adversely affected.The demand for our services depends on the level of spending by oil and gas companies for drilling, completion and production activities, which areaffected by short-term and long-term trends in oil and natural gas prices, including current and anticipated oil and natural gas prices. Oil and natural gasprices, as well as the level of drilling, completion and production activities, historically have been extremely volatile and are expected to continue to behighly volatile. For example, during 2015, oil prices were as high as $61 per barrel and as low as $35 per barrel, and entering 2016 we have seen them fall aslow as $27 per barrel. In line with the sustained weakness and volatility in oil prices over the course of 2015, we experienced a significant decline in drilling,completion and production activities across our customer base, which resulted in reduced demand and increased competition and pricing pressure to varyingdegrees across our service lines and operating areas.Worldwide military, political and economic events, including initiatives by OPEC, affect both the demand for, and the supply of, oil and natural gas.Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacity andother factors that will be beyond our control may also affect the supply of, demand for, and price of oil and natural gas. Volatility or weakness in oil prices ornatural gas prices (or the perception that oil prices or natural gas prices will decrease) affects the spending patterns of our customers and may result in thedrilling of fewer new wells or lower completion and production spending on existing wells. This, in turn, could result in lower demand for our services andcause lower pricing and utilization levels for our services. If oil and natural gas prices continue to remain low or decline further, or if there is a furtherreduction in drilling and completion activities, the demand for our services and our results of operations could be materially and adversely affected.We participate in a capital-intensive industry, and we may not be able to finance future growth of our operations or future acquisitions, which couldadversely affect our operations and financial position.Since the beginning of 2011, our growth has been funded by cash flows from operations, borrowings under our credit facilities and the net proceeds wereceived from our initial public offering, which closed on August 3, 2011. As of December 31, 2015, we had $121.0 million outstanding under our Revolverand $12.6 million in letters of credit, and as of February 23, 2016, we had $251.0 million outstanding under our Revolver and $12.6 million in letters ofcredit, leaving $36.4 million available for additional borrowing based on $300.0 million of Revolver availability. As a result, we have limited ability toborrow under our Revolver until amounts outstanding have been repaid. Please see “Liquidity and Capital Resources -Description of Our Credit Agreement”in Part II, Item 7 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about ourRevolver and other facilities under our Credit Agreement, including the financial and other restrictive covenants contained therein.We expect to depend on recent drawings made on our Revolving Credit Facility for a portion of our future capital needs. We may draw all or a portionof the remaining $36.4 million available for additional borrowing under the Revolver in ordinary course to fund operations, build cash or other generalcorporate purposes. In the event we draw the full amount available under our Revolver, we will no longer have the ability to draw additional funds from theRevolver until some or all of the outstanding borrowings have been repaid. As a result, absent the issuance of additional securities, alternative financingarrangements or the repayment of outstanding borrowings under our Revolving Credit Facility, cash flow from operations and our existing cash on hand maybe the sole source of funding for our operations16Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The successful execution of our growth strategy depends on our ability to generate sufficient cash flows and/or raise additional capital as needed. Ourability to fund future growth depends on our performance, which is impacted by factors beyond our control, including financial, business, economic andother factors, such as potential changes in customer preferences and pressure from competitors. If we are unable to generate sufficient cash flows or to obtainadditional capital on favorable terms or at all, we may be unable to continue growing our business, conduct necessary corporate activities, take advantage ofbusiness opportunities that arise or engage in activities that may be in our long-term best interest, which may adversely impact our ability to sustain orimprove our current level of profitability. Furthermore, any failure to make scheduled payments of interest and principal on our outstanding indebtednesscould harm our ability to incur additional indebtedness on acceptable terms or at all, and also could constitute an event of default under the CreditAgreement and cause a cross default with respect to our other outstanding indebtedness, resulting in the acceleration of all such outstandingindebtedness. Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could materially and adverselyaffect our business, financial condition, results of operations, cash flows and prospects, and we could be forced into bankruptcy or liquidation.If we are unable to generate enough cash flow from operations to service our indebtedness or are unable to use future borrowings to refinance ourindebtedness or fund other capital needs, we may have to undertake alternative financing plans, which may have onerous terms or may be unavailable.We cannot assure you that our business will generate sufficient cash flow from operations to service our outstanding indebtedness, or that futureborrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other capital needs. If we do not generatesufficient cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:•refinancing or restructuring all or a portion of our debt;•obtaining alternative financing;•selling assets;•reducing or delaying capital investments;•seeking to raise additional capital; or•revising or delaying our strategic plans.However, we cannot assure you that we would be able to implement alternative financing plans, if necessary, on commercially reasonable terms or atall, or that undertaking alternative financing plans would allow us to meet our debt obligations and capital requirements or that these actions would bepermitted under the terms of our Credit Agreement. Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternativefinancing could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.We are highly leveraged and our substantial indebtedness could adversely affect our operations and financial condition.As of December 31, 2015, we had $1.2 billion of debt outstanding, excluding original issue discount, comprised of $121.0 million drawn and $12.6million of letters of credit outstanding under our Revolving Credit Facility and $1.1 billion outstanding under a Term Loan B facility, consisting of a $570.7million term loan B-1 that matures in 2019 and a $481.4 million term loan B-2 that matures in 2021. As of February 23, 2016, we had $251.0 millionoutstanding under our Revolver and $12.6 million in letters of credit, leaving $36.4 million available for borrowing, based on $300.0 million of Revolveravailability. The additional draws of $130.0 million on our Revolving Credit Facility since December 31, 2015 will result in approximately $1.1 million ofadditional interest expense for the first quarter of 2016. Should we decide to draw all or some portion of the remaining $36.4 million available under ourRevolver during the first quarter of 2016, we would incur additional amounts of interest cost to do so.As a result of our current indebtedness, we have limited ability to borrow additional funds from the Revolver until some or all of the outstandingborrowings have been repaid. We expect to depend on recent drawings made on our Revolving Credit Facility for a portion of our future capital needs. Wemay draw all or a portion of the remaining $36.4 million available for additional borrowing under the Revolver in ordinary course to fund operations, buildcash or other general corporate purposes. In the event we draw the full amount available under our Revolver, we will no longer have the ability to drawadditional funds from the Revolver until some or all of the outstanding borrowings have been repaid. As a result, absent the issuance of additional securities,alternative financing arrangements or the repayment of outstanding borrowings under our Revolving Credit Facility, cash flow from operations and ourexisting cash on hand may be the sole source of funding for our operations.17Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J’s substantial indebtedness could have negative consequences that could materially and adversely affect our business, financial condition, resultsof operations, cash flows and prospects, such as: •requiring us to dedicate a substantial portion of its cash flow from operating activities to payments on its indebtedness, thereby reducing theavailability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions andother general corporate purposes•limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt servicerequirements or other cash requirements;•increasing our vulnerability to economic downturns and changing market conditions;•placing us at a competitive disadvantage relative to competitors that have less debt;•to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates; and•preventing our ability to buy back our common shares or pay cash dividends.We may not be able to service our debt obligations in accordance with their terms.Our ability to meet our expense and debt service obligations under, and comply with the financial covenants contained in, the Credit Agreementdepends on our future performance, which is affected by financial, business, economic and other factors, many of which are beyond our control, includingpotential changes in customer preferences, the success of product and marketing innovation and pressure from competitors. Should our revenues decline, wemay not be able to generate sufficient cash flow to pay our debt service obligations when due. Additionally, in the event that utilization and pricing levelsfor our services remain at or near existing levels, we may not remain in compliance with one or more of the financial covenants under the Credit Agreement infuture periods. Any failure to satisfy our debt obligations or to comply with the applicable financial covenants under the Credit Agreement could materiallyand adversely affect our business, financial condition, results of operations, cash flows and prospects.If we are unable to meet our debt service obligations or should we fail to comply with, or obtain relief from, the financial and other restrictivecovenants contained in the Credit Agreement, we may trigger an event of default under the Credit Agreement. Upon such an event of default, the lenders mayrefuse to fund borrowings under the Revolving Credit Facility and would have the right to terminate the commitments under the Revolving Credit Facilityand potentially accelerate all amounts outstanding under the Credit Agreement. An acceleration under the Credit Agreement could also cause a cross defaultor cross acceleration of our other outstanding indebtedness. If an event of default occurs, or if other debt agreements cross-default, and the lenders under oneor more of the affected debt agreements accelerate the maturity of any loans or other debt outstanding, we may be required to refinance all or part of our debt,sell important strategic assets or businesses at unfavorable prices or borrow more money. We may not be able to, at any given time, refinance our debt, sellassets or borrow more money on terms acceptable to us or at all. The inability to refinance the debt or access the capital markets could have a material adverseeffect on our financial condition and results from operations and we could be forced into bankruptcy or liquidation.We are subject to restrictive covenants in our Credit Agreement, which may restrict our operational flexibility.The Credit Agreement governing our indebtedness contains financial and other restrictive covenants that may limit our ability to obtain futurefinancings to withstand a future downturn in our business or the economy in general, conduct necessary corporate activities, take advantage of businessopportunities that arise and/or to engage in activities that may be in our long-term best interests, including a maximum Total Leverage Ratio based on netconsolidated indebtedness to EBITDA and a minimum Interest Expense Ratio requiring a minimum quarterly ratio of consolidated EBITDA to consolidatedinterest expense. On September 29, 2015, the Company obtained a waiver and entered into certain amendments to the Credit Agreement that, among otherthings, (1) suspended the quarterly maximum Total Leverage Ratio and quarterly minimum Interest Coverage Ratio covenants, commencing with the fiscalquarter ending September 30, 2015 and continuing through the fiscal quarter ending June 30, 2017 and (2) implemented new financial covenants that applyin lieu of the quarterly maximum Total Leverage Ratio and quarterly minimum Interest Coverage Ratio covenants, including a quarterly minimum EBITDAcovenant, commencing with the quarter ended September 30, 2015 and running through the quarter ending June 30, 2017.Specifically, the restrictive covenants limit our ability and that of our subsidiaries to, among other things:•sell or otherwise dispose of assets;•make certain restricted payments and investments;•create, incur, assume, suffer to exist or guarantee additional indebtedness;18Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•create, incur, assume, or suffer to exist liens on our assets;•make capital expenditures, investments or acquisitions;•repurchase, redeem or retire our capital shares;•merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;•engage in specified transactions with subsidiaries and affiliates; and•pursue other corporate activities.We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by restrictive covenantsunder the Credit Agreement, which could: limit our ability to plan for, or react to, market conditions, to meet capital needs or otherwise restrict our activitiesor business plan; and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that would be inour interest.Please see “Liquidity and Capital Resources - Description of Our Credit Agreement” in Part II, Item 7. “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” for additional information about the Credit Agreement, including the financial and other restrictivecovenants contained therein.Our Credit Agreement has substantial restrictions and financial covenants which we may not be in compliance with in future periods.Noncompliance with these restrictions and financial covenants would result in an event of default under the Credit Agreement and could also cause a crossdefault or cross acceleration of all our other outstanding indebtedness and we could be forced into bankruptcy or liquidation.The Credit Agreement governing our Revolving Credit Facility contains restrictive covenants that limit our ability and that of our subsidiaries tocreate, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of our assets, make certain restricted payments and investments, enterinto transactions with affiliates and prepay certain indebtedness. The Credit Agreement also contains financial covenants that require us to maintaincompliance with certain financial metrics. Please see “Liquidity and Capital Resources - Description of Our Credit Agreement” in Part II, Item 7 of“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about our Revolver and otherfacilities under our Credit Agreement, including the financial and other restrictive covenants contained therein; see also Note 2 - Long-Term Debt andCapital Lease Obligations in Part II, Item 8 “Financial Statements and Supplementary Data.”Our ability to comply with the restrictive and financial covenants in the future is uncertain and will be affected by the levels of cash flow from ouroperations and other events or circumstances, many of which are beyond our control. Our cash flow is highly dependent on utilization levels and pricing forour services, which have declined substantially as demand for our services significantly decreased due to the sustained weakness in commodity prices. In theevent that utilization and pricing levels for our services remain at or near existing levels for a sustained period, we may be unable to comply with one or morefinancial covenants in future periods.If we are unable to comply with, or obtain relief from, the financial and other restrictive covenants contained in the Credit Agreement, or if we areunable to meet our debt service obligations, we may trigger an event of default under the Credit Agreement. Noncompliance with these financial covenantswould result in an event of default under the Credit Agreement and could also cause a cross default or cross acceleration of all our other outstandingindebtedness. If an event of default occurs under the Credit Agreement, or if other debt agreements cross default, the lenders under one or more of the affecteddebt agreements could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit.If the lenders under one or more of the affected debt agreements accelerate the maturity of any loans or other debt outstanding, we may be required torefinance all or part of our debt, sell important strategic assets or businesses at unfavorable prices or borrow more money. We have pledged a significantportion of our and our subsidiaries’ assets as collateral and if we were unable to repay those amounts, the lenders could proceed against the collateral grantedto them to secure that indebtedness and we could be forced into bankruptcy or liquidation.The oilfield services industry is highly competitive with significant potential for excess capacity. We may not be able to meet the specific needs of oiland natural gas exploration and production companies at competitive prices which could adversely affect our business and operating results.19Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The oilfield services industry is highly competitive. The principal competitive factors in our markets are generally technical expertise, the availabilityand condition of equipment, work force capability, safety record, reputation and experience. We compete with large national and multi-national companiesthat have longer operating histories, greater financial resources and greater name recognition than we do and who can operate at a loss in the regions in whichwe operate. Additionally, some of our competitors provide a broader array of services and/or have a stronger presence in more geographic markets. Ourreputation for safety and quality may not be sufficient to enable us to maintain our competitive position, and our competitors may be able to respond morequickly to new or emerging technologies and services and changes in customer requirements. As a result of competition, we may lose market share or beunable to maintain or increase prices for our present services or to acquire additional business opportunities, which could have a material adverse effect onour business, financial condition, results of operations and cash flows.Additionally, significant increases in overall market capacity have caused active price competition and led to lower pricing and utilization levels forour services. Completion and well servicing equipment, such as hydraulic fracturing fleets, can be moved from one region to another in response to changesin levels of activity and market conditions, which may result in an oversupply of equipment in an area. For example, natural gas prices declined sharply in2009 and have remained depressed through 2015, which resulted in reduced drilling activity in natural gas shale plays. This drove many energy servicescompanies operating in those areas to relocate their equipment to more oily- and liquids-rich shale plays, such as the Eagle Ford Shale and Permian Basin. Asdrilling activity and completion capacity migrated into the oily- and liquids-rich regions from the gas-rich regions, the increase in supply relative to demandnegatively impacted pricing and utilization of our services, particularly for hydraulic fracturing services. Furthermore, as we entered 2015, we experienced aslowdown in activity across our customer base as operators reacted to the rapid decline in commodity prices that began during the fourth quarter of 2014. Theentire year proved to be extremely challenging for the North American oilfield services industry due to the sustained weakness and volatility in oil prices atlevels that caused severe reductions in drilling, completion and production activities, which in turn resulted in reduced demand and increased competitionand pricing pressure to varying degrees across our service lines and operating areas.We may be unable to implement price increases or maintain existing prices on our core services.We generate revenue from our core service lines, the majority of which is provided on a spot market basis. Pressure on pricing for our core services,including due to competition and industry and/or economic conditions, may impact, among other things, our ability to implement price increases or maintainpricing on our core services. We operate in a very competitive industry and, as a result, we may not always be successful in raising, or maintaining ourexisting prices. Additionally, during periods of increased market demand, a significant amount of new service capacity, including hydraulic fracturingequipment, may enter the market, which also puts pressure on the pricing of our services and limits our ability to increase or maintain prices. Furthermore,during periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our profitability.Even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset such rising costs. Also, we may not be ableto successfully increase prices without adversely affecting our activity levels. The inability to maintain our prices or to increase our prices as costs increasecould have a material adverse effect on our business, financial position and results of operations.Reliance upon a few large customers may adversely affect our revenue and operating results.Our top ten customers represented approximately 53.6%, 51.1% and 64.6% of our consolidated revenue for the years ended December 31, 2015, 2014and 2013, respectively. It is likely that we will continue to derive a significant portion of our revenue from a relatively small number of customers in thefuture. If a major customer fails to pay us, revenue would be impacted and our operating results and financial condition could be harmed. Additionally, if wewere to lose any material customer, we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could have an adverseeffect on our business until the equipment is redeployed at similar utilization or pricing levels.Delays in deliveries of key raw materials or increases in the cost of key raw materials could harm our business, results of operations and financialcondition.We have established relationships with a limited number of suppliers of our raw materials (such as proppant, guar, chemicals or coiled tubing) andfinished products (such as fluid-handling equipment). Should any of our current suppliers be unable to provide the necessary raw materials or finishedproducts or otherwise fail to deliver the products in a timely manner and in the quantities required, any resulting delays in the provision of services couldhave a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, increasing costs of certain rawmaterials,20Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.including guar, may negatively impact demand for our services or the profitability of our business operations. In the past, our industry faced sporadicproppant shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of severalcompetitors. We may not be able to mitigate any future shortages of raw materials, including proppants.If we were to experience an ownership change, we could be limited in our ability to use net operating losses arising prior to the ownership change tooffset future taxable income.If we were to experience an ‘‘ownership change,’’ as determined under section 382 of the Internal Revenue Code, our ability to offset taxable incomearising after the ownership change with net operating losses ("NOL's") arising prior to the ownership change would be limited, possibly substantially. Anownership change would establish an annual limitation on the amount of our pre-change NOL's we could utilize to offset our taxable income in any futuretaxable year to an amount generally equal to the value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate.Our executive officers and certain key personnel are critical to our business and these officers and key personnel may not remain with us in thefuture.Our future success depends upon the continued service of our executive officers and other key personnel, particularly Joshua E. Comstock, ourfounder, Chief Executive Officer and Chairman of the Board of Directors. If we lose the services of Mr. Comstock, or that of our other executive officers orkey personnel, our business, operating results and financial condition could be harmed. Additionally, although we maintain key person life insurance onMr. Comstock, the proceeds from such insurance would not be sufficient to cover our losses in the event we were to lose his services.We are vulnerable to the potential difficulties associated with rapid growth, mergers, acquisitions and expansion.We have grown rapidly over the last several years, both organically and through acquisitions, and most notably through the Merger combining LegacyC&J with the C&P Business. We believe that our future success depends on our ability to continue to take advantage of and manage the rapid growth that wehave experienced, as well as the demands from increased responsibility on our management personnel. The following factors could present difficulties to us: •lack of sufficient executive-level personnel;•increased administrative burden;•long lead times associated with acquiring additional equipment;•ability to manage significant levels of idle equipment in sustained periods of depressed oil and natural gas prices; and•ability to maintain the level of focused service attention that we have historically been able to provide to our customers.In addition, in the future we may seek to grow our business through acquisitions that enhance our existing operations. The success of any completedacquisition will depend on our ability to integrate effectively the acquired business into our existing operations. The process of integrating acquiredbusinesses may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. Our operating resultscould be adversely affected if we do not successfully manage these potential difficulties in integrating the businesses we may acquire.Our operations are subject to hazards inherent in the energy services industry.Risks inherent to our industry, such as equipment defects, vehicle accidents, explosions and uncontrollable flows of gas or well fluids, can causepersonal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to, or destruction ofproperty, equipment and the environment. In addition, our hydraulic fracturing and well completion services could become a source of spills or releases offluids, including chemicals used during hydraulic fracturing activities, at the site where such services are performed, or could result in the discharge of suchfluids into underground formations that were not targeted for fracturing or well completion activities, such as potable aquifers. These risks could expose us tosubstantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damagesand could result in a variety of claims, losses and remedial obligations that could have an adverse effect on our business and results of operations. Theexistence, frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. Inparticular, our customers may elect not to purchase our services if they view our safety record as unacceptable, which could cause us to lose customers andsubstantial revenue.21Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our operational personnel have experienced accidents which have, in some instances, resulted in serious injuries. Our safety procedures may notalways prevent such damages. Our insurance coverage may be inadequate to cover our liabilities. In addition, we may not be able to maintain adequateinsurance in the future at rates we consider reasonable and commercially justifiable or on terms as favorable as our current arrangements. The occurrence of asignificant uninsured claim, a claim in excess of the insurance coverage limits maintained by us or a claim at a time when we are not able to obtain liabilityinsurance could have a material adverse effect on our ability to conduct normal business operations and on our financial condition, results of operations andcash flows.We may be unable to employ a sufficient number of skilled and qualified workers.The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work. As aresult of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer adifferent work environment. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, ourability to expand our operations depends in part on our ability to increase the size of our skilled labor force. At times, demand for skilled workers in ourgeographic area of operations is high, and the supply is limited. A significant increase in the wages paid by competing employers could result in a reductionof our skilled labor force, increases in the wage rates that we pay, or both. If either of these events were to occur, our capacity and profitability could bediminished and our growth potential could be impaired.Weather conditions could materially impair our business.Our operations may be adversely affected by severe weather events and natural disasters. Furthermore, our customers’ operations may be adverselyaffected by seasonal weather conditions. For example, hurricanes, tropical storms, heavy snow, ice or rain may result in customer delays and other disruptionsto our services. Repercussions of severe weather conditions may include: •curtailment of services;•weather-related damage to facilities and equipment, resulting in suspension of operations;•inability to deliver equipment, personnel and products to job sites in accordance with contract schedules;•increase in the price of insurance; and•loss of productivity.These constraints could also delay our operations, reduce our revenue and materially increase our operating and capital costs.Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operatingrestrictions or delays as well as adversely affect demand for our support services.Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense subsurface rockformations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surroundingrock and stimulate production. We commonly perform hydraulic fracturing services for our customers.Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but the EPA has asserted federal regulatory authority pursuant tothe SDWA over certain hydraulic fracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to suchactivities. Also, in May 2014, the EPA published an advanced notice of proposed rule making under the Toxic Substances and Control Act that wouldrequire the disclosure of chemicals used in hydraulic fracturing fluids. In addition, from time to time legislation has been introduced before Congress toprovide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process.Certain governmental reviews are also either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. TheWhite House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices and the EPA is performing astudy of the potential environmental effects of hydraulic fracturing on drinking water resources. The EPA’s study includes 18 separate research projectsaddressing topics such as water acquisition, chemical mixing, well injection, flowback and produced water, and wastewater treatment and disposal. The EPAhas indicated that it expects to issue its study report sometime in 2015. The EPA is also developing effluent limitations for the treatment and discharge ofwastewater resulting from hydraulic fracturing activities and plans to propose these standards sometime in 2015. Other governmental agencies, including theU.S. Department of Energy and the U.S. Department of the22Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Interior, are evaluating various other aspects of hydraulic fracturing. Depending on their results, these studies could spur initiatives to further regulatehydraulic fracturing under the federal SDWA or other regulatory mechanisms.In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing throughadditional permit requirements, operational restrictions, disclosure requirements, well construction, and temporary or permanent bans on hydraulic fracturingin certain areas. For example, in May 2013, the Texas Railroad Commission adopted new rules governing well casing, cementing and other standards forensuring that hydraulic fracturing operations do not contaminate nearby water resources. Local governments also may seek to adopt ordinances within theirjurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performanceof well drilling in general or hydraulic fracturing in particular. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturingare adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or costly to performhydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gas exploration andproduction activities and, therefore, adversely affect demand for our services and our business. Such laws or regulations could also materially increase ourcosts of compliance and doing business.The adoption of new laws or regulations imposing reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it moredifficult to complete oil and natural gas wells in shale formations, increase our costs of compliance and adversely affect the hydraulic fracturing services thatwe render for our exploration and production customers. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federallegislation or regulatory initiatives by the EPA, fracturing activities could become subject to additional permitting requirements, and also to attendantpermitting delays and potential increases in cost, which could adversely affect our business and results of operations.Climate change legislation or regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for ourservices.The EPA determined that emissions of carbon dioxide, methane and other GHGs present an endangerment to the environment because emissions ofsuch gases are, according to the EPA, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPAadopted regulations that restrict emissions of GHGs under existing provisions of the federal CCA Act including one that requires a reduction in emissions ofGHGs from motor vehicles and another that requires certain preconstruction and operating permit reviews for GHG emissions from certain large stationarysources. The EPA has also adopted rules requiring the monitoring and reporting of GHGs from specified GHG emission sources, including, among others,certain oil and natural gas production facilities, on an annual basis. In addition to the EPA, Congress has from time to time considered legislation to reduceemissions of GHGs, and almost one-half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the development ofGHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissionsor major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effortto achieve the overall greenhouse gas emission reduction goal. The Obama Administration has also announced that it intends to release a series of newregulations on the oil and gas industry in 2015, including federal standards limiting methane emissions.Any new federal, regional or state restrictions on emissions of GHGs that may be imposed in areas in which we conduct business could result inincreased compliance costs or additional operating restrictions on our customers. Such legislation could also potentially make our customers’ products moreexpensive and thus reduce demand for those products, which could have a material adverse effect on the demand for our services and our business. Finally,some scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physicaleffects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such effects were to occur, they could havean adverse effect on our results of operations.We are subject to extensive and costly environmental, and occupational health and safety laws, and regulations that may require us to take actionsthat will adversely affect our results of operations.Our business is significantly affected by stringent and complex federal, state and local laws and regulations governing the emission or discharge ofsubstances into the environment, protection of the environment and worker health and safety. Any failure by us to comply with such environmental andoccupational health and safety laws and regulations may result in governmental authorities taking actions against our business that could adversely impactour operations and financial condition, including the following: •issuance of administrative, civil and criminal penalties;23Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•modification, denial or revocation of permits or other authorizations;•imposition of limitations on our operations; and•performance of site investigatory, remedial or other corrective actions.As part of our business, we handle, transport, and dispose of a variety of fluids and substances used by our customers in connection with their oil andnatural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. The generation, handling,transportation, and disposal of these fluids, substances, and wastes are regulated by a number of laws, including CERCLA, RCRA, Clean Water Act, SDWAand analogous state laws. Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these andother environmental laws could expose us to liability for governmental penalties, third-party claims, cleanup costs associated with releases of such materials,damages to natural resources, and other damages, as well as potentially impair our ability to conduct our operations. Moreover, certain of theseenvironmental laws impose joint and several, strict liability even though our conduct in performing such activities was lawful at the time it occurred or theconduct of, or conditions caused by, prior operators or other third parties was the basis for such liability. In addition, environmental laws and regulations aresubject to frequent change and if existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to makesignificant unanticipated capital and operating expenditures.More stringent trucking regulations may increase our costs and negatively impact our results of operations.As part of the services we provide, we operate as a motor carrier and therefore are subject to regulation by the DOT, and by other various stateagencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations andregulatory safety, and hazardous materials labeling, placarding and marking. There are additional regulations specifically relating to the trucking industry,including testing and specification of equipment and product handling requirements. In addition, the trucking industry is subject to possible regulatory andlegislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common orcontract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations,changes in the hours of service regulations which govern the amount of time a driver may drive in any specific period, require onboard black box recorderdevices or limits on vehicle weight and size.Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. To a large degree, intrastate motor carrier operations aresubject to state safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and stateregulations.From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motorfuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxesapplicable to us will be enacted.New technology may hurt our competitive position.The energy service industry is subject to the introduction of new techniques and services using new technologies, some of which may be subject topatent protection. As competitors and others use or develop new technologies or technologies comparable to ours in the future, we may lose market share orbe placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost.Some of our competitors have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages orimplement new technologies before we can. Additionally, we may be unable to implement new technologies or products at all, on a timely basis or at anacceptable cost. Limits on our ability to effectively use or implement new technologies may have a material adverse effect on our business, financialcondition and results of operations.We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-bribery laws.The United States Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws generally prohibit companies and theirintermediaries from making, offering or authorizing improper payments to non-U.S. government officials for the purpose of obtaining or retaining business.We do business and may do additional business in the future in countries or regions where strict compliance with anti-bribery laws may conflict with localcustoms and practices. Violations of anti-bribery laws (either due to our acts or our inadvertence) may result in criminal and civil sanctions and could subjectus to other liabilities in the U.S. and elsewhere. Even allegations of such violations could disrupt our business and result in a material adverse effect on ourbusiness and operations.24Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We are committed to doing business in accordance with applicable anti-corruption laws and our own internal policies and procedures. We haveimplemented policies and procedures concerning compliance with the FCPA that is disseminated to employees, directors, contractors, and agents. This policyhas been implemented as part of our anti-bribery compliance program.Our existing safeguards and any future improvements, however, may prove to be less than effective, and our employees and consultants may engage inconduct for which we might be held responsible. Some foreign jurisdictions may require us to utilize local agents and/or establish joint ventures with localoperators or strategic partners. Even though some of our agents and partners may not themselves be subject to the FCPA or other non-U.S. anti-bribery laws towhich we may be subject, if our agents or partners make improper payments to non-U.S. government officials in connection with engagements or partnershipswith us, we could be investigated and potentially found liable for violation of such anti-bribery laws and could incur civil and criminal penalties and othersanctions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.We do business in an international jurisdiction whose political and regulatory environment and compliance regimes differ from those in the UnitedStates.Over the past several years, we have focused on expanding our geographic reach, both domestically and internationally. With respect to ourinternational expansion, most of our efforts have been with respect to the Middle East and we have continued to invest in the infrastructure needed to supportthe development of operations in that region.During 2013 we began to establish a presence in the Middle East. We opened our first international office in Dubai, where we assembled a team ofsales, operational and administrative personnel, and established relationships with partners in targeted countries. In January 2014 we were awarded our firstinternational contract to provide coiled tubing services on a trial basis in Saudi Arabia. During the first half of the year, we established coiled tubingequipment, crews and logistics on the ground in Saudi Arabia to service this contract. We mobilized on location for our customer in late June 2014 and wesuccessfully completed our first coiled tubing job in July 2014. We completed the scheduled work under this provisional contract in September 2015, but wehave maintained a facility and employees in the country. We are optimistic that our efforts can lead, over time, to a long-term relationship and additionalopportunities with this customer, which we are actively pursuing. We also hope that we may be able to secure opportunities with other potential customers inthe Middle East. Risks associated with operations in foreign areas, such as the Middle East, include, but are not limited to: •expropriation, confiscation or nationalization of assets;•renegotiation or nullification of existing contracts;•foreign exchange limitations;•foreign currency fluctuations;•foreign taxation;•the inability to repatriate earnings or capital in a tax efficient manner;•changing political conditions;•changing foreign and domestic monetary policies;•social, political, military and economic situations in foreign areas where we do business and the possibilities of war, other armed conflict orterrorist attacks; and•regional economic downturns.Risks Related to Our Common SharesOur common share price has been volatile, and we expect it to continue to remain volatile in the future.The market price of common shares of companies engaged in the oil and gas services industry has been highly volatile. Likewise, the market price ofour common shares has varied significantly in the past (52-week range has been $0.82 to $18.45), and we expect it to continue to remain volatile given thecyclical nature of our industry.If we cannot meet the continued listing requirements of the NYSE, the NYSE may delist our common shares, which would have an adverse impact onthe trading volume, liquidity and market price of our common shares.On February 25, 2016, the closing price of our common shares fell below $1.00 per share. If the average closing price of our common shares were tofall below $1.00 over a period of 30 consecutive trading days, which is the minimum average share price required by the NYSE under Section 802.01C of theNYSE Listed Company Manual, we would no longer be in compliance with the NYSE’s continued listing requirements and would expect to receive a noticeof noncompliance from the25Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NYSE. The notice would have no immediate impact on the listing of our common shares, which would continue to be listed and traded on the NYSE duringthe six-month period described below, subject to our compliance with other continued listing standards.We would have six months following receipt of the NYSE’s notice to regain compliance with the NYSE’s minimum share price requirement. We wouldbe able to regain compliance at any time during the six-month cure period if on the last trading day of any calendar month during the cure period ourcommon shares has a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on thelast trading day of such month. Notwithstanding the foregoing, if we were to determine that we must cure the price condition by taking an action that willrequire approval of our shareholders (such as a reverse stock split), we could also regain compliance by: (i) obtaining the requisite shareholder approval by nolater than our next annual meeting, (ii) implementing the action promptly thereafter, and (iii) the price of our common shares promptly exceeding $1.00 pershare, and the price remaining above that level for at least the following 30 trading days. However, if at any time our common share price drops to the pointwhere the NYSE considers the price to be "abnormally low," the NYSE has the discretion to begin delisting proceedings immediately. While there is noformal definition of "abnormally low" in the NYSE rules, the NYSE has recently delisted the common stock of issuers when it trades below $0.16 per share. Inaddition, the NYSE will promptly initiate suspension and delisting procedures if the NYSE determines that we have an average global market capitalizationover a consecutive 30 trading-day period of less than $15.0 million.A delisting of our common shares from the NYSE could negatively impact us as it would likely reduce the liquidity and market price of our commonshares; reduce the number of investors willing to hold or acquire our common shares; and negatively impact our ability to access equity markets and obtainfinancing.Future issuances by us of common shares or convertible securities could lower our share price and dilute your ownership in us.As of February 22, 2016, we had 120,207,209 common shares outstanding. We are currently authorized to issue up to 750,000,000 common shares and50,000,000 preferred shares with terms designated by our Board of Directors. In the future, we may, from time to time, issue additional common shares orsecurities convertible into common shares in public offerings or privately negotiated transactions. We cannot predict the size of future issuances of commonshares or securities convertible into common shares or the effect, if any, that future issuances and sales of common shares will have on the market price of ourcommon shares. Sales of substantial amounts of common shares (including shares issued in connection with an acquisition or employee benefit plan), or theperception that such sales could occur, may adversely affect prevailing market prices of our common shares and dilute your ownership interest in us.As a result of the Merger, the majority of our common shares are held by Nabors. Holders of our common shares will vote together as a single class on all matters presented to our shareholders for their vote or approval, except asotherwise required by applicable law or our memorandum of association or bye-laws. As a result of the Merger, Nabors (through one of its wholly-ownedsubsidiaries) currently owns approximately 52% of our issued and outstanding common shares. Although Nabors is subject to certain standstill restrictions,during the period commencing on the closing date of the Merger and ending upon the earlier to occur of the five-year anniversary of the effective date of theMerger and the date that Nabors beneficially owns less than 15% of our issued and outstanding common shares (the "Standstill Period"), Nabors has the rightto vote its majority shares in its discretion. Further, Nabors has the right to ensure that three individuals who are either Nabors employees or independentdirectors selected by Nabors serve on our board of directors during the Standstill Period, and such individuals may remain on our board of directors followingthe end of the Standstill Period. In addition, until the later to occur of the termination of the Standstill Period and the two-year anniversary of the closing dateof the Merger, Nabors has preemptive rights to purchase its pro-rata portion of any common shares or other equity securities issued by us. Our amended bye-laws provide that, until the fifth anniversary of the closing date of the Merger, certain major transactions, including any sale of our Company or anyamendment to our memorandum of association or amended bye-laws, require the approval of the holders of at least two-thirds of our issued and outstandingcommon shares, and in certain circumstances the approval of a specified number of the members of our board of directors. As a result, Nabors may be able toprevent the approval of such matters, and therefore may be able to prevent transactions that would be beneficial to us, including a change in control of ourCompany or other transaction that would otherwise provide our shareholders an opportunity to receive a premium for their common shares. The existence ofsignificant shareholders may also have the effect of deterring a would-be acquirer of our Company from proposing a transaction or delaying or preventingchanges in control or changes in management. In addition, Nabors may be able to influence our management because of its substantial shareholding.26Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Under the provisions of our bye-laws , until the end of the Standstill Period, the rights of our shareholders (including Nabors) to change the amendedbye-laws relating to the election of directors and the removal of directors are subject to restrictions.Additionally, any sale by Nabors of our common shares or any announcement by Nabors that it has decided to sell our common shares, or theperception by the investment community that Nabors has sold or decided to sell our common shares, could have an adverse impact on the price of ourcommon shares.In any of these matters, the interests of Nabors may differ or conflict with the interests of our other shareholders. Moreover, this concentration of shareownership may also adversely affect the trading price of our common shares to the extent investors perceive a disadvantage in owning shares of a companywith a majority shareholder.Under the rules of the NYSE, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a"controlled company" and may elect not to comply with the requirements that a majority of its board of directors consist of independent directors, that itsboard of directors' compensation committee be comprised solely of independent directors, and that director nominees be selected or recommended to theboard of directors for selection by independent directors. Although we qualify as a "controlled company" under the NYSE rules, we are not relying on thisexemption and we intend to fully comply with all corporate governance requirements under the NYSE rules. However, if we were to utilize some or all ofthese exemptions, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE rulesregarding corporate governance.If Nabors sells a controlling interest in C&J to a third party in a private transaction, our shareholders may not realize any change-of-controlpremium on our common shares and we may become subject to the control of a presently unknown third party.As a result of the Merger, Nabors (through one of its wholly-owned subsidiaries) currently owns approximately 52% of our issued and outstandingcommon shares. Nabors has agreed that, during the Standstill Period, it will transfer our common shares only to any person or "group" (within the meaning ofSection 13(d)(3) of the Exchange Act) who has not filed a Schedule 13D with regard to C&J and is not required to file a Schedule 13D after giving effect tosuch transfer. However, following the end of the Standstill Period, or upon waiver of the standstill restrictions, should it continue to own a significant equityinterest in C&J and choose to do so, Nabors may sell some or all of the C&J common shares that it owns in a privately negotiated transaction, which, ifsufficient in size, could result in a change of control of C&J. The ability of Nabors to privately sell our common shares after the end of the Standstill Period,with no requirement for a concurrent offer to be made to acquire all of our other common shares, could prevent our shareholders from realizing any change-of-control premium on our common shares that may otherwise accrue to Nabors upon its private sale of our common shares. Additionally, if Nabors privatelysells its significant equity interest in C&J, we may become subject to the control of a presently unknown third party. Such third party may have conflicts ofinterest with other our shareholders.Provisions in our organizational documents, as well as Bermuda law, could delay or prevent a change in control of our company, which couldadversely affect the price of our common shares.The existence of certain provisions in our memorandum of association and bye-laws, as well as under Bermuda law, could delay or prevent a change incontrol of our company that a shareholder may consider favorable, which could adversely affect the price of our common shares. The provisions in ourorganizational documents that could delay or prevent an unsolicited change in control of our company include board authority to issue preferred shareswithout shareholder approval. If our board of directors elects to issue preferred shares, it could be more difficult for a third party to acquire the Company. Inaddition, some provisions of our bye-laws could make it more difficult for a third party to acquire control of our Company, even if the change of controlwould be beneficial to our shareholders, including provisions which:•limit the removal and replacement of directors, including provisions relating to the classified board of directors; •limit the ability of shareholders to increase the number of directors; •establish preemptive rights; and •establish advance notice and certain information requirements for nominations for election to our board of directors.We may issue preferred shares on terms that could adversely affect the voting power or value of our common shares. Our bye-laws authorize our Board of Directors to issue, without the approval of its shareholders, one or more classes or series of preferred shares havingsuch designations, preferences, limitations and relative rights, including preferences over its common shares respecting dividends and distributions, as theBoard may determine. The terms of one or more classes or series27Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of preferred shares could adversely affect the voting power or value of our common shares. For example, we might grant holders of preferred shares the right toelect some number of its directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase orredemption rights or liquidation preferences we might assign to holders of preferred shares could affect the residual value of the common shares.Future offerings of debt securities and preferred shares, which would rank senior to our common shares upon liquidation, may adversely affect themarket value of our common shares.In the future, we may, from time to time, attempt to increase our capital resources by making offerings of debt or additional offerings of equitysecurities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred shares. Upon liquidation, holders of our debtsecurities and preferred shares and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of ourcommon shares. Our preferred shares, which may be issued without shareholder approval, if issued, could have a preference on liquidating distributions or apreference on dividend payments that would limit amounts available for distribution to holders of our common shares. Because our decision to issuesecurities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing ornature of our future offerings. Thus, holders of our common shares bear the risk that our future offerings may reduce the market value of our common shares.Item 2. PropertiesOur principal executive headquarters are located at Crown House, 2nd Floor, 4 Par-la-Ville Road, Hamilton, Bermuda, and our U.S. corporate headquarters arelocated at 3990 Rogerdale Rd., Houston, Texas 77042. We own or lease facilities and administrative offices throughout the geographic regions in which weoperate. As of February 22, 2016, we own or lease the following principal properties:LocationType of FacilitySizeLease orOwnExpiration of Lease3990 Rogerdale Road, Houston, TXHeadquarters125,000 sq. ft. buildingLeaseFebruary 21, 2025Crown House, 2nd Floor, 4 Par-la-Ville Road,Hamilton, BermudaHeadquarters2,740 sq. ft. buildingLeaseMarch 31, 20174460 Hwy 77 Robstown, TXAdministrative offices,warehouse,maintenance shop, equipmentyard15 acres, 61,000 sq. ft.buildingOwn—Plot No. S40320 & S40321, Dubai, UAEAdministrative offices,warehouse,maintenance shop, equipmentyard14 acres, 104,755 sq. ft.buildingLeaseJune 30, 202810771 Westpark Drive, Houston, TXAdministrative offices,R&T Lab & Tech Center84,023 sq. ft. buildingLeaseOctober 31, 2025 In addition to the principal properties listed above, we own or lease numerous other smaller facilities across our operating areas, including local salesoffices and temporary facilities to house employees in regions where infrastructure is limited. Our leased properties are subject to various lease terms andexpirations.We believe that all of our existing properties are suitable for their intended uses and sufficient to support our operations. We do not believe that anysingle property is material to our operations and, if necessary, we could readily obtain a replacement facility. We continuously evaluate the needs of ourbusiness, and we will purchase or lease additional properties or consolidate our properties, as our business requires.Item 3. Legal ProceedingsWe are subject to various legal proceedings and claims incidental to or arising in the ordinary course of our business. Our management does not expectthe outcome in any of these known legal proceedings, individually or collectively, to have a material adverse effect on our consolidated financial conditionor results of operations.28Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In July 2014, following the announcement that Legacy C&J, Nabors, and New C&J had entered into the Merger Agreement, a putative class actionlawsuit was filed by a purported shareholder of Legacy C&J challenging the Merger. The lawsuit is styled City of Miami General Employees’ and SanitationEmployees’ Retirement Trust, et al. (“Plaintiff”) v. Comstock, et al.; C.A. No. 9980-CB, in the Court of Chancery of the State of Delaware, filed on July 30,2014 (the “Merger Lawsuit”). Plaintiff in the Merger Lawsuit generally alleges that the board of directors for Legacy C&J breached fiduciary duties ofloyalty, due care, good faith, candor and independence by allegedly approving the Merger Agreement at an unfair price and through an unfair process.Plaintiff alleges that the Legacy C&J board directors, or certain of them (i) failed to fully inform themselves of the market value of Legacy C&J, maximize itsvalue and obtain the best price reasonably available for Legacy C&J, (ii) acted in bad faith and for improper motives, (iii) erected barriers to discourage otherstrategic alternatives and (iv) put their personal interests ahead of the interests of Legacy C&J shareholders. The Merger Lawsuit further alleges that LegacyC&J, Nabors and New C&J aided and abetted the alleged breaches of fiduciary duties by the Legacy C&J board of directors.On November 10, 2014, Plaintiff filed a motion for a preliminary injunction. On November 24, 2014, the Court of Chancery entered a bench ruling,followed by a written order on November 25, 2014, that (i) ordered certain members of the Legacy C&J board of directors to solicit for a period of 30 daysalternative proposals to purchase Legacy C&J (or a controlling stake in Legacy C&J) that was superior to the Merger, and (ii) preliminarily enjoined LegacyC&J from holding its shareholder meeting until it had complied with the foregoing. The order provided that the solicitation of proposals consistent with theorder, and any subsequent negotiations of any alternative proposal that emerges, would not constitute a breach of the Merger Agreement in any respect.Legacy C&J complied with the Court of Chancery’s order while it simultaneously pursued an expedited appeal of the Court of Chancery’s order to theSupreme Court of the State of Delaware. On November 26, 2014, in response to, and in compliance with, the Court of Chancery’s order, the Legacy C&Jboard of directors established a special committee, which retained separate legal and financial advisors, to proceed with the ordered solicitation.On December 19, 2014, following oral argument, the Delaware Supreme Court overturned the decision of the Court of Chancery and vacated the order.As such, Legacy C&J’s special committee immediately discontinued the solicitation required by the order. On March 25, 2015, the C&J Defendants moved todismiss the complaint and filed their opening brief in support on September 15, 2015. On October 29, 2015, Plaintiff filed an amended complaint namingadditional defendants and generally alleging, in addition to the allegations described above, that (i) the special committee of the Legacy C&J board ofdirectors and its advisors improperly conducted the court-ordered solicitation that the Delaware Supreme Court vacated, and (ii) the proxy statement filed inconnection with the Merger contains alleged misrepresentations and omits allegedly material information concerning the Merger and court-orderedsolicitation process. The Lawsuit asserts, in addition to the claims described above, claims for breach of fiduciary duty and aiding and abetting breach offiduciary duty against the special committee of the Legacy C&J board of directors, its financial advisor Morgan Stanley, and certain employees of LegacyC&J. The defendants in the Lawsuit have filed motions to dismiss the amended complaint. A hearing on these motions to dismiss is currently set for April 26,2016.We cannot predict the outcome of this or any other lawsuit that might be filed, nor can we predict the amount of time and expense that will be requiredto resolve the Merger Lawsuit. We believe the Merger Lawsuit is without merit and we intend to defend against it vigorously.Item 4. Mine Safety DisclosuresNot applicable.29Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IIItem 5. Market for Registrant’s Common Equity and Related Shareholder Matters and Issuer Purchases of Equity SecuritiesMarket Price of and Dividends on the Registrant’s Common Equity and Related Shareholder MattersOur common shares are traded on the NYSE under the symbol “CJES.” As of February 22, 2016, we had 120,207,209 common shares issued andoutstanding, held by approximately 15 registered holders. The number of registered holders does not include holders that have common shares held for themin “street name”, meaning that the shares are held for their accounts by a broker or other nominee. In these instances, the brokers or other nominees areincluded in the number of registered holders, but the underlying holders of the common shares that hold such shares in “street name” are not.The following table sets forth the high and low sales prices of our common shares as reported by the NYSE for the periods indicated: High LowYear Ended December 31, 2014 Quarter ended March 31, 2014 $29.73 $20.26Quarter ended June 30, 2014 $34.93 $27.41Quarter ended September 30, 2014 $34.18 $26.90Quarter ended December 31, 2014 $30.81 $11.38Year Ended December 31, 2015 Quarter ended March 31, 2015 $14.08 $9.11Quarter ended June 30, 2015 $18.45 $11.05Quarter ended September 30, 2015 $13.36 $2.97Quarter ended December 31, 2015 $6.23 $3.26Period from January 1, 2016 to February 24, 2016 $4.97 $0.82On February 24, 2016, the last reported sales price of our common shares on the NYSE was $1.09 per share.We have not declared or paid any cash dividends on our common shares. We currently intend to retain all future earnings for the development andgrowth of our business, and we do not anticipate declaring or paying any cash dividends to holders of our common shares in the foreseeable future. Paymentsof dividends, if any, will be at the discretion of our Board and will depend on our results of operations, financial condition, capital requirements and otherfactors deemed relevant by our Board. Additionally, covenants contained in our Credit Facility restrict the payment of cash dividends on our common shares.Please read Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Description of our Credit Agreement” in this Annual Report.Recent Sales of Unregistered Securities; Use of Proceeds from Registered SecuritiesNone.Purchases of Equity Securities by the Issuer or Affiliated PurchasersRepurchases of Equity SecuritiesThe following table summarizes stock repurchase activity for the fiscal year ended December 31, 2015 (in thousands, except average price paid pershare). All of the repurchases below are common shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon thevesting of restricted shares. The value of such shares is based on the NYSE closing price of our common shares on the vesting date. 30Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Total Numberof SharesPurchased (a) AveragePricePaid PerShare Total Number of SharesPurchased as Part ofPublicly AnnouncedProgram Maximum Number ofShares that may yet bePurchased UnderSuch ProgramJanuary 1—January 31 — — — —February 1—February 28 139,366 $11.46 — —March 1—March 31 358 12.50 — —April 1—April 30 9,825 14.80 — —May 1—May 31 57 17.40 — —June 1—June 30 65,409 14.35 — —July 1—July 31 3,180 12.22 — —August 1—August 31 492 7.72 — —September 1—September 30 — — — —October 1—October 31 1,394 3.90 — —November 1—November 30 1,402 4.58 — —December 1—December 31 912 5.91 — — (a)Represents shares that were withheld by us to satisfy tax withholding obligations of employees that arose upon the vesting of restricted shares. Thevalue of such shares is based on the NYSE closing price of our common shares on the vesting date.Item 6. Selected Financial DataThis section presents our selected consolidated financial data for the periods and as of the dates indicated. The selected historical consolidatedfinancial data presented below is not intended to replace our historical consolidated financial statements. The following selected consolidated financial datashould be read in conjunction with both Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and PartII, Item 8 “Financial Statements and Supplementary Data” of this Annual Report in order to understand those factors, such as the Merger, which may affect thecomparability of the Selected Financial Data: Years Ended December 31, 2015 2014 2013 2012 2011 (In thousands except per share amounts)Revenue $1,748,889 $1,607,944 $1,070,322 $1,111,501 $758,454Net income (loss) (872,542) 68,823 66,405 182,350 161,979Net income (loss) per common share Basic (8.48) 1.28 1.25 3.51 3.28Diluted (8.48) 1.22 1.20 3.37 3.19Total assets 2,232,906 1,612,746 1,132,300 1,012,757 537,849Long-term debt and capital lease obligations,excluding current portion 1,142,077 349,875 164,205 173,705 —31Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations is intended to assist you in understanding our businessand results of operations together with our present financial condition. This section should be read in conjunction with the audited consolidated financialstatements and the related notes thereto included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements thatinvolve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors,including, without limitation, those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A “RiskFactors” of this Annual Report.Introductory Note about the Merger TransactionEffective as of March 24, 2015 (the "Effective Time"), we completed the combination of C&J Energy Services, Inc. (“Legacy C&J”) with thecompletion and production services business (the “C&P Business”) of Nabors Industries Ltd. (“Nabors”) pursuant to that certain Agreement and Plan ofMerger (as amended, the “Merger Agreement”), dated as of June 25, 2014, by and among Legacy C&J, Nabors, Nabors Red Lion Limited (subsequentlyrenamed C&J Energy Services Ltd., “New C&J”), Nabors CJ Merger Co. and CJ Holding Co. Under the terms of the Merger Agreement, Nabors separated theC&P Business from the rest of its operations and consolidated this business under New C&J. A Delaware subsidiary of New C&J then merged with and intoLegacy C&J, with Legacy C&J continuing as the surviving corporation and a direct wholly owned subsidiary of New C&J (such transactions referred toherein collectively as the “Merger”). As of the Effective Time, common shares of Legacy C&J were converted into common shares of New C&J on a 1-for-1basis, New C&J was renamed “C&J Energy Services Ltd.” and its common shares began trading on the NYSE under the symbol "CJES", which was previouslyused by Legacy C&J following completion of our initial public offering in 2011. After giving effect to the Merger, Nabors owned approximately 53% of ouroutstanding common shares, with Legacy C&J shareholders owning the remaining 47% of our outstanding common shares. As of February 23, 2016, Naborsowns approximately 52% of our outstanding shares. We are currently led primarily by the individuals who served as Legacy C&J’s executive officers prior tothe completion of the Merger.Pursuant to Rule 12g-3(a) under the Exchange Act, New C&J is the successor issuer to Legacy C&J following the closing of the Merger and isdeemed to succeed to Legacy C&J’s reporting history under the Exchange Act. Because Legacy C&J was considered the accounting acquirer in theTransactions under U.S generally accepted accounting principles (“GAAP”), Legacy C&J is also considered the accounting predecessor of C&J EnergyServices Ltd. Accordingly, the historical financial statements of C&J Energy Services Ltd. that cover periods prior to the completion of the Merger, reflect theassets, liabilities and operations of C&J Energy Services, Inc., the predecessor to C&J Energy Services Ltd., and do not reflect the assets, liabilities andoperations of the C&P Business. Accordingly, comparisons between our consolidated results following the completion of the Merger and results from priorperiods may not be meaningful.References to “C&J,” the “Company,” “we,” “us” or “our” in this Annual Report are to New C&J, together with our consolidated subsidiarieswhen referring to periods following the completion of the Merger , and are to Legacy C&J , together with our consolidated subsidiaries when referring toperiods prior to the completion of the Merger. OverviewWe are one of the largest, integrated providers of completion and production services in North America. We provide a full range of wellconstruction, well completions, well support and other complementary oilfield services to oil and gas exploration and production companies primarily inNorth America. Our services, which are involved in the entire life cycle of the well, include directional drilling, cementing, hydraulic fracturing, cased-holewireline, coiled tubing, rig services, fluids management services and other special well site services. We operate in all of the major oil and gas producingregions of the continental United States and Western Canada. For the last few years we have been working to establish an operational presence in keycountries in the Middle East, and we currently have an office and operational facility in Dubai and an operational facility in Saudi Arabia.Our operating and financial performance is heavily influenced by drilling, completion and production activity by our customers in the upstreamindustry, and thus is significantly impacted by oil and natural gas prices. However, our performance also reflects the impact of our growth strategy, includingour investments in strategic initiatives designed to strengthen, expand and diversify our company through service line diversification, vertical integrationand technological advancement. Please see "Growth Strategy and Strategic Initiatives" for additional discussion of our long term growth strategy andstrategic initiatives.32Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Growth Strategy and Strategic InitiativesOver the last few years, we have significantly invested in the execution of our long term growth strategy, which is focused on strengthening,expanding and diversifying our business through (1) the growth of our assets, customer base and geographic reach, both domestically and internationally, forour core service lines and (2) strategic initiatives advancing service line diversification; vertical integration and technological advancement.Growth of Core Service LinesDuring 2015, we continued to focus on growing our core business through the expansion of our assets, customer base and geographic reach, bothdomestically and internationally, and most notably through the Merger. The combination of Legacy C&J with the C&P Business greatly expanded our scale,service offerings and geographic reach, increasing capacity for our existing services offerings and providing diversification through the additional servicesofferings of the C&P Business with a stronger presence in all major domestic basins. With the Merger closing during the early part of the market downturn, wehave not yet been able to fully capitalize on many of the opportunities that we believe are available both domestically and internationally through ourgreater scale, enhanced offerings and significant operating efficiencies.Service Line Diversification, Vertical Integration & Technological AdvancementDuring 2015, we further advanced our ongoing strategic initiatives designed to strengthen, expand and diversify our business through service linediversification, vertical integration and technological advancement. In implementing our long term growth strategy, in addition to the diversification of ourservices through the Merger, in May 2015, we acquired an integrated business that designs, manufactures and installs electrical submersible pump systemsand accessories primarily for artificial lift applications. In addition to offering a wide variety of products that support artificial lift installations, we are alsodeveloping a line of electrical submersible pump systems that are optimized for the small casing sizes typical of long horizontal wells. We believe that thisbusiness has significant growth potential when the market eventually recovers, both in the U.S. and abroad and also has the potential to provide acompetitive advantage for our Well Support Services segment.Additionally, we acquired an equipment manufacturing business in 2011 and a data acquisition and control systems business in 2013. We utilize theequipment and products manufactured by these vertically integrated businesses in our day-to-day operations, and we also sell them to third-party customersin the global energy services industry. During 2013, we also began organically developing a specialty chemicals supply business for completion andproduction services. We source many of the chemicals and fluids used in our hydraulic fracturing operations through this business, which provides costsavings to us and also gives us direct control over the design, development and supply of these products. Additionally, we have taken a multi-faceted,integrated approach to developing our directional drilling capabilities. In April 2013, we acquired a provider of directional drilling technology and relateddownhole tools. Building on that technology, during the first half of 2014 we began manufacturing premium drilling motors in-house and during the secondquarter of 2014 we introduced our directional drilling services line to customers as a new service offering.Over the last several years we have also significantly invested in our research and technology capabilities, including the development of a state-of-the-art research and technology center with a team of engineers and support staff. We believe that one of the strategic benefits of this division is the ability todevelop and implement new technologies and respond to changes in customers’ requirements and industry demand. Our efforts to date have been focused ondeveloping innovative, fit-for-purpose solutions designed to enhance our core service offerings, increase completion efficiencies, provide cost savings to ouroperations and add value for our customers. Several of our research and technology initiatives are now generating monthly cost savings for our expanded,integrated completion services operations, which is central to our overall strategy of proactively managing our costs to maximize returns. Additionally,several of these investments are already delivering value added products and services that, in addition to producing revenue, are creating increasing demandfrom key customers.As a result of these efforts, in 2015, we introduced several new products and progressed on differentiating technologies that we believe will provide acompetitive advantage as our customers focus on extracting oil and gas in the most economical and efficient ways possible.Our Operating SegmentsWe currently operate in three reportable business segments:33Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•Completion Services, which includes the hydraulic fracturing services, cased-hole wireline services, and coiled tubing services and other wellstimulation services lines of both Legacy C&J and the C&P Business.•Well Support Services, which includes services lines acquired with the C&P Business, specifically including rig services, fluid management servicesand other special well site services.•Other Services, which include Legacy C&J’s smaller service lines and divisions, including directional drilling services, equipment manufacturingand repair, specialty chemicals sales, research and technology, and Middle East operations, as well as the C&P Business’ cementing services line.We also manage several of our vertically integrated business through our research and technology division, including our data acquisition andcontrol instruments provider and artificial lift applications provider. Costs associated with general corporate activities and intersegmenteliminations are also included in this Other Services segment.Due to the transformative nature of the Merger, upon closing of the Merger, our chief operating decision maker (the “CODM”) changed the way inwhich the Company is managed, including a revised operating segment approach in making performance evaluation and resource allocation decisions.Discrete financial information was created to provide the information necessary for our CODM to manage our combined company under the revised operatingsegment structure. As a result of this change in operating segments, we revised our reportable segments during the first quarter of 2015. The current reportablebusiness segment structure reflects the financial information and reports used by management, including our CODM, to make decisions regarding ourbusiness, including with respect to evaluating performance and allocating resource. We have recast the segment information included in this Annual Reportto reflect the new reportable segment structure in order to conform to the current year presentation.Our reportable business segments are described in more detail below; for financial information about our segments, including revenue from externalcustomers and total assets by segment, see “Note 11 - Segment Information” in Part II, Item 8 “Financial Statements and Supplementary Data” of this AnnualReport.Completion ServicesOur Completion Services segment currently consists of the following service lines: (1) hydraulic fracturing; (2) cased-hole wireline, which includeswireline logging, perforating, pressure pumping ,well site make-up and pressure testing and other complementary services; and (3) coiled tubing and otherwell stimulation services, including nitrogen and pressure pumping services. The majority of revenue for this segment is generated by our hydraulicfracturing services line.Our Completion Services segment consists of over 1.2 million hydraulic horsepower, over 130 wireline units and over 40 coiled tubing units, havingsignificantly increased our asset base as a result of the Merger. However, not all of these assets are utilized fully or at all at any time, due to, among otherthings, scheduled maintenance and downtime. Additionally, in response to the continued deterioration in market conditions over the course of the year, weimplemented aggressive cost control measures and aligned our assets with industry demand, which included stacking or idling unproductive equipmentacross our asset base within each service line.Management evaluates our Completion Services segment operations’ performance and allocates resources primarily based on Adjusted EBITDAbecause it provides important information to us about the activity and profitability of our lines of business within this segment. Adjusted EBITDA is a non-GAAP financial measure computed as total earnings (loss) before net interest expense, income taxes, depreciation and amortization, other income (expense),net, net gain or loss on disposal of assets, transaction costs, and non-routine items.For the year ended December 31, 2015, revenue from our Completion Services segment was $1.2 billion, representing approximately 70% of ourtotal revenue, compared with revenue of $1.6 billion for the year ended December 31, 2014, which represents a 23% year-over-year decrease. AdjustedEBITDA from this segment for the year ended December 31, 2015 was $73.9 million, compared with $344.7 million of Adjusted EBITDA for the year endedDecember 31, 2014, which represents a 79% year-over-year decrease. Even with our significantly expanded asset base and diversified market presence as aresult of the Merger, our financial results declined as a result of the extremely challenging market conditions that characterized the year. Specifically, revenueand Adjusted EBITDA were negatively impacted by significantly lower overall utilization and pricing levels experienced to varying degrees across ourservice lines and markets during the 2015 year, resulting from decreased demand by our customers in an extremely competitive environment caused by thecontinued decline in U.S. onshore drilling and completion activity as a result of depressed commodity prices.With respect to the fourth quarter of 2015, revenue from our Completion Services segment was $256.6 million, representing approximately 63% ofour total revenue, compared with revenue of $256.9 million for the third quarter of 2015.34Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Fourth quarter Adjusted EBITDA from this segment was $10.0 million, compared to Adjusted EBITDA of ($8.6 million) for the third quarter of 2015, whichrepresents a 217% sequential increase. Utilization levels for our Completion Services improved entering the fourth quarter, although we continued toexperience significant pricing pressure throughout the quarter and activity declined with the typical year-end seasonal slowdown. Hydraulic fracturingactivity was strong in October, but as we moved through the quarter and activity slowed, we strategically stacked additional equipment and focused oncapturing higher overall utilization levels across our active equipment base. Our strategy, which included concentrating on key customers in core basins,aggressively managing our operational cost structure and stacking our lower utilized equipment, produced improved profitability despite the challengingheadwinds we faced in the back half of the quarter. In our coiled tubing service line, utilization increased at the beginning of the quarter, but activity beganto decline as the effects of the seasonal slowdown impacted our operations and customers delayed previously scheduled work. In our wireline service line,both pricing and utilization remained depressed and continued to weaken with the falling rig count, seasonal slowdown and inclement weather experiencedduring the course of the quarter.As we entered the first quarter of 2016, our Completion Services segment experienced a significant decline in activity that has remained depressed.We are keeping a sharp focus on managing our operations and controlling costs, including closing additional facilities, further reducing headcount, stackingidle equipment and lowering our cost structure to ensure our operations remain aligned with market conditions. The implementation of this strategy over thecourse of the fourth quarter enabled us to protect market share and deliver an approximate $18.6 million sequential improvement in Adjusted EBITDA forthis segment. We will continue to focus on servicing the needs of our core customer base, and make the appropriate decisions as needed, to more effectivelyalign our operations with current market conditions.Well Support ServicesOur Well Support Services segment, which was acquired in the Merger as part of the C&P Business, currently consists of the following service lines: (1)rig services, including providing workover and well servicing rigs that are involved in routine repair and maintenance, completions, re-drilling and plug andabandonment operations; (2) fluid management services, including manufacturing, transportation, storage and disposal services for fluids used in the drilling,completion and workover of oil and gas well; and (3) other special well site services. Our rig services line is the greatest driver of revenue for this segment.Our Well Support Services segment consists of 519 workover rigs utilized by the rig services line and a fleet of 1,425 fluid services trucks, 5,258 fractanks and 30 salt water disposal wells utilized by our fluid management services line. However, not all of these assets are utilized fully or at all at any time,due to, among other things, scheduled maintenance and downtime. Additionally, in response to the continued deterioration in market conditions over thecourse of the year, we implemented aggressive cost control measures and aligned our assets with industry demand, which included stacking or idlingunproductive equipment across our asset base within each service line.Management evaluates our Well Support Services segment operations’ performance and allocates resources primarily based on activity levels,specifically rig and trucking hours, as well as Adjusted EBITDA. The following table presents rig and trucking hours for our Well Support Services for theperiod from the Merger date, March 24, 2015 through December 31, 2015 (dollars in millions): Year Ended December 31, 2015 Revenue$455.8Adjusted EBITDA$72.3Total rigs519Total rig hours465,926Total trucks1,425Total truck hours1,653,417For the year ended December 31, 2015, revenue from our Well Support Services segment was $455.8 million, representing approximately 26% of ourtotal revenue. Adjusted EBITDA from this segment for the year ended December 31, 2015 was $72.3 million. The entire Well Services segment was acquiredin connection with the Merger; as such, we had no revenues or Adjusted EBITDA from this segment for the year ended December 31, 2014.35Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.With respect to the fourth quarter of 2015, revenue from our Well Support Services segment was $135.7 million, representing approximately 33% ofour total revenue, compared to revenue of $150.9 million for the third quarter of 2015, which represents a 10% decrease quarter over quarter.Fourth quarter Adjusted EBITDA from this segment was $22.3 million, compared to Adjusted EBITDA of $23.6 million for the third quarter of 2015,which represents a 6% sequential decrease.Revenue from our Well Support Services segment was negatively impacted by the typical year-end slowdown and continued pricing pressure. Despiteincreased demand for our services in October, the seasonal slowdown around the holidays resulted in rigs being released in several core operating basins. Wealso encountered some weakness in areas that typically maintain strong fourth quarter activity, such as Canada, due to low commodity prices. During thequarter, we supported utilization and protected market share through pricing concessions, while repositioning equipment and resources in line with marketconditions and customer demand. Despite declining revenue, our continued focus on restructuring this segment, enhancing efficiencies and aggressivelyreducing costs, allowed us to generate a sequential Adjusted EBITDA margin increase of approximately 80 basis points.As with our Completion Services segment, activity and pricing levels for our Well Support Services segment declined and have remained depressedentering the first quarter of 2016. Our customers continue to focus on lowering their costs due to the continued weakness in commodity prices, and we willcontinue to work with them to the best of our ability to sustain utilization, protect market share and capitalize on strategic opportunities.Other ServicesThe Other Services segment is comprised of Legacy C&J’s smaller service lines and divisions, currently including directional drilling services,equipment manufacturing and repair, data acquisition and control instruments, artificial lift applications, specialty chemical sales, Middle East operations,and research and technology, as well as the C&P Business' cementing operations. Also included in the Other Services are intersegment eliminations and costsassociated with activities of a general corporate nature.Our Other Services segment contributed $76.1 million of revenue for the year ended December 31, 2015, representing approximately 4% of our totalrevenue, compared with $26.2 million for the year ended December 31, 2014, which represents a 190% year-over-year increase. Adjusted EBITDA from thissegment for the year ended December 31, 2015 was ($99.4 million) compared with ($91.8 million) for the year ended December 31, 2014, which represents an8% year-over-year decrease. Like our core services lines, the businesses comprising our Other Services Segment were negatively impacted by the widespreadreduction in drilling, completion and production activity over the course of the year.With respect to the fourth quarter of 2015, revenue from our Other Services segment was $16.7 million, representing approximately 4% of our totalrevenue, compared to revenue of $19.7 million for the third quarter of 2015, which represents a 16% decrease quarter over quarter. Fourth quarter AdjustedEBITDA from this segment was ($24.6 million), compared to Adjusted EBITDA of ($26.4 million) for the third quarter of 2015, which represents a 7%sequential increase. Like our core services lines, the businesses comprising our Other Services segment were negatively impacted by the falling rig count andthe typical year-end slowdown. In spite of declining activity levels, we were able to sequentially grow revenue within two of our most promising R&Tinitiatives: directional drilling and artificial lift applications. Additionally, in spite of a more than 15% reduction in revenue from this segment during thefourth quarter, Adjusted EBITDA increased approximately 7% as a result of our continued efforts to cut overhead costs and align our active R&T initiativeswith current market conditions.Operating Overview & StrategyOur results of operations are driven primarily by deviations in four interrelated, fluctuating variables: (1) the drilling, completion and productionactivities of our customers, which directly affects the demand for our services; (2) the price we are able to charge for our services, which is driven by the levelof demand for our services and equipment capacity in the market; (3) the cost of products and labor involved in providing our services, and our ability to passthose costs on to our customers; and (4) our activity, or “utilization” levels, and service performance.Our operating strategy is focused on maintaining high asset utilization levels to maximize revenue generation while controlling cost to gain acompetitive advantage and drive returns. We believe that the quality and efficiency of our service execution and aligning with customers who recognize thevalue that C&J provides through efficiency gains are central to our efforts to support utilization and grow our business. However, asset utilization is notnecessarily indicative of our financial and/or operational performance and should not be given undue reliance. Given the volatile and cyclical nature ofactivity36Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 thoseservices, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle.The Baker Hughes U.S. rig count data, which is publicly available on a weekly basis, is widely accepted and used as an indicator of overallexploration and production (“E&P”) company capital spending and resulting oilfield activity levels. Historically, our utilization levels have been highlycorrelated to U.S. onshore spending by our E&P company customers as a group. Generally, as capital spending by E&P companies 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 maybe). Conversely, when drilling, completion and production activity levels decline due to lower spending by E&P companies, we generally provide fewerservices, which results in fewer days or hours worked (as the case may be). Additionally, during periods of decreased spending by E&P companies, we may berequired to discount our rates or provide other pricing concessions to remain competitive and support utilization, which negatively impacts our revenue andoperating margins. During periods of pricing weakness for our services, we may not be able to reduce our costs accordingly, and our ability to achieve anycost reductions from our suppliers typically lag the decline in pricing for our services, which could further adversely affect our results. For additionalinformation about factors impacting our business and results of operations, please see “Industry Trends and Outlook” in this Part II, Item 7. “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”Management evaluates the performance of our operating segments primarily based on Adjusted EBITDA because it provides important informationto us about the activity and profitability of our lines of business within each segment and aids us in analytical comparisons for purposes of, among otherthings, efficiently allocating our assets and resources. Our management team also monitors asset utilization, among other factors, for purposes of assessing ouroverall activity levels and customer demand. For our Completion Services operations, we measure our asset utilization levels primarily by the total number ofdays that our asset base works on a monthly basis, based on the available working days per month, which excludes scheduled maintenance days. Wegenerally consider an asset to be working such days that it is at or in transit to a job location, regardless of the number of hours worked or whether itgenerated any revenue during such time. In our Well Support Services operations, we measure activity levels for primarily by the number of hours our assetswork on a monthly basis, based on the available working days per month. However, given the variance in revenue and profitability from job to job withineach of our core service lines, depending on the type of services to be performed and the equipment, personnel and consumables required for the job, as wellas competitive factors and market conditions in the region in which the services are performed, asset utilization cannot be relied on as indicative of ourfinancial or operating performance.Industry Trends and OutlookWe face many challenges and risks in the industry in which we operate. Although many factors contributing to these risks are beyond our ability tocontrol, we continuously monitor these risks and have taken steps to mitigate them to the extent practicable. In addition, while we believe that we are wellpositioned to capitalize on available growth opportunities, we may not be able to achieve our business objectives and, consequently, our results ofoperations may be adversely affected. Please read the factors described in the sections titled “Cautionary Note Regarding Forward-Looking Statements”and “Risk Factors” in Part I, Item 1A of this Annual Report for additional information about the known material risks that we face.General Industry TrendsThe oil and gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends,including the domestic and international supply and demand for oil and gas, current and expected future prices for oil and gas and the perceived stability andsustainability of those prices, production depletion rates and the resultant levels of cash flows generated and allocated by exploration and productioncompanies to their drilling, completion and workover budget. The oil and gas industry is also impacted by general domestic and international economicconditions, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of consumer demand, theavailability of pipeline capacity, weather conditions, and other factors that are beyond our control. Declines and sustained weakness in commodity pricesover the course of 2015 and into 2016, and the consequent negative impact on the level of exploration, development and production activity and capitalexpenditures by our customers, have adversely affected the demand for our services and, absent a significant rebound in commodity prices and correspondingincrease in exploration, development and production activity by our customers, are expected to adversely affect demand for our services in the future. This, inturn, negatively impacts our ability to maintain utilization of assets and negotiate pricing at levels generating sufficient margins, especially in our hydraulicfracturing business.37Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Demand for our services tends to be extremely volatile and cyclical, as it is a direct function of our customers’ willingness to make operating andcapital expenditures to explore for, develop and produce hydrocarbons in the United States and, to a lesser extent, in Western Canada. Our customers’willingness to undertake such activities and expenditures depends largely upon prevailing industry conditions that are influenced by numerous factors whichare beyond our control, including, among other things, current and expected future levels of oil and gas prices and the perceived stability and sustainabilityof those prices, which, in turn, is driven primarily by the supply of, and demand for, oil and gas. Oil and gas prices, and therefore the level of drilling,completion and workover activity by our customers, historically have been extremely volatile and are expected to continue to be highly volatile. Forexample, during 2015 and to date, oil prices reached and remained at their lowest levels since 2009, declining to as low as $26 per barrel, but with highs at$61 per barrel. Gas prices declined in 2009 and have remained depressed relative to historical levels.Declines or sustained weakness in oil and gas prices influences our customers to curtail their operations, reduce their capital expenditures, andrequest pricing concessions to reduce their operating costs. We have experienced a significant increase in each of these customer responses to the currentcommodity price environment since January 1, 2016. The demand for drilling, completion and workover services is driven by available investment capitalfor such activities and in a lower oil and gas price environment, demand for service and maintenance generally decreases as oil and gas producers decreasetheir activity and expenditures. Because the type of services that we offer can be easily “started” and “stopped,” and oil and gas producers generally tend tobe less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services compared withdemand for other types of energy services. A prolonged low level of customer activity will adversely affect the demand for our services and our financialcondition and results of operations.Competition and Demand for Our ServicesWe operate in highly competitive areas of the energy services industry with significant potential for excess capacity. Completion and wellservicing equipment can be moved with relative ease from one region to another in response to changes in levels of activity and market conditions, whichmay result in an oversupply of equipment in an area. Additionally, the demand for our services depends primarily on the level of spending by oil and gascompanies for drilling, completion and production activities, which are affected by short-term and long-term trends in oil and natural gas prices andnumerous other factors over which we have no control. Utilization and pricing for our services have in the past been negatively affected by increases insupply relative to demand in our core operating areas and geographic markets.Our revenues and earnings are directly affected by changes in utilization and pricing levels for our services, which fluctuate in response tochanges in the level of drilling, completion and workover activity by our customers. Pressure on pricing for our core services, including due to competitionand industry and/or economic conditions, may impact, among other things, our ability to maintain utilization and pricing for our services or implement priceincreases. During periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect ourresults. Furthermore, even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset any rising costs. Also, wemay not be able to successfully increase prices without adversely affecting our utilization levels. The inability to maintain our utilization and pricing levels,or to increase our prices as costs increase, could have a material adverse effect on our business, financial position and results of operations.Our competitors include many large and small energy service companies, including some of the largest integrated energy services companies thatpossess substantially greater financial and other resources than we do. Our larger competitors’ greater resources could allow those competitors to competemore effectively than we can, including by reducing prices for services. Our major competitors for our Completion Services include Halliburton,Schlumberger, Baker Hughes, CalFrac Well Services, Trican, Weatherford International, RPC, Inc., Pumpco, a subsidiary of Superior Energy Services, FracTech, Basic Energy Services and Archer, as well as a significant number of regional businesses. Our major competitors for our Well Support Services includeHalliburton, Schlumberger, Baker Hughes, Key Energy Services, Basic Energy Services, Superior Energy Services, Precision, Forbes, Pioneer, as well as asignificant number of regional businesses.Generally, we believe that the principal competitive factors in the markets that we serve are price, technical expertise, equipment capacity, workforce capability, safety record, reputation and experience. Although we believe our customers consider all of these factors, price is often the primary factor indetermining which service provider is awarded work, particularly during times of weak commodity prices like we experienced during 2015 and continue toexperience to date. Additionally, projects for certain of our core service lines are often awarded on a bid basis, which tends to further increase competitionbased primarily on price. While we must be competitive in our pricing, we believe many of our customers elect to work with us based on the safety,performance and quality of our crews, equipment and services. We seek to differentiate ourselves from our major competitors by our operating philosophy,which is focused on delivering the highest quality customer service and equipment, coupled with superior execution and operating efficiency. As part of thisstrategy, we target high38Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.volume, high efficiency customers with service intensive, 24-hour work, which is where we believe we can differentiate our services from our competitors.Current Market Conditions and OutlookAs we entered 2015, we experienced a slowdown in activity across our customer base as operators reacted to the rapid decline in commodityprices that began during the fourth quarter of 2014. The entire year proved to be extremely challenging for the North American oilfield services industry dueto the sustained weakness and volatility in oil prices at levels that resulted in severe reductions in drilling, completion and production activities. Thisresulted in a significant decrease in demand for our services, with reductions in customer budgets driving severe utilization declines, and increasedcompetition and pricing pressure to varying degrees across our service lines and operating areas. As our customers reduced their service needs and budgets,we worked with them, including through pricing concessions, when necessary to secure utilization and protect market share across our service lines, whilealso seeking ways to deliver greater efficiencies and reduce our operating costs. However, our financial and operating results were adversely impacted by theweak activity and pricing environment characterizing this downturn.In response to challenging market conditions, and also as part of our integration plan in anticipation of the Merger, late in the first quarter of2015 we began to scale back our operations and align our cost structure with activity levels. We idled equipment, reduced headcount, implemented strict costcontrol measures and negotiated substantial price reductions with suppliers to lower our operating costs. However, our ability to obtain cost reductions fromour third-party suppliers lagged behind the drop in pricing for our services, which further compressed margins. With the Merger closing during the early partof the downturn, we had the impetus to double-down on our efforts to streamline our combined company and to further improve our cost structure, leveragingour greater scale. We stacked unproductive equipment, further reduced head count, including through the elimination of duplicative personnel, closed orconsolidated facilities, and implemented other measures to bring our operations and cost-structure in-line with existing activity levels and anticipatedinstability over the near term.In the face of challenging headwinds, we successfully completed the integration of Legacy C&J and the C&P business ahead of schedule, whichinvolved a substantial effort across our employee base to integrate the numerous systems and functions in a timely manner. We achieved greater synergiesthan originally anticipated, and at an accelerated pace. For example, we achieved procurement synergy savings from applying more favorable pricing on keyconsumables, such as proppant, trucking and chemicals, to our expanded Completion Services operations, and the elimination of duplicative personnel andfacilities provided some synergy savings with respect to corporate overhead and administrative expenses. Additionally, through our various R&T initiativeswe became more vertically integrated, which has enabled us to continue to reduce our cost structure, creating opportunities to drive revenue and gain marketshare.Looking forward, the severity and duration of this downturn remain uncertain and we are preparing for industry conditions to remain extremelychallenging through 2016. Activity and pricing levels have declined since the beginning of the year, which will negatively impact our first quarter financialand operating results. We are actively monitoring the market and managing our business in line with demand for services, and we will continue to makeadjustments as necessary to effectively respond to the challenging conditions, including further scaling back our strategic initiatives and both core and non-core businesses. We are maintaining an intense focus on lowering our input and labor costs, driving costs savings and controlling expenses. Our top prioritiesremain to drive revenue by maximizing utilization, improve margins through cost controls, protect and grow market share by focusing on the quality andefficiency of our service execution and ensure we are strategically positioned to capitalize on any future market improvement or compelling opportunities.Although we believe that we are prepared for the challenges that lie ahead, the ultimate impact of the current industry downturn on our company will dependupon various factors, many of which remain beyond our control. Please see “Liquidity and Capital Resources” in this Part II, Item 7 “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” in addition to“Cautionary Note Regarding Forward-Looking Statements” and“Risk Factors” in Part I, Item 1A of this Annual Report.Results of OperationsThe following is a comparison of our results of operations for the year ended December 31, 2015, compared to the year ended December 31, 2014,and a comparison of our results of operations for the year ended December 31, 2014, compared to the year ended December 31, 2013. Our results for the 2015year include the financial and operating results of Legacy C&J for the entire period and the C&P Business from the Effective Time of the Merger (March 24,2015) through December 31, 2015. Results for periods prior to March 24, 2015 reflect the financial and operating results of Legacy C&J exclusively, and donot include the financial and operating results of the C&P Business. Accordingly, comparisons of 2015 results to prior years may not be meaningful. Inaddition to the Merger, we have significantly grown our company since the beginning of 2014 as we39Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.executed our long term growth strategy and demonstrated our commitment to diversify and expand our business. As a result of our efforts, as well as marketfluctuations, neither our 2015 nor our 2014 results are directly comparable to prior years.Furthermore, for the first quarter of 2015, we revised our reportable segments to reflect the change in our operating segments as a result of theMerger. Due to the transformative nature of the Merger, our chief operating decision maker (the “CODM”) changed the way in which the Company ismanaged, which included a revised segment approach in making performance evaluation and resource allocation decisions. Discrete financial informationwas created to provide the segment information necessary for the CODM to manage the Company under the revised operating segment structure. The currentreportable business segment structure reflects the financial information and reports used by management, including our CODM, to make decisions regardingthe Company’s business, including performance evaluation and resource allocation decisions. We have recast the segment information included in thisAnnual Report to reflect the new reportable segment structure in order to conform to the current year presentation.Results for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014The following table summarizes the change in our results of operations for the year ended December 31, 2015, compared to the year endedDecember 31, 2014 (in thousands): Years Ended December 31, 2015 2014 $ ChangeRevenue $1,748,889 $1,607,944 $140,945Costs and expenses: Direct costs 1,523,116 1,179,227 343,889Selling, general and administrative expenses 239,775 182,518 57,257Research and development 16,704 14,327 2,377Depreciation and amortization 276,353 108,145 168,208Impairment Expense 791,807 — 791,807Loss on disposal of assets (544) (17) (527)Operating income (1,098,322) 123,744 (1,222,066)Other income (expense): Interest expense, net (82,086) (9,840) (72,246)Other income (expense), net 8,773 598 8,175Total other expenses, net (73,313) (9,242) (64,071)Income (loss) before income taxes (1,171,635) 114,502 (1,286,137)Income tax expense (benefit) (299,093) 45,679 (344,772)Net income (loss) $(872,542) $68,823 $(941,365)RevenueRevenue increased $140.9 million, or 8.8%, for the year ended December 31, 2015, as compared to the year ended December 31, 2014. The increasein revenue was primarily due to our significantly larger asset base and expanded operations as a result of the Merger and the incremental impact of $822.2million of revenue contributed by the C&P Business, offset by a $681.3 million decrease in revenue from Legacy C&J due to significantly lower utilizationand pricing levels across our Completion Services segment resulting from the extremely competitive market environment caused by the continued decline inU.S. onshore drilling and completion activity.Direct CostsDirect costs increased $343.9 million, or 29.2%, to $1.5 billion for the year ended December 31, 2015, as compared to $1.2 billion for the year endedDecember 31, 2014, primarily due to our significantly larger asset base and expanded operations as a result of the Merger, including additional direct costs of$697.6 million from the C&P Business, partially offset by a $353.7 million decrease in direct cost attributable to Legacy C&J.As a percentage of revenue, direct costs increased to 87.1% for the year ended December 31, 2015, up from 73.3% for the year ended December 31,2014, primarily due to substantially lower pricing for our services due to competitive market conditions resulting from the rapid decline in commodity prices,partially offset by reductions to our cost structure achieved through our supply chain and procurement synergy savings following the Merger.40Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")SG&A increased $57.3 million, or 31.4%, to $239.8 million for the year ended December 31, 2015, as compared to $182.5 million for the year endedDecember 31, 2014. Excluding an increase of $22.5 million in acquisition-related costs, the remaining increase in SG&A for the year ended December 31,2015 was primarily driven by a significantly greater employee base as a result of the Merger, partially offset by the implementation of our integration planfollowing the Merger and market-driven cost control initiatives, including reductions in headcount and facilities.We also incurred $16.7 million in R&D for the year ended December 31, 2015, as compared to $14.3 million for the corresponding prior year period.We remain committed to investing in key technologies that we lower our cost base for key inputs, enhance synergy savings and improve our operationalcapabilities and efficiencies. However, as part of our cost control measures, during the latter half of 2015, we scaled back our research and technologydivision and delayed certain projects.Depreciation and Amortization Expense ("D&A")D&A increased $168.2 million, or 155.5%, to $276.4 million for the year ended December 31, 2015 as compared to $108.1 million for the sameperiod in 2014. The increase in D&A was primarily related to our significantly larger asset base as a result of the Merger, as well as the deployment of newequipment in Legacy C&J's core service lines.Impairment ExpenseImpairment expense for the year ended December 31, 2015 was $791.8 million and consisted of $385.0 million of goodwill impairment and $393.1million of property, plant and equipment ("PP&E") impairment, both related to the Completion Services and Other Services segments, and $13.8 millionrelated to other intangible assets.Due to the continued downturn in the oil and gas industry, and the resulting further deterioration in demand for our services, we determined that it wasnecessary to test goodwill for impairment and to test PP&E and intangible assets for recoverability during the third quarter of 2015 and again during thefourth quarter of 2015. As a result, we recorded a non-cash pre-tax charge of $394.2 million related to impairment of goodwill and intangible assets for ourCompletion Services and Other Services segments for the third quarter of 2015, and we recorded a non-cash pre-tax charge of $393.1 million related toimpairment of PP&E from certain asset groups within each of our Completion Services segment and Other Services for the fourth quarter of 2015.No impairment was incurred for the year ended December 31, 2014.Interest Expense, netInterest expense increased $72.2 million, or 734.2%, to $82.1 million for the year ended December 31, 2015 due to higher levels of borrowings,primarily to finance the Merger.Income TaxesWe recorded an income tax benefit of $299.1 million for the year ended December 31, 2015, at an effective rate of 25.5%, compared to income taxexpense of $45.7 million for the year ended December 31, 2014, at an effective rate of 39.9%. The decrease in the effective tax rate is primarily due to a pre-tax loss in the current year, as compared to pre-tax income in the prior year. The effective rate, and resulting benefit, is less than the expected statutory rateprimarily due to impairment charges that were not deductible for tax, the impact of permanent differences on the tax rate and the recognition of non-deductible acquisition related costs.Results for the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013The following table summarizes the change in our results of operations for the year ended December 31, 2014, when compared to the year endedDecember 31, 2013 (in thousands): 41Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Years Ended December 31, 2014 2013 $ ChangeRevenue $1,607,944 $1,070,322 $537,622Costs and expenses: Direct costs 1,179,227 751,468 427,759Selling, general and administrative expenses 182,518 124,404 58,114Research and development 14,327 5,005 9,322Depreciation and amortization 108,145 74,703 33,442Loss on disposal of assets (17) 527 (544)Operating income 123,744 114,215 9,529Other income (expense): Interest expense, net (9,840) (6,550) (3,290)Other income (expense), net 598 53 545Total other expenses, net (9,242) (6,497) (2,745)Income before income taxes 114,502 107,718 6,784Income tax expense 45,679 41,313 4,366Net income $68,823 $66,405 $2,418RevenueRevenue increased $537.6 million, or 50.2%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. OurCompletion Services segment contributed $403.2 million of additional revenue from our hydraulic fracturing services and $129.7 million of additionalrevenue from our wireline services. The increased revenue for the year ended December 31, 2014 was driven by high activity and service intensity levels,strong operational execution and the deployment of additional equipment across our service lines.Direct CostsDirect costs increased $427.8 million, or 56.9%, to $1.2 billion for the year ended December 31, 2014, as compared to $751.5 million for the yearended December 31, 2013. Our Completion Services segment had $408.1 million of additional direct costs primarily from our hydraulic fracturing servicesand $69.7 million of additional direct costs from our wireline services, in each instance related to a corresponding increase in revenue. As a percentage ofrevenue, direct costs increased from 70.2% for the year ended December 31, 2013 to 73.3% for the year ended December 31, 2014, primarily due to increasedexposure to a highly competitive spot market for our hydraulic fracturing services, as well as increased volumes and costs for proppants and logistics due to ajob-mix weighted towards greater service-intensive activity.Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")SG&A increased $58.1 million, or 46.7%, to $182.5 million for the year ended December 31, 2014, as compared to $124.4 million for the year endedDecember 31, 2013. We also incurred $14.3 million in R&D for the year ended December 31, 2014, as compared to $5.0 million for the year endedDecember 31, 2013.Excluding $20.2 million in transaction costs associated primarily with the Transactions, the increases in SG&A and R&D were primarily due toincreased costs associated with the continued investment in our strategic initiatives, including service line diversification, vertical integration, technologicaladvancement and international expansion. Inclusive of both SG&A and R&D, our strategic initiatives contributed approximately $39.7 million of additionalcosts for the year ended December 31, 2014.Depreciation and Amortization Expense ("D&A")D&A increased $33.4 million, or 44.8%, to $108.1 million for the year ended December 31, 2014, as compared to $74.7 million for the year endedDecember 31, 2013. The increase was primarily related to the deployment of new incremental equipment for our hydraulic fracturing, coiled tubing, wirelineand pressure pumping service lines.Interest Expense, net42Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Interest expense increased $3.3 million, or 50.2%, to $9.8 million for the year ended December 31, 2014, as compared to $6.6 million for the yearended December 31, 2013, due to increased average debt balances.Income TaxesWe recorded income tax expense of $45.7 million for the year ended December 31, 2014, at an effective rate of 39.9%, compared to $41.3 million forthe year ended December 31, 2013, at an effective rate of 38.4%. The increase in the effective tax rate is primarily due to an increase in permanent differencesbetween book and taxable income and foreign losses not benefited in income tax expense. Liquidity and Capital ResourcesCurrent Financial Condition and LiquidityAs of December 31, 2015, we had a cash balance of approximately $25.9 million, $121.0 million in borrowings outstanding under our RevolvingCredit Facility (as defined and discussed below) along with $12.6 million of outstanding letters of credit, and $1.05 billion outstanding under a Term Loan B(as defined and discussed below) comprised of a $570.7 million term loan B-1 and a $481.4 million term loan B-2. We also had $32.0 million in long-termcapital lease obligations. The long-term debt balance is net of $52.4 million of original issue discount on the Term Loan B. As of December 31, 2015, theRevolving Credit Facility had $166.4 million available for borrowing based on $300.0 million of Revolver availability in accordance with the CollateralCoverage Covenant (as defined and discussed below) under the Amended Credit Agreement. We generated $103.0 million of cash from operations during thetwelve months ended December 31, 2015. Please see “Financial Condition and Cash Flows” below for information about net cash provided by or used in ouroperating, investing and financing activities.As of February 23, 2016, we had a cash balance of approximately $93.6 million and $251.0 million in borrowings outstanding under our RevolvingCredit Facility with $36.4 million available for additional borrowing based on $300.0 million of Revolver availability in accordance with the CollateralCoverage Covenant. While we do not have an immediate need for these funds to continue operations, management believes it prudent to ensure direct accessto this capital over the course of 2016 in order to ensure the Company is in the best possible position to manage the current market environment. As a result,absent the issuance of additional securities, alternative financing arrangements or the repayment of outstanding borrowings under our Revolving CreditFacility, our operations for the foreseeable future will be funded from cash flow from operations, cash on hand and the remaining $36.4 million of availabilitythat may be drawn in ordinary course from time to time. The additional draws of $130.0 million on our Revolving Credit Facility since December 31, 2015will result in approximately $1.1 million of additional interest expense for the first quarter of 2016, which may increase net loss and decrease cash flow fromoperations.On September 29, 2015, we entered into the Amendments (as defined and discussed below) to our Credit Agreement that, among other things: (1)reduced the Revolver commitment from $600.0 million to $400.0 million, provided, however, that availability is subject to the newly implementedCollateral Coverage Covenant (herein so called), which limits availability to the greater of (i) $300.0 million and (ii) an amount derived from 80% of EligibleReceivables (as defined and discussed below) and 50% of Eligible Inventory (as defined and discussed below); (2) temporarily suspends the quarterly TotalLeverage Ratio (as defined and discussed below) and Interest Coverage Ratio (as defined and discussed below) covenants set forth in the Credit Agreement,commencing with the fiscal quarter ending September 30, 2015 through the fiscal quarter ending June 30, 2017; (3) provides that upon reinstatement of theTotal Leverage Ratio and Interest Coverage Ratio, the required test levels initially will be more permissive than those in effect prior to the Amendments, andwill gradually adjust to those prior levels over the subsequent fiscal quarters; (4) provides for new financial covenants that will apply in lieu of the TotalLeverage Ratio and Interest Coverage Ratio, including a quarterly Minimum EBITDA Target covenant (as defined and discussed below), commencing withthe quarter ended September 30, 2015 and running through the quarter ending June 30, 2017, based on a negotiated EBITDA test; and (5) sets quarterlylimitations on capital expenditures for the quarter ending December 31, 2015, and annual limitations on capital expenditures for the four fiscal quarterperiods ending December 31, 2016 through June 30, 2017. Please see “ - Description of Our Credit Agreement” below and Note 2 - Long-Term Debt andCapital Lease Obligations in Part II, Item 8 “Financial Statements and Supplementary Data” for additional information about the Credit Agreement.As of December 31, 2015, absent the Amendments, we would not have been in compliance with the Total Leverage Ratio or the Interest CoverageRatio. However, as of December 31, 2015 we are in compliance with the financial covenants required by the Amended Credit Agreement. If our activityand/or pricing levels remain at current levels or do not improve, we are at risk of not being able to comply with our minimum EBITDA Target covenant infuture periods.43Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Capital expenditures totaled $166.3 million for the year ended December 31, 2015, primarily relating to maintenance of our existing equipment. Inresponse to persistently challenging industry conditions, we have significantly scaled back our 2016 capital expenditure plan and capital expenditures for2016 are expected to range from $75 million to $100 million. These expenditures are expected to be funded from cash flows from operations and cash onhand (including from our recent draws under our Revolver).Our current focus is on preserving liquidity by lowering our operating expenses, controlling costs, reducing capital expenditures and maximizingcollection of receivables. Based on our existing operating performance, 2016 planned capital expenditures, and ongoing cost reduction measures, wecurrently believe that our cash flows from operations and existing capital, coupled with cash on hand and borrowings available under our Revolving CreditFacility, will be sufficient to meet our operational and capital expenditure requirements over the next twelve months. Our ability to access additional sourcesof financing will be dependent on our operating cash flows and demand for our services, which could be negatively impacted due to the extreme volatility ofcommodity prices and declines in capital and debt markets. Please see “ – Description of Our Credit Agreement” below for additional information about ourRevolving Credit Facility as amended by the Amendments; please also see “Risk Factors” in Part I, Item 1A of this Annual Report for a discussion ofpotential risks associated with our existing indebtedness and financial and restrictive covenant structure in light of current market conditions.Sources of Liquidity and Capital ResourcesOur primary sources of liquidity include cash on hand, cash flows from operations and borrowings under senior secured debt facilities, including ourRevolving Credit Facility. Historically, our primary uses of capital were for the growth of our Company, including the Merger and other strategic acquisitionsthat complement and enhance our business, the purchase and maintenance of equipment for our core service lines, geographic expansion (both domestic andinternational), and our ongoing strategic initiatives, most notably including the advancement of our research and technology capabilities and verticalintegration. Our capital expenditures, maintenance costs and other expenses have increased substantially over the last few years in line with the significantgrowth we have achieved and the ongoing execution of our long-term growth strategy.As a result of the Merger, we have improved operational scale, as well as a greater combined lending base, coupled with the expected benefit of a lowercost of capital. However, like our competitors, our operational and financial results have been significantly impacted by the current downturn, which in turnimpacts our liquidity and financial flexibility, as well as our ability to continue to comply with the financial covenants contained in the Credit Agreement.Anticipating that we would not be able to comply with the Total Leverage Ratio or the Interest Coverage Ratio, on September 29, 2015, we entered into theAmendments to the Credit Agreement to obtain relief from those financial covenants. Accordingly, as of December 31, 2015, we are in compliance with thefinancial covenants required by the Amended Credit Agreement. We believe the Amendments were a positive development for the Company, as we believethey provide us with the flexibility to continue to work through this challenging time for our industry. However, in the event activity and/or pricing levelsremain at current levels or do not improve, we may be unable to continue comply with these financial covenants in future periods. Notwithstanding theforgoing, the Credit Agreement contains customary restrictive covenants and financial covenants that may limit our ability to engage in activities that maybe in our long-term best interests, including limitations on our ability to create, incur, assume or suffer to exist liens or indebtedness, sell or otherwise disposeof assets, make certain restricted payments and investments, enter into transactions with affiliates and prepay certain indebtedness. Please see “ – Descriptionof Our Credit Agreement” below and Note 2 – Long-Term Debt and Capital Lease Obligations in Part II, Item 8 “Financial Statements and SupplementaryData” for additional information about our Credit Agreement, including the Amendments. Please also see “Risk Factors” in Part I, Item 1A of this AnnualReport.Liquidity Outlook and Future Capital RequirementsThe energy services business is capital-intensive, requiring significant investment to maintain, upgrade and purchase equipment to meet ourcustomers’ needs and industry demand. To date, our capital requirements have consisted primarily of, and we anticipate, over the long-term, will continue tobe: •growth capital expenditures, which are capital expenditures made to acquire additional equipment and other assets, increase our service lines,expand geographically or advance other strategic initiatives for the purpose of growing our business; and•capital expenditures related to our existing equipment, such as maintenance and other activities to extend the useful life of partially or fullydepreciated assets. 44Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Additionally, in the near term, we anticipate our capital requirements will consist almost entirely of capital expenditures related to our existingequipment, such as maintenance and other activities to extend the useful life of partially or fully depreciated assets.The successful execution of our long-term growth strategy depends on our ability to generate sufficient cash flows and /or raise additional capital asneeded. Historically, we have been able to generate solid cash flows in spite of challenging market conditions and our free cash flow and balance sheetallowed us to be flexible with our approach to organic growth and acquisition opportunities. Our ability to fund future growth depends on our performance,which is impacted by factors beyond our control, including financial, business, economic and other factors, such as potential changes in customerpreferences and pressure from competitors. Our current level of indebtedness could limit our ability to finance future growth and adversely affect ouroperations and financial condition. Additionally, the financial and other restrictive covenant obligations contained in the Credit Agreement may restrict ouroperational flexibility and limit our ability to create, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of their assets, makecertain restricted payments and investments and prepay certain indebtedness.As of December 31, 2015, absent the Amendments, we would not have been in compliance with the Total Leverage Ratio or the Interest CoverageRatio covenants contained in the Credit Agreement. Anticipating that we would not be able to comply with the Total Leverage Ratio or the InterestCoverage Ratio, on September 29, 2015, we entered into the Amendments to the Credit Agreement to obtain relief from those financial covenants.Accordingly, as of December 31, 2015, we are in compliance with the financial covenants required by the Amended Credit Agreement. However, in the eventactivity and/or pricing for our services remains at current levels or do not improve, we may be unable to continue comply with these financial covenants infuture periods. Please see “ – Description of Our Credit Agreement” below and Note 2 – Long-Term Debt and Capital Lease Obligations in Part II, Item 8“Financial Statements and Supplementary Data” of this Annual Report for additional information about the Credit Agreement; please see “Risk Factors” inPart I, Item 1A of this Annual Report for a discussion of potential risks associated with our existing indebtedness and financial covenant structure in light ofcurrent market condition.Over the past two years, we have significantly invested in growing our core service lines through the expansion of our assets, customer base andgeographic reach, both domestically and internationally. We have also significantly invested in advancing our ongoing strategic initiatives designed tostrengthen, expand and diversify our business, notably including service line diversification, vertical integration and technological advancement. Ourcontinued investments in international expansion and our strategic initiatives have resulted in increased capital expenditures and costs, and as we executeour long-term growth strategy and further develop our strategic initiatives, we anticipate that our costs and expenses will continue to increase. To date,neither our international operations nor our strategic initiatives have contributed significant third-party revenue; however, we expect that they willcontribute meaningful third-party revenue over the long term.Entering 2015 we experienced a slowdown in activity across our customer base as operators reacted to the rapid decline in commodity prices thatbegan during the fourth quarter of 2014. This resulted in increased competition and pricing pressure to varying degrees across our service lines andoperating areas. Activity levels across our operations have remained depressed throughout 2015. Our 2015 financial and operating performance wasnegatively impacted by the continued weakness in demand for our services, with reductions in customer budgets and drilling and completion activitydriving severe utilization declines and pricing pressure. Although the severity and duration of this downturn remains uncertain, absent a significant recoveryin commodity prices, we expect that activity and pricing levels will remain depressed, which will negatively impact our financial and operating results overthe near term, in spite of the aggressive actions we have taken, and are taking, to scale back our operations and align our cost structure with the highlycompetitive market environment. Given the challenging market conditions currently facing our industry, we significantly scaled back our 2016 capital expenditure plan to focus oncapital expenditures related to our existing equipment, including maintenance and other activities purposed to extend the useful life of our assets. Based onour existing operating performance, 2016 planned capital expenditures and ongoing cost reduction measures, we currently believe that our cash flows fromoperations and existing capital, coupled with cash on hand and borrowings available under our Revolving Credit Facility, will be sufficient to meet ouroperational and capital expenditure requirements over the next twelve months.Given the investments we have made in expanding our service lines, including through investing in new equipment, coupled with our verticallyintegrated equipment manufacturing and repair business and research and technology capabilities, we believe that we have built a strong platform that willenable us to perform at the highest level through this current downturn and when the market recovers. With respect to our strategic initiatives, we believethat the strategic investments in vertical integration and our research and technology capabilities that we have made, and our efforts to lower our cost basefor key45Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.inputs and improve our operational capabilities and efficiencies, will help us manage through this down-cycle. Several of our research and technologyinitiatives are now generating monthly cost savings to our Completion Services operations and are also helping to generate revenue. Although the financialbenefits are still minimal at this time, we believe that these strategic projects will deliver meaningful cost savings to us over the long term. Even as we seekto reduce costs, we remain committed to investing in key technologies that lower our cost base for key inputs, enhance synergy savings and improve ouroperational capabilities and efficiencies. However, we will continue to monitor the economic environment and demand for our services and adjust ourbusiness strategy as necessary to effectively respond to the market. If this current industry downturn persists or worsens, we are prepared to delay furtherinvestment in these projects in line with any sustained market weakness and to take the necessary steps to further protect our company and maximize valuefor all of our shareholders.Financial Condition and Cash FlowsThe net cash provided by or used in our operating, investing and financing activities is summarized below (in thousands): Years Ended December 31, 2015 2014 2013Cash flow provided by (used in): Operating activities $103,005 $181,837 $181,101Investing activities (825,156) (343,412) (165,295)Financing activities 734,126 157,178 (15,834)Effect of exchange rate on cash 3,908 — —Decrease (increase) in cash and cash equivalents $15,883 $(4,397) $(28)Cash Provided by Operating ActivitiesNet cash provided by operating activities decreased $78.8 million for the year ended December 31, 2015 as compared to the corresponding period in2014. The decrease in operating cash flow was primarily due to (a) the decline in net income during the year ended December 31, 2015, after excluding theeffects of changes in non-cash items, (b) cash used to satisfy obligations related to accounts payable and accrued liabilities assumed in the C&P Businessacquisition and (c) incremental cash used to pay down accounts payable, partially offset by positive changes which included an increase in cash providedfrom the collection of accounts receivable assumed in the C&P Business acquisition and operating assets and liabilities related to normal fluctuations in thetiming of cash collections and cash requirements.Net cash provided by operating activities was $0.7 million higher for the year ended December 31, 2014 as compared to the year endedDecember 31, 2013. The increase in operating cash flow was primarily due to the increase in net income during 2014, after excluding the effects of changes innon-cash items, partially offset by changes in operating assets and liabilities which included (a) incremental cash used to satisfy inventory levels primarilydue to vertical integration efforts and (b) incremental cash used from changes in other operating assets and liabilities related to our growth and from normalfluctuations due to the timing of cash collections and cash requirements.Cash Flows Used in Investing ActivitiesNet cash used in investing activities increased $481.7 million for the year ended December 31, 2015 as compared to the corresponding period in2014. This increase was primarily due to the cash consideration of $693.5 million paid at the closing of the Merger for the acquisition of the C&P Business,partially offset by a $43.4 million purchase price reduction for the C&P Business related to a working capital adjustment and a decline in capital expenditurepurchases as a result of the downturn in the oil and gas industry.Net cash used in investing activities increased $178.1 million for the year ended December 31, 2014 as compared to the year ended December 31,2013. This increase was due to a $155.8 million increase in capital expenditures primarily related to new equipment additions in our Stimulation and WellIntervention Services and Wireline Services segments, as well as a $33.2 million for the Tiger Acquisition.Cash Flows Provided by (Used in) Financing Activities46Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Net cash provided by financing activities increased $576.9 million for the year ended December 31, 2015 as compared to the corresponding periodin 2014. The increase is primarily related to proceeds received from our Credit Agreement to fund the cash consideration portion of the acquisition of theC&P Business at the closing of the Merger as well as to pay off the long-term debt of Legacy C&J.Net cash provided by financing activities was $157.2 million for the year ended December 31, 2014 as compared to net cash used in financingactivities of $15.8 million for the same period in 2013. Net cash provided by financing activities increased $173.0 million primarily due to net borrowingsfrom our credit facility to fund increased capital expenditures related to new equipment, the Tiger Acquisition, and transaction costs associated with thePending Nabors Transaction.Description of Our Credit AgreementIn connection with the closing of the Merger, we entered into a new credit agreement, dated as of March 24, 2015 (the “Original Credit Agreement”),among C&J, CJ Lux Holdings S.à r.l. (“Luxco”), CJ Holding Co, Bank of America, N.A., as Administrative Agent (in such capacity, the “AdministrativeAgent”), Swing Line Lender and an L/C Issuer, and the other lenders party thereto. The Original Credit Agreement provided for senior secured credit facilitiesin an aggregate principal amount of $1.66 billion, consisting of (a) a $600.0 million Revolving Credit Facility and (b) a Term Loan B in the aggregateprincipal amount of $1.06 billion.On September 29, 2015, we entered into a waiver and second amendment (the "Waiver and Second Amendment") and a third amendment (the "ThirdAmendment" and, together with the Waiver and Second Amendment, the "Amendments") to the Original Credit Agreement (as amended by the Amendmentsdescribed below, the "Amended Credit Agreement" or the "Credit Agreement") intended to provide the Company with increased financial flexibility throughthe third quarter of 2018. The Waiver and Second Amendment, among other things, suspends the quarterly Total Leverage Ratio and Interest Coverage Ratiocovenants set forth in the Original Credit Agreement commencing with the fiscal quarter ending September 30, 2015 and running through the fiscal quarterending June 30, 2017. Upon reinstatement of these covenants as of the quarter ending September 30, 2017, the required levels initially will be morepermissive than those in effect prior to the Waiver and Second Amendment, and will gradually adjust to those prior levels over the subsequent fiscal quarters.The Waiver and Second Amendment also provides for new financial covenants that will apply in lieu of the quarterly Total Leverage Ratio andInterest Coverage Ratio previously in effect, including the following:•a quarterly minimum EBITDA covenant, commencing with the quarter ended September 30, 2015 and running through the quarter ending June 30,2017, based on a negotiated EBITDA test ("Minimum EBITDA covenant");•a collateral coverage covenant ("Collateral Coverage covenant") commencing at the closing of the Waiver and Second Amendment and runningthrough the quarter ending March 31, 2018, which will limit outstanding Revolver borrowings and letters of credit to the greater of (i) $300.0million and (ii) an amount derived from 80% of Eligible Receivables (as defined in the Waiver and Second Amendment) and 50% of EligibleInventory (as defined in the Waiver and Second Amendment) (subject to the reduced maximum Revolver borrowing capacity described below); and•a quarterly limitation on capital expenditures for the quarter ending December 31, 2015, and annual limitations on capital expenditures for the fourfiscal quarter periods ending December 31, 2016 through June 30, 2017In summary, the Credit Agreement contains financial covenants applicable to the Revolver and the Five-Year Term Loan, which include: (i) amaximum Total Leverage Ratio of 5.50:1.00 for the fiscal quarter ending September 30, 2017, 5.00:1.00 for the fiscal quarter ending December 31, 2017,4.50:1.00 for the fiscal quarter ending March 31, 2018, 4.25:1.00 for the fiscal quarter ending June 30, 2018 and 4.00:1.00 for each fiscal quarter thereafter;(ii) a minimum quarterly ratio of consolidated EBITDA of C&J and its subsidiaries to consolidated interest expense of C&J and its subsidiaries ("InterestExpense Ratio") of 2.50:1.00 for the fiscal quarters ending September 30, 2017 and December 31, 2017, 2.75:1.00 for the fiscal quarter ending March 31,2018 and 3.00:1.00 for each fiscal quarter thereafter; and (iii) starting September 30, 2015 and until the fiscal quarter ending June, 30, 2017, a MinimumCumulative Consolidated EBITDA covenant as follows (in thousands):47Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Minimum CumulativeConsolidated EBITDA (1) Cumulative CushionAmount Three months ended September 30, 2015 $(15,000) $10,000 Three months ended December 31, 2015 $10,000 $20,000 Six months ended March 31, 2016 $28,000 $40,000 Nine months ended June 30, 2016 $63,000 $60,000 Twelve months ended September 30, 2016 $121,000 $60,000 Twelve months ended December 31, 2016 $115,000 None Twelve months ended March 31, 2017 $165,000 None Twelve months ended June 30, 2017 $205,000 None(1) Minimum Cumulative Consolidated EBITDA is defined as total earnings (loss) before net interest expense, income taxes, depreciation and amortization, other income(expense), and net gain or loss on disposal of assets, and excludes, among other things, share-based compensation expense, acquisition-related costs, and non-routine items.The Company may use some or all of the “Cumulative Cushion Amount” set forth above to increase the Cumulative Consolidated EBITDA for thespecified given period for purposes of satisfying the Minimum Cumulative Consolidated EBITDA test applicable to such period. In the event the Companyutilizes only some of the Cumulative Cushion Amount for such period, any used amount for such period will reduce the Cumulative Cushion Amountspecified for any future period.The effectiveness of the above-referenced covenant suspension is also subject to certain conditions subsequent that, among other things, will reduceour capacity to make investments and restricted payments through the quarter ending December 31, 2017.Pursuant to the Third Amendment, the revolving lenders agreed to replace the existing revolving facility with a new revolving facility having arevised pricing grid that increases the applicable rate on revolving borrowings by (i) 50 basis points in the event that C&J’s most recently reported TotalLeverage Ratio is greater than 4.0 to 1.0 and less than or equal to 4.5 to 1.0 and (ii) 100 basis points in the event that C&J’s most recently reported TotalLeverage Ratio is greater than 4.5 to 1.0. In connection with the Waiver and Second Amendment and the Third Amendment, the Company also reduced maximum borrowing capacity under therevolving facility pursuant to the Credit Agreement from $600.0 million to $400.0 million.The borrowers under the Revolving Credit Facility are C&J, Luxco and CJ Holding Co. The borrower under the Term Loan B Facility is CJ HoldingCo. All obligations under the Credit Agreement are guaranteed by the Company’s wholly-owned domestic subsidiaries, other than immaterial subsidiaries.Borrowings under the Revolving Credit Facility will mature on March 24, 2020 (except that if any Five-Year Term Loans (described below) have notbeen repaid prior to September 24, 2019, the Revolving Credit Facility will mature on September 24, 2019). The Term Loan B Facility is comprised of twotranches: a tranche consisting of $572.1 million in aggregate principal amount of term loans as of September 30, 2015 maturing on March 24, 2020 (the“Five-Year Term Loans”) and a tranche consisting of a $482.6 million in aggregate principal amount of term loans as of September 30, 2015 maturing onMarch 24, 2022 (the “Seven-Year Term Loans”).Borrowings under the Revolving Credit Facility are non-amortizing. The Term Loan B Facility requires theborrower thereunder to make quarterly amortization payments in an amount equal to 1.0% per annum, with the remaining balance payable on the applicablematurity date.Amounts outstanding under the Revolving Credit Facility bear interest based on, at the option of the borrower, the London Interbank Offered Rate(“LIBOR”) or an alternative base rate, plus an applicable margin based on the ratio of consolidated total indebtedness of C&J and its subsidiaries toconsolidated EBITDA of C&J and its subsidiaries for the most recent four fiscal quarter period for which financial statements are available (the “TotalLeverage Ratio”). The Revolving Credit Facility also requires that the borrowers pay a commitment fee equal to a percentage of unused commitments whichvaries based on the Total Leverage Ratio.Five-Year Term Loans outstanding under the Term Loan B Facility bear interest based on, at the option of the borrower, LIBOR (which, in the case ofthe Term Loan B Facility, will be deemed to be no less than 1.0% per annum), plus a margin of 5.5%, or an alternative base rate, plus a margin of 4.5%.Seven-Year Term Loans outstanding under the Term Loan B Facility bear interest based on, at the option of the borrower, LIBOR (which, in the case of theTerm Loan B Facility, will be deemed to48Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.be no less than 1.0% per annum), plus a margin of 6.25%, or an alternative base rate, plus a margin of 5.25%. The Term Loan B Facility also contains ‘mostfavored nation’ pricing protection requiring that if the effective yield (giving effect to, among other things, consent fees paid to the lenders) of the Five-YearTerm Loans increases by more than 50 basis points, the effective yield of the Seven-Year Term Loans must increase by the same amount less 50 basis points.The alternative base rate is equal to the highest of (i) the Administrative Agent’s prime rate, (ii) the Federal Funds Effective Rate plus 0.50% and(iii) LIBOR plus 1.0%.Subject to certain conditions and limitations, the Credit Agreement permits the borrowers to increase the aggregate commitments under the RevolvingCredit Facility in a total principal amount of up to $100.0 million.The Revolving Credit Facility is permitted to be prepaid from time to time without premium or penalty. Five-Year Term Loans are subject to aprepayment premium of 4% for any voluntary prepayments made on or prior to March 24, 2016 and no prepayment premium thereafter. Seven-Year TermLoans will be subject to a prepayment premium of 5% for any voluntary prepayments made on or prior to March 24, 2017 and no prepayment premiumthereafter.Subject to certain conditions and exceptions, the Term Loan B Facility is required to be prepaid under particular circumstances, including (i) in theevent that C&J and its subsidiaries generate Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year, in an amount equal to 50% of theExcess Cash Flow for such fiscal year if the Total Leverage Ratio as of the end of such fiscal year is 3.25:1.00 or greater, (ii) in the event of a sale or otherdisposition of property by C&J or its subsidiaries, in an amount equal to 100% of the net proceeds of such sale or disposition, subject to customaryreinvestment rights and other exceptions, and (iii) in the event of an incurrence of debt not permitted under the Credit Agreement, in an amount equalto 100% of the net proceeds of such debt.The Credit Agreement contains customary restrictive covenants (in each case, subject to exceptions) that limit, among other things, our ability tocreate, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of their assets, make certain restricted payments and investments, enterinto transactions with affiliates, make capital expenditures and prepay certain indebtedness. lease see “Risk Factors” in Part I, Item 1A of this Annual Reportfor a discussion of potential risks associated with our financial and restrictive covenant structure.Contractual ObligationsThe following table summarizes our contractual cash obligations as of December 31, 2015 (in thousands): Contractual Obligation Total Less than1 year 1-3 years 3-5 years More than5 yearsRevolving Credit Facility(1) $138,985 $4,641 $9,263 $125,081 $—Term Loan B Facility(2) 1,422,232 83,454 164,302 676,463 498,013Capital leases(3) 40,060 3,734 7,269 7,672 21,385Operating leases 27,837 9,008 8,612 4,147 6,070Inventory and materials(4) 102,919 33,663 62,880 6,376 —Service equipment and other capital expenditures 2,064 2,064 — — —Total $1,734,097 $136,564 $252,326 $819,739 $525,468 (1) Includes estimated interest costs at an interest rate of 2.7% along with related charges.(2) Includes estimated interest costs on two term loan tranches at an interest rate of 6.5% and 7.25%.(3) Capital lease amounts include $5.2 million in interest payments.(4) Primarily related to sand contract purchase commitments.Off-Balance Sheet Arrangements49Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We had no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, as of December 31, 2015.Critical Accounting PoliciesThe selection and application of accounting policies is an important process that has developed as our business activities have evolved and as theaccounting standards have developed. Accounting standards generally do not involve a selection among alternatives, but involve the implementation andinterpretation of existing standards, and the use of judgment applied to the specific set of circumstances existing in our business. We make every effort toproperly comply with all applicable standards on or before their adoption, and we believe the proper implementation and consistent application of theaccounting standards are critical.Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of theseconsolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and relateddisclosures. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under thecircumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analysis form the basis for making assumptions about thecarrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under differentassumptions or conditions.We believe the following critical accounting policies involve significant areas of management’s judgments and estimates in the preparation of ourconsolidated financial statements.Property, Plant and Equipment. Property, plant and equipment are recorded at cost less accumulated depreciation. Maintenance and repairs, whichdo not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the life of the equipment isextended. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, andany gain or loss is included in operating income. The cost of property and equipment currently in service is depreciated on a straight-line basis over theestimated useful lives of the related assets, which range from three to 25 years.PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value ofcertain PP&E may not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in theperiod in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimatedundiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of othergroups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interestexpense. We determined the lowest level of identifiable cash flows that are independent of other asset groups to be at the service line level, which consists ofthe well services, hydraulic fracturing, coiled tubing, wireline, pumpdown, directional drilling, cementing, artificial lift applications, international coiledtubing, equipment manufacturing and repair services, specialty chemicals and data acquisition and control instruments provider service lines as well as thevertically integrated research and technology service line. If the estimated undiscounted future net cash flows for a given asset group is less than the carryingamount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. Theimpairment loss is then allocated across the asset group's major classifications.Goodwill, Indefinite-Lived Intangible Assets and Definite-Lived Intangible Assets. Goodwill is allocated to our three reporting units: CompletionServices, Well Support Services and Other Services, all of which are consistent with the presentation of our three reportable segments. At the reporting unitlevel, we test goodwill for impairment on an annual basis as of October 31 of each year, or when events or changes in circumstances, referred to as triggeringevents, 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 unexpectedadverse economic conditions, competition, market changes and other external events may require more frequent assessments.Before employing detailed impairment testing methodologies, we may first evaluate the likelihood of impairment by considering qualitativefactors relevant to each reporting unit, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If we firstutilize a qualitative approach and determine that it is more likely than not that goodwill is impaired, detailed testing methodologies are then applied.Otherwise, we conclude that no impairment has50Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.occurred. Detailed impairment testing, or Step 1 testing, involves comparing the fair value of each reporting unit to its carrying value, including goodwill.Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, thenit is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required tomeasure possible goodwill impairment loss. The second step, or Step 2 testing, includes hypothetically valuing the tangible and intangible assets andliabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’sgoodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of thegoodwill, an impairment loss is recognized in an amount equal to the excess, not to exceed the carrying value.Our Step 1 impairment analysis involves the use of a blended income and market approach. Significant management judgment is necessary toevaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected revenue growth, fleet count,utilization, gross profit rates, SG&A rates, working capital fluctuations, capital expenditures, discount rates, terminal growth rates, and price-to-earningsmultiples. Our market capitalization is also used to corroborate reporting unit valuations.Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicatethe carrying amount may not be recoverable.Definite-lived intangible assets are amortized over their estimated useful lives. These intangibles are reviewed for impairment when events orchanges in circumstances (a triggering event) indicate that the asset may have a net book value in excess of recoverable value. In these cases, we perform arecoverability test on its definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generated from theuse of the asset to the carrying amount of the asset for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the asset, animpairment does not exist and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the asset, the asset is notrecoverable and the amount of impairment must be determined by fair valuing the asset.Mergers and Acquisitions. In accordance with accounting guidance for business combinations, we allocate the purchase price of an acquiredbusiness to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets andliabilities, if any, is recorded as goodwill. We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in thefair value determination of identifiable intangible assets such as trade names and any other significant assets or liabilities. We adjust the preliminary purchaseprice allocation, as necessary, up to one year after the acquisition closing date as we obtain more information regarding asset valuations and liabilitiesassumed.Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment toestimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, thecarrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analysis. Unanticipatedevents or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factorsand business strategies. If actual results are materially different than the assumptions we used to determine fair value of the assets and liabilities acquiredthrough a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an impact on our net earnings.See “Note 10 – Mergers and Acquisitions” in Item 8 “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for theacquisition-related information associated with mergers and acquisitions completed in the last three fiscal years.Revenue Recognition. All revenue is recognized when persuasive evidence of an arrangement exists, the service is complete or the equipment hasbeen delivered to the customer, the amount is fixed or determinable and collectibility is reasonably assured, as follows:Completion Services SegmentHydraulic Fracturing Revenue. Through its hydraulic fracturing service line, the Company provides hydraulic fracturing services on a spot marketbasis or pursuant to contractual arrangements, such as term contracts and pricing agreements. Under either scenario, revenue is recognized and customers areinvoiced upon the completion of each job, which can consist of one or more fracturing stages. Once a job has been completed to the customer’s satisfaction, afield ticket is51Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.written that includes charges for the service performed and the consumables (such as fluids and proppants) used during the course of service. The field ticketmay also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and othermiscellaneous consumables.Rates for services performed on a spot market basis are based on an agreed-upon hourly spot market rate for a specified number of hours of service.Pursuant to pricing agreements and other contractual arrangements which the Company may enter into from time to time, such as those associatedwith an award from a bid process, customers typically commit to targeted utilization levels based on a specified number of hours of service at agreed-uponpricing, but without termination penalties or obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typicallysubject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties.Cased-Hole Wireline Revenue. Through its cased-hole wireline service line, the Company provides cased-hole wireline logging, perforating,pressure pumping, well site make-up and pressure testing and other complementary services, on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. The Company typically charges the customer for these services on a per job basis atagreed-upon spot market rates. Revenue is recognized based on a field ticket issued upon the completion of the job.Coiled Tubing and Other Stimulation Services Revenue. Through its coiled tubing service line, the Company provides a range of coiled tubing andother well stimulation services, including nitrogen and pressure pumping services, 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 fieldticket. The field ticket includes charges for the services performed and the consumables (such as stimulation fluids, nitrogen and coiled tubing materials)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, anyadditional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed andresources provided on an hourly basis at agreed-upon spot market rates.Revenue from Materials Consumed While Performing Certain Completion Services. The Company generates revenue from consumables used duringthe course of providing services.With respect to hydraulic fracturing services, the Company generates revenue from the fluids, proppants and other materials that are consumed whileperforming a job. For services performed on a spot market basis, the required consumables are typically provided by the Company and the customer is billedfor those consumables at cost plus an agreed-upon markup. For services performed on a contractual basis, when the consumables are provided by theCompany, the customer typically is billed for those consumables at a negotiated contractual rate. When consumables are supplied by the customer, theCompany typically charges handling fees based on the amount of consumables used.In addition, ancillary to coiled tubing and other stimulation services revenue, the Company generates revenue from stimulation fluids, nitrogen,coiled tubing materials and other consumables used during those processes.Well Support Services SegmentRig Services Revenue. Through its rig service line, the Company primarily provides workover and well servicing rigs that are involved in routinerepair and maintenance, completions, re-drilling and plug and abandonment operations. These services are provided on an hourly basis at prices thatapproximate spot market rates. Revenue is recognized and a field ticket is generated upon the earliest of the completion of a job or at the end of each day. Arig 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 hourlyrate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate.Fluids Management Services Revenue. Through its fluids management service line, the Company primarily provides transportation, storage anddisposal 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 houror 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, basedon a completed field ticket.Other Special Well Site Services Revenue. Through its other special well site service line, the Company primarily provides fishing, contract labor,and tool rental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis ofrental 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 servicesprovided.52Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other Services SegmentRevenue within the Other Services Segment is generated from certain of the Company's smaller service lines and divisions, specifically directionaldrilling services, cementing services, equipment manufacturing and repair services, which includes the sale of oilfield parts and supplies, and the blendingand sale of specialty chemicals used in completion and production services. Additionally, the Company manages several of its vertically integratedbusinesses through its research and technology division, which is included within the Other Services Segment.With respect to its directional drilling services, the Company provides these services on a spot market basis. Jobs for these services are typicallyshort-term in nature, lasting anywhere from a few days to multiple weeks. The Company typically charges the customer for these services on a per day basis atagreed-upon spot market rates depending on the level of services required and the complexity of the job. Revenue is recognized and customers are invoicedupon the completion of each job. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the serviceperformed.With respect to its cementing services, the Company provides these services on a spot market or project basis. Jobs for these services are typicallyshort-term in nature and are generally completed in a few hours. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates or agreed-upon job pricing for a particular project. Revenue is recognized and customers are invoiced upon the completion of eachjob. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed and the consumables(such as blended bulk cement and chemical additives) used during the course of service.With respect to its equipment manufacturing and repair services, specialty chemicals provider, data acquisition and control instruments provider andartificial lift applications provider, the Company generates revenue primarily from the sale of manufactured equipment and products. Revenue is recognizedupon the completion, delivery and customer acceptance of each order.Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are stated at the amount billed to customers. The Companyprovides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existingeconomic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments ateither the contractual due dates or in the future. At December 31, 2015 and 2014, the allowance for doubtful accounts totaled $7.9 million and $2.2 million,respectively. Bad debt expense of $8.1 million, $0.7 million and $0.7 million was included in direct costs on the consolidated statements of operations forthe years ended December 31, 2015, 2014 and 2013, respectively.Share-Based Compensation. Our share-based compensation consists of restricted shares and nonqualified share options. We recognize share-basedcompensation expense on a straight-line basis over the requisite service period of the award. We value restricted share grants based on the closing price of ourcommon shares on the NYSE on the grant date, and we value option grants based on the grant date fair value by using the Black-Scholes option-pricingmodel, which requires the use of highly subjective assumptions.The Black-Scholes option-pricing model requires inputs such as the expected term of the grant, expected volatility and risk-free interest rate.Further, the forfeiture rate also affects the amount of aggregate compensation that we are required to record as an expense. We will continue to use judgmentin evaluating the expected term, volatility and forfeiture rate related to our share-based compensation on a prospective basis and will incorporate thesefactors into our option-pricing model. Each of these inputs is subjective and generally requires significant management judgment. If, in the future, wedetermine that another method for calculating the fair value of our stock options is more reasonable, or if another method for calculating these inputassumptions is prescribed by authoritative guidance, and, therefore, should be used to estimate expected volatility or expected term, the fair value calculatedfor our employee stock options could change significantly. Higher volatility and longer expected terms generally result in an increase to share-basedcompensation expense determined at the date of grant.Income Taxes. We are subject to income and other similar taxes in all areas in which we operate. When recording income tax expense, certainestimates are required because: (a) income tax returns are generally filed months after the close of our annual accounting period; (b) tax returns are subject toaudit by taxing authorities and audits can often take years to complete and settle; and (c) future events often impact the timing of when we recognize incometax expenses and benefits.We account for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financial statement carrying53Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which thosetemporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to projectedfuture taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more likely than not thatsome portion or all of the deferred tax assets will not be realized.We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will besustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that isgreater than 50% likely of being realized upon ultimate settlement with a taxing authority. We reverse a previously recognized tax position in the first periodin which it is no longer more-likely-than-not that the tax position would be sustained upon examination. We will record income tax related interest andpenalties, if applicable, as a component of the provision for income tax expense.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue fromContracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer ofpromised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. InAugust 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers ("ASU 2015-14"), which deferred the effective date of ASU 2014-09 for all entities by one year and is effective for the Company's fiscal year beginning January 1, 2018. ASU 2015-14 permits the use of either theretrospective or cumulative effect transition method. We have not yet selected a transition method nor has the effect of the standard on ongoing financialreporting been determined.In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt IssuanceCosts (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a directdeduction from the carrying amount of that debt liability, consistent with debt discounts. For public entities, ASU 2015-03 is effective for fiscal yearsbeginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not beenpreviously issued. ASU 2015-03 is to be applied on a retrospective basis and represents a change in accounting principle. In addition, in August 2015, theFASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements ("ASU2015-15"). ASU 2015-15 clarifies the guidance in ASU 2015-03 regarding presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. The SEC Staff announced they would not object to an entity deferring and presenting debt issuance costs as an asset andsubsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are anyoutstanding borrowings on the line-of-credit arrangement. We do not expect the adoption of these standards to have a material effect on our consolidatedfinancial statements.In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which changes the measurementprinciple for inventory from the lower of cost or market to lower of cost and net realizable value. ASU 2015-11 is part of the FASB’s simplification initiativeand applies to entities that measure inventory using a method other than last-in, first-out ("LIFO") or the retail inventory method. The guidance will requireprospective application at the beginning of the Company's first quarter of fiscal 2018, but permits adoption in an earlier period. We are currently evaluatingthe impact, if any, of adopting this new accounting standard on our results of operations and financial position.In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-PeriodAdjustments ("ASU 2015-16"). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during themeasurement period in the reporting period in which the adjustment amounts are determined. The acquirer must record, in the same period's financialstatements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisionalamounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for the Company's fiscal year beginningJanuary 1, 2016. We are currently evaluating the impact, if any, of adopting this new accounting standard on our results of operations and financial position.54Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes ("ASU 2015-17”). ASU 2015-17 amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on thebalance sheet. The Company is required to adopt this ASU for years beginning after December 15, 2016, with early adoption permitted, and the guidance maybe applied either prospectively or retrospectively. We do not expect this ASU to have a material impact on our consolidated financial statements.InflationInflation in the United States has been relatively low in recent years and did not have a material impact on our results of operations for the yearsended December 31, 2015, 2014 and 2013. Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S. economy, andwe tend to experience inflationary pressure on the cost of our equipment, materials and supplies as increasing oil and natural gas prices increase activity inour areas of operations.55Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 7A. Quantitative and Qualitative Disclosures About Market RiskMarket risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risk to which we are exposed iscommodity price risk, which is the risk related to increases in the prices of fuel, materials and supplies consumed in performing our services. We are alsoexposed to risks related to interest rate fluctuations and customer credit.Commodity Price Risk. Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost ofinventory consumed while performing our stimulation services such as proppants, chemicals, guar, coiled tubing and fluid supplies. Our fuel costs consistprimarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials (particularly guar and proppants)in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Historically, we havegenerally been able to pass along price increases to our customers, however, we may be unable to do so in the future. We do not engage in commodity pricehedging activities.Interest Rate Risk. We are exposed to changes in interest rates on our floating rate borrowings under our Credit Facility. The impact of a 1%increase in interest rates on our outstanding debt as of December 31, 2015 and 2014 would have resulted in an increase in interest expense and acorresponding decrease in net income of approximately $4.7 million and $3.2 million, respectively.Customer Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit tocustomers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including creditevaluations and maintaining an allowance for doubtful accounts.56Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8. Financial Statements and Supplementary DataIndex toConsolidated Financial Statements Management’s Report on Internal Control Over Financial Reporting76Reports of Independent Registered Public Accounting Firms77Consolidated Balance Sheets as of December 31, 2015 and 201480Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014 and 201381Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2015, 2014 and 201382Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 201383Notes to Consolidated Financial Statements8457Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Management’s Report on Internal Control Over Financial ReportingManagement of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, theCompany’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors,management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of managementand directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or dispositionof the Company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even thosesystems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.Management with the participation of the Company’s principal executive and financial officers assessed the effectiveness of the Company’sinternal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria set forth in 2013 by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Management’s assessment included anevaluation of the design of internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31,2015.Management’s assessment of the Company’s internal control over financial reporting as of December 31, 2015 excluded the internal control overfinancial reporting of Nabors Industries Ltd.'s completions and production services business (the "C&P Business"), which was merged with C&J EnergyServices, Inc. on March 24, 2015. The C&P Business represented approximately 44.7% of consolidated revenues and 41.8% of consolidated total assets as ofDecember 31, 2015. The acquisition of ESP Completion Technologies LLC ("ESP") on May 18, 2015, was also excluded from management's assessment as ofDecember 31, 2015. ESP represented approximately 0.3% of consolidated revenues and 0.8% of consolidated total assets as of December 31, 2015.The Company’s internal control over financial reporting as of December 31, 2015 has been audited by KPMG LLP, an independent registeredpublic accounting firm, as stated in their report which appears herein. /s/ Joshua E. Comstock /s/ Randall C. McMullen, Jr. /s/ Mark C. Cashiola Joshua E. ComstockChairman and Chief ExecutiveOfficer (Principal Executive Officer) Randall C. McMullen, Jr.President and Chief FinancialOfficer (Principal Financial Officer) Mark C. CashiolaVice President and Chief Accounting Officer(Principal Accounting Officer)February 26, 201658Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Report of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersC&J Energy Services Ltd.:We have audited the accompanying consolidated balance sheets of C&J Energy Services Ltd. and subsidiaries as of December 31, 2015 and 2014, and therelated consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the two-year periodended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of C&J Energy ServicesLtd. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the two-year periodended December 31, 2015, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), C&J Energy Services Ltd.’sinternal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2016 expressed an unqualified opinionon the effectiveness of the Company’s internal control over financial reporting. This report contains an explanatory paragraph stating that C&J EnergyServices Ltd acquired Nabors Completion and Production Services (NCPS) and ESP Completion Technologies, LLC (ESPCT) during 2015 and managementexcluded from its assessment of the effectiveness of C&J Energy Services Ltd.’s internal control over financial reporting as of December 31, 2015, NCPS andESPCT’s internal control over financial reporting associated with 44.7% and 0.3%, respectively, of consolidated revenues and 41.8% and 0.8%, respectively,of consolidated total assets of C&J Energy Services Ltd. as of and for the year ended December 31, 2015. Our audit of internal control over financial reportingof C&J Energy Services Ltd. also excluded an evaluation of the internal control over financial reporting of NCPS and ESPCT./s/ KPMG LLPHouston, TexasFebruary 26, 201659Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Report of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersC&J Energy Services Ltd.:We have audited C&J Energy Services Ltd.’s internal control over financial reporting as of December 31, 2015, based on criteria established in InternalControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). C&J Energy ServicesLtd.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, C&J Energy Services Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).C&J Energy Services Ltd. acquired Nabors Completion and Production Services (NCPS) and ESP Completion Technologies, LLC (ESPCT) during 2015, andmanagement excluded from its assessment of the effectiveness of C&J Energy Services Ltd.’s internal control over financial reporting as of December 31,2015, NCPS and ESPCT’s internal control over financial reporting associated with 44.7% and 0.3%, respectively, of consolidated revenues and 41.8% and0.8%, respectively, of consolidated total assets of C&J Energy Services Ltd. as of and for the year ended December 31, 2015. Our audit of internal controlover financial reporting of C&J Energy Services Ltd. also excluded an evaluation of the internal control over financial reporting of NCPS and ESPCT.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof C&J Energy Services Ltd. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensiveincome (loss), shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015 and our report dated February 26,2016 expressed an unqualified opinion on those consolidated financial statements./s/ KPMG LLPHouston, TexasFebruary 26, 201660Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and ShareholdersC&J Energy Services, Inc.We have audited the accompanying consolidated statements of operations, changes in shareholders’ equity and cash flows of C&J Energy Services, Inc. (aDelaware corporation) and subsidiaries (collectively, the “Company”) for the year ended December 31, 2013. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of C&J Energy Services, Inc. andsubsidiaries operations and their cash flows for the year ended December 31, 2013, in conformity with accounting principles generally accepted in the UnitedStates of America./s/ UHY LLPHouston, TexasFebruary 26, 2014, except with respect to Note 11, as to which the date is July 15, 201561Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands, except share data) As of December 31, 2015 2014ASSETS Current assets: Cash and cash equivalents $25,900 $10,017Accounts receivable, net of allowance of $7,917 at December 31, 2015 and $2,210 at December31, 2014 274,691 290,767Inventories, net 102,257 122,172Prepaid and other current assets 72,560 29,525Deferred tax assets 9,035 8,106Total current assets 484,443 460,587Property, plant and equipment, net 1,210,441 783,302Other assets: Goodwill 307,677 219,953Intangible assets, net 147,861 129,468Deferred financing costs, net of accumulated amortization of $10,532 at December 31, 2015 and$3,662 at December 31, 2014 48,309 3,786Other noncurrent assets 34,175 15,650Total assets $2,232,906 $1,612,746LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $213,065 $229,191Payroll and related costs 10,335 16,047Accrued expenses 52,250 30,794Current portion of long-term debt and capital lease obligations 13,433 3,873Other current liabilities 1,785 4,926Total current liabilities 290,868 284,831Deferred tax liabilities 149,151 193,340Long-term debt and capital lease obligations, net of original issue discount of $52,413 at December 31,2015 1,142,077 349,875Other long-term liabilities 18,167 2,848Total liabilities 1,600,263 830,894Commitments and contingencies Shareholders’ equity Common shares, par value of $0.01, 750,000,000 shares authorized, 120,420,120 issued andoutstanding at December 31, 2015 and 100,000,000 shares authorized, 55,333,392 issued andoutstanding at December 31, 2014 1,204 553Additional paid-in capital 997,766 271,104Accumulated other comprehensive loss (4,025) (45)Retained earnings (deficit) (362,302) 510,240Total shareholders’ equity 632,643 781,852Total liabilities and shareholders’ equity $2,232,906 $1,612,746See accompanying notes to consolidated financial statements62Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share data) Years Ended December 31, 2015 2014 2013Revenue $1,748,889 $1,607,944 $1,070,322Costs and expenses: Direct costs 1,523,116 1,179,227 751,468Selling, general and administrative expenses 239,775 182,518 124,404Research and development 16,704 14,327 5,005Depreciation and amortization 276,353 108,145 74,703Impairment expense 791,807 — —(Gain) loss on disposal of assets (544) (17) 527Operating income (loss) (1,098,322) 123,744 114,215Other income (expense): Interest expense, net (82,086) (9,840) (6,550)Other income (expense), net 8,773 598 53Total other income (expense) (73,313) (9,242) (6,497)Income (loss) before income taxes (1,171,635) 114,502 107,718Income tax expense (benefit) (299,093) 45,679 41,313Net income (loss) $(872,542) $68,823 $66,405Net income (loss) per common share: Basic $(8.48) $1.28 $1.25Diluted $(8.48) $1.22 $1.20Weighted average common shares outstanding: Basic 102,853 53,838 53,038Diluted 102,853 56,513 55,367See accompanying notes to consolidated financial statements63Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESConsolidated Statements of Comprehensive Income (Loss)(In thousands) Years Ended December 31, 2015 2014 2013Net income (loss)$(872,542) $68,823 $66,405 Other comprehensive income (loss): Foreign currency translation loss, net of income taxbenefit of $1,369 as of December 31, 2015(3,980) (45) —Comprehensive income (loss)$(876,522) $68,778 $66,405See accompanying notes to consolidated financial statements64Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Amounts in thousands) Common Shares AdditionalPaid-inCapital Other ComprehensiveLoss RetainedEarnings Total Number ofShares Amount, at$0.01 par value Balance, December 31, 2012 53,132 $531 $224,348 $— $375,012 $599,891Issuance of restricted shares, netof forfeitures 669 7 (7) — — —Employee tax withholding onrestricted shares vesting (74) (1) (1,374) — — (1,375)Issuance of common shares forstock options exercised 877 9 5,210 — — 5,219Tax effect of share-basedcompensation — — 3,430 — — 3,430Share-based compensation — — 22,581 — — 22,581Net income — — — — 66,405 66,405Balance, December 31, 2013 54,604 546 254,188 — 441,417 696,151Issuance of restricted shares, netof forfeitures 723 7 (7) — — —Employee tax withholding onrestricted shares vesting (153) (2) (4,376) — — (4,378)Issuance of common shares forstock options exercised 159 2 831 — — 833Tax effect of share-basedcompensation — — 2,118 — — 2,118Share-based compensation — — 18,350 — — 18,350Net income — — — — 68,823 68,823Foreign currency translationloss, net of tax — — — (45) — (45)Balance, December 31, 2014 55,333 553 271,104 (45) 510,240 781,852Issuance of common shares, netof issuance costs 62,542 625 709,642 — — 710,267Issuance of restricted shares, netof forfeitures 2,613 26 3,006 — — 3,032Employee tax withholding onrestricted shares vesting (222) (2) (2,619) — — (2,621)Issuance of common shares forstock options exercised 154 2 451 — — 453Tax effect of share-basedcompensation — — (2,367) — — (2,367)Share-based compensation — — 18,549 — — 18,549Net loss — — — — (872,542) (872,542)Foreign currency translationloss, net of tax — — — (3,980) — (3,980)Balance, December 31, 2015 120,420 $1,204 $997,766 $(4,025) $(362,302) $632,643See accompanying notes to consolidated financial statements65Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands) Years Ended December 31, 2015 2014 2013Cash flows from operating activities: Net income (loss) $(872,542) $68,823 $66,405Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 276,353 108,145 74,703Impairment expense 791,807 — —Inventory write-down 31,109 — 870Contingent consideration adjustment (11,147) — —Deferred income taxes (273,144) 33,185 16,513Provision for doubtful accounts, net of write-offs 8,071 600 689Equity (earnings) loss from unconsolidated affiliate (500) (471) 160(Gain) loss on disposal of assets (544) (17) 527Share-based compensation expense 18,549 18,350 22,581Amortization of deferred financing costs 10,926 1,168 1,160Accretion of original issue discount 6,187 — —Changes in operating assets and liabilities: Accounts receivable 278,150 (135,784) 14,704Inventories 21,123 (50,001) (10,495)Prepaid expenses and other current assets (26,821) (12,154) (12,405)Accounts payable (168,607) 132,420 11,991Payroll and related costs and accrued expenses 17,400 14,157 2,710Income taxes payable (108) (301) (3,888)Other (3,257) 3,717 (5,124)Net cash provided by operating activities 103,005 181,837 181,101Cash flows from investing activities: Purchases of and deposits on property, plant and equipment (166,321) (307,598) (151,810)Proceeds from disposal of property, plant and equipment 4,468 719 1,151Payments made for business acquisitions, net of cash acquired (663,303) (33,533) (14,636)Investment in unconsolidated subsidiary — (3,000) —Net cash used in investing activities (825,156) (343,412) (165,295)Cash flows from financing activities: Proceeds from revolving debt 338,000 229,000 60,000Payments on revolving debt (532,000) (64,000) (80,944)Proceeds from term loans 1,001,400 — —Payments on term loans (7,950) — —Payments of capital lease obligations (3,874) (4,165) (2,184)Financing costs (55,450) (2,265) —Proceeds from issuance of common shares for stock options exercised 453 833 5,219Registration costs associated with issuance of common shares (1,465) — —Employee tax withholding on restricted shares vesting (2,621) (4,378) (1,375)Excess tax benefit (expense) from share-based compensation (2,367) 2,153 3,450Net cash provided by (used in) financing activities 734,126 157,178 (15,834) Effect of exchange rate on cash 3,908 — — Net increase (decrease) in cash and cash equivalents 15,883 (4,397) (28)Cash and cash equivalents, beginning of year 10,017 14,414 14,442Cash and cash equivalents, end of year $25,900 $10,017 $14,414Supplemental cash flow disclosures: Cash paid for interest $64,950 $8,525 $5,473Income taxes paid (refunded) $(13,815) $16,125 $38,819Non-cash investing and financing activity: Capital lease obligations $— $25,847 $13,487Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Change in accrued capital expenditures $(42,793) $8,120 $6,177Non-cash consideration for business acquisition $735,125 $— $2,556See accompanying notes to consolidated financial statements66Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1 – Organization, Nature of Business and Summary of Significant Accounting PoliciesC&J Energy Services Ltd. (together with its consolidated subsidiaries, including C&J International B.V. and C&J International Middle East FZCO,“C&J” or the “Company”) is a publicly traded corporation listed on the New York Stock Exchange ("NYSE") under the symbol “CJES.” The Companyprovides well construction, well completions, well support and other complementary oilfield services to oil and gas exploration and production companiesprimarily in North America. As one of the largest completion and production services companies in North America, C&J offers a full, vertically integratedsuite of services involved in the entire life cycle of the well, including directional drilling, cementing, hydraulic fracturing, cased-hole wireline, coiledtubing, rig services, fluids management services and other special well site services. The Company operates in all of the major oil and gas producing regionsof the continental United States and Western Canada. The Company also has an office in Dubai and is working to establish an operational presence in keycountries in the Middle East.On March 24, 2015, C&J Energy Services, Inc. (“Legacy C&J”) and Nabors Industries Ltd. (“Nabors”) completed the combination of Legacy C&Jwith Nabors’ completion and production services business (the “C&P Business”), whereby Legacy C&J became a subsidiary of C&J Energy Services Ltd. (the“Merger”). The resulting combined company is currently led by the former management team of Legacy C&J.Upon the closing of the Merger, shares of common stock of Legacy C&J were converted into common shares of C&J on a 1-for-1 basis and C&J'scommon shares began trading on the NYSE under the ticker “CJES.” C&J is the successor issuer to Legacy C&J following the closing of the Merger and isdeemed to succeed to Legacy C&J’s reporting history under the Exchange Act.At the closing of the Merger, Nabors received total consideration of approximately $1.4 billion in the form of $688.1 million in cash, $5.5million in cash to reimburse Nabors for operating assets acquired prior to March 24, 2015 and approximately $714.8 million in C&J common shares. Uponthe closing of the Merger, Nabors owned approximately 53% of the outstanding and issued common shares of C&J, with the remainder held by former LegacyC&J shareholders. As discussed in more detail in Note 10 – Mergers and Acquisitions, Legacy C&J and Nabors determined that Legacy C&J possessed thecontrolling financial interest in C&J and subsequently concluded the business combination should be treated as a reverse acquisition with Legacy C&J as theaccounting acquirer.Basis of Presentation and Principles of Consolidation. The consolidated financial statements have been prepared in conformity with accountingprinciples generally accepted in the United States of America (“U.S. GAAP”) and include all of the accounts of C&J and its consolidated subsidiaries. Allsignificant inter-company transactions and account balances have been eliminated upon consolidation.As a result of the Merger, the Company revised its reportable business segments late in the first quarter of 2015. The Company’s revisedreportable segments are: (1) Completion Services, which includes the Company's hydraulic fracturing services, cased-hole wireline services, coiled tubingservices and other stimulation services; (2) Well Support Services, which includes the Company's rig services, fluids management services, and other specialwell site services; and (3) Other Services, which includes the Company’s smaller service lines and divisions, such as directional drilling services, cementingservices, equipment manufacturing and repair, specialty chemicals sales, and research and technology. The Company manages several of its verticallyintegrated businesses through its research and technology division, including its data acquisition and control instruments provider and its artificial liftapplications provider.This segment structure reflects the financial information and reports used by the Company’s management, specifically its Chief OperatingDecision Maker, to make decisions regarding the Company’s business, including resource allocations and performance assessments. This segment structurereflects the Company’s current operating focus in compliance with Accounting Standards Codification No. 280 - Segment Reporting. As a result of therevised segment structure, the Company has restated the corresponding items of segment information for all periods presented. The revised segment structureand the related presentation changes did not impact consolidated net income (loss), earnings (loss) per share, total current assets, total assets or totalshareholders’ equity. See Note 11 - Segment Information for further discussion regarding the Company’s reportable segments.The Company’s results for the year ended 2015 include results from the C&P Business from the closing of the Merger on March 24, 2015 throughDecember 31, 2015. Results for periods prior to March 24, 2015 reflect the financial and operating results of Legacy C&J, and do not include the financialand operating results of the C&P Business. Unless the context67Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSindicates otherwise, as used herein, the terms “C&J” or the “Company”, or like terms refer to Legacy C&J and its subsidiaries when referring to time periodsprior to March 24, 2015 and refer to C&J and its subsidiaries (which include Legacy C&J and its subsidiaries) when referring to time periods subsequent toMarch 24, 2015.Correction of Immaterial Errors. During the fourth quarter of 2015, the Company recorded out-of-period adjustments to correct the overstatementfrom the over-accrual of direct costs related to periods from 2008 through December 31, 2014, resulting in a $9.8 million increase to net income. Inevaluating whether these errors, individually and in the aggregate, and the corrections of the errors had a material impact to the periods such errors andcorrections related to, the Company evaluated both the quantitative and qualitative impact to its consolidated financial statements for such periods. Inassessing the quantitative impact, the Company considered the errors in each impacted period relative to the amount of reported direct costs, net income orloss, and current and total liabilities. The Company considered a number of qualitative factors, including, among others, that the errors and the correction ofthe errors (i) did not change a net loss into net income or vice versa, (ii) did not have an impact on the Company's debt covenant compliance and (iii) did notresult in a change in the Company's earnings trends when considering the overall competitive and economic environment within which it operated from 2008through December 31, 2014. Based upon the Company's quantitative and qualitative evaluation, it determined that the errors and the correction of such errorsdid not have a material impact to prior periods, individually or in the aggregate, and were not material to the year ending December 31, 2015.Reclassifications. Certain reclassifications have been made to prior period consolidated financial statements to conform to current periodpresentations.Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and thereported amounts of revenue and expenses during the reporting period. Estimates are used in, but are not limited to, determining the following: allowance fordoubtful accounts, valuation of long-lived assets and intangibles, goodwill, useful lives used in depreciation and amortization, inventory reserves, incometaxes and share-based compensation. The accounting estimates used in the preparation of the consolidated financial statements may change as new eventsoccur, as more experience is acquired, or as additional information is obtained and as the Company’s operating environment changes.Cash and Cash Equivalents. For purposes of the consolidated statement of cash flows, cash is defined as cash on-hand, demand deposits, and short-term investments with initial maturities of three months or less. The Company maintains its cash and cash equivalents in various financial institutions, whichat times may exceed federally insured amounts. Management believes that this risk is not significant.Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are stated at the amount billed to customers. The Companyprovides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existingeconomic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments ateither the contractual due dates or in the future. At December 31, 2015 and 2014, the allowance for doubtful accounts totaled $7.9 million and $2.2 million,respectively. Bad debt expense of $8.1 million, $0.7 million and $0.7 million was included in selling, general, and administrative expenses on theconsolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.Inventories. Inventories for the Completion Services segment consist of finished goods, including equipment components, chemicals, proppants,supplies and materials for the segment’s operations. Inventories for the Other Services segment consists of raw materials, work-in-process and finished goods,including equipment components, supplies and materials.Inventories are stated at the lower of cost or market (net realizable value) on a first-in, first-out basis and appropriate consideration is given todeterioration, obsolescence and other factors in evaluating net realizable value. As a result of unfavorable oil and gas industry market conditions that havecontinued to deteriorate, the Company determined that the market values of certain inventory items were below their cost basis and recorded expense of$31.1 million to direct costs for the year ended December 31, 2015.Inventories consisted of the following (in thousands): 68Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2015 2014Raw materials $34,720 $51,374Work-in-process 13,574 24,408Finished goods 58,657 47,717Total inventory 106,951 123,499Inventory reserve (4,694) (1,327)Inventory, net $102,257 $122,172Property, Plant and Equipment. Property, plant and equipment (PP&E) are reported at cost less accumulated depreciation. Maintenance and repairs,which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the value of theequipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulateddepreciation account are relieved, and any gain or loss is included in operating income.The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets,which range from three to 25 years. Depreciation expense was $261.8 million, $97.2 million, and $64.6 million for the years ended December 31, 2015, 2014and 2013, respectively. Major classifications of property, plant and equipment and their respective useful lives were as follows (in thousands): EstimatedUseful Lives As of December 31, 2015 2014Land Indefinite $44,592 $2,453Building and leasehold improvements 5-25 years 153,320 107,270Office furniture, fixtures and equipment 3-5 years 28,709 19,716Machinery and equipment 3-10 years 1,225,505 767,415Transportation equipment 5 years 224,057 66,456 1,676,183 963,310Less: accumulated depreciation (499,894) (245,683) 1,176,289 717,627Construction in progress 34,152 65,675Property, plant and equipment, net $1,210,441 $783,302PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value ofcertain PP&E may not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in theperiod in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimatedundiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of othergroups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interestexpense. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be at the service line level, whichconsists of the well services, hydraulic fracturing, coiled tubing, wireline, pumpdown, directional drilling, cementing, artificial lift applications, internationalcoiled tubing, equipment manufacturing and repair services, specialty chemicals and data acquisition and control instruments provider service lines as wellas the vertically integrated research and technology service line. If the estimated undiscounted future net cash flows for a given asset group is less than thecarrying amount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets.The impairment loss is then allocated across the asset group's major classifications.69Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIt was concluded that the sharp fall in commodity prices during the second half of 2014 constituted a triggering event that has resulted in asignificant slowdown in activity across the Company’s customer base, which in turn has increased competition and has put pressure on pricing for its servicesthroughout 2015. Although the severity and extent of this continued downturn is uncertain, absent a significant recovery in commodity prices, activity andpricing levels may continue to decline in future periods. As a result of the triggering event during the fourth quarter of 2014, PP&E recoverability testing wasperformed throughout 2015 on the asset groups in each of the Company’s service lines. During the fourth quarter of 2015, the recoverability testing for thehydraulic fracturing, coiled tubing, directional drilling, international coiled tubing, equipment manufacturing and repair services, specialty chemicals andthe research and technology asset groups yielded an estimated undiscounted net cash flow that was less than the carrying amount of the related assets. Theestimated fair value for each respective asset group was compared to its carrying value, and impairment expense of $393.1 million was recognized during thefourth quarter of 2015 and allocated across each respective asset group's major classification. The impairment charge was primarily related to underutilizedpressure pumping and other equipment in the Completion Services and Other Services segments. The fair value of these assets was based on the projectedpresent value of future cash flows that these assets are expected to generate. Should industry conditions worsen, additional impairment charges may berequired in future periods.PP&E impairment expense for the year ended 2015 was recognized across each asset group as follows (in thousands): Impairment ExpenseHydraulic Fracturing $255,283Coiled Tubing 94,546Directional Drilling 6,625International Coiled Tubing 6,931Equipment Manufacturing and Repair Services 13,847Specialty Chemicals 3,070Research and Technology 12,777Total PP&E impairment expense $393,079Goodwill, Indefinite-Lived Intangible Assets and Definite-Lived Intangible Assets. Goodwill is allocated to the Company’s three reporting units:Completion Services, Well Support Services and Other Services, all of which are consistent with the presentation of the Company’s three reportable segments.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 incircumstances, 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 unexpectedadverse economic conditions, competition, market changes and other external events may require more frequent assessments. During the third quarter of2015, sustained low commodity price levels and the resulting impact on the Company’s results of operations, coupled with the sustained weakness in theCompany’s share price were deemed triggering events that led to an interim period test for goodwill impairment. See Note 3 - Goodwill and Other IntangibleAssets for further discussion on impairment testing results.Before employing detailed impairment testing methodologies, the Company may first evaluate the likelihood of impairment by consideringqualitative factors relevant to each reporting unit, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value.If the Company first utilizes a qualitative approach and determines that it is more likely than not that goodwill is impaired, detailed testing methodologiesare then applied. Otherwise, the Company concludes that no impairment has occurred. Detailed impairment testing, or Step 1 testing, involves comparing thefair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in apotential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carryingvalue of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step, or Step 2 testing,includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a businesscombination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of thereporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess, not to exceed thecarrying value.70Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company’s Step 1 impairment analysis involves the use of a blended income and market approach. Significant management judgment isnecessary to evaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected revenue growth,fleet count, utilization, gross profit rates, SG&A rates, working capital fluctuations, capital expenditures, discount rates, terminal growth rates, and price-to-earnings multiples. The Company’s market capitalization is also used to corroborate reporting unit valuations. Further information regarding the Company'simpairment analysis may be found in Note 3 - Goodwill and Other Intangible Assets.Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicatethe carrying amount may not be recoverable.Definite-lived intangible assets are amortized over their estimated useful lives. These intangibles are reviewed for impairment when events orchanges in circumstances (a triggering event) indicate that the asset may have a net book value in excess of recoverable value. In these cases, the Companyperforms a recoverability test on its definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generatedfrom the use of the asset to the carrying amount of the asset for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of theasset, an impairment does not exist and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the asset, the asset isnot recoverable and the amount of impairment must be determined by fair valuing the asset.Deferred Financing Costs. Costs incurred to obtain financing are capitalized and amortized over the term of the loan using the effective interestmethod. These costs are classified within interest expense on the consolidated statements of operations and were $10.9 million, $1.2 million and $1.2 millionfor the years ended December 31, 2015, 2014 and 2013, respectively. Accumulated amortization of deferred financing costs was $10.5 million and $3.7million at December 31, 2015 and 2014, respectively. Estimated future amortization expense relating to deferred financing costs is as follows (in thousands):Years Ending December 31, 2016$9,31120179,853201810,43220199,90420204,28720213,6522022870 $48,309Revenue Recognition. All revenue is recognized when persuasive evidence of an arrangement exists, the service is complete or the equipment hasbeen delivered to the customer, the amount is fixed or determinable and collectibility is reasonably assured, as follows:Completion Services SegmentHydraulic Fracturing Revenue. Through its hydraulic fracturing service line, the Company provides hydraulic fracturing services on a spot marketbasis or pursuant to contractual arrangements, such as term contracts and pricing agreements. Under either scenario, revenue is recognized and customers areinvoiced upon the completion of each job, which can consist of one or more fracturing stages. Once a job has been completed to the customer’s satisfaction, afield ticket is written that includes charges for the service performed and the consumables (such as fluids and proppants) 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.Rates for services performed on a spot market basis are based on an agreed-upon hourly spot market rate for a specified number of hours of service.Pursuant to pricing agreements and other contractual arrangements which the Company may enter into from time to time, such as those associatedwith an award from a bid process, customers typically commit to targeted utilization levels based on a specified number of hours of service at agreed-uponpricing, but without termination penalties or obligations to pay for71Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSservices not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review, as specifically defined in the agreement, andmay be adjusted upon the agreement of both parties.Cased-Hole Wireline Revenue. Through its cased-hole wireline service line, the Company provides cased-hole wireline logging, perforating,pressure pumping, well site make-up and pressure testing and other complementary services, on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. The Company typically charges the customer for these services on a per job basis atagreed-upon spot market rates. Revenue is recognized based on a field ticket issued upon the completion of the job.Coiled Tubing and Other Stimulation Services Revenue. Through its coiled tubing service line, the Company provides a range of coiled tubing andother well stimulation services, including nitrogen and pressure pumping services, 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 fieldticket. The field ticket includes charges for the services performed and the consumables (such as stimulation fluids, nitrogen and coiled tubing materials)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, anyadditional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed andresources provided on an hourly basis at agreed-upon spot market rates.Revenue from Materials Consumed While Performing Certain Completion Services. The Company generates revenue from consumables used duringthe course of providing services.With respect to hydraulic fracturing services, the Company generates revenue from the fluids, proppants and other materials that are consumedwhile performing a job. For services performed on a spot market basis, the required consumables are typically provided by the Company and the customer isbilled for those consumables at cost plus an agreed-upon markup. For services performed on a contractual basis, when the consumables are provided by theCompany, the customer typically is billed for those consumables at a negotiated contractual rate. When consumables are supplied by the customer, theCompany typically charges handling fees based on the amount of consumables used.In addition, ancillary to coiled tubing and other stimulation services revenue, the Company generates revenue from stimulation fluids, nitrogen,coiled tubing materials and other consumables used during those processes.Well Support Services SegmentRig Services Revenue. Through its rig service line, the Company primarily provides workover and well servicing rigs that are involved in routinerepair and maintenance, completions, re-drilling and plug and abandonment operations. These services are provided on an hourly basis at prices thatapproximate spot market rates. Revenue is recognized and a field ticket is generated upon the earliest of the completion of a job or at the end of each day. Arig 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 hourlyrate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate.Fluids Management Services Revenue. Through its fluids management service line, the Company primarily provides transportation, storage anddisposal 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 houror 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, basedon a completed field ticket.Other Special Well Site Services Revenue. Through its other special well site service line, the Company primarily provides fishing, contractlabor, 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 basisof 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 servicesprovided.Other Services SegmentRevenue within the Other Services Segment is generated from certain of the Company's smaller service lines and divisions, specificallydirectional drilling services, cementing services, equipment manufacturing and repair services, which includes the sale of oilfield parts and supplies, and theblending and sale of specialty chemicals used in completion and72Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSproduction services. Additionally, the Company manages several of its vertically integrated business through its research and technology division, which isincluded within the Other Services Segment.With respect to its directional drilling services, the Company provides these services on a spot market basis. Jobs for these services are typicallyshort-term in nature, lasting anywhere from a few days to multiple weeks. The Company typically charges the customer for these services on a per day basis atagreed-upon spot market rates depending on the level of services required and the complexity of the job. Revenue is recognized and customers are invoicedupon the completion of each job. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the serviceperformed.With respect to its cementing services, the Company provides these services on a spot market or project basis. Jobs for these services are typicallyshort-term in nature and are generally completed in a few hours. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates or agreed-upon job pricing for a particular project. Revenue is recognized and customers are invoiced upon the completion of eachjob. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed and the consumables(such as blended bulk cement and chemical additives) used during the course of service.With respect to its equipment manufacturing and repair services, specialty chemicals provider, data acquisition and control instruments providerand artificial lift applications provider, the Company generates revenue primarily from the sale of manufactured equipment and products. Revenue isrecognized upon the completion, delivery and customer acceptance of each order.Share-Based Compensation. The Company’s share-based compensation plans provide the ability to grant equity awards to the Company’semployees, consultants and non-employee directors. As of December 31, 2015, only nonqualified stock options and restricted shares had been granted undersuch plans. The Company values option grants based on the grant date fair value by using the Black-Scholes option-pricing model and values restrictedstock grants based on the closing price of C&J’s common shares on the grant date. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for the entire award. Further information regarding the Company’s share-based compensation arrangements and therelated accounting treatment can be found in Note 5 – Share-Based Compensation.Fair Value of Financial Instruments. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accountspayable, long-term debt and capital lease obligations. The recorded values of cash and cash equivalents, accounts receivable, accounts payable, capital leaseobligations and the revolving credit facility approximate their fair values. The following table compares the carrying value of the Company's term debtinstruments to its fair value as of December 31, 2015 (See Note 2 – Long-Term Debt and Capital Lease Obligations for further discussion regarding theCompany’s senior secured debt facilities): December 31, 2015 Carrying Value Fair Value (In thousands)Five-Year Term Loans, net of original issue discount$550,825 $503,540Seven-Year Term Loans, net of original issue discount$448,812 $406,280Equity Method Investments. The Company has investments in joint ventures which are accounted for under the equity method of accounting as theCompany has the ability to exercise significant influence over operating and financial policies of the joint venture. Judgment regarding the level of influenceover each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation inpolicy-making decisions and material intercompany transactions. Under the equity method, original investments are recorded at cost and adjusted by theCompany’s share of undistributed earnings and losses of these investments. The Company eliminates all significant intercompany transactions, including theintercompany portion of transactions with equity method investees, from the consolidated financial results.The carrying value of the Company's equity method investments at December 31, 2015 and December 31, 2014 was $14.3 million and $7.0 million,respectively, and is included in other noncurrent assets on the consolidated balance sheets. The Company’s share of the net income (loss) from theunconsolidated affiliates was approximately $0.5 million for each of the years ended December 31, 2015 and 2014 and ($0.2 million) for the year endedDecember 31, 2013, and is included in other expense, net, on the consolidated statements of operations.73Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIncome Taxes. The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilitiesare recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilitiesand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates isrecognized as income or expense in the period that includes the enactment date.The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which thosetemporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to projectedfuture taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more likely than not thatsome portion or all of the deferred tax assets will not be realized.The Company recognizes the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that theposition will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount oftax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are reversedin the first period in which it is no longer more-likely-than-not that the tax position would be sustained upon examination. Income tax related interest andpenalties, if applicable, are recorded as a component of the provision for income tax expense. However, there were no material amounts recognized relating tointerest and penalties in the consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively. The Company hadno uncertain tax positions as of December 31, 2015.Earnings Per Share. Basic earnings per share is based on the weighted average number of common shares (“common shares”) outstanding during theapplicable period and excludes shares subject to outstanding stock options and shares of restricted stock. Diluted earnings per share is computed based on theweighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subjectto outstanding stock options and restricted stock.The following is a reconciliation of the components of the basic and diluted earnings per share calculations for the applicable periods: Years Ended December 31, 2015 2014 2013 (In thousands, except per share amounts)Numerator: Net income (loss) attributed to common shareholders $(872,542) $68,823 $66,405Denominator: Weighted average common shares outstanding - basic 102,853 53,838 53,038Effect of potentially dilutive securities: Stock options — 2,245 2,096Restricted stock — 430 233Weighted average common shares outstanding - diluted 102,853 56,513 55,367Net income (loss) per common share: Basic $(8.48) $1.28 $1.25Diluted $(8.48) $1.22 $1.20 A summary of securities excluded from the computation of basic and diluted earnings per share is presented below for the applicable periods: 74Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2015 2014 2013 (In thousands)Basic earnings per share: Unvested restricted stock 2,610 1,448 1,194Diluted earnings per share: Anti-dilutive stock options 3,661 201 1,054Anti-dilutive restricted stock 2,125 3 164Potentially dilutive securities excluded as anti-dilutive 5,786 204 1,218Recent Accounting Pronouncements.In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue fromContracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer ofpromised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. InAugust 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers ("ASU 2015-14"), which deferred the effective date of ASU 2014-09 for all entities by one year and is effective for the Company's fiscal year beginning January 1, 2018. ASU 2015-14 permits the use of either theretrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has the effect of the standard on ongoingfinancial reporting been determined.In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt IssuanceCosts (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a directdeduction from the carrying amount of that debt liability, consistent with debt discounts. For public entities, ASU 2015-03 is effective for fiscal yearsbeginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not beenpreviously issued. ASU 2015-03 is to be applied on a retrospective basis and represents a change in accounting principle. In addition, in August 2015, theFASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements ("ASU2015-15"). ASU 2015-15 clarifies the guidance in ASU 2015-03 regarding presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. The SEC Staff announced they would not object to an entity deferring and presenting debt issuance costs as an asset andsubsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are anyoutstanding borrowings on the line-of-credit arrangement. The Company does not expect the adoption of these standards to have a material effect on itsconsolidated financial statements.In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which changes the measurementprinciple for inventory from the lower of cost or market to lower of cost and net realizable value. ASU 2015-11 is part of the FASB’s simplification initiativeand applies to entities that measure inventory using a method other than last-in, first-out ("LIFO") or the retail inventory method. The guidance will requireprospective application at the beginning of the Company's first quarter of fiscal 2018, but permits adoption in an earlier period. The Company is currentlyevaluating the impact, if any, of adopting this new accounting standard on its results of operations and financial position.In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-PeriodAdjustments ("ASU 2015-16"). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during themeasurement period in the reporting period in which the adjustment amounts are determined. The acquirer must record, in the same period's financialstatements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisionalamounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for the Company's fiscal year beginningJanuary 1, 2016. The Company is currently evaluating the impact, if any, of adopting this new accounting standard on its results of operations and financialposition.In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes ("ASU 2015-17”). ASU 2015-17 amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on thebalance sheet. The Company is required to adopt this ASU for years beginning after December 15, 2016, with early adoption permitted, and the guidance maybe applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its consolidated financial statements.75Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 2 - Long-Term Debt and Capital Lease Obligations Long-term debt consisted of the following (in thousands): As of December 31, 2015 2014 Legacy C&J senior secured credit facility repaid in connection with the Merger $— $315,000Revolving credit facility maturing on March 24, 2020 121,000 —Five-Year Term Loans, net of original issue discount of $19,863, maturing on March 24, 2020 550,825 —Seven-Year Term Loans, net of original issue discount of $32,550, maturing on March 24,2022 448,812 —Capital leases 34,873 38,748Total debt and capital lease obligations 1,155,510 353,748Less: current portion of long-term debt and capital lease obligations (13,433) (3,873)Long-term debt and capital lease obligations $1,142,077 $349,875Credit AgreementOn March 24, 2015, in connection with the closing of the Merger, the Company entered into a new credit agreement with Bank of America N.A.,as administrative agent and other lending parties (the “Original Credit Agreement”). At the closing, the Original Credit Agreement provided for seniorsecured credit facilities in an aggregate principal amount of $1.66 billion, consisting of (i) a revolving credit facility (“Revolving Credit Facility” or the“Revolver”) in the aggregate principal amount of $600.0 million and (ii) a term loan B facility (“Term Loan B”) in the aggregate principal amount of $1.06billion. The Company simultaneously repaid all amounts outstanding and terminated Legacy C&J’s prior credit agreement; no penalties were due inconnection with such repayment and termination. The borrowers under the Revolver are the Company and certain wholly-owned subsidiaries of theCompany, specifically, CJ Lux Holdings S.à. r.l. and CJ Holding Co. The borrower under the Term Loan B is CJ Holding Co. All obligations under theOriginal Credit Agreement are guaranteed by the Company’s wholly-owned domestic subsidiaries, other than immaterial subsidiaries.On September 29, 2015, the Company obtained and entered into a waiver and amendments to the Original Credit Agreement (as amended by theamendments, the "Amended Credit Agreement"). The Amended Credit Agreement, among other things, suspends the quarterly maximum Total LeverageRatio (defined below) and quarterly minimum Interest Coverage Ratio (defined below) covenants set forth in the Original Credit Agreement. The suspensionof these financial covenants commenced with the fiscal quarter ending September 30, 2015 and will last through the fiscal quarter ending June 30, 2017.Upon reinstatement of these covenants as of the quarter ending September 30, 2017, the required levels initially will be more lenient than those in effectunder the terms of the Original Credit Agreement and will gradually adjust to those prior levels over the subsequent fiscal quarters (see Other Informationbelow). The effectiveness of the covenant suspension is also subject to certain conditions that, among other things, will reduce the capacity of the Companyto make investments and restricted payments through the quarter ending December 31, 2017.The Amended Credit Agreement also provides for new financial covenants that will apply in lieu of the Total Leverage Ratio and Interest CoverageRatio previously in effect under the Original Credit Agreement, including the following:•Implementation of a quarterly minimum EBITDA covenant, commencing with the quarter ending September 30, 2015 and running through thequarter ending June 30, 2017, based on negotiated EBITDA levels and with cushion baskets available for any EBITDA shortfalls through thethird quarter of 2016;•A permanent reduction in the maximum borrowing capacity under the Revolver from $600 million to $400 million;•A collateral coverage covenant running through the quarter ending March 31, 2018, which limits outstanding Revolver borrowings and lettersof credit to the greater of (i) $300.0 million and (ii) an amount derived from76Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS80% of Eligible Receivables and 50% of Eligible Inventory (each as defined in the Amended Credit Agreement) (subject to the reduced $400million borrowing capacity described above);•Increases to the applicable rate on Revolver borrowings by (i) 50 basis points in the event that the Company’s most recently reported totalleverage ratio is greater than 4.00:1.00 and less than or equal to 4.50:1.00 and (ii) 100 basis points in the event that the Company’s mostrecently reported total leverage ratio is greater than 4.50:1.00; and•Quarterly limitations on capital expenditures for the quarter ending December 31, 2015, and annual limitations on capital expenditures for thefour fiscal quarter periods ending December 31, 2016 through June 30, 2017.Revolving Credit FacilityAs of December 31, 2015, $121.0 million was outstanding under the Revolver along with $12.6 million of outstanding letters of credit, leaving$166.4 million of available borrowing capacity based on $300 million of availability as a result of the collateral coverage test implemented under theAmended Credit Agreement.The Revolver matures on March 24, 2020 (except that if any Five-Year Term Loans (as defined below) have not been repaid prior to September 24,2019, the Revolver will mature on September 24, 2019). Borrowings under the Revolver are non-amortizing.Amounts outstanding under the Revolver bear interest based on, at the option of the borrower, the London Interbank Offered Rate (“LIBOR”) or analternative base rate, plus an applicable margin determined pursuant to a pricing grid based on the ratio of consolidated total indebtedness of C&J and itssubsidiaries to consolidated EBITDA of C&J and its subsidiaries for the most recent four fiscal quarter period for which financial statements are available (the“Total Leverage Ratio”).The Revolver also requires that the Company pay a commitment fee equal to a percentage of unused commitments which varies based on the TotalLeverage Ratio.Subject to certain conditions and limitations, the Amended Credit Agreement permits the Company to increase the aggregate commitments underthe Revolver in a total principal amount of up to $100.0 million.The Revolver is permitted to be prepaid from time to time without premium or penalty.Term Loan B FacilityBorrowings under the Term Loan B are comprised of two tranches: a tranche consisting of $575.0 million in aggregate principal amount of termloans maturing on March 24, 2020 (the “Five-Year Term Loans”) and a tranche consisting of a $485.0 million in aggregate principal amount of term loansmaturing on March 24, 2022 (the “Seven-Year Term Loans”). The Company is required to make quarterly amortization payments in an amount equal to1.00% per annum, with the remaining balance payable on the applicable maturity date. As of December 31, 2015, the Company had borrowings outstandingunder the Five-Year Term Loans and the Seven-Year Term Loans of $570.7 million and $481.4 million, respectively.Five-Year Term Loans outstanding under the Term Loan B bear interest based on, at the option of the Company, (i) LIBOR subject to a floor of1.00% per annum, plus a margin of 5.50%, or (ii) an alternative base rate, plus a margin of 4.50%. Seven-Year Term Loans outstanding under the Term LoanB will bear interest based on, at the option of the Company, (i) LIBOR subject to a floor of 1.00% per annum, plus a margin of 6.25%, or (ii) an alternativebase rate, plus a margin of 5.25%. The Term Loan B also contains ‘most favored nation’ pricing protection requiring that if the effective yield (giving effectto, among other things, consent fees paid to the lenders) of the Five-Year Term Loans increases by more than 50 basis points, the effective yield of the Seven-Year Term Loans must increase by the same amount less 50 basis points.The alternative base rate is equal to the highest of (i) the Administrative Agent’s prime rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii)LIBOR plus 1.00%.The Term Loan B is required to be prepaid under certain circumstances and exceptions including (i) in the event that C&J and its subsidiariesgenerate Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year-end, in an amount equal to 50% of the Excess Cash Flow for such fiscalyear if the Total Leverage Ratio as of the end of such fiscal77Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSyear is 3.25:1.00 or greater, (ii) in the event of a sale or other disposition of property by C&J or its subsidiaries, in an amount equal to 100% of the netproceeds of such sale or disposition, subject to customary reinvestment rights and other exceptions, and (iii) in the event of an incurrence of debt notpermitted under the Credit Agreement, in an amount equal to 100% of the net proceeds of such debt.As of December 31, 2015, maturities under the Term Loan B facility are as follows (in thousands):2016 $10,6002017 10,6002018 10,6002019 10,6002020 552,538As of December 31, 2015, the weighted average interest rate of borrowings under the Credit Agreement was 6.5%.Other Information The Amended Credit Agreement contains customary restrictive covenants (in each case, subject to exceptions) that limit, among other things, theability of the Company and its subsidiaries to create, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of their assets, makecertain restricted payments and investments, enter into transactions with affiliates, make capital expenditures and prepay certain indebtedness. The AmendedCredit Agreement also contains financial covenants applicable to the Revolver and the Five-Year Term Loans only, which include: (i) a maximum TotalLeverage Ratio of 5.50:1.00 for the fiscal quarter ending September 30, 2017, 5.00:1.00 for the fiscal quarter ending December 31, 2017, 4.50:1.00 for thefiscal quarter ending March 31, 2018, 4.25:1.00 for the fiscal quarter ending June 30, 2018 and 4.00:1.00 for each fiscal quarter thereafter; (ii) a minimumquarterly ratio of consolidated EBITDA of C&J and its subsidiaries to consolidated interest expense of C&J and its subsidiaries ("Interest Expense Ratio") of2.50:1.00 for the fiscal quarters ending September 30, 2017 and December 31, 2017, 2.75:1.00 for the fiscal quarter ending March 31, 2018 and 3.00:1.00 foreach fiscal quarter thereafter; and (iii) starting September 30, 2015 and until the fiscal quarter ending June, 30, 2017, a Minimum Cumulative ConsolidatedEBITDA covenant as follows (in thousands): Minimum CumulativeConsolidated EBITDA (1) Cumulative CushionAmount Three months ended September 30, 2015 $(15,000) $10,000 Three months ended December 31, 2015 $10,000 $20,000 Six months ended March 31, 2016 $28,000 $40,000 Nine months ended June 30, 2016 $63,000 $60,000 Twelve months ended September 30, 2016 $121,000 $60,000 Twelve months ended December 31, 2016 $115,000 None Twelve months ended March 31, 2017 $165,000 None Twelve months ended June 30, 2017 $205,000 None(1) Minimum Cumulative Consolidated EBITDA is defined as total earnings (loss) before net interest expense, income taxes, depreciation andamortization, other income (expense), and net gain or loss on disposal of assets, and excludes, among other things, stock based compensation expense,acquisition-related costs, and non-routine items.The Company may use some or all of the “Cumulative Cushion Amount” set forth above to increase the Cumulative Consolidated EBITDA forthe specified given period for purposes of satisfying the Minimum Cumulative Consolidated EBITDA test applicable to such period. However, in the eventthe Company utilizes only some of the Cumulative Cushion Amount for such period, any unused amount for such period will not be added to the CumulativeCushion Amount specified for any future period.In the event utilization and pricing levels remain at or fall below existing levels for a sustained period, the Company may be unable to complywith one or more financial covenants in future periods.78Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSCapital Lease ObligationsIn 2013, the Company entered into “build-to-suit” lease agreements for the construction of a new, technology-focused research and developmentfacility and new corporate headquarters, respectively. Each lease is accounted for as a capital lease.The lease for the technology facility commenced upon completion of construction in October 2013, creating a capital lease obligation of $13.5million and accumulated amortization was $1.7 million at December 31, 2015. The lease is payable monthly in amounts ranging from $93 thousand to $128thousand over the term of the lease, including interest at approximately 2.7% per year, and has an initial term of 12 years. Cumulative future lease paymentsthrough the initial term are $15.9 million, of which approximately $2.4 million represents interest expense.The lease for the corporate headquarters commenced upon completion of construction in April 2014, creating a capital lease obligation of $25.6million and accumulated amortization was $2.8 million at December 31, 2015. The lease is payable monthly in amounts ranging from $181 thousand to $238thousand over the term of the lease, including interest at approximately 2.7% per year, and has an initial term of 12 years. Cumulative future lease paymentsthrough the initial term are $30.3 million, of which approximately $4.7 million represents interest expense.In addition, the Company leases certain service equipment, with the intent to purchase, under non-cancelable capital leases. The terms of thesecontracts range from three to four years with varying payment dates throughout each month.As of December 31, 2015, the future minimum lease payments under the Company’s capital leases are as follows (in thousands) Years Ending December 31, 2016 $3,7342017 3,5842018 3,6852019 3,7852020 3,887Thereafter 21,385 $40,060 As of December 31, 2015, the interest expense associated with the future minimum lease payments under the Company’s capital leases totals $5.2million.Note 3 - Goodwill and Other Intangible AssetsDuring the third quarter of 2015, sustained low commodity price levels and the resulting impact on the Company’s results of operations, coupledwith the sustained decrease in the Company’s stock price were deemed triggering events that led to an interim period test for goodwill impairment. TheCompany chose to bypass a qualitative approach and instead opted to employ the detailed Step 1 impairment testing methodologies discussed below. TheStep 1 testing revealed potential impairment for the Completion Services and Other Services reporting units, and the Step 2 test findings revealed that therewas no value remaining to be allocated to the goodwill associated with these two reporting units. As a result, the Company recognized impairment expense of$347.7 million for the Completion Services reporting unit and $37.3 million for the Other Services reporting unit, both which included adjustments duringthe fourth quarter as a result of finalizing the fair value estimates for these two reporting units.During the fourth quarter of 2015, the Company determined no further impairment write-down was considered necessary.Income approach79Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows toestimate fair value. For the Completion Services and Well Support Services reporting units, the future cash flows were projected based on estimates ofprojected revenue growth, fleet and rig count, utilization, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. For the OtherServices reporting unit, the future cash flows were projected based primarily on estimates of future demand for manufactured and refurbished equipment aswell as parts and service, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. Forecasted cash flows for the three reportingunits took into account known market conditions as of September 30, 2015, and management’s anticipated business outlook, both of which have beenimpacted by the sustained decline in commodity prices.A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5% for allthree reporting units, including an estimated inflation factor.The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 16.0% for bothCompletion Services and Other Services and 14.0% for Well Support Services reporting units. These assumptions were derived from unobservable inputs andreflect management’s judgments and assumptions.Market approachThe market approach impairment testing methodology is based upon the guideline public company method. The application of the guidelinepublic company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparablecompetitor data, price-to-earnings multiples were derived and a range of price-to-earnings multiples was determined for each reporting unit. Selected marketmultiples were 8.0x for all three reporting units.The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce theestimated fair value of the one remaining reporting unit below its carrying value. Earnings estimates were derived from unobservable inputs that requiresignificant estimates, judgments and assumptions as described in the income approach.The estimated fair value determined under the income approach was generally consistent with the estimated fair value determined under themarket approach. For purposes of the goodwill impairment test, the concluded fair value for each of the three reporting units consisted of a weighted average,with an 80% weight under the income approach and a 20% weight under the market approach.The results of the Step 1 impairment testing for the Well Support Services reporting unit during the third quarter of 2015 indicated its estimatedfair value exceeded its carrying value by approximately 11%, and it was concluded that the goodwill balance of $314.4 million was not impaired as ofSeptember 30, 2015. As a way to validate the estimated reporting unit fair values, the total market capitalization of the Company was compared to the totalestimated fair value of all reporting units, and an implied control premium was derived. Market data in support of the implied control premium was used inthis reconciliation to corroborate the estimated reporting unit fair values.A decline in the Well Support Services reporting unit cash flow projections or changes in other key assumptions may result in a goodwillimpairment charge in the future.The changes in the carrying amount of goodwill for the year ended December 31, 2015 are as follows (in thousands): CompletionServices Well SupportServices Other Services TotalAs of December 31, 2014 $206,465 $— $13,488 $219,953Acquisitions 141,435 309,541 24,700 475,676Impairment expense (347,652) — (37,316) (384,968)Foreign currency translation and other adjustments (248) (1,864) (872) (2,984)As of December 31, 2015 $— $307,677 $— $307,677Indefinite-Lived Intangible Assets80Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company had approximately $7.6 million of intangible assets with indefinite useful lives, which are subject to annual impairment tests ormore frequently if events or circumstances indicate the carrying amount may not be recoverable.As noted above, during the third quarter of 2015, sustained low commodity price levels and the resulting impact on the Company’s results ofoperations including its equipment manufacturing business line, coupled with the sustained decrease in the Company’s share price were deemed triggeringevents that led to a detailed impairment test on the Total Equipment trade name using a relief from royalty method. Based on the results of the impairmenttesting, the trade name estimated fair value was less than the carrying value by approximately $2.5 million, and it was therefore determined that the tradename was impaired as of September 30, 2015. The Company recorded impairment expense of $2.5 million to reflect the trade name at its fair value. Inaddition, as part of the valuation performed, the Company determined the trade name no longer possessed an indefinite life. As of September 30, 2015, thetrade name was categorized as a definite-lived intangible asset and is being amortized over its remaining estimated useful life.The Company’s intangible assets associated with intellectual property, research and development (“IPR&D”) consist of technology that is still inthe testing phase, and management continues to actively pursue development and planned marketing of the new technology. Based on the Company'sevaluation which includes successful test results within its research and development facilities, it was determined that the IPR&D carry value of $7.6 millionwas not impaired as of December 31, 2015.Definite-Lived Intangible AssetsThe Company reviews definite-lived intangible assets for impairment when events or changes in circumstances (a triggering event) indicate thatthe asset may have a net book value in excess of recoverable value. During the third quarter of 2015 and continuing into the fourth quarter, as noted abovemanagement determined the sustained low commodity price levels coupled with the sustained decrease in the Company’s share price were deemed triggeringevents that provided indicators that its definite-lived intangible assets may be impaired. The Company performed a recoverability test on all of its definite-lived intangible assets which compares the estimated future net undiscounted cash flows expected to be generated from the use of the asset to the carryingamount of the asset for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the asset, an impairment does not exist and aloss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the asset, the asset is not recoverable and the amount ofimpairment must be determined by fair valuing the asset.Recoverability testing resulted in intangible assets associated with the Company’s equipment manufacturing and research and technology linesof business, and included within the Other Services segment, were not recoverable. The fair value of these assets was determined to be zero, resulting inimpairment expense of $11.2 million.The changes in the carrying amounts of other intangible assets for the year ended December 31, 2015 are as follows (in thousands):81Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS AmortizationPeriod December 31,2014 Acquisitions ImpairmentExpense AmortizationExpense Move fromIndefinite-Livedto Definite-Lived ForeignCurrencyTranslationAdjustment December 31,2015Customer relationships 8-15 years $116,073 $16,400 $(9,594) $— $— $(65) $122,814Trade name 10-15 years 29,315 9,900 (253) — 3,700 (82) 42,580Developed technology 5-15 years 2,110 19,600 (1,367) — — (446) 19,897Non-compete 4-5 years 1,810 900 — — — — 2,710Patents 10 years — 373 — — — — 373IPR&D Indefinite 7,598 — — — — — 7,598Trade name - TotalEquipment Indefinite 6,247 — (2,547) — (3,700) — — 163,153 47,173 (13,761) — — (593) 195,972Less: accumulatedamortization (33,685) — — (14,516) — 90 (48,111)Intangible assets, net $129,468 $47,173 $(13,761) $(14,516) $— $(503) $147,861Amortization expense for the years ended December 31, 2015, 2014 and 2013 totaled $14.5 million, $10.9 million and $10.1 million, respectively.Estimated amortization expense for each of the next five years and thereafter is as follows (in thousands): Years Ending December 31, 2015 $14,9332016 14,7592017 14,7592018 14,7352019 12,952Thereafter 68,125 $140,263 Note 4 – Income TaxesThe provision for income taxes consisted of the following (in thousands): 82Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2015 2014 2013Current provision: Federal $(23,784) $11,184 $22,870State (2,265) 1,310 1,930Foreign 100 — —Total current provision (25,949) 12,494 24,800Deferred (benefit) provision: Federal (248,279) 31,978 14,864State (20,553) 2,036 1,705Foreign (4,312) (829) (56)Total deferred provision (273,144) 33,185 16,513Provision for income taxes $(299,093) $45,679 $41,313The following table reconciles the statutory tax rates to the Company’s effective tax rate: Years Ended December 31, 2015 2014 2013Federal statutory rate 35.0 % 35.0 % 35.0 %State taxes, net of federal benefit 1.4 % 3.0 % 2.8 %Domestic production activities deduction (0.2)% (1.0)% (1.8)%Effect of foreign losses (0.3)% 2.4 % 0.7 %Impairment (9.8)% — % — %Other (0.6)% 0.5 % 1.7 %Effective income tax rate 25.5 % 39.9 % 38.4 %The Company’s deferred tax assets and liabilities consisted of the following (in thousands): 83Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2015 2014Deferred tax assets: Accrued liabilities $4,588 $5,419Allowance for doubtful accounts 7,364 822Stock-based compensation 1,337 1,027Inventory 8,712 641Other 1,039 197Current deferred tax assets 23,040 8,106Stock-based compensation 18,166 16,896Net operating losses 84,166 1,181Accrued liabilities 3,458 69Other 2,528 —Non-current deferred tax assets 108,318 18,146Total deferred tax assets 131,358 26,252Valuation allowance (77) —Total deferred tax assets, net 131,281 26,252Deferred tax liabilities: Prepaid assets (9,677) —Contingent consideration liabilities (4,328) —Current deferred tax liability (14,005) —Depreciation on property, plant and equipment (228,981) (161,782)Amortization of goodwill and intangible assets (28,033) (49,704)Other (378) Non-current deferred tax liabilities (257,392) (211,486)Net deferred tax liability $(140,116) $(185,234)The Company has approximately $207.1 million of U.S. federal net operating loss carryforwards (“NOL’s”) which, if not utilized, will expire in theyear 2035 and state NOL’s of approximately $121.5 million which, if not utilized, will expire in various years between 2025 and 2035. Additionally, theCompany has approximately $13.5 million of NOL's in other jurisdictions which, if not utilized, will expire in various years between 2020 and 2035. As ofDecember 31, 2015 we have recorded a deferred tax asset of approximately $84.2 million relating to NOL's. A valuation allowance of $0.1 million has beenprovided for NOL's that the Company believes are more likely than not to expire unutilized.The Company’s U.S. federal income tax returns for the tax years 2012 through 2014 remain open to examination by the Internal Revenue Service("IRS") under the applicable U.S. federal statute of limitations provisions. The various states in which the Company is subject to income tax are generallyopen to examination for the tax years after 2011. The Company’s 2011, 2012 and 2013 Louisiana tax returns are currently under examination.During the year ended December 31, 2015, the company recorded deferred charges relating to income tax expense on intercompany profits thatresulted from the sale of our intellectual property rights outside of North America to our subsidiary in Luxembourg. The deferred charges, which total $16.5million, are included within other non-current assets on the consolidated balance sheet. The deferred charges are amortized as a component of income taxexpense over the economic life of the intellectual property.Note 5 - Share-Based CompensationEquity PlansIn connection with the Merger, the Company approved and adopted the C&J Energy Services 2015 Long Term Incentive Plan (the “2015 LTIP”),effective as of March 23, 2015, contingent upon the consummation of the Merger. The 2015 LTIP served as an assumption of the Legacy C&J 2012 Long-Term Incentive Plan, including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement (the “2012 LTIP”), with certainnon-material revisions made84Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSand no increase in the number of shares remaining available for issuance under the 2012 LTIP. Prior to the adoption of the 2015 LTIP, all share-based awardsgranted to Legacy C&J employees, consultants and non-employee directors were granted under the 2012 LTIP and, following the 2015 LTIP’s adoption, nofurther awards will be granted under the 2012 LTIP. Awards that were previously outstanding under the 2012 LTIP will continue and remain outstandingunder the 2015 LTIP, as adjusted to reflect the Merger. At the closing of the Merger, restricted shares and stock option awards were granted under the 2015LTIP to certain employees of the C&P Business and approximately 0.4 million C&J common shares underlying those awards were deemed part of theconsideration paid to Nabors for the Merger.The 2015 LTIP provides for the grant of share-based awards to the Company’s employees, consultants and non-employee directors. The followingtypes of awards are available for issuance under the 2015 LTIP: incentive stock options and nonqualified stock options, share appreciation rights, restrictedshares, restricted share units, dividend equivalent rights, performance awards and share awards. As of December 31, 2015 only nonqualified stock options andrestricted shares have been awarded under the 2015 LTIP and 2012 LTIP.A total of 4.3 million common shares were originally authorized and approved for issuance under the 2012 LTIP and on June 4, 2015, theshareholders of the Company approved the First Amendment to the 2015 LTIP, which increased the number of common shares that may be issued under the2015 LTIP by approximately 3.6 million shares. Approximately 3.7 million shares were available for issuance under the 2015 LTIP as of December 31, 2015.The number of common shares available for issuance under the 2015 LTIP is subject to adjustment in the event of a reclassification, recapitalization, merger,consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend,property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporate event or transaction. Thenumber of common shares available for issuance may also increase due to the termination of an award granted under the 2015 LTIP, the 2012 LTIP or thePrior Plans (as defined below), by expiration, forfeiture, cancellation or otherwise without the issuance of the common shares.Prior to the approval of the 2012 LTIP, all share-based awards granted to Legacy C&J’s employees, consultants and non-employee directors weregranted under the C&J Energy Services 2006 Stock Option Plan and subsequently under the C&J Energy Services 2010 Stock Option Plans (collectivelyknown as the “Prior Plans”). No additional awards will be granted under the Prior Plans.On February 1, 2016, the shareholders of the Company approved the Second Amendment to the 2015 LTIP , which provides for (i) an increase of 6.0million common shares that may be issued under the 2015 LTIP, (ii) an increase of 3.0 million common shares in the per participant annual limit, from 2.0million to 5.0 million, that may be awarded under the 2015 LTIP and (iii) an increase of $5.0 million in the per-participant annual limit on the fair marketvalue of certain awards designated to be paid only in cash or the settlement of which is not based on a number of common shares granted under the 2015LTIP, from $5.0 million to $10.0 million.Stock OptionsThe fair value of each option award granted under the 2015 LTIP, the 2012 LTIP and the Prior Plans is estimated on the date of grant using theBlack-Scholes option-pricing model. Option awards are generally granted with an exercise price equal to the market price of the Company’s common shareson the grant date. For options granted prior to Legacy C&J’s initial public offering, which closed on August 3, 2011, the calculation of Legacy C&J’s shareprice involved the use of different valuation techniques, including a combination of an income and/or market approach. Determination of the fair value was amatter of judgment and often involved the use of significant estimates and assumptions. Additionally, due to the Company’s lack of historical volume ofoption activity, the expected term of options granted is derived using the “plain vanilla” method. In addition, expected volatilities have been based oncomparable public company data, with consideration given to the Company’s limited historical data. The Company makes estimates with respect toemployee termination and forfeiture rates of the options within the valuation model. The risk-free rate is based on the approximate U.S. Treasury yield rate ineffect at the time of grant. During the year ended December 31, 2015, approximately 0.3 million replacement option awards were granted by the Company toemployees in connection with the Merger. No options were granted during the year ended December 31, 2014.The following table presents the assumptions used in determining the fair value of option awards during the years ended December 31, 2012 and2015. No stock options were granted by the Company for the years ended December 31, 2013 and 2014. 85Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2015 2012 Expected volatility 52.3% 65% - 75%Expected dividends None NoneExercise price $7.93 - $27.12 $16.88 - $18.89Expected term (in years) 0.3 - 4.3 6Risk-free rate 0.03% - 1.3% 0.9% - 1.4%The weighted average grant date fair value of options granted during the years ended December 31, 2012 and December 31, 2015, was $11.45 and$4.74, respectively.A summary of the Company’s stock option activity for the year ended December 31, 2015 is presented below. Shares WeightedAverageExercise Price WeightedAverageRemainingContractualLife AggregateIntrinsicValue (in thousands) (in years) (in thousands)Outstanding at January 1, 2013 6,266 $11.06 7.19 $72,024Granted — — — —Exercised (877) 5.96 — —Forfeited (106) 21.98 — —Outstanding at December 31, 2013 5,283 $11.69 6.36 $65,351Granted — — — —Exercised (159) 5.23 — —Forfeited (57) 29.00 — —Outstanding at December 31, 2014 5,067 $11.70 5.40 $21,395Granted 267 10.49 — —Exercised (154) 2.94 — —Forfeited (61) 19.03 — —Outstanding at December 31, 2015 5,119 $11.82 4.41 $2,874Exercisable at December 31, 2015 5,119 $11.82 4.41 $2,874The total intrinsic value of options exercised during the years ended December 31, 2015 and 2014 was $0.6 million and $3.2 million, respectively.As of December 31, 2015, there was no more remaining unrecognized compensation cost related to outstanding stock options.Restricted SharesRestricted shares are valued based on the closing price of the Company’s common shares on the NYSE on the date of grant. During the year endedDecember 31, 2015, approximately 2.8 million restricted shares were granted to employees and non-employee directors under the 2015 LTIP, includingapproximately 0.6 million replacement restricted shares in connection with the Merger, at fair market values ranging from $3.55 to $15.10 per share. Duringthe year ended December 31, 2014, approximately 0.8 million restricted shares were granted by the Company to employees and non-employee directors atfair market values ranging from $14.46 to $33.14 per share.To the extent permitted by law, the recipient of an award of restricted shares will have all of the rights of a shareholder with respect to the underlyingcommon shares, including the right to vote the common shares and to receive all dividends or other distributions made with respect to the common shares.Dividends on restricted shares will be deferred until the lapsing of86Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSthe restrictions imposed on the shares and will be held by the Company for the account of the recipient (either in cash or to be reinvested in restricted shares)until such time. Payment of the deferred dividends and accrued interest, if any, shall be made upon the lapsing of restrictions on the restricted shares, and anydividends deferred in respect of any restricted shares shall be forfeited upon the forfeiture of such restricted shares. As of December 31, 2015, the Companyhad not issued any dividends.A summary of the status and changes during the year ended December 31, 2015 of the Company’s shares of non-vested restricted shares is presentedbelow: Shares WeightedAverageGrant-DateFair Value (in thousands) Non-vested at January 1, 2015 1,377 $23.39Granted 2,850 13.50Forfeited (238) 14.81Vested (718) 21.97Non-vested at December 31, 2015 3,271 $15.70As of December 31, 2015 and 2014, respectively, there were $29.9 million and $18.7 million of total unrecognized compensation cost related torestricted shares. That cost is expected to be recognized over a weighted-average period of 2.12 years. The weighted-average grant-date fair value per share ofrestricted shares granted during the years ended December 31, 2015 and 2014, respectively, was $13.50 and $24.65.As of December 31, 2015, the Company had 8.4 million stock options and restricted shares outstanding to employees and non-employee directors,0.9 million of which were issued under the 2006 Plan, 4.0 million were issued under the 2010 Plan, 0.7 million were issued under the 2012 Plan and theremaining 2.8 million were issued under the 2015 Plan. As of December 31, 2014, the Company had 6.4 million of stock options and restricted sharesoutstanding to employees and non-employee directors, 1.0 million of which were issued under the 2006 Plan, 4.0 million were issued under the 2010 Planand the remaining 1.4 million were issued under the 2012 Plan.Share-based compensation expense was $18.5 million, $18.4 million and $22.6 million for the years ended December 31, 2015, 2014 and 2013,respectively, and is included in selling, general and administrative expenses, direct costs and research and development on the consolidated statements ofoperations. The total income tax benefit recognized in the consolidated statements of operations in connection with share-based compensation expense wasapproximately $6.5 million, $6.4 million and $7.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.Note 6 – Related Party TransactionsThe Company obtained support services from Nabors Corporate Services, Inc., on a transitional basis, for the processing of payroll, benefits andcertain administrative services of the C&P business in normal course following the completion of the Merger. As of December 31, 2015, the Company’spayable balance is $28.2 million and the support service fees incurred during 2015 totaled $136.4 million. The payable balance is included in accountspayable on the consolidated balance sheet.The Company obtains trucking and crane services on an arm’s length basis from certain vendors affiliated with two of its executive officers. For theyears ended December 31, 2014 and 2013, purchases from these vendors totaled $7.4 million and $3.7 million, respectively, and there were no purchasesfrom these vendors for the year ended December 31, 2015.The Company purchases certain of its equipment on an arm’s length basis from vendors affiliated with a member of its Board of Directors. For theyears ended December 31, 2015, 2014 and 2013, purchases from these vendors were $1.9 million, $5.7 million and $3.8 million, respectively. Amountspayable to these vendors at December 31, 2015 and 2014 were less than $0.1 million and $1.5 million, respectively.The Company obtains office space, equipment rentals, tool repair services and other supplies from vendors affiliated with several employees. For theyears ended December 31, 2015, 2014 and 2013, purchases from these vendors were $0.587Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSmillion, $1.0 million and $1.7 million, respectively. Amounts payable to these vendors at December 31, 2015 and 2014 were $50.6 thousand and $25.7thousand, respectively.The Company has an unconsolidated equity method investment with a vendor that provides the Company with raw material for its specialtychemical business. For the years ended December 31, 2015, 2014 and 2013, purchases from this vendor were $11.8 million, $21.8 million and $7.6 million,respectively. Amounts payable to these vendors at December 31, 2015 and 2014 were $1.5 million and $0.9 million, respectively.The Company obtained drilling fluids from a vendor which was affiliated with one of its employees. For the year ended December 31, 2015,purchases from this vendor totaled $2.1 million. Accounts payable to this vendor at December 31, 2015 was $0.2 million.The Company obtains machined parts from a vendor which is affiliated with several of its employees. For the year ended December 31, 2014,purchases from this vendor totaled $0.4 million and there was no accounts payable balance for the year ended December 31, 2014.Note 7 – Business ConcentrationConcentration of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents andaccounts receivable. Concentrations of credit risk with respect to accounts receivable are limited because the Company performs credit evaluations, setscredit limits, and monitors the payment patterns of its customers. Cash balances on deposits with financial institutions, at times, may exceed federally insuredlimits. The Company regularly monitors the institutions’ financial condition.The Company’s top ten customers accounted for approximately 53.6%, 51.1% and 64.6% of the Company’s consolidated revenue for the yearsended December 31, 2015, 2014 and 2013, respectively. For the year ended December 31, 2015, revenue from one customer represented 15.5% of theCompany’s consolidated revenue. For the year ended December 31, 2014, revenue from two customers individually represented 16.4% and 9.6% of theCompany’s consolidated revenue. For the year ended December 31, 2013, revenue from two customers individually represented 19.5% and 13.1% of theCompany’s consolidated revenue. Other than those listed above, no other customer accounted for 10% or more of the Company’s consolidated revenue in2015, 2014 or 2013. Revenue was earned from each of these customers within the Company’s Completion Services and Well Support Services segments.Note 8 - Commitments and ContingenciesEnvironmentalThe Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements forprotection of the environment. The Company cannot predict the future impact of such standards and requirements which are subject to change and can haveretroactive 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 itsfinancial position, liquidity or capital resources. However, management does recognize that by the very nature of its business, material costs could beincurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknownmagnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of theCompany’s liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.LitigationThe Company is, and from time to time may be, involved in claims and litigation arising in the ordinary course of business. Because there areinherent uncertainties in the ultimate outcome of such matters, it is presently not possible to determine the ultimate outcome of any pending or potentialclaims or litigation against the Company; however, management believes that the outcome of those matters that are presently known to the Company will nothave a material adverse effect upon the Company’s consolidated financial position, results of operation or liquidity.88Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Service Equipment and Other Capital ExpendituresThe Company has agreed to purchase service equipment and other capital assets for $2.1 million as of December 31, 2015. The Company expects tofulfill these commitments during 2016.Inventory and MaterialsThe Company has entered into contractual agreements or commitments to purchase inventory and other materials for $102.9 million as ofDecember 31, 2015. The Company expects to fulfill these commitments over the next 4 years.Contingent Consideration LiabilityOn May 18, 2015, the Company acquired all of the outstanding equity interests of ESP Completion Technologies LLC, a manufacturer of wellheads,artificial lift completion tools and electric submersible pumps for approximately $34.0 million and including a contingent consideration liability valued atapproximately $14.4 million at the date of the acquisition. If the acquiree is able to achieve certain levels of EBITDA over a three-year period, the Companywill be obligated to make future tiered payments of up to $29.5 million. The contingent consideration liability is remeasured on a fair value basis eachquarter until it is paid or expires. At December 31, 2015, the contingent consideration liability remeasurement resulted in a $9.7 million decrease in valuerecorded in other income (expense), net in the consolidated statement of operations with a revised fair value of $4.7 million included in other long-termliabilities in the Company's Consolidated Balance Sheet.Operating LeasesThe Company leases certain property and equipment under non-cancelable operating leases. The remaining terms of the operating leases generallyrange from 1 to 11 years.Lease expense under all operating leases totaled $14.2 million, $14.0 million and $14.6 million for the years ended December 31, 2015, 2014 and2013, respectively. As of December 31, 2014, the future minimum lease payments under non-cancelable operating leases were as follows (in thousands): Years Ending December 31, 2016 $9,0082017 5,3332018 3,2792019 2,2662020 1,881Thereafter 6,070 $27,837 Note 9 – Employee Benefit PlansThe Company maintains two contributory profit sharing plans under a 401(k) arrangement which covers all employees meeting certain eligibilityrequirements. Eligible employees can make annual contributions to the plans up to the maximum amount allowed by current federal regulations. TheCompany matches dollar for dollar all contributions made by eligible employees up to 4% of their gross salary. The Company’s 401(k) contributions for theyears ended December 31, 2015, 2014 and 2013 totaled $4.8 million, $2.3 million and $1.9 million, respectively.Note 10 – Mergers and Acquisitions201589Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSMerger between Legacy C&J and the C&P Business of NaborsOn March 24, 2015, Legacy C&J and Nabors completed the combination of Legacy C&J with the C&P Business. The resulting combined company,which has been renamed C&J Energy Services Ltd., is now one of the largest completion and production services providers in North America led by theformer management team of Legacy C&J. At the closing of the combination, Nabors received total consideration of $1.4 billion, before working capitaladjustments, in the form of $688.1 million in cash, $5.5 million in cash to reimburse Nabors for operating assets acquired prior to March 24, 2015, and $714.8million in C&J common shares. The C&J common share value was based upon Legacy C&J’s closing stock price on March 23, 2015 and consisted ofapproximately 62.5 million C&J common shares issued to Nabors and approximately 0.4 million designated C&J common shares attributable to replacementrestricted share and share option awards issued to certain employees of the C&P Business for the pre-acquisition-related employee service period. Upon theclosing of the combination and as of December 31, 2015, Nabors owns approximately 53% of the outstanding and issued common shares of C&J, with theremainder held by former Legacy C&J shareholders.On September 25, 2015, C&J and Nabors agreed to a working capital adjustment of $43.4 million in favor of C&J, which was accounted for as areduction to the purchase price of the C&P Business.The Merger is being accounted for using the acquisition method of accounting for business combinations. In applying the acquisition method ofaccounting, Legacy C&J and Nabors were required to determine both the accounting acquirer and the accounting acquiree with the accounting acquirerdeemed to be the party possessing the controlling financial interest. Irrespective of Nabors 53% common share ownership in C&J, Legacy C&J and Naborsdetermined that Legacy C&J possessed the controlling financial interest, based on, among other factors, the presence of a majority of Legacy C&J directorson the C&J board of directors and through the composition of C&J senior management consisting almost entirely of the executive officers of Legacy C&J.Legacy C&J and Nabors therefore concluded the business combination should be treated as a reverse acquisition with Legacy C&J as the accountingacquirer.C&J financed the cash portion of the Merger and repaid previously outstanding revolver debt with borrowings drawn under the Original CreditAgreement which provided for senior secured credit facilities in an aggregate principal amount of $1.66 billion. See Note 2 – Long-Term Debt and CapitalLease Obligations for further discussion on the Company’s Original Credit Agreement and Amended Credit Agreement.The purchase price has been allocated to the net assets acquired based upon their estimated fair values, as shown below (in thousands). Theestimated fair values of certain assets and liabilities, including accounts receivable, inventory, property plant and equipment, other intangible assets, taxes(including uncertain tax positions), and contingencies required significant judgments and estimates. As a result, the provisional measurements associatedwith these assets and liabilities are preliminary and subject to change during the measurement period and such changes could be material. Any change in theprovisional measurements could impact the amount of goodwill impairment charge the Company records for the first quarter of 2016, as a portion of thegoodwill associated with the Merger was allocated to the Completion Services reporting unit. All of the goodwill associated with this reporting unit waswritten off as of December 31, 2015.The preliminary purchase price was initially allocated to the net assets acquired during the first quarter of 2015 and subsequently adjusted duringthe remainder of 2015 in connection with the measurement period based upon revised estimated fair values, as follows (in thousands):90Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts Recognizedas of Merger Date Measurement PeriodAdjustments (1) Estimated Fair ValueAccounts receivable $262,973 $7,500 $270,473Inventory 35,491 (7,372) 28,119Other current assets 8,857 (1,940) 6,917Property, plant and equipment 1,024,622 (57,625) 966,997Goodwill 444,162 6,814 450,976Other intangible assets 28,300 13,700 42,000Other assets 11,171 (2,856) 8,315Total assets acquired 1,815,576 (41,779) 1,773,797Accounts payable (195,913) 19,610 (176,303)Other current liabilities (23,813) 1,133 (22,680)Deferred income taxes (187,515) (22,364) (209,879)Total liabilities assumed (407,241) (1,621) (408,862)Net assets acquired $1,408,335 $(43,400) $1,364,935(1) The measurement period adjustments reflect changes in the estimated fair values of certain assets and liabilities, including income taxes. The measurement periodadjustments were recorded to reflect new information obtained about facts and circumstances existing as of the date the Merger was consummated and did not result fromintervening events subsequent to that date.The fair value and gross contractual amount of accounts receivable acquired on March 24, 2015 was $270.5 million and $296.2 million,respectively. Based on the age of certain accounts receivable, a portion of the gross contractual amount is estimated to be uncollectible.Property, plant and equipment assets acquired consist of the following fair values (in thousands) and ranges of estimated useful lives. As with fairvalue estimates, the determination of estimated useful lives requires judgments and assumptions. EstimatedUseful LivesEstimated Fair ValueLand Indefinite$41,391Building and leasehold improvements 2-2577,887Office furniture, fixtures and equipment 2-52,845Machinery & Equipment 2-10660,855Transportation equipment 2-5139,070Construction in progress 44,949 Property, plant and equipment $966,997 Other intangibles have a total preliminary fair value of $42.0 million with a weighted average amortization period of approximately 11 years. Theseintangible assets consist of developed technology of $19.6 million, amortizable over 5 – 15 years, customer relationships of $13.0 million, amortizable over15 years, trade name of $8.5 million, amortizable over ten years, and non-compete agreements of $0.9 million, amortizable over five years. The amountallocated to goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill was allocated between C&J’sCompletion Services and Well Support Services reporting units on the basis of historical levels of EBITDA with $141.4 million allocated to CompletionServices and $309.6 million allocated to Well Support Services. The goodwill recognized as a result of the Merger was primarily attributable to the increasedeconomies of scale, capabilities, resources and geographic footprint of the combined company as well as the cost savings opportunities as C&J capitalizes onsynergies from the new combined company. The tax deductible portion of goodwill and other intangibles is $60.8 million and $22.3 million, respectively.The Company has treated the Merger as a non-taxable transaction. Such treatment results in the acquired assets and liabilities having carryover basisfor tax purposes. A deferred tax liability in the amount of $209.9 million was recorded to account for the differences between the preliminary purchase priceallocation and carryover tax basis.91Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAcquisition-related costs associated with the Merger were expensed as incurred and totaled $42.7 million for the year ended December 31, 2015, andare included in Selling, general and administrative expenses.The results of operations for the C&P Business that have been included in C&J's consolidated financial statements from the March 24, 2015acquisition date through December 31, 2015 include revenue of $822.2 million and a net loss of $(211.1 million). The following unaudited pro forma resultsof operations have been prepared as though the Merger was completed on January 1, 2014. Pro forma amounts are based on the preliminary purchase priceallocation of the acquisition and are not necessarily indicative of results that may be reported in the future (in thousands, except per share data): Year Ended December 31, 2015 Year Ended December 31, 2014Revenues $2,114,671 $3,861,412Net loss $(879,231) $(244,183)Net loss per common share: Basic $(7.52) $(2.09)Diluted $(7.52) $(2.09)Acquisition of Artificial Lift ProviderOn May 18, 2015, the Company acquired all of the outstanding equity interests of ESP Completion Technologies LLC, a manufacturer of wellheads,artificial lift completion tools and electric submersible pumps ("Artificial Lift Provider") for approximately $34.0 million consisting of cash of approximately$13.6 million, a holdback of $6.0 million, and a contingent consideration valued at approximately $14.4 million, subject to customary working capitaladjustments following closing. Artificial Lift Provider's results of operations since the date of the acquisition through December 31, 2015, specificallyincluding revenue of $3.4 million and a net loss of $(30.0 million), have been included in the Company’s consolidated financial statements and are reflectedin "Other Services" in Note 11 – Segment Information.The purchase price was allocated to the net assets acquired based upon their estimated fair values, as follows (in thousands):Current assets $5,822Property, plant and equipment 2,529Goodwill 24,700Other intangible assets 5,173Total assets acquired 38,224Current liabilities (1,927)Deferred income taxes (2,067)Other liabilities (276)Total liabilities assumed (4,270)Net assets acquired $33,954If Artificial Lift Provider is able to achieve certain levels of EBITDA over a three-year period, the Company will be obligated to make future tieredpayments of up to $29.5 million. This could result in a maximum total purchase price of $49.1 million. The potential payment is considered contingentconsideration. At the acquisition date, the fair value of this contingent consideration was determined using a Monte Carlo simulation discounted cash flowmodel over many simulated possible future outcomes which yielded a value of $14.4 million. The contingent consideration is remeasured on a fair valuebasis each quarter until the contingent consideration is paid or expires. At December 31, 2015, the contingent consideration remeasurement resulted in a $9.7million decrease in value recorded in other income (expense), net in the consolidated statement of operations with a revised fair value of $4.7 millionincluded in other long-term liabilities in the Company's Consolidated Balance Sheet.2014Acquisition of Tiger92Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSOn May 30, 2014, the Company acquired all of the outstanding equity interests of Tiger for approximately $33.2 million, including working capitaladjustments.Tiger provides cased-hole wireline, logging, perforating, pipe recovery and tubing-conveyed perforating services. The acquisition of Tiger increasedthe Company’s existing wireline capabilities and provides a presence on the U.S. West Coast. The results of Tiger’s operations since the date of theacquisition have been included in the Company’s consolidated financial statements and are reflected in the Completion Services segment in Note 11 –Segment Information.The purchase price was allocated to the net assets acquired based upon their estimated fair values, as follows (in thousands): Current assets $3,851Property and equipment 8,176Goodwill 14,671Other intangible assets 17,340 Total assets acquired $44,038 Current liabilities $1,223Deferred income taxes 8,556Other liabilities 1,015 Total liabilities assumed $10,794 Net assets acquired $33,244 2013Other AcquisitionsIn April 2013, the Company acquired all of the outstanding common shares of a provider of directional drilling technology and related downholetools. The aggregate purchase price of the acquisition was approximately $9.0 million.In December 2013, the Company acquired all of the outstanding stock of a manufacturer of data control instruments. The aggregate purchase price ofthe acquisition was approximately $6.7 million.Note 11 - Segment InformationIn accordance with Accounting Standards Codification No. 280 - Segment Reporting the Company routinely evaluates whether its separateoperating and reportable segments have changed. This determination is made based on the following factors: (1) the Company’s chief operating decisionmaker (“CODM”) is currently managing each operating segment as a separate business and evaluating the performance of each segment and making resourceallocation decisions distinctly and expects to do so for the foreseeable future, and (2) discrete financial information for each operating segment is available.Due to the transformative nature of the Merger, the CODM changed the way in which the Company is managed, including a revised segmentapproach in making performance evaluation and resource allocation decisions. Discrete financial information was created to provide the segment informationnecessary for the CODM to manage the Company under the revised operating segment structure. As a result of this change in operating segments, theCompany revised its reportable segments late in the first quarter of 2015. The Company’s revised reportable segments are: (i) Completion Services, (ii) WellSupport Services and (iii) Other Services. This segment structure reflects the financial information and reports used by the Company’s management, includingits CODM, to make decisions regarding the Company’s business, including performance evaluation and resource allocation decisions. As a result of therevised reportable segment structure, the Company has restated the corresponding items of segment information for all periods presented. The following is abrief description of the Company's three reportable segments:93Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSCompletion ServicesThe Company provides hydraulic fracturing services, cased-hole wireline services, coiled tubing services and other well stimulation servicesthrough its Completion Services segment.Well Support ServicesThe Company provides rig services, fluid management services and other special well site services through its Well Support Services segment.Other ServicesThe Other Services segment is comprised of the Company’s smaller service lines and divisions, including directional drilling services, cementingservices, equipment manufacturing and repair, specialty chemical sales and research and technology and Middle Eastern operations; the Company managesseveral of its vertically integrated business through its research and technology division, including its data acquisition and control instruments provider andrecently acquired artificial lift applications provider (See Note 10 - Mergers and Acquisitions for further information about this acquisition). Also included inthe Other Services are intersegment eliminations and costs associated with activities of a general corporate nature.The following tables set forth certain financial information with respect to the Company’s reportable segments. CompletionServices Well SupportServices OtherServices TotalYear Ended December 31, 2015 Revenue from external customers $1,216,994 $455,829 $76,066 $1,748,889Adjusted EBITDA 73,850 72,286 (99,380) 46,756Depreciation and amortization 188,941 70,861 16,551 276,353Operating income (loss) (816,777) (1,266) (280,279) (1,098,322)Capital expenditures 91,392 34,974 39,955 166,321As of December 31, 2015 Total assets $1,066,946 $850,725 $315,235 $2,232,906Goodwill — 307,677 — 307,677Year Ended December 31, 2014 Revenue from external customers $1,581,712 $— $26,232 $1,607,944Adjusted EBITDA 344,742 — (91,796) 252,946Depreciation and amortization 101,554 — 6,591 108,145Operating income (loss) 243,171 — (119,427) 123,744Capital expenditures 286,083 — 21,515 307,598As of December 31, 2014 Total assets $1,400,183 $— $212,563 $1,612,746Goodwill 206,465 — 13,488 219,953Year Ended December 31, 2013 Revenue from external customers $1,058,014 $— $12,308 $1,070,322Adjusted EBITDA 254,680 — (64,051) 190,629Depreciation and amortization 73,279 — 1,424 74,703Operating income (loss) 180,201 — (65,986) 114,215Capital expenditures 146,173 — 5,637 151,810As of December 31, 2013 Total assets $1,002,417 $— $129,883 $1,132,300Goodwill 191,794 — 14,004 205,79894Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSManagement evaluates segment performance and allocates resources based on total earnings (loss) before net interest expense, income taxes,depreciation and amortization, other income (expense), net gain or loss on disposal of assets, acquisition-related costs, and non-routine items (“AdjustedEBITDA”), because Adjusted EBITDA is considered an important measure of each segment’s performance. In addition, management believes that thedisclosure of Adjusted EBITDA as a measure of each segment’s operating performance allows investors to make a direct comparison to competitors, withoutregard to differences in capital and financing structure. Investors should be aware, however, that there are limitations inherent in using Adjusted EBITDA as ameasure of overall profitability because it excludes significant expense items. An improving trend in Adjusted EBITDA may not be indicative of animprovement in the Company’s profitability. To compensate for the limitations in utilizing Adjusted EBITDA as an operating measure, management alsouses U.S. GAAP measures of performance, including operating income (loss) and net income (loss), to evaluate performance, but only with respect to theCompany as a whole and not on a segment basis.As required under Item 10(e) of Regulation S-K of the Securities Exchange Act of 1934, as amended, included below is a reconciliation of AdjustedEBITDA, a non-GAAP financial measure, to net income (loss), which is the nearest comparable U.S. GAAP financial measure (in thousands) on a consolidatedbasis for the years ended December 31, 2015, 2014 and 2013, and on a reportable segment basis for the years ended December 31, 2015, 2014 and 2013. Years Ended December 31, 2015 2014 2013Adjusted EBITDA $46,756 $252,946 $190,629Interest expense, net (82,086) (9,840) (6,550)Income tax benefit (expense) 299,093 (45,679) (41,313)Depreciation and amortization (276,353) (108,145) (74,703)Impairment expense (791,807) — —Other income (expense), net 8,773 598 53Gain (loss) on disposal of assets 544 17 (527)Immaterial accounts payable accrual correction 13,190 — —Transaction costs (42,662) (20,159) (306)Severance, facility closures and other (5,849) (35) (8)Customer settlement/bad debt write-off (7,997) — —Incremental insurance reserve (3,035) — —Insurance settlement — (880) —Inventory write-down (31,109) — (870)Net income (loss) $(872,542) $68,823 $66,40595Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2015 CompletionServices Well SupportServices OtherServices TotalAdjusted EBITDA $73,850 $72,286 $(99,380) $46,756Interest expense, net (32) — (82,054) (82,086)Income tax benefit (expense) — — 299,093 299,093Depreciation and amortization (188,941) (70,861) (16,551) (276,353)Impairment expense (697,480) — (94,327) (791,807)Other income (expense), net 272 (362) 8,863 8,773(Gain) loss on disposal of assets 747 — (203) 544Immaterial accounts payable accrual correction 13,190 — — 13,190Transaction costs — — (42,662) (42,662)Severance, facility closures and other (2,376) (1,752) (1,721) (5,849)Customer settlement/bad debt write-off (6,747) (1,250) — (7,997)Incremental insurance reserve (2,810) 311 (536) (3,035)Inventory write-down (6,210) — (24,899) (31,109)Net income (loss) $(816,537) $(1,628) $(54,377) $(872,542) Year Ended December 31, 2014 CompletionServices Well SupportServices OtherServices TotalAdjusted EBITDA $344,742 $— $(91,796) $252,946Interest expense, net (118) — (9,722) (9,840)Income tax benefit (expense) — — (45,679) (45,679)Depreciation and amortization (101,554) — (6,591) (108,145)Other income (expense), net 277 — 321 598(Gain) loss on disposal of assets 17 — — 17Acquisition-related costs — — (20,159) (20,159)Severance, facility closures and other (35) — — (35)Insurance settlement — — (880) (880)Net income (loss) $243,329 $— $(174,506) $68,823 Year Ended December 31, 2013 CompletionServices Well SupportServices OtherServices TotalAdjusted EBITDA $254,680 $— $(64,051) $190,629Interest expense, net (159) — (6,391) (6,550)Income tax benefit (expense) — — (41,313) (41,313)Depreciation and amortization (73,279) — (1,424) (74,703)Other income (expense), net 224 — (171) 53(Gain) loss on disposal of assets (527) — — (527)Acquisition-related costs — — (306) (306)Severance, facility closures and other (8) — — (8)Inventory write-down (870) — — (870)Net income (loss) $180,061 $— $(113,656) $66,405Note 12 – Quarterly Financial Data (unaudited)96Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSummarized quarterly financial data for the years ended December 31, 2015 and 2014 are presented below (in thousands, except per share amounts). Quarters Ended March 31, 2015 June 30, 2015 September 30,2015 December 31,2015Revenue $401,216 $511,165 $427,497 $409,011Operating loss (30,202) (77,350) (493,338) (497,433)Loss before income taxes (35,556) (99,477) (524,378) (512,224)Net loss (30,663) (65,121) (455,016) (321,742)Net loss per common share: Basic $(0.51) $(0.56) $(3.89) $(2.75)Diluted $(0.51) $(0.56) $(3.89) $(2.75) Quarters Ended March 31, 2014 June 30, 2014 September 30,2014 December 31,2014Revenue $316,537 $367,921 $439,978 $483,508Operating income 20,908 20,060 42,011 40,765Income before income taxes 19,325 18,077 39,439 37,661Net income 11,588 11,108 23,816 22,311Net income per common share: Basic $0.22 $0.21 $0.44 $0.41Diluted $0.21 $0.20 $0.42 $0.40Note 13 – Subsequent EventsOn February 1, 2016, the Company’s shareholders approved the Second Amendment (the “Second Amendment”) to the C&J Energy Services 2015Long Term Incentive Plan (the “Plan”), which provided for (i) an increase of 6.0 million common shares that may be issued under the Plan, (ii) an increase of3.0 million common shares in the per participant annual limit, from 2.0 million to 5.0 million, that may be awarded under the Plan and (iii) an increase of $5.0million in the per-participant annual limit on the fair market value of certain awards designated to be paid only in cash or the settlement of which is not basedon a number of common shares granted under the Plan, from $5.0 million to $10.0 million.During the first quarter of 2016 and as of February 23, 2016, the Company made additional draws under its Revolving Credit Facility totaling$130.0 million. As a result of these incremental draws, as of February 23, 2016, the Company had a cash balance of $93.6 million and $251.0 million inborrowings outstanding under its Revolving Credit Facility with $36.4 million of additional availability for borrowing based on $300.0 million of Revolveravailability in accordance with the Collateral Coverage Covenant.97Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) under the Exchange Act, the Company has evaluated, under thesupervision and with the participation of its management, including its principal executive officer and principal financial officer, the effectiveness of thedesign and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and internal controlover financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of the end of the period covered by this Annual Report. TheCompany’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company inreports that it files under the Exchange Act is accumulated and communicated to its management, including its principal executive officer and principalfinancial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC. Based upon that evaluation, the Company’s principal executive officer and principal financial officerconcluded that its disclosure controls and procedures were effective as of December 31, 2015.Management’s Report Regarding Internal Control. Management is responsible for establishing and maintaining adequate internal control over financialreporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and ChiefFinancial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statementsfor external purposes in accordance with generally accepted accounting principles. As of December 31, 2015, management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, assessed the effectiveness of its internal control over financial reporting. Based on their assessment,management determined that the Company maintained effective internal control over financial reporting as of December 31, 2015. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate. Management’s report on internal control over financial reporting is included in Part II, Item 8 “Financial Statements andSupplementary Data” of this Annual Report.KPMG LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of our internal control over financialreporting as of December 31, 2015. Their report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2015, is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.Changes in Internal Controls over Financial Reporting. There have been no changes in our system of internal control over financial reporting (as such termis defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2015 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting.Item 9B. Other InformationNone.98Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IIIItem 10. Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference to our definitive proxy statement for our 2016 Annual Meeting of Shareholderspursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31,2015.Item 11. Executive CompensationThe information required by this item is incorporated by reference to our definitive proxy statement for our 2016 Annual Meeting of Shareholderspursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31,2015.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Securities Authorized for Issuance Under Equity Compensation PlansThe following table sets forth certain information regarding our equity compensation plans as of December 31, 2015. Plan Category Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights(A)(1) Weighted-averageexercise price ofoutstandingoptions, warrantsand rights(B) Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans (excludingsecurities reflectedin Column (A))(C)(2)(3)Equity compensation plans approved by security holders(4) 5,119,318 $11.82 3,667,440Equity compensation plans not approved by security holders — — —Total 5,119,318 $11.82 3,667,440 (1)Consists of (i) 897,700 non-qualified stock options issued and outstanding under the C&J Energy Services Ltd. 2006 Stock Option Plan (the “2006Plan”), (ii) 3,959,108 non-qualified stock options issued and outstanding under the C&J Energy Services Ltd. 2010 Stock Option Plan (the “2010Plan”), (iii) 73,766 non-qualified stock options issued and outstanding under the C&J Energy Services Ltd. 2012 Long-Term Incentive Plan (the“2012 LTIP”, and together with the 2006 Plan and the 2010 Plan, the "Prior Plans") and 188,744 non-qualified stock options issued and outstandingunder the C&J Energy Services 2015 Long Term Incentive Plan (as amended to date, the “2015 LTIP”)(2)Also excluded are 663,936 restricted shares issued and outstanding under the 2012 LTIP and 2,607,168 restricted shares issued and outstanding underthe 2015 LTIP.(3)The number of common shares available for issuance under the 2015 LTIP is subject to adjustment in the event of a reclassification, recapitalization,merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, stock dividend, stock split or reverse stock split,cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporateevent or transaction. The number of common shares available for issuance may also increase due to the termination of an award granted under the2015 LTIP or the Prior Plans by expiration, forfeiture, cancellation or otherwise without the issuance of the common shares.(4)The 2015 LTIP was approved and adopted effective as of March 23, 2015, contingent upon the consummation of the Merger. The 2015 LTIP servedas an assumption of the 2012 LTIP, including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement, with certainnon-material revisions made and no increase in the number of shares remaining available for issuance under the 2012 LTIP. No additional awards willbe granted under99Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Prior Plans. See Note 5 - Share-Based Compensation in Part II, Item 8 “Financial Statements and Supplementary Data” for additional informationregarding these equity compensation plans.The remaining information required by this item is incorporated by reference in our definitive proxy statement for our 2016 Annual Meeting ofShareholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year endedDecember 31, 2015.Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to our definitive proxy statement for our 2016 Annual Meeting of Shareholderspursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31,2015.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to our definitive proxy statement for our 2016 Annual Meeting of Shareholderspursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31,2015.100Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IVItem 15. Exhibits, Financial Statement Schedules(a)(1) Financial Statements Our Consolidated Financial Statements and accompanying footnotes are included under Part II, Item 8 “Financial Statements and SupplementaryData” of this Annual Report.(a)(2) Financial Statements SchedulesAll other schedules have been omitted because they are either not applicable, not required or the information called for therein appears in theconsolidated financial statements or notes thereto or will be filed within the required timeframe.(a)(2) ExhibitsThe following documents are included as exhibits to this Annual Report: Exhibit No. Description of Exhibit. 2.1 Agreement and Plan of Merger, dated as of June 25, 2014, by and among Nabors Industries Ltd., Nabors Red Lion Limited and C&JEnergy Services, Inc. (incorporated herein by reference to Exhibit 2.1 to C&J Energy Services, Inc.’s Current Report on Form 8-K, filed onJuly 1, 2014 (File No. 001-35255)).2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated as of February 6, 2015, by and between C&J Energy Services, Inc., NaborsIndustries Ltd., Nabors Red Lion Limited, CJ Holding Co. and Nabors CJ Merger Co. (incorporated herein by reference to Exhibit 10.2 onCurrent Report on Form 8-K, filed on February 9, 2015 (File No. 001-35255)).2.3 Separation Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporated herein by reference to Exhibit2.2 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A, dated February 12, 2015 (Registration No. 333-199004))2.4 Amendment No. 1 to the Separation Agreement, by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporatedherein by reference to Exhibit 2.5 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A, dated February 12, 2015(Registration No. 333-199004))2.5 Joinder Agreement by and among Nabors Industries Ltd., Nabors Red Lion Limited, C&J Energy Services, Inc., Nabors CJ Merger Co.,and CJ Holding Co. (incorporated herein by reference to Exhibit 2.3 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A,dated December 19, 2014 (Registration No. 333-199004)).3.1 Memorandum of Association of Nabors Red Lion Limited (incorporated herein by reference to Exhibit 3.1 to Nabors Red Lion Limited’sRegistration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))3.2 Amended and Restated Bye-laws of C&J Energy Services Ltd., dated March 24, 2015. (incorporated herein by reference to Exhibit 3.1 toC&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25, 2015 (File No. 000-55404)).4.1 Form of Restricted Share Agreement for Certain Executive Officers with C&J Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.2 Form of Restricted Share Agreement for Certain Executive Officers with New Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.3 Form of Restricted Share Agreement for Certain Executive Officers with Assumed Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).101Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.4 Form of Restricted Share Agreement with Restrictive Covenants, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.13 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).4.5 Form of Restricted Share Agreement with Limited Covenants, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.14 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).4.6 Form of Restricted Share Agreement for Non-Employee Directors, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.15 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404).4.7 Form of Performance-Based Restricted Share Agreement, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.16 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).4.8 Form of Nonqualified Share Option Agreement for Replacement Awards, pursuant to the C&J Energy Services 2015 Long Term IncentivePlan (incorporated herein by reference to Exhibit 10.17 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11,2015 (File No. 000-55404)).4.9 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #1), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.18 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.10 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #2), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.19 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.11 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #3), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.20 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.12 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #4), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.21 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.13 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #1), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.22 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.14 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #2), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.23 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.15 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #3), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.24 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.16 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #4), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.25 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.17 Form of Participation Agreement for C&J International Middle East FZCO Phantom Equity Arrangement, a sub-plan of the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.18 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on August 10, 2015 (File No. 000-55404)).4.18 Form of Common Share Certificate of Nabors Red Lion Limited (incorporated herein by reference to Exhibit 3.4 to Nabors Red LionLimited’s Registration Statement on Form S-4, dated February 12, 2015 (Registration No. 333-199004))10.1 Credit Agreement, dated as of March 24, 2015, among C&J Energy Services Ltd., CJ Lux Holdings S.à r.l., CJ Holding Co, Bank ofAmerica, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, Citibank, N.A., as Syndication Agent and DocumentationAgent, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s CurrentReport on Form 8-K, filed on March 30, 2015 (File No. 000-55404)).102Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.2 First Amendment to Credit Agreement, dated as of March 24, 2015, among C&J Energy Services Ltd., CJ Lux Holdings S.à r.l., CJHolding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto(incorporated herein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filed on March 30, 2015(File No. 000-55404)).10.3 Waiver and Second Amendment to Credit Agreement, dated as of September 29, 2015, among C&J Energy Services Ltd., CJ LuxHoldings S.à r.l., CJ Holding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the other lendersparty thereto (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filed onSeptember 30, 2015 (File No. 000-55404)).10.4 Third Amendment (Refinancing Amendment) to Credit Agreement, dated as of September 29, 2015, among C&J Energy Services Ltd.,CJ Lux Holdings S.à r.l., CJ Holding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the otherlenders party thereto(incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filedon September 30, 2015 (File No. 000-55404)).10.5+ C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.7 to C&J Energy Services Ltd.’sCurrent Report on Form 8-K12G3, filed on March 25, 2015 (File No. 000-55404)).10.6+ First Amendment to the C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 to C&JEnergy Services Ltd.’s Current Report on Form 8-K, filed on June 8, 2015 (File No. 000-55404)).10.7+ Second Amendment to the C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 toC&J Energy Services Ltd.’s Current Report on Form 8-K, filed on February 1, 2016 (File No. 000-55404)).10.5 Employee Benefits Agreement, dated as of March 24, 2015, by and among C&J Energy Services, Inc., Nabors Industries Ltd. and NaborsRed Lion Limited (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3,filed on March 25, 2015 (File No. 000-55404)).10.6 Tax Matters Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporatedherein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25, 2015 (File No.000-55404)).10.7 Global Alliance Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.3 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.8 Registration Rights Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.4 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.9 Transition Services Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.5 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.10 Transition Services Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.6 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.11 Amendment No. 1 dated as of June 30, 2015 to the Transition Services Agreement dated as of March 24, 2015 is by and between NaborsIndustries Ltd., a Bermuda exempted company, and C&J Energy Services Ltd. (formerly known as Nabors Red Lion Limited), a Bermudaexempted company (incorporated herein by reference to Exhibit 10.19 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on August 10, 2015 (File No. 000-55404)).10.12+ Employment Agreement by and between Nabors Red Lion Limited and Josh Comstock (incorporated herein by reference to Exhibit10.6 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004).10.13+ Employment Agreement by and between Nabors Red Lion Limited and Randy McMullen (incorporated herein by reference to Exhibit10.8 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004)).103Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.14+ Employment Agreement by and between Nabors Red Lion Limited and Donald J. Gawick (incorporated herein by reference to Exhibit10.7 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004)).10.15+ Employment Agreement by and between Nabors Red Lion Limited and Theodore R. Moore (incorporated herein by reference to Exhibit10.9 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))10.16+ Employment Agreement by and between Nabors Red Lion Limited and James H. Prestidge, Jr. (incorporated herein by reference toExhibit 10.10 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))* 21.1List of Subsidiaries of C&J Energy Services, Inc. *23.1 Consent of KPMG LLP * 23.2 Consent of UHY LLP * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002** 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 * §101.INS XBRL Instance Document ** §101.SCH XBRL Taxonomy Extension Schema Document ** §101.CAL XBRL Taxonomy Extension Calculation Linkbase Document ** §101.LAB XBRL Taxonomy Extension Label Linkbase Document ** §101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ** §101.DEF XBRL Taxonomy Extension Definition Linkbase Document *Filed herewith**Furnished, herewith in accordance with Item 601(b)(32) of Regulation S-K. In accordance with Rule 406T of Regulation S-T, the information inthese exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section,and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forthby specific reference in such filing.+Management contract or compensatory plan or arrangement104Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized, this 25th day of February, 2016. C&J Energy Services Ltd. By: /s/ Randall C. McMullen, Jr. Randall C. McMullen, Jr. President, Chief Financial Officer and Director (Principal Financial Officer) By: /s/ Brian Patterson Brian Patterson Corporate Secretary (Duly Authorized Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. 105Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Signatures and Capacities Date By: /s/ Joshua E. Comstock February 26, 2016 Joshua E. Comstock, Chairman and Chief ExecutiveOfficer (Principal Executive Officer) By: /s/ Randall C. McMullen, Jr. February 26, 2016 Randall C. McMullen, Jr., President, Chief FinancialOfficer and Director (Principal Financial Officer) By: /s/ Mark C. Cashiola February 26, 2016 Mark C. Cashiola, Vice President and Chief AccountingOfficer (Principal Accounting Officer) By: /s/ Shel Erikson February 26, 2016 Shel Erikson, Director By: /s/ William Restrepo February 26, 2016 William Restrepo, Director By: /s/ Michael Roemer February 26, 2016 Michael Roemer, Director By: /s/ H. H. “Tripp” Wommack, III February 26, 2016 H. H. “Tripp” Wommack, III, Director 106Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT INDEXThe following documents are included as exhibits to this Annual Report. Exhibit No. Description of Exhibit. 2.1 Agreement and Plan of Merger, dated as of June 25, 2014, by and among Nabors Industries Ltd., Nabors Red Lion Limited and C&JEnergy Services, Inc. (incorporated herein by reference to Exhibit 2.1 to C&J Energy Services, Inc.’s Current Report on Form 8-K, filed onJuly 1, 2014 (File No. 001-35255)).2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated as of February 6, 2015, by and between C&J Energy Services, Inc., NaborsIndustries Ltd., Nabors Red Lion Limited, CJ Holding Co. and Nabors CJ Merger Co. (incorporated herein by reference to Exhibit 10.2 onCurrent Report on Form 8-K, filed on February 9, 2015 (File No. 001-35255)).2.3 Separation Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporated herein by reference to Exhibit2.2 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A, dated February 12, 2015 (Registration No. 333-199004))2.4 Amendment No. 1 to the Separation Agreement, by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporatedherein by reference to Exhibit 2.5 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A, dated February 12, 2015(Registration No. 333-199004))2.5 Joinder Agreement by and among Nabors Industries Ltd., Nabors Red Lion Limited, C&J Energy Services, Inc., Nabors CJ Merger Co.,and CJ Holding Co. (incorporated herein by reference to Exhibit 2.3 to Nabors Red Lion Limited’s Registration Statement on Form S-4/A,dated December 19, 2014 (Registration No. 333-199004)).3.1 Memorandum of Association of Nabors Red Lion Limited (incorporated herein by reference to Exhibit 3.1 to Nabors Red Lion Limited’sRegistration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))3.2 Amended and Restated Bye-laws of C&J Energy Services Ltd., dated March 24, 2015. (incorporated herein by reference to Exhibit 3.1 toC&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25, 2015 (File No. 000-55404)).4.1 Form of Restricted Share Agreement for Certain Executive Officers with C&J Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.2 Form of Restricted Share Agreement for Certain Executive Officers with New Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.3 Form of Restricted Share Agreement for Certain Executive Officers with Assumed Employment Agreements, pursuant to the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.4 Form of Restricted Share Agreement with Restrictive Covenants, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.13 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).4.5 Form of Restricted Share Agreement with Limited Covenants, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.14 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).107Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.6 Form of Restricted Share Agreement for Non-Employee Directors, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.15 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404).4.7 Form of Performance-Based Restricted Share Agreement, pursuant to the C&J Energy Services 2015 Long Term Incentive Plan(incorporated herein by reference to Exhibit 10.16 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015(File No. 000-55404)).4.8 Form of Nonqualified Share Option Agreement for Replacement Awards, pursuant to the C&J Energy Services 2015 Long Term IncentivePlan (incorporated herein by reference to Exhibit 10.17 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11,2015 (File No. 000-55404)).4.9 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #1), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.18 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.10 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #2), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.19 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.11 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #3), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.20 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.12 Form of Restricted Share Agreement for Replacement Awards (U.S. Employee Form #4), pursuant to the C&J Energy Services 2015 LongTerm Incentive Plan (incorporated herein by reference to Exhibit 10.21 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on May 11, 2015 (File No. 000-55404)).4.13 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #1), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.22 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.14 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #2), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.23 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.15 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #3), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.24 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.16 Form of Restricted Share Agreement for Replacement Awards (Canadian Employee Form #4), pursuant to the C&J Energy Services 2015Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.25 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q, filed on May 11, 2015 (File No. 000-55404)).4.17 Form of Participation Agreement for C&J International Middle East FZCO Phantom Equity Arrangement, a sub-plan of the C&J EnergyServices 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.18 to C&J Energy Services Ltd.’s QuarterlyReport on Form 10-Q, filed on August 10, 2015 (File No. 000-55404)).4.18 Form of Common Share Certificate of Nabors Red Lion Limited (incorporated herein by reference to Exhibit 3.4 to Nabors Red LionLimited’s Registration Statement on Form S-4, dated February 12, 2015 (Registration No. 333-199004))10.1 Credit Agreement, dated as of March 24, 2015, among C&J Energy Services Ltd., CJ Lux Holdings S.à r.l., CJ Holding Co, Bank ofAmerica, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, Citibank, N.A., as Syndication Agent and DocumentationAgent, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s CurrentReport on Form 8-K, filed on March 30, 2015 (File No. 000-55404)).10.2 First Amendment to Credit Agreement, dated as of March 24, 2015, among C&J Energy Services Ltd., CJ Lux Holdings S.à r.l., CJHolding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto(incorporated herein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filed on March 30, 2015(File No. 000-55404)).108Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.3 Waiver and Second Amendment to Credit Agreement, dated as of September 29, 2015, among C&J Energy Services Ltd., CJ LuxHoldings S.à r.l., CJ Holding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the other lendersparty thereto (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filed onSeptember 30, 2015 (File No. 000-55404)).10.4 Third Amendment (Refinancing Amendment) to Credit Agreement, dated as of September 29, 2015, among C&J Energy Services Ltd.,CJ Lux Holdings S.à r.l., CJ Holding Co, the guarantors party thereto, Bank of America, N.A., as Administrative Agent, and the otherlenders party thereto(incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K, filedon September 30, 2015 (File No. 000-55404)).10.5+ C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.7 to C&J Energy Services Ltd.’sCurrent Report on Form 8-K12G3, filed on March 25, 2015 (File No. 000-55404)).10.6+ First Amendment to the C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 to C&JEnergy Services Ltd.’s Current Report on Form 8-K, filed on June 8, 2015 (File No. 000-55404)).10.7+ Second Amendment to the C&J Energy Services 2015 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 toC&J Energy Services Ltd.’s Current Report on Form 8-K, filed on February 1, 2016 (File No. 000-55404)).10.5 Employee Benefits Agreement, dated as of March 24, 2015, by and among C&J Energy Services, Inc., Nabors Industries Ltd. and NaborsRed Lion Limited (incorporated herein by reference to Exhibit 10.1 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3,filed on March 25, 2015 (File No. 000-55404)).10.6 Tax Matters Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited (incorporatedherein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25, 2015 (File No.000-55404)).10.7 Global Alliance Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.3 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.8 Registration Rights Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.4 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.9 Transition Services Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.5 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.10 Transition Services Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.6 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).10.11 Amendment No. 1 dated as of June 30, 2015 to the Transition Services Agreement dated as of March 24, 2015 is by and between NaborsIndustries Ltd., a Bermuda exempted company, and C&J Energy Services Ltd. (formerly known as Nabors Red Lion Limited), a Bermudaexempted company (incorporated herein by reference to Exhibit 10.19 to C&J Energy Services Ltd.’s Quarterly Report on Form 10-Q,filed on August 10, 2015 (File No. 000-55404)).10.12+ Employment Agreement by and between Nabors Red Lion Limited and Josh Comstock (incorporated herein by reference to Exhibit10.6 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004).10.13+ Employment Agreement by and between Nabors Red Lion Limited and Randy McMullen (incorporated herein by reference to Exhibit10.8 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004)).10.14+ Employment Agreement by and between Nabors Red Lion Limited and Donald J. Gawick (incorporated herein by reference to Exhibit10.7 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004)).109Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.10.15+ Employment Agreement by and between Nabors Red Lion Limited and Theodore R. Moore (incorporated herein by reference to Exhibit10.9 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))10.16+ Employment Agreement by and between Nabors Red Lion Limited and James H. Prestidge, Jr. (incorporated herein by reference toExhibit 10.10 to Nabors Red Lion Limited’s Registration Statement on Form S-4, dated September 29, 2014 (Registration No. 333-199004))* 21.1List of Subsidiaries of C&J Energy Services, Inc. *23.1 Consent of KPMG LLP * 23.2 Consent of UHY LLP * 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002** 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 * §101.INS XBRL Instance Document ** §101.SCH XBRL Taxonomy Extension Schema Document ** §101.CAL XBRL Taxonomy Extension Calculation Linkbase Document ** §101.LAB XBRL Taxonomy Extension Label Linkbase Document ** §101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ** §101.DEF XBRL Taxonomy Extension Definition Linkbase Document *Filed herewith**Furnished, herewith in accordance with Item 601(b)(32) of Regulation S-K. In accordance with Rule 406T of Regulation S-T, the information inthese exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section,and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forthby specific reference in such filing.+Management contract or compensatory plan or arrangement110Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 21.1List of Significant Subsidiaries of C&J Energy Services Ltd. EntityState of FormationCJ Lux Holdings S.a.r.l.LuxembourgC&J International B.V.The NetherlandsPenny Technologies S.a.r.l.LuxembourgPenny Luxembourg Financing S.a.r.l.LuxembourgPenny Global Holdings S.a.r.l.LuxembourgPenny Global Leasing S.a.r.l.LuxembourgCopper Ireland Financing IIrelandCooper Ireland Financing IIIrelandC&J Energy Production Services-Canada Ltd.AlbertaCJ Holding Co.DelawareC&J Well Services, Inc.DelawareC&J Energy Services, Inc.DelawareC&J Spec-Rent Services, Inc.IndianaSource: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersC&J Energy Services, Ltd.:We consent to the incorporation by reference in the registration statements (Nos. 333-205689 and 333-205688) on Form S-3 and (Nos. 333-209327, 333-204715 and 333-202937) on Form S-8 of C&J Energy Services Ltd. of our reports dated February 26, 2016, with respect to the consolidated balance sheets ofC&J Energy Services Ltd. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income(loss), shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015, and the effectiveness of internal controlover financial reporting as of December 31, 2015, which reports appear in the December 31, 2015 annual report on Form 10-K of C&J Energy Services Ltd.Our report dated February 26, 2016, on the effectiveness of internal control over financial reporting as of December 31, 2015, contains an explanatoryparagraph stating that C&J Energy Services Ltd. acquired Nabors Completion and Production Services (NCPS) and ESP Completion Technologies, LLC(ESPCT) during 2015, and management excluded from its assessment of the effectiveness of C&J Energy Services Ltd.’s internal control over financialreporting as of December 31, 2015, NCPS and ESPCT’s internal control over financial reporting associated with 44.7% and 0.3 %, respectively, ofconsolidated revenues and 41.8% and 0.8%, respectively, of consolidated total assets of C&J Energy Services Ltd. as of and for the year ended December 31,2015. Our audit of internal control over financial reporting of C&J Energy Services Ltd. also excluded an evaluation of the internal control over financialreporting of NCPS and ESPCT./s/ KPMG LLPHouston, TexasFebruary 26, 2016Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.2 Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statements on Form S‑3 (Nos. 333-205689 and 333-205688) and Form S-8(Nos. 333‑209327, 333‑204715 and 333‑202937) of C&J Energy Services Ltd. of our report dated February 26, 2014, except with respect to Note 11 as towhich the date is July 15, 2015, with respect to the consolidated financial statements of C&J Energy Services, Inc. and subsidiaries as of and for the yearended December 31, 2013, which appears in this Annual Report on Form 10-K for the year ended December 31, 2015./s/ UHY LLPFarmington Hills, MichiganFebruary 26, 2016Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1 Certification of Principal Executive OfficerPursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) I, Joshua E. Comstock, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of C&J Energy Services Ltd.; 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 thestatements 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 thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange 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 ensurethat 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 effectivenessof 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 fiscalquarter (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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 overfinancial reporting. Date:February 26, 2016/s/ Joshua E. Comstock Joshua E. Comstock Chairman and Chief Executive Officer (Principal Executive Officer)Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2 Certification of Chief Financial OfficerPursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) I, Randall C. McMullen, Jr., certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of C&J Energy Services Ltd.; 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 thestatements 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 thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange 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 ensurethat 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 effectivenessof 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 fiscalquarter (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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 overfinancial reporting. Date:February 26, 2016/s/ Randall C. McMullen, Jr. Randall C. McMullen, Jr. President, Chief Financial Officer and Director (Principal Financial Officer)Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of C&J Energy Services Ltd. (the “Company”) for the year ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Joshua E. Comstock, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1)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. /s/ Joshua E. ComstockJoshua E. ComstockChairman and Chief Executive Officer (Principal Executive Officer)Date:February 26, 2016Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of C&J Energy Services Ltd. (the “Company”) for the year ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Randall C. McMullen, Jr., Chief Financial Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1)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. /s/ Randall C. McMullen, Jr.Randall C. McMullen, Jr. President, Chief Financial Officer and Director(Principal Financial Officer)Date:February 26, 2016Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: C&J Energy Services Ltd., 10-K, February 29, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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