C&J Energy Services, Ltd.
Annual Report 2016

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KC&J Energy Services, Inc. - CJFiled: March 02, 2017 (period: December 31, 2016)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, 2016OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO Commission File Number: 000-55404 C&J Energy Services, Inc.(Exact name of registrant as specified in its charter) Delaware 81-4808566(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 3990 Rogerdale Rd.Houston, Texas 77042(Address of principal executive offices)(713) 325-6000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: NoneSecurities registered pursuant to Section 12(g) of the Act: Warrants, each exercisable to purchase one share of Common Stock, $0.01 par value per share Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ 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 ¨ Accelerated filer ¨ Non-accelerated filer x (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 stock held by non-affiliates on June 30, 2016 (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 $34.0 million.The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at February 24, 2017, was 56,217,229.DOCUMENTS INCORPORATED BY REFERENCENone Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 3 Item 1A. Risk Factors 17 Item 1B. Unresolved Staff Comments 31 Item 2. Properties 31 Item 3. Legal Proceedings 32 Item 4. Mine Safety Disclosures 33 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Selected Financial Data 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8. Financial Statements and Supplementary Data 63 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 113 Item 9A. Controls and Procedures 113 Item 9B. Other Information 113 PART III Item 10. Directors, Executive Officers and Corporate Governance 114 Item 11. Executive Compensation 128 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 147 Item 13. Certain Relationships and Related Transactions, and Director Independence 149 Item 14. Principal Accounting Fees and Services 153 PART IV Part 15. Exhibits, Financial Statement Schedules 155 Signatures 157 Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, the impact of our emergence from bankruptcy on our business and relationships, future sales ofor the availability for future sale of substantial amounts of our common stock, including the exercise of outstanding Warrants, our plan to list our commonstock on the NYSE MKT, our business strategy and our financial strategy.Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience 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 declining commodity prices, overcapacity and other competitive factors affectingour industry;•the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activityand spending patterns by E&P companies;•a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by ourcustomers and negatively impacts drilling, completion and production activity;•pressure on pricing for our core services, including due to competition and industry and/or economic conditions, which may impact,among other things, our ability to implement price increases or maintain pricing on our core services;•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;•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 thoserelated to expansion 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 indoing so;•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 regulationof hydraulic fracturing could reduce or eliminate demand for our hydraulic fracturing services;1Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 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 existingenvironmental regulations or an accidental release of hazardous substances into the environment;•the loss of, or inability to attract, key management personnel;•a shortage of qualified workers;•the loss of, or interruption or delay in operation 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;•accidental damage to or malfunction of equipment;•uncertainty regarding our ability to improve our operating structure, financial results and profitability and to maintain relationships withsuppliers, customers, employees and other third parties following emergence from bankruptcy and other risks and uncertainties related toour emergence from bankruptcy;•our ability to maintain sufficient liquidity and/or obtain adequate financing to allow us to execute our business plan; and•our ability to comply with covenants under our new credit facility.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, Inc., 10-K, March 02, 2017Powered 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, Inc., a Delaware corporation (the “Successor” and together with its consolidated subsidiaries for periods subsequent to thePlan Effective Date (as defined below), “C&J” or the “Company”) is a leading provider of well construction, well completion, well support and othercomplementary oilfield services to oil and gas exploration and production (“E&P”) companies in North America. We offer a comprehensive, vertically-integrated suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing, directionaldrilling, coiled tubing, service rigs, fluids management and other support services. The Company is headquartered in Houston, Texas and operates in allactive onshore basins in the continental United States and Western Canada.C&J’s business was founded in Texas in 1997 as a partnership and converted to a Delaware corporation (“Old C&J”) in connection with ourinitial public offering that we completed in July 2011 with a listing on the New York Stock Exchange (“NYSE”) under the symbol “CJES.” In 2015, Old C&Jcombined with the completion and production services business (the “C&P Business”) of Nabors Industries Ltd. (“Nabors”) in a transformative transaction(referred to herein as the “Nabors Merger”) that nearly tripled the Company’s size, significantly expanding the Company’s Completion Services business andadding the Well Support Services business to the Company’s service offering. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&JEnergy Services Ltd. (the “Predecessor”) and shares of common stock of Old C&J were converted into common shares of the Predecessor on a 1-for-1 basis.Due to a severe industry downturn, on July 20, 2016, the Predecessor and certain of its subsidiaries (collectively with the Predecessor, the“Predecessor C&J Companies” and for periods prior to the Plan Effective Date, “C&J” or the “Company”) voluntarily filed petitions for reorganizationseeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court forthe Southern District of Texas, Houston Division (the "Bankruptcy Court"), with ancillary recognition proceedings filed in Canada and Bermuda(collectively, the “Chapter 11 Proceeding”). Contemporaneously with the commencement of the Chapter 11 Proceeding, trading in the Predecessor’scommon shares was suspended and ultimately delisted from the NYSE. On July 21, 2016, the Predecessor’s common shares began trading on the OTCMarkets Group Inc.’s (“OTC”) Pink® Open Market under the symbol “CJESQ.”On December 16, 2016, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the plan of reorganization (the“Restructuring Plan”) of the Predecessor C&J Companies. On January 6, 2017 (the “Plan Effective Date”), the Predecessor C&J Companies substantiallyconsummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan,effective on the Plan Effective Date, the Predecessor’s equity was canceled and the Predecessor transferred all of its assets and operations to the Successor. OnJanuary 12, 2017, trades in the Successor’s common stock began being reported on the OTC “Grey marketplace” under the symbol “CJJY.” Our commonstock has been approved for listing on the NYSE MKT and we expect it to begin trading on the NYSE MKT under the symbol “CJ” on March 6, 2017. Weexpect that our common stock will continue to trade on the OTC “Grey marketplace” until the close of the market on March 3, 2017.Upon emergence from the Chapter 11 Proceeding, we adopted Fresh Start accounting in accordance with the provisions set forth in AccountingStandards Codification (“ASC”) 852 - Reorganizations. For more information regarding the adoption of Fresh Start accounting, see Note 4 - Fresh StartAccounting in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.The Successor is the successor issuer to the Predecessor for purposes of and pursuant to Rule 12g-3 of the Exchange Act. References to “C&J,”the “Company,” “we,” “us” or “our” in this Annual Report on Form 10-K (this “Annual Report”) are to the Successor, together with our consolidatedsubsidiaries when referring to periods following the Plan Effective Date, and to the Predecessor C&J Companies when referring to periods prior to the PlanEffective Date. We file annual, quarterly and current reports and other documents with the U.S. Securities and Exchange Commission (“SEC”) under theExchange Act. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.You may obtain information on the operations of the Public Reference Room by calling the SEC at (800) SEC-0330. In addition, the SEC maintains a websiteat www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC.Our principal executive offices are located at 3990 Rogerdale Road, Houston, Texas 77042 and our main telephone number at that address is(713) 325-6000. Our website is available at www.cjenergy.com. We make available free of charge through our website all reports filed with or furnished to theSEC pursuant to Section 13(a) or 15(d) of the Exchange Act,3Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and allamendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information containedon or available through our website is not a part of or incorporated into this Annual Report or any other report that we may file with or furnish to the SEC.Our Reportable Business Segments and StrategyAs of December 31, 2016, our reportable business segments were:•Completion Services, which consists of the following service lines: (1) hydraulic fracturing; (2) Casedhole Solutions, which includes cased-hole wireline, pumpdown services, wireline logging, perforating, pressure pumping, well site make-up and pressure testing and othercomplementary services; (3) well construction services, specifically cementing and directional drilling services; and (4) research &technology (R&T), which is primarily engaged in the engineering and production of certain parts and components, such as perforatingguns and addressable switches, which are used in the completion process.•Well Support Services, which consists of the following service lines: (1) rig services, including workover and other support servicesprimarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plugging & abandonment operations; (2)fluids management services, which provides storage, transportation and disposal services for produced fluids and fluids used in thedrilling, completion and workover of oil and gas wells; (3) coiled tubing services, primarily used for frac plug drill-out during completionoperations and for well workover and maintenance; (4) artificial lift applications; and (5) other well support services.•Other Services, which consists of our smaller, non-core service lines that have either been divested, or are in the process of being divested,including our specialty chemical business (divested in June 2016), equipment manufacturing and repair (initial divestiture in January2017, and remainder divested in February 2017) and our international coiled tubing operations in the Middle East (operations ceased late2015, and began winding down in 2016).In line with the discontinuance of these small, ancillary service lines and divisions, we now currently manage our business through two operatingsegments. Accordingly, on a go forward basis beginning with our quarterly report for the period ended March 31, 2017, we will only disclose two reportablesegments. Each reportable business segment is described in more detail below; for additional financial information about each of our reportable businesssegments, including revenue from external customers and total assets by reportable business segment, see Note 14 - Segment Information in Part II, Item 8“Financial Statements and Supplementary Data” of this Annual Report.Our core service lines are primarily included in our Completion Services and Well Support Services segments. Operating results in our coreservice lines are driven primarily by four interrelated, fluctuating variables: (1) the drilling, completion and production activities of our customers, which isin turn primarily driven by oil and natural gas prices and directly affects the demand for our services; (2) the price we are able to charge for our services,which is in turn primarily driven by the level of demand for our services and the supply of equipment capacity in the market; (3) the cost of products andlabor involved in providing our services, and our ability to pass those costs on to our customers; and (4) our activity, or “utilization” levels, and serviceperformance.Management evaluates the performance of our reportable segments primarily based on Adjusted EBITDA because it provides importantinformation to us about the activity and profitability of our service lines within each segment and aids us in analytical comparisons for purposes of, amongother things, efficiently allocating our assets and resources. Adjusted EBITDA is a non-GAAP financial measure computed as total earnings before net interestexpense, income taxes, depreciation and amortization, other income (expense), net gain or loss on disposal of assets, acquisition-related costs, and certainnon-routine items. For additional information about Adjusted EBITDA for each of our reportable business segments, please see Note 14 - SegmentInformation in Part II, Item 8 "Financial Statements and Supplementary Data" of this Annual Report.Our operating strategy is focused on maintaining high asset utilization levels to maximize revenue generation while controlling costs to gain acompetitive advantage and drive returns. We believe that the quality and efficiency of our service execution and our alignment with customers whorecognize the value that C&J provides through efficiency gains are central to our efforts to support utilization and grow our business. Although ourmanagement team monitors asset utilization, among other factors, for purposes of assessing our overall activity levels and customer demand, asset utilizationcannot be relied on as the sole indicator of our financial and/or operational performance. Furthermore, given the volatile and cyclical nature of4Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.activity drivers in the U.S. onshore oilfield services industry, coupled with the varying prices we are able to charge for our services and the cost of providingthose services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle, and we thereforedo not rely solely on operating margins as an indicator of financial performance. For additional information about factors impacting our business and resultsof operations, please see “Industry Trends and Outlook” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in this Annual Report.Completion ServicesThe core services provided through our Completion Services segment are hydraulic fracturing and cased-hole wireline and pumpdown services.We utilize our in-house manufacturing capabilities, including our data acquisition and control instruments business, to offer a technologically advanced andefficiency focused range of completion techniques. Our strategy is to offer our completion services as a bundled package in order to provide an integrated,value-added solution and maximize efficiency for our customers. Our well construction services, specifically cementing and directional drilling services, andour R&T division, which includes manufacturing capabilities, are also managed through our Completions Services segment.Hydraulic Fracturing. Our fleet of approximately 820,000 hydraulic horsepower (“HHP”) is capable of handling the most technically demandingwell completions in conventional and unconventional high-pressure formations. We leverage our R&T capabilities to provide customers with a moreefficiently and effectively engineered frac designs, refracturing and other reservoir stimulation services that help regain production and increase wellrecovery. We also can provide our services using smaller frac fleets in response to customer demand for vertical fracs and restimulation services.Casedhole Wireline and Pumpdown Services. Through our cased-hole wireline and pumpdown services line, we are one of the leading providersof perforating, pumpdown, pipe recovery, pressure pumping, and wellsite make-up and pressure testing services. We operate and maintain 127 wireline trucksand 57 pumpdown units in order to provide these services to our customers. We are highly experienced in safely servicing deep, high-pressure, high-temperature wells in some of the most active onshore basins in the United States, and provide premium perforating services for both wireline and tubing-conveyed applications. Our in-house manufacturing capabilities through our R&T division allow us to manage costs and lead times with regard to hardwareand perforating charges, providing us with a competitive advantage and allowing us to achieve high returns. We believe we are one of the most efficientproviders of perforating services, and as such we are able to command a market premium for these services.Cementing. Our cementing service line consists of 36 units operating in the Permian Basin and Northeast producing basins, each of which isequipped with full-service laboratory capabilities. Since acquiring this business in March 2015, we have been recognized as a leading provider in customersatisfaction surveys for both 2015 and 2016.Not all of these assets are utilized fully or at all at any time, due to, among other things, routine scheduled maintenance and downtime.Additionally, throughout 2016, in response to the challenging market conditions, we focused on various operational rightsizing measures to better align ourassets with industry demand, which primarily included stacking or idling unproductive equipment and closing or consolidating facilities across our assetbase within each business line. Going forward, we would expect certain rightsizing measures from 2016 to help us moderate select cost inflation even as themarket continues to improve and we enter equipment back into service in 2017 and beyond.The majority of revenue for this segment is generated by our hydraulic fracturing service line, and we consider our hydraulic fracturing serviceline and cased-hole wireline and pumpdown services line to be our core service lines within this reportable business segment.For the year ended December 31, 2016, revenue from our Completion Services segment was $544.0 million, representing approximately 56.0% ofour total revenue, with net loss of $253.8 million and Adjusted EBITDA of $(39.6) million.Well Support ServicesOur Well Support Services segment focuses on post-completion activities at the well site, and includes rig services, including workover,plugging and abandonment, fluids management, coiled tubing, artificial lift applications and other specialized well site services.5Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Rig Services. As part of our services that help prolong the productive life of an oil or gas well, we operate the second largest fleet in NorthAmerica, consisting of 459 workover and well servicing rigs throughout the continental U.S. and Western Canada. These rigs range from 150 to 900horsepower and are involved in the routine repair and maintenance of oil and gas wells, re-drilling operations and plugging and abandonment operations.Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depletedproduction zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recoveryoperations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending onthe complexity of the workover. Maintenance services provided with our rig fleet are generally required throughout the life cycle of an oil or gas well.Examples of these maintenance services include routine mechanical repairs to the pumps, tubing and other equipment, removing debris and formationmaterial from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance servicesare generally less complicated than completion and workover related services and require less time to perform. Our rig fleet is also used in the process ofpermanently shutting-in oil or gas wells that are at the end of their productive lives. These plugging and abandonment services generally require auxiliaryequipment in addition to a well servicing rig. The demand for plugging and abandonment services is not significantly impacted by the demand for oil andgas because well operators are required by state regulations to plug wells that are no longer productive.Fluids Management. We provide a full range of fluid services, including the storage, transportation and disposal of various fluids used in thedrilling, completion and workover of oil and gas wells utilizing a service fleet of 1,121 fluid trucks and trailers and 4,243 portable tanks. This large fleet oftrucks and trailers and portable tanks enable us to rapidly deploy our equipment across a broad geographic area. Included in our fleet of fluid trucks andtrailers are over 70 specialized trucks and trailers that are optimized to transport condensate. We also own 29 private salt water disposal wells. Demand andpricing for our fluids management services generally correspond to demand for our rig services.Coiled Tubing. We offer a complete range of coiled tubing services to help customers accomplish a wide variety of goals in their horizontalcompletion, workover and well maintenance projects. We operate a fleet of 44 coiled tubing units. Approximately 70 percent of our coiled tubing fleetconsists of large diameter coil, meaning two inches or larger in diameter, which allows us to service wells with longer lateral lengths. Our coiled tubingservices allow customers to complete projects quickly and safely across a wide spectrum of pressures, without having to shut in their wells.We also provide artificial lift applications and other specialty well site support services.The majority of revenue for this segment is generated by our rig services line, and we consider our rig services line, fluids management serviceline and coiled tubing service line to be our core service lines within this reportable business segment.For the year ended December 31, 2016, revenue from our Well Support Services segment was $419.6 million, representing approximately 43.2%of our total revenue, with net loss of $426.7 million and Adjusted EBITDA of $17.5 million.Other ServicesOur Other Services segment consists of our smaller, non-core service lines that have either been divested, or are in the process of being divested,including our specialty chemical business (divested in June 2016), equipment manufacturing and repair (initial divestiture in January 2017, and remainderdivested February 2017) and our international coiled tubing operations in the Middle East (operations ceased late 2015, and began winding down in 2016).Our Other Services segment contributed $7.6 million of revenue for the year ended December 31, 2016, representing approximately 0.8% of ourtotal revenue, with net loss of $58.8 million and Adjusted EBITDA of $(5.8) million.Other Information About Our BusinessGeographic AreasWe operate in all active onshore basins in the continental United States and Western Canada. During the year ended December 31, 2016,approximately $933.6 million, or 96.1%, of our consolidated revenue from external customers was derived from the United States, and the majority of ourlong lived assets were located in the United States. We also generated approximately $37.1 million, or 3.8%, of our 2016 consolidated revenue from rigservices operations in Canada and approximately $0.4 million, or less than 0.1%, of our 2016 consolidated revenue from our artificial lift applicationsbusiness in Ecuador and the Middle East.6Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.From late 2011 through mid-2016, we worked to establish an operational presence in key countries in the Middle East, and opened offices inDubai, Saudi Arabia and Oman. We were successful in winning a short-term contract to provide coiled tubing services in Saudi Arabia, which we completedin September 2015. However, we were not successful in winning any other work in Saudi Arabia or elsewhere in the region. Given the Company’s financialposition and the severe industry downturn, coupled with changes in the Company’s executive management team with a resulting shift in short- and long-termgrowth strategy, in mid-2016 we re-evaluated our business plan with respect to international expansion generally, and the Middle East specifically. Wedetermined that it was appropriate to significantly scale back our investment in this area to preserve liquidity and focus on the advancement of our corebusiness in the United States. We are in the process of unwinding our footprint in the region, including selling assets and excess inventory to other operatorsin the region. The only business line we are currently offering in the Middle East is our artificial lift systems.SeasonalityOur operations are subject to seasonal factors and our overall financial results reflect the seasonal variations that impact activity in our corebusiness lines. Specifically, we typically have experienced a pause by our customers around the holiday season in the fourth quarter, which may becompounded as our customers exhaust their annual capital spending budgets towards year end. Additionally, our operations are directly affected by weatherconditions. During the winter months our customers may delay operations or we may not be able to operate or move our equipment between locations duringperiods of heavy snow, ice or rain, and during the spring some areas impose transportation restrictions due to the muddy conditions caused by the springthaws. During the summer months, our operations may be impacted by tropical weather systems.Sales and MarketingSales of our Completion Services and Well Support Services are primarily generated by the efforts of our sales force. In our core business lines ofhydraulic fracturing and rig services, these services are typically contracted well in advance for relatively long duration engagements, which results in salesbacklogs that could be as long as several months during periods of high demand for our services. The remainder of our core business lines tends to be call-outtype work and typically have no, or very limited, backlogs of sales.Sales and marketing activities are typically performed through our local operations in each geographic region, with the exception of hydraulicfracturing, which is centralized to a specific sales team at the corporate level. For our other core business lines, we believe our local field sales personnel havea strong understanding of region-specific issues and customer operating procedures and, therefore, can effectively target marketing activities. We also havemultiple corporate sales representatives that supplement our field sales efforts and focus on large accounts and selling technical services. Our salesrepresentatives collaborate with our legal team to identify customer contracting needs in advance of potential operations, which we believe streamlines ourcustomer onboarding process. Our sales representatives work closely with our local managers and field sales personnel to target compelling marketopportunities. We facilitate teamwork among our sales representatives by basing a portion of their compensation on aggregate company sales targets ratherthan individual sales targets. We believe this emphasis on teamwork enables us to better serve our existing customers and will also allow us to further expandour customer base.CustomersWe serve a diverse group of independent and major national oil and gas companies that are active in our core areas of operations across thecontinental United States and in Western Canada. We monitor closely the financial condition of our customers, their capital expenditure plans and otherindications of their drilling, completion and production services activity. In particular, we seek to identify distressed customers and apply what we believe tobe appropriate business and legal measures to protect us from any defaults or failures to pay.Our top ten customers accounted for approximately 46.0%, 53.6% and 51.1% of our consolidated revenue for the years ended December 31,2016, 2015 and 2014, respectively. There were no individual customers that accounted for more than 10.0% of our consolidated revenues during the yearended December 31, 2016. For the year ended December 31, 2015, revenue from Oxy USA, Inc. represented 15.5% of our consolidated revenue. For the yearended December 31, 2014, revenue from Anadarko Petroleum Corporation individually represented 16.4% of our consolidated revenue. Other than thoselisted above, no other customer accounted for more than 10.0% of our consolidated revenue in 2016, 2015 or 2014. If we were to lose any material customer,we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could have an adverse effect on our business until theequipment is redeployed at similar utilization or pricing levels.Competition7Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 operate in highly competitive areas of the oilfield services industry with significant potential for excess capacity. Completion and wellservicing equipment can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in anoversupply of such equipment in any particular area. Utilization and pricing for our services have in the past been negatively affected by increases in supplyrelative to demand in our core operating areas and geographic markets.Additionally, the demand for our services depends primarily on the level of spending by oil and gas companies for drilling, completion andproduction activities, which is affected by short-term and long-term trends in oil and natural gas prices and numerous other factors over which we have nocontrol. Severe declines and sustained weakness and volatility in commodity prices over the course of 2015, and for most of 2016, and the consequentnegative impact on the level of drilling, completion and production activity and capital expenditures by our customers, adversely affected the demand forour services. This, in turn, negatively impacted our ability to maintain adequate utilization of our asset base and negotiate pricing at levels generatingsufficient margins.Our revenues and earnings are directly affected by changes in utilization and pricing levels for our services, which fluctuate in direct response tochanges in the level of drilling, completion and production activity by our customers. Pressure on pricing for our services, including due to competition andindustry and/or economic conditions, may impact, among other things, our ability to maintain utilization and profitability. During periods of decliningpricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results. Furthermore, even when we areable to increase our prices, we may not be able to do so at a rate that is sufficient to offset any rising costs. Also, we may not be able to successfully increaseprices 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 oilfield services companiesthat possess substantially greater financial and other resources than we do. Our larger competitors’ greater resources could allow them to compete moreeffectively than we can, including by reducing prices for services in our core operating areas. Our major competitors for our Completion Services includeHalliburton, Schlumberger, Keane Group, RPC, Inc., FTS International, Inc. (formerly known as Frac Tech Services), Basic Energy Services, Superior EnergyServices, CalFrac Well Services, a significant number of regional, mostly-private businesses, and to a smaller extent, both Weatherford International andBaker Hughes, both of which have recently announced plans to exit the hydraulic fracturing business. Our major competitors for our Well Support Servicesinclude Key Energy Services, Basic Energy Services, Superior Energy Services, Precision, Forbes and Pioneer Energy Services, as well as a significant numberof mostly-private, 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 such as those we experienced from late 2014through mid-2016. Throughout this severe, prolonged downturn for our industry, our customer base demonstrated a more intense focus and placed a higherpriority on receiving the lowest service cost pricing possible. Additionally, projects for certain of our core service lines are often awarded on a bid basis,which tends to further increase competition based primarily on price. During this downturn, our utilization and pricing levels were also negatively impactedby predatory pricing from certain large competitors, who elected to operate at negative margins for these services. During healthier market conditions, webelieve many of our customers choose to work with us based on the safety, performance and quality of our crews, equipment and services, although eventhen, we must be competitive in our pricing. We seek to differentiate ourselves from our major competitors by our operating philosophy, which is focused ondelivering the highest quality customer service and equipment, coupled with superior execution and operating efficiency. As part of this strategy, we targethigh volume, high efficiency customers with service intensive, 24-hour work, which is where we believe we can differentiate our services from ourcompetitors.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 PropertyOver the last several years we have significantly invested in technological advancement, including the development of a state-of-the-art researchand technology center staffed by a team of highly skilled engineers focused on developing innovative, fit-for-purpose solutions designed to enhance ourservice offerings, increase efficiencies, provide cost savings to our operations and add value for our customers. We believe that one of the strategic benefits ofthis business line is the ability to develop and implement new technologies and respond to changes in customer requirements and industry demand. Severalof8Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 research and technology initiatives are generating monthly cost savings for our completion services operations, which is central to our overall strategy ofproactively managing our costs to maximize returns. Additionally, several of these investments are delivering value-added products and services that, inaddition to producing revenue, are generating demand from key customers. We believe these capabilities can provide a competitive advantage as customerslook for innovative means for extracting oil and gas in the most economical and efficient way possible. However, as with our other service lines, over the lastyear we have been forced to implement meaningful cost reductions that significantly scaled back the size and resources of this business line.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. We also rely,to a significant extent, on the technical expertise and know-how of our personnel to maintain our competitive position.See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” foradditional detail as to our investment in technological advancement.SuppliersWe purchase raw materials (such as proppant, guar, acid, chemicals, completion fluids and coiled tubing strings) and finished products (such asfluid-handling equipment) used in our Completion Services segment and certain raw materials and finished products used in our Well Support Servicessegment from various third-party suppliers.We are not materially dependent on any single supply source for these materials or products and we believe that we would be able to makesatisfactory alternative arrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers. However, ifalternative sources of supply are unavailable and we are unable to purchase the necessary materials and/or products needed for our business in a timelymanner and in the quantities required, we may be delayed in providing our services, which could have a material adverse effect on our business, financialcondition, results of operations and cash flows. For example, in the past, our industry has faced sporadic guar and proppant shortages and trucking shortagesassociated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several of our competitors.Additionally, increasing costs of certain raw materials, such as guar, may negatively impact demand for our services or the profitability of our businessoperations.During the year ended December 31, 2016, Unimin Corporation and U.S. Silica Company supplied 8.4% and 5.2%, respectively, of the materialsand/or products used in our Completion Services segment; but no single third party supplier supplied 5.0% or more of the materials and/or products used inour Well Support Services segment. Additionally, with respect to our Completion Services segment, as part of our financial restructuring we rejected all of ourtake or pay contracts for proppant and chemicals, which enabled us to negotiate two new proppant contracts covering approximately 80.0% of our forecastedvolume needs for 2017 and beyond. In conjunction with the sale of our manufacturing business line, we also entered into a preferred supply agreement with athird party to supply us with components and finished goods to repair and refurbish certain of our stacked hydraulic fracturing equipment.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 extensiveemployee review process. We have comprehensive QHSE-focused training programs designed to minimize accidents in the workplace and improve theefficiency of our operations. We believe that our QHSE policies and procedures, which are reviewed internally for compliance with industry changes, providea solid framework to ensure our operations minimize the hazards inherent in our work and meet regulatory requirements and customer demands. Further, wehave developed our own QHSE management system to help ensure compliance with our procedures and processes in an effort to drive continuousimprovement. Our reputation and proven safety record has allowed us to earn work certification from several industry leaders that we believe have some ofthe most demanding safety requirements, including ConocoPhillips, ExxonMobil, Chevron and Royal Dutch Shell.Our record and reputation for safety is important to all aspects of our business. In the oilfield services industry, a critical competitive factor inestablishing and maintaining long-term customer relationships is having an experienced, skilled and well-trained work force. In recent years, many of ourlarger customers have placed an added emphasis on the safety records and quality management systems of their contractors. We strive to meet or exceed thesafety and quality management9Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.requirements of our customers, and we believe our continued focus on safety will gain even further importance to our customers as the market improves.Risk Management and InsuranceOur operations are subject to hazards inherent in the oil and gas industry, including blowouts, explosions, cratering, fires, oil spills, surface andunderground pollution and contamination, hazardous material spills, loss of well control, loss of or damage to the wellbore, formation or undergroundreservoir, damaged or lost equipment, and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury ordeath, damage to or destruction of equipment and facilities, loss of oil and natural gas production, suspension of operations, environmental and naturalresources damage and damage to the property of others. Additionally, because our business involves the transportation of heavy equipment and materials, wemay also experience traffic accidents which may result in personal injury or death, damage to or destruction of equipment and the property of others andhazardous material spills. If a serious accident were to occur involving our employees, equipment and/or services, it could result in C&J being named as adefendant 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 experienceaccidents in the future. In addition to the property and personal losses from these accidents, the frequency and severity of these incidents affect our operatingcosts and insurability, and our relationship with customers, employees and regulatory agencies. Any significant increase in the frequency or severity of theseincidents, or the general level of compensatory payments, could adversely affect the cost of, or our ability to obtain, workers’ compensation and other formsof insurance, 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, together with excess loss liability coverage. These insurance policies carry self-insured retention limits or deductibles on a per occurrence basis. We have deductibles per occurrence for: workers’ compensation of $1,000,000; automobileliability claims of $1,000,000; general liability claims, including sudden and accidental pollution claims, of $250,000, plus an additional annual aggregatedeductible of $250,000; and property damage for catastrophic events of $25,000. The excess loss liability coverage is subject to a self-insured retention of$5,000,000 for each occurrence and in the aggregate.With respect to the C&P Business that we acquired from Nabors in the Nabors Merger, and as a result of the settlement agreement negotiated withNabors in connection the Chapter 11 Proceeding, we assumed, among other liabilities, all liabilities of the C&P Business to the extent arising out of orresulting from the operation of the C&P Business at any time before, at or after the closing of the Nabors Merger, including liability for death, personal injuryand property damage resulting from or caused by the assets, products and services of the C&P Business; other than those liabilities specifically identified inthe settlement agreement, as incorporated into the Restructuring Plan, for which Nabors maintains a continuing indemnification obligation.As discussed below, our Master Service Agreements (“MSAs”) with our customers generally provide, among other things, that our customersgenerally assume (without regard to fault) liability for underground pollution and pollution emanating from the wellbore as a result of an explosion, fire orblowout. We retain the risk for any liability not indemnified by our customers in excess of our insurance coverage. Our insurance coverage may beinadequate to cover our liabilities. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable andcommercially justifiable or on terms as favorable as our current arrangements.We seek to enter into MSAs with each of our customers before providing any services. Our sales and operations teams work closely with our legalteam to identify and prioritize MSAs for negotiation, which we believe increases the efficiency of our risk management efforts. These MSAs delineate our andour customers’ respective warranty and indemnification obligations with respect to the services we provide. With respect to warranty issues, our MSAstypically provide that our obligations are limited to replacing any defective good or services, or in the alternative, providing the customer with a refund. OurMSAs typically provide for knock-for-knock indemnification for all losses, which means that we and our customers assume (without regard to fault) liabilityfor damages to our respective personnel and property. For catastrophic losses, our MSAs generally include industry-standard carve-outs from the knock-for-knock indemnities, pursuant to which our customers (typically the exploration and production company) assume (without regard to fault) liability for(i) damage to the well bore, including the cost to re-drill; (ii) damage to the formation, underground strata and the reservoir; (iii) damages or claims arisingfrom loss of control of a well or a blowout; and (iv) allegations of subsurface trespass. Additionally, our MSAs often provide carve-outs to the “without regardto fault” concept that would permit, for example, us to be held responsible for events of catastrophic loss only if they arise as a result of our gross negligenceor willful misconduct. Our MSAs typically10Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.provide for industry-standard pollution indemnities, pursuant to which we assume liability for surface pollution associated with our equipment andoriginating above the surface (without regard to fault), and our customer assumes (without regard to fault) liability arising from all other pollution, including,without limitation, underground pollution and pollution emanating from the wellbore as a result of an explosion, fire or blowout. In certain circumstances, weagree to exceptions from our MSAs’ catastrophic loss and pollution indemnities to the extent incidents arise from our gross negligence or willful misconduct.The description of insurance policies set forth above is a summary of certain material terms of our insurance policies currently in effect and 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 MSA that we have entered into or may enter into in the future, some of which may containindemnity structures and risk allocations between our customers and us that are different than those described here.EmployeesAs of February 24, 2017, we have 5,261 employees. The delivery of our services requires personnel with specialized skills and experience whocan perform physically demanding work. Subject to industry and local market conditions, the additional crew members needed for our core service lines inour Completion Services and Well Support Services segments are generally available for hire on relatively short notice.Due to the severe deterioration in market conditions over the course of 2015 and through mid-2016, we significantly reduced our headcount aspart of our continuing effort to align our business with the prolonged industry downturn and resulting reduction in demand for our services. During the latterpart of the third quarter of 2016, the market conditions began to improve, as commodity prices appeared to stabilize and customers began to increase drillingactivity. We are actively monitoring demand for our services and will seek to hire additional employees as needed to take advantage of availableopportunities.Our employees are not represented by any labor unions or covered by collective bargaining agreements. We consider our relations with ouremployees to be generally good.Government Regulations and Environmental, Health and Safety 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. Theregulatory burden on the industry increases the cost of doing business and consequently affects profitability. Any failure by us to comply with such local,state and federal laws and regulations may result in governmental authorities taking actions against our business that could adversely impact our operationsand 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 December 2015, the U.S. Departments of Justice and Labor announced a plan to more frequently andeffectively prosecute worker health and safety violations, including enhanced penalties. In addition, the OSHA hazard communication standard requires thatinformation be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and localgovernment authorities and the public.Motor Carrier Operations11Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Among the services we provide, we operate as a motor carrier and therefore are subject to regulation by the United States Department ofTransportation (“DOT”) and various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization toengage in motor carrier operations; regulatory safety; hazardous materials labeling, placarding and marking; financial reporting; and certain mergers,consolidations and acquisitions. There are additional regulations specifically relating to the trucking industry, including testing and specification ofequipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economicsof the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providingtruckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulationswhich govern the amount of time a driver may drive in any specific period and requiring onboard black box recorder devices or limits on vehicle weight andsize. For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking a commercial driver’s license. Certain motorvehicle operators are required to register with the DOT. This registration requires an acceptable operating record. The DOT periodically conducts compliancereviews and may revoke registration privileges based on certain safety performance criteria, and a revocation could result in a suspension of operations. Since2010, the DOT has pursued its Compliance, Safety, Accountability (“CSA”) program, in an effort to improve commercial truck and bus safety. A componentof CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federal and state law enforcement personnel todetermine a carrier’s safety performance. The SMS is intended to allow DOT to identify carriers with safety issues and intervene to address those problems.However, in January 2016 the DOT proposed its Safety Determination rule, which would alter the DOT's methodology for determining when a motor carrier isunfit to operate a commercial motor vehicle. A final rule remains pending, and, at this time, we cannot predict whether the rule will be adopted as proposednor the effect such a revision may have on our safety rating.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 as necessary and applicable. Numerous governmental agencies issue regulations to implementand enforce these laws, for which compliance is often costly and difficult. The violation of these laws and regulations may result in the denial or revocationof permits, issuance of corrective action orders, injunctions prohibiting some or all of our operations, assessment of administrative and civil penalties, andeven criminal prosecution.Hazardous SubstancesWe generate wastes, including hazardous wastes, which are subject to the federal Resource Conservation and Recovery Act (“RCRA”), andcomparable state statutes. The U.S. Environmental Protection Agency (“EPA”), the NRC, and state agencies have limited the approved methods of disposalfor some types of hazardous and nonhazardous wastes. RCRA currently excludes drilling fluids, produced waters and certain other wastes associated with theexploration, development or production of oil and natural gas from regulation as “hazardous waste.” Disposal of such non-hazardous oil and natural gasexploration, development and production wastes is usually regulated by state law. Other wastes handled at exploration and production sites or generated inthe course of providing well services may not fall within this exclusion. Moreover, stricter standards for waste handling and disposal may be imposed on theoil and natural gas industry in the future. For example, in December 2016, the EPA and environmental groups entered into a consent decree to address EPA’salleged failure to timely assess its RCRA Subtitle D criteria regulations exempting certain exploration and production related oil and gas wastes fromregulation as hazardous wastes under RCRA. The consent decree requires EPA to propose a rulemaking no later than March 15, 2019 for revision of certainSubtitle D criteria regulations pertaining to oil and gas wastes or to sign a determination that revision of the regulations is not necessary. Removal of RCRA’sexemption for exploration and production wastes has the potential to significantly increase waste disposal costs, which in turn will result in increasedoperating costs and could adversely impact our business and results of operations. The impact of future revisions to environmental laws and regulationscannot be predicted. Additionally, Naturally Occurring Radioactive Materials (“NORM”) may contaminate extraction and processing equipment used in theoil and natural gas industry. The waste resulting from such contamination is regulated by12Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.federal and state laws. Standards have been developed for: worker protection; treatment, storage, and disposal of NORM and NORM waste; management ofNORM-contaminated waste piles, containers and tanks; and limitations on the relinquishment of NORM contaminated land for unrestricted use under RCRAand state laws. It is possible that we may incur costs or liabilities associated with elevated levels of NORM.The Federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or the “Superfund” law), and comparablestate statutes impose liability, without regard to fault or legality of the original conduct, on classes of persons that are considered to have contributed to therelease of a hazardous substance into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardoussubstance was released, and companies that disposed or arranged for disposal of hazardous substances at off-site locations such as landfills. Under CERCLA,these persons may be subject to strict, joint and several liability for the costs of cleaning up the hazardous substances that have been released into theenvironment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personalinjury and property damage allegedly caused by the hazardous substances released into the environment. We currently own, lease, or operate numerousproperties and facilities that for many years have been used for industrial activities, including oil and natural gas related operations. Hazardous substances,wastes, or hydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations where such substances havebeen taken for recycling or disposal. In addition, some of these properties have been operated by third parties or by previous owners whose treatment anddisposal or release of hazardous substances, wastes, or hydrocarbons, was not under our control. These properties and the substances disposed or released onthem may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed substances andwastes and remediate contaminated property (including groundwater contamination) ,including instances where the prior owner or operator caused thecontamination, or perform remedial plugging of disposal wells or waste pit closure operations to prevent future contamination. These laws and regulationsmay 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 regardingthe discharge of pollutants into state waters or waters of the United States. The discharge of pollutants into jurisdictional waters is prohibited unless thedischarge is permitted by the EPA or applicable state agencies. The Clean Water Act also prohibits the discharge of dredge and fill material into regulatedwaters, including jurisdictional wetlands, unless authorized by an appropriately issued permit. In September 2015, the EPA and U.S. Army Corps of Engineers(the “Corps”) issued a new rule defining the scope of the EPA’s and the Corps’ jurisdiction over wetlands and other waters. 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, and, as ofOctober 2015, implementation of the rule has been stayed pending resolution of the court challenge. The process for obtaining permits has the potential todelay the development of natural gas and oil projects. Also, spill prevention, control and countermeasure regulations under federal law require appropriatecontainment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture orleak.In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of stormwater runoff from certain types of facilities. Moreover, the Oil Pollution Act of 1990 (“OPA”) imposes a variety of requirements on responsible parties relatedto the prevention of oil spills and liability for damages, including natural resource damages, resulting from such spills in waters of the United States. Aresponsible party includes the owner or operator of an onshore facility. The Clean Water Act and analogous state laws provide for administrative, civil andcriminal penalties for unauthorized discharges and, together with the OPA, impose rigorous requirements for spill prevention and response planning, as wellas substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.The Safe Water Drinking Act (“SDWA”) regulates the underground injection of substances through the Underground Injection Control (“UIC”)program. Hydraulic fracturing generally is exempt from regulation under the UIC program, and the hydraulic fracturing process is typically regulated by 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 rely13Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.upon the use of such wells in our operations, our costs to operate may significantly increase and our ability to perform services may be delayed or limited,which could have an adverse effect on our results of operations and financial position.Air EmissionsSome of our operations also result in emissions of regulated air pollutants. The federal Clean Air Act (“CAA”) and analogous state laws requirepermits for certain facilities that have the potential to emit substances into the atmosphere that could adversely affect environmental quality. These laws andtheir implementing regulations also impose generally applicable limitations on air emissions and require adherence to maintenance, work practice, reportingand record keeping, and other requirements. Failure to obtain a permit or to comply with permit or other regulatory requirements could result in theimposition of substantial administrative, civil and even criminal penalties. In addition, we or our customers could be required to shut down or retrofit existingequipment, 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 “green completions.” These regulations also establish specific new requirements regarding emissions from productionrelated wet seal and reciprocating compressors, 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 naturalgas projects and increase costs for us and our customers. Although we do not believe our operations will be materially adversely affected by theserequirements, our business could be materially affected if our customers’ operations are significantly affected by these or other similar requirements. Theserequirements could increase the cost of doing business for us and our customers, reduce the demand for the oil and gas our customers produce, and thus havean adverse effect 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 operatingcosts or reduce the demand for our services. The EPA has determined that emissions of carbon dioxide, methane, and other greenhouse gases (“GHGs”)present an endangerment to the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth’satmosphere and other climatic changes. Based on these findings, EPA has adopted regulations that restrict emissions of GHGs under existing provisions ofthe CAA, including rules that require preconstruction and operating permit reviews for GHG emissions from certain large stationary sources. The EPA has alsoadopted rules requiring the monitoring and reporting of GHG emissions from specified GHG sources, including, among others, certain oil and natural gasproduction facilities, on an annual basis. More recently, in June 2016, the EPA issued final rules that establish new air emission controls for emissions ofmethane from certain equipment and processes in the oil and natural gas source category, including production, processing transmission and storageactivities. The EPA’s final rule package includes first-time standards to address emissions of methane from equipment and processes across the sourcecategory, including hydraulically fractured oil and natural gas well completions. The Bureau of Land Management (“BLM”) also finalized similar rules inNovember 2016 which seek to limit methane emissions from new and existing oil and gas operations on federal lands through limitations on the venting andflaring of gas, as well as enhanced leak detection and repair requirements for certain equipment and processes. However, both the U.S. House ofRepresentatives and the Senate have introduced resolutions seeking to repeal the BLM methane rules under the Congressional Review Act and futureimplementation of the BLM methane rules is uncertain. In any event, both the EPA and BLM methane rules impose substantially similar requirements. We donot believe our operations are currently subject to these requirements, but our business could be affected if our customers’ operations become subject to theseor other similar requirements. Moreover, these requirements could increase the cost of doing business for us and our customers, reduce the demand for the oiland gas our customers produce, and thus have a material adverse effect on the demand for our products and services.In addition, Congress has from time to time considered legislation to reduce emissions of GHGs, and almost one-half of the states haveestablished or joined GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions or major producers offuels, to acquire and surrender emission allowances. The number of14Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. In addition, in 2015, theU.S. participated in the United Nations Conference on Climate Change, which led to the creation of the Paris Agreement. The Paris Agreement requirescountries to review and “represent a progression” in their intended nationally determined contributions, which set GHG emission reduction goals, every fiveyears beginning in 2020. However, the Paris Agreement is not binding and, at present, the U.S.’s continued participation in the agreement remains uncertain.Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact ourbusiness, any new federal, regional or state restrictions on emissions of carbon dioxide or other GHGs that may be imposed in areas in which we conductbusiness could result in increased compliance costs or additional operating restrictions on our customers. Such restrictions could potentially make ourcustomers’ products more expensive and thus reduce demand for such products, which in turn could have a material adverse effect on the demand for ourservices and our business. Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the earth’s atmospheremay produce climatic changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and otherclimatic events; if any such effects 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 subsurfacerock formations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture thesurrounding rock and stimulate production. We commonly perform hydraulic fracturing services for our customers. Hydraulic fracturing typically is regulatedby state oil and natural gas commissions, but, as noted above, the EPA has asserted federal regulatory authority pursuant to the SDWA over certain hydraulicfracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to such activities. In addition, the EPA hastaken the following actions and issued final regulations under the CAA governing performance standards, including standards for the capture of air emissionsreleased during hydraulic fracturing; an advanced notice of proposed rulemaking 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 from hydraulic fracturing operations to publicly owned wastewater treatment plants. Also, the BLM finalized rules in March 2015 that imposenew or more stringent standards for performing hydraulic fracturing on federal and Native American lands. The U.S. District Court of Wyoming struck downBLM's enforcement of the rule; the decision was appealed to the Tenth Circuit by the BLM and the matter remains pending. Also, in December 2016, the EPAreleased its final report on the potential impacts of hydraulic fracturing on drinking water resources. The final report concluded that “water cycle” activitiesassociated with hydraulic fracturing may impact drinking water resources “under some circumstances,” noting that the following hydraulic fracturing watercycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals forfracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection offracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequatelytreated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits.In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturingthrough additional permit requirements, operational restrictions, disclosure requirements, well construction and temporary or permanent bans on hydraulicfracturing in certain areas. For example, in May 2013, the Texas Railroad Commission adopted new rules governing well casing, cementing and otherstandards for ensuring that hydraulic fracturing operations do not contaminate nearby water resources. Local governments also may seek to adopt ordinanceswithin their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit theperformance of well drilling in general or hydraulic fracturing in particular. We believe that we follow applicable standard industry practices and legalrequirements for groundwater protection in our hydraulic fracturing activities. If new federal, state or local laws or regulations that significantly restricthydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficultor costly to perform hydraulic fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could result in decreased oil and natural gasexploration and production activities and, therefore, adversely affect demand for our services and our business. Such laws or regulations could also materiallyincrease our costs 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 havenot been involved in any litigation over alleged environmental violations, have not been ordered to pay any material monetary fine or penalty with respectto alleged 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 surface15Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.pollution, not underground or flowback pollution, which our customers are generally liable for and for which we are typically indemnified by our customers.We maintain insurance against some risks associated with underground contamination that may occur as a result of well services activities.However, this insurance is limited to activities at the well site and may not continue to be available or may not be available at premium levels that justify itspurchase. The occurrence of a significant event not fully insured or indemnified against could have a materially adverse effect on our financial condition andresults of operations.Overall, we do not anticipate that compliance with existing environmental laws and regulations will have a material effect on our financialcondition or results of operations. It is possible, however, that substantial costs for compliance or penalties for non-compliance may be incurred in the future.Moreover, it is possible that other developments, such as the adoption of stricter environmental laws, regulations, and enforcement policies, could result inadditional costs or liabilities that we cannot currently quantify.16Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 1A. Risk FactorsWe face many challenges and risks in the industry in which we operate. Before investing in our common stock you should carefully considereach of the following risk factors and all of the other information set forth in this Annual Report, including under the section titled “Cautionary NoteRegarding Forward-Looking Statements”, and in our other reports filed with the SEC, and the documents and other information incorporated by referenceherein and therein, for a detailed discussion of known material factors which could materially affect our business, financial condition or future results. Therisks and uncertainties described are not the only ones we face. Additional risk factors not presently known to us or which we currently consider immaterialmay also adversely affect our business, financial condition or future results. If any of these risks were actually to occur, our business, financial condition orresults of operations could be materially adversely affected. In that case, the trading price of our common stock could decline and you could lose all or partof your investment.Risks Relating to Our Emergence from BankruptcyWe recently emerged from bankruptcy, which could adversely affect our business and relationships.Due to a severe industry downturn beginning in late 2014, on July 20, 2016, the Predecessor C&J Companies voluntarily filed petitions forreorganization seeking relief under the provisions of Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On December 16, 2016, the BankruptcyCourt entered a Confirmation Order confirming the Restructuring Plan of the Predecessor C&J Companies. On January 6, 2017, the Predecessor C&JCompanies substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding.Our recent emergence from the Chapter 11 Proceeding could adversely affect our business and relationships with customers, employees, suppliersand others. Due to uncertainties, many risks exist, including the following:•we may have difficulty obtaining the capital we need to run and grow our business;•key suppliers could terminate their relationship with us or require financial assurances or enhanced performance;•our ability to renew existing contracts and compete for new business may be adversely affected;•our ability to attract, motivate and/or retain key executives and employees may be adversely affected;•employees may be distracted from performance of their duties or more easily attracted to other employment opportunities, and current andformer employees could pursue claims against us; and•competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted.The occurrence of one or more of these events could have a material and adverse effect on our operations, financial condition and reputation. Wecannot assure you that having been through a Chapter 11 Proceeding will not adversely affect our operations in the future.Our actual financial results after emergence from our Chapter 11 Proceeding may not be comparable to our projections filed with theBankruptcy Court in the course of our Chapter 11 Proceeding, and will not be comparable to our historical financial results as a result of theimplementation of our Restructuring Plan and the transactions contemplated thereby, as well as our adoption of Fresh Start accounting followingemergence.We filed with the Bankruptcy Court projected financial information to demonstrate to the Bankruptcy Court the feasibility of our RestructuringPlan and our ability to continue operations following our emergence from the Chapter 11 Proceeding. Those projections were prepared solely for the purposeof the Chapter 11 Proceeding and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time theywere prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipatedmarket and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial andnumerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/orvaluation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. As aresult, investors should not rely on these projections.17Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification No. 852 -Reorganizations, we will apply Fresh Start accounting in our financial statements commencing with our financial statements as of and for the three monthperiod ended March 31, 2017. We expect that this will dramatically impact 2017 first quarter operating results as certain pre-bankruptcy debts weredischarged in accordance with the Restructuring Plan immediately prior to our emergence from bankruptcy and our assets and liabilities will be adjusted totheir fair values upon emergence. As a result, our financial information subsequent to emergence from bankruptcy will not be comparable to our financialstatements prior to emergence.The warrants we issued in accordance with the Restructuring Plan are exercisable for shares of common stock of the Company. The exercise ofsuch equity instruments would have a dilutive effect to stockholders of the Company.In accordance with the terms of the Restructuring Plan, on the Plan Effective Date, we issued 1,180,083 warrants that are exercisable into sharesof common stock of the Company at an initial exercise price of $27.95 per warrant. In addition, the Warrant Agreement provides for the issuance in the futureof up to 2,360,166 warrants to the Unsecured Claims Representative (as defined in the Restructuring Plan) for the benefit of the former holders of UnsecuredCreditor Claims (as defined in the Restructuring Plan). The exercise of these warrants into common stock would have a dilutive effect to the holdings of ourexisting stockholders. The warrants will not expire until January 6, 2024 and may create an overhang on the market for, and have a negative effect on themarket price of, our common stock.There is no guarantee that the warrants issued by the Company in accordance with the Restructuring Plan will be or continue to be in themoney, and unexercised warrants may expire worthless. Further, the terms of such warrants may be amended.If our stock price is below $27.95 per share, the warrants will have limited economic value, and they may expire worthless. In addition, thewarrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defectiveprovision, but requires the approval by the holders of at least a certain percentage of the then-outstanding warrants originally issued to make any change thatadversely affects the interests of the holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least acertain percentage of the then outstanding warrants approve of such amendment.There is a limited trading market for our securities and the market price of our securities is subject to volatility.Upon emergence from the Chapter 11 Proceeding, our old common stock was canceled and we issued new common stock. Our common stock hasbeen approved for listing on the NYSE MKT and we expect to begin trading under the symbol “CJ” on March 6, 2017. The market price of our common stockcould be subject to wide fluctuations in response to, and the level of trading that develops with our common stock may be affected by, numerous factorsbeyond our control such as our limited trading history subsequent to our emergence from bankruptcy, our limited trading volume, the concentration ofholdings of our common stock, the lack of comparable historical financial information due to our adoption of Fresh Start accounting, actual or anticipatedvariations in our operating results and cash flow, business conditions in our markets and the general state of the securities markets and the market for energy-related stocks, as well as general economic and market conditions and other factors that may affect our future results, including those described in this AnnualReport. No assurance can be given that an active market will develop for our common stock or as to the liquidity of the trading market for our common stock.Our common stock may be traded only infrequently, and reliable market quotations may not be available. Holders of our common stock may experiencedifficulty in reselling, or an inability to sell, their shares. In addition, if an active trading market does not develop or is not maintained, significant sales of ourcommon stock, or the expectation of these sales, could materially and adversely affect the market price of our common stock.Upon our emergence from bankruptcy, the composition of our shareholder base and Board of Directors changed significantly. As a result, thefuture strategy and plans of the Company may differ materially from those in the past.Pursuant to our Restructuring Plan, the composition of our Board of Directors (the “Board”) changed significantly effective upon our emergencefrom the Chapter 11 Proceeding. Our Board is now made up of seven directors, five of which have not previously served on the Board. The new directors havedifferent backgrounds, experiences and perspectives from those individuals who previously served on the Board and, thus, may have different views on theissues that will determine the future of the Company. As a result, the future strategy and plans of the Company may differ materially from those of the past.As a result of the implementation of our Restructuring Plan, we believe our ability to use net operating loss carryforwards to offset futuretaxable income for U.S. federal income tax purposes may be subject to limitation under Section 382.18Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 U.S. federal income tax law, a corporation is generally permitted to deduct from taxable income net operating losses (“NOLs”) carriedforward from prior years. As of December 31, 2016, we reported consolidated federal NOL carryforwards of approximately $530.6 million. Our ability toutilize our NOL carryforwards to offset future taxable income and to reduce U.S. federal income tax liability is subject to certain requirements and restrictions.In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” issubject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. An ownership change generally occurs if one or moreshareholders (or groups of shareholders) who are each deemed to own at least 5% of our stock have aggregate increases in their ownership of such stock ofmore than 50 percentage points over such stockholders’ lowest ownership percentage during the testing period (generally a rolling three year period). Webelieve we experienced an ownership change in January 2017 as a result of the implementation of our Restructuring Plan under Chapter 11 of the U.S.Bankruptcy Code and that our pre-change NOLs are subject to limitation under Section 382 as a result. Such limitation may cause U.S. federal income taxesto be paid earlier than otherwise would be paid if such limitation were not in effect and could cause our pre-change NOLs to expire unused, in each casereducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for state income tax purposes.As a result of the implementation of our Restructuring Plan, NOLs and other tax attributes may be subject to reduction, causing less NOL ortax deductions to be available to offset future taxable income for U.S. federal income tax purposes.As a result of consummating our Restructuring Plan, the obligations of the Predecessor with respect to the Original Credit Agreement (the "OldC&J Debt") was canceled and discharged and certain lenders were issued common stock in the reorganized Company (See Note 2 - Chapter 11 Proceedingand Emergence and Note 17 - Subsequent Events). This exchange may give rise to cancellation of debt income (“CODI”) to the extent that the fair marketvalue of the common stock and other rights exchanged with the lenders is less than the adjusted issue price of the Old C&J Debt. Other settlements withholders of Claims under the Restructuring Plan may have resulted in satisfaction of debts for less than the amount of the liability resulting in CODI. The Codeprovides that CODI arising under a discharge in a Chapter 11 bankruptcy proceeding is excluded from taxable income. A taxpayer excluding CODI underthese circumstances may be required to reduce certain tax attributes, such as NOLs and depreciable basis by an amount up to the amount of excluded CODI(the “Tax Attribute Reduction Rules”). We expect to realize CODI as a result of consummating our Restructuring Plan, but expect to exclude such CODI fromour taxable income, which would cause a partial reduction of our tax attributes under the Tax Attribute Reduction Rules. Any reduction in our tax attributeswill result in fewer deductions available to offset future taxable income. Based upon our estimate of fair market value as determined under the Code andaccompanying tax authorities the estimated CODI and required tax attribute reduction from the effects of the Restructuring Plan will not cause a significantchange in our recorded deferred tax liability. Our current estimates show that any required reduction in deferred tax assets recorded for our tax attributes willbe less than the valuation allowance that is currently reducing the carrying value of such deferred tax assets in our financial statements. The consummation ofthe Restructuring Plan occurred in 2017, and the related fair market value, CODI and any associated tax attribute reduction as determined by the Code areestimates at this time and will not be finalized until the 2017 tax return is filed in 2018. Our estimates are subject to change throughout this period.Risks Related to Our BusinessOur business is cyclical and dependent upon conditions in the oil and natural gas industry that impact the level of exploration, developmentand production of oil and natural gas and capital expenditures by oil and natural gas companies. Our customers’ willingness to undertake drilling,completion and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors that are beyond ourcontrol. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flow.We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. Ifthese expenditures decline, our business will suffer. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cyclesand is influenced 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;19Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 level of global and domestic oil and natural gas inventories;•the supply of and demand for hydraulic fracturing and other well service equipment in the continental United States and Western Canada;•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 orregulate hydraulic fracturing activities;•the expected rates of decline of current oil and natural gas production;•lead times associated with acquiring equipment and products and availability of personnel;•regulation of drilling activity;•the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids;•the discovery and development rates of new oil and natural gas reserves;•available pipeline and other transportation capacity;•weather conditions, including hurricanes that can affect oil and natural gas operations over a wide area;•political instability in oil and natural gas producing countries;•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 more rapid decline indemand for our services compared with demand for other types of energy services. Any negative impact on the spending patterns of our customers may causelower pricing and utilization for our core service lines, which could have a material adverse effect on our business, financial condition, results of operationsand 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, the rates we can charge and the utilization of our assets. Moreover, reduced discovery rates of new oil andnatural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations onexploration 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 gascompanies and our revenues, cash flows and profitability. If oil and natural gas prices remain volatile, or if oil or natural gas prices remain low or declinefurther, the demand for our services could be adversely affected.20Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 demand for our services depends on the level of spending by oil and gas companies for drilling, completion and production activities, whichare affected by short-term and long-term trends in oil and natural gas prices, including current and anticipated oil and natural gas prices. Oil and natural gasprices, as well as the level of drilling, completion and production activities, historically have been extremely volatile and are expected to continue to be so.For example, during 2016, NYMEX crude oil prices reached a high of $54.06 per barrel and a low of $26.21 per barrel, and entering 2017 we have recentlywitnessed prices as high as $54.45 per barrel. In line with the sustained weakness and volatility in oil prices over the course of 2016, we experienced asignificant decline in drilling, completion and production activities across our customer base, which resulted in reduced demand and increased competitionand pricing pressure to varying degrees 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 naturalgas. Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacityand other factors that will be beyond our control may also affect the supply of, demand for, and price of oil and natural gas. Volatility or weakness in oilprices or natural gas prices (or the perception that oil prices or natural gas prices will decrease) affects the spending patterns of our customers and may resultin the drilling of fewer new wells or lower completion and production spending on existing wells. This, in turn, could result in lower demand for our servicesand cause 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, whichcould adversely affect our operations and financial position.The successful execution of our growth strategy depends on our ability to generate sufficient cash flows and our access to capital, both of whichare impacted by numerous factors beyond our control, including financial, business, economic and other factors, such as volatility in commodity prices andpressure from competitors. If we are unable to generate sufficient cash flows or to obtain additional capital on favorable terms or at all, we may be unable tocontinue growing our business, conduct necessary corporate activities, take advantage of business opportunities that arise or engage in activities that may bein our long-term best interest, which may adversely impact our ability to sustain or improve our current level of profitability. Furthermore, any failure to makescheduled payments of interest and principal on our outstanding indebtedness could harm our ability to incur additional indebtedness on acceptable terms orat all, and also could constitute an event of default under our New Credit Facility. Our inability to generate sufficient cash flow to satisfy our debt obligationsor to obtain alternative financing could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects, andwe 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 needsof oil and natural gas exploration and production companies at competitive prices which could adversely affect our business and operating results.The oilfield services industry is highly competitive. The principal competitive factors in our markets are generally technical expertise, theavailability and condition of equipment, work force capability, safety record, reputation and experience. We compete with large national and multi-nationalcompanies that have longer operating histories, greater financial resources and greater name recognition than we do and who can operate at a loss in theregions in which we operate. Additionally, some of our competitors provide a broader array of services and/or have a stronger presence in more geographicmarkets. Our reputation for safety and quality may not be sufficient to enable us to maintain our competitive position, and our competitors may be able torespond more quickly to new or emerging technologies and services and changes in customer requirements. As a result of competition, we may lose marketshare or be unable to maintain or increase prices for our present services or to acquire additional business opportunities, which could have a material adverseeffect on our 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 levelsfor our services. Completion and well servicing equipment, such as hydraulic fracturing fleets, can be moved from one region to another in response tochanges in levels of activity and market conditions, which may result in an oversupply of equipment in an area. For example, natural gas prices declinedsharply in 2009 and remained depressed through 2015, which resulted in reduced drilling activity in natural gas shale plays. This drove many oilfieldservices companies operating in those areas to relocate their equipment to more oil- and liquids-rich shale plays, such as the Eagle Ford Shale and PermianBasin. As drilling activity and completion capacity migrated into the oil- and liquids-rich regions from the gas-rich regions, the increase in supply relative todemand negatively impacted pricing and utilization of our services, particularly for hydraulic fracturing services. Furthermore, as we entered 2015, weexperienced a slowdown in activity across our customer21Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.base as operators reacted to the rapid decline in commodity prices that began during the fourth quarter of 2014. The entire year proved to be extremelychallenging for the North American oilfield services industry due to the sustained weakness and volatility in oil prices at levels that caused severe reductionsin drilling, completion and production activities, which in turn resulted in reduced demand and increased competition and pricing pressure to varyingdegrees 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 coreservices, including due to competition and industry and/or economic conditions, may impact, among other things, our ability to implement price increases ormaintain pricing on our core services. We operate in a very competitive industry and, as a result, we may not always be successful in raising, or maintainingour existing 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 notbe able to successfully increase prices without adversely affecting our activity levels. The inability to maintain our prices or to increase our prices as costsincrease could have a material adverse effect on our business, financial position and results of operations.We may not be able to service our debt obligations in accordance with their terms.On January 6, 2017, we entered into a new revolving credit and security agreement (the “New Credit Facility”). Our ability to meet our debtservice obligations under, and comply with the financial covenants contained in, our New Credit Facility or future debt agreements depends on our futureperformance, which is affected by financial, business, economic and other factors, many of which are beyond our control, including volatility in commodityprices and pressure from competitors. Should our revenues decline, we may not be able to generate sufficient cash flow to pay our debt service obligationswhen due. Additionally, revenue, utilization and pricing level declines may result in our not being in compliance with one or more of the financial covenantsunder our New Credit Facility or future debt agreements in future periods. Any failure to satisfy our debt obligations or to comply with the applicablefinancial covenants could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.If we are unable to meet our debt service obligations or should we fail to comply with, or obtain relief from, the financial and other restrictivecovenants contained in our New Credit Facility or future debt agreements, we may trigger an event of default. Upon such an event of default, our lenders mayrefuse to fund borrowings and have the right to terminate their commitments and potentially accelerate all of our outstanding debt. If an event of defaultoccurs and the lenders under our New Credit Facility or future debt agreements accelerate the maturity of any loans or other debt outstanding. We may not beable to make all required payments or borrow sufficient funds to refinance such indebtedness. Even if new financing is available at that time it may not be onterms that are acceptable to us.Any reduction of the borrowing base under our New Credit Facility could require us to repay that portion of indebtedness that exceeds the newborrowing base under our New Credit Facility earlier than anticipated, which could adversely impact our liquidity.Our New Credit Facility allows us to borrow amounts up to the lesser of $100 million and a borrowing base based on the value of our accountsreceivable and inventory. Reductions in accounts receivable and inventory due to events or market forces beyond our control could reduce the amountavailable to us under our New Credit Facility and could result in a redetermination, and potentially a reduction, of our borrowing bases under our New CreditFacility. If our New Credit Facility eventually becomes fully drawn, any reduction in the borrowing bases could require us to make mandatory prepaymentsunder our New Credit Facility to the extent existing indebtedness under the New Credit Facility exceeds the borrowing base. We may have insufficient cashon hand to be able to make mandatory prepayments under our New Credit Facility. Any failure to repay indebtedness in excess of our borrowing bases inaccordance with the terms of the New Credit Facility would constitute an event of default under the New Credit Facility. Such event of default would permitour lenders to accelerate our outstanding debt, which if actually accelerated, would become immediately due and payable and could permit our securedlenders to foreclose on any of our assets securing indebtedness.We are subject to restrictive covenants in our New Credit Facility, which may restrict our operational flexibility.22Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 New Credit Facility governing our indebtedness contains, and future debt agreements may contain, financial and other restrictive covenantsthat may limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general, conduct necessary corporateactivities, take advantage of business opportunities that arise and/or to engage in activities that may be in our long-term best interests.Specifically, our New Credit Facility includes a Fixed Charge Coverage Ratio and minimum liquidity threshold covenants and restrictivecovenants that limit our ability and that of our subsidiaries to, among other things:•sell or otherwise dispose of assets;•make certain restricted payments and investments;•create, incur, assume, suffer to exist or guarantee additional indebtedness;•create, incur, assume, or suffer to exist liens on our assets;•make capital expenditures, investments or acquisitions;•repurchase, redeem or retire our capital shares;•merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;•engage in specified transactions with subsidiaries and affiliates; and•pursue other corporate activities.We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by restrictivecovenants under the New Credit Facility, which could: limit our ability to plan for, or react to, market conditions, to meet capital needs or otherwise restrictour activities or business plan; and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities thatwould be in our interest.Please see “Liquidity and Capital Resources - Description of Our New Credit Facility” in Part II, Item 7 “Management’s Discussion and Analysisof Financial Condition and Results of Operations” for additional information about the New Credit Facility, including the financial and other restrictivecovenants contained therein.We may become more leveraged and our indebtedness could adversely affect our operations and financial condition.Our business is capital intensive and we may seek to raise debt capital to fund our business and growth strategy. Indebtedness could havenegative consequences that could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects, such as:•requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducingthe availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategicacquisitions and other 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 stock or pay cash dividends.23Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Disruptions in the capital and credit markets, continued low commodity prices, our debt level and other factors may restrict our ability to raisecapital on favorable terms, or at all.Disruptions in the capital and credit markets, in particular with respect to companies in the energy sector, could limit our ability to access thesemarkets or may significantly increase our cost to borrow. Continued low commodity prices, among other factors, have caused some lenders to increaseinterest rates, enact tighter lending standards which we may not satisfy as a result of our debt level or otherwise, refuse to refinance existing debt at maturityon favorable terms, or at all, and in certain instances have reduced or ceased to provide funding to borrowers. If we are unable to access the capital and creditmarkets on favorable terms or at all, it could adversely affect our business, financial condition and results of operations.Reliance upon a few large customers may adversely affect our revenue and operating results.Our top ten customers represented approximately 46.0%, 53.6% and 51.1% of our consolidated revenue for the years ended December 31, 2016,2015 and 2014, 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 andfinancial condition.We have established relationships with a limited number of suppliers of our raw materials (such as proppant, guar, chemicals or coiled tubing)and finished products (such as fluid-handling equipment). Should any of our current suppliers be unable to provide the necessary raw materials or 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, including guar, may negatively impact demand for our services or the profitability of our business operations. In the past, our industry facedsporadic shortages associated with hydraulic fracturing operations, such as proppant and guar, requiring work stoppages, which adversely impacted theoperating results of several competitors. We may not be able to mitigate any future shortages of raw materials, including proppants.We are vulnerable to the potential difficulties associated with rapid growth, mergers, acquisitions and expansion.We believe that our future success depends on our ability to take advantage of and manage the rapid growth that we have experienced, as well asthe 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 anycompleted acquisition will depend on our ability to integrate effectively the acquired business into our existing operations. The process of integratingacquired businesses may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. Our operatingresults could 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 oilfield services industry.24Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.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. For example, transportation of heavy equipment creates the potential for our trucks to become involved inroadway accidents, which in turn could result in personal injury or property damages lawsuits being filed against us. In addition, our hydraulic fracturing andwell completion services could become a source of spills or releases of fluids, including chemicals used during hydraulic fracturing activities, at the sitewhere such services are performed, or could result in the discharge of such fluids into underground formations that were not targeted for fracturing or wellcompletion activities, such as potable aquifers. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, lossof oil and natural gas production, pollution and other environmental damages and could result in a variety of claims, losses and remedial obligations thatcould have an adverse effect on our business and results of operations. The existence, frequency and severity of such incidents will affect operating costs,insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to purchase our services if they view oursafety record as unacceptable, which could cause us to lose customers and substantial revenue.Our operational personnel have experienced accidents which have, in some instances, resulted in serious injuries. Our safety procedures may 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 key employees, technical personnel and other skilled and qualified workers.The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work.As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment in fields thatoffer a different work environment. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition,our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force. At times, demand for skilled workers in 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.We depend heavily on the efforts of our executive officers, managers and other key employees to manage our operations. The unexpected loss orunavailability of key members of management or technical personnel may have a material adverse effect on our business, financial condition, prospects orresults of operations.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 beadversely affected by seasonal weather conditions. For example, hurricanes, tropical storms, heavy snow, ice or rain may result in customer delays and otherdisruptions to 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.25Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additionaloperating restrictions 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 subsurfacerock formations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture thesurrounding rock and stimulate production. We commonly perform hydraulic fracturing services for our customers.Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but the EPA has asserted federal regulatory authoritypursuant to the SDWA over certain hydraulic fracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 thatapplies to such activities. Also, in May 2014, the EPA published an advanced notice of proposed rulemaking under the Toxic Substances and Control Actthat would require the disclosure of chemicals used in hydraulic fracturing fluids. In addition, in June 2016, the EPA finalized regulations that prohibit thedischarge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants.Certain governmental reviews are also either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices.For example, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources. The final reportconcluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under some circumstances,” noting that thefollowing hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severeimpacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals orproduced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwaterresources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits. Since thereport did not find a direct link between hydraulic fracturing itself and contamination of groundwater resources, this years-long study report does not appearto provide any basis for further regulation of hydraulic fracturing at the federal level.Various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing 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. In addition, state and federal regulatory agencies have recentlyfocused on a possible connection between the disposal of wastewater in underground injection wells and the increased occurrence of seismic activity, andregulatory agencies at all levels are continuing to study the possible linkage between oil and gas activity and induced seismicity. In response to theseconcerns, regulators in some states are seeking to impose additional requirements on hydraulic fracturing fluid disposal practices, including restrictions onthe operations of produced water disposal wells and imposing more stringent requirements on the permitting of such wells. The adoption and implementationof any new laws or regulations that restrict our ability to dispose of produced water gathered from our customer’s activities by limiting volumes, disposalrates, disposal well locations or otherwise, or requiring us to shut down disposal wells, could have a material adverse effect on our fluid transportationbusiness, financial condition and results of operations.Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities ingeneral or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general or hydraulic fracturing in particular. If newfederal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminatecertain drilling and injection activities and make it more difficult or costly to perform hydraulic fracturing. Any such regulations limiting or prohibitinghydraulic fracturing could result in decreased oil and natural gas exploration and production activities and, therefore, adversely affect demand for ourservices and our business. Such laws or regulations could also materially increase our costs of compliance and doing business.The adoption of new laws or regulations imposing reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make itmore difficult to complete oil and natural gas wells in shale formations, increase our costs of compliance and adversely affect the hydraulic fracturing servicesthat we 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.26Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 EPA has determined that emissions of carbon dioxide, methane and other GHGs present an endangerment to the environment becauseemissions of such gases are contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA adoptedregulations that restrict emissions of GHGs under existing provisions of the federal Clean Air 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. More recently, in June 2016, the EPA finalized regulations under the Clean Air Act thataddress emissions of methane from equipment and processes across the source category, including hydraulically fractured oil and natural gas wellcompletions, and also imposes leak detection and repair requirements on operators. The BLM finalized similar rules in November 2016 that limit methaneemissions from new and existing oil and gas operations on federal lands through limitations on the venting and flaring of gas, as well as enhanced leakdetection and repair requirements. However, both the U.S. House of Representatives and the Senate have introduced resolutions seeking to repeal the BLMmethane rules under the Congressional Review Act and future implementation of the BLM methane rules is uncertain. In any event, both the EPA and BLMmethane rules impose substantially similar requirements.From time to time the U.S. Congress has considered legislation to reduce emissions of GHGs, and almost one-half of the states have establishedGHG 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 andsurrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gasemission reduction goal. In addition, in 2015, the U.S. participated in the United Nations Conference on Climate Change, which led to the creation of theParis Agreement. The Paris Agreement requires countries to review and “represent a progression” in their intended nationally determined contributions,which set GHG emission reduction goals, every five years beginning in 2020. However, the Paris Agreement is not binding and, at present, the U.S.’scontinued participation in the agreement remains uncertain.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 actions 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 if they were to damage our equipment or facilities.We are subject to extensive and costly environmental, and occupational health and safety laws, and regulations that may require us to takeactions that will adversely affect our results of operations.Our business is significantly affected by stringent and complex federal, state and local laws and regulations governing the emission or dischargeof substances 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;•modification, denial or revocation of permits or other authorizations;•imposition of limitations on our operations or orders prohibiting our operations altogether; and•performance of site investigatory, remedial or other corrective actions.As part of our business, we handle, transport, and dispose of a variety of fluids and substances used by our customers in connection with their oiland natural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. The generation, handling,transportation, and disposal of these fluids, substances, and wastes are regulated by a number of laws, including CERCLA, RCRA, Clean Water Act, 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 aresubject27Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.to frequent change and if existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to make significantunanticipated 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. For example, in December 2016, the DOT finalized minimum training standards for new drivers seeking acommercial driver’s license. Certain motor vehicle operators are required to register with the DOT. This registration requires an acceptable operating record.The DOT periodically conducts compliance reviews and may revoke registration privileges based on certain safety performance criteria, and a revocationcould result in a suspension of operations. Since 2010, the DOT has pursued its Compliance, Safety, Accountability (“CSA”) program, in an effort to improvecommercial truck and bus safety. A component of CSA is the Safety Measurement System (“SMS”), which analyzes all safety violations recorded by federaland state law enforcement personnel to determine a carrier’s safety performance. The SMS is intended to allow DOT to identify carriers with safety issues andintervene to address those problems. However, in January 2016 the DOT proposed its Safety Determination rule, which would alter the DOT's methodologyfor determining when a motor carrier is unfit to operate a commercial motor vehicle. A final rule remains pending, and at this time, we cannot predict whetherthe rule will be adopted as proposed nor the effect such a revision may have on our safety rating.Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. To a large degree, intrastate motor carrier operationsare subject 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 onmotor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in suchtaxes applicable 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 subjectto patent protection. As competitors and others use or develop new technologies or technologies comparable to ours in the future, we may lose market shareor be placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost.Some of our competitors have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages 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.Our assets require significant amounts of capital for maintenance, upgrades and refurbishment and may require significant capitalexpenditures for new equipment.Our hydraulic fracturing fleets and other completion service-related equipment require significant capital investment in maintenance, upgradesand refurbishment to maintain their competitiveness. The costs of components and labor required to maintain our fleets have increased in the past and mayincrease in the future with increases in demand, which will require us to incur additional costs to make our remaining active fleets operational. Our fleets andother equipment typically do not generate revenue while they are undergoing maintenance, refurbishment or upgrades. Any maintenance, upgrade orrefurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities. Further, such projects may requireproportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms. To theextent we are unable to fund such projects, we may have less equipment available for service or our equipment may not be attractive to potential or currentcustomers. Additionally, competition or advances in technology within our industry may require us to update or replace existing fleets or build or acquirenew fleets. Such demands on our capital or reductions in demand for our hydraulic fracturing fleets and other completion service related28Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.equipment and the increase in cost to maintain labor necessary for such maintenance and improvement, in each case, could have a material adverse effect onour business, liquidity position, financial condition, prospects and results of operations and may increase the cost to make our inactive fleets operational.If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. Asa result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of ourcommon stock.Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. Ifwe cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We are currently a non-accelerated filer.Accordingly, we are currently exempt from the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, and our independent registered publicaccounting firm is not required to audit the design and operating effectiveness of our internal controls and management’s assessment of the design and theoperating effectiveness of such internal controls in connection with our 2016 audit. We cannot be certain that our efforts to develop and maintain our internalcontrols will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be ableto comply with our obligations under Section 404 of the Sarbanes Oxley Act. Any failure to develop or maintain effective internal controls, or difficultiesencountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect onthe trading price of our common stock.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 and partners from making, offering or authorizing improper payments to non-U.S. government officials for the purpose of obtaining orretaining business. Although we are seeking to wind-down our international operations, we previously did business and may do business in the future incountries or regions where strict compliance with anti-bribery laws may conflict with local customs and practices. Our employees, intermediaries, and partnersmay face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal or insurgent organizations, or private entities inthe countries in which we operate or may operate in the future. As a result, we face the risk that an unauthorized payment or offer of payment could be madeby one of our employees, intermediaries, or partners even if such parties are not always subject to our control or are not themselves subject to the FCPA orother anti-bribery laws to which we may be subject. We are committed to doing business in accordance with applicable anti-bribery laws, and haveimplemented policies and procedures concerning compliance with such laws. Our existing safeguards and any future improvements, however, may prove tobe less than effective, and our employees, intermediaries, and partners may engage in conduct for which we might be held responsible. Violations of theFCPA and other anti-bribery laws (either due to our acts, the acts of our intermediaries or partners, or our inadvertence) may result in criminal and civilsanctions and could subject us to other liabilities in the U.S. and elsewhere. Even allegations of such violations could disrupt our business and result in amaterial adverse effect on our business and operations.The ability to attract and retain key personnel is critical to the success of our business and may be affected by our recent Chapter 11Proceeding, the implementation of our Restructuring Plan and the transactions contemplated thereby.The success of our business depends on our ability to attract and retain key personnel. The ability to attract and retain the talented employee basethat our business demands may be difficult in light of our recent emergence from the Chapter 11 Proceeding, the uncertainties currently facing the businessand changes we may make to our organizational structure to adjust to changing circumstances. We may need to adjust our compensation structure or enterinto retention or other arrangements that could be costly to maintain. If executives, managers or other key personnel resign, retire or are terminated, or theirservice is otherwise interrupted, we may not be able to replace them in a timely manner and we could experience significant declines in productivity.Certain provisions of our Certificate of Incorporation, Bylaws, Stockholders Agreement and our stockholder rights plan may make it difficultfor stockholders to change the composition of our Board and may discourage, delay or prevent a merger or acquisition that some stockholders mayconsider beneficial.Certain provisions of our Certificate of Incorporation and our Bylaws may have the effect of delaying or preventing changes in control if ourBoard determines that such changes in control are not in the best interests of the Company and our stockholders. The provisions in our Certificate ofIncorporation and our Bylaws include, among other things, those that:29Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.•classify the Board;•limit removal of directors;•authorize our Board to issue preferred stock and to determine the price and other terms, including preferences and voting rights, of thoseshares without stockholder approval;•establish advance notice procedures for nominating directors or presenting matters at stockholder meetings;•prohibit cumulative voting;•prohibit action by written consent following the termination of the Stockholders Agreement (as defined below); and•provide that only the Board may call special meetings of stockholders.In addition, we have adopted a stockholder rights plan. While our stockholder rights plan and the above provisions have the effect ofencouraging persons seeking to acquire control of the Company to negotiate with our Board, they could enable the Board to hinder or frustrate a transactionthat some, or a majority, of the stockholders may believe to be in their best interests. These provisions may prevent or discourage attempts to remove andreplace incumbent directors. These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management bymaking it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of our management.We may issue preferred stock on terms that could adversely affect the voting power or value of our common stock.Except as provided in a Stockholders Agreement with the Holders (as defined below), dated as of January 6, 2017 (as amended the “StockholdersAgreement”), our Certificate of Incorporation authorizes our Board to issue, without the approval of our stockholders, one or more classes or series ofpreferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends anddistributions, as the Board may determine. The terms of one or more classes or series of preferred stock could adversely affect the voting power or value of ourcommon stock. For example, we might grant holders of preferred stock the right to elect some number of directors in all events or on the happening ofspecified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign toholders of preferred stock could affect the residual value of the common stock.There may be circumstances in which the interests of our significant stockholders could be in conflict with the interests of our otherstockholders.Each of GSO Capital Solutions Fund II (Luxembourg) S.a.r.l. (together with its affiliates, “GSO”) and Solus Alternative Asset Management LP(together with its affiliates, “Solus”) or certain funds or accounts affiliated with and/or managed by them (each a “Holder” and, collectively, the “Holders”),both currently own approximately 13.4% of our outstanding common stock and are parties to the Stockholders Agreement, which gives them consent rightsover certain material transactions. Circumstances may arise in which these Holders may have an interest in pursuing or preventing acquisitions, divestituresor other transactions, including the issuance of additional shares or debt, that, in their judgment, could enhance their investment in us or another company inwhich they invest. Such transactions might adversely affect us or other holders of our common stock.Furthermore, pursuant to the Stockholders Agreement, GSO currently has the right to designate for nomination up to three directors and Soluscurrently has the right to designate for nomination up to two directors, as well as one non-voting observer, to the Board, subject in each case to maintainingcertain levels of share ownership. The Stockholders Agreement also provides that, for so long as the Holders hold specified amounts of our common stock, inaddition to the approval of our Board, the approvals of the Holders, in their capacity as stockholders, shall be required for certain corporate actions such aschange in control transactions and acquisitions with a value in excess of $100 million.In addition, our concentration of share ownership may adversely affect the trading price of our common stock because investors may perceivedisadvantages in owning shares in companies with significant stockholders.30Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Future sales or the availability for sale of substantial amounts of our common stock, or the perception that these sales may occur, couldadversely affect the trading price of our common stock and could impair our ability to raise capital through future sales of equity securities.Our Amended and Restated Certificate of Incorporation authorizes us to issue 1,000,000,000 shares of common stock, of which an estimated56,217,229 shares were outstanding as of February 24, 2017. This number includes 55,463,903 shares issued in connection with our emergence frombankruptcy, almost all of which are freely transferable without restriction or further registration pursuant to Section 1145 of the Bankruptcy Code. We alsohave 8,046,021 shares of common stock authorized for issuance as equity awards under the 2017 C&J Energy Services, Inc. Management Incentive Plan, ofwhich 255,570 shares are issuable pursuant to outstanding options and 864,130 shares are issuable pursuant to outstanding restricted stock awards. Inaddition, as of February 24, 2017, warrants to purchase up to 1,178,894 shares of our common stock were outstanding and immediately exercisable, and wemay issue in the future up to 2,360,166 Warrants to the Unsecured Claims Representative (as defined in the Restructuring Plan) for the benefit of the formerholders of Unsecured Creditor Claims (as defined in the Restructuring Plan). Shares issued upon exercise of these warrants will generally be freely transferablewithout restriction or registration under the Securities Act pursuant to Section 1145 of the Bankruptcy Code.A large percentage of our shares of common stock are held by a relatively small number of investors. We entered into a registration rightsagreement, (the “Registration Rights Agreement”) with certain of those investors pursuant to which we have agreed to file a registration statement with theSEC to facilitate potential future sales of such shares by them. Sales of a substantial number of shares of our common stock in the public markets, or even theperception that these sales might occur (such as upon the filing of the aforementioned registration statement), could impair our ability to raise capital througha future sale of, or pay for acquisitions using, our equity securities.We may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. If anysuch acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, ofother securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or othersecurities in connection with any such acquisitions and investments.We cannot predict the effect that future sales of our common stock will have on the price at which our common stock trades or the size of futureissuances of our common stock or the effect, if any, that future issuances will have on the market price of our common stock. Sales of substantial amounts ofour common stock, or the perception that such sales could occur, may adversely affect the trading price of our common stock.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesWe lease office space for our principal executive headquarters, which is located at 3990 Rogerdale Rd., Houston, Texas 77042. In addition, weown or lease numerous other smaller facilities and administrative offices across the geographic regions in which we operate, including local sales offices andtemporary facilities to house employees in regions where infrastructure is limited. Our leased properties are subject to various lease terms and expirations.We believe all properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient toconduct our operations. However, we continue to evaluate the purchase or lease of additional properties or the consolidation of our properties, as our businessrequires.The following table shows our active owned and leased properties, categorized by geographic region as of December 31, 2016.31Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.RegionAdministrative and Sales Offices;Research and Technology Facilities Operational Field Services FacilitiesUnited States Owned4 102Leased18 106Canada Owned— 14Leased5 2Total27 224Item 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 notexpect the outcome in any of these known legal proceedings, individually or collectively, to have a material adverse effect on our consolidated financialcondition or results of operations.Shareholder Litigation relating to the Nabors MergerIn July 2014, following the announcement that Old C&J, Nabors, and the Predecessor had entered into the Nabors Merger Agreement, a purportedshareholder of Old C&J filed a putative class action lawsuit challenging the Nabors Merger. The lawsuit is styled City of Miami General Employees’ andSanitation Employees’ 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 onJuly 30, 2014 (the “Shareholder Litigation”). Plaintiff in the Shareholder Litigation generally alleges that the board of directors of Old C&J (the “Old C&JBoard”) breached their fiduciary duties by allegedly approving the Merger Agreement at an unfair price and through an unfair process. Plaintiff alleges thatthe Old C&J Board, or certain of them (i) failed to fully inform themselves of the market value of Old C&J, maximize its value and obtain the best pricereasonably available for Old C&J, (ii) acted in bad faith and for improper motives, (iii) erected barriers to discourage other strategic alternatives and (iv) puttheir personal interests ahead of the interests of Old C&J shareholders. The Shareholder Litigation further alleges that Old C&J, Nabors and the Predecessoraided and abetted the alleged breaches of fiduciary duties by the Old C&J Board.On October 29, 2015, Plaintiff filed an amended complaint naming additional defendants and generally alleging, in addition to the allegationsdescribed above, that (i) the special committee of the Old C&J Board and its advisors improperly conducted the court-ordered solicitation that the DelawareSupreme Court vacated and (ii) the proxy statement filed in connection with the Nabors Merger contains alleged misrepresentations and omits allegedlymaterial information concerning the Nabors Merger and court-ordered solicitation process. The Shareholder Litigation asserts, in addition to the claimsdescribed above, claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty against the special committee of the Old C&J Board, itsfinancial advisor Morgan Stanley, and certain employees of Old C&J. Following the death of Josh Comstock, our founder and former Chief Executive Officerand Chairman of the Old C&J Board, Plaintiff substituted the executor of Mr. Comstock’s estate in place of Mr. Comstock as a defendant in the ShareholderLitigation.The defendants in the Shareholder Litigation filed motions to dismiss the amended complaint. On August 24, 2016, the Court of Chancery of theState of Delaware granted defendants’ motions and dismissed the Shareholder Litigation in its entirety with prejudice. On September 22, 2016, Plaintiffs fileda Notice of Appeal to the Delaware Supreme Court, appealing the dismissal of the Shareholder Litigation. Oral argument was held on March 1, 2017, andPlaintiffs’ appeal is still pending.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 berequired to resolve the Shareholder Litigation. We believe the Shareholder Litigation is without merit and we intend to defend against it vigorously.U.S. Department of Justice Criminal Investigation into Pre-Nabors Merger Incident32Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.There is a pending criminal investigation led by the United States Attorney’s Office for the District of North Dakota in connection with a fatalitythat occurred at a C&P Business facility in Williston, North Dakota on October 3, 2014 prior to the Company’s acquisition of the C&P Business in the NaborsMerger. We are cooperating fully with the investigation, and expect to continue to do so. At this time, the Company cannot predict the outcome of theinvestigation.Item 4. Mine Safety DisclosuresNot applicable.33Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 MattersOld C&J completed its initial public offering in 2011 with a listing on the NYSE under the ticker “CJES.” Upon the closing of the NaborsMerger, shares of common stock of Old C&J were converted into common shares of the Predecessor on a 1-for-1 basis and the Predecessor's common sharesbegan trading on the NYSE under the ticker “CJES.” Contemporaneously with the commencement of the Chapter 11 Proceeding, trading in the Predecessor’scommon shares on the NYSE was suspended and such shares were ultimately delisted from the NYSE. On July 21, 2016, the Predecessor’s common sharesbegan trading on the OTC’s Pink® Open Market under the symbol “CJESQ.”On January 6, 2017, pursuant to the Restructuring Plan, all of our Predecessor’s outstanding common stock was canceled and the Successorissued an aggregate of 55,463,903 shares of new common stock to the Holders of Allowed Secured Lender Claims (as defined in the Restructuring Plan). TheSuccessor also issued 1,180,083 Warrants (subject to adjustments pursuant to the terms of the Warrants) at an initial exercise price of $27.95 per warrant(subject to adjustments pursuant to the terms of the Warrants) to former holders of interests in our Predecessor and will issue in the future up to an additional2,360,166 Warrants (subject to adjustments pursuant to the terms of the Warrants) at an initial exercise price of $27.95 per warrant (subject to adjustmentspursuant to the terms of the Warrants) to the Unsecured Claims Representative for the benefit of the former holders of Unsecured Creditor Claims inaccordance with the terms of the Restructuring Plan, the Confirmation Order, the Unsecured Creditor Agreement (as defined in the Plan) and the WarrantAgreement.The common stock of the Company is not currently traded on a national securities exchange and no broker dealer is making an active market inour common stock, but certain transactions in the Company’s common stock have been reported on the OTC “Grey marketplace” under the symbol “CJJY”beginning January 12, 2017. Broker-dealers must report OTC “Grey marketplace” trades to FINRA; therefore trade data is available onhttp://www.otcmarkets.com and other public sources. Information contained in or available through the OTC Markets website is not part of or incorporatedinto this Annual Report or any other report that we may file with or furnish to the SEC. Our common stock has been approved for trading on the NYSE MKTand we expect it to begin trading on the NYSE MKT under the symbol "CJ" on March 6, 2017. We expect that transactions in our common stock willcontinue to be reported on the OTC until the close of the market on March 3, 2017.The number of shareholders of record of our common stock was approximately 24 as of February 24, 2017. The number of registered holders doesnot include holders that have shares of common stock held for them in “street name,” meaning that the shares are held for their accounts by a broker or othernominee. In these instances, the brokers or other nominees are included in the number of registered holders, but the underlying holders of the common stockthat have shares held in “street name” are not.We have not declared or paid any cash dividends on our common stock. 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 stock 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 New Credit Facility restrict the payment of cash dividends on our commonstock. 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 SecuritiesRights Offering, Backstop Commitment AgreementOn December 6, 2016, we entered into a backstop commitment agreement (the “Backstop Commitment Agreement”), pursuant to which certainholders of our unsecured indebtedness as of such date (the “Backstop Parties”) agreed to backstop a $200 million cash investment in the Company pursuantto a rights offering (the “Rights Offering”) conducted in accordance with the Restructuring Plan.In accordance with the Restructuring Plan, the Backstop Commitment Agreement and the Rights Offering procedures, we offered eligiblecreditors, including the Backstop Parties, the right to purchase common stock upon emergence from the Chapter 11 Proceeding for an aggregate purchaseprice of $200 million. The Rights Offering, which commenced on34Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.November 15, 2016 and ended on December 9, 2016, provided holders of eligible secured claims under our prior credit agreement as of the record date settherefor to be granted rights entitling each such holder to subscribe to purchase an amount of common stock (such common stock offered for purchasepursuant to the Rights Offering, the “Rights Offering Shares”) up to such holders’ respective pro rata share of such eligible secured claims at a per share priceof $13.58. Under the Backstop Commitment Agreement, the Backstop Parties agreed to purchase, severally and not jointly, the Rights Offering Shares thatwere not duly subscribed to by parties other than Backstop Parties pursuant to the Rights Offering at the same per share price as the Rights Offering (the“Backstop Commitment”).We paid the Backstop Parties on the Plan Effective Date a put option premium equal to 5.0% of the $200 million committed amount (the “PutOption Premium”) in the form of common stock at the same per share price offered in the Rights Offering. All amounts paid to the Backstop Parties in theircapacities as such for the Put Option Premium were paid pro rata based on the amount of their respective Backstop Commitments. As a condition to theclosing of the transactions contemplated by the Backstop Commitment Agreement, we entered into a Registration Rights Agreement with the BackstopParties entitling such Backstop Parties to request that the Company register their securities for sale under the Securities Act at various times and upon theterms and conditions set forth in the Registration Rights Agreement.New Common StockOn the Plan Effective Date, pursuant to the terms of the Restructuring Plan, we issued an aggregate of 55,463,903 shares of common stock to theHolders of Allowed Secured Lender Claims (as defined in the Restructuring Plan). We also issued 1,180,083 warrants (subject to adjustments pursuant to theterms of the Warrants) at an initial exercise price of $27.95 per warrant (subject to adjustments pursuant to the terms of the Warrants) to former holders ofInterests in our Predecessor and will issue in the future up to an additional 2,360,166 warrants (subject to adjustments pursuant to the terms of the Warrants) atan initial exercise price of $27.95 per warrant (subject to adjustments pursuant to the terms of the Warrants) to the Unsecured Claims Representative for thebenefit of the former holders of Unsecured Creditor Claims after the Plan Effective Date in accordance with the terms of the Restructuring Plan, theConfirmation Order, the Unsecured Creditor Agreement and the Warrant Agreement.Of the 55,463,903 shares of common stock issued on the Plan Effective Date,•39,999,997 shares of common stock were issued pro rata to certain holders of claims arising under our Predecessor's prior credit agreement(the “Plan Shares”);•14,408,789 shares of common stock were issued to participants in the Right Offering at a per share purchase price of $13.58, for anaggregate purchase price of approximately $195.7 million (the “Rights Offering Shares”);•318,743 shares of common stock were issued to the Backstop Parties under the Backstop Parties’ commitment to purchase UnsubscribedShares (as defined in the Backstop Commitment Agreement) at a per share purchase price of $13.58, for an aggregate purchase price ofapproximately $4.3 million (the “Backstop Shares”); and•736,374 shares of common stock were issued to the Backstop Parties as the Put Option Premium (as defined in the Backstop CommitmentAgreement) under the Backstop Commitment Agreement, representing 5.0% of the $200 million committed amount and a per sharepurchase price of $13.58 (the “Put Option Shares”).The Warrants, Plan Shares, Rights Offering Shares and Put Option Shares were issued pursuant to an exemption from the registration requirementsof the Securities Act under Section 1145 of the Bankruptcy Code. The Backstop Shares were issued pursuant to the exemption from the registrationrequirements of the Securities Act provided by Section 4(a)(2) thereof.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, 2016 (in thousands, except average price paidper share). All of the repurchases below are the Predecessor common shares that were withheld to satisfy tax withholding obligations of employees that aroseupon the vesting of restricted shares. The value of such shares is based on the closing price of the Predecessor common shares on the vesting date. No shareswere purchased as part of a publicly announced program.35Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 PerShareJanuary 1—January 31 6,800 $4.76February 1—February 29 120,618 2.19March 1—March 31 63,582 1.77April 1—April 30 8,065 1.92May 1—May 31 970 0.84June 1—June 30 105,593 0.55July 1—July 31 4,429 0.56August 1—August 31 — —September 1—September 30 — —October 1—October 31 3,369 0.59November 1—November 30 — —December 1—December 31 — —(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 closing price of our common shares on the vesting date.Stock Performance GraphThe following graph compares the cumulative total return to shareholders on our (as the Predecessor) common shares, the Russell 2000 Index andan industry Peer Group. The Peer Group consists of Basic Energy Services, Inc.; Key Energy Services, Inc.; Superior Energy Services, Inc.; RPC, Inc. andPioneer Energy Services Corp. The graph assumes that $100.00 was invested in our common shares on July 29, 2011 (the date Old C&J common shares beganto trade in connection with our initial public offering) and in the comparison groups and assumes the reinvestment of all cash dividends prior to any taxeffect. We have not declared any dividends during the periods covered by this graph. This graph depicts the past performance of our common shares throughJanuary 5, 2017 (the date prior to our emergence from the Chapter 11 Proceeding), and in no way should be used to predict future share performance.36Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 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 Nabors Merger, which mayaffect the comparability of the Selected Financial Data: Years Ended December 31, 2016 2015 2014 2013 2012 (In thousands except per share amounts)Revenue $971,142 $1,748,889 $1,607,944 $1,070,322 $1,111,501Net income (loss) (944,289) (872,542) 68,823 66,405 182,350Net income (loss) per common share Basic (7.98) (8.48) 1.28 1.25 3.51Diluted (7.98) (8.48) 1.22 1.20 3.37Total assets 1,361,601 2,198,952 1,612,746 1,132,300 1,012,757Long-term debt and capital lease obligations,excluding current portion — 1,108,123 349,875 164,205 173,70537Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 ourbusiness and results of operations together with our present financial condition. This section should be read in conjunction with the audited consolidatedfinancial statements and the related notes thereto included elsewhere in this Annual Report. This discussion and analysis contains forward-lookingstatements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because ofvarious factors, including, without limitation, those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I,Item 1A “Risk Factors” of this Annual Report.Introductory Note and Corporate OverviewC&J Energy Services, Inc., a Delaware corporation (the “Successor” and together with its consolidated subsidiaries and for periods subsequent tothe Plan Effective Date (as defined below), “C&J” or the “Company”), is a leading provider of well construction, well completion, well support and othercomplementary oilfield services to oil and gas exploration and production (“E&P”) companies in North America. The Company offers a comprehensive,vertically-integrated suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing,directional drilling, coiled tubing, rig services, fluids management and other support services. The Company is headquartered in Houston, Texas and operatesin all active onshore basins in the continental United States and Western Canada. For a description of our history, including our formation, the Nabors Mergerand the Chapter 11 Proceeding, please see “Overview of our Business” in Part I, Item 1 of this Annual Report.Business OverviewWe are a leading provider of well construction, well completion, well support and other complementary oilfield services to oil and gasexploration and production companies in North America. We offer a comprehensive, vertically-integrated suite of services throughout the life cycle of thewell, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing, directional drilling, coiled tubing, rig services, fluids management andother support services. We are headquartered in Houston, Texas and operate in all active onshore basins in the continental United States and Western Canada.Our operating and financial performance is heavily influenced by drilling, completion and production activity by our customers, which issignificantly impacted by commodity prices. We have invested heavily in strategic initiatives to strengthen, expand and diversify our company throughservice line diversification, vertical integration and technological advancement. In our day-to-day operations, we utilize equipment and productsmanufactured by our vertically integrated businesses, and we also sell such equipment and products to third-party customers in the global energy servicesindustry.In late 2014, oil prices began a substantial and rapid decline, and the severe weakness and volatility continued throughout 2015. As we entered2016, we experienced a sharp drop in activity across our customer base as operators reacted to further declines in oil prices and the deteriorating onshoredrilling rig count. The significant volatility in commodity prices continued through much of 2016 and, although both crude oil and natural gas prices beganto increase modestly and stabilize in late 2016, commodity prices, in general, remain significantly lower than the industry average experienced in recentyears. Notwithstanding the relatively low level of prices, our customers have gradually started to increase activity, which resulted in slightly improvedoperational and financial performance in both the third and fourth quarters of 2016. Additionally, as discussed below under “Our Reportable BusinessSegments-Completion Services-Completion Services Outlook” and “Our Reportable Business Segments-Well Support Services-Well Support ServicesOutlook,” we are expecting improved activity levels and pricing across several of our business lines during 2017 and 2018.Recent DevelopmentsChapter 11 ProceedingOn the Plan Effective Date, the Predecessor C&J Companies substantially consummated the Restructuring Plan and emerged from the Chapter 11Proceeding. Upon emergence from the Chapter 11 Proceeding, the Company adopted Fresh Start accounting in accordance with the provisions set forth inAccounting Standards Codification (“ASC”) 852 - Reorganizations. For more information regarding the adoption of Fresh Start accounting, see Note 4 -Fresh Start Accounting in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.38Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.For a description of the Chapter 11 Proceeding, please see “Overview of Our Business” in Part I, Item 1 of this Annual Report. For additionaldiscussion of the known, material risks associated with our emergence from the Chapter 11 Proceeding , please see “Risk Factors” in Part I, Item 1A of thisAnnual Report, as well as “Liquidity and Capital Resources” in this Part II, Item 7 of this Annual Report.Our Reportable Business SegmentsAs of December 31, 2016, our reportable business segments were:•Completion Services, which consists of the following service lines: (1) hydraulic fracturing; (2) Casedhole Solutions, which includes cased-hole wireline and pumpdown services, wireline logging, perforating, pressure pumping, well site make-up and pressure testing and othercomplementary services; (3) well construction services, specifically cementing and directional drilling services; and (4) research &technology (R&T), which is primarily engaged in the engineering and production of certain parts and components, such as perforating gunsand addressable switches, which are used in the completion process•Well Support Services, which consists of the following service lines: (1) rig services, including workover and other support servicesprimarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plugging & abandonment operations; (2)fluids management services, which provides storage, transportation and disposal services for produced fluids and fluids used in the drilling,completion and workover of oil and gas wells; (3) coiled tubing services, primarily used for frac plug drill-out during completionoperations and for well workover and maintenance; (4) artificial lift applications; and (5) other well support services.•Other Services, which consists of our smaller non-core service lines that have either been divested, or are in the process of being divested,including our specialty chemical business (divested in June 2016), equipment manufacturing and repair business (initial divestiture inJanuary 2017, and remainder divested in February 2017) and our international coiled tubing operations in the Middle East (operationsceased late 2015, and began winding down in 2016).Our reportable business segments are described in more detail below; for financial information about our reportable business segments, includingrevenue from external customers and total assets by reportable business segment, please see “Note 14 - Segment Information” in Part II, Item 8 “FinancialStatements and Supplementary Data” of this Annual Report.Completion ServicesThe core services provided through our Completion Services segment are hydraulic fracturing and cased-hole wireline and pumpdown services.We utilize our in-house manufacturing capabilities, including our data acquisition and control instruments business, to offer a technologically advanced andefficiency focused range of completion techniques. Our strategy is to offer our completion services as a bundled package in order to provide an integrated,value-added solution and maximize efficiency for our customers. Our well construction services, specifically cementing and directional drilling services, andour R&T division, which includes manufacturing capabilities, are also managed through our Completions Services segment. The majority of revenue for thissegment is generated by our hydraulic fracturing business, and we consider our hydraulic fracturing service line and our cased-hole wireline and pumpdownservices line to be our core service lines within this segment.During the fourth quarter of 2016, our hydraulic fracturing service line deployed, on average, approximately 430,000 horsepower out of ourcurrent estimated fleet of approximately 820,000 horsepower. In our cased-hole wireline and pumpdown services line, we deployed, on average,approximately 60 wireline trucks and 42 pumpdown units out of our current estimated fleet of approximately 127 trucks and 57 pumpdown units. In ourcementing service line, we deployed, on average, approximately 9 units out of our current estimated asset base of approximately 36 units. However, not all ofour deployed assets are utilized fully, or at all, at any given time, due to, among other things, routine scheduled maintenance and downtime. Additionally, inresponse to the continued competitive landscape, we have focused on operational rightsizing measures to better align our assets with current industrydemand, which has included stacking or idling unproductive equipment across our asset base within each service line.Management evaluates the operational performance of our Completions Services segment and allocates resources primarily based on AdjustedEBITDA because management believes that Adjusted EBITDA provides important information about the activity and profitability of our lines of businesswithin this segment. Adjusted EBITDA is a non-GAAP financial39Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.measure computed as total earnings (loss) before net interest expense, income taxes, depreciation and amortization, other income (expense), net, net gain orloss on disposal of assets, acquisition-related costs, and non-routine items.For the year ended December 31, 2016, revenue from our Completion Services segment was $544.0 million, representing approximately 56.0% ofour total revenue, compared with revenue of $1.1 billion for the year ended December 31, 2015, which represents a 52.2% year-over-year decrease. AdjustedEBITDA from this segment for the year ended December 31, 2016 was $(39.6) million, compared with $39.9 million of Adjusted EBITDA for the year endedDecember 31, 2015, which represents a 199.4% year-over-year decrease. Year Ended December 31, 2016 December 31, 2015 Revenue Hydraulic Fracturing$353,929 $797,914 Wireline & Pumpdown159,317 296,202 Other (Cementing, Directional Drilling and Research & Technology)30,712 44,405Total revenue$543,958 $1,138,521 Adjusted EBITDA$(39,628) $39,851 Average active hydraulic fracturing horsepower480,000 790,000Total fracturing stages11,413 16,011 Average active wireline trucks68 115 Average active pumpdown units44 56Please read Note 14 - Segment Information” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for areconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income (loss), which is the nearest comparable U.S. GAAP financial measure (inthousands) on a reportable segment basis for the years ended December 31, 2016 and 2015.Due to improving commodity prices and higher North American drilling rig count, fourth quarter revenue and Adjusted EBITDA from ourCompletion Services segment benefited from higher overall utilization and slightly improved pricing levels in all service lines within most of our coreoperating basins. In our hydraulic fracturing service line, we witnessed an increase in completion activity, which resulted in the reduction of available fracdays, slightly higher pricing and improved margins throughout the fourth quarter. Despite the improved market conditions, the primary driver behind themajority of the margin improvement continued to be our efforts to aggressively control costs. In our cased-hole wireline and pumpdown services line,increases in completion activity caused capacity to tighten in most of our core operating basins, which resulted in increased utilization and greater marketshare gains as well as higher overall pricing. Additionally, our wireline operations continue to experience cost savings from utilizing our in-housemanufactured perforating equipment and addressable switches. In our cementing service line, which comprises the vast majority of the remaining revenue inthe Completion Services segment, key customers in our core Northeast and West Texas markets requested that we deploy additional crews due to increasedefficiencies and superior service quality, which allowed us to continue expanding our growing market share position.Completion Services OutlookIn 2017, we expect our Completion Services segment to experience improved overall activity levels as many of our key customers continue toincrease their rig count and completion activity. Due to improving market conditions and increasing customer demand, available frac days continue todecrease and many customers have begun to inquire about securing dedicated hydraulic fracturing fleets. Additionally, we were recently awarded asubstantial package of completion services work in the Eagle Ford Shale Trend in South Texas, and we anticipate increasing our operating fleet count toeleven horizontal hydraulic fracturing fleets during the first quarter of 2017. As a result, we are expecting that pricing for many of our services will increase,our utilization will improve and that we would redeploy additional hydraulic fracturing fleets, wireline trucks and40Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.pumpdown units during 2017 and 2018, in each case assuming that current market trends continue. However, improving activity levels, pricing and thedeployment of equipment are all dependent upon macroeconomic and commodity price stability, and our expectations could change if market conditionschange. Despite the continued competitive landscape, we have recently begun to experience market share gains in most of our completion services’ lines ascertain competitors continue to withdraw or permanently leave the marketplace. As we continue to emerge from the challenging commodity priceenvironment, our primary focus will be to remain one of the premier completion services providers and to continue to service the needs of all of our customersin a safe, cost efficient manner, which will best position the Company for future growth and success.Well Support ServicesOur Well Support Services segment focuses on post-completion activities at the well site, and includes rig services, including workover, plug andabandonment, fluids management, coiled tubing, artificial lift applications and other specialized well site services. The majority of revenue for this segmentis generated by our rig services line, and we consider our rig services line, fluids management service line and coiled tubing service line to be our core servicelines within this segment.During the fourth quarter of 2016, our workover rig services line deployed, on average, approximately 145 workover rigs per workday out of ourestimated average fleet of approximately 483 workover rigs. In our coiled tubing service line, we deployed, on average, approximately 25 units out of ourcurrent estimated average fleet of approximately 44 coiled tubing units. In our fluids management service line, we deployed, on average, approximately 640fluid services trucks per workday and approximately 1,054 frac tanks per workday out of our estimated average fleets of approximately 1,329 trucks and4,903 tanks, respectively. In our fluids management service line, we own 29 private salt water disposal wells for fluids disposal purposes. However, not all ofour deployed assets are utilized fully, or at all, at any given time, due to, among other things, routine scheduled maintenance and downtime. Additionally, inresponse to the continued competitive landscape, we have focused on operational rightsizing measures to better align our assets with current industrydemand, which has included idling unproductive equipment across our asset base within each service line.Management evaluates the operation and performance of our Well Support Services segment and allocates resources primarily based on activitylevels, specifically rig and trucking hours, as well as Adjusted EBITDA. The following table presents rig and trucking hours for our Well Support Services forthe period from the Nabors Merger date, March 24, 2015 through December 31, 2015 and for the year ended December 31, 2016 (dollars in millions): Year Ended December 31, 2016 December 31, 2015 Revenue Rig Services$197,003 $248,547 Fluids Management Services132,486 169,934 Coiled Tubing Services55,829 122,878 Other Well Support Services (includes ESPCT)34,279 40,783Total revenue$419,597 $582,142 Adjusted EBITDA$17,460 $79,966 Average active workover rigs197 275Total workover rig hours430,076 465,926 Average coiled tubing units45 45Average active coiled tubing units27 34 Average fluids management trucks1,411 1,444Average active fluids management trucks725 1,076Total fluids management truck hours1,384,898 1,653,41741Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Please read Note 14 - Segment Information” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for areconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income (loss), which is the nearest comparable U.S. GAAP financial measure (inthousands) on a reportable segment basis for the years ended December 31, 2016 and 2015.During the fourth quarter, both revenue and Adjusted EBITDA declined in our Well Support Services segment primarily due to downtimeassociated with severe weather in certain core operating basins and the typical fourth quarter seasonal slowdown as customers exhausted their annual budgetsand began budgeting for the coming year. Despite lower overall segment revenue and Adjusted EBITDA, revenue in our rig services service line increasedslightly as pricing stabilized and our average daily working rig count increased prior to the effects of the seasonal slowdown. We witnessed stable, to slightlyhigher, rig services activity and pricing in our core operating regions in the Southwest, Rocky Mountains, California and Western Canada; however, thefragmented marketplace remains extremely competitive. After a slow start due to warm weather, our Western Canada rig services service line experiencedincreased utilization, which partially offset some of the utilization decline and competitive pricing experienced in the United States in both our rig servicesand fluids management service lines. In our fluids management service line, utilization was negatively impacted by the seasonal slowdown and pricingpressure due to the predatory pricing tactics of certain of our competitors. In our coiled tubing service line, pricing remained competitive and utilization wasnegatively affected by the seasonal slowdown, but we continued to enhance our overall market share position as completion activity increased andcompetitors continued to leave the marketplace.Well Support Services OutlookIn 2017, we expect activity levels to gradually improve, as higher overall commodity prices have encouraged certain of our largest customers tobegin allocating more capital towards well workover and maintenance, which could result in higher overall utilization and enhanced revenue growth in thissegment. Additionally, in our rig services service line, we have recently witnessed opportunities to continue to grow market share due to our superior servicequality and safety track record. In our fluids management service line, we continue to focus on quality work with core customers and to aggressively managecosts in order to maintain profitability while the market continues to suffer from overall low pricing. We have also won additional work in most of our corebasins due to competitor service quality issues, and we have recently witnessed pockets of pricing improvement in select core regions. Despite these recentpositive data points, the fluids management service line continues to suffer from significant over capacity and increased competition from continuedinfrastructure build-out. In our coiled tubing service line, we continue to high grade our customer base and have remained focused on higher margincompletion oriented work and acid and nitrogen workover and maintenance work in select basins. We have experienced increases in activity, and pricing to asmaller extent, in select core basins, such as South Texas, and we continue to expand our market share in West Texas and the Mid-Continent. As a result, weare expecting modest increases in rig and truck hours as well as modest growth in coiled tubing units deployed during 2017 and 2018. Similarly, we areexpecting pricing to remain flat with modest increases possible in rig services and fluids management, with more significant gains in coiled tubing due to acombination of better pricing, utilization and efficiency gains during 2017 and 2018. Despite these recent segment improvements, activity levels aredependent upon macroeconomic and commodity price stability, and the market remains competitive and customers remain highly price sensitive. We willcontinue with our strategy of aggressive cost control and focusing on markets and customers that generate positive Adjusted EBITDA. Our near-term strategywill continue to focus on enhancing margins and profitability, properly managing capital spending levels and positioning the business to capitalize onopportunities as the market recovers.Other ServicesOur Other Services segment consists of our smaller, non-core service lines that have either been divested, or are in the process of being divested,including our specialty chemical business (divested in June 2016), our equipment manufacturing and repair business (initial divestiture in January 2017, andremainder divested in February 2017) and our international coiled tubing operations in the Middle East (operations ceased late 2015, and began windingdown in 2016).Our Other Services segment contributed $7.6 million of revenue for the year ended December 31, 2016, representing approximately 0.8% of ourtotal revenue, compared with $28.2 million of revenue for the year ended December 31, 2015, which represents a 73.1% year-over-year decrease. AdjustedEBITDA from this segment for the year ended December 31, 2016 was $(5.8) million compared with $(1.3) million for the year ended December 31, 2015,which represents a 335.3% year-over-year decrease. Like our core services lines, the businesses comprising our Other Services reportable business segmentwere negatively impacted by the widespread reduction in drilling, completion and production activity over the course of the year.42Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 2016, revenue from our Other Services segment was $1.9 million, representing approximately 0.2% of ourtotal revenue, compared to revenue of $2.0 million for the third quarter of 2016, which represents a 5.0% decrease quarter over quarter. Fourth quarterAdjusted EBITDA from this segment was ($1.2 million), compared to Adjusted EBITDA of ($2.1 million) for the third quarter of 2016, which represents a42.9% sequential increase.Please read Note 14 - Segment Information” in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for areconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income (loss), which is the nearest comparable U.S. GAAP financial measure (inthousands) on a reportable business segment basis for the years ended December 31, 2016 and 2015.Unlike the utilization and pricing improvements witnessed in our core service lines in our Completion Services segment and Well SupportServices segment, the majority of the businesses comprising our Other Services segment were negatively impacted by lower overall demand. Although the rigcount has increased and commodity prices have stabilized, most customers are still hesitant to expand their capital budgets for additional services, whichcontinues to negatively affect the service lines in this segment. During 2016, we re-evaluated our strategy pertaining to international expansion andsuspended our coiled tubing operations in the Middle East indefinitely. With the exception of our artificial lift business, we are in the process of unwindingour footprint in the region, including selling assets and excess inventory to other operators in the region. Additionally, we divested our specialty chemicalbusiness on June 29, 2016 and began the process of selling our equipment manufacturing and repair service line, with the initial sale closing on January 25,2017, and the remaining sale closing on February 28, 2017. In line with the discontinuance of these small, ancillary service lines and divisions, we nowcurrently manage our business through two reportable segments. Accordingly, on a go forward basis beginning with our quarterly report for the period endedMarch 31, 2017, we will only disclose two reportable segments.Operating Overview & StrategyOur results of operations in our core service lines are driven primarily by four interrelated, fluctuating variables: (1) the drilling, completion andproduction activities of our customers, which is primarily driven by oil and natural gas prices and directly affects the demand for our services; (2) the price weare able to charge for our services, which is primarily driven by the level of demand for our services and the supply of equipment capacity in the market;(3) the cost of products and labor involved in providing our services, and our ability to pass those costs on to our customers; and (4) our activity, or“utilization” levels, and 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 we provide 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 ofactivity 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 providingthose services, among other factors, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle.Historically, our utilization levels have been highly correlated to U.S. onshore spending by our customers as a group. Generally, as capitalspending by our customers increases, drilling, completion and production activity also increases, resulting in increased demand for our services, and thereforemore days or hours worked (as the case may be). Conversely, when drilling, completion and production activity levels decline due to lower spending by ourcustomers, we generally provide fewer services, which results in fewer days or hours worked (as the case may be). Additionally, during periods of decreasedspending by our customers, we may be required to discount our rates or provide other pricing concessions to remain competitive and support utilization,which negatively impacts our revenue and operating margins. During periods of pricing weakness for our services, we may not be able to reduce our costsaccordingly, and our ability to achieve any cost reductions from our suppliers typically lags behind the decline in pricing for our services, which couldfurther adversely affect our results. For additional information about factors impacting our business and results of operations, please see “Industry Trends andOutlook” in this Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Management evaluates the performance of our reportable business segments primarily based on Adjusted EBITDA because management believesAdjusted EBITDA provides important information about the activity and profitability of our lines of business within each reportable business segment andaids us in analytical comparisons for purposes of, among other things, efficiently allocating our assets and resources. Our management team also monitorsasset utilization, among other factors, for purposes of assessing our overall activity levels and customer demand. For our Completion Services operations, wemeasure our asset utilization levels primarily by the total number of days that our asset base works on a monthly basis, based43Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.on the available working days per month, which excludes scheduled maintenance days. We generally consider an asset to be working such days that it is at orin transit to a job location, regardless of the number of hours worked or whether it generated any revenue during such time. In our Well Support Servicesoperations, we measure activity levels primarily by the number of hours our assets work on a monthly basis, based on the available working days per month.However, given the variance in revenue and profitability from job to job, depending on the type of service to be performed and the equipment, personnel andconsumables required for the job, as well as competitive factors and market conditions in the region in which the services are performed, asset utilizationcannot be relied on as indicative of our financial or operating performance. For additional information, please see “Our Reportable Business Segments” inthis Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”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 abilityto control, we continuously monitor these risks and have taken steps to mitigate them to the extent practicable. In addition, while we believe that we are 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 oil and gas companies to theirdrilling, completion and workover budgets. The oil and gas industry is also impacted by general domestic and international economic conditions, politicalinstability in oil producing countries, government regulations (both in the United States and elsewhere), levels of consumer demand, the availability ofpipeline capacity, weather conditions, and other factors that are beyond our control. Severe declines and sustained weakness and volatility in commodityprices over the course of 2015 and for most of 2016, and the consequent negative impact on the level of drilling, completion and production activity andcapital expenditures by our customers, adversely affected the demand for our services. However, relative to the first half of 2016, crude oil prices, inparticular, have increased substantially compared to all-time lows experienced in February of 2016, and customers have gradually increased activity, whichresulted in improved operational and financial performance in both the third and fourth quarters of 2016.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 in early 2016, NYMEX crude oil prices reached their lowest levels since 2009, declining to as low as $26.21 per barrel. Natural gasprices declined significantly in 2009 and have remained depressed relative to pre-2009 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. The demand for drilling, completion and workover services is driven by available investmentcapital for such activities and in a lower oil and gas price environment, demand for service and maintenance generally decreases as oil and gas producersdecrease their activity and expenditures. Because the type of services that we offer can be easily “started” and “stopped,” and oil and gas producers generallytend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services comparedwith demand for other types of energy services. A prolonged low level of customer activity, such as we experienced in 2015 and early 2016, adversely affectsour financial condition and results of operations.Competition and Demand for Our ServicesWe operate in highly competitive areas of the oilfield services industry with significant potential for excess capacity. Completion and wellservicing equipment can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in anoversupply of such equipment in any particular area. Utilization and44Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.pricing for our services have in the past been negatively affected by increases in supply relative to demand in our core operating areas and geographicmarkets.Additionally, the demand for our services depends primarily on the level of spending by oil and gas companies for drilling, completion andproduction activities, which is affected by short-term and long-term trends in oil and natural gas prices and numerous other factors over which we have nocontrol. Severe declines and sustained weakness and volatility in commodity prices over the course of 2015, and for most of 2016, and the consequentnegative impact on the level of drilling, completion and production activity and capital expenditures by our customers, adversely affected the demand forour services. This, in turn, negatively impacted our ability to maintain adequate utilization of our asset base and to negotiate pricing at levels generatingsufficient margins.Our revenues and earnings are directly affected by changes in utilization and pricing levels for our services, which fluctuate in direct response tochanges in the level of drilling, completion and production activity by our customers. Pressure on pricing for our services, including due to competition andindustry and/or economic conditions, may impact, among other things, our ability to maintain utilization and profitability. During periods of decliningpricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our results. Furthermore, even when we areable to increase our prices, we may not be able to do so at a rate that is sufficient to offset any rising costs. Also, we may not be able to successfully increaseprices 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 oilfield services companiesthat possess substantially greater financial and other resources than we do. Our larger competitors’ greater resources could allow them to compete moreeffectively than we can, including by reducing prices for services in our core operating areas. Our major competitors for our Completion Services includeHalliburton, Schlumberger, Keane Group, RPC, Inc., FTS International, Inc. (formerly known as Frac Tech Services), Basic Energy Services, Superior EnergyServices, CalFrac Well Services, a significant number of regional, mostly-private businesses, and to a smaller extent, both Weatherford International andBaker Hughes, both of which have recently announced plans to exit the hydraulic fracturing business. Our major competitors for our Well Support Servicesinclude Key Energy Services, Basic Energy Services, Superior Energy Services, Precision, Forbes and Pioneer Energy Services, as well as a significant numberof mostly-private, 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 such as those we experienced from late 2014through mid-2016. Throughout this severe, prolonged downturn for our industry, our customer base demonstrated a more intense focus and placed a higherpriority on receiving the lowest service cost pricing possible. Additionally, projects for certain of our core service lines are often awarded on a bid basis,which tends to further increase competition based primarily on price. During this downturn, our utilization and pricing levels were also negatively impactedby predatory pricing from certain large competitors, who elected to operate at negative margins for these services. During healthier market conditions, webelieve many of our customers choose to work with us based on the safety, performance and quality of our crews, equipment and services, although eventhen, we must be competitive in our pricing. We seek to differentiate ourselves from our major competitors by our operating philosophy, which is focused ondelivering the highest quality customer service and equipment, coupled with superior execution and operating efficiency. As part of this strategy, we targethigh volume, high efficiency customers with service intensive, 24-hour work, which is where we believe we can differentiate our services from ourcompetitors.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.Current Market Conditions and OutlookThe challenging market conditions experienced through the first half of 2016 began to abate towards the latter part of the third quarter ascommodity prices began to stabilize and customers began re-initiating their drilling and completion programs. In our Completion Services segment, weexperienced increasing utilization levels as customers accelerated completion activity to take advantage of higher commodity prices. In some cases, we wereable to increase pricing slightly within some of our core service lines primarily due to a lack of available service capacity in select core operating basins. Inour Well Support Services segment, customers began to allocate slightly more capital towards well maintenance and workover activities as commodity pricesstabilized, which particularly enhanced the financial performance of our workover rig, plug & abandonment and other specialty services service lines.Despite the increased activity levels, the operating environment45Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.remains competitive, and we continue to evaluate alternatives to further rightsize our service lines with current market conditions. Additionally, as discussedabove under “Our Reportable Business Segments-Completion Services-Completion Services Outlook” and “Our Reportable Business Segments-Well SupportServices-Well Support Services Outlook,” we are expecting improved activity levels and pricing across several of our business lines during 2017 and 2018.Despite the recent improvement in commodity prices and customer activity levels, we are taking a measured approach regarding potentialoperational and financial improvement in 2017. As long as macroeconomic conditions remain stable and commodity prices continue to improve, we wouldexpect higher levels of activity from the majority of our customer base in 2017, which should result in continued operational and financial improvement,especially in our Completion Services segment. In our hydraulic fracturing service line, we continued to deploy approximately ten horizontal and three smallvertical fracturing fleets during the fourth quarter, and based on current projections and customer discussions, we expect to add an additional horizontalfracturing fleet into service by the end of the first quarter of 2017. In our cased-hole wireline and pumpdown service line, we deployed two additionalwireline trucks and three additional pumpdown units in the fourth quarter, and if completion activity continues to increase, we would expect to add morewireline trucks and pumpdown units into service by the end of the first quarter of 2017.Conditions within our Well Support Service segment remain more challenged, as both pricing and the operational environment remaincompetitive. During the fourth quarter, our average daily workover rig count per work day increased by approximately 4.0% to 145 workover rigs, but ouraverage daily counts for both fluids management trucks and frac tanks declined by approximately 8.0% to 640 trucks and 18.0% to 1,054 frac tanks,respectively. Our fluids management service line continues to struggle with extremely competitive pricing from both private and public peers, lower overallcompletion activity levels compared to prior peak levels and continued competition from infrastructure build-out. In our coiled tubing service line, ouraverage deployed unit count remained flat in the fourth quarter, totaling 25 units, as both market conditions and service pricing have remained competitive.As completion activity increases and select competitors continue to the leave the marketplace, we expect higher overall activity levels to result in higherutilization and enhanced overall profitability. However, until customers start allocating significantly more capital towards workover and maintenance ofexisting wells, we would expect only gradual increases in both utilization and pricing within the majority of our Well Support Services’ service lines in 2017.We are actively monitoring the market and managing our business in line with demand for services, and we will make adjustments as necessary toeffectively respond to changes in market conditions. Our top priorities remain to drive revenue by maximizing utilization, improve margins through costcontrols, protect and grow market share by focusing on the quality and efficiency of our service execution and ensure we are strategically positioned tocapitalize on future market improvement.Please see “Liquidity and Capital Resources” in this Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Resultsof 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, 2016, compared to the year ended December 31,2015, and a comparison of our results of operations for the year ended December 31, 2015, compared to the year ended December 31, 2014. Our results for the2016 and 2015 years include the financial and operating results of Old C&J for the entire period and the C&P Business from the March 24, 2015 (the "MergerEffective Time") through December 31, 2016. Results for periods prior to March 24, 2015 reflect the financial and operating results of Old C&J exclusively,and do not include the financial and operating results of the C&P Business. Accordingly, comparisons of the 2016 and 2015 results to prior years may not bemeaningful.We revised our reportable segments during the first quarter of 2015 in connection with the Nabors Merger. As a result of the revised reportablesegment structure, we restated the corresponding items of reportable segment information for the 2014 year.Results for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015The following table summarizes the change in our results of operations for the year ended December 31, 2016, compared to the year endedDecember 31, 2015 (in thousands):46Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, 2016 2015 $ ChangeCompletion Services: Revenue $543,958 $1,138,521 $(594,563) Operating income (loss) $(253,513) $(754,874) $501,361 Well Support Services: Revenue $419,597 $582,142 $(162,545) Operating income (loss) $(430,808) $(159,165) $(271,643) Other Services: Revenue $7,587 $28,226 $(20,639) Operating income (loss) $(51,778) $(69,129) $17,351 Corporate / Elimination: Revenue $— $— $— Operating income (loss) $(133,909) $(115,154) $(18,755) Combined: Revenue $971,142 $1,748,889 $(777,747) Costs and expenses: Direct costs 947,255 1,523,194 (575,939)Selling, general and administrative expenses 229,267 239,697 (10,430)Research and development 7,718 16,704 (8,986)Depreciation and amortization 217,440 276,353 (58,913)Impairment Expense 436,395 791,807 (355,412)Loss on disposal of assets 3,075 (544) 3,619Operating income (loss) (870,008) (1,098,322) 228,314Other income (expense): Interest expense, net (157,465) (82,086) (75,379)Other income (expense), net 9,504 8,773 731Total other expenses, net (147,961) (73,313) (74,648)Loss before reorganization items and income taxes (1,017,969) (1,171,635) 153,666 Reorganization items 55,330 — 55,330Income tax expense (benefit) (129,010) (299,093) 170,083Net income (loss) $(944,289) $(872,542) $(71,747)RevenueRevenue decreased $777.7 million, or 44.5%, for the year ended December 31, 2016, as compared to the year ended December 31, 2015. Thedecrease in revenue was primarily due to (i) a decrease of $594.6 million in our Completion Services segment as a result of significantly lower utilization andpricing levels across this segment caused by the extremely competitive market environment given the severe decline in U.S. onshore drilling and completionactivity, partially offset by the fact that revenue for the corresponding prior year period only included C&P Business Completion Services revenue from theMerger Effective Time to December 31, 2015. The $162.5 million decrease in revenue in our Well Support Services segment was primarily due to theunprecedented low levels of customer activity during 2016 in areas that typically maintain moderate levels of well support services activity, partially offsetby the fact that revenue for the corresponding prior year period only included C&P Business Well Support Services revenue from the Merger Effective Timeto December 31, 2015. The $20.6 million decrease in our Other Services segment was primarily due to continued weak demand for our services driven by thelow commodity prices characterizing this severe, prolonged industry downturn.47Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Direct CostsDirect costs decreased $575.9 million, or 37.8%, to $947.3 million for the year ended December 31, 2016, as compared to $1.5 billion for theyear ended December 31, 2015. The decrease in direct costs was primarily due to the corresponding decrease in revenue which was negatively impacted byoverall lower utilization levels across our Completion Services and Well Support Services segments resulting from the extremely competitive marketenvironment caused by the severe decline in U.S. onshore drilling and completion activity as well as the unprecedented slowdown in well support servicesactivity, and partially offset by the shorter period for the C&P Business from the Merger Effective Time to December 31, 2015, as noted above. As utilizationfell in our Completion Services segment, we strategically stacked additional equipment, closed unprofitable facilities, reduced head count and aggressivelycut costs in order to further lower our operational cost structure. Similarly, in our Well Support Services segment, we exited select service lines in certainbasins, closed unprofitable facilities and further reduced head count.As a percentage of revenue, direct costs increased to 97.5% for the year ended December 31, 2016, up from 87.1% for the year endedDecember 31, 2015, primarily due to substantially lower pricing for our services due to competitive market conditions resulting from the rapid and sustaineddecline in commodity prices, partially offset by reductions to our cost structure, as noted above.Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")SG&A decreased $10.4 million, or 4.4%, to $229.3 million for the year ended December 31, 2016, as compared to $239.7 million for the yearended December 31, 2015. The decrease in SG&A was primarily due to a $32.1 million decrease in acquisition-related costs and a $12.6 million decrease inemployee related costs as a result of headcount reductions. These amounts are partially offset by $30.4 million in costs related to the Chapter 11 Proceedingand related restructuring activities, by a $2.0 million increase in legal fees and settlements as a result of the Chapter 11 Proceeding and by the fact that SG&Aassociated with the C&P Business was only incurred from the Merger Effective Time to December 31, 2015.We also incurred $7.7 million in R&D for the year ended December 31, 2016, as compared to $16.7 million for the corresponding prior yearperiod. The decrease in R&D was primarily due to our cost control initiatives, which included scaling back our R&T business line and initiatives anddelaying certain projects.Depreciation and Amortization Expense ("D&A")D&A decreased $58.9 million, or 21.3%, to $217.4 million for the year ended December 31, 2016 as compared to $276.4 million for the sameperiod in 2015. The decrease in D&A was primarily the result of significant impairment charges recorded during 2015 and the first half of 2016 due to thesteep decline in asset utilization levels related to the sustained downturn in the oil and gas industry.Impairment ExpenseDue to the severe downturn in the oil and gas industry, and the resulting weakness in demand for our services, we determined that it wasnecessary to test goodwill for impairment and to test property, plant and equipment ("PP&E") and other intangible assets for recoverability during the thirdand fourth quarters of 2015 and throughout 2016. Based on our assessment, we recorded impairment expense of $436.4 million for the year endedDecember 31, 2016, consisting of $314.3 million of goodwill impairment related to impairment of all remaining goodwill associated with our Well SupportServices segment, along with $61.0 million related to other intangible assets and $61.1 million related to PP&E within each of our Completion Services, WellSupport Services, and Other Services segments.Impairment expense for the year ended December 31, 2015 was $791.8 million and consisted of $385.0 million of goodwill impairment related tothe Completion Services and Other Services segments, $393.1 million of PP&E impairment related to the Completion Services and Other Services segments,and $13.7 million related to other intangible assets.Reorganization itemsReorganization items of $55.3 million for the year ended December 31, 2016 are primarily related to professional fees of $41.2 million, contracttermination settlements of $20.3 million and revisions of estimated claims of $0.8 million, partially offset by $5.2 million in related party settlements and$1.8 million in vendor claims adjustments in connection with our Chapter 11 Proceeding.48Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, netInterest expense increased $75.4 million, or 91.8%, to $157.5 million for the year ended December 31, 2016. The increase is primarily due to$91.9 million of accelerated amortization of original issue discount and deferred financing costs, which we fully amortized as of June 30, 2016 as a result ofour entry into a restructuring support agreement related to our Chapter 11 Proceeding, and due to $3.5 million in interest expense primarily related to higherlevels of borrowings under the Revolving Credit Facility and DIP Facility, partially offset by $20.0 million of lower interest expense due to the Chapter 11Proceeding in that interest expense subsequent to a Chapter 11 filing is recognized only to the extent that it will be paid during the cases or that it is probablethat it will be an allowed claim. As a result, we did not accrue interest that we believed was not probable of being treated as an allowed claim in the Chapter11 Proceeding.Income TaxesWe recorded an income tax benefit of $129.0 million for the year ended December 31, 2016, at an effective rate of 12.0%, compared to incometax benefit of $299.1 million for the year ended December 31, 2015, at an effective rate of 25.5%. The decrease in the effective tax rate is primarily due tovaluation allowances applied against certain deferred tax assets, including net operating loss carryforwards. The effective rate, and resulting benefit, is lessthan the expected statutory rate primarily due to impairment charges that were not deductible for tax, the impact of permanent differences, including non-deductible reorganization costs and the valuation allowance reducing the carrying value of certain deferred tax assets.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, when compared to the year endedDecember 31, 2014 (in thousands):49Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, 2015 2014 $ ChangeCompletion Services: Revenue $1,138,521 $1,400,133 $(261,612) Operating income (loss) $(754,874) $187,615 $(942,489) Well Support Services: Revenue $582,142 $188,256 $393,886 Operating income (loss) $(159,165) $28,471 $(187,636) Other Services: Revenue $28,226 $19,555 $8,671 Operating income (loss) $(69,129) $16,579 $(85,708) Corporate / Elimination: Revenue $— $— $— Operating income (loss) $(115,154) $(108,921) $(6,233) Combined: Revenue $1,748,889 $1,607,944 $140,945Costs and expenses: Direct costs 1,523,194 1,179,227 343,967Selling, general and administrative expenses 239,697 182,518 57,179Research 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 before income taxes (1,171,635) 114,502 (1,286,137)Income tax expense (299,093) 45,679 (344,772)Net income $(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. Theincrease in revenue was primarily due to our significantly larger asset base and expanded operations as a result of the Nabors Merger and the incrementalimpact of $822.2 million of revenue contributed by the C&P Business, offset by a $681.3 million decrease in revenue from Old C&J due to significantlylower utilization and pricing levels across our Completion Services segment resulting from the extremely competitive market environment caused by thedecline in U.S. onshore drilling and completion activity.Direct CostsDirect costs increased $344.0 million, or 29.2%, to $1.5 billion for the year ended December 31, 2015, as compared to $1.2 billion for the yearended December 31, 2014, primarily due to our significantly larger asset base and expanded operations as a result of the Nabors Merger, including additionaldirect costs of $697.6 million from the C&P Business, partially offset by a $353.7 million decrease in direct cost attributable to Old C&J.50Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.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 December31, 2014, primarily due to substantially lower pricing for our services due to competitive market conditions resulting from the rapid decline in commodityprices, partially offset by reductions to our cost structure achieved through our supply chain and procurement synergy savings following the Nabors Merger.Selling, General and Administrative Expenses ("SG&A") and Research and Development Expenses ("R&D")SG&A increased $57.2 million, or 31.3%, to $239.7 million for the year ended December 31, 2015, as compared to $182.5 million for the yearended December 31, 2014. Excluding an increase of $22.5 million in acquisition-related costs, the remaining increase in SG&A for the year ended December31, 2015 was primarily driven by a significantly greater employee base as a result of the Nabors Merger, partially offset by the implementation of ourintegration plan following the Nabors 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 yearperiod. We remain committed to investing in key technologies that will lower our cost base for key inputs, enhance synergy savings and improve ouroperational capabilities and efficiencies. However, as part of our cost control measures, during the latter half of 2015, we scaled back our R&T business lineand 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 Nabors Merger, as well as the deployment ofnew equipment in the Old C&J core service lines.Impairment ExpenseDue to the continued downturn in the oil and gas industry, and the resulting further deterioration in demand for our services, we determined thatit was necessary to test goodwill for impairment and to test PP&E and intangible assets for recoverability during the third quarter of 2015 and again duringthe fourth quarter of 2015. As a result, we recorded impairment expense of $791.8 million for the year ended December 31, 2015, consisting of $385.0 millionof goodwill impairment related to the Completion Services and Other Services segments, $393.1 million of PP&E impairment related to the CompletionServices, Well Support Services, and Other Services segments, and $13.7 million related to other intangible assets.No impairment expense 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 Nabors 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 incometax expense 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 apre-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 statutoryrate primarily 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.Liquidity and Capital ResourcesSources of Liquidity and Capital ResourcesOur primary uses of cash are for operating costs and expenditures and capital expenditures. The energy services business is capital-intensive,requiring significant investment to maintain, upgrade and purchase equipment to meet our customers’ needs and industry demand. Our capital requirementsconsist primarily of: 51Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 capital expenditures, which are capital expenditures made to acquire additional equipment and other assets, increase our servicelines, 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, refurbishment and other activities to extend the useful life ofpartially or fully depreciated assets. In addition, in prior periods, a significant amount of our cash flow was used to service our indebtedness; however, as a result of the Chapter 11Proceeding, substantially all of our debt was discharged and we expect that interest expense will be a smaller component of our expenses in the near term. Ourprimary sources of liquidity have historically included cash flows from operations and borrowings under debt facilities. Future cash flows are subject to anumber of variables, and are highly dependent on the drilling, completion and production activity by our customers, which in turn is highly dependent on oiland gas prices.Additionally, we currently have only $63.4 million of available borrowing capacity under our New Credit Facility. Accordingly, we may seek toaccess capital from other sources, such as the capital markets and/or increase the borrowing capacity under our New Credit Facility. If, however, we are notable to access needed capital, we may be required to reduce our expenditures which would limit our ability to grow and could adversely affect our operatingresults, financial conditions and cash flows.During 2016, we initially relied on cash from operations and our Original Credit Agreement for liquidity. However, prior to commencement ofthe Chapter 11 Proceeding in May 2016, we breached a financial covenant under our Original Credit Agreement and were prohibited from making any furtherborrowings under such facility. As a result, after that date, our principal source of liquidity was limited to cash on hand. As part of the Chapter 11 Proceeding,on July 29, 2016, we entered into the DIP Credit Agreement, providing the $100 million DIP Facility that was intended to provide the Company withsufficient liquidity to fund the administration of the Chapter 11 Proceeding. On the Plan Effective Date, we repaid all amounts outstanding under the DIPFacility with the proceeds from the Rights Offering and the DIP Facility was canceled and discharged. As a result of the debt-to-equity conversion feature ofthe Restructuring Plan, we emerged from the Chapter 11 Proceeding substantially debt free. On the Plan Effective Date, we entered into a New Credit Facility(as defined below) with PNC Bank, National Association, as administrative agent. For additional information about the New Credit Facility, please see“Description of our Indebtedness- Description of our New Credit Facility” below. For additional information about the Chapter 11 Proceeding andemergence, please see “Overview of Our Business” in Part I, Item 1 of this Annual Report, Note 2 –Chapter 11 Proceeding and Emergence and Note 5 – Debtand Capital Lease Obligations in Part II, Item 8 “Financial Statements and Supplementary Data”; and “Risk Factors” in Part I, Item 1A of this Annual Report.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, 2016 2015 2014Cash flow provided by (used in): Operating activities $(107,372) $103,005 $181,837Investing activities (26,927) (825,156) (343,412)Financing activities 174,264 734,126 157,178Effect of exchange rate on cash (1,282) 3,908 —Decrease (increase) in cash and cash equivalents $38,683 $15,883 $(4,397)Cash Provided by (Used in) Operating ActivitiesNet cash from operating activities decreased $210.4 million for the year ended December 31, 2016 as compared to the corresponding period in2015. The decrease in operating cash flow was primarily due to (i) the increase in net loss during the year ended December 31, 2016, after excluding theeffects of changes in non-cash items and (ii) the decline in cash collections of accounts receivable due to higher collection levels during the second and thirdquarters of 2015 from accounts acquired as part of the Nabors Merger, partially offset by positive changes in operating assets and liabilities which included(i)52Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 decrease in the use of cash to satisfy obligations related to accounts payable and accrued liabilities due to higher disbursement levels during the second andthird quarters of 2015 from trade payables acquired in connection with the Nabors Merger and (ii) a decrease in the use of cash related to accounts payableand accrued expenses during the third and fourth quarters of 2016 both resulting from the automatic stay associated with the Chapter 11 Proceeding.Net cash provided by operating activities decreased $78.8 million for the year ended December 31, 2015 as compared to the correspondingperiod in 2014. The decrease in operating cash flow was primarily due to (a) the decline in net income during the year ended December 31, 2015, afterexcluding the effects of changes in non-cash items, (b) cash used to satisfy obligations related to accounts payable and accrued liabilities in connection withthe Nabors Merger and (c) incremental cash used to pay down accounts payable, partially offset by positive changes which included an increase in cashprovided from the collection of accounts receivable acquired in connection with the Nabors Merger and operating assets and liabilities related to normalfluctuations in the timing of cash collections and cash requirements.Cash Flows Used in Investing ActivitiesNet cash used in investing activities decreased $798.2 million for the year ended December 31, 2016 as compared to the corresponding period in2015. This decrease was primarily due to the cash consideration of $693.6 million paid at the closing of the Nabors Merger for the acquisition of the C&PBusiness during the first quarter of 2015 as well as a decline in capital expenditure purchases as a result of the sustained downturn in the oil and gas industry,partially offset by a $43.4 million purchase price reduction for the C&P Business related to a working capital adjustment during the third quarter of 2015 andproceeds from the divestiture of our specialty chemical business (divested in June 2016) and disposals of property, plant and equipment.Net 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 $693.6 million paid at the closing of the Nabors Merger for the acquisition of the C&PBusiness, 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 capitalexpenditure purchases as a result of the downturn in the oil and gas industry.Cash Flows Provided by Financing ActivitiesNet cash provided by financing activities decreased $559.9 million for the year ended December 31, 2016 as compared to the correspondingperiod in 2015. The decrease is primarily related to proceeds received from our Credit Agreement to fund the cash consideration portion of the acquisition ofthe C&P Business at the closing of the Nabors Merger, partially offset by the payoff of the long-term debt of Old C&J, both during the first quarter of 2015.Net cash provided by financing activities increased $576.9 million for the year ended December 31, 2015 as compared to the correspondingperiod in 2014. The increase is primarily related to proceeds received from our Credit Agreement to fund the cash consideration portion of the acquisition ofthe C&P Business at the closing of the Nabors Merger as well as to pay off the long-term debt of Old C&J.Description of our IndebtednessDescription of the New Credit FacilityThe Company and certain of its subsidiaries, as borrowers (the “Borrowers”), have entered into a revolving credit and security agreement (the“New Credit Facility”) dated the Plan Effective Date, with PNC Bank, National Association, as administrative agent (the “Lender”).The New Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of $100 million and a borrowingbase, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory, subject to eligibility criteria and customary reserveswhich may be modified in the Lender’s permitted discretion. The New Credit Facility also contains an availability block, which will reduce the amountotherwise available to be borrowed under the New Credit Facility by $20 million until the later of the delivery of financial statements for the fiscal yearending December 31, 2017 and the date on which the Company achieves a fixed charge coverage ratio of 1.10:1.0.The New Credit Facility also provides for the issuance of letters of credit, which would reduce borrowing capacity thereunder. The maturity dateof the New Credit Facility is January 6, 2021.53Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.If at any time the amount of loans and other extensions of credit outstanding under the New Credit Facility exceed the borrowing base, theBorrowers may be required, among other things, to prepay outstanding loans immediately.The Borrowers’ obligations under the New Credit Facility are secured by liens on a substantial portion of the Borrowers’ personal property,subject to certain exclusions and limitations. Upon the occurrence of certain events, additional collateral, including a portion of the Borrowers’ realproperties, may also be required to be pledged. Each of the Borrowers is jointly and severally liable for the obligations of the other Borrowers under the NewCredit Facility.At the Borrowers’ election, interest on borrowings under the New Credit Facility will be determined by reference to either LIBOR plus anapplicable margin of 4.0% per annum or an “alternate base rate” plus an applicable margin of 3.0% per annum. Beginning after the fiscal year ending on orabout December 31, 2017, these margins will be subject to a step-down of 0.50% in the event that the Company achieves a fixed charge coverage ratio of1.15:1.0 or greater. Interest will be payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest periodapplicable to LIBOR-based loans. The Borrowers will also be required to pay a fee on the unused portion of the New Credit Facility equal to 1.0% per annumin the event that utilization is less than 50.0% of the total commitment and 0.75% per annum in the event that utilization is greater than or equal to 50.0% ofthe total commitment.A termination fee of 1.00% of the maximum amount available will be payable if the loans are repaid in full and the New Credit Facility isterminated prior to the first anniversary of the Plan Effective Date.The New Credit Facility contains covenants that limit the Borrowers’ and their subsidiaries’ ability to incur additional indebtedness, grant liens,make loans or investments, make distributions, merge into or consolidate with other persons, make capital expenditures or engage in certain assetdispositions including a sale of all or substantially all of the Company’s assets.The New Credit Facility also contains the following financial covenants:•a minimum liquidity covenant under which the Borrowers must not permit availability under the New Credit Facility, plus certainunrestricted cash and cash equivalents, to be less than $100.0 million as of the last day of each fiscal month through the fiscal monthending August 31, 2017; and•a fixed charge coverage ratio under which Borrowers must maintain a fixed charge coverage ratio of at least 1.0 to 1.0 as of the last day ofany fiscal month on or after September 30, 2017 on which, (a) for any date occurring through (and including) December 31, 2017,availability under the New Credit Facility, plus certain unrestricted cash and cash equivalents, is less than $50 million and (b) for any dateoccurring from and after January 1, 2018, availability under the New Credit Facility, plus certain unrestricted cash and cash equivalents, isless than $40 million.The fixed charge coverage ratio is generally defined in the New Credit Facility as the ratio of (i) EBITDA minus certain capital expenditures andcash taxes paid to (ii) the sum of cash interest expenses, scheduled principal payments on borrowed money and certain distributions.Debtor-in-Possession $100 Million Term Loan FacilityPrior to the execution of the New Credit Facility, certain DIP Lenders agreed to fund a $100 million DIP Facility.The borrowers under the DIP Facility were the Company and CJ Holding Co. All obligations under the DIP Facility were guaranteed by theCompany’s subsidiaries that were debtors in the Bankruptcy cases. Borrowings under the DIP Credit Agreement were generally secured by superprioritypriming liens on substantially all of the assets of the borrowers and guarantors.The DIP Facility was scheduled to mature on March 31, 2017.Amounts outstanding under the DIP Facility bore interest based on, at the option of the borrower, the London Interbank Offered Rate (“LIBOR”)or an alternative base rate, plus an applicable margin equal to 9.0% in the case of LIBOR loans and 8.0% in the case of base rate loans. The alternative baserate was equal to the highest of (i) the published ‘prime rate’, (ii) the Federal Funds Effective Rate (as defined in the DIP Credit Agreement) plus 0.5% and(iii) LIBOR plus 1.0%.54Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 DIP Facility also required that the Company pay various fees to the DIP Lenders, including a commitment fee equal to 5.0% of the unusedcommitments thereunder.In accordance with the Restructuring Plan, on the Plan Effective Date, we repaid all amounts outstanding under the DIP Facility with theproceeds from the Rights Offering and the DIP Facility was canceled and discharged.Description of the Original Credit AgreementOn March 24, 2015, we entered into a credit agreement (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 “Administrative Agent”), Swing Line Lender and an L/C Issuer, andthe other lenders party thereto. The Original Credit Agreement provided for senior secured credit facilities (collectively, the “Credit Facilities”) in anaggregate principal amount of $1.66 billion, consisting of (a) a $600.0 million revolving credit facility (“Revolving Credit Facility” or “Revolver”) and (b) aTerm Loan B Facility in the aggregate principal amount of $1.06 billion, comprised of two tranches: (i) a tranche consisting of $575.0 million in originalaggregate principal amount of term loans maturing on March 24, 2020 (the “Five-Year Term Loans”) and (ii) a tranche consisting of a $485.0 million inoriginal aggregate principal amount of term loans maturing on March 24, 2022 (the “Seven-Year Term Loans”).The borrowers under the Revolving Credit Facility were C&J, Luxco and CJ Holding Co. The borrower under the Term Loan B Facility was CJHolding Co. All obligations under the Original Credit Agreement were guaranteed by CJ Holding Co.'s wholly-owned domestic subsidiaries, other thanimmaterial subsidiaries and certain other customary exceptions.Borrowings under the Revolving Credit Facility were scheduled to mature on March 24, 2020 (except that if any Five-Year Term Loans had notbeen repaid prior to September 24, 2019, the Revolving Credit Facility was scheduled to mature on September 24, 2019).Borrowings under the Revolving Credit Facility were non-amortizing. The Term Loan B Facility required the borrower thereunder to makequarterly amortization payments in an amount equal to 1.0% per annum, with the remaining balance payable on the applicable maturity date.Amounts outstanding under the Revolving Credit Facility bore interest based on, at the option of the borrower, the LIBOR or an alternative baserate, plus an applicable margin based on the ratio of consolidated total indebtedness of C&J and its subsidiaries to consolidated EBITDA of C&J and itssubsidiaries for the most recent four fiscal quarter period for which financial statements are available (the “Total Leverage Ratio”). The Revolving CreditFacility also required that the borrowers pay a commitment fee equal to a percentage of unused commitments which varied based on the Total LeverageRatio.Five-Year Term Loans outstanding under the Term Loan B Facility bore interest based on, at the option of the borrower, LIBOR (which, in thecase of the Term Loan B Facility, was 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 bore interest based on, at the option of the borrower, LIBOR (which, in the case of theTerm Loan B Facility, will be deemed to 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 alternative base rate was equal to the highest of (i) the Administrative Agent’s prime rate, (ii) the Federal Funds Effective Rate plus 0.5% and(iii) LIBOR plus 1.0%.On the Plan Effective Date, except as otherwise specifically provided for in the Restructuring Plan, the obligations of the Debtors under theOriginal Credit Agreement, any guarantees, and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument ordocument directly or indirectly evidencing or creating any indebtedness or obligation of or ownership interest in any of the Debtors giving rise to any claimor equity interest (except as provided under the Restructuring Plan), were canceled as to the Debtors and their affiliates, and the reorganized Company and itsaffiliates ceased to have any obligations thereunder.Contractual ObligationsThe following table summarizes our contractual cash obligations as of December 31, 2016 (in thousands):55Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Contractual Obligation Total Less than1 year 1-3 years 3-5 years More than5 yearsDIP Facility (1) $25,538 $25,538 $— $— $—Operating leases 25,599 6,934 7,394 5,822 5,449Total $51,137 $32,472 $7,394 $5,822 $5,449(1) Includes estimated interest costs at an interest rate of 10.0% along with related charges. Off-Balance Sheet ArrangementsWe had no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, as of December 31, 2016.Critical Accounting PoliciesThe selection and application of accounting policies is an important process that has developed as our business activities have evolved and asthe accounting standards have developed. Accounting standards generally do not involve a selection among alternatives, but involve the implementationand interpretation 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 ofour consolidated financial statements.Property, Plant and Equipment. Property, plant and equipment are recorded 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 life of theequipment is extended. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account arerelieved, 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 basisover the estimated 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:Completion Services, Well Support Services and Other Services, all of which are consistent with the presentation of our three reportable segments. At thereporting unit level, we test goodwill for impairment on an annual basis as56Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 October 31 of each year, or when events or changes in circumstances, referred to as triggering events, indicate the carrying value of goodwill may not berecoverable 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 has occurred. Detailed impairment testing, or Step 1 testing, involves comparing the fair value of each reportingunit 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 reportingunit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unitexceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step, or Step 2 testing, includes hypotheticallyvaluing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, theimplied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwillexceeds the implied fair value of the goodwill, 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 circumstancesindicate the 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 judgmentto estimate 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 13 – 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.57Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Revenue Recognition. All revenue is recognized when persuasive evidence of an arrangement exists, the service is complete or the equipmenthas been delivered to the customer, the amount is fixed or determinable and collectibility is reasonably assured, as follows:Completion Services SegmentHydraulic Fracturing Revenue. Through our hydraulic fracturing service line, we provide hydraulic fracturing services on a spot market basis orpursuant to contractual arrangements, such as term contracts and pricing agreements. Under either scenario, revenue is recognized and customers are invoicedupon 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, a fieldticket is written that includes charges for the service performed and the consumables (such as fluids and proppants) used during the course of service. Thefield 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, andother miscellaneous consumables. Rates for services performed on a spot market basis are based on an agreed-upon hourly spot market rate for a specifiednumber of hours of service.Pursuant to pricing agreements and other contractual arrangements which we may enter into from time to time, such as those associated with anaward from a bid process, customers typically commit to targeted utilization levels based on a specified number of hours of service at agreed-upon pricing,but without termination penalties or obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject toperiodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties.Casedhole Wireline Revenue. Through our cased-hole wireline service line, we provide cased-hole wireline logging, perforating, pressurepumping, well site make-up and pressure testing and other complementary services, on a spot market basis. Jobs for these services are typically short-term innature, lasting anywhere from a few hours to multiple days. We typically charge the customer for these services on a per job basis at agreed-upon spot marketrates. Revenue is recognized based on a field ticket issued upon the completion of the job.Revenue from Materials Consumed While Performing Certain Completion Services. We generate revenue from consumables used during thecourse of providing services.With respect to hydraulic fracturing services, we generate 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 us and the customer is billed for thoseconsumables at cost plus an agreed-upon markup. For services performed on a contractual basis, when the consumables are provided by us, the customertypically is billed for those consumables at a negotiated contractual rate. When consumables are supplied by the customer, we typically charge handling feesbased on the amount of consumables used.Other Completion Services. We generate revenue from certain smaller service lines, specifically directional drilling services, cementing services,and research and technology business lines.With respect to our directional drilling services, we provide these services on a spot market basis. Jobs for these services are typically short-termin nature, lasting anywhere from a few days to multiple weeks. We typically charge the customer for these services on a per day basis at agreed-upon spotmarket rates depending on the level of services required and the complexity of the job. Revenue is recognized and customers are invoiced upon thecompletion of each job. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed.With respect to our cementing services, we provide these services on a spot market or project basis. Jobs for these services are typically short-termin nature and are generally completed in a few hours. We typically charge the customer for these services on a per job basis at agreed-upon spot market ratesor agreed-upon job pricing for a particular project. Revenue is recognized and customers are invoiced upon the completion of each job. Once a job has beencompleted to the customer’s satisfaction, a field ticket is written that includes charges for the service performed and the consumables (such as blended bulkcement and chemical additives) used during the course of service.Well Support Services SegmentRig Services Revenue. Through our rig service line, we primarily provide workover and well servicing rigs that are involved in routine repair andmaintenance, completions, re-drilling and plug and abandonment operations. These services are provided on an hourly basis at prices that approximate spotmarket rates. Revenue is recognized and a field ticket is generated upon the earliest of the completion of a job or at the end of each day. A rig services job canlast anywhere from a few hours to58Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.multiple days depending on the type of work being performed. The field ticket includes the base hourly rate charge and, if applicable, charges for additionalpersonnel or equipment not contemplated in the base hourly rate.Fluids Management Services Revenue. Through our fluids management service line, we primarily provide transportation, storage and disposalservices for fluids used in the drilling, completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or perload basis, or on the basis of quantities sold or disposed. Revenue is recognized upon the completion of each job or load, or delivered product, based on acompleted field ticket.Coiled Tubing and Other Stimulation Services Revenue. Through our coiled tubing service line, we provide a range of coiled tubing and otherwell stimulation services, including nitrogen and pressure pumping services, primarily on a spot market basis. Jobs for these services are typically short-termin 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. We typically charge the customer for the services performed and resourcesprovided on an hourly basis at agreed-upon spot market rates.Other Special Well Site Services Revenue. Through our other special well site service line, we primarily provide fishing, contract labor, and toolrental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis of rental daysper month. Revenue is recognized based on a field ticket issued upon the completion of each job or on a monthly billing for rental services provided.In addition, ancillary to coiled tubing and other stimulation services revenue, we generate revenue from stimulation fluids, nitrogen, coiledtubing materials and other consumables used during those processes.With respect to our artificial lift applications, we generate revenue primarily from the sale of manufactured equipment and products. Revenue isrecognized upon the completion, delivery and customer acceptance of each order.Other Services SegmentRevenue within the Other Services Segment is generated from certain of our smaller non-core service lines that have either been divested or are inthe process of being divested, such as, equipment manufacturing and repair operations and our international coiled tubing operations in the Middle East.Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are generally stated at the amount billed to customers. Weprovide 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, 2016 and 2015, the allowance for doubtful accounts totaled $3.0 million and $7.9 million,respectively. Bad debt expense of $1.7 million, $8.1 million and $0.7 million was included in direct costs on the consolidated statements of operations forthe years ended December 31, 2016, 2015 and 2014, respectively.Share-Based Compensation. Our share-based compensation consists of restricted shares and nonqualified share options. We recognize share-based compensation expense on a straight-line basis over the requisite service period of the award. We value restricted share grants based on the closing priceof our common shares on the grant date, and we value option grants based on the grant date fair value by using the Black-Scholes option-pricing model,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.59Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.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 carrying amounts of existing assets and liabilities and their respective taxbases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expensein 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 have federal, state and international net operating loss carryforwards that will expire in the years 2021 through 2036. After considering thescheduled reversal of deferred tax liabilities, projected future taxable income, the limitations on use of NOLs under Section 382 and tax planning strategies,we established a valuation allowance due to the uncertainty regarding the ultimate realization of the deferred tax assets associated with our carryforwards.On the Plan Effective Date, we believe we experienced an ownership change for purposes of Internal Revenue Code Section 382 as result of ourRestructuring Plan and that our pre-change NOLs are subject to an annual limitation. The ownership change and resulting annual limitation on use of NOLsare not expected to result in the expiration of our NOL carryforwards if we are able to generate sufficient future taxable income within the carryforwardperiods. However, the potential limitation on the amount of NOLs available to offset taxable income in a specific year may result in the payment of incometaxes before all NOLs have been utilized. Additionally, a subsequent ownership change may result in further limitation on the ability to utilize existing NOLsand other tax attributes.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 willbe sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit thatis greater than 50.0% likely of being realized upon ultimate settlement with a taxing authority. We reverse a previously recognized tax position in the firstperiod in which it is no longer more-likely-than-not that the tax position would be sustained upon examination. We will record income tax related interestand penalties, if applicable, as a component of the provision for income tax expense. The Company recorded income tax expense for unrecognized taxbenefits equal to $6.5 million and zero for the periods ending December 31, 2016 and December 31, 2015 respectively.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board ("FASB") issued a comprehensive new revenue recognition standard, AccountingStandards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") that will supersede existing revenue recognition guidanceunder U.S. GAAP. In August 2015, the FASB issued an accounting standards update for a one-year deferral of the revenue recognition standard's effectivedate for all entities, which changed the effectiveness to annual reporting periods beginning after December 15, 2017, including interim periods within thatreporting period. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standardcreates a five step model that requires companies to exercise judgment when considering the terms of a contract and all relevant facts and circumstances. Thestandard allows for several transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) amodified retrospective adoption in which the standard is applied only to the most current period presented in the financial statements, including additionaldisclosures of the standard’s application impact to individual financial statement line items. We are currently evaluating the impact, if any, of adopting thisnew accounting standard on our results of operations and financial position.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 realizable60Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.value. ASU 2015-11 is part of the FASB’s simplification initiative and applies to entities that measure inventory using a method other than last-in, first-out("LIFO") or the retail inventory method. The guidance will require prospective application at the beginning of our first quarter of fiscal 2018, but permitsadoption in an earlier period. We do not expect this ASU to have a material impact on our consolidated financial statements.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. We are required to adopt this ASU for years beginning after December 15, 2016, with early adoption permitted, and the guidance may beapplied either prospectively or retrospectively. We do not expect this ASU to have a material impact on our consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU No. 2016-02 seeks to increase transparency andcomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasingarrangements. Unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, ASU No. 2016-02 will require bothoperating and finance leases to be recognized on the balance sheet. Additionally, the new guidance will require disclosures to help investors and otherfinancial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitativerequirements. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within thosefiscal years, and early application is permitted. We are currently evaluating the impact of adopting this new accounting standard on our results of operationsand financial position.In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting ("ASU 2016-09"), to simplify certain provisions in stock compensation accounting, including the simplification of accounting for astock payment's tax consequences. The ASU amends the guidance for classifying awards as either equity or liabilities, allows companies to estimate thenumber of stock awards they expect to vest, and revises the tax withholding requirements for stock awards. The amendments in ASU No. 2016-09 areeffective for public companies for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early application ispermitted. We are currently evaluating the impact of adopting this new accounting standard on our results of operations and financial position.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected creditlosses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments inASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, andrequires a modified retrospective transition approach. We are currently evaluating the impact this standard will have on our results of operations and financialposition.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer ofinventory, when the transfer occurs. The ASU is effective for the interim and annual reporting periods beginning after December 15, 2017, including interimperiods within those fiscal years, and early application is permitted. We are currently evaluating the impact of adopting this new accounting standard on ourresults of operations and financial position.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, 2016, 2015 and 2014. 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.61Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 New Credit Facility. As of December 31,2016, the outstanding balance under our DIP Facility was $25.0 million. The impact of a 1.0% increase in interest rates under the terms of the New CreditFacility on our outstanding debt as of December 31, 2016 would have resulted in an increase in interest expense of approximately $0.3 million for the year.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.62Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 Reporting64Reports of Independent Registered Public Accounting Firms65Consolidated Balance Sheets as of December 31, 2016 and 201566Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 201467Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016, 2015 and 201468Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2016, 2015 and 201469Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 201470Notes to Consolidated Financial Statements7163Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, 2016. 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 31,2016. /s/ Donald J. Gawick /s/ Mark C. Cashiola Donald J. GawickPresident, Chief Executive Officer andDirector (Principal Executive Officer) Mark C. CashiolaChief Financial Officer (Principal FinancialOfficer and Principal Accounting Officer)March 2, 201764Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc.:We have audited the accompanying consolidated balance sheets of C&J Energy Services Ltd. and subsidiaries (Debtor-in-Possession) as of December 31,2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the yearsin the three‑year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion 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 EnergyServices Ltd. and subsidiaries (Debtor-in-Possession) as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each ofthe years in the three‑year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles./s/ KPMG LLPHouston, TexasMarch 2, 201765Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands, except share data) As of December 31, 2016 2015ASSETS Current assets: Cash and cash equivalents $64,583 $25,900Accounts receivable, net of allowance of $2,951 and $7,917 as of December 31, 2016 and 2015respectively 137,222 274,691Inventories, net 54,471 102,257Prepaid and other current assets 37,392 72,560Deferred tax assets 6,020 9,035Total current assets 299,688 484,443Property, plant and equipment, net of accumulated depreciation of $683,189 and $499,894 atDecember 31, 2016 and 2015, respectively 950,811 1,210,441Other assets: Goodwill — 307,677Intangible assets, net 76,057 147,861Deferred financing costs, net of accumulated amortization of $6,396 as of December 31, 2015 — 14,355Other noncurrent assets 35,045 34,175Total assets $1,361,601 $2,198,952LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $75,193 $184,859Payroll and related costs 18,287 10,516Accrued expenses 59,129 52,069DIP Facility 25,000 —Current portion of debt and capital lease obligations — 13,433Related party payables — 28,206Other current liabilities 3,026 1,785Total current liabilities 180,635 290,868Deferred tax liabilities 15,613 149,151Long-term debt and capital lease obligations, net of original issue discount and financing costs of$86,368 as of December 31, 2015 — 1,108,123Other long-term liabilities 18,577 18,167Total liabilities not subject to compromise 214,825 1,566,309Liabilities subject to compromise 1,445,346 —Commitments and contingencies Shareholders’ equity Common shares, par value of $0.01, 750,000,000 shares authorized, 119,529,942 and 120,420,120issued and outstanding as of December 31, 2016 and 2015, respectively 1,195 1,204Additional paid-in capital 1,009,426 997,766Accumulated other comprehensive loss (2,600) (4,025)Retained deficit (1,306,591) (362,302)Total shareholders’ equity (deficit) (298,570) 632,643Total liabilities and shareholders’ equity (deficit) $1,361,601 $2,198,952See accompanying notes to consolidated financial statements66Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share data) Years Ended December 31, 2016 2015 2014Revenue $971,142 $1,748,889 $1,607,944Costs and expenses: Direct costs 947,255 1,523,194 1,179,227Selling, general and administrative expenses 229,267 239,697 182,518Research and development 7,718 16,704 14,327Depreciation and amortization 217,440 276,353 108,145Impairment expense 436,395 791,807 —(Gain) loss on disposal of assets 3,075 (544) (17)Operating income (loss) (870,008) (1,098,322) 123,744Other income (expense): Interest expense, net (157,465) (82,086) (9,840)Other income (expense), net 9,504 8,773 598Total other income (expense) (147,961) (73,313) (9,242)Income (loss) before reorganization items and income taxes (1,017,969) (1,171,635) 114,502Reorganization items 55,330 — —Income tax expense (benefit) (129,010) (299,093) 45,679Net income (loss) $(944,289) $(872,542) $68,823Net income (loss) per common share: Basic $(7.98) $(8.48) $1.28Diluted $(7.98) $(8.48) $1.22Weighted average common shares outstanding: Basic 118,305 102,853 53,838Diluted 118,305 102,853 56,513See accompanying notes to consolidated financial statements67Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.C&J ENERGY SERVICES LTD. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(In thousands) Years Ended December 31, 2016 2015 2014Net income (loss)$(944,289) $(872,542) $68,823 Other comprehensive income (loss): Foreign currency translation gain (loss), net of income tax(expense) benefit of ($31) and $1,369 as of December 31, 2016and 2015, respectively1,425 (3,980) (45)Comprehensive income (loss)$(942,864) $(876,522) $68,778See accompanying notes to consolidated financial statements68Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Amounts in thousands) Common Shares AdditionalPaid-inCapital Other ComprehensiveLoss RetainedEarnings(Deficit) Total Number ofShares Amount, at$0.01 par value Balance, December 31, 2013 54,604 $546 $254,188 $— $441,417 $696,151Issuance of restricted shares,net of 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,net of issuance costs 62,542 625 709,642 — — 710,267Issuance of restricted shares,net of 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) 632,643Forfeitures of restricted shares (576) (6) 6 — — —Employee tax withholding onrestricted shares vesting (314) (3) (494) — — (497)Tax effect of share-basedcompensation — — (5,592) — — (5,592)Share-based compensation — — 17,740 — — 17,740Net loss — — — — (944,289) (944,289)Foreign currency translationgain, net of tax — — — 1,425 — 1,425Balance, December 31, 2016 119,530 $1,195 $1,009,426 $(2,600) $(1,306,591) $(298,570)See accompanying notes to consolidated financial statements69Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands) Years Ended December 31, 2016 2015 2014Cash flows from operating activities: Net income (loss) $(944,289) $(872,542) $68,823Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 217,440 276,353 108,145Impairment expense 436,395 791,807 —Inventory write-down 35,350 31,109 —Contingent consideration adjustment (4,700) (11,147) —Deferred income taxes (129,533) (273,144) 33,185Provision for doubtful accounts, net of write-offs 1,735 8,071 600Equity (earnings) loss from unconsolidated affiliate 5,663 (500) (471)(Gain) loss on disposal of assets 3,075 (544) (17)Share-based compensation expense 17,740 18,549 18,350Amortization of deferred financing costs 48,310 10,926 1,168Accretion of original issue discount 52,414 6,187 —Reorganization items 30,611 — —Changes in operating assets and liabilities: Accounts receivable 137,075 278,150 (135,784)Inventories 4,244 21,123 (50,001)Prepaid expenses and other current assets 24,447 (26,821) (12,154)Accounts payable (75,016) (168,607) 132,420Payroll and related costs and accrued expenses 35,028 17,400 14,157Income taxes receivable (payable) 3,604 (108) (301)Other (6,965) (3,257) 3,717Net cash provided by (used in) operating activities (107,372) 103,005 181,837Cash flows from investing activities: Purchases of and deposits on property, plant and equipment (57,909) (166,321) (307,598)Proceeds from disposal of property, plant and equipment 32,809 4,468 719Payments made for business acquisitions, net of cash acquired (1,419) (663,303) (33,533)Investment in unconsolidated subsidiary (408) — (3,000)Net cash used in investing activities (26,927) (825,156) (343,412)Cash flows from financing activities: Proceeds from revolving debt 174,000 338,000 229,000Payments on revolving debt (10,600) (532,000) (64,000)Proceeds from term loans — 1,001,400 —Payments on term loans (2,650) (7,950) —Proceeds from DIP Facility 23,000 — —Payments of capital lease obligations (2,388) (3,874) (4,165)Financing costs (1,009) (55,450) (2,265)Proceeds from issuance of common shares for stock options exercised — 453 833Registration costs associated with issuance of common shares — (1,465) —Employee tax withholding on restricted shares vesting (497) (2,621) (4,378)Excess tax benefit (expense) from share-based compensation (5,592) (2,367) 2,153Net cash provided by financing activities 174,264 734,126 157,178 Effect of exchange rate on cash (1,282) 3,908 — Net increase (decrease) in cash and cash equivalents 38,683 15,883 (4,397)Cash and cash equivalents, beginning of year 25,900 10,017 14,414Cash and cash equivalents, end of year $64,583 $25,900 $10,017See accompanying notes to consolidated financial statements70Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR IN POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1 – Organization, Nature of Business and Summary of Significant Accounting PoliciesC&J Energy Services, Inc., a Delaware corporation (the "Successor" and together with its consolidated subsidiaries and for periods subsequent tothe Plan Effective Date as defined below, “C&J” or the “Company”) is a leading provider of well construction, well completion, well support and othercomplementary oilfield services to oil and gas exploration and production companies in North America. The Company offers a comprehensive, vertically-integrated suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing, directionaldrilling, coiled tubing, service rigs, fluids management and other support services. The Company is headquartered in Houston, Texas and operates in allactive onshore basins in the continental United States and Western Canada.C&J's business was founded in Texas in 1997 as a partnership and converted to a Delaware corporation ("Old C&J") in 2010 in connection withan initial public offering that was completed in July 2011 with a listing on the New York Stock Exchange ("NYSE") under the symbol "CJES." In 2015, OldC&J combined with the completion and production services business (the "C&P Business") of Nabors Industries Ltd. ("Nabors") in a transaction (referred toherein as the "Nabors Merger") that nearly tripled the Company's size, significantly expanding the Company's Completion Services business and adding WellSupport Services to the Company's service offering. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&J Energy Services Ltd. (the"Predecessor" and shares of common stock of Old C&J were converted into common shares of the Predecessor on a 1-for-1 basis. Due to the severe industrydownturn, on July 20, 2016, the Predecessor and certain other subsidiaries of the Company (the "Debtors" or the "Reorganized Debtors") filed voluntarypetitions for reorganization seeking relief under the provisions of Chapter 11 with the United States Bankruptcy Court in the Southern District of Texas,Houston Division ("Bankruptcy Court"). These Chapter 11 cases were being administered under the caption "In re: CJ Holding Co., et al., Case No. 16-33590", and the Predecessor commenced ancillary proceedings in Canada on behalf of the Canadian Entities and a provisional liquidation proceeding inBermuda on behalf of the Bermudian Entities (collectively, the "Chapter 11 Proceeding"). Throughout the Chapter 11 Proceeding, the Debtors continuedoperations and management of their assets in the ordinary course as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance withthe applicable provisions of the United States Bankruptcy Code and orders of the Bankruptcy Court.On January 6, 2017 (the "Plan Effective Date"), the Predecessor substantially consummated the plan of reorganization (the "Restructuring Plan")and emerged from the Chapter 11 cases, as part of the transactions undertaken pursuant to the Restructuring Plan, the Predecessor equity was canceled and thePredecessor transferred all of its assets and operations to the Successor. As a result, the Company became the Successor issuer to the Predecessor. See Note 2 -Chapter 11 Proceeding and Emergence for additional information about the Chapter 11 Proceeding and emergence from the Chapter 11 bankruptcy.C&J was listed on the New York Stock Exchange ("NYSE") under the symbol "CJES". Contemporaneously with the commencement of theChapter 11 Proceeding, trading in the Predecessor's common shares on the NYSE was suspended and such shares were ultimately delisted from the NYSE. OnJuly 21, 2016, the Predecessor's common shares began trading on the OTC Markets Group Inc.'s ("OTC") Pink® Open Market under the symbol "CJESQ." OnJanuary 12, 2017, trades in the Successor's common stock began trading on the OTC "Grey marketplace" under the symbol "CJJY".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.The Company’s results for the year ended 2015 include results from the C&P Business from the closing of the Nabors Merger on March 24, 2015through December 31, 2015. Results for periods prior to March 24, 2015 reflect the financial and operating results of Old C&J, and do not include thefinancial and operating results of the C&P Business.Correction of Immaterial Errors. During the fourth quarter of 2015, the Company recorded out-of-period adjustments to correct theoverstatement from the over-accrual of direct costs related to periods from 2008 through December 31, 2014, resulting in a $9.8 million increase to netincome. In evaluating whether these errors, individually and in the aggregate, and the corrections of the errors had a material impact to the periods such errorsand corrections 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 reported71Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSdirect costs, net income or loss, and current and total liabilities. The Company considered a number of qualitative factors, including, among others, that theerrors and the correction of the 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 covenantcompliance and (iii) did not result in a change in the Company's earnings trends when considering the overall competitive and economic environment withinwhich it operated from 2008 through December 31, 2014. Based upon the Company's quantitative and qualitative evaluation, it determined that the errorsand the correction of such errors did not have a material impact to prior periods, individually or in the aggregate, and were not material to the year endingDecember 31, 2015.Reclassifications. Certain reclassifications have been made to prior period amounts to conform to current period financial statement presentation,including changes in accounting principle from the adoption of Accounting Standards Update ("ASU") No. 2015-03, Interest - Imputation of Interest(Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs which requires deferred financing costs to be presented on the balance sheet as adirect deduction from the carrying amount of a debt liability, consistent with debt discounts. Because ASU 2015-03 was applied on a retrospective basis,deferred financing costs of $34.0 million related to the Company's Term Loan B facility have been reclassified to long-term debt and capital lease obligationsas of December 31, 2015. These reclassifications had no effect on the consolidated financial position, results of operations or cash flows of the Company.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, useful lives used in depreciation and amortization, inventory reserves, income taxes andliabilities subject to compromise. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur,as more experience is acquired, or as additional information is obtained and as the Company’s operating environment changes.Cash and Cash Equivalents. For purposes of the consolidated statement of cash flows, cash is defined as cash on-hand, demand deposits, andshort-term investments with initial maturities of three months or less. The Company maintains its cash and cash equivalents in various financial institutions,which at times may exceed federally insured amounts. Management believes that this risk is not significant. Cash balances related to the Company's captiveinsurance subsidiaries, which totaled $16.1 million and $18.3 million at December 31, 2016 and December 31, 2015, respectively, are included in cash andcash equivalents in the consolidated balance sheets, and the Company expects to use these cash balances to fund the operations of the captive insurancesubsidiaries and to settle future anticipated claims.Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are generally stated at the amount billed to customers. TheCompany provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information andexisting economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the requiredpayments at either the contractual due dates or in the future. At December 31, 2016 and 2015, the allowance for doubtful accounts totaled $3.0 million and$7.9 million, respectively. Bad debt expense of $1.7 million, $8.1 million and $0.7 million was included in selling, general, and administrative expenses onthe consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014, 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$35.4 million and $31.1 million to direct costs for the years ended December 31, 2016 and 2015 respectively.Inventories consisted of the following (in thousands):72Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 2015Raw materials $16,367 $34,720Work-in-process 5,022 13,574Finished goods 38,091 58,657Total inventory 59,480 106,951Inventory reserve (5,009) (4,694)Inventory, net $54,471 $102,257Property, Plant and Equipment. Property, plant and equipment (PP&E) are reported at cost less accumulated depreciation. Maintenance andrepairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the value ofthe equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and relatedaccumulated depreciation account are relieved, and any gain or loss is included in operating income.The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the relatedassets, which range from three to 25 years. Depreciation expense was $206.7 million, $261.8 million, and $97.2 million for the years ended December 31,2016, 2015 and 2014, respectively. Major classifications of property, plant and equipment and their respective useful lives were as follows (in thousands): EstimatedUseful Lives As of December 31, 2016 2015Land Indefinite $46,000 $44,592Building and leasehold improvements 5-25 years 121,915 153,320Office furniture, fixtures and equipment 3-5 years 29,435 28,709Machinery and equipment 3-10 years 1,219,645 1,225,505Transportation equipment 5 years 179,426 224,057 1,596,421 1,676,183Less: accumulated depreciation (683,189) (499,894) 913,232 1,176,289Construction in progress 37,579 34,152Property, plant and equipment, net $950,811 $1,210,441PP&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 and data acquisition and control instruments provider service lines as well as the research andtechnology ("R&T") service line. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the relatedassets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is thenallocated across the asset group's major classifications.73Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company concluded that the sharp fall in commodity prices during the second half of 2014 constituted a triggering event that resulted in asignificant slowdown in activity across the Company’s customer base, which in turn has increased competition and put pressure on pricing for its servicesthroughout 2015 and 2016. Although the severity and extent of this continued downturn is uncertain, absent a significant recovery in commodity prices,activity and pricing levels may continue to decline in future periods. As a result of the triggering event during the fourth quarter of 2014, PP&Erecoverability testing was performed throughout 2015 and 2016 on the asset groups in each of the Company’s service lines. For the 2016 year, therecoverability testing for the coiled tubing, directional drilling, cementing, artificial lift applications and international coiled tubing asset groups yielded anestimated undiscounted net cash flow that was less than the carrying amount of the related assets. The estimated fair value for each respective asset group wascompared to its carrying value, and impairment expense of $61.1 million was recognized during 2016 and allocated across each respective asset group'smajor classification. The impairment charge was primarily related to underutilized equipment in the Completion Services and Other Services segments. Thefair value of these assets was based on the projected present value of future cash flows that these assets are expected to generate. Should industry conditionsnot significantly improve or worsen, additional impairment charges may be required in future periods.On June 29, 2016, the Company sold a majority of the assets comprising their specialty chemicals supply business, including PP&E, forapproximately $9.3 million of net cash.PP&E impairment expense for the years ended December 31, 2016 and 2015 were recognized across each asset group as follows (in thousands): Years Ended December 31, 2016 2015Hydraulic Fracturing $— $255,283Coiled Tubing 36,130 94,546Cementing 11,814 —Directional Drilling 1,933 6,625International Coiled Tubing 4,663 6,931Equipment Manufacturing and Repair Services 3,238 13,847Specialty Chemicals — 3,070Artificial lift 2,784 —Research and Technology 518 12,777Total PP&E impairment expense $61,080 $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. During the first quarter of 2016, commodityprice levels remained depressed which materially and negatively impacted the Company's results of operations, and the further declines in the Company'sshare price led to another interim period test for goodwill impairment. See Note 6 - Goodwill and Other Intangible Assets for further discussion on impairmenttesting 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 concluded74Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSthat no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possiblegoodwill impairment loss. The second step, or Step 2 testing, includes hypothetically valuing the tangible and intangible assets and liabilities of thereporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is comparedto the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment lossis recognized in an amount equal to the excess, not to exceed the carrying value.The 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, sales, general and administrative ("SG&A") rates, working capital fluctuations, capital expenditures, discount rates,terminal growth rates, and price-to-earnings multiples. The Company’s market capitalization is also used to corroborate reporting unit valuations.Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicatethe carrying amount may not be recoverable.Definite-lived intangible assets are amortized over their estimated useful lives. Along with PP&E, these intangibles are reviewed for impairmentwhen a triggering event indicates that the asset may have a net book value in excess of recoverable value. In these cases, the Company performs arecoverability test on its PP&E and definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generatedfrom the use of these assets to the carrying amount of the assets for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of theassets, an impairment does not exist and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the assets, the assetsare not recoverable and the amount of impairment must be determined by fair valuing the assets.For further discussion of the application of this accounting policy regarding impairments, please see Note 6 - Goodwill and Other IntangibleAssets.Deferred Financing Costs. Costs incurred to obtain term debt financing are presented on the balance sheet as a direct deduction from the carryingamount of the term debt, consistent with debt discounts, and accreted over the term of the loan using the effective interest method. Costs incurred to obtainrevolver based financing are capitalized and amortized over the term of the loan using the effective interest method. These costs are classified within interestexpense on the consolidated statements of operations and were $48.3 million, $10.9 million and $1.2 million for the years ended December 31, 2016, 2015and 2014, respectively. Accumulated amortization of deferred financing costs was $58.8 million and $10.5 million at December 31, 2016 and 2015,respectively. As of December 31, 2016, and prior to emergence from the Chapter 11 Proceeding, deferred financing costs were fully amortized to zero.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 spotmarket basis or pursuant to contractual arrangements, such as term contracts and pricing agreements. Under either scenario, revenue is recognized andcustomers are invoiced upon the completion of each job, which can consist of one or more fracturing stages. Once a job has been completed to the customer’ssatisfaction, a field ticket is written that includes charges for the service performed and the consumables (such as fluids and proppants) used during the courseof service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment usedon 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 ofservice.Pursuant to pricing agreements and other contractual arrangements which the Company may enter into from time to time, such as thoseassociated with an award from a bid process, customers typically commit to targeted utilization levels based on a specified number of hours of service atagreed-upon pricing, but without termination penalties or obligations to pay for services not used by the customer. In addition, the agreed-upon pricing istypically subject to periodic review, as specifically defined in the agreement, and may be adjusted upon the agreement of both parties.75Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSCasedhole Solutions Revenue. Through its Casedhole Solutions service line, the Company provides cased-hole wireline, pumpdown services,wireline logging, perforating, pressure pumping, well site make-up and pressure testing and other complementary services, on a spot market basis. Jobs forthese services are typically short-term in nature, lasting anywhere from a few hours to multiple days. The Company typically charges the customer for theseservices on a per job basis at agreed-upon spot market rates. Revenue is recognized based on a field ticket issued upon the completion of the job.Revenue from Materials Consumed While Performing Certain Completion Services. The Company generates revenue from consumables usedduring the 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.Other Completion Services. The Company generates revenue from certain smaller well construction service lines, specifically cementing anddirectional drilling services, and R&T which is primarily engaged in the engineering and production of certain parts and components, such as perforatingguns and addressable switches, which are used in the completion process.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.Well Support Services SegmentRig Services Revenue. Through its rig service line, the Company provides workover and well servicing rigs that are primarily used for routinerepair and maintenance of oil and gas wells, re-drilling operations and plugging and abandonment operations. These services are provided on an hourly basisat prices that approximate spot market rates. Revenue is recognized and a field ticket is generated upon the earliest of the completion of a job or at the end ofeach day. A rig services job can last anywhere from a few hours to multiple days depending on the type of work being performed. The field ticket includes thebase hourly rate 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 storage, transportation 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.Coiled Tubing Services Revenue. Through its coiled tubing service line, the Company provides a range of coiled tubing services primarily usedfor frac plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services aretypically 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 acompleted field ticket. The field ticket includes charges for the services performed and the consumables (such as stimulation fluids, nitrogen and coiledtubing materials) used during the course of service. The field ticket may also include charges for the mobilization and set-up of equipment, the personnel onthe job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the servicesperformed and resources provided on an hourly basis at agreed-upon spot market rates.76Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn addition, ancillary to coiled tubing services revenue, the Company generates revenue from stimulation fluids, nitrogen, coiled tubingmaterials and other consumables used during those processes.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.With respect to its artificial lift applications, the Company generates revenue primarily from the sale of manufactured equipment and products.Revenue is recognized upon the completion, delivery and customer acceptance of each order.Other Services SegmentRevenue within the Other Services Segment is generated from certain of the Company's smaller, non-core service lines that have either beendivested or are in the process of being divested, such as, equipment manufacturing and repair operations and the Company's international coiled tubingoperations in the Middle East.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, 2016, 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 8 – Share-Based Compensation.Fair Value of Financial Instruments. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accountspayable, the DIP Facility (as defined in Note 5 - Debt and Capital Lease Obligations). The recorded values of cash and cash equivalents, accounts receivable,accounts payable and the DIP Facility approximate their fair values given the short-term nature of these instruments.Equity Method Investments. The Company has investments in joint ventures which are accounted for under the equity method of accounting asthe Company has the ability to exercise significant influence over operating and financial policies of the joint venture. Judgment regarding the level ofinfluence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors,participation in policy-making decisions and material intercompany transactions. Under the equity method, original investments are recorded at cost andadjusted by the Company’s share of undistributed earnings and losses of these investments. The Company eliminates all significant intercompanytransactions, including the intercompany portion of transactions with equity method investees, from the consolidated financial results.The carrying value of the Company's equity method investments at December 31, 2016 and December 31, 2015 was $9.0 million and $14.3million, 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 ($5.7) million for the year ended December 31, 2016 and approximately $0.5 million for each of the years endedDecember 31, 2015 and 2014, and is included in other expense, net, on the consolidated statements of operations.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.The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized asincome or expense in the period that includes the enactment date.77Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe 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 has federal, state and international net operating loss carryforwards that will expire in the years 2021 through 2036. Afterconsidering the scheduled reversal of deferred tax liabilities, projected future taxable income, the potential limitation on use of NOLs under Section 382 andtax planning strategies and tax planning strategies, the Company established a valuation allowance due to the uncertainty regarding the ultimate realizationof the deferred tax assets associated with its carryforwards.On the Plan Effective Date, the Company believes it experienced an ownership change for purposes of Internal Revenue Code Section 382 asresult of its Restructuring Plan and that its pre-change NOLs are subject to an annual limitation. The ownership change and resulting annual limitation on useof NOLs are not expected to result in the expiration of the Company's NOL carryforwards if it is able to generate sufficient future taxable income within thecarryforward periods. However, the limitation on the amount of NOL available to offset taxable income in a specific year may result in the payment of incometaxes before all NOLs have been utilized. Additionally, a subsequent ownership change may result in further limitation on the ability to utilize existing NOLsand other tax attributes.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 50.0% likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions arereversed in the first period in which it is no longer more-likely-than-not that the tax position would be sustained upon examination. Income tax relatedinterest and penalties, if applicable, are recorded as a component of the provision for income tax expense. The Company recorded income tax expense forunrecognized tax benefits equal to $6.5 million and zero for the periods ending December 31, 2016 and December 31, 2015 respectively.Earnings Per Share. Basic earnings per share is based on the weighted average number of common shares (“common shares”) outstanding duringthe applicable period and excludes shares subject to outstanding stock options and shares of restricted stock. Diluted earnings per share is computed based onthe weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of sharessubject to 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, 2016 2015 2014 (In thousands, except per share amounts)Numerator: Net income (loss) attributed to common shareholders $(944,289) $(872,542) $68,823Denominator: Weighted average common shares outstanding - basic 118,305 102,853 53,838Effect of potentially dilutive securities: Stock options — — 2,245Restricted stock — — 430Weighted average common shares outstanding - diluted 118,305 102,853 56,513Net income (loss) per common share: Basic $(7.98) $(8.48) $1.28Diluted $(7.98) $(8.48) $1.22A summary of securities excluded from the computation of basic and diluted earnings per share is presented below for the applicable periods:78Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2016 2015 2014 (In thousands)Basic earnings per share: Unvested restricted stock 1,529 2,610 1,448Diluted earnings per share: Anti-dilutive stock options 4,808 3,661 201Anti-dilutive restricted stock 1,490 2,125 3Potentially dilutive securities excluded as anti-dilutive 6,298 5,786 204On January 6, 2017, the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. As part of thetransactions undertaken pursuant to the Restructuring Plan, all of the existing shares of the Predecessor common equity that were used in the above earningsper share calculations were canceled as of the Plan Effective Date.Recent Accounting Pronouncements.In May 2014, the Financial Accounting Standards Board ("FASB") issued a comprehensive new revenue recognition standard, AccountingStandards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") that will supersede existing revenue recognition guidanceunder U.S. GAAP. In August 2015, the FASB issued an accounting standards update for a one-year deferral of the revenue recognition standard's effectivedate for all entities, which changed the effectiveness to annual reporting periods beginning after December 15, 2017, including interim periods within thatreporting period. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standardcreates a five step model that requires companies to exercise judgment when considering the terms of a contract and all relevant facts and circumstances. Thestandard allows for several transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) amodified retrospective adoption in which the standard is applied only to the most current period presented in the financial statements, including additionaldisclosures of the standard’s application impact to individual financial statement line items. The Company is currently evaluating the impact, if any, ofadopting this new accounting standard on its results of operations and financial position.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 does notexpect this ASU to have a material impact on its consolidated financial statements.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.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU No. 2016-02 seeks to increase transparency andcomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasingarrangements. Unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, ASU No. 2016-02 will require bothoperating and finance leases to be recognized on the balance sheet. Additionally, the new guidance will require disclosures to help investors and otherfinancial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitativerequirements. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within thosefiscal years, and early application is permitted. The Company is currently evaluating the impact of adopting this new accounting standard on its results ofoperations and financial position.In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting ("ASU 2016-09"), to simplify certain provisions in stock79Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTScompensation accounting, including the simplification of accounting for a stock payment's tax consequences. The ASU amends the guidance for classifyingawards as either equity or liabilities, allows companies to estimate the number of stock awards they expect to vest, and revises the tax withholdingrequirements for stock awards. The amendments in ASU No. 2016-09 are effective for public companies for fiscal years beginning after December 15, 2016,including interim periods within those fiscal years, and early application is permitted. The Company is currently evaluating the impact of adopting this newaccounting standard on its results of operations and financial position.June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments (“ASU 2016-13”), which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected creditlosses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments inASU 2016-13 are effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, andrequires a modified retrospective transition approach. The Company is currently evaluating the impact this standard will have on its results of operations andfinancial position.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer ofinventory, when the transfer occurs. The ASU is effective for the interim and annual reporting periods beginning after December 15, 2017, including interimperiods within those fiscal years, and early application is permitted. The Company is currently evaluating the impact of adopting this new accountingstandard on its results of operations and financial position.Note 2 - Chapter 11 Proceeding and EmergenceOverviewOn July 8, 2016, C&J and certain of its direct and indirect subsidiaries, including C&J Corporate Services (Bermuda) Ltd. (together with C&J,collectively the “Bermudian Entities”), C&J Energy Production Services-Canada Ltd. and Mobile Data Technologies Ltd. (together, the “CanadianEntities”), entered into a Restructuring Support and Lock-Up Agreement (the “Restructuring Support Agreement”), with certain lenders (the “SupportingLenders”) holding approximately 90.0% of the secured claims and interests arising under the Credit Agreement, dated as of March 24, 2015 (as amended andotherwise modified, the “Credit Agreement”). The Restructuring Support Agreement contemplated the implementation of a restructuring of the Company,including eliminating all amounts owed under the Company’s Credit Agreement, through a debt-to-equity conversion and equity rights offering, whichtransaction was effectuated through the Restructuring Plan under Chapter 11 of Title 11 (“Chapter 11”) of the United States Bankruptcy Code (the“Bankruptcy Code”), which was subject to the approval of the Bankruptcy Court.To implement the restructuring, on July 20, 2016 (the "Petition Date"), the Debtors filed voluntary petitions for reorganization (the "BankruptcyPetitions") seeking relief under the provisions of Chapter 11 with the Bankruptcy Court. These Chapter 11 cases were being administered under the caption"In re: CJ Holding Co., et al., Case No. 16-33590", and the Company commenced ancillary proceedings in Canada on behalf of the Canadian Entities and aprovisional liquidation proceeding in Bermuda on behalf of the Bermudian Entities. Throughout the Chapter 11 Proceeding, the Debtors continuedoperations and management of their assets in the ordinary course as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance withthe applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.The Restructuring Support Agreement contained certain Restructuring Plan-related milestones, including deadlines: (a) to file the RestructuringPlan and related disclosure statement; (b) for entry of interim and final DIP orders; (c) for entry of the Disclosure Statement order; (d) for entry of theConfirmation Order; and (e) for the Plan Effective Date to occur. In accordance with the Restructuring Support Agreement, the Debtors filed the RestructuringPlan with the Bankruptcy Court on August 19, 2016, with a first amendment to the Restructuring Plan filed on September 28, 2016 and a second amendmentfiled on November 3, 2016. On November 4, 2016, the Bankruptcy Court approved the Disclosure Statement, finding that the Disclosure Statement containedadequate information as required by the Bankruptcy Code. The Debtors then launched a solicitation of acceptances of the Restructuring Plan, as required bythe Bankruptcy Code. On December 16, 2016, the Confirmation Order confirming the Restructuring Plan was entered by the Bankruptcy Court. On January 6,2017, the Debtors substantially consummated the Restructuring Plan and emerged from their Chapter 11 cases. As part of the transactions undertakenpursuant to the Restructuring Plan, C&J’s equity was canceled, and all of C&J's assets and operations were transferred to the Successor, C&J Energy Services,Inc. As a result, the Successor became the successor issuer to the Predecessor.80Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe key terms of the restructuring included in the Restructuring Plan were as follows:•Debt-to-equity Conversion: The Supporting Lenders were issued new common equity in the reorganized Company ("New Equity"), and allof the existing shares of the Predecessor common equity were canceled as of the Plan Effective Date.•The Rights Offering: Certain of the Supporting Lenders (the "Backstop Parties") agreed to provide an equity rights offering for aninvestment in the Successor in an amount of up to $200 million as part of the approved Restructuring Plan (the “Rights Offering”). TheRights Offering was consummated on the Plan Effective Date pursuant to a Backstop Commitment Agreement, which also provided for acommitment premium of 5.0% of the $200 million committed amount payable in New Equity to the Backstop Parties (the “BackstopFee”). The Rights Offering shares were issued at a price that reflects a discount of 20.0% to the Restructuring Plan value, which was $750million.•DIP Facility: Certain of the Supporting Lenders (the “DIP Lenders”) provided a superpriority secured delayed draw term loan facility to thePredecessor in an aggregate principal amount of up to $100 million (the “DIP Facility”). As further discussed below, on July 25, 2016, theBankruptcy Court entered an order approving the Debtors’ entry into the DIP Facility on an interim basis, pending a final hearing. On July29, 2016, the Debtors entered into a superpriority secured debtor-in-possession credit agreement, among the Debtors, the DIP Lenders andCortland Capital Market Services LLC, as Administrative Agent (the “DIP Credit Agreement”), which set forth the terms and conditions ofthe DIP Facility. On September 25, 2016, the Bankruptcy Court entered a final order approving entry into the DIP Facility and DIP CreditAgreement. The Company repaid all amounts outstanding under the DIP Facility on the Plan Effective Date using proceeds from theRights Offering.•The New Credit Facility: The Company and certain of its subsidiaries, as borrowers (the “Borrowers”), entered into a revolving credit andsecurity agreement (the “New Credit Facility”) dated the Plan Effective Date, with PNC Bank, National Association, as administrativeagent (the “Lender”). The New Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of$100 million and a borrowing base, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory.The New Credit Facility also contains an availability block, which will reduce the amount otherwise available to be borrowed under theNew Credit Facility by $20 million until the later of the delivery of financial statements for the fiscal year ending December 31, 2017 andthe date on which the Company achieves a fixed charge coverage ratio of 1.10:1.0. The New Credit Facility also provides for the issuanceof letters of credit, which would reduce borrowing capacity thereunder. The maturity date of the New Credit Facility is January 6, 2021.•The New Warrants: On the Plan Effective Date, the Company issued new seven-year warrants exercisable on a net-share settled basis intoup to 6.0% of the New Equity at a strike price of $27.95 per warrant (the “New Warrants”). New Warrants representing up to 2.0% of theNew Equity were issued to existing holders of Predecessor common equity as a result of such holders voting as a class to accept theRestructuring Plan, and the remaining New Warrants representing up to 4.0% of the New Equity were issued to the Debtors' generalunsecured creditors.•Distributions: The DIP Lenders received payment in full in cash on the Plan Effective Date from cash on hand and proceeds from theRights Offering. The Supporting Lenders received all of the New Equity, subject to dilution on account of the Management Incentive Plan(as defined below), the Rights Offering, the Backstop Fee and the New Warrants, along with all of the subscription rights under the RightsOffering. Under the Restructuring Plan, mineral contractor claimants will be paid in full in the ordinary course of business. Additionally,subject to the terms of the Restructuring Plan, certain other unsecured claimants will share in a $33.0 million cash recovery pool, plus aportion of the New Warrants, as described above.•Management Incentive Plan: 10.0% of the New Equity was reserved for a management incentive program to be issued to management ofthe reorganized Company after the Plan Effective Date at the discretion of the board of the reorganized Company (the “ManagementIncentive Plan”).•Governance: The board of the reorganized Company was appointed by the Supporting Lenders and includes the reorganized Company’sChief Executive Officer.81Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSReorganization ProcessOn and after the Petition Date, the Bankruptcy Court issued certain additional interim and final orders with respect to the Company's’ first-daymotions and other operating motions that allowed the Company to operate the business in the ordinary course. The first-day motions provided for, amongother things, the payment of certain pre-petition employee expenses and benefits, the use of the Company’s existing cash management system, the paymentof certain pre-petition amounts to certain critical vendors and mineral lien claimants, the ability to pay certain pre-petition taxes and regulatory fees, and thepayment of certain pre-petition claims owed on account of insurance policies and programs.Subject to certain exceptions under the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically stayed the continuation of anyjudicial or administrative proceedings or other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the filing ofthe Bankruptcy Petitions. Most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the Debtors’property, or to collect on monies owed or otherwise exercise rights or remedies with respect to a pre-petition claim were stayed.Under Section 365 and other relevant sections of the Bankruptcy Code, the Debtors may assume, assume and assign, or reject certain executorycontracts and unexpired leases, including leases of real property and equipment, subject to the approval of the Bankruptcy Court and certain otherconditions, including Supporting Lender approval in accordance with the Restructuring Support Agreement.Under Chapter 11, the Restructuring Plan determined the rights and satisfaction of claims and interests of various creditors and security holdersand was subject to negotiation amongst the Debtors’ creditors, including the Supporting Lenders and other interested parties, and required Bankruptcy Courtapproval via the Confirmation Order. The Restructuring Plan, among other things, provides mechanisms for treatment of the Debtors’ pre-petitionobligations, treatment of the Predecessor’s existing equity holders, potential income tax liabilities and certain corporate governance and administrativematters pertaining to the Successor.Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, pre-petition liabilities and post-petitionliabilities must be satisfied in full before shareholders are entitled to receive any distribution or retain any property under a Chapter 11 plan. The ultimaterecovery to creditors and shareholders was determined upon confirmation of the Restructuring Plan.The Company filed schedules and statements with the Bankruptcy Court setting forth, among other things, the assets and liabilities of each of theDebtors. These schedules and statements were subject to further amendment or modification after filing. Certain holders of pre-petition claims that are notgovernmental units were required to file proofs of claim by the deadline for general claims, (the “bar date”), which was set by the Bankruptcy Court asNovember 8, 2016. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and will be reconciled and resolvedto within an immaterial amount in connection with the claims resolution process. In light of the expected number of creditors, the claims resolution processmay take considerable time to complete and is continuing after the Debtors emergence from bankruptcy. Accordingly, the ultimate number and amount ofallowed claims is not presently known, nor can the ultimate recovery with respect to allowed claims be presently asserted. As of December 31, 2016, theCompany estimated that approximately $960 million of filed claims had not yet been resolved.Liabilities Subject to CompromiseAs of December 31, 2016, the Company has segregated liabilities and obligations whose treatment and satisfaction were dependent on theoutcome of its reorganization under the Chapter 11 Proceeding and has classified these items as liabilities subject to compromise. Generally, all actions toenforce or otherwise effect repayment of pre-petition liabilities of the Debtors, as well as all pending litigation against the Debtors, were stayed while theCompany is subject to the Chapter 11 Proceeding. The ultimate amount and treatment for these types of liabilities will be subject to the claims resolutionprocesses in the Chapter 11 Proceeding and the terms of the Restructuring Plan confirmed by the Bankruptcy Court in the Chapter 11 Proceeding. Liabilitiessubject to compromise includes only those liabilities that are obligations of the Debtors and excludes the obligations of the Company's non-debtorsubsidiaries. As noted above, those liabilities subject to compromise may vary significantly from the stated amounts of claims filed with the BankruptcyCourt.Principal and accrued interest owed to the Supporting Lenders as of the Petition Date were settled via the issuance of New Equity under theRestructuring Plan. Interest expense incurred subsequent to the Petition Date was not accrued since it was not treated as an allowed claim under theRestructuring Plan. For the year ended December 31, 2016, the Company did not accrue interest totaling $60.5 million under the Credit Agreementsubsequent to the Petition Date.82Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAs of December 31, 2016, the Company classified the entire principal balance of the Revolving Credit Facility, the Five-Year Term Loans andthe Seven-Year Term Loans (see Note 5 - Debt and Capital Lease Obligations for defined terms), as well as interest that was accrued but unpaid as of thePetition Date, as liabilities subject to compromise in accordance with ASC 852 - Reorganizations. The components of liabilities subject to compromise are asfollows (in thousands): December 31, 2016Revolving Credit Facility $284,400Five-Year Term Loans 569,250Seven-Year Term Loans 480,150Total debt subject to compromise 1,333,800Accrued interest on debt subject to compromise 37,516Accounts payable and other estimated allowed claims 60,780Related party payables 13,250Total liabilities subject to compromise $1,445,346Reorganization ItemsThe Company classifies all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 Proceeding asreorganization items in its consolidated statements of operations. In addition, the Company reports professional fees and related costs associated with andincurred during the Chapter 11 Proceeding as reorganization items. The components of reorganization items are as follows (in thousands): Year Ended December 31,2016Professional fees $41,240Contract termination settlements 20,383Revision of estimated claims 782Related party settlement (5,226)Vendor claims adjustment (1,849)Total reorganization items $55,330In accordance with the requirements of ASC 852 - Reorganizations, the following are condensed combined financial statements of the Debtorentities:83Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSC&J ENERGY SERVICES LTD. AND CERTAIN SUBSIDIARIES (DEBTOR-IN-POSSESSION) (1)CONDENSED COMBINED BALANCE SHEET(In thousands)(Unaudited) December 31, 2016 ASSETS Current assets: Cash and cash equivalents $47,780 Accounts receivable, net of allowance of $2,951 136,608 Inventories, net 52,413 Prepaid and other current assets 36,801 Deferred tax assets 5,817 Total current assets 279,419 Property, plant and equipment, net of accumulated depreciation of $681,788 950,207 Intangible assets, net 59,934 Investments in non-debtor subsidiaries 7,489 Intercompany receivables from non-debtor subsidiaries 42,909 Other noncurrent assets 33,397 Total assets $1,373,355 LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable $74,993 Accrued expenses and other 76,624 DIP Facility 25,000 Total current liabilities 176,617 Deferred tax liabilities 15,196 Intercompany payables to non-debtor subsidiaries 3,557 Other long-term liabilities 11,903 Total liabilities not subject to compromise 207,273 Liabilities subject to compromise 1,445,346 Total liabilities 1,652,619 Total shareholders' deficit (279,264) Total liabilities and shareholders’ deficit $1,373,355 84Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSC&J ENERGY SERVICES LTD. AND CERTAIN SUBSIDIARIES (DEBTOR-IN-POSSESSION) (1)CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(In thousands)(Unaudited) Year Ended December 31,2016Revenue $970,837Costs and expenses: Direct costs 940,352Selling, general and administrative expenses 238,679Research and development 7,718Depreciation and amortization 214,335Impairment expense 423,216(Gain) loss on disposal of assets 3,097Operating loss (856,560)Other income (expense): Interest expense, net (155,132)Equity in losses of non-debtor subsidiaries (30,133)Other income (expense), net 19,375Total other income (expense) (165,890)Loss before reorganization items and income taxes (1,022,450)Reorganization items 55,330Income tax benefit (133,768)Net loss (944,012)Comprehensive loss, net of income taxes: Net loss (944,012)Other comprehensive income (loss): Foreign currency translation gain (loss), net of tax 1,425Comprehensive loss $(942,587) 85Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSC&J ENERGY SERVICES LTD. AND CERTAIN SUBSIDIARIES (DEBTOR-IN-POSSESSION) (1)CONDENSED COMBINED STATEMENT OF CASH FLOWS(In thousands)(Unaudited) Year Ended December 31,2016Cash flows from operating activities: Net loss $(944,012)Adjustments to reconcile net loss to net cash used in operating activities 855,421Net cash used in operating activities (88,591)Cash flows from investing activities: Purchases of and deposits on property, plant and equipment (54,499)Proceeds from disposal of property, plant and equipment 32,786Investment in unconsolidated affiliate (408)Payments made for business acquisitions, net of cash acquired (1,419)Investment in non-debtor subsidiaries (8,244)Payments made for intercompany receivables (8,538)Net cash used in investing activities (40,322)Cash flows from financing activities: Proceeds from revolving debt 174,000Payments on revolving debt (10,600)Payments on term loans (2,650)Proceeds from DIP Facility 23,000Payments of capital lease obligations (2,388)Financing costs (1,009)Payments on non-debtor intercompany notes (2,281)Employee tax withholding on restricted shares vesting (497)Excess tax expense from share-based compensation (5,592)Net cash provided by financing activities 171,983 Effect of exchange rate changes on cash (2,129) Net increase in cash and cash equivalents 40,941Cash and cash equivalents, beginning of period 6,839Cash and cash equivalents, end of period $47,780(1) As of December 31, 2016, the subsidiaries of C&J Energy Services Ltd. that had filed voluntary petitions seeking relief under the Chapter 11Proceeding were CJ Holding Co.; Blue Ribbon Technology Inc.; C&J Corporate Services (Bermuda) Ltd.; C&J Energy Production Services-Canada Ltd.;C&J Energy Services, Inc.; C&J Spec-Rent Services, Inc.; C&J VLC, LLC; C&J Well Services Inc.; ESP Completion Technologies LLC; KVS Transportation,Inc.; Mobile Data Technologies Ltd.; Tellus Oilfield Inc.; Tiger Cased Hole Services Inc.; and Total E&S, Inc. The condensed combined balance sheet, thecondensed combined statements of operations and comprehensive loss and the condensed combined statement of cash flows above include only thoseentities that were subject to Chapter 11 Proceeding as of December 31, 2016. All direct and indirect investments in debtor subsidiaries that were included inthe condensed combined financial statements have been eliminated.Note 3 – LiquidityAs of December 31, 2016, the Company had a cash balance of approximately $64.6 million, and $75.0 million of available borrowing capacityunder the DIP Facility. As of December 31, 2016, the Company had borrowings totaling $25.0 million associated with the DIP Facility, all of which areclassified as a current liability on the consolidated balance sheet.As of December 31, 2016 and prior to Plan Effective Date, the Company's primary sources of liquidity were from cash on hand and borrowingsunder the DIP Facility. On the Plan Effective Date, the Debtors emerged from the Chapter 11 Proceeding, and in connection with the Restructuring Plan, theCompany closed on the $200 million Rights Offering. Proceeds from the Rights Offering were used to repay $25.0 million associated with the DIP Facility,and the DIP Facility was canceled86Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSand discharged. On the Plan Effective Date, the Company entered into the New Credit Facility, which allows the Borrowers to incur revolving loans in anaggregate amount up to the lesser of $100 million and a borrowing base, which borrowing base is based upon the value of the Company's accounts receivableand inventory. The New Credit Facility also contains an availability block, which will reduce the amount otherwise available to be borrowed under the NewCredit Facility by $20 million until the later of the delivery of financial statements for the fiscal year ending December 31, 2017 and the date on which theCompany achieves a fixed charge coverage ratio of 1.10:1.0. The New Credit Facility also provides for the issuance of letters of credit, which would furtherreduce borrowing capacity.As of February 24, 2017, the Company had a cash balance of approximately $115.0 million and $63.4 million of available borrowing capacityunder the Company's New Credit Facility after taking into consideration the $20 million availability block and the Company's current outstanding letters ofcredit of approximately $15.1 million (see Note 5 - Debt and Capital Lease Obligations for defined terms).The Company's ability to maintain adequate liquidity after emerging from the Chapter 11 Proceeding depends on its ability to successfullyimplement the Restructuring Plan, successful operation of its business, and appropriate management of operating expenses and capital spending. TheCompany's anticipated liquidity needs are highly sensitive to changes in each of these and other factors.Note 4 – Fresh Start AccountingThe Company will adopt the fresh start accounting provisions ("Fresh Start") on the Plan Effective Date in connection with the Company'semergence from bankruptcy. Although the effective date of the Restructuring Plan was January 6, 2017, the Company will account for the consummation ofthe Restructuring Plan as if it had occurred on January 1, 2017 and has implemented Fresh Start reporting as of that date. The adoption of Fresh Startaccounting will result in a new reporting entity, the Successor, for financial reporting purposes. The presentation is analogous to that of a new business entitysuch that on the Plan Effective Date the Successor's consolidated financial statements reflect a new capital structure with no beginning retained earnings ordeficit and a new basis in the identifiable assets and liabilities assumed. In order to adopt Fresh Start accounting, the Company has to meet the following twoconditions: (i) holders of existing voting shares of the Predecessor immediately before the Plan Effective Date received less than 50.0% of the voting sharesof the Successor and (ii) the reorganization value of the Successor was less than its post-petition liabilities and estimated allowed claims.As part of Fresh Start accounting, the Company is required to determine the reorganization value of the Successor upon emergence from theChapter 11 Proceeding. Reorganization value approximates the fair value of the entity, before considering liabilities, and approximates the amount a willingbuyer would pay for the assets of the entity immediately after the restructuring. The fair value of the Successor's assets will be determined with the assistanceof a third party valuation expert who is expected to use available comparable market data and quotations, discounted cash flow analysis, and other methodsin determining the appropriate asset fair values. The reorganization value will be allocated to the Company's individual assets based on their estimated fairvalues.Enterprise value, which was used to derive reorganization value, represents the estimated fair value of an entity’s capital structure whichgenerally consists of long term debt and shareholders’ equity. The Successor’s enterprise value, as approved by the Bankruptcy Court in support of theRestructuring Plan, was estimated to be $750 million which represented the mid-point of a determined range of $600 million to $900 million. The Successor'senterprise value of $750 million was determined based upon $725.9 million of New Equity and New Warrants as approved by the Bankruptcy Court and$24.1 million of other liabilities that were not eliminated or discharged under the Restructuring Plan. The Successor's enterprise value was determined withthe assistance of a separate third party valuation expert who used available comparable market data and quotations, discounted cash flow analysis and otherinternal financial information and projections. This enterprise value combined with the Company’s Rights Offering was the basis for deriving equity value. The Company’s estimates of fair value are inherently subject to significant uncertainties and contingencies beyond its control. Accordingly, there can be noassurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially. Moreover, the market value of the Company’s common stock subsequent to its emergence from bankruptcy may differ materially from the equity valuationderived for accounting purposes.The unaudited pro forma balance sheet below summarizes the impact of the reorganization and the Fresh Start accounting as if the effective dateof the emergence from bankruptcy had occurred on December 31, 2016. The reorganization value has been allocated to the assets acquired based upon theirestimated fair values, as shown below. The estimated fair values of certain assets and liabilities, including property, plant and equipment, other intangibleassets, taxes (including uncertain tax positions), and contingencies require significant judgments and estimates. C&J continues to assess the fair values87Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 certain assets acquired and liabilities assumed, and these estimated fair values are preliminary and subject to material change (in thousands): PredecessorDecember 31, 2016 ReorganizationAdjustments Fresh StartAdjustments Successor Proforma December31, 2016 (Unaudited) (Unaudited) (Unaudited)ASSETS Current assets: Cash and cash equivalents $64,583 $111,281(b)(c)(d)(e)(f)(g)$— $175,864 Accounts receivable 137,222 — — 137,222 Inventories, net 54,471 — — 54,471 Prepaid and other current assets 37,392 — — 37,392 Deferred tax assets 6,020 — — 6,020 Total current assets 299,688 111,281 — 410,969Property, plant and equipment, net 950,811 — (349,435)(h)601,376Other assets: Intangible assets, net 76,057 — (26,057)(h)50,000 Deferred financing costs — 2,248(g)— 2,248 Other noncurrent assets 35,045 — — 35,045Total assets $1,361,601 $113,529 $(375,492) $1,099,638LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable $75,193 $— $— $75,193 Payroll and related costs 18,287 — — 18,287 Accrued expenses 59,129 (16,051)(d)(e)— 43,078 DIP Facility 25,000 (25,000)(e)— — Other current liabilities 3,026 — — 3,026 Total current liabilities 180,635 (41,051) — 139,584Deferred tax liabilities 15,613 — — 15,613Other long-term liabilities 18,577 — — 18,577 Total liabilities not subject to compromise 214,825 (41,051) — 173,774Liabilities subject to compromise 1,445,346 (1,445,346)(a)(b)(c) —Commitments and contingencies Shareholders' equity: Common stock 1,195 555 (1,195)(i)555 Additional paid-in capital 1,009,426 925,309(a)(f)(1,009,426)(i)925,309 Accumulated other comprehensive loss (2,600) — 2,600(i)— Retained earnings (deficit) (1,306,591) 674,062(a)(c)(d)632,529(h)(i)— Total shareholders' equity (298,570) 1,599,926 (375,492) 925,864Total liabilities and shareholders' equity $1,361,601 $113,529 $(375,492) $1,099,638(a) To record the discharge of indebtedness under the old Credit Agreement in exchange for the New Equity and toreflect the issuance of the New Warrants.88Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.(b) To record the settlement of liabilities subject to compromise related to contract cures, 503(b)(9) claims and criticalvendors.(c) To record the settlement of liabilities subject to compromise related to the general unsecured creditors.(d) To record the professional fees to be paid at or subsequent to emergence.(e) To record repayment of DIP Facility and related accrued interest.(f) To record the cash proceeds received from the $200 million rights offering.(g) To record deferred loan costs associated with the closing of the New Credit Facility.(h) To record the Fresh Start accounting adjustments based upon the individual net asset fair values.(i) To eliminate the historical equity of the Predecessor company in accordance with ASC 852, Reorganizations.Note 5 - Debt and Capital Lease ObligationsLong term debt and capital lease obligations consisted of the following as of December 31, 2016 and 2015 (in thousands): As of December 31, 2016 2015 Revolving Credit Facility $284,400 $121,000Five-Year Term Loans, net of original issue discount and deferred financing costs of $34,336as of December 31, 2015 569,250 536,353Seven-Year Term Loans, net of original issue discount and deferred financing costs of $52,032as of December 31, 2015 480,150 429,330Capital leases — 34,873Total debt and capital lease obligations 1,333,800 1,121,556Less: liabilities subject to compromise (1,333,800) —Less: current portion of long-term debt and capital lease obligations — (13,433)Long-term debt and capital lease obligations $— $1,108,123 DIP Facility $25,000 $—On July 20, 2016, the Debtors filed Bankruptcy Petitions in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code underthe caption “In re: CJ Holding Co., et al., Case No. 16-33590.” The filing of the Bankruptcy Petitions constituted an event of default with respect to theCompany's Credit Agreement. As a result, the Company’s pre-petition secured indebtedness under the Credit Agreement became immediately due andpayable and any efforts to enforce such payment obligations were automatically stayed as a result of the Chapter 11 Proceeding. As of December 31, 2016,$1.3 billion of debt under the Company's Credit Agreement was classified as liabilities subject to compromise.Additional information regarding the Chapter 11 Proceeding is included in Note 2 - Chapter 11 Proceeding and Emergence.New Credit FacilityOn January 6, 2017, in connection with the emergence from bankruptcy, the Company entered into a revolving credit and security agreement(the "New Credit Facility") with PNC Bank, National Association, as administrative agent (the "Lender").The New Credit Facility allows the Borrowers to incur revolving loans in an aggregate amount up to the lesser of $100 million and a borrowingbase, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory, subject to eligibility criteria and customary reserveswhich may be modified in the Lender’s permitted discretion. The New Credit Facility also contains an availability block, which will reduce the amountotherwise available to be borrowed under the New Credit Facility by $20 million until the later of the delivery of financial statements for the fiscal yearending December 31, 2017 and the date on which the Company achieves a fixed charge coverage ratio of 1.10:1.0. The New Credit Facility also provides forthe issuance of letters of credit, which would reduce borrowing capacity thereunder. The maturity date of the New Credit Facility is January 6, 2021.89Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIf at any time the amount of loans and other extensions of credit outstanding under the New Credit Facility exceed the borrowing base, theBorrowers may be required, among other things, to prepay outstanding loans immediately.The Borrowers’ obligations under the New Credit Facility are secured by liens on a substantial portion of the Borrowers’ personal property,subject to certain exclusions and limitations. Upon the occurrence of certain events, additional collateral, including a portion of the Borrowers’ realproperties, may also be required to be pledged. Each of the Borrowers is jointly and severally liable for the obligations of the other Borrowers under the NewCredit Facility.At the Borrowers’ election, interest on borrowings under the New Credit Facility will be determined by reference to either LIBOR plus anapplicable margin of 4.0% per annum or an “alternate base rate” plus an applicable margin of 3.0% per annum. Beginning after the fiscal year ending on orabout December 31, 2017, these margins will be subject to a step-down of 0.5% in the event that the Company achieves a fixed charge coverage ratio of1.15:1.0 or greater. Interest will be payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest periodapplicable to LIBOR-based loans. The Borrowers will also be required to pay a fee on the unused portion of the New Credit Facility equal to 1.0% per annumin the event that utilization is less than 50.0% of the total commitment and 0.75% per annum in the event that utilization is greater than or equal to 50.0% ofthe total commitment.A termination fee of 1.0% of the maximum amount available will be payable if the loans are repaid in full and the New Credit Facility isterminated prior to the first anniversary of the Plan Effective Date.The New Credit Facility contains covenants that limit the Borrowers’ and their subsidiaries’ ability to incur additional indebtedness, grant liens,make loans or investments, make distributions, merge into or consolidate with other persons, make capital expenditures or engage in certain assetdispositions including a sale of all or substantially all of the Company’s assets.The New Credit Facility also contains certain financial covenants:•on or prior to August 31, 2017, a monthly minimum liquidity covenant equal to $100 million; and•beginning on September 30, 2017, a monthly minimum fixed charge coverage ratio of 1.0:1.0, tested only if (a) as of any month-end on orprior to December 31, 2017, liquidity is less than $50 million, and (b) as of any month-end thereafter, liquidity is less than $40 million.DIP FacilityIn connection with the commencement of the Chapter 11 Proceeding, the Company filed a motion seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in a contemplated $100 million Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP CreditAgreement”). On July 25, 2016, the Bankruptcy Court entered an order approving, on an interim basis, the financing to be provided pursuant to the DIPFacility, and on July 29, 2016, the DIP Credit Agreement was entered into by and among the Company, the other Debtors, the DIP Lenders and CortlandCapital Market Services LLC, as administrative agent on July 29, 2016, the Company accessed $25 million under the DIP Facility. On September 25, 2016,the Bankruptcy Court entered a final order (the “Final DIP Order”) authorizing the Debtors’ entry into the DIP Facility. In addition to approving the terms ofthe DIP Facility described above, the Final DIP Order contained a number of significant bankruptcy related provisions.The borrowers under the DIP Facility were the Company and CJ Holding Co. All obligations under the DIP Facility were guaranteed by theCompany’s subsidiaries that were debtors in the Bankruptcy cases. Borrowings under the DIP Credit Agreement were generally secured by superprioritypriming liens on substantially all of the assets of the borrowers and guarantors.Amounts outstanding under the DIP Facility bore interest based on, at the option of the borrower, the London Interbank Offered Rate (“LIBOR”)or an alternative base rate, plus an applicable margin equal to 9.0% in the case of LIBOR loans and 8.0% in the case of base rate loans. The alternative baserate was equal to the highest of (i) the published ‘prime rate’, (ii) the Federal Funds Effective Rate (as defined in the DIP Credit Agreement) plus 0.5% and(iii) LIBOR plus 1.0%. The DIP Facility also required that the Company pay various fees to the DIP Lenders, including a commitment fee equal to 5.0% of theunused commitments thereunder. The DIP Facility could be prepaid from time to time without premium or penalty, except for a 2.0% prepayment penaltypayable in the event the DIP facility was refinanced or replaced with the proceeds of another financing during the pendency of the Bankruptcy cases. The DIPFacility was scheduled to mature on March 31, 2017.90Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company was required under the terms of the DIP Credit Agreement to comply with various covenants and milestones, including therequirement to deliver periodic 13-week budgets. The DIP Credit Agreement contained a covenant requiring our actual receipts and expenditures to remainwithin a certain variance of the amounts set forth in such budgets.The DIP Credit Agreement also contained customary restrictive covenants (in each case, subject to exceptions) that limited, among other things,the Company's ability to create, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of assets, make certain restricted payments andinvestments, enter into transactions with affiliates, make capital expenditures and prepay certain indebtedness. The activities of the Company's subsidiariesthat were not debtors in the Bankruptcy cases were extremely limited pursuant to the DIP Credit Agreement.In accordance with the Restructuring Plan, on the Plan Effective Date, the Company repaid all amounts outstanding under the DIP Facility withthe proceeds from the Rights Offering and the DIP Facility was canceled and discharged.Credit AgreementOn March 24, 2015, in connection with the closing of the Nabors Merger, the Company entered into a new credit agreement with Bank ofAmerica N.A., as administrative agent and other lending parties (the “Original Credit Agreement”). At the closing, the Original Credit Agreement provided forsenior secured credit facilities in an aggregate principal amount of $1.66 billion, consisting of (i) a revolving credit facility (“Revolving Credit Facility” orthe “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$1.06 billion. The Company simultaneously repaid all amounts outstanding and terminated Old 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, suspended 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 would 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 would be more lenient than those in effectunder the terms of the Original Credit Agreement and would gradually adjust to those prior levels over the subsequent fiscal quarters (see Other Informationbelow). The effectiveness of the covenant suspension was also subject to certain conditions that, among other things, would reduce the capacity of theCompany to make investments and restricted payments through the quarter ending December 31, 2017.On May 10, 2016, the Company obtained a temporary limited waiver agreement from certain of the lenders pursuant to which, effective as ofMarch 31, 2016, such lenders agreed to not consider a breach of the Minimum Cumulative Consolidated EBITDA Covenant measured as of March 31, 2016an event of default through May 31, 2016. 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, stockbased compensation expense, acquisition-related costs, and non-routine items.On May 31, 2016, the Company obtained and entered into the Forbearance Agreement with certain of the lenders pursuant to which, among otherthings, such lenders agreed not to pursue default remedies against the Company with respect to its breach of the Minimum Cumulative ConsolidatedEBITDA Covenant or certain specified payment defaults.On June 30, 2016, this forbearance was extended through July 17, 2016 pursuant to the Second Forbearance Agreement, and prior to thetermination of the Second Forbearance Agreement, this forbearance period was once again extended through July 20, 2016. The Second ForbearanceAgreement provided that the forbearance would terminate upon the occurrence of certain events, including the failure of the Company to enter into theRestructuring Support Agreement on or prior to July 8, 2016. On July 8, 2016, the Company entered into the Restructuring Support Agreement with theSupporting Lenders. The Restructuring Support Agreement contemplated the implementation of a restructuring of the Company through a debt-to-equityconversion and Rights Offering, which transaction was effectuated through the Restructuring Plan.On July 20, 2016, the Debtors filed Bankruptcy Petitions in the Bankruptcy Court seeking relief under Chapter 11. Additional information,including definitions of capitalized defined terms, regarding the Chapter 11 Proceeding is included in Note 2 - Chapter 11 Proceeding and Emergence.91Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSRevolving Credit FacilityThe Revolver was scheduled to mature on March 24, 2020 (except that if any Five-Year Term Loans (as defined herein) had not been repaid priorto September 24, 2019, the Revolver was scheduled to mature on September 24, 2019). Borrowings under the Revolver are non-amortizing. Amountsoutstanding under the Revolver bore interest based on, at the option of the borrower, LIBOR or an alternative base rate, plus an applicable margin determinedpursuant to a pricing grid based on the ratio of consolidated total indebtedness of C&J and its subsidiaries to Consolidated EBITDA of C&J and itssubsidiaries for the most recent four fiscal quarter period for which financial statements are available (the “Total Leverage Ratio”).On July 20, 2016, the Debtors filed the Bankruptcy Petitions which constituted an event of default under the Credit Agreement and acceleratedthe Revolver indebtedness to become immediately due and payable; however, any efforts to enforce such payment obligations were automatically stayed as aresult of the Chapter 11 Proceeding. On the Plan Effective Date, pursuant to the Restructuring Support Agreement entered into on July 8, 2016, holders of theRevolver received their pro rata share of 100.0% of the New Equity in the reorganized company, subject to dilution from the issuance of New Equity onaccount of the Management Incentive Plan, the Rights Offering, the Backstop Fee and the New Warrants as discussed further in Note 2 - Chapter 11Proceeding and Emergence.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 was required to make quarterly amortization payments in an amount equal to1.0% per annum, with the remaining balance payable on the applicable maturity date. As of December 31, 2016 and 2015, the Company had borrowingsoutstanding under the Five-Year Term Loans and the Seven-Year Term Loans of $569.3 million and $480.2 million and $570.7 million and $481.4 million,respectively.Five-Year Term Loans outstanding under the Term Loan B bore interest based on, at the option of the Company, (i) LIBOR subject to a floor of1.0% per annum, plus a margin of 5.5%, or (ii) an alternative base rate, plus a margin of 4.5%. Seven-Year Term Loans outstanding under the Term Loan Bbore interest based on, at the option of the Company, (i) LIBOR subject to a floor of 1.0% per annum, plus a margin of 6.25%, or (ii) an alternative base rate,plus a margin of 5.25%.The alternative base rate was equal to the highest of (i) the Administrative Agent’s prime rate, (ii) the Federal Funds Effective Rate plus 0.5%, or(iii) LIBOR plus 1.0%.On July 20, 2016, the Debtors filed the Bankruptcy Petitions which constituted an event of default under the Credit Agreement and acceleratedthe Term Loan B Facility indebtedness to become immediately due and payable; however, any efforts to enforce such payment obligations wereautomatically stayed as a result of the Chapter 11 Proceeding. On the Plan Effective Date, pursuant to the Restructuring Support Agreement entered into onJuly 8, 2016, holders of the Term Loan B Facility debt received their pro rata share of 100.0% of the New Equity in the reorganized company, subject todilution from the issuance of New Equity on account of the Management Incentive Plan, the Rights Offering, the Backstop Fee and the New Warrants asdiscussed further in Note 2 - Chapter 11 Proceeding and Emergence.Capital Lease ObligationsIn October 2016, the Company entered into amended lease agreements related to the Company’s corporate headquarters and its R&T facility,both originally entered into during 2013 and accounted for as capital leases. The Company determined that both amended lease agreements qualify as a newoperating lease under ASC 840 - Leases, which resulted in accounting for the amended leases as a sale-leaseback pursuant to the requirements of ASC 840. The conversion from capital lease to operating lease accounting treatment resulted in the deferral of $6.3 million of gain. As of December 31, 2016, theCompany had no capital lease obligations.Interest ExpenseAs of June 30, 2016, based on the negotiations between the Company and the lenders, it became evident that the restructuring of the Company'scapital structure would not include a restructuring of the Company's Revolving Credit Facility, the Five-Year Term Loans and the Seven-Year Term Loans,and these debt obligations, as demand obligations, would not be92Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSpaid in the ordinary course of business over the term of these loans. As a result, during the second quarter of 2016, the Company accelerated the amortizationof the associated original issue discount and deferred financing costs, fully amortizing these amounts as of June 30, 2016. In addition, the Company has notaccrued interest that it believes is not probable of being treated as an allowed claim in the Chapter 11 Proceeding. For the year ended December 31, 2016, theCompany did not accrue interest totaling $60.5 million under the Credit Agreement subsequent to the Petition Date. For the year ended December 31, 2016,interest expense consisted of the following (in thousands): Years Ended December 31, 2016 2015 Revolving Credit Facility $8,504 $7,058Five-Year Term Loans 23,330 29,302Seven-Year Term Loans 21,762 27,557DIP Facility 2,087 —Capital leases 1,206 1,005Accretion of original issue discount 4,193 6,187Amortization of deferred financing costs 4,590 10,926Original issue discount accelerated amortization 48,221 —Deferred financing costs accelerated amortization 43,720 —Interest income and other (148) 51Interest expense, net $157,465 $82,086Note 6 - Goodwill and Other Intangible AssetsDuring the first quarter of 2016, utilization and commodity price levels continued to fall towards unprecedented levels and the resulting negativeimpact on the Company’s results of operations, coupled with the sustained decrease in the Company’s stock price, were deemed triggering events that led toan interim period test for goodwill impairment. The Company chose to bypass a qualitative approach and instead opted to employ the detailed Step 1impairment testing methodologies discussed below.Income approachThe 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 March 31, 2016, and management’s anticipated business outlook, both of which have been impactedby 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 14.5% forCompletion Services, 14.0% for Well Support Services, and 16.0% for Other Services reporting units. These assumptions were derived from unobservableinputs and reflect 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 10.6x for93Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSCompletion Services, 10.5x for Well Support Services and 11.0x for Other Services reporting units.The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of the multiples could reduce theestimated fair value of any of the three reporting units below their respective carrying values. Earnings estimates were derived from unobservable inputs thatrequire significant estimates, judgments and assumptions as described in the income approach.The estimated fair value determined under the income approach was consistent with the estimated fair value determined under the marketapproach. The concluded fair value for the Completion Services and Well Support Services reporting units consisted of a weighted average, with an 80.0%weight under the income approach and a 20.0% weight under the market approach. The concluded fair value for the Other Services reporting unit consisted ofa weighted average with a 50.0% weight under the income approach and a 50.0% weight under the market approach.The results of the Step 1 impairment testing indicated potential impairment in the Well Support Services reporting unit. The goodwill associatedwith both the Completion Services and Other Services reporting units was completely impaired during the third quarter of 2015. As a way to validate theestimated reporting unit fair values, the total market capitalization of the Company was compared to the total estimated fair value of all reporting units, andan implied control premium was derived. Market data in support of the implied control premium was used in this reconciliation to corroborate the estimatedreporting unit fair values.Step 2 of the goodwill impairment testing for the Well Support Services reporting units was performed during the first quarter of 2016, and theresults concluded that there was no value remaining to be allocated to the goodwill associated with this reporting unit. As a result, the Company recognizedimpairment expense of $314.3 million during 2016.As of December 31, 2016, there is no goodwill remaining to be allocated across the Company's three reporting units.The changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 are as follows (in thousands): CompletionServices Well SupportServices Other Services TotalAs of December 31, 2014 $200,149 $15,085 $4,719 $219,953Acquisitions 141,435 334,241 — 475,676Impairment expense (340,464) (39,785) (4,719) (384,968)Foreign currency translation and other adjustments (1,120) (1,864) — (2,984)As of December 31, 2015 — 307,677 — 307,677Measurement period adjustments 8 5,382 — 5,390Impairment expense (8) (314,293) — (314,301)Foreign currency translation and other adjustments — 1,234 — 1,234As of December 31, 2016 $— $— $— $—Indefinite-Lived Intangible AssetsThe Company had approximately $6.0 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.The Company’s intangible assets associated with intellectual property, research and development (“IPR&D”) consist of technology that is still inthe testing phase; however, given the continued market downturn management has made the decision to postpone these projects. Based on the Company'sevaluation, it was determined that the IPR&D carry value of $6.0 million was impaired and written down to zero as of December 31, 2016.Definite-Lived Intangible Assets94Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company reviews definite-lived intangible assets, along with PP&E, for impairment when a triggering event indicates that the asset mayhave a net book value in excess of recoverable value. During 2016, management determined the sustained low commodity price levels coupled with thesustained decrease in the Company’s share price were deemed triggering events that provided indicators that its definite-lived intangible assets may beimpaired. The Company performed a recoverability test on all of its definite-lived intangible assets and PP&E by comparing the estimated future netundiscounted cash flows expected to be generated from the use of these assets to the carrying amounts of the assets for recoverability. If the estimatedundiscounted cash flows exceed the carrying amount of the assets, an impairment does not exist and a loss will not be recognized. If the undiscounted cashflows are less than the carrying amount of the assets, the assets are not recoverable and the amount of impairment must be determined by fair valuing theassets.Recoverability testing through June 30, 2016 resulted in the determination that certain intangible assets associated with the Company’s wirelineand artificial lift lines of business were not recoverable. The fair value of the wireline and artificial lift assets was determined to be approximately $38.2million and zero, respectively, resulting in impairment expense of $50.4 million and $4.6 million, respectively. For the year ended December 31, 2016, theCompany recorded $55.0 million of impairment expense, as the intangible assets assessed were determined not to be recoverable. For the year endedDecember 31, 2015, recoverability testing resulted in $11.2 million of impairment expense as the intangible assets assessed were determined not to berecoverable.The changes in the carrying amounts of other intangible assets for the year ended December 31, 2016 are as follows (in thousands): AmortizationPeriod December 31,2015 ImpairmentExpense AmortizationExpense Move fromIndefinite-Livedto Definite-Lived Foreign CurrencyTranslationAdjustment December 31,2016Customer relationships 8-15 years $122,814 $(41,990) $— $— $2 $80,826Trade name 10-15 years 42,580 (12,588) — — 2 29,994Developed technology 5-15 years 19,897 — — 1,610 9 21,516Non-compete 4-5 years 2,710 (110) — — — 2,600Patents 10 years 373 (338) — — — 35IPR&D Indefinite 7,598 (5,988) — (1,610) — — 195,972 (61,014) — — 13 134,971Less: accumulated amortization (48,111) — (10,789) — (14) (58,914)Intangible assets, net $147,861 $(61,014) $(10,789) $— $(1) $76,057Amortization expense for the years ended December 31, 2016, 2015 and 2014 totaled $10.8 million, $14.5 million and $10.9 million,respectively.Estimated amortization expense for each of the next five years and thereafter is as follows (in thousands): Years Ending December 31, 2017 $9,0452018 9,0452019 9,0342020 7,2602021 6,686Thereafter 34,987 $76,057Note 7 – Income TaxesThe provision for income taxes consisted of the following (in thousands):95Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2016 2015 2014Current provision: Federal $2,047 $(23,784) $11,184State (1,588) (2,265) 1,310Foreign 64 100 —Total current provision 523 (25,949) 12,494Deferred (benefit) provision: Federal (122,302) (248,279) 31,978State (8,864) (20,553) 2,036Foreign 1,633 (4,312) (829)Total deferred provision (129,533) (273,144) 33,185Provision for income taxes $(129,010) $(299,093) $45,679The following table reconciles the statutory tax rates to the Company’s effective tax rate: Years Ended December 31, 2016 2015 2014Federal statutory rate 35.0 % 35.0 % 35.0 %State taxes, net of federal benefit 0.3 % 1.4 % 3.0 %Domestic production activities deduction — % (0.2)% (1.0)%Effect of foreign losses (2.0)% (0.3)% 2.4 %Impairment (8.8)% (9.8)% — %Valuation allowance (10.9)% — % — %Other (1.6)% (0.6)% 0.5 %Effective income tax rate 12.0 % 25.5 % 39.9 %The Company’s deferred tax assets and liabilities consisted of the following (in thousands): As of December 31, 2016 2015Deferred tax assets: Accrued liabilities $25,470 $8,046Allowance for doubtful accounts 2,630 7,364Stock-based compensation 11,530 19,503Inventory reserve 9,131 8,712Net operating losses 231,360 68,821163j interest limitation 58,426 15,345Amortization of goodwill and intangible assets 4,526 —Other 3,774 3,567Total deferred tax assets 346,847 131,358Deferred tax liabilities: Prepaids (2,123) (9,677)Earnout liabilities — (4,328)Depreciation on property, plant and equipment (179,428) (228,981)Amortization of goodwill and intangible assets — (28,033)Other (3,873) (378)Total deferred tax liabilities (185,424) (271,397)Valuation allowances (171,016) (77)Net deferred tax liability $(9,593) $(140,116)96Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company has approximately $530.6 million of U.S. federal net operating loss carryforwards (“NOLs”) which, if not utilized, will begin toexpire in the year 2035 and state NOLs of approximately $224.4 million which, if not utilized, will expire in various years between 2025 and 2036.Additionally, the Company has approximately $105.5 million of NOLs in other jurisdictions which, if not utilized, will expire in various years between2020 and 2036. As of December 31, 2016 we have recorded a deferred tax asset of approximately $231.4 million relating to NOLs. A valuation allowance of$171.0 million has been provided for NOLs 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 2013 through 2015 remain open to examination by the Internal Revenue Serviceunder the applicable U.S. federal statute of limitations provisions. The various states in which the Company is subject to income tax are generally open toexamination for the tax years after 2012. The Company's 2015 Federal income tax return and the Company’s 2011, 2012 and 2013 Louisiana tax returns arecurrently under examination.During the year ended December 31, 2016, the company realized tax expense of $1.6 million on the deferred charges relating to income taxexpense on intercompany profits that resulted from the sale of our intellectual property rights outside of North America to our subsidiary in Luxembourg. Theremaining $14.8 million of deferred charges are included within other noncurrent assets on the consolidated balance sheet. The deferred charges areamortized as a component of income tax expense over the economic life of the intellectual property.A reconciliation of unrecognized tax benefit balances is as follows (in thousands): Years Ended December 31, 2016 2015Balance at beginning of year$— $—Additions based on tax positions related to the current year6,525 —Additions for tax positions of prior years— —Reductions for tax positions of prior years— —Reductions for audit settlements— —Reductions resulting from a lapse of applicable statute of limitations periods— —Balance at end of year$6,525 $—The balances of unrecognized tax benefits, the amount of related interest and penalties is $6.5 million as of December 31, 2016, all of which issubject to reasonably possible changes in the next 12 months.The Company classifies interest and penalties within the provision for income taxes. The Company recognized interest expense of zero in theprovision for income taxes for each of the years ended December 31, 2016, 2015 and 2014.Note 8 - Share-Based CompensationEquity PlansIn connection with the Nabors Merger, the Company approved and adopted the C&J Energy Services 2015 Long Term Incentive Plan (the “2015LTIP”), effective as of March 23, 2015, contingent upon the consummation of the Nabors Merger. The 2015 LTIP served as an assumption of the Old C&J2012 Long-Term Incentive Plan, including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement (the “2012 LTIP”),with certain non-material revisions made and no increase in the number of shares remaining available for issuance under the 2012 LTIP. Prior to the adoptionof the 2015 LTIP, all share-based awards granted to Old C&J employees, consultants and non-employee directors were granted under the 2012 LTIP and,following the 2015 LTIP’s adoption, no further awards will be granted under the 2012 LTIP. Awards that were previously outstanding under the 2012 LTIPwill continue and remain outstanding under the 2015 LTIP, as adjusted to reflect the Nabors Merger. At the closing of the Nabors Merger, restricted sharesand stock option awards were granted under the 2015 LTIP to certain employees of the C&P Business and approximately 0.4 million C&J common sharesunderlying those awards were deemed part of the consideration paid to Nabors for the Nabors Merger.The 2015 LTIP provides for the grant of share-based awards to the Company’s employees, consultants and non-employee directors. Thefollowing types of awards are available for issuance under the 2015 LTIP: incentive stock options and nonqualified stock options, share appreciation rights,restricted shares, restricted share units, dividend equivalent rights, performance awards and share awards. As of December 31, 2016 only nonqualified stockoptions and restricted shares have been awarded under the 2015 LTIP and 2012 LTIP. No grants were issued during the year ended December 31, 2016.97Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSA 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. The shareholders of the Company approved the Second Amendment to the 2015 LTIP in February 2016,which increased the number of common shares that may be issued by approximately 6.0 million shares. Including the add-back of approximately 0.9 millionrestricted shares and 0.7 million options canceled or expired under the 2012 LTIP and 2015 LTIP during 2016, approximately 11.3 million shares wereavailable for issuance under the 2015 LTIP as of December 31, 2016. The number of common shares available for issuance under the 2015 LTIP is subject toadjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights ordebentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares,change in corporate structure or any similar corporate event or transaction. The number of common shares available for issuance may also increase due to thetermination of an award granted under the 2015 LTIP, the 2012 LTIP or the Prior Plans (as defined below), by expiration, forfeiture, cancellation or otherwisewithout the issuance of the common shares.Prior to the approval of the 2012 LTIP, all share-based awards granted to Old 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.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 Old C&J’s initial public offering, which closed on August 3, 2011, the calculation of Old C&J’s share priceinvolved 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. No options were granted during the year ended December 31, 2016. During the year ended December 31, 2015, approximately 0.3million replacement option awards were granted by the Company to employees in connection with the Nabors Merger.The following table presents the assumptions used in determining the fair value of option awards during the year ended December 31, 2015. Nostock options were granted by the Company for the year ended December 31, 2016 and for the year ended December 31, 2014. Year Ended December 31, 2015 Expected volatility 52.3% Expected dividends None Exercise price $7.93 - $27.12 Expected term (in years) 0.3 - 4.3 Risk-free rate 0.03% - 1.3% The weighted average grant date fair value of options granted during the year ended December 31, 2015, was $4.74.A summary of the Company’s stock option activity for the year ended December 31, 2016 is presented below.98Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Shares WeightedAverageExercise Price WeightedAverageRemainingContractualLife AggregateIntrinsicValue (in thousands) (in years) (in thousands)Outstanding at January 1, 2014 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 $2,874Granted — — — —Exercised — — — —Forfeited (703) 3.19 — —Outstanding at December 31, 2016 4,416 $13.18 3.86 $—Exercisable at December 31, 2016 4,416 $13.18 3.86 $—The total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was zero and $0.6 million, respectively. As ofDecember 31, 2016, there was no more remaining unrecognized compensation cost related to outstanding stock options.Restricted SharesHistorically, restricted shares were valued based on the closing price of the Company’s common shares on the NYSE on the date of grant. Duringthe year ended December 31, 2016 there were no restricted shares granted to employees and non-employee directors under the 2015 LTIP. During the yearended December 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, at fair market values ranging from $3.55 to $15.10 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 theunderlying common shares, including the right to vote the common shares and to receive all dividends or other distributions made with respect to thecommon shares. Dividends on restricted shares will be deferred until the lapsing of the restrictions imposed on the shares and will be held by the Company forthe 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, ifany, shall be made upon the lapsing of restrictions on the restricted shares, and any dividends deferred in respect of any restricted shares shall be forfeitedupon the forfeiture of such restricted shares. As of December 31, 2016, the Company had not issued any dividends.A summary of the status and changes during the year ended December 31, 2016 of the Company’s shares of non-vested restricted shares ispresented below: Shares WeightedAverageGrant-DateFair Value (in thousands) Non-vested at January 1, 2016 3,271 $15.70Forfeited (576) 15.30Vested (1,797) 15.92Non-vested at December 31, 2016 898 $15.3499Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAs of December 31, 2016 and 2015, respectively, there were $8.9 million and $29.9 million of total unrecognized compensation cost related torestricted shares. That cost is expected to be recognized over a weighted-average period of 1.42 years. The weighted-average grant-date fair value per share ofrestricted shares granted during the year ended December 31, 2015 was $13.50.As of December 31, 2016, the Company had 5.3 million stock options and restricted shares outstanding to employees and non-employeedirectors, 0.3 million of which were issued under the 2006 Plan, 3.9 million were issued under the 2010 Plan, 0.2 million were issued under the 2012 Plan andthe remaining 0.9 million were issued under the 2015 Plan. As of December 31, 2015, the Company had 8.4 million stock options and restricted sharesoutstanding 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 the remaining 2.8 million were issued under the 2015 Plan.Share-based compensation expense was $17.7 million, $18.5 million and $18.4 million for the years ended December 31, 2016, 2015 and 2014,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 $6.2 million, $6.5 million and $6.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.Emergence from Chapter 11 ProceedingOn January 6, 2017, the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. As part of thetransactions undertaken pursuant to the Restructuring Plan, all of the existing shares of the Predecessor common equity were canceled as of the Plan EffectiveDate. As a result, on the Plan Effective Date all equity based awards issued under the equity plans discussed above were canceled as part of the RestructuringPlan, and the equity plans discussed above were dissolved.Note 9 – 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 Nabors Merger. As of December 31, 2015, theCompany’s payable balance was $28.2 million and the support service fees incurred during 2015 totaled $136.4 million. During 2016 and prior to theConfirmation Date, the Company, the Official Committee of Unsecured Creditors of CJ Holding Co, the Steering Committee of Lenders under the CreditAgreement and the DIP Facility, and Nabors entered into a mediated settlement agreement that was subsequently approved by the Bankruptcy Courtwhereby, among other things, Nabors was awarded two allowed proofs of claim totaling $13.25 million. As of December 31, 2016, the allowed proofs of claimare included in liabilities subject to compromise on the consolidated balance sheet.The Company leases certain properties from Nabors, and Nabors leases certain properties from the Company. For the year ended December 31,2016, the Company incurred obligations to Nabors of approximately $0.6 million under the leases, and Nabors incurred obligations to C&J of less than $0.1million under the leases. The Company plans to continue the leasing arrangements with Nabors for the foreseeable future.The Company provided certain services to Shehtah Nabors LP, a Nabors partnership with a third party, pursuant to a Management Agreement anda Cash Flow Sharing Agreement (collectively, “Shehtah Agreements”). Nabors incurred obligations to the Company of approximately $1.8 million under theShehtah Agreements during 2016. There were no amounts due to the Company under the Shehtah Agreements at December 31, 2016.The Company utilizes the services of certain saltwater disposal wells owned by Pyote Water Solutions, LLC, Pyote Water Systems, LLC, PyoteWater Systems II, LLC and Pyote Water Systems III, LLC (together “Pyote”) used in the disposal of certain fluids associated with oil and gas production. Aformer member of the Company's Board of Directors, who served from March 24, 2015 until December 16, 2016, holds the position of President and ChiefManager of Pyote and serves as Chairman of the Board of Governors of Pyote. Amounts invoiced from Pyote totaled approximately $0.8 million and $0.6million for the years ended December 31, 2016 and 2015, respectively. Amounts payable to this vendor at December 31, 2016 and 2015 were less than $0.1million for both years. In addition, the Company provides certain workover rig services, fluid hauling services and plug and abandonment services to Pyote.Revenues from Pyote totaled approximately $0.3 million for the year ended December 31, 2015, and no services were provided to Pyote during 2016. Therewere no amounts due to the Company from Pyote at December 31, 2016.100Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company obtains trucking and crane services from certain vendors affiliated with two of its executive officers. For the year ended December31, 2014, purchases from these vendors totaled $7.4 million, and there were no purchases from these vendors for the years ended December 31, 2016 and2015.The Company purchased certain of its equipment from vendors affiliated with a member of its Board of Directors. For the years endedDecember 31, 2015, and 2014, purchases from these vendors totaled $1.9 million and $5.7 million, respectively. Amounts payable to these vendors atDecember 31, 2015 were less than $0.1 million. There were no purchases from these vendors for the year ended December 31, 2016.The Company obtains office space, equipment rentals, tool repair services and other supplies from vendors affiliated with several employees. Forthe years ended December 31, 2016, 2015 and 2014, purchases from these vendors totaled $0.5 million, $0.5 million and $1.0 million, respectively. Amountspayable to these vendors at December 31, 2016 and 2015 were less than $0.1 million for each respective year.The Company has an unconsolidated equity method investment with a vendor that provided the Company with raw material for its discontinuedspecialty chemical business. For the years ended December 31, 2016, 2015 and 2014, purchases from this vendor were $1.7 million, $11.8 million and $21.8million, respectively. Amounts payable to this vendor at December 31, 2016 and 2015 were $2.1 million and $1.5 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. Amounts due to this vendor at December 31, 2015 were $0.2 million. There were no purchases from thisvendor for the year ended December 31, 2016.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. There were no purchases from this vendor for the years ended December 31, 2016 and 2015.Note 10 – 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 46.0%, 53.6% and 51.1% of the Company’s consolidated revenue for the yearsended December 31, 2016, 2015 and 2014, respectively. For the year ended December 31, 2016, no individual customer accounted for 10.0% or more of theCompany's consolidated revenue. For the year ended December 31, 2015, revenue from one customer represented 15.5% of the Company’s consolidatedrevenue. For the year ended December 31, 2014 revenue from two customers individually represented 16.4% and 9.6% of the Company’s consolidatedrevenue. Other than those noted above, no other customer accounted for 10.0% or more of the Company’s consolidated revenue in 2016, 2015 or 2014.Revenue was earned from each of these customers within the Company’s Completion Services and Well Support Services segments.Note 11 - Commitments and ContingenciesEnvironmentalThe Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for theprotection of the environment. The Company continues to monitor the status of these laws and regulations. However, the Company cannot predict the futureimpact of such standards and requirements on its business, which are subject to change and can have retroactive effectiveness.Currently, the Company has not been fined, cited or notified of any environmental violations or liabilities that would have a material adverseeffect upon its consolidated financial position, liquidity or capital resources. However, management does recognize that by the very nature of its business,material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors,including the unknown101Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSmagnitude 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 on the Company’s consolidated financial position, results of operations or liquidity.Contingent Consideration LiabilityOn May 18, 2015, the Company acquired all of the outstanding equity interests of ESP Completion Technologies LLC, a manufacturer ofwellheads, artificial lift completion tools and electric submersible pumps for approximately $34.0 million and including a contingent consideration liabilityvalued at approximately $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, theCompany will be obligated to make future tiered payments of up to $29.5 million. The contingent consideration liability is remeasured on a fair value basiseach quarter until it is paid or expires. As of December 31, 2016, the earn-out was estimated to have zero value.Operating LeasesThe Company leases certain property and equipment under non-cancelable operating leases. The remaining terms of the operating leasesgenerally range from 1 to 11 years.Lease expense under all operating leases totaled $10.0 million, $14.2 million and $14.0 million for the years ended December 31, 2016, 2015and 2014, respectively. As of December 31, 2016, the future minimum lease payments under non-cancelable operating leases were as follows (in thousands):Years Ending December 31, 2017 $6,9342018 4,2052019 3,1892020 2,9852021 2,836Thereafter 5,450 $25,599Note 12 – Employee Benefit PlansThe Company maintains a contributory profit sharing plan under a 401(k) arrangement which covers all employees meeting certain eligibilityrequirements. Eligible employees can make annual contributions to the plan up to the maximum amount allowed by current federal regulations, but no morethan 80.0% of compensation as noted in the plan document. The Company’s 401(k) contributions for the years ended December 31, 2016, 2015 and 2014totaled zero, $4.8 million and $2.3 million, respectively.Note 13 – Mergers and Acquisitions2015Merger between Old C&J and the C&P Business of NaborsOn March 24, 2015, Old C&J and Nabors completed the combination of Old C&J with the C&P Business. The resulting combined company wasrenamed C&J Energy Services Ltd. At the closing of the combination, Nabors received total102Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSconsideration of $1.4 billion, subject to working capital adjustments, in the form of $688.1 million in cash, $5.5 million in cash to reimburse Nabors foroperating assets acquired prior to March 24, 2015, and $714.8 million in C&J common shares. The C&J common share value was based upon Old C&J’sclosing stock price on March 23, 2015 and consisted of approximately 62.5 million C&J common shares issued to Nabors and approximately 0.4 milliondesignated C&J common shares attributable to replacement restricted share and share option awards issued to certain employees of the C&P Business for thepre-acquisition-related employee service period. Upon the closing of the combination and as of December 31, 2015, Nabors owned approximately 53.0% ofthe outstanding and issued common shares of Old C&J, with the remainder held by former Old 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 Nabors Merger was accounted for using the acquisition method of accounting for business combinations. In applying the acquisition methodof accounting, Old 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 53.0% common share ownership in C&J immediately followingthe closing of the Nabors Merger, Old C&J and Nabors determined that Old C&J possessed the controlling financial interest, based on, among other factors,the presence of a majority of Old C&J directors on the C&J board of directors and through the composition of C&J senior management consisting almostentirely of the executive officers of Old C&J. Old C&J and Nabors therefore concluded the business combination should be treated as a reverse acquisitionwith Old C&J as the accounting acquirer.C&J financed the cash portion of the Nabors Merger and repaid previously outstanding revolver debt with borrowings drawn under the OriginalCredit Agreement which provided for senior secured credit facilities in an aggregate principal amount of $1.66 billion. See Note 5 – Debt and Capital LeaseObligations for further discussion on the Company’s Original Credit Agreement.The purchase price was allocated to the net assets acquired based upon their estimated fair values, as shown below (in thousands). The estimatedfair values of certain assets and liabilities, including accounts receivable, inventory, property plant and equipment, other intangible assets, taxes (includinguncertain tax positions), and contingencies required significant judgments and estimates.All of the goodwill associated with the Nabors Merger was allocated to the Completion Services and Well Support Services reporting units. Aspart of the Company's interim test for goodwill impairment, during the third quarter of 2015, all of the goodwill allocated to the Completion Servicesreporting unit was written off. In addition, during the first quarter of 2016, all of the goodwill allocated to the Well Support Services reporting unit waswritten off. See Note 6 - Goodwill and Other Intangible Assets for further discussion.The purchase price was initially allocated to the net assets acquired during the first quarter of 2015 and subsequently adjusted during 2015 andin the first quarter of 2016 in connection with the measurement period based upon revised estimated fair values, as follows (in thousands):103Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts Recognized asof Merger Date Measurement PeriodAdjustments (1) Estimated Fair ValueAccounts receivable $262,973 $11,079 $274,052Inventory 35,491 (7,372) 28,119Other current assets 8,857 (1,940) 6,917Property, plant and equipment 1,024,622 (59,378) 965,244Goodwill 444,162 12,684 456,846Other intangible assets 28,300 13,700 42,000Other assets 11,171 (2,913) 8,258Total assets acquired 1,815,576 (34,140) 1,781,436Accounts payable (195,913) 19,610 (176,303)Other current liabilities (23,813) (7,503) (31,316)Deferred income taxes (187,515) (21,368) (208,883)Total liabilities assumed (407,241) (9,261) (416,502)Net assets acquired $1,408,335 $(43,401) $1,364,934(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 Nabors Merger was consummated and did notresult from intervening events subsequent to that date.The fair value and gross contractual amount of accounts receivable acquired on March 24, 2015 was $274.1 million and $296.2 million,respectively. Based on the age of certain accounts receivable, a portion of the gross contractual amount was estimated to be uncollectible.Property, plant and equipment assets acquired consist of the following fair values (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$42,741Building and leasehold improvements 2-2579,456Office furniture, fixtures and equipment 2-52,845Machinery & Equipment 2-10628,791Transportation equipment 2-5166,457Construction in progress 44,954Property, plant and equipment $965,244Other intangibles were assessed a 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 $315.4 million allocated to Well Support Services. The goodwill recognized as a result of the Nabors Merger was primarily attributable to theexpected increased economies of scale, capabilities, resources and geographic footprint of the combined company as well as the cost savings opportunities asC&J expected to capitalize on synergies from the new combined company. The tax deductible portion of goodwill and other intangibles is $60.8 million and$22.3 million, respectively.104Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company treated the Nabors Merger as a non-taxable transaction. Such treatment resulted in the acquired assets and liabilities havingcarryover basis for tax purposes. A deferred tax liability in the amount of $208.9 million was recorded to account for the differences between the preliminarypurchase price allocation and carryover tax basis.Acquisition-related costs associated with the Nabors Merger were expensed as incurred and totaled $42.7 million for the year ended December31, 2015, and are 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 Nabors Merger was completed on January 1, 2014. Pro forma amounts are based on the 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 ofwellheads, artificial lift completion tools and electric submersible pumps ("Artificial Lift Provider") for approximately $34.0 million consisting of cash ofapproximately $13.6 million, a holdback of $6.0 million, and an earn-out valued at approximately $14.4 million on the acquisition date.During the second quarter of 2016, C&J and the sellers agreed to a working capital adjustment of $0.5 million in favor of C&J, which wasaccounted for as a reduction to the purchase price of ESP Completion Technologies LLC. The adjusted purchase price of $33.5 million was allocated to thenet assets acquired based upon their estimated fair values, as follows (in thousands):Current assets $5,822Property, plant and equipment 2,529Goodwill 24,219Other intangible assets 5,173Total assets acquired 37,743Current liabilities (1,927)Deferred income taxes (2,067)Other liabilities (276)Total liabilities assumed (4,270)Net assets acquired $33,473If Artificial Lift Provider is able to achieve certain levels of EBITDA over a three-year period, the Company will be obligated to make futuretiered payments 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 earn-out was determined using a Monte Carlo simulation model over many simulated possiblefuture outcomes which yielded a value of $14.4 million. The earn-out has been remeasured on a fair value basis each quarter and will continue to beremeasured each quarter until the contingent consideration is paid or expires. As of December 31, 2016, the earn-out was estimated to have zero value.2014105Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAcquisition of TigerOn May 30, 2014, the Company acquired all of the outstanding equity interests of Tiger for approximately $33.2 million, including workingcapital adjustments.Tiger provides cased-hole wireline, logging, perforating, pipe recovery and tubing-conveyed perforating services. The acquisition of Tigerincreased the 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 14 –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 17,340Total assets acquired $44,038 Current liabilities $1,223Deferred income taxes 8,556Other liabilities 1,015Total liabilities assumed $10,794Net assets acquired $33,244Note 14 - 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.The Company’s reportable segments are: (i) Completion Services, (ii) Well Support Services and (iii) Other Services. This segment structurereflects the financial information and reports used by the Company’s management, including its CODM, to make decisions regarding the Company’sbusiness, including performance evaluation and resource allocation decisions. The Company revised its reportable segments during the first quarter of 2015in connection with the Nabors Merger. As a result of the revised reportable segment structure, the Company has restated the corresponding items of segmentinformation for the 2014 year. The following is a brief description of the Company's three reportable segments:Completion ServicesCompletion Services consists of the following service lines: (1) hydraulic fracturing; (2) Casedhole Solutions, which includes cased-holewireline, pumpdown services, wireline logging, perforating, pressure pumping, well site make-up and pressure testing and other complementary services; (3)well construction services, specifically cementing and directional drilling services; and (4) R&T, which is primarily engaged in the engineering andproduction of certain parts and components, such as perforating guns and addressable switches, which are used in the completion process.Well Support ServicesWell Support Services consists of the following service lines: (1) rig services, including workover and other support services primarily used forrepair and maintenance of oil and gas wells, re-drilling operations and plugging and abandonment operations; (2) fluids management services, whichprovides storage, transportation and disposal services for produced fluids and fluids used in the drilling, completion and workover of oil and gas wells; (3)coiled tubing services, primarily used for frac plug drill-out during completion operations and for well workover and routine maintenance; (4) artificial lift;and (5) other specialty well site services.106Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSOther ServicesOther Services consists of smaller, non-core business lines that have either been divested, or are in the process of being divested, including thespecialty chemical business (divested in 2016), equipment manufacturing and repair business (in the process of being divested) and the Company'sinternational coiled tubing operations in the Middle East (operations ceased in 2016).The following tables set forth certain financial information with respect to the Company’s reportable segments. CompletionServices Well SupportServices OtherServices Corporate /Elimination TotalYear Ended December 31, 2016 Revenue from external customers $543,958 $419,597 $7,587 $— $971,142Inter-segment revenues 1,049 224 29,115 (30,388) —Depreciation and amortization 131,237 84,105 2,307 (209) 217,440Operating loss (253,513) (430,808) (51,778) (133,909) (870,008)Net loss (253,845) (426,716) (58,757) (204,971) (944,289)Adjusted EBITDA (39,628) 17,460 (5,777) (66,897) (94,842)Capital expenditures 15,622 16,295 8,451 17,541 57,909As of December 31, 2016 Total assets $692,437 $557,292 $52,978 $58,894 $1,361,601Goodwill — — — — —Year Ended December 31, 2015 Revenue from external customers $1,138,521 $582,142 $28,226 $— $1,748,889Inter-segment revenues 4,276 226 150,754 (155,256) —Depreciation and amortization 170,452 100,858 5,159 (116) 276,353Operating loss (754,874) (159,165) (69,129) (115,154) (1,098,322)Net income (loss) (755,704) (163,103) (68,584) 114,849 (872,542)Adjusted EBITDA 39,851 79,966 (1,327) (71,734) 46,756Capital expenditures 79,211 55,612 30,444 1,054 166,321As of December 31, 2015 Total assets $968,438 $1,045,223 $124,328 $60,963 $2,198,952Goodwill — 307,677 — — 307,677Year Ended December 31, 2014 Revenue from external customers $1,400,133 $188,256 $19,555 $— $1,607,944Inter-segment revenues 366 122 228,162 (228,650) —Depreciation and amortization 86,514 18,184 3,796 (349) 108,145Operating income (loss) 187,615 28,471 16,579 (108,921) 123,744Net income (loss) 187,536 28,471 16,029 (163,213) 68,823Adjusted EBITDA 274,113 46,689 20,375 (88,231) 252,946Capital expenditures 254,455 57,817 9,240 (13,914) 307,598As of December 31, 2014 Total assets $1,218,005 $209,490 $186,908 $(1,657) $1,612,746Goodwill 200,149 15,085 4,719 — 219,953Management evaluates reportable segment performance and allocates resources based on total earnings (loss) before net interest expense, incometaxes, depreciation and amortization, other income (expense), net gain or loss on disposal107Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSof assets, acquisition-related costs, and non-routine items (“Adjusted EBITDA”), because Adjusted EBITDA is considered an important measure of eachreportable segment’s performance. In addition, management believes that the disclosure of Adjusted EBITDA as a measure of each reportable segment’soperating performance allows investors to make a direct comparison to competitors, without regard to differences in capital and financing structure. Investorsshould be aware, however, that there are limitations inherent in using Adjusted EBITDA as a measure of overall profitability because it excludes significantexpense items. An improving trend in Adjusted EBITDA may not be indicative of an improvement in the Company’s profitability. To compensate for thelimitations in utilizing Adjusted EBITDA as an operating measure, management also uses U.S. GAAP measures of performance, including operating income(loss) and net income (loss), to evaluate performance, but only with respect to the Company as a whole and not on a reportable segment basis.As required under Item 10(e) of Regulation S-K of the Securities Exchange Act of 1934, as amended, included below is a reconciliation ofAdjusted EBITDA, a non-GAAP financial measure, to net income (loss), which is the nearest comparable U.S. GAAP financial measure (in thousands) on aconsolidated basis for the years ended December 31, 2016, 2015 and 2014, and on a reportable segment basis for the years ended December 31, 2016, 2015and 2014. Years Ended December 31, 2016 2015 2014Net income (loss) $(944,289) $(872,542) $68,823Interest expense, net 157,465 82,086 9,840Income tax (benefit) expense (129,010) (299,093) 45,679Depreciation and amortization 217,440 276,353 108,145Other (income) expense, net (9,504) (8,773) (598)(Gain) loss on disposal of assets 3,075 (544) (17)Impairment expense 436,395 791,807 —Immaterial accounts payable accrual correction — (13,190) —Acquisition-related costs 10,534 42,662 20,159Severance, facility closures and other 31,498 5,849 35Customer settlement/bad debt write-off 1,113 7,997 —Incremental insurance reserve — 3,035 —Insurance settlement — — 880Debt restructuring costs 30,401 — —Reorganization costs 55,330 — —Inventory write-down 35,350 31,109 —Legal settlements 1,020 — —Share-based compensation expense acceleration 7,792 — —Insurance reserve true-up 548 — —Adjusted EBITDA $(94,842) $46,756 $252,946108Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2016 CompletionServices Well SupportServices OtherServices Corporate /Elimination TotalNet loss $(253,845) $(426,716) $(58,757) $(204,971) $(944,289)Interest expense, net 706 (145) — 156,904 157,465Income tax benefit — — — (129,010) (129,010)Depreciation and amortization 131,237 84,105 2,307 (209) 217,440Impairment expense 69,822 357,817 8,756 — 436,395Debt restructuring costs — — — 30,401 30,401Reorganization costs — — — 55,330 55,330Other (income) expense, net (374) (3,947) 6,979 (12,162) (9,504)(Gain) loss on disposal of assets (769) (4,192) 3,060 4,976 3,075Severance, facility closures and other 7,601 3,978 7,558 12,361 31,498Acquisition-related costs 202 — 209 10,123 10,534Share-based compensation expenseacceleration — — — 7,792 7,792Customer settlement/bad debt write-off 375 738 — — 1,113Legal settlements — — — 1,020 1,020Insurance reserve true-up — — — 548 548Inventory write-down 5,417 5,822 24,111 — 35,350Adjusted EBITDA $(39,628) $17,460 $(5,777) $(66,897) $(94,842) Year Ended December 31, 2015 CompletionServices Well SupportServices OtherServices Corporate /Elimination TotalNet income (loss) $(755,704) $(163,103) $(68,584) $114,849 $(872,542)Interest expense, net 358 (41) — 81,769 82,086Income tax benefit — — — (299,093) (299,093)Depreciation and amortization 170,452 100,858 5,159 (116) 276,353Impairment expense 617,047 134,331 40,429 — 791,807Other (income) expense, net 472 3,979 (545) (12,679) (8,773)(Gain) loss on disposal of assets 287 (899) 19 49 (544)Acquisition-related costs — — 46 42,616 42,662Severance, facility closures and other 2,303 2,248 608 690 5,849Inventory write-downs 8,620 1,153 21,336 — 31,109Customer settlement/bad debt write-off 4,269 3,728 — — 7,997Immaterial accounts payable accrualcorrection (10,552) (2,638) — — (13,190)Incremental insurance reserve 2,299 350 205 181 3,035Adjusted EBITDA $39,851 $79,966 $(1,327) $(71,734) $46,756109Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2014 CompletionServices Well SupportServices OtherServices Corporate /Elimination TotalNet income (loss) $187,536 $28,471 $16,029 $(163,213) $68,823Interest expense, net 463 — — 9,377 9,840Income tax expense — — — 45,679 45,679Depreciation and amortization 86,514 18,184 3,796 (349) 108,145Other (income) expense, net (384) — 550 (764) (598)(Gain) loss on disposal of assets (51) 34 — — (17)Acquisition-related costs — — — 20,159 20,159Severance, facility closures and other 35 — — — 35Insurance settlement — — — 880 880Adjusted EBITDA $274,113 $46,689 $20,375 $(88,231)$252,946Note 15 – Quarterly Financial Data (unaudited)Summarized quarterly financial data for the years ended December 31, 2016 and 2015 are presented below (in thousands, except per shareamounts). Quarters Ended March 31, 2016 June 30, 2016 September 30,2016 December 31,2016Revenue $269,615 $225,168 $232,537 $243,822Operating loss (500,416) (182,437) (85,553) (101,602)Loss before reorganization items and income taxes (522,560) (302,368) (86,636) (106,405)Net loss (428,412) (291,116) (106,390) (118,371)Net loss per common share: Basic $(3.65) $(2.46) $(0.90) $(1.00)Diluted $(3.65) $(2.46) $(0.90) $(1.00) 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) (497,432)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)Note 16 - Supplemental Cash Flow DisclosuresListed below are supplemental cash flow disclosures for the year ended December 31, 2016, 2015 and 2014:110Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2016 2015 2014Cash paid for interest $19,153 $64,950 $8,525Cash paid for (refunded from) income taxes $(14,943) $(13,815) $16,125Cash paid for reorganization items $24,719 $— $—Non-cash investing and financing activity: Capital lease obligations $— $— $25,847Change in accrued capital expenditures $(3,182) $(42,793) $8,120Non-cash consideration for business acquisition $— $735,125 $—Note 17 – Subsequent EventsEmergence from Chapter 11 ProceedingOn January 6, 2017, the Predecessor substantially consummated the Restructuring Plan and emerged from the Chapter 11 Proceeding. See Note 2- Chapter 11 Proceeding and Emergence for additional information regarding confirmation of the Restructuring Plan and emergence from the Chapter 11bankruptcy.New Credit FacilityOn January 6, 2017, in connection with the emergence from bankruptcy, the Company entered into the New Credit Facility with PNC Bank,National Association. See Note 5 - Debt and Capital Lease Obligations for additional information about the New Credit Facility.Warrant AgreementOn the Plan Effective Date, by operation of the Restructuring Plan, the Company entered into a warrant agreement (the “Warrant Agreement”)with American Stock Transfer & Trust Company, LLC, which provides for the Company’s issuance of up to 1,180,083 New Warrants to former holders ofcommon equity interests in the Predecessor on the Plan Effective Date and up to 2,360,166 New Warrants to the Debtors' general unsecured creditors after thePlan Effective Date.The New Warrants are exercisable from the date of issuance, or the Plan Effective Date, until 5:00 p.m., New York City time, on January 6, 2024.The New Warrants are initially exercisable for one share of the Company’s common stock, par value $0.01 per share, per New Warrant at an initial exerciseprice of $27.95 per New Warrant (the “Exercise Price”).Cancellation of indebtednessIn accordance with the Restructuring Plan, on the Plan Effective Date, the obligations of the Predecessor with respect to the Original CreditAgreement indebtedness were canceled and discharged (collectively, the “Old C&J Debt”). The obligations of the Predecessor under the Old C&J Debt werecanceled in exchange for 39,999,997 shares of common stock issued to certain holders of claims arising under the Original Credit Agreement.Issuance of New Common StockOn the Plan Effective Date, pursuant to the terms of the Restructuring Plan, the Successor issued an aggregate of 55,463,903 shares of its commonstock to the Holders of Allowed Secured Lender Claims (as defined in the Restructuring Plan), including 15,463,906 shares of common stock issued inconnection with the Rights Offering.Management Incentive PlanIn accordance with the terms of the Restructuring Plan, effective January 6, 2017, a total of 8,046,021 shares of common stock were authorized,approved and reserved for future issuance under that certain 2017 C&J Energy Services, Inc. Management Incentive Plan (the "MIP"). On January 31, 2017,the board of directors (the "Board") of the Company and the Compensation Committee of the Board approved grants of 12,603 shares of restricted stockunder the MIP to the Company’s non-employee directors. The awards granted to the non-employee directors shall vest in full on the first anniversary of thedate of grant, subject to each director’s continued service.111Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSOn February 5, 2017, the Board approved grants of restricted stock and nonqualified stock options under the MIP to certain of the Company’sexecutive officers totaling 369,246 shares of restricted stock and 255,570 nonqualified stock options. The awards granted to the executive officers effectiveas of February 5, 2017, shall vest according to the following schedule: (i) 34% vests immediately on the date of grant, (ii) 22% vests on the first anniversaryof the date of grant, (iii) 22% vests on the second anniversary of the date of grant and (iv) 22% vests on the third anniversary of the date of grant, in each case,subject to each executive officer’s continued employment.Effective as of February 5, 2017, 482,281 shares of restricted stock were granted under the MIP to certain of the Company's non-executiveemployees. These awards granted to the non-executive employees shall vest according to the following schedule: (i) 34% vests immediately on the date ofgrant, (ii) 22% vests on the first anniversary of the date of grant, (iii) 22% vests on the second anniversary of the date of grant and (iv) 22% vests on the thirdanniversary of the date of grant, in each case, subject to each non-executive employees' continued employment. 112Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, 2016.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, 2016, 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, 2016. 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.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, 2016 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting.Item 9B. Other InformationOn February 27, 2017, the parties to the Stockholders Agreement entered into an amendment to the Stockholders Agreement (“StockholdersAgreement Amendment No. 1”) to revise the provision regarding termination of the agreement. As amended, the Stockholders Agreement will terminateautomatically (i) immediately prior to the earlier of (A) our common stock being listed on the NASDAQ Global Market, the NASDAQ Global Select Market orthe New York Stock Exchange or (B) the closing of a firmly underwritten Public Offering (as defined therein), or (ii) upon the occurrence of both (A) each ofGSO and Solus holding less than 5% of the outstanding common stock and (B) all Holders collectively holding less than 20% of the outstanding commonstock.The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Stockholders AgreementAmendment No. 1, a copy of which is filed as Exhibit 4.4 to this Annual Report and incorporated by reference herein.113Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 GovernanceInformation About Our Directors and Executive OfficersAt and immediately prior to January 6, 2017, the Plan Effective Date of our Restructuring Plan, our Board was comprised of the followingindividuals: the Company’s Chief Executive Officer, Donald Gawick, Jay Golding, William Restrepo, Michael Roemer, James Trimble and H.H. “Tripp”Wommack III. Both Mr. Gawick and Mr. Roemer remained a member of Board following the Plan Effective Date and continue to currently serve. During the2016 fiscal year, the following persons also served on the Board: Joshua Comstock, the Company’s founder and prior Chief Executive Officer, through March2016; Randall McMullen, Jr., the Company’s prior Chief Executive Officer (immediately subsequent to Mr. Comstock), President and Chief FinancialOfficer, through June 2016; and Sheldon Erikson, through May 2016. Additional information concerning our former board members is included in ourdefinitive proxy statement for our 2016 Annual Meeting of Shareholders.As of the Plan Effective Date, by operation of the Restructuring Plan and pursuant to the Company’s Certificate of Incorporation and Bylaws, aswell as the Stockholders Agreement, the Board consists of seven members divided into three classes. The Company’s Bylaws provide that the Company’sChief Executive Officer will serve on the Board, and the Stockholders Agreement provides that certain funds affiliated with and/or managed by certain of ourlargest stockholders have the right to designate nominees to serve on the Board as directors, subject in each case to maintaining certain levels of shareownership; specifically, (a) GSO may designate for nomination up to three directors to the Board and (b) Solus may designate for nomination up to twodirectors to the Board, as well as designating one non-voting observer to the Board. In addition, the Stockholders Agreement provides that the Board or anominating committee thereof shall designate the Company’s Chief Executive Officer and one other director for nomination to the Board.As of the Plan Effective Date and continuing to date, the Company’s directors and executive officers are as set forth in the following table,including their names, ages, titles and director classification.NameAgePosition at The RegistrantDonald Gawick59President and Chief Executive Officer and Director Class IIIE. Michael Hobbs54Chief Operating OfficerMark Cashiola41Chief Financial OfficerDanielle Hunter34Executive Vice President, General Counsel, Chief Risk & Compliance Officer andCorporate SecretaryPatrick Bixenman54Chief Administrative Officer and President, Research & TechnologyEdward Keppler52President, Corporate Operational DevelopmentTimothy Wallace55President, Completion ServicesNicholas Petronio70President, Well ServicesPatrick Murray(1)74Chairman of the Board, Director Class IIIStuart Brightman(1)60Director Class IMichael Zawadzki(2)36Director Class IJohn Kennedy(2)64Director Class IIMichael Roemer58Director Class IISteven Mueller(2)63Director Class III(1) Messrs. Brightman and Murray were designated for nomination to the Board by Solus pursuant to the Stockholders Agreement.(2) Messrs. Zawadzki, Kennedy and Mueller were designated for nomination to the Board by GSO pursuant to the Stockholders Agreement.Directors. Biographical information for each director of the Company is set forth below.Donald Gawick. Mr. Gawick has served as a member of our Board since July 2016. He also currently serves as our President and Chief ExecutiveOfficer, a position he was appointed to in June 2016, having previously served as our Chief114Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Operating Officer. Mr. Gawick was President and Chief Executive Officer of C&J’s wireline business, Casedhole Solutions, Inc. (“Casedhole Solutions”),from March 2010 through June 2012, when C&J acquired Casedhole Solutions. Mr. Gawick continued in his role of President of Casedhole Solutions untilhis promotion to Chief Operating Officer in October 2012. Mr. Gawick started his oilfield career in 1979 with Schlumberger and between 1979 and March2010, he held numerous management positions with Schlumberger, focusing on operations and marketing, including oversight of all of Schlumberger’soilfield business segments. In addition, he has held senior leadership positions in oilfield services in sales business and new technology development, servicedelivery and Health-Safety-Environmental management, with assignments throughout the United States, as well as in Canada, Europe, the Far East and LatinAmerica. Mr. Gawick holds a Bachelor of Science degree in Electrical Engineering from the University of Manitoba.Stuart Brightman. Mr. Brightman joined our Board in January 2017, effective upon emergence from the Chapter 11 Proceeding in accordancewith the Restructuring Plan. Mr. Brightman has served as President and Chief Executive Officer of Tetra Technologies, Inc. (“Tetra”) since May 2009, atwhich time he was also appointed to serve on its board of directors. He served as Executive Vice President and Chief Operating Officer of Tetra from April2005 to May 2009. Mr. Brightman also serves as chairman of the board of directors of Tetra’s CSI Compressco GP Inc. subsidiary, the general partner of CSICompressco LP, one of Tetra’s consolidated subsidiaries and a publicly traded limited partnership subject to the reporting requirements of the Exchange Act.From April 2004 to April 2005, Mr. Brightman was self-employed. Mr. Brightman served as president of the Dresser Flow Control division of Dresser, Inc.from April 2002 until April 2004. Dresser Flow Control, which manufactures and sells valves, actuators, and other equipment and provides relatedtechnology and services for the oil and gas industry, had revenues in excess of $400 million in 2004. From November 1998 to April 2002, Mr. Brightman waspresident of the Americas Operation of the Dresser Valve Division of Dresser, Inc. He served in other capacities during the earlier portion of his career withDresser, from 1993 to 1998. From 1982 to 1993, Mr. Brightman served in several financial and operational positions with Cameron Iron Works and itssuccessor, Cooper Oil Tools. Mr. Brightman holds a Bachelor of Science degree from the University of Pennsylvania and a Master of Business Administrationdegree from the Wharton School of Business.Michael Roemer. Mr. Roemer has served as a member of our Board since December 2010, and was reappointed to the Board of the reorganizedCompany in January 2017 effective upon emergence from the Chapter 11 Proceeding in accordance with the Restructuring Plan. Mr. Roemer previouslyserved as the Chief Financial Officer of Hammond, Kennedy, Whitney & Company, Inc. ("HKW"), a private equity group, and as a partner in several affiliatefunds of HKW from 2000 until January 2012. Upon his retirement from HKW, Mr. Roemer founded Roemer Financial Consulting, through which he providesfinancial accounting advice. Prior to joining HKW, Mr. Roemer served as a shareholder and Vice President of Flackman, Goodman & Potter, P.A., a publicaccounting firm, from 1988 to 2000. Mr. Roemer is a licensed Certified Public Accountant with over 35 years’ experience, and is a member of the AmericanInstitute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. Mr. Roemer holds a Bachelor of Science degree inAccounting from the University of Rhode Island.Michael Zawadzki. Mr. Zawadzki joined our Board in January 2017, effective upon emergence from the Chapter 11 Proceeding in accordancewith the Restructuring Plan. Mr. Zawadzki is a Senior Managing Director with GSO Capital Partners, focused principally on the sourcing, execution, andmanagement of investments in the energy sector. Mr. Zawadzki is a senior member of GSO’s energy team and sits on the investment committees for GSO’senergy funds. Since joining GSO in July 2006, Mr. Zawadzki has led or played a critical role in transactions totaling over $3 billion of invested capital. Priorto joining GSO, from 2004 to 2006, Mr. Zawadzki was with Citigroup Private Equity, where he completed numerous private equity and subordinated debtinvestments. From 2002 to 2004, Mr. Zawadzki worked in the investment banking division of Salomon Smith Barney, focused on the media andtelecommunications industries. Mr. Zawadzki currently serves on the board of directors of Titan Energy (since October 2016), Sequel Energy Group (sinceNovember 2016), 3Bear Energy (since September 2016), and Community Development Capital Group (since November 2013). Mr. Zawadzki received aBachelor of Science in Economics from the Wharton School of the University of Pennsylvania, where he graduated magna cum laude.John Kennedy. Mr. Kennedy joined our Board in January 2017, effective upon emergence from the Chapter 11 Proceeding in accordance withthe Restructuring Plan. Mr. Kennedy was President and Chief Executive Officer of Wilson International, a wholly-owned business unit of Smith Internationalfrom 1999 to 2010 and of Schlumberger from August 2010 to May 2012. He joined Wilson International after having previously served as Senior VicePresident and Chief Financial Officer of Smith International, Inc. from 1997 to 1999. Mr. Kennedy also served as Vice President of Finance and ChiefAccounting Officer of Smith International from 1994 to 1997, also holding the title of Treasurer from 1991 to 1997. He has served as the Co-Chairman of theboard of directors of MicroSeismic, Inc., a post he has held since January 2017, along with Chairman of the audit committee since January 2015. He wasappointed to MicroSeismic’s board of directors in September 2013. Mr. Kennedy also currently serves as an advisor to Sumitomo Corporation of theAmericas and as Vice Chairman of the board of directors of Global Stainless Supply Inc., a wholly owned subsidiary of Sumitomo Corporation, positionswhich he has held since July 2015 and November 2015, respectively. Mr. Kennedy also currently serves as Vice Chairman of the115Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Operating Segment Board of Directors of Sumitomo Corporation. Mr. Kennedy previously served on the board of directors for Edgen Group Inc. from Januaryto November 2013 and CE Franklin Inc. from 1999 to May 2012. His career has spanned over 45 years in both executive finance and operating positionsproviding a broad range of expertise in acquisitions, divestitures, recapitalizations and reorganizations in companies with global operations. Mr. Kennedy isalso a member of the Chartered Association of Corporate Treasurers (FCT). He graduated from Wimbledon College in 1970 and Farnborough College ofTechnology in 1973.Steven Mueller. Mr. Mueller joined our Board in January 2017, effective upon emergence from the Chapter 11 Proceeding in accordance with theRestructuring Plan. Mr. Mueller serves as a Senior Advisor for First Reserve, a private equity fund focused on energy investments, having joined the FirstReserve Senior Advisor Program in October 2016. Mr. Mueller served as a director of Southwestern Energy Company from July 2009 to May 2016, servingas Chairman of the board of directors from May 2014 to May 2016. Previously, Mr. Mueller served as the Chief Executive Officer of Southwestern Energyfrom May 2009 until his retirement in January 2016. Mr. Mueller also held the title of President of Southwestern Energy from May 2009 until December2014, having previously served as the President and Chief Operating Officer since June 2008. He joined Southwestern Energy from CDX Gas, LLC, aprivately owned company where he was employed as Executive Vice President from September 2007 to May 2008. From 2001 until its acquisition by ForestOil in 2007, Mr. Mueller served first as the Senior Vice President and General Manager Onshore and later as the Executive Vice President and ChiefOperating Officer of The Houston Exploration Company. Mr. Mueller has over 40 years of experience in the oil and gas industry and served in multipleoperational and managerial roles at Tenneco Oil Company, Fina Oil Company, American Exploration Company and Belco Oil & Gas Company. Mr. Muellerholds a Bachelor of Science degree in Geologic Engineering from the Colorado School of Mines.Patrick Murray. Mr. Murray joined our Board in January 2017, effective upon emergence from the Chapter 11 Proceeding in accordance with theRestructuring Plan. He currently serves as Chairman of the Board. In 2007, Mr. Murray retired from Dresser, Inc., where had been the Chairman of the Boardand Chief Executive Officer since 2004. From 2000 until becoming Chairman of the Board, Mr. Murray served as President and Chief Executive Officer ofDresser, Inc. Mr. Murray was President of Halliburton Company’s Dresser Equipment Group, Inc.; Vice President, Strategic Initiatives of Dresser Industries,Inc.; and Vice President, Operations of Dresser, Inc. from 1996 to 2000. Mr. Murray served as the President of Sperry-Sun Drilling Services from 1988 through1996. Mr. Murray joined NL Industries in 1973 as a Systems Application Consultant and served in a variety of increasingly senior management positions.Mr. Murray has been on the board of directors of Harvest Natural Resources (NYSE: HNR) since October, 2000. Mr. Murray also serves on the board of theWorld Affairs Council of Dallas Fort Worth, on the board of advisors for the Maguire Energy Institute at the Edwin L. Cox School of Business, SouthernMethodist University, and as Chairman of the Board of Regents of Seton Hall University. Mr. Murray holds a Bachelor of Science degree in Accounting and aMaster of Business Administration from Seton Hall University. He also served for two years in the U.S. Army as a commissioned officer.Executive Officers. Biographical information for the Company’s executive officers who do not serve on the Board of Directors and so whosebiographical information was not included above in “Directors” is set out below.E. Michael Hobbs. Mr. Hobbs serves as C&J’s Chief Operating Officer, a position he has held since August 2016. He previously served asPresident of C&J’s Well Services division since June 2015. Mr. Hobbs was Chief Operating Officer of the Company’s wireline division, Casedhole Solutions,at the time C&J acquired it in June 2012. Following C&J’s acquisition of Casedhole Solutions through October 2012, he served as Vice President -Operations for Casedhole Solutions. Mike first joined Casedhole Solutions in April 2010 as Vice President and General Manager for the Southern region,before being promoted to Chief Operating Officer in 2011. Mr. Hobbs is a 37-year veteran of the oilfield services industry, starting his career in 1980. Hespent the early fourteen years of his career with Schlumberger, holding numerous operational and management positions in the Permian Basin. After leavingSchlumberger in 1997, Mr. Hobbs founded E.M. Hobbs, Inc. where he was influential in the development and implementation of many of the multi-stagecompletion procedures and techniques that are currently used today within the wireline service industry. Before leaving E.M. Hobbs, Inc. in 2004, Mr. Hobbsgrew the company to 21 units in five locations in Texas and New Mexico. E.M. Hobbs is now known as E&P Wireline owned by Schlumberger.Mark Cashiola. Mr. Cashiola serves as C&J’s Chief Financial Officer, a position he has held since June 2016. Mark joined C&J in January 2011and previously served as the Company’s Vice President - Controller and Chief Accounting Officer. He has over 18 years of finance and accountingexperience, the majority of which has been spent in the energy industry. Prior to joining C&J, Mark was Senior Controller for Precision Drilling Trustbeginning in late 2008 through 2010 and Assistant Controller for Grey Wolf, Inc., prior to its acquisition by Precision, from 2005 through late 2008. Markbegan his career in public practice working for Arthur Andersen, L.L.P. and KPMG, L.L.P. for a combined six years, most recently as116Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Audit Manager. Mark received a B.B.A. in Accounting from Texas A&M University and is a Certified Public Accountant in the State of Texas.Danielle Hunter. Ms. Hunter serves as C&J’s Executive Vice President, General Counsel and Chief Risk & Compliance Officer, a position she hasheld since June 2016. She also serves as the Company’s Corporate Secretary. Ms. Hunter joined C&J in June 2011 and previously served as the Company’sVice President - Corporate & Compliance and Associate General Counsel. Prior to joining C&J, Ms. Hunter practiced corporate / transactional law at Vinson& Elkins L.L.P. from 2007 through 2011, representing public and private companies and investment banking firms in numerous capital markets offerings,and mergers and acquisitions, primarily in the oil and gas industry. She also counseled clients with respect to corporate governance, compliance, SECdisclosure / reporting, and general corporate matters. Ms. Hunter served as a judicial law clerk to the Honorable Judge Tucker Melancon, United StatesDistrict Court - Western District of Louisiana, from 2006 to 2007. Ms. Hunter graduated magna cum laude and order of the coif with a Juris Doctor fromTulane Law School in 2006.Patrick Bixenman. Mr. Bixenman serves as C&J’s Chief Administrative Officer, a position he has held since August 2016. He also serves asPresident of C&J’s Research & Technology division, having joined C&J in October 2012 to build this division from the ground up. Through the Research &Technology division, C&J develops products and provides technical support to C&J’s legacy core service lines of hydraulic fracturing, coiled tubing andwireline services. Pat also initiated development of drilling products that allowed the Company to enter the directional drilling services business. Prior tojoining C&J, Pat was employed by Schlumberger from 1985 through 2012, where he gained significant technology development and manufacturingexperience in wireline logging, coiled tubing, completions tools, artificial lift, drill stem testing, and subsea intervention trees. While employed bySchlumberger, Mr. Bixenman held numerous key management positions, including Engineering Manager, Manufacturing Center Manager and TechnologyCenter Manager. Mr. Bixenman graduated from Tennessee Technology University with a B.S. in Mechanical Engineering in 1983 and Rice University with aMasters in Mechanical Engineering in 1988.Edward Keppler. Mr. Keppler serves as C&J’s President of Corporate Operational Development, a position he has held since October 2016. He isresponsible for structural and tactical operational issues across all of C&J’s service lines to provide strategic direction and support through the developmentof standards, processes, and systems to increase efficiency and quality for C&J’s operations. Mr. Keppler previously served as President of the Company’sDrilling & Completion Services division from March 2015 to October 2016. Prior to assuming the role of President - Drilling & Completion Services inMarch 2015, he served as the Company’s Senior Vice President - Corporate Oilfield Operations from July 2013. Mr. Keppler first joined C&J with theCompany’s acquisition of its wireline business, Casedhole Solutions, in June 2012. He previously served as the President of Casedhole Solutions fromOctober 2012 through July 2013, having joined Casedhole Solutions as its Vice President and General Manager for the North Region in May 2010. Prior tojoining Casedhole Solutions, Mr. Keppler was employed by Schlumberger from 1991 through 2010, where he gained significant wireline experience in theNorth American market with extensive expertise in cased-hole operations, perforating, open-hole logging, and wellbore formation sampling. While employedby Schlumberger, Mr. Keppler held numerous key management positions, including wireline district manager in six different locations, regional operationsmanager for the state of Alaska, Engineering Sustaining Manager and Cased-Hole Service Delivery Manager for the U.S. Mr. Keppler’s last position beforejoining Casedhole Solutions was Global Wireline Technical Support Manager for Weatherford. Mr. Keppler graduated from New Mexico State Universitywith a Bachelor of Science in Mechanical Engineering in 1990.Timothy Wallace. Mr. Wallace serves as President of C&J’s Drilling & Completion Services division, a position he has held since October 2016.Tim previously served as the Company’s Senior Vice President of Sales & Marketing for the Drilling & Completion Services division, a position he wasappointed to in January 2016. Tim served as C&J’s Senior Vice President-Casedhole Solutions from July 2013 through January 2016. Tim first joined C&Jwith the Company’s acquisition of its wireline business, Casedhole Solutions, in June 2012, and from that time through July 2013 he served as C&J’s VicePresident of Wireline Operations. Mr. Wallace joined Casedhole Solutions in October 2011 as the Southwest Regional Wireline Operations Manager. Beforearriving at Casedhole Solutions, Mr. Wallace was employed for 28 years with Schlumberger. While at Schlumberger, he held positions in operationsmanagement, sales management, software project management, corporate sales, field sales and field operations at various locations in North America, withextensive international travel. Mr. Wallace graduated from Louisiana Tech University with a Bachelor of Science in Petroleum Engineering in 1984.Nicholas Petronio. Mr. Petronio serves as President of C&J’s Well Services division, a position he has held since August 2016. He previouslyserved as Senior Vice President for Operational Development in the Well Services division, having joined the Company in March 2015 when C&J combinedwith the completion and production services business of Nabors Industries Ltd. A veteran of the oil and gas industry, Mr. Petronio served as Assistant to theChairman of Nabors from 2010 to 2015. He was President of Pool Well Services in Houston, a subsidiary of Nabors, from 1999 to 2010. The companyoperated a fleet of more than 750 workover rigs and 350 oilfield trucks and managed a workforce of 3,400 that provided well services to117Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.customers in eight states. Pool was renamed Nabors Well Services in 2005. Mr. Petronio joined Pool as Construction Manager in 1978 and held numerousroles of increasing responsibility within the company, including Vice President of Equipment and Environmental Affairs and Senior Vice President of EasternU.S. Operations before being named President in 1999. Mr. Petronio started his career in 1968 with General Dynamics’ Electric Boat division before joiningMarathon-LeTourneau as a as a technical manager from 1976 to 1978. Mr. Petronio earned a Bachelor of Science in Civil Engineering from the University ofRhode Island and a Masters in Civil Engineering (Applied Mechanics) from the University of Connecticut. Nick is a past President of the Association ofEnergy Services Companies (AESC). He is currently a Registered Professional Engineer in the State of Texas.Corporate GovernanceWe are committed to adhering to sound principles of ethical conduct and good corporate governance. We have adopted corporate policies andpractices that promote the effective functioning of our Company and ensure that it is managed with integrity and in the best interest of our shareholders.The Board has adopted a corporate code of business conduct and ethics (the “Code of Business Conduct and Ethics”), which provides basicprinciples and guidelines to assist our directors, officers, employees, contractors, agents and other representatives in complying with the legal and ethicalrequirements governing our business conduct. This Code of Business Conduct and Ethics is supplemented by our Financial Code of Ethics, which sets forththe ethical principles by which our Chief Executive Officer, Chief Financial Officer (or other principal financial officer), Controller (or other principalaccounting officer) and other senior financial officers are expected to conduct themselves when carrying out their duties and responsibilities. Anyamendment to, or waiver from, a provision of the Code of Business Conduct and Ethics or Financial Code of Ethics that (i) applies to our Chief ExecutiveOfficer, Chief Financial Officer(or other principal financial officer), Controller (or other principal accounting officer) or any person performing functionssimilar to those performed by such officers, and (ii) relates to any element of the code of ethics definitions, as enumerated in Item 406(b) of Securities andExchange Commission (“SEC”) Regulation S-K, will be posted on the Company’s website at www.cjenergy.com within four business days following the dateof the amendment or waiver. Copies of the Code of Business Conduct and Ethics and the Financial Code of Ethics are available on our website athttp://www.cjenergy.com/company-profile/corporate-governance under “Governance Documents and Corporate Policies.” Information on our website is notincorporated by reference into this Annual report or any other filing we file with or furnish to the SEC. Shareholders may also obtain electronic or printedcopies by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailingInvestors@cjenergy.com.Other important corporate policies and practices include the following:•Policy for Complaint Procedures. In keeping with our commitment to maintaining the highest standards of ethical and legal conduct, andpursuant to the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and applicable rules and regulations of the SEC, ourPolicy for Complaint Procedures (also known as the “Whistleblower Policy”) sets forth established procedures for (i) the receipt, retentionand treatment of complaints received by the Company regarding (a) financial reporting, accounting, internal accounting controls orauditing matters, (b) potential violations of applicable laws, rules and regulations or of the Company’s codes, standards, policies andprocedures and (c) any other activities which otherwise may amount to unethical or improper conduct, and (ii) the confidential,anonymous submission by employees of concerns regarding questionable accounting matters, compliance matters and ethical matters. Acopy of the Policy for Complaint Procedures is available on our website at http://www.cjenergy.com/company-profile/corporate-governance under “Governance Documents and Corporate Policies”. Shareholders may also obtain electronic or printed copies of thepolicy, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn:Corporate Secretary, or by emailing Investors@cjenergy.com.•Related Persons Transaction Policy. Our written Related Persons Transaction Policy provides guidelines for the review and approval ofcertain transactions, arrangements or relationships involving the Company and any of our directors (or nominees for director), executiveofficers, shareholder owing more than 5% of the Company, and any immediate family members of any such person. As a general matter, wediscourage such “related persons transactions” because they may present potential or actual conflicts of interest and create the appearancethat decisions are based on considerations other than the best interest of the Company and its shareholders. Additionally, our CorporateCode of Business Conduct and Ethics restricts our directors, officers and employees from engaging in any business or conduct, or enteringinto any agreement or arrangement, that would give rise to an actual or potential conflict of interest. Under the Corporate Code118Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 Business Conduct and Ethics, conflicts of interest occur when an individual’s private or family interests interfere in any way with theinterest of the Company or its shareholders. Our Related Person Transaction Policy supplements our Corporate Code of Business Conductand Ethics and is intended to assist us in complying with the disclosure obligations concerning certain related person transactions underthe SEC rules. Please see Item 13. Certain Relationships And Related Transactions, And Director Independence, “Transactions withRelated Persons” for additional information regarding our Related Persons Transaction Policy.•Insider Trading Policy. Our Insider Trading Policy provides guidelines to our directors, officers, employees, agents, advisors andconsultants with respect to transactions in the Company’s securities for the purposes of promoting compliance with applicable securitieslaws. Integrity and fair dealing are fundamental to the way we do business and we believe that it is vitally important that we maintain theconfidence of our shareholders and the public markets. Our commitment to integrity and fair dealing means that our directors, officers andemployees do not misuse material, non-public information, or take personal advantage of such information, to the detriment of or unfairadvantage over others who do not have that information. We are determined to preserve our reputation, and we take our obligation toprevent insider trading violations seriously.•Anti-Hedging Policy. Our Anti-Hedging Policy prohibits our directors, officers, employees, agents, advisors and consultants fromengaging in hedging, monetization and other speculative transactions that are designed to hedge or offset any decrease in the marketvalue of the Company’s securities. Such transactions are prohibited because they present the appearance of a “bet” against the Company.They also allow the holder to own the Company’s securities without the full risks and rewards of ownership, which potentially separatesthe holder’s interest from that of the Company and its other shareholders. Transactions involving Company-based derivative securities arealso prohibited, whether or not entered into for hedging or monetization purposes. This policy supplements our Insider Trading Policy.•Conflict Minerals Policy and Program. Our Conflict Minerals Policy is part of our commitment to being a responsible corporate citizenand complying with SEC regulations requiring publicly traded companies to file annual reports disclosing certain “conflict minerals”(defined as tin, tantalum, tungsten and gold) to the extent that they originate from the Democratic Republic of Congo and its adjoiningcountries (“Conflict Areas”) and are necessary to functionality of products we manufacture or contract to manufacture. We are committedto the responsible sourcing of materials, products and components and to exercising diligence over our sourcing practices so as not tosupport conflict, human rights abuses or crimes against humanity. We are taking steps to establish a due diligence framework andcompliance program to implement the Conflict Minerals Policy across the Company. We are also communicating to our suppliers ourexpectation that they will cooperate with our efforts to procure materials, products, and components that either do not originate from theConflict Areas or are otherwise conflict-free. A copy of the Conflict Minerals is available on our website athttp://www.cjenergy.com/company-profile/corporate-governance under “Governance Documents and Corporate Policies”. Shareholdersmay also obtain electronic or printed copies of the policy, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing Investors@cjenergy.com.•International Business Requirements Compliance Program. We are committed to maintaining the highest ethical and legal standards,complying with both the letter and spirit of applicable laws and regulations in each country in which we do business. We have adoptedrobust policies and procedures to provide additional guidance to our directors, officers, employees, agents, contractors, partners and otherthird parties representing the Company to ensure that our business practices and operations are in compliance with applicable laws,including the following:◦Anti-Corruption Policy and related Compliance Procedures, to ensure compliance with the United States Foreign CorruptPractices Act of 1977 (“FCPA”), which makes it a crime to give, or to offer to give, anything of value to non-U.S. governmentofficials (including employees of state-owned companies, such as national oil and transportation companies) or to improperlyinfluence the performance of the officials’ duties. The FCPA also includes requirements that public companies, like C&J, havestrong internal controls and accurate books and records. Many other countries have also adopted their own domestic anti-corruption and anti-bribery laws. Our Anti-Corruption Policy and related Compliance Procedures are designed to ensure that ourbusiness practices and119Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.operations are in compliance with applicable anti-corruption, anti-bribery and record keeping laws, including the FCPA andSarbanes-Oxley;◦Compliance Policy on Trade Restrictions, Sanctions & Anti-Money Laundering Requirements and related ComplianceProcedure, to ensure compliance with trade sanctions maintained by the U.S. government against targeted foreign countries, aswell as terrorists and international drug traffickers, according to U.S. foreign policy and national security objectives; and◦Export Compliance Policy and related Compliance Procedures, to ensure compliance with U.S. laws and regulations governingthe export of goods, technologies and services from the U.S., the release of sensitive technologies to foreign persons in the U.S.,and the retransfer of U.S.-origin goods and technologies abroad.Information About Our Board and Its CommitteesOur Board currently consists of seven directors with three standing committees to assist it in discharging its responsibilities: the AuditCommittee, the Compensation Committee and the Nominating & Governance Committee. Details as to the membership of the Board and each committee andthe function of each committee are provided below.The following table identifies the current members of the Board, their respective classes, the standing committees of the Board on which theyserve, and the chairman of each committee as of the date of this Annual Report. The Board appoints members to its various committees on an annual basis at aregularly scheduled meeting, typically following the annual general meeting of shareholders. Additional information about each committee is set forth belowunder the heading “Committees of Our Board.” Each committee has a charter, which is available on our website at http://www.cjenergy.com/company-profileunder “Corporate Governance,” and shareholders may obtain printed copies, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing Investors@cjenergy.com. Biographies and other background informationconcerning each of our current directors are set forth under the heading “Information About our Directors and Executive Officers.Name of Director Class AuditCommittee(2) CompensationCommittee(2) Nominating& GovernanceCommittee(2)Donald J. Gawick (1) III Patrick M. Murray + III Stuart Brightman+ I * *Michael Zawadzki + I * *John Kennedy+ II * ** *Michael Roemer+ II ** * *Steven Mueller+ III * * ***Committee Member**Chairman+Independent. The rules and regulations of the SEC and NYSE require that each of the Audit Committee, Compensation Committee and Nominating & Governance Committee becomprised solely of independent directors.(1)President and Chief Executive Officer.(2)Immediately prior to the Plan Effective Date, our Audit Committee consisted of Messrs. Roemer and Trimble; our Compensation Committee consisted of Messrs. Roemer andGolding; and our Nominating & Governance Committee consisted of Messrs. Roemer and Golding. Prior to his resignation from the Board on December 16, 2016, Mr.Wommack also served on the Audit Committee, Compensation Committee and Nominating & Governance Committee. Additionally, prior to his resignation from the Board onMay 26, 2016, Mr. Erikson served on the Compensation Committee and Nominating & Governance Committee; Mr. Golding was appointed to the Board to replace the positionvacated by Mr. Erikson. Each of Messrs. Erikson, Golding, Roemer, Trimble and Wommack were independent as defined by and required under the rules and regulations of theSEC and NYSE for service on the Audit Committee, Compensation Committee and Nominating & Governance Committee, as applicable.Class I directors initially serve for a one-year term of office ending in 2018, Class II directors initially serve for a two-year term of office ending in2019; and Class III directors initially serve for a three-year term of office ending in 2020. Following their respective initial terms, each Class I, II and IIIdirector will be elected for a three-year term of office.120Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.During 2016, the Board held 50 meetings. As noted above, of the current directors, only Messrs. Gawick and Roemer served on the Board during2016. Each then serving director attended at least 75% of the aggregate of the total number of meetings of the Board in 2016 and the total number ofmeetings held by each committee on which he served in 2016. Directors are encouraged but not required to attend our annual shareholder meetings, and noneof our then serving directors were in attendance at our 2016 annual shareholder meeting.Board GovernanceWe are committed to good corporate governance. Our Board has adopted several governance documents to guide the operation and direction ofthe Board and its committees, which include Corporate Governance Guidelines, and charters for the Audit Committee, Compensation Committee, andNominating & Governance Committee, as well as those policies described above under the heading “Corporate Governance.” A summary of the CorporateGovernance Guidelines follow immediately below, and summaries of each committee charter are set forth below under the heading “-Committees of OurBoard.” The Corporate Governance Guidelines and committee charters are available on our website at http://www.cjenergy.com/company-profile under“Corporate Governance”. Shareholders may also obtain printed copies of these documents, free of charge, by sending a written request to C&J EnergyServices, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary or by emailing Investors@cjenergy.com.Corporate Governance GuidelinesEffective January 6, 2017, our Board adopted Corporate Governance Guidelines to provide a framework within which the Board, assisted by itscommittees, can conduct its business and fulfill its duties to our shareholders. The Corporate Governance Guidelines are reviewed periodically as deemednecessary by the Nominating & Governance Committee, and any proposed additions to or amendments of the Corporate Governance Guidelines arepresented to the Board for its approval. Among other matters, the Corporate Governance Guidelines include provisions concerning the following:1.Director Qualification Standards•Our Nominating & Governance Committee is responsible for evaluating candidates for nomination to our Board and will conduct appropriateinquiries into the backgrounds and qualifications of possible candidates.•A majority of directors on our Board must be “independent” as defined by the rules and regulations of the SEC and NYSE. Each year, ourNominating & Governance Committee will review the relationships between us and each director and will report the results of its review toour Board, which will then determine which directors satisfy the applicable independence standards.•Nominees for directorship will be selected by the Nominating and Governance Committee in accordance with the policies and principles in itscharter, subject to the requirements in the our organizational documents and our legal requirements under contract, including, requirementswith respect to the nomination and appointment of Board Designees (as defined in the Stockholders Agreement) and their replacements, asselected by GSO or Solus, as applicable, pursuant to our organizational documents and Sections 2.1.2 and 2.1.3 of the StockholdersAgreement.2.Director Responsibilities•The basic responsibility of each director is to exercise his business judgment to act in what he reasonably believes to be in the best interests ofthe Company and our shareholders.•Directors are expected to attend meetings of the Board and of committees on which they serve and to spend the time needed and meet asfrequently as necessary to properly discharge their responsibilities. The Chairman of the Board is responsible for establishing the agenda foreach Board meeting. Attendance at Board and committee meetings is considered by our Nominating & Governance Committee in assessingeach director’s performance.•Directors are encouraged but not required to attend each annual general meeting.3.Director Access to Independent Advisors and Management121Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 Board and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary,without consulting or obtaining approval of any officer of the Company in advance.•Directors have full and free access to officers and employees of the Company.4.Management Evaluation and Succession Planning•Each year, the Nominating and Governance Committee will lead the Board in the annual performance review of our executive managementteam, including our Chief Executive Officer.•The Nominating and Governance Committee will meet annually on succession planning. Our Chief Executive Officer should, at all times,make available his recommendations and evaluations of potential successors, along with a review of any development plans recommendedfor such individuals.5.Annual Performance Evaluation of the Board and Committees, Director Orientation and Continuing Education•Each year, the Nominating and Governance Committee will lead the Board in its annual performance review. As part of this process, theNominating and Governance Committee will receive comments from all directors and report to the full Board with an assessment of theBoard’s performance following the end of each fiscal year.•Each year, the Nominating and Governance Committee will lead the Board in its annual performance review of the Board’s committees. As partof this process, the Nominating and Governance Committee will request that the chairman of each committee report to the full Board aboutthe committee’s annual evaluation of its performance and evaluation of this charter following the end of each fiscal year.•Our Nominating and Governance Committee is responsible for developing and annually evaluating orientation and continuing educationprograms for directors.Board Leadership StructureOur founder and former Chief Executive Officer, Joshua Comstock, served as Chairman of the Board until his death on March 11, 2016. Inconnection with the succession evaluation following the death of Mr. Comstock, the Board decided to separate the roles of Chairman and Chief ExecutiveOfficer, but then did not immediately designate a Chairman to replace Mr. Comstock.In connection with our emergence from the Chapter 11 Proceeding and instituting the reorganized Company, it was determined that the roles ofChairman and Chief Executive Officer should remain separate, and on January 6, 2017, Mr. Murray was appointed to serve as the Chairman of the Board. TheBoard believes that this governance structure will allow Mr. Gawick to focus his time and energy on managing the Company and Mr. Murray to lead theBoard in its fundamental role of providing guidance, advice and counsel regarding our business, operations and strategy, and that having a separateChairman will better position the Board in evaluating the performance of management. The Board believes that Mr. Murray’s deep knowledge andunderstanding of our industry, along with his experience as a former Chairman of the Board and Chief Executive Officer of a publicly traded company, putshim in the best position to lead our Board.Going forward, each year our Nominating & Governance Committee will review whether this leadership structure is in the Company’s and ourshareholder’s best interests, in light of its evaluation of the desirability of having a single individual act as Chairman and Chief Executive Officer, and suchindividual’s ability to simultaneously execute such roles.Director IndependenceFrom our initial public offering in July 2011 through our delisting from the NYSE in July 2016 in connection with the Chapter 11 Proceeding,we were a publicly traded company on the NYSE under the symbol “CJES.” During our tenure as a NYSE-listed company, we were required to comply withthe rules of the NYSE and were subject to the related rules and regulations of the SEC, including Sarbanes-Oxley. Although we have not been listed on anational exchange for a period of time as a result of our Chapter 11 Proceeding, we have continued to look to the NYSE regulations for guidance, amongother reasons, as a matter of best practices. Furthermore, on February 28, 2016, our common stock was approved for listing on the NYSE MKT and is expectedto begin trading under the symbol "CJ" on March 6, 2017.122Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 NYSE regulations require listed companies to have a board of directors with at least a majority of independent directors. Additionally, eachof the Audit Committee, Compensation Committee and Nominating and Governance Committee are required to be comprised solely of independentdirectors, as that term is defined by the applicable rules and regulations of the NYSE and SEC. Rather than adopting categorical standards, our Board assessesdirector independence on a case-by-case basis, in each case consistent with the applicable rules and regulations of the SEC and the NYSE. After reviewing allrelationships each director has with the Company, including the nature and extent of any business relationships between the Company and such person, ourBoard has affirmatively determined that each of Messrs. Murray, Brightman, Kennedy, Mueller, Roemer and Zawadzki has no material relationships with theCompany and, therefore, is “independent” as defined under the applicable rules and regulations of the SEC and the NYSE. Mr. Zawadzki is employed byGSO, a significant shareholder of the Company, and was designated for nomination to the Board by GSO pursuant to the Stockholders Agreement.Mr. Gawick, our President and Chief Executive Officer, is not considered to be “independent” because of his employment position with the Company.With respect to the former members of our Board who served during 2016, each of Messrs. Erickson, Golding, Trimble and Wommack weredetermined by our Board to be “independent” prior to their departures in 2016. None of Messrs. Comstock, McMullen or Restrepo were considered to be“independent” during the period of time they served on the Board, as discussed further below.Executive SessionsTo facilitate candid discussion among the directors, our non-employee directors meet in executive session as determined to be necessary,including in conjunction with regular board and/or committee meetings. The chairman of the Board or the respective committee presides at each executivesession in conjunction with regular board and/or committee meetings.Board’s Role in Risk OversightThe Board believes that risk management is an integral part of setting and implementing our business strategy, which includes, among otherthings, identifying and assessing the risks and opportunities facing the Company. It is management’s responsibility to manage the Company’s risk exposureand potential impact of the many risks that are associated with our business and a primary function of our Board is to assist and oversee management in thiseffort. The Board, as a whole and also at the committee level, has oversight responsibility. The Board’s committees assist the Board in fulfilling its oversightresponsibilities with respect to risks within its areas of responsibilities, as further discussed below. We believe the Board’s role in risk oversight is consistentwith the Company’s leadership structure (as discussed under the heading “-Board Leadership Structure”), with our Chief Executive Officer and other membersof senior management having direct responsibility for risk management, and the remaining directors involved in providing oversight of management’s effortsto reduce, mitigate or eliminate the risks that we face.The primary means by which the Board and its designated committees oversee our risk management structure and policies is through its regularcommunications with management and our internal audit department. In connection with our quarterly Board meetings, the full Board (or the appropriateCommittee in the case of risks that are under the purview of a particular Committee) receives regular reports from members of senior management on areas ofmaterial risk to the Company, including operational, financial, legal and regulatory, and strategic risks. The Chairman of each of the Committees will discussand review significant matters with management outside of the quarterly Board meetings as needed. When a Committee receives a separate report or theChairman has separate discussions, the Committee Chairman may discuss that report with the full Board.As part of its charter, the Audit Committee is responsible for reviewing and discussing our policies with respect to risk assessment and riskmanagement generally, and also specifically with respect to financial reporting, internal controls and accounting matters, legal, tax and regulatorycompliance and the internal audit function. The Audit Committee is responsible for ensuring that an effective risk assessment process is in place, andquarterly reports are made to the Audit Committee on material risks facing the Company. Upon request, both the full Board and Audit Committee mayreceive reports from those executive officers who are deemed responsible for particular risks due to being in a position that makes them most likely to be ableto impact the effects of such risks. The Audit Committee also oversees our internal audit department, which is responsible for monitoring the Company’sadherence to our significant corporate policies and internal controls.Our Compensation Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks arising fromour compensation and health and welfare benefits policies and programs. Our Nominating and Governance Committee assists our Board in fulfilling itsoversight responsibilities with respect to the123Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 of risks associated with corporate governance, Board organization, membership and structure and succession planning for our Chief ExecutiveOfficer and other members of senior management.Board DiversityOur Board seeks independent directors who represent a mix of backgrounds and experiences that will enhance the quality of our Board’sdeliberations and decisions. Our Nominating and Governance Committee is responsible for identifying and recommending to our Board qualified individualsto be nominated to serve on our Board. Our Board’s objective is to select individuals that have a demonstrated record of integrity, sound business judgment,leadership, objectivity, independence of mind and commitment. In selecting potential Board candidates, our Board considers diversity in its broadest sense,including, among other things, diversity of background, perspective, personal and professional experiences, geography, gender, race and ethnicity, as well asthe existing skill-set of our Board and the needs of our Company. We believe that this process has resulted in a Board that is comprised of highly qualifieddirectors that reflect diversity as we define such concept. We discuss each of our directors’ qualifications and characteristics under the heading “Informationabout our Directors and Executive Officers.”Our Nominating and Governance Committee factors the effectiveness of our diversity policy into its annual evaluation of our Board and itscommittees. Part of this review focuses on whether or not our Board includes the appropriate skills and characteristics that reflect a diverse, effective Board.We believe that the evaluation program has been designed such that any diversity-related deficiencies would be identified as part of the process.Committees of Our BoardAs noted above, our Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominating &Governance Committee. A description of each committee, its function and charter, are provided below:Audit CommitteeOur Audit Committee is responsible for the oversight of risks relating to financial reporting, internal controls and accounting matters, as well aslegal, tax and regulatory compliance, and our internal audit systems. Pursuant to its charter, the purposes of the Audit Committee are to:•Oversee the quality, integrity and reliability of the financial statements and other financial information we provide to any governmental bodyor the public;•Oversee our compliance with legal, tax and regulatory requirements, as well as with our significant corporate codes, policies and procedures;•Oversee the qualifications, independence and performance of our independent registered public accounting firm;•Oversee the effectiveness and performance of our internal audit function, including our internal audit department;•Oversee the effectiveness and performance of our systems of internal controls regarding finance, accounting, legal compliance and ethics thatour management and Board have established;•Provide an open avenue of communication among our independent registered public accounting firm, financial and senior management, theinternal audit department and our Board, always emphasizing that the independent registered public accounting firm is accountable to ourAudit Committee;•Annually prepare an “Audit Committee Report” for inclusion in the proxy statement for each annual general meeting of shareholders, inaccordance with applicable rules and regulations; and•Perform such other functions as our Board may assign to our Audit Committee from time to time.In connection with these purposes and to satisfy its oversight responsibilities, our Audit Committee annually selects, engages and evaluates theperformance and ongoing qualifications of, and determines the compensation for, our independent registered public accounting firm, reviews our annual andquarterly financial statements, and confirms the independence of our independent registered public accounting firm. Our Audit Committee meets regularlywith our management, internal auditors and independent registered public accounting firm regarding the adequacy of our financial124Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.controls and our compliance with legal, tax and regulatory matters and our significant corporate policies. Our Audit Committee separately meets regularlywith our independent registered public accounting firm, internal auditors, Chief Financial Officer, Chief Accounting Officer/Controller and other members ofsenior management. Our Audit Committee Chairman routinely meets between formal committee meetings with our Chief Financial Officer, Controller,internal auditors and our independent registered public accounting firm. Our Audit Committee also receives regular reports regarding issues such as the statusand findings of audits being conducted by the internal and independent auditors, accounting changes that could affect our financial statements and proposedaudit adjustments.While our Audit Committee has the responsibilities and powers set forth in its charter, it is not the duty of our Audit Committee to plan orconduct audits, to determine that our financial statements are complete and accurate or to determine that such statements are in accordance with accountingprinciples generally accepted in the United States (“U.S. GAAP”) and other applicable rules and regulations. Our management is responsible for thepreparation of our financial statements in accordance with U.S. GAAP and our internal controls. Our independent registered public accounting firm isresponsible for the audit work on our financial statements. It is also not the duty of our Audit Committee to conduct investigations or to assure compliancewith laws and regulations and our corporate policies and procedures. Our management is responsible for compliance with applicable laws and regulations, aswell as compliance with our policies and procedures.The current members of the Audit Committee are Messrs. Roemer (Chairman), Kennedy and Mueller. We have an audit committee consisting ofat least three members, each of whom meets certain independence standards established under the rules and regulations of the SEC and the NYSE. Our Boardhas determined that all members of our Audit Committee are independent as that term is defined by the listing requirements of the NYSE and by Rule 10A-3promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Additionally, our Board has determined that each member of theAudit Committee is financially literate, and that Mr. Roemer has the necessary accounting and financial expertise to serve as Chairman. Our Board has alsodetermined that Mr. Roemer is an “audit committee financial expert” following a determination that Mr. Roemer met the criteria for such designation underthe rules and regulations of the SEC. For information regarding Mr. Roemer’s business experience please read “Information about our Directors and Officers.”The Audit Committee held 7 meetings during 2016. Of the current members of the Audit Committee, only Mr. Roemer was a member of theBoard and the Audit Committee during 2016.Compensation CommitteeOur Compensation Committee is responsible for the oversight of risks relating to the compensation of our executive officers and directors, as wellas our compensation and benefit plans, policies and programs. Pursuant to its charter, the purposes of the Compensation Committee are to:•Review, evaluate, and approve our agreements, plans, policies and programs to compensate our executive officers and directors;•Oversee our employee benefit plans, policies and programs, including our incentive compensation plans and equity-based plans, tocompensate our non-executive employees as well as executive officers;•Fulfill our Board’s responsibility relating to compensation of our executive officers and directors;•Review and discuss with management the “Compensation Discussion and Analysis” disclosures proposed to be included in our proxystatement for each annual meeting of shareholders or our annual report on Form 10-K, as applicable, and determine whether to recommend toour Board that the proposed Compensation Discussion and Analysis disclosure be included in the proxy statement or annual report, inaccordance with applicable rules and regulations;•Annually prepare a “Compensation Committee Report” for inclusion in the proxy statement for each annual meeting of shareholders or annualreport on Form 10-K, as applicable, in accordance with applicable rules and regulations of the SEC; and•Perform such other functions as our Board may assign to our Compensation Committee from time to time.In connection with these purposes, our Board has delegated to the Compensation Committee the overall responsibility for establishing,implementing and monitoring compensation for our executive officers. Together with management (with the exception of compensation matters related toour Chief Executive Officer), and any counsel or other125Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.advisors it deems appropriate, the Compensation Committee reviews and discusses each particular executive compensation matter presented and makes afinal determination. For example, the Compensation Committee reviews and approves the compensation of our executive officers and makes appropriateadjustments based on Company performance, achievement of predetermined goals and changes in an officer’s duties and responsibilities. Additionally,following each shareholder meeting at which “say-on-pay” resolutions are proposed for a shareholder advisory vote, the Compensation Committee willreview the results of the shareholder advisory vote, and consider whether to make any adjustments to our executive compensation policies and practices. TheCompensation Committee is also responsible for approving all employment agreements related to our executive officers.In addition, our Board has delegated to the Compensation Committee the responsibility for establishing, implementing and monitoring thecompensation for our directors. Our Compensation Committee establishes reviews and approves the compensation of our directors and makes appropriateadjustments based on their performance, duties and responsibilities and competitive environment. Our Compensation Committee’s primary objectives inestablishing and implementing director compensation are to:•Ensure the ability to attract, motivate and retain the talent necessary to provide qualified Board leadership; and•Use the appropriate mix of long-term and short-term compensation to ensure high Board and/or committee performance. Under its charter, our Compensation Committee has the sole authority to select, retain, approve the fees and other retention terms of, andterminate the services of an independent compensation consultant or other experts to assist the Compensation Committee in fulfilling its responsibilities,including the evaluation of the compensation of our executive officers and directors.The current members of the Compensation Committee are Messrs. Kennedy (Chairman), Brightman, Mueller, Roemer and Zawadzki, each ofwhom our Board has determined to be independent and eligible for service on the Compensation Committee under the rules and regulations of the SEC andthe NYSE.The Compensation Committee held 7 meetings during 2016. Of the current members of the Compensation Committee, only Mr. Roemer was amember of the Board and the Compensation Committee during 2016. Nominating & Governance CommitteeOur Nominating & Corporate Governance Committee is responsible for the oversight of risks relating to corporate governance, Board organization,membership and structure, and succession planning for our senior management team, including our Chief Executive Officer. Pursuant to its charter, thepurposes of our Nominating & Governance Committee are to:•Advise our Board and make recommendations regarding appropriate corporate governance practices and assist our Board in implementingthose practices;•Assist our Board by identifying individuals qualified to become members of our Board, consistent with criteria approved by the Board, andrecommending director nominees for election at each annual general meeting of shareholders or for appointment to fill vacancies;•Advise our Board and make recommendations regarding the appropriate composition of our Board and its committees;•Lead our Board in its annual review of the performance of the Board and its committees and of senior management, including our ChiefExecutive Officer;•Direct all matters relating to succession planning for the Company’s Chief Executive Officer, as well as succession planning for the othermembers of the senior management team in consultation with our Chief Executive Officer and succession planning of our accounting andfinancial personnel in consultation with the Audit Committee; and•Perform such other functions as our Board may assign to our Nominating & Governance Committee from time to time.126Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 connection with these purposes, our Nominating & Governance Committee evaluates potential new members of our Board, actively monitorsand advises the Board about appropriate corporate governance practices, evaluates director independence under the applicable standards, and identifies thequalities and characteristics necessary for an effective Chief Executive Officer.Our Nominating & Governance Committee is responsible for developing and recommending to the Board appropriate criteria for selecting newdirectors and actively seeking out candidates for recommendation to our Board. In considering candidates for our Board, our Nominating & GovernanceCommittee considers the entirety of each candidate’s credentials. There is currently no set of specific minimum qualifications that must be met by a nomineerecommended by our Nominating & Governance Committee, as different factors may assume greater or lesser significance at particular times. Furthermore, theneeds of our Board may vary in light of its composition, and our Nominating & Governance Committee’s perceptions about future issues and needs.However, while the Board does not maintain a formal list of qualifications, in making its evaluation and recommendation of candidates, our Nominating &Governance Committee may consider, among other factors, diversity, age, skill, experience in the context of the needs of our Board, independencequalifications and whether a prospective nominee has relevant business and financial experience, industry or other specialized expertise and a high moralcharacter.Our Nominating & Governance Committee may consider candidates for our Board from any reasonable source, including from a search firmengaged by our Nominating & Governance Committee or shareholder recommendations. Our Nominating & Governance Committee does not intend to alterthe manner in which it evaluates candidates based on whether the candidate is recommended by a shareholder. However, in evaluating a candidate’s relevantbusiness experience, our Nominating & Governance Committee may consider previous experience as a member of our Board.The current members of the Nominating & Governance Committee are Messrs. Mueller (Chairman), Brightman, Kennedy, Roemer and Zawadzki,each of whom our Board has determined to be independent under the rules and regulations of the SEC and the NYSE.The Nominating & Governance Committee held 5 meeting during 2016. Of the current members of the Nominating & Governance Committee,only Mr. Roemer was a member of the Board and the Nominating & Governance Committee during 2016. Communications with the BoardOur Board welcomes communications from our shareholders and other interested parties. Shareholders and any other interested parties may sendcommunications to our Board, any committee of our Board, the Chairman of our Board, or to any director in particular, by writing to:C&J Energy Services, Inc.3990 Rogerdale Rd.Houston, Texas 77042Attn: General Counsel and Corporate SecretaryShareholders and any other interested parties should mark the envelope containing each communication as “Shareholder Communication with Directors” andclearly identify the intended recipient(s) of the communication.Our General Counsel will review each communication received from shareholders and other interested parties and will forward thecommunications, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies with the requirements of any applicablepolicy adopted by our Board relating to the subject matter of the communication and (2) the communication falls within the scope of matters generallyconsidered by our Board.Section 16(a) Beneficial Ownership Reporting ComplianceEach person who, at any time during the fiscal year 2016, was a director, executive officer or beneficial owner of more than 10% of our commonstock was required by Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership of our securities (Forms 3, 4 and 5) with theSEC, and to furnish us with copies of the reports.Based solely on our review of the reports furnished to us and written representations received from our directors and executive officers during thefiscal year 2016, we believe that, during the fiscal year 2016, all of our directors, executive officers and beneficial owners of more than 10% of our commonstock timely complied with all Section 16(a) filing requirements.127Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 11. Executive CompensationCompensation Discussion and AnalysisExecutive SummaryThis Compensation Discussion and Analysis (“CD&A”) provides information about the compensation objectives, policies and program for ourexecutive offices, specifically including the individuals who served as our principal executive officer, principal financial officer, and the other three mosthighly-compensated executive officers during fiscal year 2016 (collectively referred to as the “Named Executive Officers”), as set out below:•Donald Gawick, President and Chief Executive Officer•E. Michael Hobbs, Chief Operating Officer•Mark Cashiola, Chief Financial Officer and Chief Accounting Officer•Danielle Hunter, Executive Vice President, General Counsel, Chief Risk and Compliance Officer, and Corporate Secretary•Edward Keppler, President - Corporate Operational DevelopmentThis CD&A also provides information regarding three Named Executive Officers who are no longer executive officers of the Company;specifically: Mr. Joshua Comstock, our Founder and former Chairman and Chief Executive Officer, whose employment with the Company terminated onMarch 11, 2016 upon his death; Mr. Randall McMullen, Jr. Former President and Chief Financial Officer, as well as successor Chief Executive Officer to Mr.Comstock, whose employment with the Company terminated on June 13, 2016; and Mr. Theodore Moore, Former Executive Vice President, General Counseland Chief Risk Officer, whose employment with the Company terminated on June 13, 2016.This CD&A provides a general description of our 2016 compensation program and specific information about its various components, whichprimarily consisted of base salaries and short-term incentive programs, and is intended to place in perspective the information contained in the executivecompensation tables that follow this discussion under the heading “Executive Compensation.” The 2016 compensation program and decisions described inthis CD&A were determined by our Predecessor’s Compensation Committee (the “Legacy Compensation Committee”), which was composed of threeindependent directors: Messrs. H.H. “Tripp” Wommack, III (Chairman), Jay Golding, and Michael Roemer. Mr. Sheldon Erikson also served on the LegacyCompensation Committee during 2016 through the date of his resignation from the Board on May 26, 2016.Following the Company’s emergence from its Chapter 11 Proceeding on January 6, 2017, compensation decisions for the Named ExecutiveOfficers are made by our current Compensation Committee (the “Compensation Committee”), which is comprised of the following five members: Messrs.Kennedy (Chairman), Brightman, Mueller, Roemer and Zawadzki. While this CD&A focuses on compensation for the Named Executive Officers for 2016, asthe last completed fiscal year, in accordance with the rules of the SEC, we also describe compensation actions effected after the end of the last completedfiscal year to the extent we believe such discussion enhances the understanding of our executive compensation disclosures and our executive compensationstructure. See “-Actions Taken for the 2017 Fiscal Year” below for additional information.As used in this CD&A and in the sections entitled “Executive Compensation” and “Director Compensation” below, the terms “we,” “us,” “our,”and the “Company” refer, when discussing time periods prior to the Company’s emergence from its Chapter 11 Proceeding, to our Predecessor and its Boardof Directors and Compensation Committee. Additionally, the term “share”, “shares” or “shareholders” refer, when discussing time periods prior to theCompany’s emergence from its Chapter 11 Proceeding, to our Predecessor’s stock and stockholders.Overview of Our Executive Compensation ProgramCompensation Philosophy and ObjectivesThe primary objectives of our compensation program are as follows:•To attract and retain a talented and experienced employee base by competitive positioning within the industry;128Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.•To motivate best-in-class performance by linking compensation with the achievement of strategic business and financial objectives; and•To align the interests of our employees with those of our stakeholders by providing an incentive to our employees to focus on the long-termsuccess of the Company and rewarding our employees for individual successes and contributions.To this end, we have focused on designing a compensation program for our employees, including our executive officers (and specifically, theNamed Executive Officers), that includes a large component of incentive compensation based on our overall performance and the individual successes andcontributions of our employees. We believe that incentive compensation elements, such as equity awards and cash bonuses, communicate to our executivesthat they will be paid for performance and align the interests of our executives with our shareholders’ interests.We expect that our Compensation Committee will continue to design our executive compensation policies and program in a manner that allowsus to attract and retain individuals with the background and skills necessary to successfully execute our business strategy in a demanding environment, tomotivate those individuals to reach near-term and long-term goals in a way that aligns their interests with that of our shareholders, and to reward keycontributors for individual and overall success in reaching near-term and long-term goals, importantly including enhancing our share valuation. In doing so,we anticipate that the Compensation Committee will work with an independent compensation consultant to the extent deemed necessary or appropriate toassist in further tailoring our compensation program to that of a large scale, public company within our industry so that we remain competitive.Key Components of Our Executive Compensation ProgramIn designing our executive compensation program, the Legacy Compensation Committee relied on three primary elements of compensation:•Base salary;•Annual short-term incentive cash bonus awards; and•Annual long-term incentive equity awards. We believe that annual short-term cash incentive bonuses and annual long-term equity incentive awards are optimal vehicles for providingperformance-based incentive because, among other reasons, they are flexible in application and can be tailored to meet our compensation objectives.Typically, the determination of an employee’s cash incentive bonus reflects the Compensation Committee’s assessment of the employee’s relativecontribution to achieving or exceeding our annual, near-term objectives, while the determination of an employee’s long-term equity incentive awards isbased, in large part, on the employee’s demonstrated and expected contribution to our longer term goal objectives.We have historically granted equity awards to employees, including our Named Executive Officers, pursuant to an omnibus plan that providedbroad flexibility to our Compensation Committee to tailor awards to meet our compensation objectives.In accordance with the Restructuring Plan, 10% of the equity of the Company was reserved for a management incentive program to allow for theissuance of equity to management of the reorganized Company after emergence at the discretion of the Board. On January 12, 2017, the Board adopted theC&J Energy Services, Inc. 2017 Management Incentive Plan (the “MIP”), effective as of January 6, 2017, which provides that a maximum of 8,046,021 sharesof our common stock may be issued or transferred pursuant to awards under the MIP. Persons eligible to receive awards under the MIP include our non-employee directors, our employees and affiliates, and certain of our consultants and advisors.The MIP provides for the grant of equity-based awards, including but not limited to stock options, restricted stock units, restricted stock,performance awards and other forms of awards granted or denominated in shares of our common stock, as well as certain cash-based awards. TheCompensation Committee is responsible for administering the MIP with broad authority to, among other things: (i) select participants; (ii) determine thetypes of awards that participants are to receive and the number of shares that are to be subject to such awards; and (iii) establish the terms and conditions ofawards, including the price (if any) to be paid for the shares or the award. If any stock option or other stock-based award granted under the MIP expires,terminates or is cancelled for any reason without having been exercised in full, the number of shares of common stock underlying any unexercised awardshall again be available for the purpose of awards under the MIP. If any shares of restricted129Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.stock, performance awards or other stock-based awards denominated in shares of our common stock awarded under the MIP are forfeited for any reason, thenumber of forfeited shares shall again be available for purposes of awards under the MIP. Any award under the MIP settled in cash shall not be countedagainst the maximum share limitation. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available underthe MIP and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-basedawards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or othersimilar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to our stockholders.Other key components of our executive compensation program historically have included severance and change in control benefits, retirementbenefits (including 401(k) contributions), health and welfare benefits and other limited perquisites. We also maintain employment agreements with each ofour executive officers and enter into award agreements with each recipient of an equity award that governs the terms and conditions of that award.The key components of our 2016 executive compensation program, which reflect cost savings necessitated by our financial and businesscondition, are described in greater detail under heading “-Components of 2016 Compensation of our Named Executive Officers” and “ExecutiveCompensation.”Shareholder-Friendly Features of Our Executive Compensation ProgramOur compensation objectives and policies are focused on, and our compensation program is designed to, align the interests of the NamedExecutive Officers with the interests of our shareholders and the delivery of shareholder value through sustainable growth strategies. Notably, our executivecompensation program contains the following shareholder-friendly features:•Our equity award agreements with our Named Executive Officers do not contain “single trigger” vesting acceleration provisions.•Our employment agreements for our Named Executive Officers contain “double trigger” severance and change in control provisions.•We do not provide tax gross-ups on any potential golden parachute payments.•All long-term incentive awards are paid in shares of our common stock via awards of restricted stock and/or stock options.•We do not allow for the backdating or repricing of stock options.•The Compensation Committee has discretion and authority with respect to the payment of cash and equity incentive awards.•The Compensation Committee has utilized a compensation consultant that is independent from management. Compensation Setting ProcessRole of the Compensation Committee and Named Executive Officers in Setting CompensationThe Compensation Committee has the authority to oversee our executive compensation program and to implement any formal equity-basedcompensation plans or policies that the Compensation Committee deems appropriate for our employees, including the Named Executive Officers. TheCompensation Committee consults with certain of our executive officers regarding our compensation and benefit programs, other than with respect to suchexecutive officer’s own compensation and benefits, but the Compensation Committee is ultimately responsible for making all compensation decisions for theNamed Executive Officers.Role of Compensation Consultants in Setting CompensationThe Compensation Committee has the authority to engage a compensation consultant at any time if it determines that it would be appropriate toconsider the recommendations of an independent outside source. Historically, the Legacy Compensation Committee from time to time engaged Pearl Meyerand Partners (“Pearl Meyer”) as an independent130Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.compensation consultant to review the Company’s executive compensation program and non-employee director compensation program, with the informationprovided by the consultant being one of the various factors considered in making compensation decisions. Following our emergence from the Chapter 11Proceeding, the Compensation Committee engaged Pearl Meyer to review the Company’s executive compensation program and make recommendationsregarding the grants of transaction success equity awards to the Company’s executive officers.Key Factors in Setting CompensationThe Legacy Compensation Committee selected a peer group of companies for purposes of evaluating 2016 executive compensation. The LegacyCompensation Committee’s general criteria for selecting a peer group included:•Companies that are direct competitors for the same space, products and/or services;•Companies that competed with us for the same executive team talent;•Companies with a similar Standard Industry Classification code or in a similar sector;•Companies that are most statistically related to us with similar revenue size;•Companies that generally are subject to the same market conditions (or specifically, oilfield services companies); and•Companies that are tracked similarly or which are considered comparable investments by outside analysts.For purposes of evaluating 2016 compensation, the peer group included the following companies: Archrock, Inc. Oceaneering International, Inc. Basic Energy Services, Inc. Oil States International, Inc. Ensco plc Patterson-UTI Energy, Inc. FMC Technologies, Inc. Pioneer Energy Services Corp. Helmerich & Payne, Inc. RPC, Inc. Key Energy Services Inc. Superior Energy Services, Inc. Newpark Resources, Inc. Transocean Ltd.Timing of Compensation DecisionsCompensation decisions, including decisions with respect to annual cash short-term incentive bonus awards historically were made by theLegacy Compensation Committee at a regular meeting held in in December of each year. Occasionally, the Legacy Compensation Committee deferred finalapproval of compensation decisions to the first quarter of the following year to permit additional review and revisions to compensation and award decisionsbased on final financial results for the prior year and finalizing the business plan for the following year. For various reasons, decisions on long-term equitycompensation awards were typically made in the first quarter or at other times in the year. Also, compensation adjustments may be made due to promotions orchanges in duties during a year. Components of 2016 Compensation of our Named Executive OfficersEach of our Named Executive Officers has an employment agreement which generally provide that the Named Executive Officers are eligible toreceive the following compensation and benefits: (i) an annualized base salary; (ii) eligibility to receive an annual cash incentive bonus award with adesignated target range of a specified percentage of annualized base salary that is based on the achievement of certain performance targets set forth by theLegacy Compensation Committee; (iii) eligibility to receive annual long-term equity compensation awards (or cash awards upon mutual agreement of us andthe executive) at a target award level of no less than the executive’s “Total Cash Compensation”, which is the sum of (a) the executive’s annualized basesalary for the prior calendar year and (b) the greater of the annual cash incentive bonus award paid to the Named Executive Officer in either of the prior twocalendar years; (iv) eligibility to receive discretionary bonuses as determined solely by our Board; (v) employee benefits for the executive and theexecutive’s eligible family members that we131Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.ordinarily provide to similarly situated employees (including, but not limited to, medical and dental insurance, retirement plans, disability insurance and lifeinsurance); and (vi) certain fringe benefits and perquisites. The following table enumerates certain of the foregoing items of compensation and benefits thateach of the Named Executive Officers are entitled to or eligible to, or were entitled to or were eligible to, receive under the employment agreements, whichare described in more detail in “Executive Compensation-Summary Compensation Table.” Name Annualized Base Salary Target Cash Incentive Bonus Awardas a Percentage of 2016 Base SalaryDonald Gawick $875,000 150-250%Mark Cashiola $425,000 100%E. Michael Hobbs $500,000 150%Danielle Hunter $400,000 100%Edward Keppler $400,000 75%Joshua Comstock $1,100,000 200-300%Randall McMullen, Jr. $650,000 100-200%Theodore Moore $450,000 100%Base SalaryEach Named Executive Officer’s base salary is provided for in the respective employment agreement as a fixed component of compensation thatmay be annually adjusted by the Compensation Committee. We generally do not adjust base pay for our Named Executive Officers based strictly on ourperformance, rather we take individual accomplishments and market trends into account as well. As such, base pay functions as an important counterbalanceto incentive, discretionary, and equity compensation, all of which are generally contingent on our performance or success. The Compensation Committeewill review the base salaries for each Named Executive Officer annually as well as at the time of any promotion or significant change in job responsibilities,and in connection with each review considers individual and Company performance over the course of that year.In March 2016, the Company implemented reductions in base salaries for all employees, including a 10% reduction in the salaries of the NamedExecutive Officers, which remained in effect through 2016 and continues in effect today. Accordingly, the Named Executive Officers received less than theamounts stated in the table above. The total base salary earned by each Named Executive Officer in 2016 is reported in “Summary Compensation Table.” Annual Short-Term Incentive Cash Bonus AwardsThe employment agreements provide that each Named Executive Officer is eligible to receive an annual cash incentive bonus award, which isstated in each employment agreement with a designated target range of a specified percentage of annualized base salary. The actual amount of each annualbonus is based on the achievement of certain performance targets set forth by the Compensation Committee and is determined by the CompensationCommittee in its sole discretion and may be higher or lower than the target range in the Named Executive Officer’s employment agreement. Bonus payments,if any, are typically paid between December 15 of the applicable year for which the bonus was earned and March 15 of the year following the year in whichthe bonus was earned. In the event that any executive is terminated for cause in advance of the bonus payment date, however, such executive would forfeitany right to receive a bonus for that year.Given the Company’s performance as a result of the highly challenging market conditions in our industry and the Company’s Chapter 11Proceeding, we did not pay the annual year-end cash incentive bonuses for 2016. However, in May 2016, in anticipation of the Company’s Chapter 11Proceeding, the Board approved the terms of the C&J Energy Services 2016 Senior Executive Incentive Plan (the “SEIP Plan”) and the C&J Energy Services2016 Key Employee Incentive Plan.Pursuant to the terms of the SEIP Plan, our named executive officers and certain other executive officers received performance-based cash awardson a quarterly basis. A participant’s target award opportunity under the SEIP Plan was equal to 50% to 100% of the participant’s year-end cash bonus target,plus 25% to 50% of the participant's annual long-term incentive target and, depending on the level of achievement of the set performance goals, aparticipant’s final award could have been as little as zero or as much as 150% of the target award opportunity. Awards were earned under the SEIP Plan basedon the Company’s achievement during each 2016 calendar quarter of performance goals related to the Company’s Adjusted EBITDA,132Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.defined as adjusted earnings before interest, taxes, depreciation and amortization, weighted at 80%, and the Company’s total recordable injury rate, weightedat 20%.Actual payouts were made in cash quarterly upon the Legacy Compensation Committee’s certification of the achievement of certain performancetargets set forth in the SEIP Plan. The fourth quarter performance targets were certified by the Compensation Committee. The SEIP plan was terminated in thefourth quarter of 2016, and the final payments were made on January 30, 2017. The total SEIP Plan payments earned by each Named Executive Officer in2016 is reported in “Summary Compensation Table.”Annual Long-Term Equity Compensation AwardsThe employment agreements provide that each Named Executive Officer is eligible to receive an annual long-term equity compensation award(or cash award upon mutual agreement of the Company and the executive) at a target award level of no less than the executive’s “Total Cash Compensation,”which is the sum of (a) the executive’s annualized base salary for the prior calendar year and (b) the greater of the annual cash incentive bonus award paid tothe Named Executive Officer in either of the prior two calendar years.As discussed above, we maintain the 2015 Long Term Incentive Plan (the “LTIP”), which was an amendment and restatement of our 2012 LongTerm Incentive Plan. The LTIP also includes a sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement (the “MENA”). We alsopreviously maintained the 2006 Stock Option Plan and the 2010 Stock Option Plan. As a result of the Company’s Chapter 11 Proceeding, all outstandingunvested awards granted under the foregoing plans were terminated for no consideration. On January 12, 2017, the Board adopted the MIP, effective as ofJanuary 6, 2017. A maximum of 8,046,021 shares of our common stock may be issued or transferred pursuant to awards under the MIP as the Company’s prioromnibus plan was terminated in conjunction with the Chapter 11 Proceeding.Given the Company’s performance as a result of the highly challenging market conditions in our industry and the Company’s Chapter 11Proceeding, we did not grant any equity compensation awards for 2016. Following the Company’s Chapter 11 Proceeding, we currently maintain and onlyintend to grant equity awards under the MIP.Post-Emergence Long-Term Equity Compensation Awards for 2017Following emergence, in January and February 2017, the Compensation Committee approved equity grants (the “Emergence Grants”) to non-employee directors and selected members of the Company's senior management, including each of the Named Executive Officers. The CompensationCommittee based its decision to approve the Emergence Grant on a review of market practices for companies following the emergence from Chapter 11bankruptcy, and because the grants served the following objectives:•Strengthen alignment with the interests of our new stockholders;•Provide an incentive to maximize stockholder value; and•Enhance the ability to retain key talent through the post-emergence period.These awards were granted in the form of restricted stock and stock options. The stock options have an exercise price per share based on the fairmarket value of a share of the Company’s common stock (“Common Stock”) on the applicable date of grant, which was $42.65. The restricted stock and thestock options granted to senior management are subject to the following vesting schedule: (i) 34% vests immediately on the grant date; (ii) 22% vests on thefirst anniversary of the grant date; (iii) 22% vests on the second anniversary of the grant date; and (iv) 22% vests on the third anniversary of the grant date.These awards were made from the MIP, which was approved by the Compensation Committee.Other Benefits and PerquisitesUnder the employment agreements, each Named Executive Officer and eligible family members are eligible to receive the health and welfarebenefits generally made available to our other full-time, salaried employees (including, but not limited to, medical and dental insurance, retirement plans,disability insurance and life insurance), as well as other fringe benefits and perquisites, including provision for an automobile (or an automobile allowance)for business and personal use and related insurance coverage, use of the Company aircraft for business purposes and reimbursement of reasonable businessexpenses. On April 1, 2016, the Company aircraft was sold with no replacement aircraft purchased.133Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Prior to his death, Mr. Comstock was also eligible to use the Company aircraft for personal purposes under the terms of his employmentagreement, provided that the use of the aircraft was imputed as income to him and he was also responsible for reimbursing the Company for the incrementalcosts associated with operating the aircraft. In the event that Mr. Comstock’s family accompanied him on a business-related trip using the Company aircraft,amounts associated with respect to his family’s travel costs were reported as compensation to Mr. Comstock (no additional direct operating costs is incurredin such situations). Additionally, Mr. Comstock owned a personal aircraft that he occasionally used for business travel and we partially reimbursedMr. Comstock for the expenses associated with business travel. In the event that Mr. Comstock’s family accompanied him on a business-related trip using hispersonal aircraft, the amounts that we reimbursed him with respect to his family’s travel costs were reported as compensation to Mr. Comstock (no additionaldirect operating costs was incurred in such situations). Amounts imputed as income to Mr. Comstock in 2016 for personal use of the Company aircraft or withrespect to his family’s travel cost on business trips are included in the “All Other Compensation” column of the “Summary Compensation Table.”We do not maintain a defined benefit pension plan for our executive officers or other employees because we believe such plans primarily rewardlongevity rather than performance. Nevertheless, we recognize the importance of providing our employees with assistance in saving for their retirement. Wetherefore maintain a retirement plan, or the “401(k) Plan”, that is qualified under Section 401(k) of the Internal Revenue Code. Historically, following thecompletion of one year of service plus an additional required waiting period, we offer matching contributions for each of our employees, including ourNamed Executive Officers, up to 4% of their qualifying compensation each year, subject to certain limitations imposed by the Internal Revenue Code.Effective January 1, 2016, we eliminated the Company matching contributions to the 401(k) Plan but we may decide to offer matching contributions again inthe future.Severance and Change in Control BenefitsWe believe it is important that the Named Executive Officers focus their attention and energy on our business without any distractions regardingthe effects of a termination that is beyond their control or our change in control. Therefore, the employment agreements each provide that they will beentitled to receive severance benefits and certain accelerated vesting of their outstanding equity awards in the event their employment is terminated undercertain circumstances. Specifically, substantially all severance payment obligations to the Named Executive Officers associated with a change in control are“double trigger” payments, which require termination of employment within a specified period prior to or following a change in control to receive thebenefit. Our Board believes that double trigger payments are typically more appropriate than single trigger payments (where a payment is made upon theoccurrence of a change in control alone) because they financially protect the employee if he is terminated following a change in control transaction, withoutproviding a potential windfall if the employee is not terminated. For more detailed information regarding our severance and change in control benefits underthe employment agreements and other compensation arrangements in effect for our Named Executive Officers during 2016, please read “ExecutiveCompensation-Potential Payments upon Termination or Change in Control.”Waiver and Release AgreementsMr. McMullenIn connection with his termination of employment, Mr. McMullen entered into a waiver and release agreement (the “McMullen Agreement”)with us pursuant to which Mr. McMullen received the payments and benefits payable upon a termination without cause pursuant to his employmentagreement, except that (i) for purposes of calculating such payments and benefits, his annual base salary and target annual bonus were deemed to be a higheramount than is provided for under his employment agreement due to his appointment to Chief Executive Officer in March 2016 without a correspondingchange in his employment agreement and (ii) notwithstanding the terms of the employment agreement, as a result of certain restrictions applicable to usunder our credit facility, Mr. McMullen received a lump sum cash payment in an amount equal to the value of outstanding restricted shares held by him atthe time of his termination of employment, based on the closing price of the Company’s company shares on the New York Stock Exchange on thetermination date, in lieu of any accelerated vesting of such shares.Mr. MooreIn connection with his termination of employment, Mr. Moore entered into a waiver and release agreement (the “Moore Agreement”) with uspursuant to which Mr. Moore received the payments and benefits payable upon a termination without cause pursuant to his employment agreement, exceptthat Mr. Moore waived any acceleration of unvested equity awards under the terms of his employment agreement.134Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Stock Ownership GuidelinesHistorically, we have elected not to adopt formal stock ownership guidelines for our Named Executive Officers. Our Compensation Committeerecently considered this position and, following consultation with the Company's independent compensation consultant, intends to adopt formal stockownership guidelines applicable to our Named Executive Officers in 2017.Tax Deductibility of Executive CompensationAs part of its role in determining the amounts and type of compensation to grant to the Named Executive Officers, the Compensation Committeetakes into consideration the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that we may notdeduct certain compensation in excess of $1,000,000 that is paid to our Chief Executive Officer or our three other most highly compensated executiveofficers (other than our Chief Financial Officer) unless the compensation is “performance-based” within the meaning of Section 162(m) of the InternalRevenue Code. The Compensation Committee considers its primary goal to design compensation strategies that further the best interests of our shareholders.Although deductibility of compensation is preferred when possible, tax deductibility is not a primary objective of our compensation programs, and webelieve that achieving our compensation objectives is more important than the benefit of tax deductibility of compensation in certain circumstances.Relation of Compensation Policies and Practices to Risk ManagementWe anticipate that our compensation policies and practices will continue to be tailored to provide rewards for short-term and long-termperformance, both on an individual basis and at the entity level. In general, optimal financial and operational performance, particularly in a competitivebusiness, requires some degree of risk-taking. However, at this time our Compensation Committee retains a significant amount of discretion with respect tothe compensation packages of our Named Executive Officers, which we believe prevents management from entering into actions that could have a materialadverse effect on us in the long-run to simply achieve a specific short-term goal. We also believe that the compensation program that our general employeepopulation is eligible to receive does not entice the employees to take unnecessary risks in their day to day activities.We expect our compensation arrangements to contain a number of design elements that serve to minimize the incentive for taking unwarrantedrisk to achieve short-term, unsustainable results. Those elements include delaying the rewards, subjecting such rewards to forfeiture in the case of certainterminations of employment, and subjecting such awards to equity claw-backs under certain scenarios related to violations of our risk management policiesand practices.In combination with our risk-management practices, we do not believe that risks arising from our compensation policies and practices for ouremployees, including our Named Executive Officers, are reasonably likely to have a material adverse effect on us.Actions Taken For the 2017 Fiscal YearBased on, among other factors, the Company’s business following emergence from the Chapter 11 Proceeding, performance and prevailingindustry conditions, the Compensation Committee is assessing potential changes to our executive compensation program for the 2017 fiscal year. Asdiscussed above under “Post-Emergence Long-Term Equity Compensation Awards for 2017,” on February 5, 2017, the Compensation Committee approvedthe Emergence Grants to non-employee directors and selected members of the Company’s senior management, including each of the Named ExecutiveOfficers, which consisted of awards of restricted stock and stock options under the MIP.135Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 THE COMPENSATION COMMITTEEAs discussed herein, the Compensation Discussion and Analysis included in this Annual Report focuses on compensation for the NamedExecutive Officers of C&J Energy Services Ltd., the predecessor of C&J Energy Services, Inc., during the last completed fiscal year (2016). The 2016compensation program and decisions described herein were determined by such predecessor’s Compensation Committee, and were not determined by theCompensation Committee of the Board of Directors of C&J Energy Services, Inc. While Mr. Roemer was a member of such predecessor’s CompensationCommittee during the 2016 fiscal year, Messrs. Kennedy, Brightman, Mueller, and Zawadzki were not and, accordingly, did not participate in anydeterminations relating to the 2016 compensation program and decisions applicable to the Named Executive Officers.The Compensation Committee of the Board of Directors of C&J Energy Services, Inc.:•Has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management; and•Based on the review and discussions referred to above, recommended to the Board of Directors that the Compensation Discussion andAnalysis be included in this Annual Report.Respectfully submitted by the Compensation Committee of the Board of Directors of C&J Energy Services, Inc.John J. Kennedy (Chairman)Stuart M. BrightmanSteven MuellerMichael RoemerMichael Zawadzki136Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.EXECUTIVE COMPENSATIONSummary Compensation TableThe table below sets forth the annual compensation earned during the 2016, 2015 and 2014 fiscal years by our Named Executive Officers:Name and Principal Position Year Salary($)(1) Bonus($)(2) ShareAwards($)(3) OptionAwards($) All OtherCompensation($)(4) Total($)Donald J. Gawick 2016 654,106 2,766,669 — — 29,369 3,450,144 Chief Executive Officer 2015 484,973 555,000 1,290,998 — 35,725 2,366,696 2014 423,077 637,500 999,991 — 35,360 2,095,928 Mark Cashiola 2016 316,188 776,202 — — 32,344 1,124,734 Chief Financial Officer E. Michael Hobbs 2016 380,229 665,752 — — 17,350 1,063,331 Chief Operating Officer Danielle Hunter 2016 286,486 708,851 — — 30,413 1,025,750 Executive Vice President and General Counsel Edward Keppler 2016 366,077 532,876 — — 23,090 922,043 President, Corporate Operational Development Joshua Comstock (5) 2016 245,173 — — — 1,514,718 1,759,891 Former Chief Executive 2015 969,946 3,300,000 9,089,996 — 160,247 13,520,189 Officer 2014 843,077 1,750,000 3,270,010 — 47,887 5,910,974 Randall McMullen, Jr. (5) 2016 358,123 650,000 — — 6,382,102 7,390,225 Former Chief 2015 575,112 650,000 2,174,000 — 39,860 3,438,972 Executive Officer and 2014 509,038 1,020,000 1,883,011 — 39,126 3,451,175 Former Chief Financial Officer Theodore Moore (5) 2016 219,072 230,625 — — 1,832,560 2,282,257 Former Executive Vice 2015 393,373 450,000 1,024,996 — 39,604 1,907,973 President and General 2014 349,039 487,500 734,011 — 38,870 1,609,420 Counsel (1)In March 2016, the Company implemented reductions in base salaries for all employees, including a 10% reduction in the salaries of the Named Executive Officers. Basesalary adjustments for Messrs. Gawick and Cashiola and for Ms. Hunter for the 2016 fiscal year were generally effective June 23, 2016 in connection with theirappointments to their current positions and entry into new employment agreements. Base salary adjustments for Mr. Hobbs for the fiscal year ended December 31, 2016was generally effective August 22, 2016 in connection with his appointment to his current position and entry into a new employment agreement. Base salary adjustmentsfor the Named Executive Officers for the fiscal year 2015 year were generally effective March 24, 2015 in connection with the closing of the Nabors Merger and entryinto new employment agreements. Base salary adjustments for the137Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Named Executive Officers for the 2014 fiscal year were generally effective January 5, 2014, except that Mr. Comstock’s 2014 salary was not effective until February 2,2014.(2)For 2016, the amounts in this column reflect amounts earned under the 2016 Senior Executive Incentive Plan, regardless of when it was paid. For years prior to 2016, theamounts in this column reflect amounts earned for the applicable year under the annual cash incentive bonus component of such Named Executive Officer’s employmentagreement, regardless of when it was paid.(3)This column reflects (a) restricted shares awarded under the annual equity incentive bonus component of such Named Executive Officer’s employment agreement,regardless of when it was granted, (b) for 2015, the merger success equity bonus granted to each Named Executive Officer pursuant to such Named Executive Officer’semployment agreement and (c) for 2015, the phantom units granted to each Named Executive Officer under the MENA (although the accounting value on the grant dateof the awards was $0, therefore no values are reflected for these awards in the table above for the 2015 year). The amounts in this column represent the aggregate grantdate fair value of such awards computed in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 718.(4)The amounts in this column for the 2016 fiscal year include the following amounts for each of the Named Executive Officers: (i) for subsidized healthcare, life anddisability insurances: $4,613.52 to Mr. Comstock, $9,227.04 to Mr. McMullen, $13,569.84 to Mr. Gawick, $9,227.04 to Mr. Moore, $18,454.08 to Mr. Cashiola,$9,268.68 to Mr. Keppler, $16,523.25 to Ms. Hunter, and $13,569.84 to Mr. Hobbs; (ii) for automobile allowances and related fuel and maintenance costs $6,300 toMr. Comstock, $7,367 to Mr. McMullen, $15,799 to Mr. Gawick, $7,367 to Mr. Moore, $13,890 to Mr. Cashiola, $13,821 to Mr. Keppler, $13,890 to Ms. Hunter, and$3,780 to Mr. Hobbs; (iii) $10,407.22 to Mr. Comstock for income that we imputed to him during 2016 for the personal use of the Company’s airplane; and (iv)$1,493,397.60 for severance payments and benefits paid to Mr. Comstock’s estate following his death, which consisted of value attributable to acceleration of vesting ofequity awards, $6,365,508 for severance payments and benefits paid to Mr. McMullen following his termination of employment, which (among other things) consisted ofpayment of accrued vacation, acceleration of vesting of equity awards, a lump sum payment in an amount equal to two times the result of his annualized base salary plustarget annual bonus and a lump sum payment equal to 18 months of Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) premiums and$1,815,966 for severance payments and benefits paid to Mr. Moore following his termination of employment, which (among other things) consisted of payment ofaccrued vacation, a lump sum payment in an amount equal to two times the result of his annualized base salary plus target annual bonus and a lump sum payment equal to18 months of COBRA premiums.(5)On March 11, 2016, Mr. Comstock’s employment with the Company terminated due to his death. On June 13, 2016, Mr. McMullen’s and Mr. Moore’s employmentwith the Company terminated due to their departure. Amounts shown for Messrs. Comstock, McMullen and Moore reflect payments or benefits earned through theapplicable date of termination, including severance payments and benefits.Grants of Plan-Based Awards for the 2016 Fiscal YearGiven the Company’s performance as a result of the highly challenging market conditions in our industry and the Company’s Chapter 11Proceeding, the Company did not grant any plan-based awards for the 2016 fiscal year.Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards for the 2016 Fiscal YearEmployment AgreementsWe maintain employment agreements with each of the Named Executive Officers. The employment agreements set forth the duties of eachNamed Executive Officer’s position. Each employment agreement set forth the Named Executive Officer’s base salary, annual bonus target ranges, andeligibility for various other benefits such as health and welfare benefits and/or retirement opportunities. The employment agreements also provided that eachNamed Executive Officer was entitled to receive annual equity awards under our equity incentive plans, although the terms and conditions of such awardswere to be determined by the Compensation Committee on an individual basis and governed by individual award agreements. For potential severance andchange in control benefits under these employment agreements, see the “-Potential Payments upon Termination or Change in Control” section below.Percentage of Salary and Bonus in Comparison to Total CompensationThe amount of salary and bonus that each of our current Named Executive Officers received for 2016 in relation to their respective totalcompensation amounts reported in the “Summary Compensation Table” for 2016 is as follows:138Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.NameSalary & Bonus asPercentage of TotalCompensationDonald Gawick99.0%Mark Cashiola97.0%E. Michael Hobbs98.0%Danielle Hunter97.0%Edward Keppler97.0%SeveranceDuring 2016, each of Messrs. Comstock, McMullen and Moore experienced a termination of employment. In connection with each terminationof employment, such Named Executive Officers received certain severance payments and benefits, which are described in more detail below under “-PotentialPayments upon Termination or Change in Control.”Outstanding Equity Awards at 2016 Fiscal Year-EndThe following table provides information on the equity awards held by the Named Executive Officers as of December 31, 2016. This tableincludes unexercised options that were vested as of December 31, 2016, as well as unvested options and restricted shares. The vesting dates for each award areshown in the accompanying footnotes. As a result of the Company’s Chapter 11 Proceeding, all outstanding unvested awards granted were terminated for noconsideration.139Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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. Option AwardsShare AwardsNameNumber ofSecuritiesUnderlyingUnexercised Options(#) ExercisableNumber ofSecuritiesUnderlyingUnexercised Options(#) UnexercisableOption ExercisePrice ($)Option ExpirationDateNumber of SharesThat Have NotVested (#)Market Value ofShares That HaveNot Vested ($)(9)Donald J. Gawick3,167(4)—18.896/19/2022 13,473(6)3,099 16,666(7)3,833 44,150(8)10,155 Mark Cashiola10,000—10.001/17/2021 45,000(3)—29.007/28/2021 3,166(6)728 15,673(8)3,605 Everett Hobbs2,488(4)—18.896/19/2022 4,716(6)1,085 26,490(8)6,093 Danielle Hunter5,000—15.505/23/2021 7,500(3)—29.007/28/2021 977(6)225 5,408(8)1,244 Edward Keppler1,900(4)—18.896/19/2022 4,716(6)1,085 28,697(8)6,600 Joshua Comstock105,000(1)—1.4311/11/2018—— 17,500(1)—10.0012/23/2020 1,662,468(2)—10.0012/23/2020 275,000(3)—29.007/28/2021 29,583(4)—18.896/19/2022 Randall McMullen, Jr.17,500(1)—10.0012/23/2020—— 1,187,477(2)—10.0012/23/2020 200,000(3)—29.007/28/2021 17,034(4)—18.896/19/2022 Theodore Moore40,000(5)—10.002/01/2021—— 100,000(3)—29.007/28/2021 6,610(4)—18.896/19/2022 (1)Each of these options was granted from Legacy C&J’s 2006 Stock Option Plan and became fully vested on December 23, 2010.(2)Each of these options was granted from Legacy C&J’s 2010 Stock Option Plan on December 23, 2010 and vested in equal one third installments on each of December23, 2011, December 23, 2012 and December 23, 2013.(3)Each of these options was granted from Legacy C&J’s 2010 Stock Option Plan and vested in equal one third installments on each of July 28, 2012, July 28, 2013 andJuly 28, 2014.140Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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)Each of these options was granted from the LTIP and vested in equal one third installments on each of June 19, 2013, June 19, 2014 and June 19, 2015.(5)Each of these options was granted from Legacy C&J’s 2010 Stock Option Plan and vested in equal one third installments on each of February 1, 2012, February 1, 2013and February 1, 2014.(6)Each of these restricted share awards was granted from the LTIP and vested or would have vested in equal one third installments subject to continued employment by theaward holder on the applicable vesting dates. The first tranche vested on February 11, 2015, the second tranche vested on February 11, 2016, and the remaining tranchewould have vested on February 11, 2017.(7)Each of these restricted share awards was granted from the LTIP and vested or would have vested subject to the following two-tiered vesting schedule: (1) the restrictedshares were first subject to certification by the Compensation Committee of the achievement of positive “EBITDA” (as defined in the award agreement) (the“Performance-Based Vesting Schedule”) in any calendar quarter during the period beginning on April 1, 2015 and ending on December 31, 2017; and (2) in addition tosatisfaction of the Performance-Based Vesting Schedule, the restricted shares were subject to a time-based vesting schedule such that one third of the restricted shareswould have become unrestricted on each of the first, second, and third anniversaries of the date of grant.(8)Each of these restricted share awards was granted from the LTIP and vested or would have vested in equal one third installments subject to continued employment by theaward holder on the applicable vesting dates. The first tranche vested on June 5, 2016, the second tranche would have vested on June 5, 2017 and the remaining tranchewould have vested on June 5, 2018.(9)The market value of the restricted share awards was calculated by multiplying the applicable number of restricted shares outstanding as of December 31, 2016 by $0.23,which was the market value of C&J’s common shares on the “grey market” on December 31, 2016.Option Exercises and Shares Vested in the 2016 Fiscal YearThe following table presents information regarding the exercise of options and the vesting of restricted share awards held by the NamedExecutive Officers during 2016. Option AwardsShare AwardsNameNumber of SharesAcquired on Exercise(#)Value Realized onExercise ($)Number of SharesAcquired on Vesting(#)Value Realized onVesting ($)(1)Donald Gawick——53,91474,910Mark Cashiola——14,11217,728E. Michael Hobbs——23,14327,114Danielle Hunter——9,12010,908Edward Keppler——23,98828,498Joshua Comstock——850,6831,493,398Randall McMullen, Jr.——101,767146,292Theodore Moore——44,75464,653(1)This amount was calculated based on the market price of C&J’s common shares on the applicable vesting date, multiplied by the number of restricted shares that vested onthat date. For awards vesting on (a) February 11, 2016, the price was $2.14, (b) April 4, 2016, the price was $1.34 and (c) June 5, 2016, the price was $0.55.Pension BenefitsWhile we provide our employees with the opportunity to participate in the 401(k) Plan, we do not currently maintain a defined benefit pensionplan. Please read “Compensation Discussion and Analysis-Components of 2016 Executive Compensation Program-Other Benefits and Policies.”Nonqualified Deferred CompensationWe do not provide a nonqualified deferred compensation plan for our employees, including our Named Executive Officers, at this time.Potential Payments Upon Termination or Change in ControlThe following discussion and table reflect the payments and benefits that each of the Named Executive Officers other than Messrs. Comstock,McMullen and Moore would have been eligible to receive in the event of certain terminations,141Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.assuming that each such termination occurred on December 31, 2016. As a result, the payments and benefits disclosed represent what would have been dueand payable to the Named Executive Officers under the applicable agreements and plans in existence between the Named Executive Officers and C&J as ofDecember 31, 2016. The payments and benefits described below do not contemplate any changes to such agreements or plans, or new agreements or plansadopted, after December 31, 2016.As described above under “Compensation Discussion and Analysis-Executive Summary”, the employment of each of Messrs. Comstock,McMullen and Moore was terminated during fiscal year 2016. In connection with such termination, the estate of Mr. Comstock received the payments andbenefits due under his employment agreement in connection with a termination as a result of death. In connection with their termination of employment,Messrs. McMullen and Moore each entered into a Waiver and Release Agreement with the Company.As a result of his termination of employment, the estate of Mr. Comstock received value equal to $1,493,397.60, which consisted of valueattributable to acceleration of vesting of equity awards.As a result of his termination of employment, Mr. McMullen received $6,365,508, which (among other things) consisted of (i) payment foraccrued vacation, (ii) $94,129 representing acceleration of vesting of equity awards, (iii) $5,675,000 representing a lump sum equal to the result of two timeshis annualized base salary plus target annual bonus and (iv) $37,386 representing COBRA premiums.As a result of his termination of employment, Mr. Moore received $1,853,980, which (among other things) consisted of (i) payment for accruedvacation, (ii) $1,800,000 representing a lump sum equal to the result of two times his annualized base salary plus target annual bonus and (iii) $37,386representing COBRA premiums.Employment Agreements in effect as of December 31, 2016The employment agreements between us and the Named Executive Officers that existed as of December 31, 2016 contained certain severanceprovisions.If the Named Executive Officer is terminated other than for cause by us or the Named Executive Officer resigns for good reason (each as definedin the employment agreements), in each case, outside of the period beginning 30 days prior to the effective date of a change of control (as defined in theemployment agreements) and ending on the two year anniversary of the effective date of such change of control (such period, the “Protected Period”), thenthe Named Executive Officer would be eligible to receive: (i) to the extent unpaid, the sum of the Named Executive Officer’s base salary earned through thedate of termination and any accrued, unused vacation pay earned by the Named Executive Officer and any unreimbursed business expenses, (ii) subject tosatisfaction of any applicable performance targets, any of the Named Executive Officer’s unpaid bonuses with respect to a previous calendar year completedprior to the date of termination (without regard to any continued employment requirement) (each (i) and (ii), the “Accrued Obligations”), (iii) other than Mr.Keppler, payment of the annual bonus for the calendar year in which the termination occurs (based on actual results and payable at the time bonuses are paidto active executives) and (iv) (a) lump sum payment of an amount equal to two times (or one times in the case of Mr. Keppler) the Named Executive Officer’sannualized base salary in effect on the date of termination and (b) a lump sum payment of an amount equal to all COBRA premiums that would be payablefor the 18 month period beginning on the date of termination, assuming that the Named Executive Officer and the Named Executive Officer’s eligibledependents elected COBRA coverage (without regard to whether actual coverage was elected or would be applicable for the entire 18 month period). AllNamed Executive Officers other than Mr. Keppler also would receive accelerated vesting of any unvested equity awards.If the Named Executive Officer is terminated other than for cause by us (including due to non-renewal of the employment agreement by us) or theNamed Executive Officer resigns for good reason, during the Protected Period in connection with a change of control, then the Named Executive Officerwould be eligible to receive (in lieu of the ordinary severance payments and benefits described above): (i) the Accrued Obligations, (ii) other than Mr.Keppler, payment of the annual bonus for the calendar year in which the termination occurs at the target level and (iii) (a) lump sum payment of an amountequal to three times (or one times in the case of Mr. Keppler) the Named Executive Officer’s annualized base salary in effect on the date of termination and(b) a lump sum payment of an amount equal to all COBRA premiums that would be payable for the 36 month period beginning on the date of termination,assuming that the Named Executive Officer and the Named Executive Officer’s eligible dependents elected COBRA coverage (without regard to whetheractual coverage was elected or would be applicable for the entire 36 month period). All Named Executive Officers other than Mr. Keppler also would receiveaccelerated vesting of any unvested equity awards.142Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.If the Named Executive Officer is terminated by reason of death or permanent disability (as defined in the employment agreement), then theNamed Executive Officer would be eligible to receive: (i) the Accrued Obligations, (ii) payment of the annual bonus for the calendar year in which thetermination occurs based on actual performance and (iii) timely payment or provision of any and all benefit obligations provided under the employmentagreement (which includes, but is not limited to, employee benefits, sick-leave benefits, disability insurance and paid vacation), which under their terms arepayable in the event of the Named Executive Officer’s death or permanent disability. All Named Executive Officers other than Mr. Keppler also wouldreceive accelerated vesting of any unvested equity awards.If any portion of the payments under the employment agreements would constitute “excess parachute payments” and would have resulted in theimposition of an excise tax on the Named Executive Officer, then the payments made to such Named Executive Officer would have either been (1) deliveredin full or (2) reduced in accordance with the Named Executive Officer’s employment agreement until no portion of the payments are subject to an excise tax,whichever would have resulted in the Named Executive Officer receiving the greatest benefit on an after-tax basis.Pursuant to each of our Named Executive Officers’ employment agreements, all payments of deferred compensation paid upon a termination ofemployment would have been paid on the second day following the sixth month after the Named Executive Officer’s termination of employment if sorequired by Section 409A of the Code (or, if earlier, death or any date that otherwise complied with Section 409A of the Code).Equity Award AgreementsNone of our Named Executive Officers received equity awards in 2016; although each received awards of restricted stock and/or options in prioryears.Our form agreements for awards granted to the Named Executive Officers under the LTIP take into account that each Named Executive Officer isalso a party to an employment agreement with us. To the extent that the employment agreement includes provisions that govern the treatment of equityawards (whether in the case of a termination of service or a change of control or otherwise), the provisions of the employment agreement will supersede theterms of our form award agreements and govern the treatment of such equity awards. To the extent the employment agreement does not include suchprovisions, the provisions of each applicable award agreement will govern.Potential Payments Upon Termination or Change in Control TableThe following table quantifies the amounts that each of our Named Executive Officers other than Messrs. Comstock, McMullen and Moorewould have received under the terms of the respective employment agreements upon certain terminations, assuming that such an event occurred on December31, 2016. These amounts could not be determined with any certainty outside of the occurrence of an actual termination. The value of any accelerated equityvesting upon a hypothetical termination is based on the market value of Legacy C&J’s common shares on December 31, 2016, which was $0.23 per share. Wehave also assumed for purposes of the table below that all Accrued Obligations and other similar expenses were paid current or equaled $0 as of December 31,2016. Where applicable, amounts reported reflect each Named Executive Officer’s salary and target or actual bonus as of December 31, 2016. Any actualpayments that may be made pursuant to the agreements described above are dependent on various factors, which may or may not exist at the time the NamedExecutive Officer is actually terminated. Therefore, such amounts and disclosures should be considered “forward-looking statements.” Messrs. Comstock,McMullen and Moore are not included in the table below because they terminated employment during fiscal year 2016 prior to December 31, 2016, but thepayments and benefits actually received by the estate of Mr. Comstock and each of Messrs. McMullen and Moore are described and quantified above.143Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Name and Principal PositionWithout Cause or For GoodReason Termination, Outsideof a Change in Control ($) Without Cause or For GoodReason Termination, or Non-Renewal by us, in Connectionwith Change in Control ($)(4) Termination Due to Death orDisability ($)(6)Donald J. Gawick Chief Operating Officer Severance (Multiple of Salary and Target Bonus)3,937,500 5,906,250 —Bonus (1)— 1,181,250 —Continued Medical20,362 40,725 —Accelerated Equity (2)17,086 17,086 17,086Total3,974,948 7,145,311 17,086 Mike Hobbs Chief Operating Officer Severance (Multiple of Salary and Target Bonus)2,250,000 3,375,000 —Bonus (1)— 675,000 —Continued Medical20,362 40,725 —Accelerated Equity (2)7,177 7,177 7,177Total2,277,539 4,097,902 7,177 Mark Cashiola Chief Financial Officer Severance (Multiple of Salary and Target Bonus)1,530,000 2,295,000 —Bonus (1)— 382,500 —Continued Medical28,162 56,323 —Accelerated Equity (2)4,333 4,333 4,333Total1,562,495 2,738,156 4,333 Danielle E. Hunter Executive Vice President and General Counsel Severance (Multiple of Salary and Target Bonus)1,440,000 2,160,000 —Bonus (1)— 360,000 —Continued Medical15,930 31,859 —Accelerated Equity (2)1,469 1,469 1,469Total1,457,399 2,553,328 1,469 Edward J. Keppler President, Corporate Operational Development Severance (Multiple of Salary and Target Bonus)630,000 630,000 —Bonus (1)— — —Continued Medical28,162 56,323 —Accelerated Equity (2)— — —Total658,162 686,323 —(1)Each Named Executive Officer would receive the actual cash incentive bonus earned under the employment agreement for the year of termination for a termination withoutcause or for good reason outside of a change in control or due to death or disability. The amount of the cash incentive bonus earned by each Named Executive Officer underthe employment agreement for 2016 was $0. Each Named Executive Officer would receive the Named Executive Officer’s target bonus amount for the year of terminationfor a termination without cause or for good reason in connection with a change in control.(2)Equity awards that were subject to Section 162(m) of the Code will be accelerated at actual performance levels in the event that the Named Executive Officer is terminated“Without Cause or For Good Reason Termination Outside of a Change in Control”. As of December 31, 2016, the144Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.performance metric applicable to outstanding equity awards that were subject to Section 162(m) of the Code had been achieved. As a result, for such awards, the actualamounts have been included for purposes of this table. 145Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.DIRECTOR COMPENSATIONAnnual compensation for our non-employee directors is comprised of cash and equity-based compensation. Our President and Chief ExecutiveOfficer, Mr. Gawick, does not receive additional compensation for his services as a director. All compensation that Mr. Gawick received for his services to usduring 2016 as an employee is described under the headings “Compensation Discussion and Analysis” and “Executive Compensation.”The Board believes that compensation for non-employee directors should be competitive and should fairly compensate directors for the time andskills devoted to serving our company. With the assistance of our independent compensation consultant, the Compensation Committee periodically reviewsour director compensation practices and compares them against the practices of companies in our compensation peer group as well as against the practices ofpublic company boards generally. The Compensation Committee requested information from our independent compensation consultant regarding thecompensation provided to non-employee directors at our peer companies and our independent compensation consultant produces year-end compensationreports for the Compensation Committee for each fiscal year. The Compensation Committee utilized our independent compensation consultant’s mostcurrent report when making certain compensation decisions for our non-employee directors for the 2016 year. Based on such findings, the CompensationCommittee determined that no changes were necessary for 2016.In 2016, cash compensation paid to our non-employee directors consisted of an annual retainer of $50,000, a fee of $1,500 per board meetingattended in person or telephonically, and a fee of $1,500 per committee meeting attended in person or telephonically if held on a day different than the dayof a full board meeting. Non-employee directors also received cash compensation for serving as the chairman of the committees: our Audit CommitteeChairman received an annual fee of $15,000, while our Nominating & Governance Committee Chairman and our Compensation Committee Chairman eachreceived an annual fee of $10,000. We also reimbursed our non-employee directors for reasonable out-of-pocket expenses associated with travel to andattendance at our Board and committee meetings.The following table discloses the compensation earned by and/or awarded to each of our non-employee directors in 2016.NameFees Earned in Cash ($)Share Awards ($)Total ($)Sheldon Erickson(1)63,500—63,500William Restrepo(1)179,000—179,000Michael Roemer231,199—231,199James Trimble (1)186,087—186,087H. H. “Tripp” Wommack, III(1)219,297—219,297Jay Golding (1)175,040—175,040(1)Messrs. Restrepo, Trimble, Wommack and Golding no longer serve as non-employee directors following our emergence from the Chapter 11 Proceeding, and Mr.Erickson resigned from the Board in May 2016.In connection with the Company’s emergence from the Chapter 11 Proceeding and in accordance with the Stockholders Agreement, theStockholder Steering Committee initially set 2017 director compensation, which was subsequently ratified and approved by the Board. In 2017, cashcompensation paid to our non-employee directors consists of an annual cash retainer of $87,500. Additionally, each non-employee director receives anannual equity retainer of $87,500 of restricted common stock, which restricted shares are subject to a ratable three year vesting period. Non-employeedirectors will also receive equity compensation for serving as the Chairman of the Board and Chairman of each Board committee, as follows:: (i) $50,000 tothe Board Chairman; (ii) $20,000 to the Audit Committee Chairman; (iii) $15,000 to the Compensation Committee Chairman; and (iv) $15,000 to theNominating & Governance Committee Chairman. Mr. Zawadzki does not receive compensation for serving as a director for so long as GSO has the right todesignate directors for nomination pursuant to the Stockholders Agreement.COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONDuring 2016, no person who served as a member of the Compensation Committee served as an officer or employee of the Company, nor did any personwho served as a member of the Compensation Committee have any relationship with the Company requiring disclosure herein. Additionally, none of ourexecutive officers (including any person who served as an executive officer at any point in 2016) has served as a director or member of a compensationcommittee (or other committee146Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.performing similar functions) of any other entity of which an executive officer served on our Board or our Compensation Committee.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersBeneficial Ownership InformationThe following table shows the amount of our common shares beneficially owned as of February 24, 2017 (unless otherwise indicated) by (1) eachperson known by us to own beneficially more than 5% of our common shares; (2) each of our Named Executive Officers, (3) each of our directors and (4) all ofour current directors and executive officers as a group.Name and Address of Beneficial Owner(1)Aggregate Number ofShares OwnedAcquirable within 60Days(4)Percent of ClassOutstanding(5)Solus Alternative Asset Management LP(2)(6)7,553,128—13.4%GSO Capital Solutions Fund II (Luxembourg) S.a.r.l(2)(7)7,520,635—13.4%Luxor Capital Group, LP(2)(8)4,099,414—7.3%D.E. Shaw & Company, L.P.(2)(9)3,728,642—6.6%BlueMountain Capital Management, LLC(2)(10)3,203,584—5.7%Magnetar Financial, LLC(2)(11)3,003,912—5.3%Donald Gawick(3)159,80435,137*Mark Cashiola(3)65,2499,740*E. Michael Hobbs(3)44,34214,365*Edward Keppler(3)21,0894,806*Danielle Hunter(3)41,5618,994*Stuart Brightman(3)2,052—*Michael Roemer(3)2,747226*Michael Zawadzki(12)———John Kennedy(3)2,403—*Steven Mueller(3)2,403—*Patrick Murray(3)3,224—*Executive Officers and Directors as Group (14 persons)418,63189,446**Represents less than 1% of the outstanding common stock.(1)Except as otherwise indicated, the mailing address of each person or entity named in the table is C&J Energy Services, Inc, 3990 Rogerdale Rd., Houston, Texas 77042.(2)Reflects information provided to the Company by such named person as of February 24, 2017.(3)The number of shares beneficially owned by the named person includes (a) any shares of restricted stock, whether vested or unvested, held by such person and (b) anyshares that could be purchased upon the exercise of options and/or warrants held by the named person as of February 24, 2017, or within 60 days after February 24,2017. Unless otherwise indicated, each of the persons below has sole voting and investment power with respect to the shares beneficially owned by such person.(4)Reflects the number of shares that could be purchased upon the exercise of options and/or warrants held by the named person as of February 24, 2017 or within 60 daysafter February 24, 2017.(5)Based on 56,217,229 common shares estimated to be issued and outstanding as of February 24, 2017.(6)Reflects shares of common stock directly held by certain funds and accounts (the “Solus Funds”) for which Solus Alternative Asset Management LP is the investmentmanager. Solus GP LLC is the general partner of Solus Alternative Asset Management LP, and Christopher Pucillo is the managing member of Solus GP LLC. Each ofSolus Alternative Asset Management LP, Solus GP LLC and Christopher Pucillo may be deemed to have shared voting power and/or shared investment power withrespect to the shares of common stock held by each Solus Fund. Each of the foregoing entities and individuals disclaims beneficial ownership of the shares147Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 common stock described in this paragraph. The mailing address of each of the entities and persons identified in this paragraph is c/o Solus Alternative AssetManagement LP, 410 Park Avenue, 11th Floor, New York, New York 10022.(7)Reflects securities directly held by GSO Capital Solutions Fund II (Luxembourg) S.a.r.l. (“GSO CSF II Lux”). The sole shareholder of GSO CSF II Lux is GSO CapitalSolutions Fund II LP. The general partners of GSO Capital Solutions Fund II LP are GSO Capital Solutions Associates II (Delaware) LLC and GSO Capital SolutionsAssociates II (Cayman) Ltd. GSO Holdings I L.L.C. is the managing member of GSO Capital Solutions Associates II (Delaware) LLC and a shareholder of GSO CapitalSolutions Associates II (Cayman) Ltd. Blackstone Holdings II L.P. is a managing member of GSO Holdings I L.L.C., an affiliate of GSO Capital Partners LP and TheBlackstone Group L.P., with respect to securities beneficially owned by GSO Capital Solutions Associates II (Delaware) LLC. Blackstone Holdings I/II GP Inc. is thegeneral partner of Blackstone Holdings II L.P. The Blackstone Group L.P. is the controlling shareholder of Blackstone Holdings I/II GP Inc. Blackstone GroupManagement L.L.C. is the general partner of The Blackstone Group L.P. Blackstone Group Management L.L.C. is wholly-owned by Blackstone's senior managingdirectors and controlled by its founder, Stephen A. Schwarzman. In addition, each of Bennett J. Goodman and J. Albert Smith III serves as an executive of GSOHoldings I L.L.C. and may be deemed to have shared voting power and/or investment power with respect to the securities held by GSO CSF II Lux. Each of theforegoing entities and individuals disclaims beneficial ownership of the shares held directly by GSO CSF II Lux (other than GSO CSF II Lux to the extent of its directholdings). In the ordinary course of business, GSO Capital Partners LP and its affiliates, including Blackstone, manage, advise or sub-advise certain funds whoseportfolio companies may have relationships with us. The address of GSO CSF II Lux is 345 Park Avenue, 31st Floor, New York, New York 10154.(8)Consists of 4,099,414 shares of common stock held by Luxor Capital Group, LP. Luxor Capital Group, LP is an investment manager. Luxor Management, LLC is thegeneral partner of Luxor Capital Group, LP. Christian Leone is the managing member of Luxor Management, LLC and may be deemed to beneficially own the sharesbeneficially owned by Luxor Capital Group, LP.(9)Consists of (i) 2,417,773 shares of common stock held by D.E. Shaw Galvanic Portfolios, L.L.C. and (ii) 1,310,869 shares of common stock held by D.E. Shaw ValencePortfolios, L.L.C. (collectively, the “D.E. Shaw Funds”). David E. Shaw is the President and sole shareholder of D.E. Shaw & Co., Inc., which is the general partner ofD.E. Shaw & Co., LP., which in turn is the managing member and investment advisor of D.E. Shaw Galvanic Portfolios, L.L.C. and D.E. Shaw Valence Portfolios,L.L.C. Each of D.E. Shaw & Co., LP, D.E. Shaw & Co., Inc. and David E. Shaw may be deemed to have shared voting power and/or investment power with respect tothe shares of common stock held by each D.E Shaw Fund. Each of the foregoing entities and individuals disclaims beneficial ownership of the shares of common stockdescribed in this paragraph other than each D.E. Shaw Fund to the extent of its direct holdings. The mailing address of each of the entities and persons identified in thisparagraph is c/o D.E. Shaw & Co., L.P., 1166 Avenue of the Americas, Ninth Floor, New York, NY 10036, United States.(10)Consists of (i) 1,739,369 shares of common stock held by Blue Mountain Credit Alternatives Master Fund L.P., (ii) 111,554 shares of common stock held byBlueMountain Kicking Horse Fund L.P., (iii) 316,956 shares of common stock held by BlueMountain Montenvers Master Fund SCA SICAV-SIF, (iv) 100,203 sharesof common stock held by BlueMountain Guadalupe Peak Fund L.P., (v) 631,613 shares of common stock held by BlueMountain Summit Trading L.P., (vi) 97,838shares of common stock held by BlueMountain Logan Opportunities Master Fund L.P. and (vii) 206,051 shares of common stock held by BlueMountain FoinavenMaster Fund L.P. (collectively, the “BlueMountain Funds”). BlueMountain Capital Management, LLC is the investment manager of each BlueMountain Fund and may bedeemed to have shared voting power and/or shared investment power with respect to the securities described in this paragraph. Members of the investment committee ofBlueMountain Capital Management, LLC, which is made up of Andrew Feldstein, Derek Smith, Marina Lutova and David Zorub, may also be deemed to have sharedvoting power and/or shared investment power over the securities described in this paragraph. Each of the foregoing entities and persons disclaims beneficial ownership ofthe securities described in this paragraph other than each BlueMountain Fund to the extent of its direct holdings The mailing address of each of the entities and personsidentified in this paragraph is c/o BlueMountain Capital Management, LLC, 280 Park Ave., 12th Floor, New York, New York 10017.(11)Consists of 3,003,912 shares of common stock held by MTP Energy Fund Ltd (“Magnetar”). Magnetar may be deemed to have sole voting and investment power overthe securities described in this paragraph and disclaims beneficial ownership of the shares of common stock described in this paragraph other than to the extent of itsdirect holdings. The mailing address of each of Magnetar is c/o MTP Energy Management LLC, 1603 Orrington Avenue, 13th Floor, Evanston, Illinois 60201.(12)Michael Zawadzki is an employee of GSO Capital Partners LP and/or one of its affiliates. Mr. Zawadzki disclaims beneficial ownership of our common stock held byGSO CSF II Lux.Equity Compensation Plan InformationIn accordance with the Restructuring Plan, 10% of the equity of the Company was reserved for a management incentive program to allow for theissuance of equity to management of the reorganized Company after emergence at the discretion of the Board. On January 12, 2017, the Board adopted theC&J Energy Services, Inc. 2017 Management Incentive Plan (the “MIP”), effective as of January 6, 2017, which provides that a maximum of 8,046,021 sharesof our common stock may be issued or transferred pursuant to awards under the MIP. Persons eligible to receive awards under the MIP include our148Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.non-employee directors, our employees and affiliates, and certain of our consultants and advisors. As of February 24, 2017, 838,384 shares of our commonstock have been issued or are subject to outstanding awards under the MIP.Upon the effective date of the Company’s emergence from the Chapter 11 Proceeding, the Company’s prior omnibus incentive plans wereterminated, specifically (i) the 2015 Long Term Incentive Plan (as amended and in effect, the “2015 LTIP”); (ii) the 2012 Long-Term Incentive Plan,including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement (the “2012 LTIP”); (iii) 2010 Stock Option Plan (the“2010 Option Plan”); and the 2006 Stock Option Plan (the “2006 Option Plan”, and together with the 2015 LTIP, 2012 LTIP and the 2010 Option Plan, the“Prior Plans”)). Awards that were previously outstanding under the Prior Plans were canceled effective on the Company’s emergence from the Chapter 11Proceeding.The following table sets forth certain information regarding the Prior Plans as of December 31, 2016: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) 4,416,247 $13.18 11,276,328Equity compensation plans not approved by security holders — — —Total 4,416,247 $13.18 11,276,328 (1)Consists of (i) 311,500 non-qualified stock options issued and outstanding under the C&J Energy Services Ltd. 2006 Stock Option Plan (the “2006Plan”), (ii) 3,899,076 non-qualified stock options issued and outstanding under the C&J Energy Services Ltd. 2010 Stock Option Plan (the “2010Plan”), (iii) 71,866 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 133,805 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 112,447 restricted shares issued and outstanding under the 2012 LTIP and 785,521 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 Nabors Merger. The 2015 LTIPserved as an assumption of the 2012 LTIP, including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement,with certain non-material revisions made and no increase in the number of shares remaining available for issuance under the 2012 LTIP. Noadditional awards will be granted under the Prior Plans. See Note 8 - Share-Based Compensation in Part II, Item 8 “Financial Statements andSupplementary Data” for additional information regarding these equity compensation plans.Item 13. Certain Relationships and Related Transactions, and Director IndependenceRelated Persons TransactionsRelated Persons Transactions Policy149Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 Board has adopted a Related Persons Transactions Policy (the “Related Persons Transactions Policy”), which provides guidelines for thereview of all transactions or arrangements involving the Company, on one side, and, on the other side, a person with a position of control over the Company(such as a director or senior officer of the Company), or a person or entity, who beneficially owns more than 5% of the Company’s common shares, as well asfamily members or affiliates of the aforementioned (each, a “Related Person”), to determine whether such persons have a direct or indirect material interest inthe transaction. Specifically, the Related Persons Transactions Policy covers any transaction (i) in which the aggregate amount involved exceeds or may beexpected to exceed $120,000 in any calendar year, (ii) the Company is or will be a participant and (iii) any Related Person, as defined below, has or will havea direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). Related persons transactionsare also subject to our Code of Conduct and Ethics, which restricts our directors, officers and employees from engaging in any business or conduct or enteringinto any agreement or arrangement that would give rise to an actual or potential conflict of interest. Under our Code of Conduct and Ethics, conflicts ofinterest occur when private or family interests interfere, or appear to interfere, in any way with our interests. We have processes for reporting actual orpotential conflicts of interests, including related person transactions, under both our Code of Business Conduct and Ethics and our Related PersonsTransactions Policy.Under the terms of our Code of Business Conduct and Ethics, our General Counsel is primarily responsible for developing and implementingprocedures and controls to obtain information from our directors, officers and employees with respect to any proposed transaction or arrangement that mayconstitute a potential conflict of interest, including with respect to related person transactions. Our General Counsel is required to report to the Board anyactual or potential conflict of interest involving a director or officer, or a member of such person’s immediate family, and the Board will determine whetherthe possible conflict of interest indeed constitutes a conflict of interest. Board approval is required prior to the consummation of any proposed transaction orarrangement that is determined by the Board to constitute a conflict of interest. Any director who has an interest in the transaction will be recused from thereview and approval process.Pursuant to our Related Persons Transactions Policy, the Audit Committee is required to review the material facts and either approve ordisapprove, those related persons transactions, in which (1) the aggregate amount involved exceeds, or is expected to exceed, $120,000 in any calendar yearand (2) any Related Person has or will have a direct or indirect interest (other than solely as a result of being a director of, or holding less than a 10%beneficial ownership interest in, another entity). In determining whether to approve a related person transaction, the Audit Committee will take into account,among other factors it deems appropriate with respect to the particular transaction:•The nature and extent of the Related Person’s interest in the transaction;•The material terms of the transaction, including, without limitation, the amount and type of transaction;•Whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similarcircumstances;•The importance of the transaction to the Related Person;•The importance of the transaction to us; and•Whether the transaction would impair the judgment of a director or executive officer to act in the best interest of our Company.Thereafter, on at least an annual basis, the Audit Committee is required to review and assess any ongoing transaction, arrangement or relationshipwith the Related Person to confirm that such transaction, arrangement or relationship remains appropriate. Any member of the Audit Committee who is aRelated Person with respect to the transaction will be recused from the review and approval process.Transactions with Related PersonsSupply and Services TransactionsWe utilize the services of certain saltwater disposal wells owned by Pyote Water Solutions, LLC, Pyote Water Systems, LLC, Pyote WaterSystems II, LLC and Pyote Water Systems III, LLC (together “Pyote”) for the disposal of certain of our customers’ fluids associated with oil and gasproduction. Payments to Pyote totaled approximately $780,000 and $565,000 for the years ended December 31, 2016 and December 31, 2015, respectively.Mr. H. H. “Tripp” Wommack, III, a former150Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.member of our Board who served from March 24, 2015 until December 16, 2016, serves as Chairman of the Board of Governors, President and Chief Managerof Pyote.In addition, we provide certain workover rig services, fluid hauling services and plug and abandonment services to Pyote. Payments from Pyotetotaled approximately $284,000 for the year ended December 31, 2015. We plan to continue our relationship with Pyote for the foreseeable future.Transactions Related to the Nabors MergerFollowing the closing of the Nabors Merger in March 2015, Nabors was considered a “related person” of the Company for purposes of Item 404of Regulation S-K due to Nabors’s ownership of approximately 52% of the Company’s common shares, although those shares were canceled in the Chapter11 Proceeding and Nabors ceased to be a shareholder as of January 6, 2017. Nabors’ Chief Financial Officer, William Restrepo, also served on our Board fromthe closing of the Nabors Merger in March 2015 through January 6, 2017.Since the closing of the Nabors Merger and continuing to date, we lease certain properties from Nabors, and Nabors leases certain properties fromus. For the year ended December 31, 2016, we incurred obligations to Nabors of approximately $640,000 under the leases, and Nabors incurred obligations tous of approximately $62,000 under the leases. We plan to continue the leasing arrangements with Nabors for the foreseeable future.Additionally, following the closing of the Nabors Merger through December 2016, we provided certain services to Shehtah Nabors LP, a Naborspartnership with a third party, pursuant to a Management Agreement and a Cash Flow Sharing Agreement (collectively, “Shehtah Agreements”). Naborsincurred obligations to us of approximately $1.8 million under the Shehtah Agreements during 2016. In connection with our Chapter 11 Proceeding, weentered into a settlement agreement with Nabors which provided, among other things, for the cancellation of outstanding amounts owed between the partiesunder the leases and the Shehtah Agreements, as well as the termination of certain contracts with continuing obligations between the parties relating to theNabors Merger.Transactions Related to Chapter 11Rights Offering, Backstop Commitment AgreementOn December 6, 2016, we entered into a Backstop Commitment Agreement with the Backstop Parties, which include certain of our significantstockholders, pursuant to which the Backstop Parties agreed to backstop a $200 million cash investment in the Company pursuant to the Rights Offeringconducted in accordance with the Restructuring Plan.In accordance with the Restructuring Plan, the Backstop Commitment Agreement and the Rights Offering procedures, we offered eligiblecreditors, including the Backstop Parties, the right to purchase common stock upon emergence from the Chapter 11 Proceeding for an aggregate purchaseprice of $200 million.The Rights Offering, which commenced on November 15, 2016 and ended on December 9, 2016, provided holders of eligible secured claimsunder our prior credit agreement as of the record date set therefor to be granted rights entitling each such holder to subscribe to purchase an amount ofcommon stock (the “Rights Offering Shares”), up to such holders’ respective pro rata share of such eligible secured claims. The Rights Offerings Shares,collectively, reflect an aggregate purchase price of $200 million at the per share price of $13.58.Under the Backstop Commitment Agreement, the Backstop Parties agreed to purchase, severally and not jointly, the Rights Offering Shares thatwere not duly subscribed to by parties other than Backstop Parties pursuant to the Rights Offering at the same per share price as the Rights Offering (the“Backstop Commitment”).We paid the Backstop Parties on the Plan Effective Date a put option premium equal to 5% of the $200 million committed amount as the PutOption Premium in the form of common stock at the same per share price offered in the Rights Offering. All amounts paid to the Backstop Parties in theircapacities as such for the Put Option Premium were paid pro rata based on the amount of their respective Backstop Commitments on the Closing Date (ascompared to the aggregate Backstop Commitment of all Backstop Parties).As a condition to the closing of the transactions contemplated by the Backstop Commitment Agreement, we entered into the Registration RightsAgreement with the Backstop Parties entitling such Backstop Parties to request that the151Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Company register their securities for sale under the Securities Act at various times and upon the terms and conditions set forth in the Registration RightsAgreement.Registration Rights AgreementWe are party to a Registration Rights Agreement with the Backstop Parties, which include certain of our significant stockholders. TheRegistration Rights Agreement requires us to file a shelf registration statement within 10 calendar days after the date that we file our Annual Report on Form10-K for the year ended December 31, 2016 or the latest date we would be required to file a Form 10-K specified in the SEC’s rules and regulations applicableto non-accelerated filers. The Registration Rights Agreement also provides the registration rights holders the ability to demand registrations or underwrittenshelf takedowns subject to certain requirements and exceptions.In addition, if we propose to register shares of our common stock in certain circumstances, the registration rights holders will have certain“piggyback” registration rights, subject to restrictions set forth in the Registration Rights Agreement, to include their shares of common stock in theregistration statement.Parties to the Registration Rights Agreement who collectively have beneficial ownership of a majority of the registrable securities may,beginning 60 days after the Plan Effective Date, request for us to use reasonable best efforts to relist on a national securities exchange within 60 days of suchrequest so long as we meet the eligibility requirements for a national securities exchange acceptable to such registration rights holders.Stockholders AgreementWe are party to a Stockholders Agreement with certain funds affiliated with and/or managed by each of GSO, Solus, and BlueMountain (each aHolder).The Stockholders Agreement provides that the Board will consist of seven directors and grants rights to designate nominees to serve as directorsto GSO and Solus as follows: (a) GSO may designate up to three directors for nomination to the Board and (b) Solus may designate up to two directors fornomination to the Board and may also designate one non-voting observer to the Board. In addition, the Board or a nominating committee thereof shalldesignate our Chief Executive Officer and one other director for nomination to the Board.Certain significant actions by us require the consent of one or more of the Holders. These actions include, but are not limited to, the issuance ofequity securities of the Company representing more than 10% of the shares of common stock issued pursuant to the Restructuring Plan (excluding shares ofcommon stock issued pursuant to New Warrants), the incurrence of indebtedness in excess of $100 million in the aggregate, the consummation ofacquisitions greater than $100 million and any voluntary registration of our common stock under Section 12 of the Exchange Act. Under the StockholdersAgreement, the Holders will be entitled to certain preemptive rights upon the issuance of certain types of equity or debt securities by the Company.The Stockholders Agreement provides that it will terminate automatically (i) immediately prior to the registration of the shares of common stockpursuant to Section 12(b) of the Exchange Act in connection with (A) our common stock being listed on the NASDAQ Global Market, the NASDAQ GlobalSelect Market or the New York Stock Exchange or (B) the closing of a firmly underwritten Public Offering (as defined therein), or (ii) upon the occurrence ofboth (A) each of GSO and Solus holding less than 5% of the outstanding common stock and (B) all Holders collectively holding less than 20% of theoutstanding common stock.DIRECTOR INDEPENDENCEFrom our initial public offering in July 2011 through delisting in July 2016 as a result of filing the Chapter 11 Proceeding, we were a publiclytraded company on the NYSE. During our tenure as a NYSE-listed company, we were required to comply with the rules of the NYSE and were subject to therelated rules and regulations of the SEC, including Sarbanes-Oxley. Although we have not been listed on a national exchange for a period of time as a resultof the Chapter 11 Proceeding, we have continued to look to the NYSE regulations for guidance, among other reasons, as a matter of best practices.Furthermore, on February 28, 2016, our common stock was approved for listing on the NYSE MKT and is expected to begin trading under the symbol "CJ" onMarch 6, 2017.The NYSE rules require listed companies to have a board of directors with at least a majority of independent directors. Additionally, each of theAudit Committee, Compensation Committee and Nominating & Governance Committee are152Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.required to be comprised solely of independent directors, as that term is defined by the applicable rules and regulations of the NYSE and SEC. Rather thanadopting categorical standards, each year our Board assessed director independence on a case-by-case basis, in each case consistent with the applicable rulesand regulations of the SEC and the NYSE.After reviewing all relationships each director has with the Company, including the nature and extent of any business relationships between theCompany and such person, our Predecessor’s board of directors affirmatively determined that each person who served on our Predecessor’s board of directorsduring 2016 was “independent” as that term is defined under the applicable rules and regulations of the SEC and the NYSE, with the exception of thefollowing persons due to the their role with the Company: (i) Mr. Comstock, the Company’s Founder and former Chairman and Chief Executive Officer(terminated from the Board in March 2016); (ii) Mr. McMullen, the Company’s former Chief Executive Officer (as successor to Mr. Comstock), President andChief Financial Officer (terminated from the Board in March 2016); and (iii) Mr. Gawick, the Company’s current Chief Executive Officer (as successor to Mr.McMullen). Additionally, Mr. William Restrepo was not considered to be independent due to his employment as an executive officer of Nabors, whichbeneficially owned approximately 52% of our common shares as a result of the Nabors Merger.In connection with the appointment of the current Board, the Board assessed the independence of each director in accordance with the rules andregulations of the SEC and the NYSE, even though we were not at that time and continue to not be a publicly traded company. After reviewing allrelationships each director has with the Company, including the nature and extent of any business relationships between the Company and such person, theBoard affirmatively determined that each of Messrs. Murray, Brightman, Kennedy, Mueller, Roemer and Zawadzki has no material relationships with theCompany and, therefore, is “independent” as defined under the applicable rules and regulations of the SEC and the NYSE. Mr. Zawadzki is employed byGSO, a significant shareholder of the Company, and was designated for nomination to the Board by GSO pursuant to the Stockholders Agreement. Mr.Gawick, our President and Chief Executive Officer, is not considered to be “independent” because of his employment position with the Company.Item 14. Principal Accounting Fees and ServicesAudit and other fee informationSet forth below is a summary of certain fees paid to KPMG for services related to the fiscal years ended December 31, 2016 and December 31,2015. In determining the independence of KPMG, Old C&J's Audit Committee considered whether the provision of non-audit services is compatible withmaintaining KPMG's independence. 2016 2015Audit fees $1,938,086 $2,361,750Audit related fees 20,000 140,000Tax fees 4,357 52,977 Total $1,962,443 $2,554,727Audit feesAudit fees consisted of amounts incurred for services performed in association with the annual financial statement audit, fees related to the auditof internal controls over financial reporting under Section 404 of Sarbanes-Oxley, review of financial statements included in the Company's QuarterlyReports on Form 10-Q, and other services normally provided by the Company's independent registered public accounting firm in connection with regulatoryfilings or engagements for the fiscal years shown.Audit related feesAudit related fees consisted of amounts incurred for accounting consultation in connection with the Nabors Merger.Tax FeesTax fees consisted of services provided for sales and use tax planningPolicy on Audit Committee Pre-Approval of Audit and Non-Audit Services153Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.All of the services described above were pre-approved by the Old C&J Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 ofRegulation S-X under the Exchange Act, to the extent that rule was applicable during fiscal years 2014 and 2015.On March 24, 2016, the Old C&J Audit Committee adopted a policy requiring pre-approval by the Audit Committee of all services (audit, taxand non-audit) to be provided to the Company by our independent registered public accounting firm, in each case subject to a specific budget. In accordancewith this Pre-Approval Policy, in April 2015 our Audit Committee gave its annual approval for the provision of such services by KPMG for the 2015 fiscalyear. Additionally, in February 2016, in accordance with this Pre-Approval Policy, the Audit Committee gave its annual approval for the provision of suchservices by KPMG for the 2016 fiscal year. Any proposed services to be provided by the independent registered public accounting firm not covered by one ofthese approvals, including proposed services exceeding pre-approved budget levels, requires special pre-approval by our Audit Committee. In certaincircumstances and for certain services, our Audit Committee delegates its responsibilities to pre-approve services performed by the independent registeredpublic accounting firm to the Chairman of our Audit Committee. However, our Audit Committee does not under any circumstance delegate itsresponsibilities to pre-approve services performed by the independent registered public accounting firm to management.Prior to the adoption of the current Pre-Approval Policy, the Company’s Audit Committee had adopted a policy requiring pre-approval of allservices (audit, tax and non-audit) to be provided to the Company by our independent registered public accounting firm, which policy was substantially thesame as the Pre-Approval Policy currently in effect. In accordance with this policy, our Audit Committee has given its annual approval for the provision ofaudit services by KPMG through December 31, 2016.KPMG does not provide any internal audit services to us.154Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 StatementsOur 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 Second Amended Joint Plan of Reorganization (as Modified) of CJ Holding Company, et al., Pursuant to Chapter 11 of theBankruptcy Code, dated December 15, 2016 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by C&JEnergy Services Ltd. on December 22, 2016 (File No. 000-55404)).3.1 Amended and Restated Certificate of Incorporation of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to theRegistrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).3.2 Bylaws of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).3.3 Certificate of Designation of Series A Participating Cumulative Preferred Stock of C&J Energy Services, Inc. (incorporated byreference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017 (File No. 000-55404)).4.1 Form of specimen Warrant certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).4.2 Warrant Agreement, dated as of January 6, 2017, by and between C&J Energy Services, Inc. and American Stock Transfer & TrustCompany, LLC, as warrant agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).4.3 Stockholders Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto (incorporatedby reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).*4.4 Amendment No. 1 to Stockholders Agreement, dated as of February 27, 2017, by and among C&J Energy Services, Inc. and the partiesthereto.4.5 Registration Rights Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto(incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).4.6 Rights Agreement, dated as of January 6, 2017, between C&J Energy Services, Inc. and American Stock Transfer & Trust Company,LLC, as Rights Agent, which includes the Form of Certificate of Designation of Series A Participating Cumulative Preferred Stock ofC&J Energy Services, Inc. as Exhibit A, the Summary of Terms of Rights Agreement as Exhibit B and the Form of Right Certificate asExhibit C (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017(File No.000-55404)).155Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.10.1 Credit Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc., the lenders party thereto and PNC Bank,National Association, as administrative agent. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).10.2+ C&J Energy Services, Inc. 2017 Management Incentive Plan. (incorporated by reference to Exhibit 10.1 to the Registrant’s CurrentReport on Form 8-K filed on January 13, 2017(File No. 000-55404)).10.3+ First Amendment to the C&J Energy Services, Inc. 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.1 to theRegistrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.4+ Restricted Share Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.5+ Restricted Share Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit10.3 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.6+ Restricted Share Agreement (Non-Employee Directors) under the 2017 Management Incentive Plan (incorporated by reference toExhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.7+ Nonqualified Stock Option Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan(incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.8+ Nonqualified Stock Option Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by referenceto Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.9 Tax Matters Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).* 21.1 List of Subsidiaries of C&J Energy Services, Inc.* 23.1 Consent of KPMG LLP* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002** 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002*§101.INS XBRL Instance Document*§101.SCH XBRL Taxonomy Extension Schema Document* §101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* §101.LAB XBRL Taxonomy Extension Label Linkbase Document* §101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* §101.DEF XBRL Taxonomy Extension Definition Linkbase Document*Filed herewith**Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K+Management contract or compensatory plan or arrangement156Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 2nd day of March, 2017. C&J Energy Services, Inc. By: /s/ Mark C. Cashiola Mark C. Cashiola Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) By: /s/ Danielle E. Hunter Danielle E. Hunter Executive Vice President, General Counsel, Chief Risk and Compliance Officer and Corporate Secretary 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. 157Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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/ Donald J. Gawick March 2, 2017 Donald J. Gawick, President and Chief Executive Officerand Director (Principal Executive Officer) By: /s/ Mark C. Cashiola March 2, 2017 Mark C. Cashiola, Chief Financial Officer (Principal Financial Officer and Principal AccountingOfficer) By: /s/ Patrick Murray March 2, 2017 Patrick Murray, Director and Chairman of the Board By: /s/ Stuart Brightman March 2, 2017 Stuart Brightman, Director By: /s/ John Kennedy March 2, 2017 John Kennedy, Director By: /s/ Steven Mueller March 2, 2017 Steven Mueller, Director By: /s/ Michael Roemer March 2, 2017 Michael Roemer, Director By: /s/ Michael Zawadzki March 2, 2017 Michael Zawadzki, Director 158Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 Second Amended Joint Plan of Reorganization (as Modified) of CJ Holding Company, et al., Pursuant to Chapter 11 of theBankruptcy Code, dated December 15, 2016 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by C&JEnergy Services Ltd. on December 22, 2016 (File No. 000-55404)).3.1 Amended and Restated Certificate of Incorporation of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.1 to theRegistrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).3.2 Bylaws of C&J Energy Services, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).3.3 Certificate of Designation of Series A Participating Cumulative Preferred Stock of C&J Energy Services, Inc. (incorporated byreference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017 (File No. 000-55404)).4.1 Form of specimen Warrant certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).4.2 Warrant Agreement, dated as of January 6, 2017, by and between C&J Energy Services, Inc. and American Stock Transfer & TrustCompany, LLC, as warrant agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed onJanuary 6, 2017(File No. 000-55404)).4.3 Stockholders Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto (incorporatedby reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).*4.4 Amendment No. 1 to Stockholders Agreement, dated as of February 27, 2017, by and among C&J Energy Services, Inc. and the partiesthereto.4.5 Registration Rights Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc. and the parties thereto(incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).4.6 Rights Agreement, dated as of January 6, 2017, between C&J Energy Services, Inc. and American Stock Transfer & Trust Company,LLC, as Rights Agent, which includes the Form of Certificate of Designation of Series A Participating Cumulative Preferred Stock ofC&J Energy Services, Inc. as Exhibit A, the Summary of Terms of Rights Agreement as Exhibit B and the Form of Right Certificate asExhibit C (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017(File No.000-55404)).10.1 Credit Agreement, dated as of January 6, 2017, by and among C&J Energy Services, Inc., the lenders party thereto and PNC Bank,National Association, as administrative agent. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 6, 2017(File No. 000-55404)).10.2+ C&J Energy Services, Inc. 2017 Management Incentive Plan. (incorporated by reference to Exhibit 10.1 to the Registrant’s CurrentReport on Form 8-K filed on January 13, 2017(File No. 000-55404)).10.3+ First Amendment to the C&J Energy Services, Inc. 2017 Management Incentive Plan (incorporated by reference to Exhibit 10.1 to theRegistrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.4+ Restricted Share Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.5+ Restricted Share Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by reference to Exhibit10.3 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.6+ Restricted Share Agreement (Non-Employee Directors) under the 2017 Management Incentive Plan (incorporated by reference toExhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.7+ Nonqualified Stock Option Agreement (C&J Executive Employment Agreements) under the 2017 Management Incentive Plan(incorporated by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on February 6, 2017 (File No. 000-55404)).159Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.10.8+ Nonqualified Stock Option Agreement (Restrictive Covenants) under the 2017 Management Incentive Plan (incorporated by referenceto Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on February 6, 2017(File No. 000-55404)).10.9 Tax Matters Agreement, dated as of March 24, 2015, by and between Nabors Industries Ltd. and Nabors Red Lion Limited(incorporated herein by reference to Exhibit 10.2 to C&J Energy Services Ltd.’s Current Report on Form 8-K12G3, filed on March 25,2015 (File No. 000-55404)).* 21.1 List of Subsidiaries of C&J Energy Services, Inc.* 23.1 Consent of KPMG LLP* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002** 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002* §101.INS XBRL Instance Document* §101.SCH XBRL Taxonomy Extension Schema Document* §101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* §101.LAB XBRL Taxonomy Extension Label Linkbase Document* §101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* §101.DEF XBRL Taxonomy Extension Definition Linkbase Document *Filed herewith**Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K+Management contract or compensatory plan or arrangement160Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Execution VersionAMENDMENT NO. 1 TOSTOCKHOLDERS AGREEMENTThis AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT (this “Amendment”) is entered into as of February27, 2017, among C&J Energy Services, Inc., a Delaware corporation (the “Company”), and the Required Holders (as defined in thatcertain Stockholders Agreement among the Company and the other parties thereto, dated January 6, 2017 (the “StockholdersAgreement”)). Capitalized terms used herein without definition shall have the definitions assigned thereto in the StockholdersAgreement. The rules of construction specified in Section 1.2 of the Stockholders Agreement also apply to this Amendment mutatismutandis.RECITALSWHEREAS, the Company and the Holders previously entered into the Stockholders Agreement, and the Holders partyhereto constitute the Required Holders under the Stockholders Agreement;WHEREAS, the Company and the Required Holders wish to amend and restate the Stockholders Agreement as set forth onAnnex A hereto, and the Board of Directors of the Company has approved such amendment and restatement, and this Amendment;WHEREAS, the Company has requested the written consent of the Required Holders to list the Common Stock on theNYSE MKT and to register the Common Stock under Section 12 of the Exchange Act in connection therewith; andWHEREAS, the Company has requested that the Required Holders waive the required notice period before registering theCommon Stock under Section 12 of the Exchange Act pursuant to Section 2.2.3 of the Stockholders Agreement;NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained in thisAmendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the partiesto this Amendment, intending to be legally bound, hereby agree as follows:1.Amended and Restated Stockholders Agreement. The Company and the Required Holders agree that the StockholdersAgreement is hereby amended and restated as set forth on Annex A hereto effective as of the date hereof pursuant toSection 6.9.2 of the Stockholders Agreement.2.Consents and Waivers.(a)The Required Holders hereby consent to: (i) the listing of the Common Stock on the NYSE MKT and theregistration of the Common Stock under Section 12 of the Exchange Act in connection therewith; and (ii) the entryof the Company into agreements or binding obligations to do any of the foregoing, pursuant to Sections 2.2.1(i),2.2.1(j), 2.2.1(o) and 6.9.2 of the Stockholders Agreement.(b)The Required Holders hereby waive the required notice period before registering the Common Stock underSection 12 of the Exchange Act in connection with the Company taking the actions contemplated by Section2.2(a) of this Amendment pursuant to Sections 2.2.3 and 6.9.2 of the Stockholders Agreement.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.3.Agreement to Remain in Effect. Except as amended and restated by this Amendment, all terms and conditions of theStockholders Agreement shall remain in full force and effect among the parties thereto.4.Approvals. Each party to this Amendment represents and warrants that it has obtained all corporate, board and otherapprovals necessary to execute and deliver this Amendment and for this Amendment to be effective.5.Governing Law; Miscellaneous. This Amendment and all claims or causes of action (whether in contract or tort) thatmay be based upon, arise out of or relate to this Amendment or the negotiation, execution or performance of thisAmendment (including any claim or cause of action based upon, arising out of or related to any representation orwarranty made in or in connection with this Amendment) shall be governed by and construed in accordance with thelaws of the State of Delaware, without regard to principles of conflicts of law. The provisions of Sections 6.3(Submission to Jurisdiction), 6.4 (Waiver of Jury Trial), 6.10 (Non-Recourse), 6.12 (Further Assurances) and 6.14(Independent Agreement by the Holders) of the Stockholders Agreement also apply to this Amendment mutatismutandis.6.Severability. If any provision of this Amendment shall be invalid or unenforceable in any jurisdiction, such invalidity orunenforceability shall not affect the validity or enforceability of the remainder of this Amendment in that jurisdiction orthe validity or enforceability of any provision of this Amendment in any other jurisdiction.7.Counterparts. This Amendment may be executed in any number of counterparts, each of which will be deemed to be anoriginal copy of this Amendment and all of which, when taken together, will be deemed to constitute one and the sameagreement. This Amendment and any signed agreement entered into in connection herewith or contemplated hereby, andany amendments hereto or thereto, to the extent signed and delivered by facsimile, by electronic mail in “portabledocument format” (“.pdf”) form, or any other electronic transmission, shall be treated in all manner and respects as anoriginal contract and shall be considered to have the same binding legal effects as if it were the original signed versionthereof delivered in person.8.Entire Agreement. This Amendment and the Stockholders Agreement, as amended and restated by this Amendment,contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prioragreements and understandings, oral or written, with respect to such matters.[Signature Pages Follow]Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, all as of the date first writtenabove. C&J Energy Services, Inc. By: /s/ Danielle E. Hunter Danielle E. Hunter Executive Vice President, General Counsel, Chief Risk and Compliance Officer and Corporate Secretary [Signature Page to Stockholders Agreement]Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.REQUIRED HOLDERS:GSO:GSO Capital Solutions Fund II (Luxembourg) S.a.r.l.By:/s/ JC Koch JC Koch Manager A By:/s/ Elliot Eisenberger Elliot Eisenberger Manager B ADDRESS:9 Allée SchefferL-2520 Luxembourg[Signature Page to Stockholders Agreement]Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Solus:Solus Opportunities Fund 5 LPBy Solus Alternative Asset Management LP, its Investment AdvisorBy:/s/ C.J. Lanktree C.J. Lanktree Authroized Signatory ADDRESS:C/O Solus Alternative Asset Management410 Park Avenue, Floor 11New York, NY 10022Attention: Stephen BlaunerFacsimile No.: 212-284-4320Email: sblauner@soluslp.com compliance@soluslp.comSolus Opportunities Fund 3 LPBy Solus Alternative Asset Management LP, its Investment AdvisorBy:/s/ C.J. Lanktree C.J. Lanktree Authroized Signatory ADDRESS:C/O Solus Alternative Asset Management410 Park Avenue, Floor 11New York, NY 10022Attention: Stephen BlaunerFacsimile No.: 212-284-4320Email: sblauner@soluslp.com compliance@soluslp.comSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Ultra Master LtdBy Solus Alternative Asset Management LP, its Investment AdvisorBy:/s/ C.J. Lanktree C.J. Lanktree Authroized Signatory ADDRESS:C/O Solus Alternative Asset Management410 Park Avenue, Floor 11New York, NY 10022Attention: Stephen BlaunerFacsimile No.: 212-284-4320Email: sblauner@soluslp.com compliance@soluslp.comSOLA LTDBy Solus Alternative Asset Management LP, its Investment AdvisorBy:/s/ C.J. Lanktree C.J. Lanktree Authroized Signatory ADDRESS:C/O Solus Alternative Asset Management410 Park Avenue, Floor 11New York, NY 10022Attention: Stephen BlaunerFacsimile No.: 212-284-4320Email: sblauner@soluslp.com compliance@soluslp.comSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.ANNEX AAMENDED AND RESTATED STOCKHOLDERS AGREEMENTSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.AMENDED AND RESTATED STOCKHOLDERS AGREEMENTby and amongC&J ENERGY SERVICES, INC.andTHE OTHER PARTIES TO THIS AGREEMENTDated as of February 27, 2017Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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 CONTENTSPAGEARTICLE 1 DefinitionsDefinitions1Other Definitional and Interpretive Matters7ARTICLE 2 Management of the Company and Certain ActivitiesBoard8Actions Requiring Consent13ARTICLE 3 Preemptive RightsPreemptive Rights 16ARTICLE 4 Corporate OpportunitiesCorporate Opportunities18ARTICLE 5 TerminationTermination of Agreement 20Termination as to a Party20Effect of Termination20ARTICLE 6 MiscellaneousNotices 20Governing Law21Submission to Jurisdiction21Waiver of Jury Trial22Successors and Assigns22Counterparts22Severability23Specific Performance23No Waivers; Amendments23Non-Recourse24Action by Holders24Further Assurances24Entire Agreement24Independent Agreement by the Holders24Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.AMENDED AND RESTATED STOCKHOLDERS AGREEMENTTHIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of February 27,2017, is entered into by and among (i) C&J Energy Services, Inc., a Delaware corporation (the “Company”), (ii) GSO CapitalSolutions Fund II (Luxembourg) S.a.r.l. (together with GSO Capital Partners LP, and their Affiliates and Related Funds, “GSO”), (iii)Solus Opportunities Fund 5 LP, Solus Opportunities Fund 3 LP, Ultra Master Ltd and SOLA LTD (collectively and together withSolus Alternative Asset Management LP, and their Affiliates and Related Funds, “Solus”) and (iv) BlueMountain Foinaven MasterFund L.P., Blue Mountain Credit Alternatives Master Fund L.P., BlueMountain Guadalupe Peak Fund L.P., BlueMountain SummitTrading L.P., BlueMountain Montenvers Master Fund SCA SICAV-SIF, BlueMountain Logan Opportunities Master Fund L.P. andBlueMountain Kicking Horse Fund L.P. (collectively and together with BlueMountain Capital Management, LLC, and their Affiliatesand Related Funds, “Blue Mountain”). GSO, Solus and Blue Mountain are, collectively, the “Holders” and, individually, each a“Holder.”Pursuant to, and in consideration of the obligations of the Company and the Holders under the Plan (as hereinafter defined), thepremises, mutual covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, the parties hereto agree as follows effective as of the Effective Date (as herein defined):ARTICLE 1 DEFINITIONSSection 1.1 Definitions.1.1.1 As used herein, the following terms have the following meanings:“Act of Bankruptcy” means, with respect to any Person, the occurrence of any of the following events, conditions orcircumstances: (a) such Person files a voluntary petition in bankruptcy or files any petition or consent seeking any reorganization,arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under the Bankruptcy Code or any present orfuture applicable federal, state or other statute or Law relating to bankruptcy, insolvency, reorganization or other relief for debtors, orseeks or consents to, or acquiesces in, the appointment of any trustee, receiver, conservator or liquidator of such Person or of all or anysubstantial part of its properties (the term “acquiesce,” as used in this definition, includes the failure to file a petition or motion to vacateor discharge any order, judgment or decree within 20 days, after entry of such order, judgment or decree); (b) such Person admits inwriting its inability to pay its debts as they mature or is generally not paying its debts as they become due; or (c) such Person makes ageneral assignment for the benefit of creditors or take any other similar action for the protection or benefit of creditors.“Affiliate” means, with respect to any Person, any Person who, directly or indirectly, controls, is controlled by or is undercommon control with that Person, and the term “control” (including the terms “controlled”, “controlled by” and “under commoncontrol with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policiesof such Person, whether through ownership of voting securities, by contract (including proxy) or otherwise; provided, however, that (i)for the avoidance of doubt no Holder shall be deemed an affiliate of any other Holder solely on account of ownership of securities ofthe Company or being party to this Agreement, and no Holder shall be deemed an affiliate of the Company solely on account of beingparty to this Agreement and (ii) for purposes of this Agreement, all Holders comprising GSO shall be deemed Affiliates of eachSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, all Holders comprising Solus shall be deemed Affiliates of each other and all Holders comprising Blue Mountain shall bedeemed Affiliates of each other.“Alternative Securities Exchange” means, excluding any National Securities Exchange, any other securities exchange orover-the-counter quotation system, including, without limitation, the NYSE MKT, the NASDAQ Capital Market, any quotation orother listing service provided by the OTC Markets Group or the Financial Industry Regulatory Authority, Inc., any “pink sheet” orother alternative listing service or any successor or substantially equivalent service to any of the foregoing.“Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code.“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas, Houston Division.“beneficially owned,” “beneficial ownership” and similar phrases have the same meanings as such terms have under Rule13d-3 and 13d-5 (or any successor rule then in effect) promulgated under the Exchange Act, except that in calculating the beneficialownership of any Holder, such Holder shall be deemed to have beneficial ownership of all securities that such Holder has the right toacquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. Thecalculation of beneficial ownership for a Holder shall also include any Related Fund of such Holder.“Board” means the board of directors of the Company.“Business Day” means any day other than a Saturday, Sunday or a day on which state or federally chartered bankinginstitutions in New York City, New York are not required to be opened.“Bylaws” means the Bylaws of the Company, as the same may be amended, restated, amended and restated, waived,supplemented or otherwise modified from time to time in accordance with its terms.“Capitalized Lease Obligations” means, as to any Person, the obligations of such Person to pay rent or other amounts under alease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classifiedand accounted for as a capital lease on a balance sheet of such Person under GAAP. For purposes of this Agreement, the amount ofsuch Capitalized Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP.“Certificate of Incorporation” means the Certificate of Incorporation of the Company, as the same may be amended, restated,amended and restated, waived, supplemented or otherwise modified from time to time in accordance with its terms.“Class I Director” means a director of the Board designated as a Class I director in accordance with the Certificate ofIncorporation.“Class II Director” means a director of the Board designated as a Class II director in accordance with the Certificate ofIncorporation.“Class III Director” means a director of the Board designated as a Class III director in accordance with the Certificate ofIncorporation.“Commission” means the United States Securities and Exchange Commission.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.“Common Stock” means the common stock, par value $0.01 per share, of the Company, and any shares or capital stock for orinto which such common stock hereafter is exchanged, converted, reclassified or recapitalized by the Company or pursuant to anagreement to which the Company is a party.“Common Stock Equivalents” means, without duplication, Common Stock and any warrants, options, securities,Indebtedness or other rights exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock whetherexercisable, convertible or exchangeable at the time of issuance or upon the passage of time or the occurrence of some future event,including, for greater clarity, restricted stock units, performance stock units or any substantially similar award, whether or not settled inCommon Stock or a Common Stock Equivalent, if the value of such award is derived from or measured in part or in full from themarket value of the Common Stock or a Common Stock Equivalent.“Currency Agreement” means any foreign exchange contract, currency swap agreement or other similar agreement orarrangement designed to protect the Company or any of its Subsidiaries against fluctuations in currency values.“DGCL” means the General Corporation Law of the State of Delaware.“Effective Date” shall have the meaning given to such term in the Plan.“Equity Interest” means, with respect to any Person, any and all securities, shares, interests, participations or otherequivalents, including (i) if such Person is a limited liability company, membership interests (however designated, whether voting ornonvoting) in such limited liability company and any other interest or participation that confers on a person the right to receive a shareof the profits and losses of, or distributions of property of, such limited liability company, and (ii) if such Person is a partnership,partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive ashare of the profits and losses of, or distributions of property of, such partnership.“Equity Securities” means common stock or other equity securities or Equity Interest, including any security, bond, note,Indebtedness, warrant, option or other right or instrument exercisable for or exchangeable or convertible into such equity securities orEquity Interest, including, in the case of the Company, Common Stock and Common Stock Equivalents.“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by theCommission thereunder.“Exit Facility Loan Agreement” shall have the meaning given to such term in the Plan.“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of theAccounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of theFinancial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segmentof the accounting profession that are in effect from time to time, applied on a consistent basis for the periods involved.“Holder Ownership Percentage” means a fraction (expressed as a percentage), the numerator of which is the number ofshares of Common Stock beneficially owned by a specified Holder at such time, and the denominator of which is the total number ofissued and outstanding shares of Common Stock at such time.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.“Indebtedness” means with respect to any Person, without duplication, any liability of such Person (i) for borrowed money,(ii) incurred or assumed as the deferred purchase price of property or services (but excluding trade accounts payable arising in theordinary course of business), (iii) evidenced by notes, bonds, debentures or other similar instruments, (iv) pursuant to conditional saleobligations and title retention agreements (even though the rights and remedies of the seller or lender under such agreement in the eventof default are limited to repossession of such property), (v) constituting Capitalized Lease Obligations, (vi) for the reimbursement ofany obligor on any banker’s acceptance, letter of credit or similar credit transaction, (vii) for Indebtedness of others guaranteed by suchPerson to the extent of such guarantee, (viii) for Interest Swap Obligations and Currency Agreements and (ix) for Indebtedness of anyother Person of the type referred to in clauses (i) through (viii) of this definition which is secured by any lien on any property or assetof such first referred to Person, the amount of such Indebtedness being deemed to be the lesser of the value of such property or asset orthe amount of the Indebtedness so secured to the extent of such security interest. The amount of Indebtedness of any Person at any dateshall be (A) the outstanding principal amount of all unconditional obligations described above, as such amount would be reflected on abalance sheet prepared in accordance with GAAP, and (B) with respect to all contingent obligations described above, the maximumliability as of such date of such Person for any guarantees of Indebtedness for borrowed money of any other Person and the amountrequired under GAAP to be accrued with respect to any other contingent obligation.“Initial Board Members” means the directors appointed to the Board pursuant to the Plan.“Interest Swap Obligations” means the obligations of any Person under any interest rate protection agreement, interest ratefuture, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement.“MIP” means any equity incentive plan approved by the Board pursuant to which Common Stock, Common StockEquivalents or any other equity award may be issued to employees, officers and/or directors of the Company and its Subsidiaries asincentive compensation.“National Securities Exchange” means The NASDAQ Global Market, The NASDAQ Global Select Market or The NewYork Stock Exchange (which, for the avoidance of doubt, does not include the NYSE MKT).“Person” or “person” means any individual, firm, partnership, company or other entity, and shall include any successor (bymerger or otherwise) of such entity.“Plan” means the Second Amended Joint Plan of Reorganization of CJ Holding Co., et al., Pursuant to Chapter 11 of theBankruptcy Code (Docket No. 1045), as amended from time to time and as approved by the Bankruptcy Court.“Preemptive Debt Securities” means any bonds, debentures, notes, or other similar evidences of indebtedness commonlyknown as “securities,” secured or unsecured, convertible, subordinated or otherwise, or any certificates of interest, shares orparticipations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire,any of the foregoing.“Public Offering” means an underwritten public offering of Common Stock by the Company pursuant to a registrationstatement effective under the Securities Act after the Effective Date covering a sale of shares of Common Stock to the public.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.“Qualified Pledge” means a bona fide pledge of Common Stock or other Equity Securities in connection with a securedborrowing transaction, the pledgee with respect to which is a financial institution in the business of engaging in secured lending andsimilar transactions which has entered into such transaction in the ordinary course of such business.“Related Fund” means, with respect to any Person, an Affiliate or any fund, account or investment vehicle that is controlled,managed, advised or sub-advised by such Person, an Affiliate or the same investment manager, advisor or sub-advisor as such Personor an Affiliate of such investment manager, advisor or sub-advisor.“Required Holders” means GSO and Solus; provided that (x) GSO shall cease to be a Required Holder upon its HolderOwnership Percentage being reduced to less than 5% and (y) Solus shall cease to be a Required Holder upon its Holder OwnershipPercentage being reduced to less than 5%.“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commissionthereunder.“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,Rule 1-02 of Regulation S-X under the Exchange Act.“Subsidiary” of any Person means (i) a corporation a majority of whose outstanding shares of capital stock or other equityinterests with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person,by one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person, and (ii) any other Person(other than a corporation) in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of suchPerson, directly or indirectly, at the date of determination thereof, has (x) at least a majority ownership interest or (y) the power to elector direct the election of the directors or other governing body of such Person.“Transfer” means, when used as a verb, to sell, transfer, assign, convey or otherwise dispose, and when used as a noun, anydirect or indirect sale, transfer, assignment, conveyance or other disposition, including by merger, operation of law, bequest or pursuantto any domestic relations order, whether voluntarily or involuntarily; provided that (i) no Transfer of shares of Common Stock or othersecurities shall be deemed to have occurred as a result of the entry into, modification of or existence of any Qualified Pledge until suchtime as the pledgee commences any action to foreclose upon such shares of Common Stock or other securities, or any shares ofCommon Stock or other securities are delivered upon settlement or termination of such Qualified Pledge (whichever occurs first); (ii)with respect to any Holder that is a widely held “investment company” as defined in the Investment Company Act of 1940, asamended, or any publicly traded company whose securities are registered under the Exchange Act, a sale, transfer, gift, hypothecation,pledge, assignment, devise or other disposition of ownership interests in such investment company or publicly traded company shallnot be deemed a Transfer; and (iii) with respect to any Holder that is a private equity fund, hedge fund or similar vehicle, any Transferof limited partnership or other similar non-controlling interests in any entity which is a pooled investment vehicle holding other materialinvestments and which is an equityholder (directly or indirectly) of a Holder, or the change in control of any general partner, manageror similar person of such entity, will not be deemed to be a Transfer for purposes hereof.1.1.2 Each of the following terms is defined in the Section set forth opposite such term:Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.TermSectionAgreementPreambleBoard DesigneesSection 2.1.2Board ObserverSection 2.1.8(a)Blue MountainPreambleCompanyPreambleContracting PartiesSection 6.10Director Designation RightSection 2.1.2Entitled HolderSection 3.1.2Excess SharesSection 3.1.4GSOPreambleHolderPreambleIdentified PersonSection 4.1.2Issuance NoticeSection 3.1.2Non-Party AffiliatesSection 6.10OpportunitySection 4.1.1Opt-In ElectionSection 3.1.8Opt-Out ElectionSection 3.1.8Preemptive RatioSection 3.1.2Preemptive SharesSection 3.1.2Related CompaniesSection 4.1.3Replacement NomineeSection 2.1.3(b)(i)SolusPreambleSection 1.2 Other Definitional and Interpretive Matters. For purposes of this Agreement, the following rules shall apply:1.2.1 Calculation of Time Period. When calculating the period of time before which, within which or following which any actis to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. Ifthe last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.1.2.2 Dollars. Any reference in this Agreement to “$” shall mean U.S. dollars.1.2.3 Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting thesingular number only shall include the plural and vice versa.1.2.4 Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and othersubdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing orinterpreting this Agreement. All references in this Agreement to any “Article” or “Section” are to the corresponding Article or Sectionof this Agreement unless otherwise specified.1.2.5 Herein. The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole andnot merely to a subdivision in which such words appear unless the context otherwise requires.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.1.2.6 Including. The word “including” or any variation thereof means “including, without limitation” and shall not beconstrued to limit any general statement that it follows to the specific or similar items or matters immediately following it.1.2.7 Successor Laws. Any reference to any law or code section thereof will be interpreted to include any revision of orsuccessor to that section regardless of how it is numbered or classified.1.2.8 Heirs, Executors, etc. References herein to any Person shall include such Person’s heirs, executors, personalrepresentatives, administrators, successors and assigns; provided, however, that nothing contained in this Section ​1.2.8 is intended toauthorize any assignment or other Transfer not otherwise permitted by this Agreement.ARTICLE 2MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIESSection 2.1 Board.2.1.1 Initial Board Representation. As of the Effective Date the Board consists of the Initial Board Members.2.1.2 Board Representation; Number of Directors. From and after the Effective Date, the Board shall consist of individualswho may be designated for election from time to time in the following manner subject to Section ​2.1.4(b) (a “Director DesignationRight”):(a) until such time as the rights of GSO are reduced or terminated in accordance with Section ​2.1.5, GSO shall beentitled to designate for nomination for election to the Board up to three (3) members of the Board, who shall initially beMichael Zawadzki, a Class I Director, John Kennedy, a Class II Director, and Steven Mueller, a Class III Director;(b) until such time as the rights of Solus are reduced or terminated in accordance with Section ​2.1.5, Solus shall beentitled to designate for nomination for election to the Board up to two (2) members of the Board, who shall initially be StuartBrightman, a Class I Director, and Patrick Murray, a Class III Director;(c) the Board, or any nominating committee thereof, shall designate for nomination for election to the Board the ChiefExecutive Officer of the Company, who as of the date hereof is Donald Gawick, who shall be a Class III Director; and(d) the Board, or any nominating committee thereof, shall designate for nomination for election to the Board one (1)member of the Board, who shall initially be Michael Roemer, a Class II Director.Members of the Board designated pursuant to Section ​2.1.2(a) and Section ​2.1.2(b) or appointed to fill a vacancy by aRequired Holder as provided in Section ​2.1.3(b) shall be referred to as the “Board Designees.” For so long as any RequiredHolder is entitled to designate persons for nomination for election to the Board pursuant to this Article ​2, the whole Board shallconsist of seven (7) directors unless a different number is approved by prior written consent of the Required Holders.2.1.3 Board Elections; Board Vacancies; Replacements.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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) Board Elections. The Company and the Board shall, subject to and consistent with the Board’s fiduciary duties andapplicable law, take such actions as necessary to cause the Board Designees to be nominated and submitted to the stockholdersof the Company for election to the Board, or appointed to the Board by the remaining members of the Board, as provided inSection ​2.1.3(b) or Section ​2.1.3(c). The parties hereto agree that, when considering any Board Designee for nomination orapproval for nomination to the Board or any nominating committee thereof, the party or parties entitled to such nomination shalltake into account the same criteria (applying such criteria consistently with the Board’s and any such nominating committee’sprior application of such criteria) and use substantially the same procedures as the Board and any such nominating committeehistorically have considered and used in considering and vetting prior candidates for the Board, including the then-currentmembers of the Board, including taking into account the independence and other corporate governance standards (includingapplicable to the members of any committee of the Board) of any National Securities Exchange on which the Company is thenlisted. For the avoidance of doubt, none of the Holders shall have any right to remove any of the Board Designees from theBoard, irrespective of whether they nominated such Board Designee.(b) Vacancies. If, as a result of death, disability, retirement, resignation, removal or otherwise, there shall exist or occurany vacancy on the Board, then:(i) the Person that initially designated such deceased, disabled, retired, resigning or removed director maydesignate another individual (the “Replacement Nominee”), in accordance with the applicable subsection of Section​2.1.2, to fill such vacancy and serve as a director on the Board by delivering to the Board a written notice signed by theparty or parties entitled to such nomination or proposal and the remaining Board members shall appoint suchReplacement Nominee to fill such vacancy; provided that, in the case of a member of the Board designated pursuant toSection ​2.1.2(a) or Section ​2.1.2(b), if a Replacement Nominee is not provided by written notice to the Board withinsixty (60) days after such individual has ceased to be a member of the Board then a majority of the remaining Boardmembers then serving shall be entitled to fill such vacancy with an individual to serve in such capacity until the nextmeeting of stockholders of the Company at which directors are elected and such individuals successor has been electedand qualified; and(ii) any vacancy with respect to a person serving as a member of the Board pursuant to Section ​2.1.2(c) may befilled by a majority of the remaining Board members then serving with a person then serving as the Chief ExecutiveOfficer or, if no person is then serving as the Chief Executive Officer, with a person approved by such majority of theremaining Board members then serving until the appointment of a Chief Executive Officer, at which point such personshall immediately resign and the Chief Executive Officer shall be appointed to the Board.(c) Replacements. At an annual meeting of the Company’s stockholders or any special meeting in lieu thereof at whichthe term of a Board Designee is to expire, the Required Holder that designated such Board Designee shall be entitled by writtennotice: (i) to request that such Board Designee not be nominated to serve as a director on the Board, in which case theCompany and the Board shall take such actions necessary to cause such Board Designee to not be nominated; and (ii)designate a Replacement Nominee for nomination to serve as a director on the Board pursuant to Section ​2.1.4(a).2.1.4 Stockholder Meeting.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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) At each annual meeting of the Company’s stockholders or any special meeting in lieu thereof at which the term ofany Board Designee is to expire or prior to which there shall be a vacancy on the Board that any Required Holder is thenentitled to designate pursuant to Section ​2.1.2, such Required Holder shall be entitled to designate for nomination as a directorthe number of individuals necessary so that, if such designees are elected to the Board at such annual meeting or any specialmeeting in lieu thereof, the maximum number of Board Designees such Required Holder is entitled to designate pursuant toSection ​2.1.2 shall be serving on the Board. The Company and the Board shall, subject to and consistent with the Board’sfiduciary duties and applicable law, take such actions as necessary to cause each Board Designee so designated by any suchRequired Holder to be nominated for election to the Board at each annual meeting of the Company’s stockholders or anyspecial meeting in lieu thereof. To the extent the Company’s proxy statement for any annual meeting of stockholders, or anyspecial meeting in lieu thereof, includes a recommendation regarding the election of any other nominees to the Board, theCompany and the Board shall, subject to and consistent with the Board’s fiduciary duties and applicable law, include arecommendation of its Board that the stockholders also vote in favor of each Board Designee standing for election at suchmeeting.(b) If any Board Designee has not been designated, or fails to agree to serve on the Board if elected or otherwiseprovide information reasonably requested by the Board, including to determine such Board Designee’s qualification to serve onthe Board and information regarding such Board Designee as required to be included in any proxy statement of the Companywith respect to the election of directors, within such time periods as required by the Bylaws or otherwise established by theBoard in good faith, then the Board shall not be required to appoint or nominate for election to the Board such Board Designeeand shall be entitled to appoint or nominate for election to the Board a person approved by the Board pursuant to the Bylaws.2.1.5 Reduction; Termination of Rights. The rights of the Required Holders to designate directors under this ​Section 2.1 shallbe reduced and terminated as follows:(a) (i) Upon the Holder Ownership Percentage of GSO being reduced to less than 15% but greater than or equal to10%, GSO’s right to designate three (3) members of the Board pursuant to Section ​2.1.2(a) shall be reduced to the right todesignate two (2) members of the Board, and (ii) upon the Holder Ownership Percentage of GSO being reduced to less than10% but greater than or equal to 5%, GSO’s right to designate two (2) members of the Board pursuant to Section ​2.1.2(a) shallbe reduced to the right to designate one (1) member of the Board; provided that the then current term of any GSO BoardDesignees then serving on the Board shall not be affected solely by the loss of such right by GSO.(b) Upon the Holder Ownership Percentage of Solus being reduced to less than 10% but greater than or equal to 5%,Solus’s right to designate two (2) members of the Board pursuant to Section ​2.1.2(b) shall be reduced to the right to designateone (1) member of the Board; provided that the then current term of any Solus Board Designees then serving on the Boardshall not be affected solely by the loss of such right by Solus.(c) Upon the Holder Ownership Percentage of any Required Holder being reduced to less than 5%, such RequiredHolder’s right to designate Board Designees to the Board shall immediately expire and such Required Holder’s rights underthis Agreement shall also terminate pursuant to ​Section 5.2; provided that the then current term of any Board Designeedesignated by such Required Holder shall not be affected solely by the loss of such right by such Required Holder.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.2.1.6 Fees; Costs and Expenses. Except for Board Designees who are not employees of the Company or any of itsSubsidiaries or an Identified Person (as defined below) or as provided in the following sentence, no Board Designee shall receive anannual retainer, meeting fee or other consideration for serving on the Board (or committee thereof) or any board of directors of anySubsidiary of the Company. The Company will pay and reimburse each Board Designee for all reasonable out-of-pocket expensesincurred by such Board Designee in connection with his or her participation in (or attendance at) meetings of the Board (andcommittees thereof) and the boards of directors (and committees thereof) of the Subsidiaries of the Company.2.1.7 Directors’ and Officers’ Insurance. The Company will purchase and will use its reasonable best efforts to maintaindirector and officer liability insurance in such amounts and such limits as reasonably determined by the Board on behalf of any Personwho is or was a member of the Board against any liability asserted against him or incurred by him in any capacity as such, whether ornot the Company would have the power to indemnify him against that liability under the Certificate of Incorporation or Bylaws.2.1.8 Board Observer.(a) Solus shall have the right to designate one non-voting observer to the Board (a “Board Observer”) for so long asits Holder Ownership Percentage is at least 5%.(b) Subject to the provisions of this Section ​2.1.8, the Board Observer shall have right to attend all meetings (includingtelephonically) of the Board, and the Company shall give the Board Observer copies of all notices, minutes, consents and othermaterials that it provides to the directors of the Board, it being understood that the rights of the Board Observer to receive suchnotices or materials or to attend such meetings shall be conditional upon the Company, the Board Observer and Solus enteringinto a customary confidentiality and restriction on usage agreement in form and substance mutually acceptable to the Board andsuch Board Observer.(c) Notwithstanding the foregoing, the Company reserves the right to withhold any information and to exclude theBoard Observer from any meeting or portion thereof if access to such information or attendance at such meeting couldadversely affect the attorney-client privilege between the Company and its counsel, serve to waive the work product doctrine orany other similarly protective privilege or doctrine, or result in disclosure of trade secrets or a conflict of interest, in each caseupon the affirmative vote of a majority of the members of the Board not affiliated with such Board Observer, acting in goodfaith.(d) Neither the presence of the Board Observer at all or at any part of a meeting of the Board, nor the disclosure to theBoard Observer of any confidential information, specifically including any material non-public information, shall provide theBoard Observer or its Holder with a right to require the Company to disclose publicly any information acquired by such BoardObserver in the capacity as such.(e) For the avoidance of doubt, the Board Observer shall not be permitted to vote at any meeting of the Board or becounted for purposes of determining whether there is a sufficient quorum for the Board to conduct its business. The BoardObserver shall be reimbursed by the Company upon written request (including submission of reasonable documentation) forany reasonable out-of-pocket travel and other reasonable out-of-pocket expenses incurred in order to attend Board meetings.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.(f) The Board Observer shall cease to have any rights hereunder automatically on the date that Solus no longer has theright to designate a Board Observer pursuant to this Agreement. A person’s rights as a Board Observer may be terminated atany time by Solus by delivering written notice of such termination to the Board.(g) The Company shall make reasonable best efforts to include the Board Observer as an insured party under any of itsdirectors and officers liability insurance policies.2.1.9 No Conflicts. Neither the Company nor the Board shall take any action to cause the Bylaws or Certificate ofIncorporation to conflict in any respect with the provisions of this Article ​2, and if at any time the Bylaws or Certificate ofIncorporation are determined to conflict in any manner with this Article ​2 or the rights of the Required Holders hereunder, then, subjectto requirements under the DGCL, the Company and Board shall take such actions within their control to cause the Bylaws and/or theCertificate of Incorporation, as applicable, not to conflict in any respect with the provisions of this Article ​2, including amending theBylaws or submitting an amendment to the Certificate of Incorporation to the stockholders of the Company for approval.Section 2.2 Actions Requiring Consent.2.2.1 From and after the Effective Date, for so long as any Required Holder’s Holder Ownership Percentage is at least 10%,the Company shall not, and, as applicable, shall not permit any Subsidiary of the Company to, take any of the following actionswithout the prior written consent of each Required Holder whose Holder Ownership Percentage is at least 10%:(a) authorize or adopt any certificate of designations relating to any class or series of Preferred Stock (as defined in theCertificate of Incorporation), amend the Certificate of Incorporation to increase the authorized shares of Common Stock orauthorize any other class or series or Equity Securities, or authorize a stockholder rights plan or “poison pill” (other than thestockholder rights plan, if any, approved by the Bankruptcy Court);(b) issue any Equity Securities of the Company representing in the aggregate more than 10% of the shares of CommonStock issued pursuant to the Plan (as adjusted, if applicable to give effect to any stock dividend, stock split or reverse stocksplit), excluding (i) shares of Common Stock issued pursuant to the New Warrants (as defined in the Plan) issued pursuant tothe Plan and (ii) Common Stock and Common Stock Equivalents (excluding Indebtedness) of the Company representing in theaggregate not more than 10% of the outstanding shares of Common Stock issued pursuant to MIPs approved by the Board;(c) issue any Equity Security of any Subsidiary of the Company other than to another Subsidiary of the Company allof which Equity Securities are owned, directly or indirectly, by the Company;(d) incur or become obligated (as a guarantor or otherwise) for any Indebtedness in excess of $100 million in theaggregate, excluding any Indebtedness (i) existing on the Effective Date and (ii) under the Exit Facility Loan Agreement;(e) make any acquisition, by merger or consolidation, or by purchase of, or investments in, all or substantially all of theassets or stock of, any business or any corporation, partnership, joint venture, limited liability company, association or otherbusiness organization or division thereof, in excess of $100 million per transaction or series of related transactions;Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.(f) consummate any (i) merger, consolidation, sale (whether by a sale of Equity Securities, lease to a third party ordisposition of all or substantially all of the assets) or (ii) other Transfer of the Company or any Subsidiary of the Company inexcess of $100 million per transaction or series of related transactions;(g) dissolve or liquidate the Company or any Significant Subsidiary, enter into any recapitalization or reorganization ofthe Company or any Significant Subsidiary or commit any voluntary Act of Bankruptcy with respect to the Company or anySignificant Subsidiary;(h) reincorporate or convert the Company into any entity other than a corporation or redomicile the Company into anyjurisdiction other than Delaware;(i) take any actions to list the shares of Common Stock on a National Securities Exchange or any AlternativeSecurities Exchange, or to conduct or consummate a Public Offering unless the Company is required to do so pursuant to theRegistration Rights Agreement;(j) voluntarily register the Common Stock under Section 12 of the Exchange Act, unless required by the rulesthereunder or pursuant to the Registration Rights Agreement;(k) at such time that any Common Stock Equivalent is registered under Section 12 of the Exchange Act or listed onany Alternative Securities Exchange, take any action to deregister such Common Stock Equivalent or delist such CommonStock Equivalent from such Alternative Securities Exchange;(l) other than as required to comply with the rules and regulations of the National Securities Exchange or AlternativeSecurities Exchange on which the Common Stock becomes listed, establish or grant any authority to any committee of theBoard unless such committee is composed solely of Board members and each Board Designee is a member of such committee(with rights to appoint a successor to fill any vacancy of such Board Designee’s position commensurate to such rights asapplicable to the Board under this Agreement);(m) authorize or adopt any amendment to the Bylaws or the Certificate of Incorporation;(n) redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any Equity Securitiesof the Company or any Subsidiary of the Company, other than (i) the withholding of shares of Common Stock to satisfy taxobligations with respect to awards granted pursuant to MIPs, (ii) the acquisition by the Company of Common StockEquivalents (excluding Indebtedness) in connection with the forfeiture of such awards or (iii) as contemplated by anyapplicable MIP; or(o) enter into any agreement or other binding obligation to do any of the foregoing.2.2.2 Confidential information regarding the Company provided to any Required Holder or any representative of a RequiredHolder pursuant to this ​Section 2.2 shall be held in confidence and not disclosed to any other Person (other than officers, directors,employees, representatives, financial advisors, legal counsel or other consultants or advisors of Required Holders to whom or on behalfof whose request such disclosure is made) or used for any purpose adverse or detrimental to the Company for so long as suchinformation remains confidential, in each case without the prior written consent of the Company; provided that the voting of anyEquity Securities of the Company on any matter on the basis of such information shall not be deemed adverse or detrimental to theCompany; and provided, further, thatSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Required Holders may share such information (a) when disclosure of such information is required by court or administrative order or isnecessary to respond to inquiries of regulatory authorities, (b) when disclosure of such information is required by law (including anydisclosure requirements pursuant to federal securities laws), (c) when such information becomes generally available to the public otherthan as a result of a breach of this Agreement or (d) when such information becomes available to any such Person from a source otherthan the Company and such source is not bound by a confidentiality agreement. Each Required Holder shall be responsible for anybreach of this Section ​2.2.2 by any of its officers, directors, employees, representatives or advisors.2.2.3 Required Notice before Exchange Act Section 12 Registration. If the Company plans to register the Common Stockunder Section 12 of the Exchange Act pursuant to Section ​2.2.1(i) or if the Company is required to register the Common Stockpursuant to Section 12(g) of the Exchange Act, other applicable law, any other provision of this Agreement or otherwise, in each casethe Company shall provide a minimum of thirty (30) days prior written notice to the Required Holders of such registration.ARTICLE 3 PREEMPTIVE RIGHTSSection 3.1 Preemptive Rights.3.1.1 The Board, subject to the Plan, the Certificate of Incorporation, the Bylaws, the preemptive rights provided for in thisArticle ​3, and the consent rights provided for in ​Section 2.2, shall have the authority to issue Common Stock or other Equity Securitiesof the Company in such amounts and at a purchase price per share of Common Stock or other Equity Security as the Board shalldetermine.3.1.2 In the event the Board determines to issue Common Stock, other Equity Securities or Preemptive Debt Securities of theCompany or any Subsidiary after obtaining prior written consent of the Required Holders as required by ​Section 2.2, to the extentapplicable (the foregoing, collectively, the “Preemptive Shares”), except as provided in Section ​3.1.7, the Board shall give each of theHolders (each such Holder, an “Entitled Holder”), written notice of such proposed issuance at least ten (10) days prior to theproposed issuance date (an “Issuance Notice”). The Issuance Notice shall specify the number and class of Preemptive Shares and theprice (or a good faith range of the price if the final price is not then determinable) at which such Preemptive Shares are proposed to beissued and the other material terms and conditions of such Preemptive Shares and of the issuance, including the proposed closing date.Subject to Section ​3.1.7, each such Entitled Holder shall be entitled to purchase, at the price (provided that if a range is provided in theIssuance Notice then each Entitled Holder shall be entitled to condition such participation to within a specified price range and/orreserve all rights to elect not to participate upon the final determination of such price) and on the other terms and conditions specified inthe Issuance Notice, up to a number of Preemptive Shares equal to (x) the number of Preemptive Shares proposed to be issued by theCompany, multiplied by (y) their Holder Ownership Percentage immediately prior to the proposed issuance (the “Preemptive Ratio”).3.1.3 An Entitled Holder may exercise its rights under Section ​3.1.2 by delivering written notice of its election to purchasesuch Preemptive Shares to the Board within five (5) Business Days after receipt of the Issuance Notice. A delivery of such notice(which notice shall specify the number of Preemptive Shares requested to be purchased by the Entitled Holder submitting such notice,up to the maximum amount determined pursuant to the final sentence of Section ​3.1.2 above) by such Entitled Holder shall constitute abinding agreement of such Entitled Holder to purchase, at the price and on the terms and conditions specified in the Issuance Notice,the number of Preemptive Shares specified in such Entitled Holder’s notice. If, at the end of such five (5) day period, any EntitledHolder has not exercised its right toSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.purchase any of its Preemptive Ratio of such Preemptive Shares by delivering such notice, such Entitled Holder shall be deemed tohave waived all of its rights under this Article ​3 with respect to, and only with respect to, the purchase of such Equity Securitiesspecified in the applicable Issuance Notice.3.1.4 If any of the Entitled Holders fails to exercise its preemptive rights (if any) under this Article ​3, or elects to exercise suchrights with respect to less than such Entitled Holder’s Preemptive Ratio of the Preemptive Shares (the difference between such EntitledHolder’s Preemptive Ratio of the Preemptive Shares and the number of Preemptive Shares for which such Entitled Holder exercised itspreemptive rights under this Article ​3, the “Excess Shares”), then the Company (or the applicable Subsidiary) shall offer to sell to theEntitled Holders that have elected to purchase all of their Preemptive Ratio of the Preemptive Shares any Excess Shares, pro rata andat the same price and on the same terms as those specified in the Issuance Notice, and such Entitled Holders shall have the right toacquire all or any portion of such Excess Shares within two (2) Business Days following the expiration of the period specified inSection ​3.1.3 by delivering written notice thereof to the Company.3.1.5 Subject to compliance with this Article ​3, the Company shall have sixty (60) days after the date of the Issuance Notice toconsummate the proposed issuance of any or all of such Preemptive Shares that the applicable Entitled Holders have elected not topurchase at the same (or higher) price and upon such other terms and conditions that, taken as a whole, are not materially less favorableto the Company than those specified in the Issuance Notice; provided that, if such issuance is subject to regulatory approval, such 60-day period shall be extended until the expiration of five (5) Business Days after all such approvals have been received, but in no eventto later than ninety (90) days after the date of the Issuance Notice. If the Board proposes to issue any Preemptive Shares after such 60-day period (or 90-day period, if applicable) or during such 60-day period (or 90-day period, if applicable) at a lower price or on suchother terms that are, taken as a whole, materially less favorable to the Company, it shall again comply with the procedures set forth inthis Article ​3.3.1.6 The closing of any issuance of Preemptive Shares to the Entitled Holders pursuant to this Article ​3 shall take place at thetime and in the manner provided in the Issuance Notice. The Company shall be under no obligation to consummate any proposedissuance of Preemptive Shares, nor shall there be any liability on the part of the Company, or the Board to any Entitled Holder, if theCompany has not consummated any proposed issuance of Preemptive Shares pursuant to this Article ​3 for whatever reason, except forwillful misconduct or breach of this Agreement, regardless of whether the Board shall have delivered an Issuance Notice in respect ofsuch proposed issuance.3.1.7 The preemptive rights under this Article ​3 shall not apply to (i) issuances or sales of Equity Securities to employees,officers, directors, managers or consultants of the Company or any of its Subsidiaries pursuant to employee benefits or similaremployee or management equity incentive plans or arrangements of the Company or any Subsidiary thereof (including offer letters,employment agreements, appointment letters or any MIP), (ii) issuances or sales in, or in connection with, a merger or reorganization ofthe Company or any of its Subsidiaries with or into another Person or an acquisition by the Company or any of its Subsidiaries ofanother Person or substantially all the assets of another Person, in each case, approved in accordance with the terms of this Agreement,to the extent required under ​Section 2.2, (iii) issuances by the Company or a wholly-owned Subsidiary of the Company to theCompany or another wholly-owned Subsidiary of the Company, (iv) issuances as a dividend or upon any stock split, reclassification,recapitalization, exchange or readjustment of Common Stock, or other similar transaction (in each case, on a pro rata basis), or (v)issuances upon the conversion or exercise of any Common Stock Equivalents of the Company which Common Stock Equivalentswere (A) outstanding on the Effective Date or otherwise issued pursuant to the Plan or (B) issued in compliance with the terms andconditions of this ​Section 3.1.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.3.1.8 Neither the Company nor the Board shall effect or authorize a Public Offering unless each Holder is afforded (or shallhave waived) rights to acquire shares of Common Stock (as part of such Public Offering or otherwise) commensurate with this Article​3, mutatis mutandis, so that such Holder has the right to maintain its Holder Ownership Percentage as in effect immediately prior tosuch Public Offering immediately following such Public Offering.3.1.9 Notwithstanding anything to the contrary in this Agreement, this Article ​3 shall not apply to any Holder that is not aRequired Holder until such Holder makes an affirmative written election that this Article ​3 shall apply to such Holder (an “Opt-InElection”). At any time following a Holder making an Opt-In Election, such Holder may also make a written election that this Article​3 shall no longer apply to such Holder (an “Opt-Out Election”), which election shall cancel any previous Opt-In Election. An Opt-Out Election may state a date on which it expires or, if no such date is specified, shall remain in effect indefinitely. A Holder whopreviously has given the Company an Opt-In Election or Opt-Out Election may revoke such election at any time, and there shall be nolimit on the ability of a Holder to issue and revoke subsequent Opt-In Elections and Opt-Out Elections.ARTICLE 4 CORPORATE OPPORTUNITIESSection 4.1 Corporate Opportunities.4.1.1 Any of the Holders, the Board Designees or Board Observers who are employed by any of the Holders or any of theirAffiliates and Related Funds, any of the foregoing Persons’ respective Affiliates and Related Funds and any one or more of therespective managers, directors, principals, officers, employees and other representatives of such Persons or their respective Affiliatesand Related Funds, in each case who is not also an employee of the Company or any of its Subsidiaries (the foregoing Persons beingreferred to, collectively, as “Identified Persons”) may now engage, may continue to engage, or may, in the future, engage in the sameor similar activities or lines of business as those in which the Company or any of its Affiliates, directly or indirectly, now engage ormay engage or other business activities that overlap with, are complementary to, or compete with those in which the Company or anyof its Affiliates, directly or indirectly, now engage or may engage (any such activity or line of business, an “Opportunity”). NoIdentified Person shall, as a result of its capacity as such, have any duty to refrain, directly or indirectly, from (i) engaging in anyOpportunity or (ii) otherwise competing with the Company or any of its Affiliates. No Identified Person shall, as a result of its capacityas such, have any duty or obligation to refer or offer to the Company or any of its Affiliates any Opportunity, and the Company herebyrenounces any interest or expectancy of the Company in, or in being offered, an opportunity to participate in any Opportunity whichmay be a corporate (or analogous) or business opportunity for the Company or any of its Affiliates.4.1.2 In the event that any Identified Person acquires knowledge of a potential transaction or other corporate (or analogous) orbusiness opportunity which may be an Opportunity for the Company or any of its Affiliates, such Identified Person shall have no dutyto communicate or offer such Opportunity to the Company or any of its Affiliates and shall not be liable to the Company or thestockholders for breach of any purported fiduciary duty by reason of the fact that such Identified Person pursues or acquires suchOpportunity for itself, or offers or directs such Opportunity to another Person (including any Affiliate or Related Fund of suchIdentified Person). Notwithstanding Section ​4.1.1 and this Section ​4.1.2, the Company does not renounce any intent or expectancy itmay have in any Opportunity that is offered to a Board Designee if such Opportunity is expressly first offered to such Person in thecapacity of a director of the Company or any of its Subsidiaries or knowledge of such Opportunity is first acquired by such Personsolely as a result of such Person’s position as a director of the Company or any of its Subsidiaries.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.4.1.3 The Identified Persons may now own, may continue to own, and from time to time may acquire and own, investmentsin one or more other entities (such entities, collectively, “Related Companies”) that are direct competitors of, or that otherwise mayhave interests that do or could conflict with those of, the Company, any stockholders of the Company or any of their respectiveAffiliates, and (a) the enjoyment, exercise and enforcement of the rights, interests, privileges, powers and benefits granted or availableto the Identified Persons under this Agreement shall not be in any manner reduced, diminished, affected or impaired, and theobligations of the Identified Persons under this Agreement shall not be in any manner augmented or increased, by reason of any act,circumstance, occurrence or event arising from or in any respect relating to (i) the ownership by an Identified Person of any interest inany Related Company, (ii) the affiliation of any Related Company with an Identified Person or (iii) any action taken or omitted by anIdentified Person in respect of any Related Company, (b) no Identified Person shall, by reason of such ownership, affiliation or action,become subject to any fiduciary duty to the Company, any of the stockholders or any of their respective Affiliates, (c) none of theduties imposed on an Identified Person, whether by contract or law, do or shall limit or impair the right of any Identified Personlawfully to compete with the Company, any of its stockholders or any of their respective Affiliates and (d) the Identified Persons arenot and shall not be obligated to disclose to the Company, any of the stockholders of the Company or any of their respective Affiliatesany information related to their respective businesses or opportunities, including acquisition opportunities, or to refrain from or in anyrespect to be restricted in competing against the Company, any of the stockholders of the Company or any of their respective Affiliatesin any such business or as to any such opportunities.4.1.4 In addition to and notwithstanding the foregoing provisions of this Article ​4, a corporate (or analogous) or businessopportunity shall not be deemed to be an Opportunity for the Company or any of its Affiliates if it is an opportunity (a) that theCompany is neither financially or legally able, nor contractually permitted to undertake, (b) that from its nature, is not in the line of theCompany’s business or is of no practical advantage to the Company or (c) in which the Company has no interest or reasonableexpectancy.ARTICLE 5 TERMINATIONSection 5.1 Termination of Agreement. This Agreement shall terminate automatically either (i) immediately prior to the earlierof (A) the Common Stock being listed on a National Securities Exchange or (B) the closing of a firmly underwritten Public Offeringresulting in gross cash proceeds to the Company and/or the selling stockholders of at least $200 million in the aggregate; or (ii) uponthe occurrence of both (A) the Holder Ownership Percentage of each Required Holder being reduced to less than 5% respectively and(B) the Holder Ownership Percentage of all Holders, collectively, being reduced to less than 20%; provided, however, that if suchreduction is as a result of dilution from the issuance by the Company of additional shares of Common Stock, then this Agreement shallcontinue in effect until a Holder disposes of any Common Stock and immediately following such disposition, the Holder OwnershipPercentage of each Required Holder is less than 5% and the Holder Ownership Percentage of all Holders, collectively, is less than20%; provided, further, that (A) Article ​1, Article ​4, this Article ​5 and Article ​6 shall survive any termination of this Agreement and(B) the confidentiality obligations of Section ​2.2.2 shall survive any termination of this Agreement until the date that is one (1) yearfollowing the date of termination of this Agreement.Section 5.2 Termination as to a Party. A Holder shall immediately without any further action cease to be a Holder and shallhave no further rights or obligations (other than pursuant to Section ​2.2.2 or Article ​4) under this Agreement (i) if such Holder elects toterminate its obligations under this Agreement at any time by giving the Company written notice thereof or (ii) automatically andwithout any furtherSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.action by any party upon such Holder’s Holder Ownership Percentage being reduced to less than 5%; provided that if such Holder’sHolder Ownership Percentage is reduced to less than 5% as a result of dilution from the issuance by the Company of additional sharesof Common Stock, then such Holder shall continue to be a Holder for purposes of, and retain its rights and obligations as a Holderunder, this Agreement until such time thereafter as such Holder disposes of any Common Stock and immediately following suchdisposition, such Holder’s Holder Ownership Percentage is less than 5%.Section 5.3 Effect of Termination. Neither the termination of this Agreement nor a Holder ceasing to be a Holder under​Section 5.2 shall relieve any Holder of the Company from any violation of this Agreement by such person prior to such termination ofthis Agreement or such Holder ceasing to be a Holder under ​Section 5.2.ARTICLE 6 MISCELLANEOUSSection 6.1 Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall besufficiently given if made by hand delivery, by facsimile, electronic mail or registered or certified mail, postage prepaid, return receiptrequested, addressed as follows (or at such other address as may be substituted by notice given as herein provided):If to the Company:C&J Energy Services, Inc. 3990 Rogerdale RoadHouston, Texas 77042 Attention: General Counsel Email: danielle.hunter@cjes.comWith a copy to:Vinson & Elkins LLP1001 Fannin Street, Suite 2500Houston, Texas 77002Attention: Stephen M. Gill, Michael S. TelleEmail: sgill@velaw.com, mtelle@velaw.comIf to any Holder, at its address and the address of its representative, if any, listed on the signature pages hereofWith a copy to:Davis Polk & Wardwell LLP 450 Lexington AvenueNew York, NY 10017 Attention: Timothy Graulich, Stephen SalmonE-mail: timothy.graulich@davispolk.com, stephen.salmon@davispolk.comSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Any notice or communication hereunder shall be deemed to have been given or made as of the date and time so delivered ifpersonally delivered or as of the date and time so sent if sent by electronic mail, facsimile or registered or certified mail.Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to otherHolders.Section 6.2 Governing Law. This Agreement and all claims or causes of action (whether in contract or tort) that may be basedupon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim orcause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement)shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts oflaw.Section 6.3 Submission to Jurisdiction. Any action, suit or proceeding seeking to enforce any provision of, or based on anymatter arising out of or in connection with, this Agreement or the transactions contemplated hereby must be brought in the UnitedStates District Court for the Southern District of New York or any New York state court, in each case, located in the Borough ofManhattan, and each party consents to the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courtstherefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that itmay now or hereafter have to the laying of the venue of any such, action, suit or proceeding in any such court or that any such action,suit or proceeding brought in any such court has been brought in an inconvenient forum.Section 6.4 Waiver of Jury Trial. Each of the parties to this Agreement hereby agrees to waive its respective rights to a jurytrial of any claim or cause of action based upon or arising out of this Agreement. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, includingcontract claims, tort claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is amaterial inducement to enter into this Agreement, that each has already relied on this waiver in entering into this Agreement and thateach will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it hasreviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation withlegal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY ORIN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION ​6.4​AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANYSUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In theevent of litigation, this Agreement may be filed as a written consent to a trial by the court.Section 6.5 Successors and Assigns. This Agreement shall be binding upon the Company, each Holder, and their respectivesuccessors and permitted assigns; provided that neither the Company nor any Holder may assign any of its rights or obligations underthis Agreement without the prior written consent of all Holders then a party to this Agreement (for clarity, excluding Persons who haveceased to be a Holder as provided in ​Section 5.2) and the Company; provided, however, that a Holder may assign any of its rights orobligations under this Agreement to any Affiliate or Related Fund of such Holder without the prior written consent of any other Holderor the Company.Section 6.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed tobe an original copy of this Agreement and all of which, when takenSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.together, will be deemed to constitute one and the same agreement. This Agreement and any signed agreement entered into inconnection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by facsimile,by electronic mail in “portable document format” (“.pdf”) form, or any other electronic transmission, shall be treated in all manner andrespects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed versionthereof delivered in person.Section 6.7 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in anyjurisdiction is, as to such jurisdiction, ineffective to the extent of any such prohibition, unenforceability or nonauthorization withoutinvalidating the remaining provisions hereof, or affecting the validity, enforceability or legality of such provision in any otherjurisdiction, unless the ineffectiveness of such provision would result in such a material change as to cause completion of thetransactions contemplated hereby to be unreasonable. Upon a determination that any provision of this Agreement is prohibited,unenforceable or not authorized, the parties hereto agree to negotiate in good faith to modify this Agreement so as to effect the originalintent of the parties hereto as closely as possible, in a mutually acceptable manner, in order that the transactions contemplated herebyare consummated as originally contemplated to the fullest extent possible.Section 6.8 Specific Performance. The parties agree that irreparable damage would occur in the event that any of theprovisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, including if theparties hereto fail to take any action required of them hereunder to consummate this Agreement. It is accordingly agreed that, inaddition to any other applicable remedies at law or equity, the parties shall be entitled to an injunction or injunctions, without proof ofdamages, to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each partyhereto agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that (i) theother party has an adequate remedy at law or (ii) an award of specific performance is not an appropriate remedy for any reason at lawor in equity. Each of the parties hereto hereby waives (i) any defenses in any action for specific performance, including the defense thata remedy at law would be adequate and (ii) any requirement under any law to post a bond or other security as a prerequisite toobtaining equitable relief.Section 6.9 No Waivers; Amendments.6.9.1 No failure or delay on the part of the Company or any Holder in exercising any right, power or remedy hereunder shalloperate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or furtherexercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are notexclusive of any remedies that may be available to the Company or any Holder at law or in equity or otherwise.6.9.2 Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver makes specificreference to this Agreement and (i) in the case of an amendment, such amendment is with the written consent of the Company and theRequired Holders; provided, that no provision of this Agreement shall be modified or amended in a manner that is disproportionatelyand materially adverse to any Holder, without the prior written consent of such Holder, as applicable; and (ii) in the case of a waiver,such waived is signed by the Person against whom it is to be enforced. Any amendment or waiver effected in accordance with thisparagraph shall be binding upon each party to the Agreement, regardless of whether such party has signed such amendment or waiver,and each then current and future holder of all such shares of Common Stock, and the Company.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Section 6.10 Non-Recourse. All claims, obligations, liabilities, or causes of action (whether in contract or in tort, in law or inequity, or granted by statute) that may be based upon, in respect of, arise under, out or by reason of, be connected with, or relate in anymanner to this Agreement, or the negotiation, execution, or performance of this Agreement (including any representation or warrantymade in, in connection with, or as an inducement to, this Agreement), may be made only against (and are expressly limited to) theentities that are expressly identified as parties in the preamble to this Agreement (“Contracting Parties”). No Person who is not aContracting Party, including any director, officer, employee, incorporator, member, partner, manager, stockholder, Affiliate, RelatedFund, agent, attorney, or representative of, and any financial advisor or lender to, any Contracting Party, or any director, officer,employee, incorporator, member, partner, manager, stockholder, Affiliate, Related Fund, agent, attorney, or representative of, and anyfinancial advisor or lender to, any of the foregoing (“Non-Party Affiliates”), shall have any liability (whether in contract or in tort, inlaw or in equity, or granted by statute) for any claims, causes of action, obligations, or liabilities arising under, out of, in connectionwith, or related in any manner to this Agreement or based on, in respect of, or by reason of this Agreement or its negotiation,execution, performance, or breach; and, to the maximum extent permitted by law, each Contracting Party hereby waives and releasesall such liabilities, claims, causes of action, and obligations against any such Non-Party Affiliates.Section 6.11 Action by Holders.(a) Any action to be taken or consent or approval to be given by GSO, Solus or Blue Mountain pursuant to thisAgreement shall be deemed taken, consented to or approved upon the affirmative consent or approval by Holders beneficiallyowning a majority of the Common Stock beneficially owned by GSO, Solus or Blue Mountain, respectively.(b) Any Holder comprising GSO, Solus or Blue Mountain may exercise the rights, and grant any approval or consent,under this Agreement of the other Holders comprising GSO, Solus or Blue Mountain, respectively.Section 6.12 Further Assurances. Each party shall cooperate and shall take such further action and shall execute and deliversuch further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of thisAgreement.Section 6.13 Entire Agreement. This Agreement contains the entire agreement among the parties hereto with respect to thesubject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.Section 6.14 Independent Agreement by the Holders. The obligations of each Holder hereunder are several and not joint withthe obligations of any other Holder, and no provision of this Agreement is intended to confer any obligations on any Holder vis-à-visany other Holder. Nothing contained herein, and no action taken by any Holder pursuant hereto, shall be deemed to constitute theHolders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in anyway acting in concert or as a group with respect to such obligations or the transactions contemplated herein.[Signature Pages Follow]SIGNATURES TO STOCKHOLDERS AGREEMENTIN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date first writtenabove.Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc. By: Danielle E. Hunter Executive Vice President, General Counsel, Chief Risk and Compliance Officer STOCKHOLDERS:GSO:By: Name: Title: ADDRESS:Attention:Facsimile No.:Email:Solus:By: Name: Title: ADDRESS:Attention:Facsimile No.:Email:Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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.Blue Mountain:By: Name: Title: ADDRESS:Attention:Facsimile No.:Email:To exercise the Opt-In Election pursuant to Section ​​3.1.8, please check the box below and countersign:[ ] – The undersigned Holder hereby notifies the Company of its exercise of the Opt-In Election. By: Name: Title:Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc. EntityState of FormationCJ Lux Holdings S.a.r.l.LuxembourgC&J International B.V.The NetherlandsCJ Holding Co.DelawareC&J Well Services, Inc.DelawareC&J Spec-Rent Services, Inc.IndianaSource: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc.:We consent to the incorporation by reference in the registration statements (No. 333-215550) on Form S-8 of C&J Energy Services Inc. of our report datedMarch 2, 2017, with respect to the consolidated balance sheets of C&J Energy Services Ltd. and subsidiaries (Debtor-in-Possession) as of December 31, 2016and 2015, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years inthe three-year period ended December 31, 2016, which report appears in the December 31, 2016 annual report on Form 10-K of C&J Energy Services, Inc./s/ KPMG LLPHouston, TexasMarch 2, 2017Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Donald J. Gawick, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2016 of C&J Energy Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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:March 2, 2017/s/ Donald J. Gawick Donald J. Gawick President, Chief Executive Officer and Director (Principal Executive Officer)Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Mark C. Cashiola, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2016 of C&J Energy Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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:March 2, 2017/s/ Mark C. Cashiola Mark C. Cashiola Chief Financial Officer (Principal Financial Officer and Principal AccountingOfficer)Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc.. (the “Company”) for the year ended December 31, 2016 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald J. Gawick, 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/ Donald J. GawickDonald J. GawickPresident, Chief Executive Officer and Director (Principal Executive Officer)Date:March 2, 2017Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc. (the “Company”) for the year ended December 31, 2016 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark C. Cashiola, 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/ Mark C. CashiolaMark C. Cashiola Chief Financial Officer(Principal Financial Officer and Principal AccountingOfficer)Date:March 2, 2017Source: C&J Energy Services, Inc., 10-K, March 02, 2017Powered 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, Inc., 10-K, March 02, 2017Powered 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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