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Forum Energy Technologies, Inc.

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FY2022 Annual Report · Forum Energy Technologies, Inc.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-K
____________________________________

☑

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

For the Fiscal Year Ended December 31, 2022

OR

☐

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

For the transition period from __________ to __________

Commission File Number 001-35504

FORUM ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

61-1488595

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

10344 Sam Houston Park Drive

Suite 300

Houston

Texas

(Address of Principal Executive Offices)

77064
(Zip Code)

Registrant’s telephone number, including area code: (713) 351-7900

Securities registered pursuant to Section 12(b) of the Act:

Common stock, $0.01 par value
(Title of Each Class)

FET
(Trading Symbol)

New York Stock Exchange
(Name of Each Exchange on Which Registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Securities registered pursuant to Section 12(g) of the Act: None

Indicate 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 ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act:

Large accelerated filer

Smaller reporting company

☐ Accelerated filer
☑ Emerging growth company

☑ Non-accelerated filer
☐

☐

If  an  emerging  growth  company,  indicate  by  check  mark  if  the  registrant  has  elected  not  to  use  the  extended  transition  period  for  complying  with  any  new  or  revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The  aggregate  market  value  of  Common  Stock  held  by  non-affiliates  on  June  30,  2022,  determined  using  the  per  share  closing  price  on  the  New  York  Stock  Exchange
Composite tape of $19.62 on June 30, 2022, was approximately $90.9 million. For this purpose, our executive officers and directors and SCF Partners L.P. and its affiliates
are considered affiliates.
As of February 24, 2023, there were 10,297,809 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Proxy Statement for the 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.

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Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Item 5.

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Forum Energy Technologies, Inc.
Index to Form 10-K

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

PART I

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

PART III

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Item 15.
Item 16.
SIGNATURES

Exhibits, Financial Statement Schedules
Form 10-K Summary

PART IV

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PART I

Item 1. Business

Forum Energy Technologies, Inc., a Delaware corporation (the “Company,” “FET,” “Forum,” “we,” “our” or “us”), is a global company serving
the oil, natural gas, industrial and renewable energy industries. Our common shares are listed on the New York Stock Exchange (“NYSE”)
under the symbol “FET.” Our principal executive offices are located at 10344 Sam Houston Park Drive, Houston, Texas 77064, our telephone
number is (713) 351-7900, and our website is www.f-e-t.com. Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current
reports  on  Form  8-K,  and  all  amendments  thereto,  are  available  free  of  charge  in  the  “Investors”  section  of  our  website  as  soon  as
reasonably  practicable  after  such  reports  are  electronically  filed  with  or  furnished  to  the  Securities  and  Exchange  Commission  (“SEC”).
These  reports  are  also  available  on  the  SEC’s  website  at  www.sec.gov.  Information  contained  on  or  accessible  from  our  website  is  not
incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report or any other filing that we
make with the SEC.

Overview

We are a global company serving the oil, natural gas, industrial and renewable energy industries. FET provides value added solutions aimed
at  improving  the  safety,  efficiency,  and  environmental  impact  of  our  customers'  operations.  We  are  an  environmentally  and  socially
responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout
the world. Our products include highly engineered capital equipment as well as consumable products. These consumable products are used
in drilling, well construction and completions activities and at processing centers and refineries. Our engineered capital products are directed
at drilling rig equipment for constructing new or upgrading existing rigs, subsea construction and development projects, pressure pumping
equipment,  the  placement  of  production  equipment  on  new  producing  wells,  downstream  capital  projects  and  capital  equipment  for
renewable energy projects. In 2022, over 68% of our revenue was derived from consumable products and activity-based equipment, while
the balance was primarily derived from capital products with a small amount from rental and other services.

We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among
others,  oil  and  natural  gas  operators,  land  and  offshore  drilling  contractors,  oilfield  service  companies,  subsea  construction  and  service
companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies.

We expect that the world's long-term energy demand will continue to rise. We also expect hydrocarbons will continue to play a vital role in
meeting the world's long-term energy needs while renewable energy sources continue to develop. As such, we remain focused on serving
our customers in both oil and natural gas as well as renewable energy applications. We are also continuing to develop products to help oil
and natural gas operators lower their emissions while also deploying our existing product technologies in renewable energy applications and
seeking to develop innovative equipment.

Our  reporting  segments  align  with  business  activity  drivers  and  the  manner  in  which  management  reviews  and  evaluates  operating
performance. FET operates in the following three reporting segments: Drilling & Downhole, Completions and Production. We believe that the
reporting segment structure is aligned with the key phases of the well cycle and provides operating efficiencies.

We incorporate by reference the segment and geographic information for the last two years set forth in Note 17 Business Segments, and the
information with respect to an acquisition set forth in Note 4 Acquisition.

DRILLING AND DOWNHOLE SEGMENT

Our  Drilling  &  Downhole  segment  designs,  manufactures  and  supplies  products  and  provides  related  services  to  the  drilling,  well
construction, artificial lift and subsea energy construction markets, including applications in oil and natural gas, renewable energy, defense,
and communications. The products and related services consist primarily of (i) capital equipment and a broad line of expendable products
consumed in the drilling process; (ii) well construction casing and cementing equipment and protection products for artificial lift equipment
and cables; and (iii) subsea remotely operated vehicles and trenchers, submarine rescue vehicles, specialty components and tooling, and
complementary subsea technical services.

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There  are  several  factors  that  drive  demand  for  our  Drilling  &  Downhole  segment.  Our  Drilling  Technologies  product  line  is  influenced  by
global  drilling  activity,  the  level  of  capital  investment  in  drilling  rigs  and  equipment  replacement  as  drilling  contractors  modify  or  replace
existing rigs to improve capability, efficiency or safety, and the number of rigs in use, and the severity of operating conditions. Our Downhole
Technologies product line is impacted by the level of well completion activity and complexity of well construction and completion. Our Subsea
Technologies  product  line  is  affected  by  global  offshore  activity,  defense  spending,  subsea  equipment  and  pipeline  installation,  repair  and
maintenance expenditures, and growth in offshore windfarm development.

Drilling Technologies. We provide both drilling capital equipment and consumables, with a focus on products that enhance our customers’
handling  of  tubulars  and  drilling  fluids  on  the  drilling  rig.  Our  product  offering  includes  powered  and  manual  tubular  handling  equipment;
customized offline crane systems; drilling data acquisition management systems; pumps, pump parts, valves, and manifolds; drilling fluid end
components; and, a broad line of items consumed in the drilling process.

Drilling capital equipment. We design and manufacture a range of powered and manual tubular handling tools used on onshore and offshore
drilling rigs. Our Forum B+V Oil Tools and Wrangler™ branded tools reduce direct human involvement in the handling of pipe during drilling
operations,  improving  safety,  speed  and  efficiency  of  operations.  Our  tubular  handling  tools  include  elevators,  clamps,  rotary  slips,  rotary
tongs, powered slips, spiders and kelly spinners. Our make-up and break-out tools, called Forum Roughneck™, automate a dangerous rig
floor task and improve rig drilling speed and safety. Our hydraulic catwalks mechanize the lifting and lowering of tubulars to and from the drill
floor, eliminating or reducing the need for traditional drill pipe and casing “pick-up and lay-down” operations with associated personnel. We
also design and manufacture a range of rig-based offline activity cranes and multi-purpose cranes.

In addition to powered tubular handling equipment, we design and manufacture drilling manifold systems and high-pressure piping packages.
Finally, we repair and service drilling equipment for both land and offshore rigs. Many of our service employees work in the field to address
problems at the rig site.

Consumable products.  We  manufacture  a  range  of  consumable  products  used  on  drilling  rigs,  well  servicing  rigs,  and  hydraulic  fracturing
systems.  Our  consumable  products  include  valves,  centrifugal  pumps,  mud  pump  fluid  end  components,  including  P-Quip™  mud  pump
modules, Forumlok™, rig sensors, inserts, and dies. We are also a supplier of oilfield bearings, including FracMax™, to original equipment
manufacturers and repair businesses for use in drilling and well stimulation equipment.

Our primary customers in this product line include domestic and international drilling rig contractors operating land and offshore based drilling
rigs.

Downhole Technologies. We manufacture a broad line of downhole products that are consumed during the construction, completion and
production phases of a well’s lifecycle.

Downhole  protection  systems.  We  offer  a  full  selection  of  downhole  protection  solutions  and  artificial  lift  accessories  through  our  various
brands  such  as  Cannon  Services™  and  Multilift.  Our  Cannon  Services  protectors  are  used  to  shield  downhole  control  lines,  cables  and
gauges  during  installation  and  to  provide  protection  during  production  enhancement  operations.  We  design  and  manufacture  a  variety  of
downhole  protection  solutions  for  electrical  submersible  pump  (“ESP”)  cabling,  encapsulated  control  lines,  sub-surface  safety  valves  and
permanent  downhole  gauges.  We  provide  both  standard  and  customized  protection  systems,  and  we  utilize  a  range  of  materials  in  our
products  for  various  downhole  environments.  SandGuard™  and  Cyclone™  branded  completion  tools  extend  the  useful  life  of  an  ESP  by
protecting it against sand and other solids during shutdown and startup. Forum’s GasGuard™ branded product also extends the useful life of
an ESP by breaking down gas slugs, creating an uninterrupted flow of liquid.

Casing  and  cementing  tools.  Through  our  Davis-Lynch™  branded  downhole  well  construction  operations,  we  design  and  manufacture
products used in the construction of oil, natural gas and geothermal wells. We supply a full portfolio of centralizers, float equipment, stage
cementing tools, inflatable packers, flotation collars, cementing plugs and surge reduction equipment. Our products are used globally in the
construction of onshore and offshore wells.

Our primary customers in this product line are oil and natural gas producers, and service companies providing completions, artificial lift and
other intervention services to producers.

Subsea Technologies. We design and manufacture capital equipment and specialty components used in the subsea sector and provide a
broad suite of complementary technical services. We have a core focus on the design

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and manufacture of remotely operated vehicle (“ROV”) systems, other specialty subsea vehicles, and rescue submarines, as well as critical
components of these vehicles. Many of our related technical services complement our vehicle offerings.

Subsea vehicles. We are a leading designer and manufacturer of a wide range of ROVs that we supply to the offshore subsea construction,
observation and related service markets. The market for ROVs can be segmented into three broad classes of vehicles based on size and
category  of  operations:  (1)  large  work-class  vehicles  and  trenchers  for  construction  and  installation  activities,  (2)  drilling-class  vehicles
deployed from and for use around an offshore rig and (3) observation-class vehicles for inspection and light manipulation. We are a leading
provider of work-class and observation class vehicles.

We  design  and  manufacture  large  work-class  ROVs  through  our  highly  respected  Perry   brand.  These  vehicles  are  principally  used  in
deepwater construction applications. In addition to work-class ROVs, we design and manufacture large trenchers that travel along the sea
floor for trenching, installation and burial operations. The largest of these trenchers is able to cut over three meters deep into the seafloor to
lay pipelines, power cables or communications cables for customers in the pipeline, offshore wind power and telecom markets.

®

Our Forum Sub-Atlantic  branded observation-class vehicles are electrically powered and are principally used for inspection, survey and light
manipulation, and serve a wide range of industries.

®

In addition to ROVs, we design and manufacture subsea rescue vehicles capable of a range of tasks, including submarine rescue operations,
diver support, seabed survey, port security, under hull search and a variety of other tasks.

Our  subsea  vehicle  customers  are  primarily  large  offshore  service  companies  that  serve  the  oil  and  natural  gas,  telecommunications,
offshore  wind  power,  and  other  industries  operating  in  marine  environments.  In  addition,  we  sell  products  to  a  range  of  governmental
organizations including naval, maritime science and geoscience research organizations.

Subsea products and technical services. We are also a leading designer and manufacturer of subsea products and components utilized in
®
conjunction  with  ROVs  for  the  oil  and  natural  gas,  renewables,  telecommunications  and  defense  markets.  We  manufacture  Dynacon
branded ROV launch and recovery systems, linear cable engines, Sub-Atlantic  branded ROV thrusters, and a wide range of hydraulic power
units  and  valve  packs.  We  design  and  manufacture  these  ROV  components  for  incorporation  into  our  own  vehicles  as  well  as  for  sale  to
other ROV manufacturers. We also provide a broad suite of subsea tooling and technical services.

®

COMPLETIONS SEGMENT

Our Completions segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation
and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold to the pressure
pumping,  hydraulic  fracturing  and  flowback  services  markets,  including  hydraulic  fracturing  pumps,  cooling  systems,  high-pressure  flexible
hoses and flow iron as well as wireline cable and pressure control equipment used in the well completion and intervention service markets;
and (ii) coiled tubing strings and coiled line pipe and related services.

Demand  for  our  Stimulation  &  Intervention  and  Coiled  Tubing  product  lines  is  impacted  by  the  level  of  shale  or  tight  sand  basin  hydraulic
fracturing activity and the level of workover and intervention activity.

Stimulation  and  Intervention.  We  provide  a  broad  range  of  high-pressure  pumps  and  flow  equipment  used  by  pressure  pumping
companies during stimulation, intervention (principally plug and perforation activity) and flowback processes. We sell power end assemblies,
industrial  heat  exchanger  and  cooling  systems,  manifolds  and  manifold  trailers,  high-pressure  flexible  hoses  and  flow  iron.  Frequent
refurbishment and recertification of flow equipment is critical to ensuring the reliable and safe operation of a pressure pumping company’s
fleet. We perform these services and position inventory in strategic locations in North America.

We also manufacture pressure control products that are used for well intervention operations that are sold domestically and internationally to
oilfield  service  companies  and  equipment  rental  companies.  Products  we  supply  include  blowout  preventers  for  coiled  tubing  and  wireline
units  and  our  Hydraulic  Latch  Assembly,  which  is  used  to  facilitate  efficient  zipper  fracturing  operations.  We  also  manufacture  electro-
mechanical  wireline  cables  as  well  as  innovative  EnviroLite  branded  (greaseless)  cables.  We  also  conduct  aftermarket  refurbishment  and
recertification services for pressure control equipment.

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Our primary customers in the Stimulation and Intervention product line are pressure pumping, wireline and flowback service companies. In
addition, we sell directly to pressure pumping unit original equipment manufacturers.

Coiled Tubing. We manufacture Global Tubing® branded coiled tubing strings, including DURACOIL (quench and temper), and coiled line
pipe,  and  provide  related  services.  Coiled  tubing  strings  are  consumable  components  utilized  to  perform  well  completion  and  intervention
activities.  Our  coiled  line  pipe  offering  serves  as  an  alternative  to  conventional  line  pipe  and  composite  flexibles  in  onshore  and  offshore
applications.  In  addition,  our  coiled  line  pipe  offering  can  be  utilized  for  carbon  capture  projects  to  transport  carbon  for  injection  into
underground storage.

The product line’s primary customers are domestic and international service companies that provide coiled tubing services and oil and gas
operators.

PRODUCTION SEGMENT

Our  Production  segment  designs,  manufactures  and  supplies  products  and  provides  related  equipment  and  services  for  production  and
infrastructure markets. The products and related services consist primarily of: (i) engineered process systems, production equipment, as well
as  specialty  separation  equipment;  and  (ii)  a  wide  range  of  industrial  valves  focused  on  serving  oil  and  natural  gas  customers  as  well  as
power generation, renewable energy and other general industrial applications.

The segment’s primary market driver is the level of spending associated with new producing wells as well as spending on midstream and
downstream  projects.  In  addition,  demand  for  our  Valve  Solutions  products  is  affected  by  activity  levels  in  the  power  generation,  process,
petrochemical and mining industries.

Production Equipment. Our  Production  Equipment  product  line  provides  engineered  process  systems  for  capital  equipment  used  at  the
wellsite  and  for  production  processing  in  the  U.S.  Once  a  well  has  been  drilled,  completed  and  brought  on  stream,  we  provide  the  well
operator  with  process  equipment  necessary  to  make  the  oil  or  natural  gas  ready  for  transmission.  We  engineer,  fabricate  and  install
separators,  packaged  production  systems  and  pressure  vessels,  skidded  vessels  with  gas  measurement,  modular  process  plants,  header
and manifold skids, process and flow control equipment and separators to help clean and process oil or natural gas as it travels from the
wellhead and along the transmission line to the refinery. Our customers are principally U.S. oil and natural gas operators or producers.

We  also  design  and  provide  process  oil  treatment  equipment,  including  EDGE   and  NU-STATIC branded  desalters  and  dehydrator
technologies,  used  in  refineries  and  other  process  applications  worldwide.  We  have  a  team  of  highly  trained  technicians  and  field  service
engineers  for  repair  and  installation,  and  we  supply  a  broad  range  of  replacement  parts  for  our  equipment  and  other  manufacturers.  This
equipment removes sand, water and suspended solids from hydrocarbons prior to their transmission or refining.

®

® 

Valve Solutions. We provide a wide range of industrial valves that principally serve the upstream, midstream and downstream markets of
the oil and natural gas industry. Our valves also serve general industrial, power generation and process industry customers as well as the
mining  industry.  In  addition,  our  Canadian  operations  provide  significant  exposure  to  heavy  oil  projects.  We  provide  ball,  gate,  globe  and
check valves across a range of sizes and applications.

We market our valves to our customers and end users through our recognized brands: PBV , DSI  and Accuseal . Much of our production is
sold through distribution supply companies, with our marketing efforts targeting end users for pull through of our valve products.

®

®

®

Our  supply  chain  systems  enable  us  to  design  and  sell  high-quality  engineered  valves,  as  well  as  provide  standardized  products,  while
maintaining  competitive  pricing  and  minimizing  capital  requirements.  We  utilize  our  international  manufacturing  partners  to  produce
completed products and components for the majority of our valve products.

Depending on the product, our valves are manufactured to conform to the standards of one or more of the API, American National Standards
Institute,  American  Bureau  of  Shipping,  and  International  Organization  for  Standardization  and/or  other  relevant  standards  governing  the
design and manufacture of industrial valves.

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Business history

Forum was incorporated in 2005 and formed through a series of acquisitions. In August 2010, Forum Oilfield Technologies, Inc. was renamed
Forum Energy Technologies, Inc., when four other companies were merged into Forum. On April 17, 2012, we completed our initial public
offering.

Backlog

As we provide a mix of consumable products, capital goods, and repair parts and services, the majority of orders and commitments included
in our backlog as of December 31, 2022 are scheduled to be delivered within six months. Our backlog was approximately $264.8 million at
December  31,  2022  and  approximately  $196.5  million  at  December  31,  2021.  Substantially  all  of  the  projects  currently  in  our  backlog  are
subject  to  change  and  our  customers  may  seek  to  terminate  these  orders.  However,  customers  are  generally  required  to  pay  us  for  work
performed as well as other costs and fees as a result of such changes or termination. It is difficult to predict how much of our current backlog
may be delayed or terminated, or subject to changes, as well as our ability to collect termination or change fees.

Our consumable and repair products are predominantly off-the-shelf items requiring short lead-times, generally less than six months, and our
related refurbishment or other services are also not contracted with significant lead time. The composition of our backlog is reflective of our
mix  of  capital  equipment,  consumable  products,  aftermarket  and  other  related  items.  Our  bookings,  which  consist  of  written  orders  or
commitments for our products or related services, during the years ended December 31, 2022 and 2021 were approximately $780.7 million
and $632.3 million, respectively.

Customers

No customer represented more than 10% of consolidated revenue in any of the last two years.

Seasonality

Our business is not significantly impacted by seasonality. However, our customers are susceptible to exhausting their capital and operating
budgets in the fourth quarter. As a result, we may experience decreased demand for our products in the fourth quarter. In addition, given the
geographic  proximity  of  a  number  of  our  facilities  to  the  Gulf  Coast,  we  are  subject  to  business  interruptions  caused  by  hurricanes  and
tropical  storms.  Furthermore,  a  small  portion  of  the  revenue  we  generate  from  select  Canadian  operations  often  benefits  from  higher  first
quarter activity levels, as operators take advantage of the winter freeze to gain access to remote drilling and production areas.

Competition

The markets in which we operate are highly competitive. We compete with a number of companies of varying sizes. There are several large
national and multinational companies that have longer operating histories, greater financial, technical and other resources and greater name
recognition. In addition, we have several smaller competitors who compete with us on a regional or local basis. These competitors are often
times very quick to respond to new or emerging technologies and services, and changes in customer requirements. The principal competitive
factors  in  our  markets  are  product  quality  and  performance,  price,  breadth  of  product  offering,  availability  of  products  and  services,
performance, distribution capabilities, technical expertise, responsiveness to customer needs, reputation for service and intellectual property
rights.  We  believe  our  products  and  services  in  each  segment  are  comparable  in  price,  quality,  performance  and  dependability  with  our
competitors’ offerings. We seek to differentiate ourselves from our competitors by providing a rapid response to the needs of our customers,
expert knowledge, a high level of customer service, and innovative product development initiatives. Some of our competitors expend greater
amounts  of  money  than  us  on  formal  research  and  engineering  efforts.  We  believe,  however,  that  our  product  development  efforts  are
enhanced by the investment of management time that we make to improve our customer service and to work with our customers on their
specific product needs and challenges.

Although we have no single competitor across all of our product lines, the companies we compete with across the greatest number of our
product lines include National Oilwell Varco, Inc., Cameron International Corporation (a subsidiary of Schlumberger), TechnipFMC plc,
Tenaris S.A., and Caterpillar, Inc.

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Patents, trademarks and other intellectual property

We currently hold multiple U.S. and international patents and trademarks, have a number of pending patent and trademark applications and
have developed a significant amount of trade secrets or other know how in the areas where we compete. Although our patents, trademarks,
licenses, trade secrets and know how are material to us in the aggregate, we do not regard any single piece of intellectual property to be
material to our business as a whole.

Raw materials

We  acquire  component  parts,  products  and  raw  materials  from  suppliers,  including  foundries,  forge  shops,  and  original  equipment
manufacturers. The prices we pay for our raw materials may be affected by, among other things, energy, steel and other commodity prices,
inflationary  pressures,  tariffs  and  duties  on  imported  materials  and  foreign  currency  exchange  rates.  Certain  of  our  component  parts,
products or raw materials, such as bearings, are only available from a limited number of suppliers. Please see “Risk factors—Risks related to
our business—We rely on relationships with key suppliers to operate and maintain our business.”

Timely receipt of raw materials is critical to our business. In 2021, we were negatively impacted by various transportation and other supply
chain constraints, which caused manufacturing delays for some of our products. During 2022, supply chain constraints eased; however, raw
material prices for many of our product lines were negatively impacted by inflationary pressures. In the future, while we anticipate inflationary
pressures will improve, and supply chain constraints will continue to ease, the timing of any reduction in inflation is unknown, and it is unclear
whether we will be able to continue purchasing raw materials on a timely basis or at acceptable prices. We generally try to purchase raw
materials from multiple suppliers so that we are not dependent on any one supplier, but this is not always possible.

Working Capital

An  important  consideration  for  many  of  our  customers  in  selecting  a  vendor  is  timely  availability  of  the  product.  Customers  may  pay  a
premium  for  earlier  or  immediate  availability  because  of  the  cost  of  delays  in  critical  operations.  We  stock  our  consumable  products  in
regional  warehouses  or  on  consignment  around  the  world  so  that  these  products  are  available  for  our  customers  when  needed.  This
availability  is  especially  critical  for  certain  consumable  products,  causing  us  to  carry  substantial  inventories  for  these  products.  For  critical
capital items in which demand is expected to be strong, we often build certain items before we have a firm order. Our having such goods
available on short notice can be of great value to our customers. We also stock raw materials and components in order to be in a position to
build products in response to market demand.

We typically offer our customers standard payment terms of 30 days, although during downturns in activity, customers often take 65 days or
more to settle accounts. For sales into certain countries or for select customers, we might require payment upfront or credit support through a
letter of credit. For longer term projects, we typically require progress payments as important milestones are reached. On average, we collect
our receivables in about 60 days from shipment resulting in a substantial investment in accounts receivable. Standard terms with our vendors
are  90  days.  For  critical  items  sourced  from  significant  vendors,  we  have  settled  accounts  more  quickly,  sometimes  in  exchange  for  early
payment discounts.

Governmental regulation

Our  operations  are  subject  to  numerous  stringent  and  complex  laws  and  regulations  governing  the  discharge  of  materials  into  the
environment, health and safety aspects of our operations, or otherwise relating to human health and environmental protection. In addition to
environmental and worker safety regulations, we are subject to regulation by numerous other governmental regulatory agencies, including
the U.S. Department of Labor and other state, local and international bodies regulating worker rights and labor conditions. In addition, we are
subject to certain requirements to contribute to retirement funds or other benefit plans and laws in some jurisdictions in which we operate
restrict our ability to dismiss employees. Failure to comply with these laws or regulations or to obtain or comply with permits may result in the
assessment  of  administrative,  civil  and  criminal  penalties,  imposition  of  remedial  or  corrective  action  requirements,  and  the  imposition  of
injunctions to prohibit certain activities or force future compliance.

The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact the
environment, and thus, any changes in environmental laws and regulations or in enforcement policies that result in more stringent and costly
waste  handling,  storage,  transport,  disposal,  or  remediation  requirements  could  have  a  material  adverse  effect  on  our  operations  and
financial position. Moreover,

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accidental releases or spills of regulated substances may occur in the course of our operations, and if so, we may incur significant costs and
liabilities as a result of such releases or spills, including any third-party claims for damage to property, natural resources or persons.

The following is a summary of the more significant existing environmental, health and safety laws and regulations to which our business
operations are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations or
financial position.

Hazardous substances and waste

The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes, regulate the generation, transportation, treatment,
storage,  disposal  and  cleanup  of  hazardous  and  non-hazardous  wastes.  Under  the  auspices  of  the  Environmental  Protection  Agency
(“EPA”), the individual states administer some or all of the provisions of the RCRA, sometimes in conjunction with their own, more stringent
requirements. We are required to manage the transportation, storage and disposal of hazardous and non-hazardous wastes in compliance
with the RCRA.

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as the Superfund law, imposes joint
and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release
of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and
anyone  who  disposed  or  arranged  for  the  disposal  of  a  hazardous  substance  released  at  the  site.  We  currently  own,  lease,  or  operate
numerous  properties  that  have  been  used  for  manufacturing  and  other  operations  for  many  years.  We  also  contract  with  waste  removal
services  and  landfills.  These  properties  and  the  substances  disposed  or  released  on  them  may  be  subject  to  the  CERCLA,  RCRA  and
analogous  state  laws.  Under  such  laws,  we  could  be  required  to  remove  previously  disposed  substances  and  wastes,  remediate
contaminated  property,  or  perform  remedial  operations  to  prevent  future  contamination.  In  addition,  it  is  not  uncommon  for  neighboring
landowners and other third-parties to file claims for personal injury and property damage allegedly caused by hazardous substances released
into the environment.

Hydraulic fracturing

A  significant  percentage  of  our  customers’  oil  and  natural  gas  production  is  being  developed  from  unconventional  sources,  such  as
hydrocarbon shales. These formations require hydraulic fracturing completion processes to release the oil or natural gas from the rock so
that  it  can  flow  through  the  formations.  Hydraulic  fracturing  involves  the  injection  of  water,  sand  and  chemicals  under  pressure  into  the
formation  to  stimulate  production.  A  number  of  federal  agencies,  including  the  EPA  and  the  U.S.  Department  of  Energy,  are  analyzing,  or
have  been  requested  to  review,  a  variety  of  environmental  issues  associated  with  shale  development,  including  hydraulic  fracturing.
Moreover,  various  political  groups  and  officials  are  requesting  or  have  discussed  implementing  a  ban  on  hydraulic  fracturing,  or  oil  &  gas
extraction generally, on federal lands. For more information, please read “Risk Factors-Potential legislation or regulations restricting the use
of hydraulic fracturing could reduce demand for our products.”

Operating risk and insurance

We maintain insurance coverage of types and amounts that we believe to be customary and reasonable for companies of our size and with
similar operations. In accordance with industry practice, however, we do not maintain insurance coverage against all of the operating risks to
which  our  business  is  exposed.  Therefore,  there  is  a  risk  our  insurance  program  may  not  be  sufficient  to  cover  any  particular  loss  or  all
losses. Currently, our insurance program includes coverage for, among other things, general liability, umbrella liability, sudden and accidental
pollution, personal property, vehicles, workers’ compensation, and employer’s liability coverage.

Employees

As of December 31, 2022, we had approximately 1,500 employees. Of our total employees, approximately 1,100 were in the U.S., 150 were
in  the  United  Kingdom,  100  were  in  Germany,  100  were  in  Canada  and  50  were  in  other  locations.  We  are  not  a  party  to  any  collective
bargaining agreements, other than in our Hamburg, Germany facility. We consider our relations with our employees to be satisfactory.

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Item 1A. Risk Factors

The  following  summarizes  the  principal  factors  that  make  an  investment  in  our  company  speculative  or  risky,  all  of  which  are  more  fully
described in the Risk Factors section below. This summary should be read in conjunction with the Risk Factors section and should not be
relied upon as an exhaustive summary of the material risks facing our business.

Risks Related to our Business and Operations:

•

•

The  success  of  our  business  largely  depends  on  activity  levels  in  the  oil  and  natural  gas  industry,  which  can  be  affected  by  the
amount and volatility of oil and natural gas prices.
The  markets  in  which  we  operate  are  highly  competitive,  including  some  companies  that  hold  substantial  market  share  and  have
substantially greater resources than we do, as well as a number of regional or local competitors for certain of our product lines. We
may not be able to compete successfully in this environment.

• Given  the  uncertainty  related  to  long-term  commodity  prices  and  associated  customer  demand,  we  may  hold  excess  or  obsolete

inventory, and as a result, may experience a reduction in gross margins and financial results.

• We  may  not  realize  revenue  on  our  current  backlog  due  to  customer  order  reductions,  cancellations  or  acceptance  delays,  which

•

•

may negatively impact our financial results.
The  industry  in  which  we  operate  is  undergoing  continuing  consolidation  and  seeking  opportunities  to  participate  in  the  energy
transition, which may impact our results of operations.
A greater focus on budgetary discipline and technological advances have caused a decline in customer spending that may remain at
a low level despite an increase in commodity prices.

• We may be unable to employ a sufficient number of skilled and qualified workers.
• We rely on relationships with key suppliers to operate and maintain our business.
• Our business depends upon our ability to obtain key raw materials and specialized equipment from suppliers. Increased costs of raw

materials and other components, and inflationary pressure, may result in increased operating expenses.
A deterioration of global economic conditions could adversely affect our financial condition and results of operations.

•
• We  may  not  be  able  to  satisfy  technical  requirements,  testing  requirements,  code  requirements  or  other  specifications  under

•

contracts and contract tenders.
A  failure  or  breach  of  our  information  technology  infrastructure,  including  as  a  result  of  cyber  attacks  or  failures  of  data  protection
measures, could adversely impact our business and results of operations and expose us to potential liabilities.

• Our success depends on our ability to implement new technologies and services more efficiently and quickly than our competitors.
• Our success will be affected by the use and protection of our proprietary technology. Due to the limitations of our intellectual property
rights, our ability to exclude others from the use of our proprietary technology may be reduced. Furthermore, we may be adversely
affected by disputes regarding intellectual property rights.

• We may incur liabilities, fines, penalties or additional costs, or we may be unable to sell to certain customers if we do not maintain safe

•

•

operations.
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.
The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material
adverse effect on our business, financial condition and results of operations.

• Facility consolidations or expansions may subject us to risks of operating inefficiencies, construction delays and cost overruns.
• Our acquisitions and dispositions may not result in anticipated benefits and may present risks not originally contemplated, which may

have a material adverse effect on our business, consolidated results of operations and consolidated financial condition.
• A natural disaster, catastrophe or other event could result in severe property damage, which could curtail our operations.

Legal and Regulatory Risks:

• Our operations and our customers’ operations are subject to a variety of governmental laws and regulations that affect our and our
customers’  costs,  prohibit  or  curtail  our  customers’  operations  in  certain  areas,  limit  the  demand  for  our  products  and  services  or
restrict our operations.

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Potential legislation or regulations restricting the use of hydraulic fracturing could reduce demand for our products.

•
• Our  financial  results  could  be  adversely  impacted  by  changes  in  regulation  of  oil  and  natural  gas  exploration  and  development

activity in response to significant environmental incidents or climate change actions.

• Our operations are subject to environmental and operational safety laws and regulations that may expose us to significant costs and

liabilities.
Tariffs imposed by the U.S. government could have a further severe adverse effect on our results of operations.

•
• We are subject to litigation risks that may not be covered by insurance.
•

The number and cost of our current and future asbestos claims could be substantially higher than we have estimated and the timing
of payment of claims could be sooner than we have estimated.

• Our products are used in operations that are subject to potential hazards inherent in the oil and natural gas industry and, as a result,

we are exposed to potential liabilities that could affect our financial condition and reputation.

• Climate change legislation or regulations restricting emissions of greenhouse gases and related divestment and other efforts could

increase our operating costs or reduce demand for our products.

Risks Related to our International Operations

• Our business operations worldwide are subject to a number of U.S. federal laws and regulations, including restrictions imposed by
the  U.S.  Foreign  Corrupt  Practices  Act  as  well  as  trade  sanctions  administered  by  the  Office  of  Foreign  Assets  Control  and  the
Commerce  Department,  as  well  as  similar  laws  in  non-U.S.  jurisdictions  that  govern  our  operations  by  virtue  of  our  presence  or
activities there.

• Our exposure to currency exchange rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect on

our results of operations.

Risks Related to our Common Stock, Indebtedness and Financial Condition:

• Our common stock price has been volatile, and we expect it to continue to remain volatile in the future.
•

The indenture governing our 2025 Notes and our Credit Facility contain operating and financial restrictions that restrict our business
and financing activities.

• Our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level, industry conditions

•

and credit rating.
Provisions  in  our  organizational  documents  and  under  Delaware  law  could  delay  or  prevent  a  change  in  control  of  our  company,
which could adversely affect the price of our common stock.

• We have incurred impairment charges and we may incur additional impairment charges in the future.

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Risks Related to our Business and Operations:

The success of our business largely depends on activity levels in the oil and natural gas industry, which can be affected by the
amount and volatility of oil and natural gas prices.

We have experienced, and will continue to experience, fluctuations in revenues and operating results due to economic and business cycles.
The  willingness  of  oil  and  natural  gas  operators  to  make  capital  expenditures  to  explore  for  and  produce  oil  and  natural  gas,  the  need  of
oilfield  services  companies  to  replenish  consumable  parts  and  the  willingness  of  these  customers  to  invest  in  capital  equipment  depends
largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control. Such factors include:

•

•

•

•

•

•

•

domestic and foreign supply of and demand for oil and natural gas;

prices, and expectations about future prices, of oil and natural gas;

ability  or  willingness  of  the  Organization  of  Petroleum  Exporting  Countries  (“OPEC”)  and  other  major  producers  to  set  and  maintain
production limits;

cost of exploring for, developing, producing and delivering oil and natural gas;

levels of drilling and completions activity;

expected decline in rates of current and future production, or faster than anticipated declines in production;

discovery rates of new oil and natural gas reserves;

• COVID-19 and related public health measures implemented by governments worldwide and the occurrence or threat of other epidemic or

pandemic diseases, including variants of COVID-19, and any government response to such occurrence or threat;

•

ability of our customers to access new markets or areas of production or to continue to access current markets, including as a result of
trade restrictions;

• weather conditions, including hurricanes and tornadoes, that can affect oil and natural gas operations;

•

•

•

•

•

•

•

•

•

•

•

natural disasters, catastrophes or other events resulting in severe property damage;

governmental regulations, including those instituted in connection with a response to climate change;

prohibitions,  moratoriums  or  similar  limitations  on  drilling  or  hydraulic  fracturing  activity  resulting  in  a  cessation  or  disruption  of
operations;

domestic  and  worldwide  economic  and  political  conditions,  including  inflationary  pressures,  further  increases  in  interest  rates  and  the
cost  of  capital,  a  general  economic  slowdown  or  recession,  political  tensions  and  war  (including  future  developments  in  the  ongoing
Russia-Ukraine conflict);

financial stability of our customers and other industry participants;

political instability in oil and natural gas producing countries;

increased  pressures  to  invest  in  sustainable  energy  sources,  shareholder  activism  or  activities  by  non-governmental  organizations  to
restrict the exploration, development and production of oil and natural gas;

investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit climate change;

conservation measures and technological advances affecting energy consumption;

price and availability of alternative energy resources and fuels;

uncertainty in capital and commodities markets, and the ability of oil and natural gas companies to raise equity capital and debt financing;
and

• merger and divestiture activity among oil and natural gas producers, drilling contractors and oilfield service companies.

The oil and natural gas industry has historically experienced periodic reductions in the overall level of exploration and development activities
in  connection  with  declines  in  commodity  prices.  As  a  result,  there  are  periodic  reductions  in  the  demand  for  our  products  and  services,
downward pressure on the prices that we charge and ultimately an adverse impact on our business. During the year ended December 31,
2022, ongoing COVID-19 outbreaks and related work restrictions impacted demand for oil and natural gas and caused disruptions in global

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supply chains, which have contributed to price volatility and inflationary pressures for certain goods and services. Although, during the year
oil and gas prices and demand increased significantly from the historic lows seen in the first half of 2020, it is uncertain whether prices will
maintain current levels, decline or increase. Furthermore, there can be no assurance that the demand or pricing for oil and natural gas will
follow  historic  patterns,  including  as  a  result  of  increased  availability  of  alternative  energy  sources.  Declines  in  oil  and  natural  gas  prices,
decreased levels of exploration, development, and production activity, use of alternative sources of energy, and the willingness of customers
to invest in their equipment relative to historical norms may negatively affect:

•

•

•

•

•

revenues, cash flows, and profitability;

the ability to maintain or increase borrowing capacity;

the ability to obtain additional capital to finance our business and the cost of that capital;

the ability to collect outstanding amounts from our customers; and

the ability to attract and retain skilled personnel to maintain our business or that will be needed in the event of an upturn in the demand
for our products.

The markets in which we operate are highly competitive, including some companies that hold substantial market share and have
substantially greater resources than we do, as well as a number of regional or local competitors for certain of our product lines.
We may not be able to compete successfully in this environment.

The markets in which we operate are highly competitive and our products and services are subject to competition from significantly larger
businesses.  We  have  several  competitors  that  are  large  national  and  multinational  companies  that  have  longer  operating  histories,  and
greater  financial,  technical  and  other  resources  than  we  do.  In  addition,  we  compete  with  many  small  companies  on  a  regional  or  local
basis.  Our  competitors  may  be  able  to  respond  more  quickly  to  new  or  emerging  technologies  and  services  and  changes  in  customer
requirements.  In  addition,  several  of  our  competitors  provide  a  much  broader  array  of  services,  and  have  a  stronger  presence  in  more
geographic markets and, as such, may be better positioned to withstand an extended downturn. Our larger competitors are able to use their
size and purchasing power to seek economies of scale and pricing concessions. Furthermore, some of our customers are our competitors
and have in the past ceased buying from us, and may do the same in the future. We also have competitors outside of the U.S. with lower
structural  costs  due  to  labor  and  raw  material  cost  in  and  around  their  manufacturing  centers,  and  prices  based  on  foreign  currencies.
Accordingly, currency fluctuations may cause U.S. dollar-priced products to be less competitive than our competitors’ products that are priced
in  other  currencies.  Moreover,  our  competitors  may  utilize  available  capacity  during  a  period  of  depressed  energy  prices  to  gain  market
share.

New  competitors  have  also  entered  the  markets  in  which  we  compete.  We  consider  product  quality,  price,  breadth  of  product  offering,
availability of products and services, performance, distribution capabilities, technical expertise, responsiveness to customer needs, reputation
for  service  and  intellectual  property  rights  to  be  the  primary  competitive  factors.  Competitors  may  be  able  to  offer  more  attractive  pricing,
duplicate strategies, or develop enhancements to products that offer performance features that are superior to our products. In addition, we
may not be able to retain key employees of entities that we acquire in the future and those employees may choose to compete against us
following a contractually agreed period of non-competition that is permitted under the law. Competitive pressures, including those described
above, and other factors could adversely affect our competitive position, resulting in a loss of market share or decreases in prices. For more
information about our competitors, please read “Business—Competition.”

Given the uncertainty related to long-term commodity prices and associated customer demand, we may hold excess or obsolete
inventory, and as a result, may experience a reduction in gross margins and financial results.

We cannot accurately predict what or how many products our customers will need in the future. Orders are placed with our suppliers based
on  forecasts  of  customer  demand  and,  in  some  instances,  we  may  establish  buffer  inventories  to  accommodate  anticipated  demand.  At
certain times, we have built capital equipment before receiving customer orders. Our forecasts of customer demand are based on multiple
assumptions, which have introduced errors into the estimates. These forecasts have been particularly challenging to develop as a result of
uncertainty created by COVID-19 outbreaks and related work restrictions, and U.S. recessionary pressures and supply chain inefficiencies
preventing  our  customers  from  receiving  finished  goods.  In  addition,  many  of  our  suppliers,  such  as  those  for  certain  of  our  standardized
valves, require a longer lead time to provide products than our customers demand for delivery of our finished products. If we underestimate
customer  demand  or  if  insufficient  manufacturing  capacity  is  available,  we  would  miss  revenue  opportunities  and  potentially  lose  market
share and damage our

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customer  relationships.  Conversely,  if  we  overestimate  customer  demand,  we  would  allocate  resources  to  the  purchase  of  material  or
manufactured products that we are not be able to sell when we expect to, if at all. As a result, we would hold excess or obsolete inventory,
which  would  reduce  gross  margin  and  adversely  affect  financial  results  upon  writing  down  the  value  of  inventory.  In  addition,  any  future
significant  cancellations  or  deferrals  of  product  orders  or  the  return  of  previously  sold  products  could  materially  and  adversely  affect  profit
margins, increase product obsolescence and restrict our ability to fund our operations.

We may not realize revenue on our current backlog due to customer order reductions, cancellations or acceptance delays, which
may negatively impact our financial results.

Uncertainty  regarding  demand  for  our  customers’  services  has  resulted  in  order  reductions,  cancellations  and  acceptance  delays,  and  we
may experience more of these in the future. We may be unable to collect revenue for all of the orders reflected in our backlog, or we may be
unable to collect cancellation penalties, to the extent we have the right to impose them, or the revenues may be pushed into future periods.
In  addition,  customers  who  are  more  highly  leveraged  or  otherwise  unable  to  pay  their  creditors  in  the  ordinary  course  of  business  may
become insolvent or be unable to operate as a going concern. We may be unable to collect amounts due or damages we are awarded from
these  customers,  and  our  efforts  to  collect  such  amounts  may  damage  our  customer  relationships.  Our  results  of  operations  and  overall
financial condition may be negatively impacted by a reduction in revenue as a result of these circumstances.

The  industry  in  which  we  operate  is  undergoing  continuing  consolidation  and  seeking  opportunities  to  participate  in  the  energy
transition, which may impact our results of operations.

Some  of  our  customers  have  consolidated  and  are  seeking  to  achieve  economies  of  scale  and  pricing  concessions.  In  addition,  they  are
making  investments  in  non-traditional  oil  and  gas  markets  as  part  of  the  energy  transition. As  a  result,  we  may  be  unable  to  supply  our
traditional oil and gas products to these customers if we do not develop new technology that meets their changing needs. In addition, the
consolidation  of  customers  and  focus  on  non-traditional  energy  investments  could  result  in  reduced  spending  by  such  companies  or
decreased  demand  for  our  existing  products  and  services.  Therefore,  to  counteract  these  pressures,  any  reduced  spending  or  decreased
demand for traditional energy products will need to be offset at the same or greater pace by sales to other customers or increased sales of
renewable energy technologies that we develop. If we are not successful in offsetting such sales, there could be a significant negative impact
on  our  results  of  operations  or  financial  condition.  We  are  unable  to  predict  what  effect  consolidations  and  the  energy  transition  in  the
industry may have on prices, spending by customers, selling strategies, competitive position, customer retention or our ability to negotiate
favorable agreements with customers.

A greater focus on budgetary discipline and technological advances have caused a decline in customer spending that may remain
at a low level despite an increase in commodity prices.

A portion of our business is driven by our customers’ spending on capital equipment such as drilling rigs. Our customers and their investors
have adopted business strategies placing significant emphasis on capital discipline that has limited the level of their spending. In addition,
new  techniques  and  technological  advances  have  reduced  the  number  of  days  required  to  drill  wells.  The  number  of  days  required  for  a
drilling rig to be on a site to drill a well has in many areas been reduced by at least half over the last several years. Given these factors, we
cannot provide any assurance that our capital equipment sales will increase if there is an increase in commodity prices.

We may be unable to employ a sufficient number of skilled and qualified workers.

The  delivery  of  our  products  and  services  requires  personnel  with  specialized  skills  and  experience.  Our  ability  to  be  productive  and
profitable  depends  upon  our  ability  to  employ  and  retain  skilled  workers.  During  periods  of  increasing  activity  in  our  industry,  our  ability  to
expand  our  operations  depends  in  part  on  our  ability  to  increase  the  size  of  our  skilled  labor  force.  In  addition,  during  those  periods,  the
demand for skilled workers is high, the supply is limited and the cost to attract and retain qualified personnel increases, especially for skilled
workers.  For  example,  we  have  recently  experienced  shortages  of  engineers,  mechanical  assemblers,  machinists  and  welders,  which  in
some  instances  slowed  the  productivity  of  certain  of  our  operations.  Furthermore,  a  significant  increase  in  the  wages  paid  by  competing
employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. During periods of low
activity in our industry, we have reduced the size of our labor force to match declining revenue levels, and other employees have chosen to
leave in order to find more stable employment. This causes us to lose skilled personnel, the absence of which could cause us to incur quality,
efficiency and deliverability issues in our operations, or delay our response to an upturn in the market. We are also exposed to the impact of
labor cost increases resulting from other factors such as high employment levels, increased wages offered

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by employers in other industries, and government regulations. If any of these events were to occur, our ability to respond quickly to customer
demands may be inhibited and our growth potential could be impaired.

We rely on relationships with key suppliers to operate and maintain our business.

Certain of our product lines depend on a limited number of third-party suppliers. In some cases, the suppliers own the intellectual property
rights to the products we sell, or possess the technology or specialized tooling required to manufacture them. As a result of this concentration
in  part  of  our  supply  chain,  our  business  and  operations  may  be  negatively  affected  if  our  key  suppliers  were  to  experience  significant
disruptions affecting the price, quality, availability or timely delivery of their products, such as from COVID-19, or if they were to decide to
terminate their relationships with us. For example, we have a limited number of suppliers for our bearings product lines and certain of our
valve product lines. The limited number of these suppliers can restrict the quantity and timeliness of customer deliveries. In addition, some of
our suppliers have imposed more stringent payment terms and conditions on us based on our perceived risk as a counterparty. The partial or
complete  loss  of  any  one  of  our  key  suppliers,  a  significant  adverse  change  in  the  relationship  with  any  of  these  suppliers,  through
consolidation or otherwise, would limit our ability to manufacture and sell certain of our products.

Our business depends upon our ability to obtain key raw materials and specialized equipment from suppliers. Increased costs of
raw materials and other components, and inflationary pressure, may result in increased operating expenses.

Should our suppliers be unable to provide the necessary raw materials or finished products or otherwise fail to deliver such materials and
products timely and in the quantities required, resulting delays in the provision of products or services to customers could have a material
adverse effect on our business. In particular, because many of our products are manufactured out of steel, we are particularly susceptible to
fluctuations  in  steel  prices  and  tariffs.  Our  results  of  operations  may  be  adversely  affected  by  our  inability  to  manage  the  rising  costs  and
availability  of  raw  materials  and  components  used  in  our  products.  For  example,  our  Coiled  Tubing  product  line  was  unable  to  source  a
sufficient amount of steel during the third and fourth quarters of 2021 to satisfy customer orders on a timely basis. In addition to the impact of
COVID-19 and related supply chain and operational disruptions, the availability and cost of necessary raw materials and finished products
may be impacted by macroeconomic demand, various national, regional, local, economic and political factors, and inflationary pressures.

Some of our contracts require us to compensate customers if we do not meet specified delivery obligations. We rely on suppliers to provide
required materials and in many instances these materials must meet certain specifications. Managing a geographically diverse supply base
poses inherently significant logistical challenges. Furthermore, the ability of third-party suppliers to deliver materials to our specifications may
be affected by events beyond our control. As a result, there is a risk that we could experience diminished supplier performance resulting in
longer  than  expected  lead  times  and/or  product  quality  issues.  For  example,  in  the  past,  we  have  experienced  issues  with  the  quality  of
certain  forgings  used  to  produce  materials  utilized  in  our  products.  As  a  result,  we  were  required  to  seek  alternative  suppliers  for  those
forgings,  which  resulted  in  increased  costs  and  a  disruption  in  our  supply  chain.  We  have  also  been  required  in  certain  circumstances  to
provide  better  economic  terms  to  some  of  our  suppliers  in  exchange  for  their  agreement  to  increase  their  capacity  to  satisfy  our  supply
needs. The occurrence of any of the foregoing factors would have a negative impact on our ability to deliver products to customers within
committed time frames.

A deterioration of global economic conditions could adversely affect our financial condition and results of operations.

A deterioration in global economic conditions, including an economic slowdown or recession in the United States or in any other country that
significantly affects the supply of or demand for oil or natural gas, inflation, geopolitical issues such as the continuing conflict between Russia
and  Ukraine,  the  availability  and  cost  of  credit  and  supply  chain  disruptions,  could  adversely  affect  our  financial  condition  and  results  of
operations. Global economic conditions have a significant impact on oil and natural gas prices, and any stagnation or deterioration in these
conditions  could  result  in  less  demand  for  our  products  and  services  and  could  cause  our  customers  to  reduce  their  planned  capital
spending.  Adverse  global  economic  conditions  also  may  cause  our  customers,  vendors  and/or  suppliers  to  lose  access  to  the  financing
necessary  to  sustain  or  increase  their  current  level  of  operations,  fulfill  their  commitments  and/or  fund  future  operations  and  obligations.
Additionally,  if  inflation  increases,  we  may  be  unable  to  raise  pricing  for  our  products  and  services  at  or  above  the  rate  of  inflation,  which
could  reduce  our  profit  margins.  In  the  past,  global  economic  conditions,  and  expectations  for  future  global  economic  conditions,  have
sometimes  experienced  significant  deterioration  in  a  relatively  short  period  of  time  and  there  can  be  no  assurance  that  global  economic
conditions or expectations for future global economic conditions will recover in the near term or not quickly deteriorate again due to one or
more factors.

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We  may  not  be  able  to  satisfy  technical  requirements,  testing  requirements,  code  requirements  or  other  specifications  under
contracts and contract tenders.

Many of our products are used in harsh environments and severe service applications. Our contracts with customers and customer requests
for bids often set forth detailed specifications or technical requirements (including that they meet certain industrial code requirements, such
as API, ASME or similar codes, or that our processes and facilities maintain ISO or similar certifications) for our products and services, which
may  also  include  extensive  testing  requirements.  We  anticipate  that  such  code  testing  requirements  will  become  more  common  in  our
contracts. We cannot assure that our products or facilities will be able to satisfy the specifications or requirements, or that we will be able to
perform  the  full-scale  testing  necessary  to  prove  that  the  product  specifications  are  satisfied  in  future  contract  bids  or  under  existing
contracts, or that the costs of modifications to our products or facilities to satisfy the specifications and testing will not adversely affect our
results of operations. If our products or facilities are unable to satisfy such requirements, or we are unable to perform or satisfy any required
full-scale  testing,  we  may  suffer  reputational  harm  and  our  customers  may  cancel  their  contracts  and/or  seek  new  suppliers,  and  our
business, results of operations or financial position may be adversely affected.

A failure or breach of our information technology infrastructure, including as a result of cyber attacks or failures of data protection
measures, could adversely impact our business and results of operations and expose us to potential liabilities.

The efficient operation of our business is dependent on our information technology (“IT”) systems. Accordingly, we rely upon the capacity,
reliability and security of our IT hardware and software infrastructure and our ability to expand and update this infrastructure in response to
our  changing  needs,  including  remote  connectivity.  Despite  our  implementation  of  security  measures,  our  IT  systems  are  vulnerable  to
computer viruses, natural disasters, incursions by intruders or hackers, failures in hardware or software, power fluctuations, cyber terrorists
and other similar disruptions. Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cyber
attacks. In certain instances, our IT systems have failed to perform as anticipated, resulting in disruptions in operations and other adverse
consequences. Should our IT systems materially fail in the future, it may result in numerous other adverse consequences, including reduced
effectiveness  and  efficiency  of  our  operations,  inappropriate  disclosure  or  loss  of  confidential  or  sensitive  information,  increased  overhead
costs,  and  loss  of  intellectual  property,  which  could  lead  to  liability  to  third  parties  or  otherwise  and  have  a  material  adverse  effect  on  our
business and results of operations. While we carry cyber insurance, we cannot be certain that our coverage will be adequate for liabilities
actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not
deny  coverage  as  to  any  future  claim.  In  addition,  we  may  be  required  to  incur  significant  costs  to  prevent  damage  caused  by  these
disruptions  or  security  breaches  in  the  future.  Further,  cyber  attacks  on  a  communications  network  or  power  grid  could  cause  operational
disruption resulting in loss of revenues.

In  addition,  recent  laws  and  regulations  governing  data  privacy  and  the  unauthorized  disclosure  of  confidential  information,  including  the
European Union General Data Protection Regulation and laws enacted in certain U.S. jurisdictions, pose increasingly complex compliance
challenges and potentially elevate our costs. Any failure by us to comply with these laws and regulations, including as a result of a security or
privacy breach, could result in significant penalties and liabilities for us. Additionally, if we acquire a company that has violated or is not in
compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result.

Our  success  depends  on  our  ability  to  implement  new  technologies  and  services  more  efficiently  and  quickly  than  our
competitors.

Our success depends on our ability to develop and implement new product designs and improvements that meet our customer’s needs in a
manner  equal  to  or  more  effective  than  those  offered  by  our  competitors.  If  we  are  not  able  to  continue  to  provide  new  and  innovative
services  and  technologies  in  a  manner  that  allows  us  to  meet  evolving  industry  requirements,  including  the  focus  on  renewable  energy
opportunities, at prices acceptable to our customers, our financial results would be negatively affected. In addition, some of our competitors
are large national and multinational companies that we believe are able to devote greater financial, technical, manufacturing and marketing
resources to research and develop more or better systems, services and technologies than we are able to do. Moreover, as a result of the
currently  depressed  levels  of  customer  activity,  we  may  be  unable  to  allocate  sufficient  amounts  of  capital  to  research  and  new  product
development activities, which may limit our ability to compete in the market and generate revenue.

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Our  success  will  be  affected  by  the  use  and  protection  of  our  proprietary  technology.  Due  to  the  limitations  of  our  intellectual
property rights, our ability to exclude others from the use of our proprietary technology may be reduced. Furthermore, we may be
adversely affected by disputes regarding intellectual property rights.

Our success will be affected by our development and implementation of new product designs and improvements and by our ability to protect
and  maintain  intellectual  property  assets  related  to  these  developments.  Although  in  many  cases  our  products  are  not  protected  by  any
registered intellectual property rights, in some cases we rely on a combination of patents and trade secret laws to establish and protect this
proprietary technology.

We  currently  hold  multiple  U.S.  and  international  patents  and  have  several  pending  patent  applications  associated  with  our  products  and
processes. Some work is conducted in international waters and, therefore, does not fall within the scope of any country’s patent jurisdiction.
As a result, we would be limited in the degree to which we can enforce our patents against infringement occurring in international waters and
other “non-covered” territories. Also, we do not have patents in every jurisdiction in which we conduct business and our patent portfolio will
not protect all aspects of our business and may relate to obsolete or unusual methods, which would not prevent third parties from entering
the same market.

From time to time, our competitors have infringed upon, misappropriated, circumvented, violated or challenged the validity or enforceability of
our  intellectual  property.  In  the  future,  we  may  not  be  able  to  adequately  protect  or  enforce  our  intellectual  property  rights.  Our  failure  or
inability  to  protect  our  proprietary  information  or  successfully  oppose  intellectual  property  challenges  against  us  could  materially  and
adversely  affect  our  competitive  position.  Moreover,  third  parties  from  time  to  time  may  initiate  litigation  against  us  by  asserting  that  the
conduct of our business infringes, misappropriates or otherwise violates their intellectual property rights. For example, in 2017, one of our
subsidiaries  filed  an  action  seeking  a  declaratory  judgment  action  of  non-infringement  against  Tenaris  Coiled  Tubes,  LLC.  Tenaris
subsequently filed counterclaims against our subsidiary and us alleging infringement on certain of its patents. We may not prevail in any such
legal proceedings, and our products and services may be found to infringe, impair, misappropriate, dilute or otherwise violate the intellectual
property  rights  of  others.  Any  legal  proceeding  concerning  intellectual  property  is  likely  to  be  protracted  and  costly  and  is  inherently
unpredictable, and could have a material adverse effect on our business, regardless of its outcome. Further, our intellectual property rights
may not have the value expected and such value is expected to change over time as new products are designed and improved.

We may incur liabilities, fines, penalties or additional costs, or we may be unable to sell to certain customers if we do not maintain
safe operations.

If we fail to comply with safety regulations or maintain an acceptable level of safety at our facilities, we may incur fines, penalties or other
liabilities,  or  we  may  be  held  criminally  liable.  In  addition,  a  portion  of  our  work  force  is  made  up  of  newer  employees  who  are  less
experienced and therefore more prone to injury. As a result, new employees require ongoing training and a higher degree of oversight. We
incur  additional  costs  to  encourage  training  and  ensure  proper  oversight  of  these  shorter  service  employees.  Moreover,  we  incur  costs  in
connection with equipment upgrades, or other costs to facilitate our compliance with safety regulations. Failure to maintain safe operations or
achieve certain safety performance metrics could disqualify us from doing business with certain customers, particularly major oil companies.

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.

Effective  internal  controls  over  financial  processes  and  reporting  are  necessary  for  us  to  provide  reliable  financial  reports  that  effectively
prevent fraud and operate successfully. Our efforts to maintain internal control systems have not been successful in the past. The existence
of a material weakness in the future or a failure of our internal controls could affect our ability to obtain financing or increase the cost of any
such financing. The identification of a material weakness in the future could also cause investors to lose confidence in the reliability of our
financial statements and could result in a decrease in the value of our common stock. In addition, the entities that we acquire in the future
may not maintain effective systems of internal control or we may encounter difficulties integrating our system of internal controls with those of
acquired  entities.  If  we  are  unable  to  maintain  effective  internal  controls  and,  as  a  result,  fail  to  provide  reliable  financial  reports  and
effectively prevent fraud, our reputation and operating results would be harmed.

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The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material
adverse effect on our business, financial condition and results of operations.

Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, and fear of such events have adversely impacted and may
continue to adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil
and natural gas and the level of demand for our products and services. Other effects of such public health crises, pandemics and epidemics,
including  the  COVID-19  pandemic,  have  included  and  may  continue  to  include  significant  volatility  and  disruption  of  the  global  financial
markets; continued volatility of oil and natural gas prices and related uncertainties around OPEC+ production; disruption of our operations;
impact  to  costs;  loss  of  workers;  labor  shortages;  operational  and  supply  chain  disruptions;  material  or  equipment  shortages;  logistics
constraints;  customer  demand  for  our  products  and  services  and  industry  demand  generally;  capital  spending  by  oil  and  natural  gas
companies;  our  liquidity;  the  price  of  our  securities  and  trading  markets  with  respect  thereto;  our  ability  to  access  capital  markets;  asset
impairments and other accounting changes; certain of our customers experiencing bankruptcy or otherwise becoming unable to pay vendors,
including  us;  and  employee  impacts  from  illness,  travel  restrictions,  including  border  closures  and  other  community  response  measures.
Such public health crises, pandemics and epidemics are continuously evolving and the extent to which our business operations and financial
results  continue  to  be  affected  depends  on  various  factors  beyond  our  control,  such  as  the  duration,  severity  and  sustained  geographic
resurgence of the COVID-19 virus; the emergence, severity and spread of new variants of the COVID-19 virus; the impact and effectiveness
of  governmental  actions  to  contain  and  treat  such  outbreaks,  including  government  policies  and  restrictions;  vaccine  hesitancy,  vaccine
mandates, and voluntary or mandatory quarantines; and the global response surrounding such uncertainties.

Given the dynamic nature of these events, we cannot reasonably estimate the period of time that COVID-19 and related market conditions
will persist, the full extent of the impact they will have on our business, financial condition, results of operations or cash flows or the pace or
extent of any subsequent recovery. The ultimate extent of the impact of COVID-19 will depend largely on future developments, including the
spread  of  the  virus  within  communities,  the  success  of  programs  designed  to  prevent  the  virus  and  its  spread  and  the  related  impact  on
overall  economic  activity,  all  of  which  are  uncertain  and  cannot  be  predicted  with  certainty  at  this  time.  For  more  information,  see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Conditions.”

Facility consolidations or expansions may subject us to risks of operating inefficiencies, construction delays and cost overruns.

We  have  consolidated  and  may  continue  to  consolidate  facilities  to  achieve  operating  efficiencies  and  reduce  costs.  These  facility
consolidations  may  be  delayed  and  cause  us  to  incur  increased  costs,  product  or  service  delivery  delays,  decreased  responsiveness  to
customer  needs,  liabilities  under  terms  and  conditions  of  sale  or  other  operational  inefficiencies,  or  may  not  provide  the  benefits  we
anticipate. We may lose key personnel and operational knowledge that might lead to quality issues, delays in production or other competitive
disadvantages.

In the future, we may grow our businesses through the construction of new facilities and expansions of our existing facilities. These projects,
and any other capital asset construction projects that we may commence, are subject to similar risks of delay or cost overruns inherent in any
construction project resulting from numerous factors, including the following:

•

•

•

•

difficulties or delays in obtaining land;

shortages of key equipment, materials or skilled labor;

unscheduled delays in the delivery of ordered materials and equipment;

unanticipated cost increases;

• weather interferences; and

•

difficulties in obtaining necessary permits or in meeting permit conditions.

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Our acquisitions and dispositions may not result in anticipated benefits and may present risks not originally contemplated, which
may have a material adverse effect on our business, consolidated results of operations and consolidated financial condition.

We  continually  seek  opportunities  to  maximize  efficiency  and  value  through  various  transactions,  including  purchases  or  sales  of  assets,
businesses, investments, or joint venture interests. These transactions are intended to (but may not) result in the realization of savings, the
creation  of  efficiencies,  the  offering  of  new  products  or  services,  the  generation  of  cash  or  income,  or  the  reduction  of  risk.  Acquisition
transactions may use cash on hand or be financed by additional borrowings or by the issuance of our common stock. These transactions
may also affect our business, consolidated results of operations and consolidated financial condition. These transactions also involve risks,
and we cannot ensure that:

•

•

•

•

•

•

•

any acquisitions we attempt will be completed on the terms announced, or at all;

any acquisitions would result in an increase in income or provide an adequate return of capital or other anticipated benefits;

any acquisitions would be successfully integrated into our operations and internal controls;

the  due  diligence  conducted  prior  to  an  acquisition  would  uncover  situations  that  could  result  in  financial  or  legal  exposure,  including
under the U.S. Foreign Corrupt Practices Act (“FCPA”), or that we will appropriately quantify the exposure from known risks;

any disposition would not result in decreased earnings, revenue, or cash flow;

use of cash for acquisitions would not adversely affect our cash available for capital expenditures and other uses; or

any dispositions, investments, or acquisitions, including integration efforts, would not divert management resources.

A natural disaster, catastrophe or other event could result in severe property damage, which could curtail our operations.

Adverse  weather  conditions,  such  as  hurricanes,  tornadoes,  ice  or  snow  may  damage  or  destroy  our  facilities,  interrupt  or  curtail  our
operations, or our customers’ operations, cause supply disruptions and result in a loss of revenue, which may or may not be insured. For
example, certain of our facilities located in Oklahoma and Pennsylvania have experienced suspensions in operations due to tornado activity
or extreme cold weather conditions.

Some of our operations involve risks of, among other things, property damage, which could curtail our operations. Disruptions in operations
or damage to a manufacturing plant could reduce our ability to produce products and satisfy customer demand. In particular, we have offices
and manufacturing facilities in Houston, Texas, and in various places throughout the U.S. Gulf Coast region. These offices and facilities are
particularly  susceptible  to  severe  tropical  storms  and  hurricanes,  which  may  disrupt  our  operations.  Damage  to  one  or  more  of  our
manufacturing facilities by severe weather or any other disaster, accident, catastrophe or event, could significantly interrupt our operations.
Similar interruptions could result from damage to production or other facilities that provide supplies or other raw materials to our plants or
other  stoppages  arising  from  factors  beyond  our  control.  These  interruptions  might  involve  significant  damage  to  property,  among  other
things, and repairs might take a significant amount of time. For example, in the third quarter 2017, we were impacted by idled facilities and
operations  directly  related  to  Hurricane  Harvey’s  widespread  damage  in  Texas  and  Louisiana.  As  a  result,  our  financial  results  were
negatively impacted by foregone revenue and under-absorption of manufacturing costs, and, indirectly, due to supplier and logistical delays.

Legal and Regulatory Risks:

Our operations and our customers’ operations are subject to a variety of governmental laws and regulations that affect our and our
customers’ costs, prohibit or curtail our customers’ operations in certain areas, limit the demand for our products and services or
restrict our operations.

Our business and our customers’ businesses may be significantly affected by:

•

•

federal, state and local U.S. and non-U.S. laws and other regulations relating to oilfield operations, worker safety and protection of the
environment;

changes in these laws and regulations;

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•

•

the level of enforcement of these laws and regulations; and

interpretation of existing laws and regulations.

In  addition,  we  depend  on  the  demand  for  our  products  and  services  from  the  oil  and  natural  gas  industry.  This  demand  is  affected  by
changing  taxes,  price  controls  and  other  laws  and  regulations  relating  to  the  oil  and  natural  gas  industry  in  general.  For  example,  the
adoption of laws and regulations curtailing exploration and development drilling for oil and natural gas for economic or other policy reasons
could adversely affect our operations by limiting demand for our products. In addition, some non-U.S. countries adopt regulations or practices
that  provide  an  advantage  to  local  oil  companies  in  bidding  for  oil  leases,  or  require  local  companies  to  perform  oilfield  services  currently
supplied  by  international  service  companies.  To  the  extent  that  such  companies  are  not  our  customers,  or  we  are  unable  to  develop
relationships  with  them,  our  business  may  suffer.  We  cannot  determine  the  extent  to  which  our  future  operations  and  earnings  may  be
affected by new legislation, new regulations or changes in existing regulations.

Because of our non-U.S. operations and sales, we are also subject to changes in non-U.S. laws and regulations that encourage or require
hiring of local contractors or require non-U.S. contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. If we fail to
comply with any applicable law or regulation, our business, results of operations or financial condition may be adversely affected.

Potential legislation or regulations restricting the use of hydraulic fracturing could reduce demand for our products.

Certain environmental advocacy groups and politicians have suggested that additional federal, state and local laws and regulations may be
needed to more closely regulate the hydraulic fracturing process, and have made claims that hydraulic fracturing techniques are harmful to
surface  water  and  drinking  water  resources.  Various  governmental  entities  (within  and  outside  the  U.S.)  are  in  the  process  of  studying,
restricting, regulating or preparing to regulate hydraulic fracturing, directly or indirectly.

The EPA has asserted federal authority over hydraulic fracturing using fluids that contain “diesel fuel” under the federal Safe Drinking Water
Act  (“SDWA”)  Underground  Injection  Control  Program  and  has  issued  permitting  guidance  for  hydraulic  fracturing  operations  involving  the
use of diesel fuel in fracturing fluids in those states where the EPA is the permitting authority.  Additionally, in March 2015, the Department of
the  Interior’s  Bureau  of  Land  Management  (“BLM”)  issued  final  rules,  including  new  requirements  relating  to  public  disclosure,  wellbore
integrity and handling of flowback water, to regulate hydraulic fracturing on federal and Indian lands. These rules were rescinded by rule in
December  2017;  however,  in  January  2018,  California  and  a  coalition  of  environmental  groups  filed  a  lawsuit  in  the  Northern  District  of
California to challenge the BLM’s rescission of the rules. The Northern District of California upheld the rescission in 2020, but this decision
was then appealed to the Ninth Circuit Court of Appeals. This litigation is ongoing and future implementation of the BLM rules is uncertain at
this time.

In past sessions, Congress has considered, but not passed, the adoption of legislation to provide for federal regulation of hydraulic fracturing
under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. Some states have adopted, and other
states  are  considering  adopting,  legal  requirements  that  could  impose  more  stringent  permitting,  public  disclosure  or  well  construction
requirements on hydraulic fracturing activities or impose bans or moratoria on these activities altogether. Local governments also may seek
to  adopt  ordinances  within  their  jurisdictions  regulating  the  time,  place  and  manner  of  drilling  activities  in  general  or  hydraulic  fracturing
activities in particular, in some cases banning hydraulic fracturing entirely. For example, the Colorado state legislature passed a package of
hydraulic  fracturing  regulations  in  April  2019.  Under  the  new  law,  the  state  oil  and  natural  gas  agency  must  review  well  locations  for
environmental  protection  criteria.  In  addition,  the  legislation  broadened  the  authority  for  local  governments  to  further  regulate  or  restrict
hydraulic fracturing. In April 2021, the California governor’s office directed state regulators to end the issuance of new permits for hydraulic
fracturing by January 2024. In February 2018, the Oklahoma Corporation Commission released a protocol that requires operators to suspend
hydraulic fracturing well completion operations in response to certain levels of seismic activity.

If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where our oil
and  natural  gas  exploration  and  production  customers  operate,  they  could  incur  potentially  significant  added  costs  to  comply  with  such
requirements,  experience  delays  or  curtailment  in  the  pursuit  of  exploration,  development,  and  production  activities,  and  perhaps  even  be
precluded from drilling wells, some or all of which could adversely affect demand for our products and services from those customers.

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Our  financial  results  could  be  adversely  impacted  by  changes  in  regulation  of  oil  and  natural  gas  exploration  and  development
activity in response to significant environmental incidents or climate change actions.

Environmental incidents such as the Macondo well incident could result in drilling moratoria, and could result in increased federal, state, and
international  regulation  of  our  and  our  customers’  operations  that  could  negatively  impact  our  earnings,  prospects  and  the  availability  and
cost of insurance coverage. Any additional regulation of the exploration and production industry as a whole could result in fewer companies
being financially qualified to operate offshore or onshore in the U.S. or in non-U.S. jurisdictions, resulting in higher operating costs for our
customers and reduced demand for our products and services.

In January 2021, President Biden signed an executive order that, among other things, instructed the Secretary of the Interior to pause new oil
and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil
and natural gas permitting and leasing practices. Following that executive order, the acting Secretary of the Interior issued an order imposing
a 60 day pause on the issuance of new leases, permits and right-of-way grants for oil and gas drilling on federal lands, unless approved by
senior officials at the Department of the Interior. In March 2021, prior to the expiration of the Secretary of the Interior’s order, President Biden
announced that career staff at the Department of the Interior would resume processing oil and gas drilling permits. In August 2022, a federal
judge for the U.S. District Court of the Western District of Louisiana issued a permanent injunction against the pause of oil and natural gas
leasing on public lands or in offshore waters of the thirteen plaintiff states that brought the lawsuit, which followed a June 2021 nationwide
preliminary injunction by the district court that was subsequently vacated by the U.S. Court of Appeals for the Fifth Circuit. The full impact of
these  federal  actions  remains  unclear,  and  if  other  restrictions  or  prohibitions  become  effective  in  the  future,  they  could  have  an  adverse
impact on our business, financial condition, results of operations and cash flows.

Our operations are subject to environmental and operational safety laws and regulations that may expose us to significant costs
and liabilities.

Our  operations  are  subject  to  numerous  stringent  and  complex  laws  and  regulations  governing  the  discharge  of  materials  into  the
environment, health and safety aspects of our operations, or otherwise relating to human health and environmental protection. These laws
and  regulations  may,  among  other  things,  regulate  the  management  and  disposal  of  hazardous  and  nonhazardous  wastes;  require
acquisition of environmental permits related to our operations; restrict the types, quantities, and concentrations of various materials that can
be released into the environment; limit or prohibit operational activities in certain ecologically sensitive and other protected areas; regulate
specific  health  and  safety  criteria  addressing  worker  protection;  require  compliance  with  operational  and  equipment  standards;  impose
testing, reporting and record keeping requirements; and require remedial measures to mitigate pollution from former and ongoing operations.
Failure to comply with these laws and regulations or to obtain or comply with permits may result in the inability to conduct certain operational
activities,  assessment  of  administrative,  civil  and  criminal  penalties,  imposition  of  remedial  or  corrective  action  requirements  and  the
imposition  of  injunctions  to  prohibit  certain  activities  or  force  future  compliance.  Certain  environmental  laws  may  impose  joint  and  several
liability,  without  regard  to  fault  or  legality  of  conduct,  on  classes  of  persons  who  are  considered  to  be  responsible  for  the  release  of  a
hazardous  substance  into  the  environment.  In  addition,  these  risks  may  be  greater  for  us  because  the  companies  we  acquire  or  have
acquired may not have allocated sufficient resources and management focus to environmental compliance, potentially requiring rehabilitative
efforts during the integration process or exposing us to liability before such rehabilitation occurs.

The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact the
environment. The implementation of new laws and regulations could result in materially increased costs, stricter standards and enforcement,
larger fines and liability and increased capital expenditures and operating costs, particularly for our customers.

Tariffs imposed by the U.S. government could have a further severe adverse effect on our results of operations.

The  U.S.  government  imposed  global  tariffs  on  certain  imported  steel  and  aluminum  products  pursuant  to  Section  232  of  the  Trade
Expansion Act of 1962, as well as tariffs on imports of various Chinese product (including steel) pursuant to Section 301 of the Trade Act of
1974. In response, China and other countries have imposed retaliatory tariffs on a wide range of U.S. products, including those containing
steel and aluminum. The U.S. government recently entered into tariff agreements with the European Union, Japan, and the United Kingdom
to ease Section 232 tariffs on the close allies and trade partners, but Section 232 tariffs still remain in effect with respect to the other nations.
In addition, the U.S. government issued a final determination pursuant to an anti-dumping duty order on

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certain hot-rolled steel products from Japan, in which it found imports of the subject merchandise were sold in the United States at prices
below normal value during the October 2019 to September 2020 time period. As a result, the U.S. government assessed a dumping margin
of 24.07% for imports from Japan of the subject steel products. Further, the U.S. government conducted a sunset review on its existing anti-
dumping  duty  on  certain  hot-rolled  steel  products  from  Australia,  Brazil,  Japan,  the  Republic  of  Korea,  the  Netherlands,  the  Republic  of
Turkey,  and  the  United  Kingdom  that  was  issued  in  2016,  and  determined  to  continue  the  anti-dumping  duty  order  on  all  subject  steel
products except for those from Brazil. Our efforts to mitigate the impact of tariffs on raw materials through the diversification of our supply
chain,  exemption  requests  and  other  measures  may  not  be  sufficiently  successful.  Furthermore,  a  prolonged  imposition  of  tariffs  on  our
goods could have a significant adverse effect on our results of operations.

We are subject to litigation risks that may not be covered by insurance.

In  the  ordinary  course  of  business,  we  become  the  subject  of  claims,  lawsuits  and  administrative  proceedings  seeking  damages  or  other
remedies concerning our commercial operations, products, employees and other matters, including occasional claims by individuals alleging
exposure to hazardous materials as a result of our products or operations. Some of these claims relate to the activities of businesses that we
have acquired, even though these activities may have occurred prior to our acquisition of such businesses. Our insurance does not cover all
of  our  potential  losses,  and  we  are  subject  to  various  self-insured  retentions  and  deductibles  under  our  insurance.  A  judgment  may  be
rendered against us in cases in which we could be uninsured or which exceed the amounts that we currently have reserved or anticipate
incurring for such matters.

The  number  and  cost  of  our  current  and  future  asbestos  claims  could  be  substantially  higher  than  we  have  estimated  and  the
timing of payment of claims could be sooner than we have estimated.

One of our subsidiaries has been and continues to be named as a defendant in asbestos related product liability actions. The actual amounts
expended on asbestos-related claims in any year may be impacted by the number of claims filed, the nature of the allegations asserted in the
claims, the jurisdictions in which claims are filed, and the number of settlements. As of December 31, 2022, our subsidiary has a net liability
of $0.3 million for the estimated indemnity cost associated with the resolution of its current open claims and future claims anticipated to be
filed during the next five years.

Due to a number of uncertainties, the actual costs of resolving these pending claims could be substantially higher than the current estimate.
Among these are uncertainties as to the ultimate number and type of lawsuits filed, the amounts of claim costs, the impact of bankruptcies of
other companies with asbestos suits or of our insurers, and potential legislative changes and uncertainties surrounding the litigation process
from  jurisdiction  to  jurisdiction  and  from  case  to  case.  In  addition,  future  claims  beyond  the  five-year  forecast  period  are  possible,  but  the
accrual does not cover losses that may arise from such additional future claims. Therefore, any such future claims could result in a loss.

Significant costs are incurred in defending asbestos claims and these costs are recorded at the time incurred. Receipt of reimbursement from
our insurers may be delayed for a variety of reasons. In particular, if our primary insurers claim that certain policy limits have been exhausted,
we  may  be  delayed  in  receiving  reimbursement  due  to  the  transition  from  one  set  of  insurers  to  another.  Our  excess  insurers  may  also
dispute the claims of exhaustion, or may rely on certain policy requirements to delay or deny claims. Furthermore, the various per occurrence
and aggregate limits in different insurance policies may result in extended negotiations or the denial of reimbursement for particular claims.
For more information on the cost sharing agreements related to this risk, refer to Note 12 Commitments and Contingencies.

Our  products  are  used  in  operations  that  are  subject  to  potential  hazards  inherent  in  the  oil  and  natural  gas  industry  and,  as  a
result, we are exposed to potential liabilities that could affect our financial condition and reputation.

Our products are used in potentially hazardous completion, production and drilling applications in the oil and natural gas industry where an
accident or a failure of a product can potentially have catastrophic consequences. Risks inherent to these applications, such as equipment
malfunctions;  failures;  explosions;  blowouts  or  uncontrollable  flows  of  oil,  natural  gas  or  well  fluids;  and  natural  disasters  on  land  or  in
deepwater or shallow-water environments, can cause personal injury; loss of life; suspension of operations; damage to formations; damage
to facilities; business interruption and damage to or destruction of property, surface water and drinking water resources, equipment and the
environment. These risks can be caused or contributed to by failure of, defects in or misuse of our products. In addition, we provide certain
services that could cause, contribute to or be implicated in these events. If our products or services fail to meet specifications or are involved
in accidents or failures, we could face

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warranty, contract or other litigation claims, which could expose us to substantial liability for personal injury, wrongful death, property damage,
loss of oil and natural gas production, and pollution or other environmental damages. In addition, failure of our products to operate properly
or to meet specifications may increase costs by requiring additional engineering resources and services, replacement of parts and equipment
or monetary reimbursement to a customer. Our insurance policies may not be adequate to cover all liabilities. Further, insurance may not be
generally available in the future or, if available, insurance premiums may make such insurance commercially unjustifiable. Moreover, even if
we are successful in defending a claim, it could be time-consuming and costly to defend.

In  addition,  the  frequency  and  severity  of  such  incidents  could  affect  operating  costs,  insurability  and  relationships  with  customers,
employees and regulators. In particular, our customers may elect not to purchase our products or services if they view our safety record as
unacceptable, which could cause us to lose customers and revenues. In addition, these risks may be greater for us because we may acquire
companies that have not allocated significant resources and management focus to quality or safety, requiring rehabilitative efforts during the
integration  process.  We  may  incur  liabilities  for  losses  associated  with  these  newly  acquired  companies  before  we  are  able  to  rehabilitate
such companies’ quality, safety and environmental programs.

Climate  change  legislation  or  regulations  restricting  emissions  of  greenhouse  gases  and  related  divestment  and  other  efforts
could increase our operating costs or reduce demand for our products.

Environmental  advocacy  groups  and  regulatory  agencies  in  the  U.S.  and  other  countries  have  focused  considerable  attention  on  the
emissions  of  carbon  dioxide,  methane  and  other  greenhouse  gases  and  their  potential  role  in  climate  change.  In  response  to  scientific
studies  suggesting  that  emissions  of  GHGs,  including  carbon  dioxide  and  methane,  are  contributing  to  the  warming  of  the  Earth’s
atmosphere  and  other  climatic  conditions,  the  U.S.  Congress  has  considered  adopting  comprehensive  legislation  to  reduce  emissions  of
GHGs,  and  almost  half  of  the  states  have  already  taken  legal  measures  to  reduce  emissions  of  GHGs,  primarily  through  measures  to
promote the use of renewable energy and/or regional GHG cap-and-trade programs. The EPA has attempted to regulate greenhouse gas
emissions under the federal Clean Air Act. In December 2009, the EPA determined that emissions of carbon dioxide, methane and certain
other  GHGs  endanger  public  health  and  the  environment  because  emissions  of  such  gases  are,  according  to  the  EPA,  contributing  to
warming  of  the  Earth’s  atmosphere  and  other  climatic  changes.  In  October  2015,  the  EPA  finalized  the  Clean  Power  Plan  (“CPP”),  which
tried to impose additional obligations on the power generation sector to reduce GHG emissions. In August 2019, the EPA finalized the repeal
of  the  2015  regulations  and  replaced  them  with  the  Affordable  Clean  Energy  rule  (“ACE”),  which  designates  heat  rate  improvement,  or
efficiency improvement, as the best system of emissions reduction for carbon dioxide from existing coal-fired electric utility generating units.
In 2021, the U.S. Court of Appeals for the District of Columbia struck down the ACE rule but did not reinstate the former CPP regulation. In
June  2022,  the  CPP  was  struck  down  by  the  United  States  Supreme  Court,  which  held  that  Congress  did  not  grant  EPA  the  authority  to
devise emissions caps based on the generation-shifting approach the EPA took in the CPP. In August 2020, the EPA rescinded methane and
volatile  organic  compound  emissions  standards  for  new  and  modified  oil  and  gas  transmission  and  storage  infrastructure  previously
promulgated  in  2016,  as  well  as  methane  limits  for  new  and  modified  oil  and  gas  production  and  processing  equipment.  The  EPA  also
relaxed  requirements  for  oil  and  gas  operators  to  monitor  emissions  leaks.  However,  in  November  2021,  the  EPA  proposed  new  source
performance standards (“NSPS”) updates and emission guidelines to reduce methane and other pollutants from the oil and gas industry. In
December 2022, the EPA issued a supplemental proposal to update, strengthen, and expand the November 2021 NSPS updates and further
reduce methane and other pollutants from the oil and gas industry. The public comment period on the proposed rule ended on January 5,
2023. The EPA has also adopted rules requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission
sources in the U.S., including oil and natural gas systems. In August 2022, President Biden also signed into law the Inflation Reduction Act,
which  contains  tax  inducements  and  other  provisions  that  incentivize  investment,  development,  and  deployment  of  alternative  energy
sources and technologies, which could increase operating costs within the oil and gas industry and accelerate the transition away from fossil
fuels.

Efforts  have  also  been  made  and  continue  to  be  made  in  the  international  community  toward  the  adoption  of  international  treaties  or
protocols that would address global climate change issues. Although the U.S. had withdrawn from the Paris Agreement in November 2020,
the  Biden  Administration  officially  reentered  the  U.S.  into  the  agreement  in  February  2021.  Under  the  Paris  Agreement,  the  Biden
Administration  has  committed  the  United  States  to  reducing  its  greenhouse  gas  emissions  by  50  -  52%  from  2005  levels  by  2030.  In
November 2021, the United States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed
to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and
cooperating toward the advancement of the development of clean energy.

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The adoption of additional legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased
operating costs to comply with new emissions-reduction or reporting requirements. Any such legislation or regulatory programs could also
increase the cost of consuming, and thereby reduce demand for, hydrocarbons that certain of our customers produce and reduce revenues
by  other  of  our  customers  who  provide  services  to  those  exploration  and  production  customers.  Consequently,  legislation  and  regulatory
programs to reduce emissions of greenhouse gases could have a material adverse effect on our business, financial condition and results of
operations.

In  addition  to  the  regulatory  efforts  described  above,  there  have  also  been  efforts  in  recent  years  aimed  at  the  investment  community,
including investment advisers, sovereign wealth funds, public pension funds, universities and other groups, promoting the divestment of fossil
fuel equities as well as to pressure lenders and other financial services companies to limit or curtail activities with companies engaged in the
extraction  of  fossil  fuel  reserves.  In  connection  with  such  developments,  numerous  market  participants,  including  certain  New  York  State
pension and public employee retirement funds, have announced plans to completely or partially divest from fossil fuel and related stocks or
otherwise  pursue  net-zero  portfolio  strategies.  If  these  efforts  are  successful,  our  ability  to  access  capital  markets  may  be  limited  and  our
stock price may be negatively impacted.

Members of the investment community have recently increased their focus on sustainability practices, including practices related to GHGs
and climate change, in the oil and natural gas industry. As a result, we and our customers have come under increasing pressure to improve
our sustainability and other Environmental, Social and Governance (“ESG”) performance and to increase our public reporting and disclosure
on our ESG practices. Some of our customers have begun to screen their service providers, including us, for compliance with sustainability
metrics and we may incur additional costs to comply with ESG reporting expectations and ESG-linked contracting policies for our customers
and suppliers.

Additionally,  members  of  the  investment  community  have  begun  to  screen  companies  such  as  ours  for  sustainability  performance  before
investing  in  our  stock.  If  we  are  unable  to  establish  adequate  sustainability  practices,  we  may  lose  customers,  our  stock  price  may  be
negatively  impacted,  our  reputation  may  be  negatively  affected,  and  it  may  be  more  difficult  for  us  to  compete  effectively.  Our  efforts  to
improve our sustainability practices in response to these pressures may increase our costs, and we may be forced to implement technologies
that  are  not  economically  viable  in  order  to  improve  our  sustainability  performance  and  to  perform  services  for  certain  customers.  Finally,
some  scientists  have  concluded  that  increasing  concentrations  of  greenhouse  gases  in  the  Earth’s  atmosphere  may  produce  climate
changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic
events.

Finally,  increasing  attention  to  the  risks  of  climate  change  has  resulted  in  an  increased  possibility  of  lawsuits  or  investigations  brought  by
public and private entities against oil and natural gas companies in connection with their greenhouse gas emissions. Should we be targeted
by  any  such  litigation  or  investigations,  we  may  incur  liability,  which,  to  the  extent  that  societal  pressures  or  political  or  other  factors  are
involved, could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors.

Risks Related to our International Operations:

Our business operations worldwide are subject to a number of U.S. federal laws and regulations, including restrictions imposed by
the FCPA as well as trade sanctions administered by the Office of Foreign Assets Control and the Commerce Department, as well
as similar laws in non-U.S. jurisdictions that govern our operations by virtue of our presence or activities there.

We rely on a large number of agents in non-U.S. countries that have been identified as posing a high risk of corrupt activities and whose local
laws and customs differ significantly from those in the U.S. In many countries, particularly in those with developing economies, it is common
to engage in business practices that are prohibited by the regulations applicable to us. The U.S. Foreign Corrupt Practices Act and similar
anti-corruption laws in other jurisdictions, including the UK Bribery Act 2010, (“anti-corruption laws”) prohibit corporations and individuals from
engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. We may be held responsible
for violations by our employees, contractors and agents for violations of anti-corruption laws. We may also be held responsible for violations
by an acquired company that occur prior to an acquisition, or subsequent to an acquisition but before we are able to institute our compliance
procedures.  In  addition,  our  non-U.S.  competitors  that  are  not  subject  to  the  FCPA  or  similar  anti-corruption  laws  may  be  able  to  secure
business or other preferential treatment in such countries by means that such laws prohibit with respect to us. The UK Bribery Act 2010 is
broader in scope than the FCPA, applies to public and private sector corruption, and contains no facilitating payments exception. A violation
of any of these laws, even if prohibited by our policies, could have a

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material adverse effect on our business. Actual or alleged violations could damage our reputation, be expensive to defend, impair our ability
to do business, and cause us to incur civil and criminal fines, penalties and sanctions.

Compliance with regulations relating to export controls, trade sanctions and embargoes administered by the countries in which we operate,
including the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and similar regulations in non-U.S. jurisdictions
also  pose  a  risk  to  us.  We  cannot  provide  products  or  services  to  certain  countries,  companies  or  individuals  subject  to  U.S.  and  other
countries’  trade  sanctions.  Furthermore,  the  laws  and  regulations  concerning  import  activity,  export  record  keeping  and  reporting,  export
controls  and  economic  sanctions  are  complex  and  constantly  changing.  Any  failure  to  comply  with  applicable  legal  and  regulatory  trading
obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts,
seizure of shipments and loss of import and export privileges.

Our exposure to currency exchange rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect
on our results of operations.

Fluctuations in currency exchange rates could be material to us depending upon, among other things, our manufacturing locations and the
sourcing for our raw materials and components. In particular, we are sensitive to fluctuations in currency exchange rates between the U.S.
dollar and each of the Canadian dollar, the British pound sterling, the Euro, and, to a lesser degree, the Mexican peso, the Chinese yuan, the
Singapore  dollar,  and  the  Saudi  riyal.  There  may  be  instances  in  which  costs  and  revenue  will  not  be  matched  with  respect  to  currency
denomination.  As  a  result,  to  the  extent  that  we  expand  on  a  global  basis,  higher  portions  of  revenue,  costs,  assets  and  liabilities  will  be
subject to fluctuations in foreign currency valuations. We may experience economic loss and a negative impact on earnings or net assets
solely  as  a  result  of  foreign  currency  exchange  rate  fluctuations.  Further,  the  markets  in  which  we  operate  could  restrict  the  removal  or
conversion of the local currency, resulting in our inability to hedge against these risks.

Risks Related to our Common Stock, Indebtedness and Financial Condition:

Our common stock price has been volatile, and we expect it to continue to remain volatile in the future.

The  market  price  of  common  stock  of  companies  engaged  in  the  oil  and  natural  gas  equipment  manufacturing  and  services  industry  has
been volatile. Likewise, the market price of our common stock has varied significantly in the past. For example, in 2022, the market price of
our common stock reached a high of $31.36 per share on December 20, 2022, and a low of $16.79 per share on January 5, 2022. We expect
our stock price to continue to remain volatile given the cyclical nature of our industry and our limited public float.

The  indenture  governing  our  2025  Notes  and  our  Credit  Facility  contain  operating  and  financial  restrictions  that  restrict  our
business and financing activities.

Our  indenture  and  Credit  Facility  contain,  and  any  future  indebtedness  we  incur  may  contain,  a  number  of  restrictive  covenants  that  will
impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

•

pay dividends on, purchase or redeem our common stock;

• make certain investments;

•

•

•

•

•

•

•

•

•

incur or guarantee additional indebtedness or issue certain types of equity securities;

create certain liens;

sell assets, including equity interests in our restricted subsidiaries;

redeem or prepay subordinated debt or debt that is unsecured or secured on a basis junior to our notes;

restrict dividends or other payments of our restricted subsidiaries;

consolidate, merge or transfer all or substantially all of our assets;    

engage in transactions with affiliates;

create unrestricted subsidiaries; or

execute our acquisition strategy.

Our  Credit  Facility  also  contains  covenants,  which,  among  other  things,  require  us  in  certain  circumstances,  on  a  consolidated  basis,  to
maintain  specified  financial  ratios  or  conditions.  As  a  result  of  these  covenants,  we  are  limited  in  the  manner  in  which  we  conduct  our
business, and we may be unable to engage in favorable business activities

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or finance future operations or capital needs. Our ability to borrow under the Credit Facility and comply with some of the covenants, ratios or
tests  contained  in  our  indenture  and  Credit  Facility  may  be  affected  by  events  beyond  our  control.  If  market  or  other  economic  conditions
deteriorate, and there is a decrease in our accounts receivable and inventory, our ability to borrow under our Credit Facility will be reduced
and our ability to comply with these covenants, ratios or tests may be impaired. A failure to comply with the covenants, ratios or tests would
result in an event of default, which, if not cured or waived, would cause some or all of our indebtedness to become immediately due and
payable and have a material adverse effect on our business, financial condition and results of operations.

The  restrictions  in  our  debt  agreements  may  have  significant  consequences  for  our  future  prospects,  including  limiting  our  liquidity  and
flexibility in obtaining additional financing, increasing our vulnerability to general adverse economic and industry conditions, and reducing our
flexibility to plan for, and react to, changes in the economy and in our industry. Our ability to pay our expenses, and fund our working capital
needs and debt obligations, will depend on our future performance, which will be affected by financial, business, economic, regulatory and
other factors that are outside of our control. As a result of these factors, our business may not generate sufficient cash flow from operations
to enable us to meet our debt obligations.

Our  ability  to  access  the  capital  and  credit  markets  to  raise  capital  on  favorable  terms  is  limited  by  our  debt  level,  industry
conditions and credit rating.

Our ability to access the capital and credit markets is limited by, among other things, oil and natural gas prices, our existing capital structure,
our credit ratings, the state of the economy, the health of the drilling and overall oil and natural gas industry, trends among investors to avoid
companies associated with the production of hydrocarbon products, and the liquidity of the capital markets. Many of the factors that affect our
ability to access capital markets are outside of our control and may be negatively impacted by market events. Recent trends and conditions
in  the  capital  and  credit  markets  with  respect  to  the  energy  sector,  including  environmental  and  climate  change  related  divestment
campaigns, limit our ability to access these markets or may significantly increase our cost of capital. Low levels of exploration and drilling
activity  have  caused  and  may  continue  to  cause  lenders  to  increase  the  interest  rates  under  our  credit  facilities,  enact  tighter  lending
standards, refuse to refinance existing debt on acceptable terms or at all and may reduce or cease to provide funding. If we are unable to
access the capital or credit markets on terms acceptable to us, it could have a material adverse effect on our business, financial condition,
results of operations, cash flows and liquidity, particularly in respect of our ability to repay or refinance our debt.

Provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our company,
which could adversely affect the price of our common stock.

The existence of some provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our
company that a stockholder may consider favorable, which could adversely affect the price of our common stock. Certain provisions of our
amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire
control of our company, even if the change of control would be beneficial to our stockholders. These provisions include:

•

•

•

•

•

a classified board of directors, so that only approximately one-third of our directors are elected each year;

authority of our board to fill vacancies and determine its size;

the ability of our board of directors to issue preferred stock without stockholder approval;

limitations on the removal of directors; and

limitations on the ability of our stockholders to call special meetings.

In addition, our amended and restated bylaws establish advance notice provisions for stockholder proposals and nominations for elections to
the board of directors to be acted upon at meetings of stockholders.

We have incurred impairment charges and we may incur additional impairment charges in the future.

We  evaluate  our  long-lived  assets,  including  property  and  equipment,  intangible  assets  with  definite  lives  and  operating  lease  right  of  use
assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not
be recoverable. In performing our review for impairment, future cash flows expected to result from the use of the asset and its eventual value
upon disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that
the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair
value of the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted
future cash flows based on expected utilization.

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If we determine that the carrying value of our long-lived assets is less than their fair value, we would be required to record additional charges
in the future, which could adversely affect our financial condition and results of operations.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

The following table describes the significant facilities owned or leased by us as of December 31, 2022, for our Drilling & Downhole (“D&D”),
Completions (“C”) and Production (“P”) segments:

Country

Canada

Location

Red Deer
Calgary
Edmonton
Grande Prairie
Hamburg
Dammam
Jebel Ali

Germany
Saudi Arabia
UAE
United Kingdom Aberdeen

United States

Kirkbymoorside
Broussard, LA
Bryan, TX
Clearfield, PA
Dayton, TX
Fort Worth, TX
Guthrie, OK
Houston, TX
Humble, TX
Midland, TX
Odessa, TX
Odessa, TX
Pearland, TX
Plantersville, TX
Smock, PA
Stafford, TX
Stafford, TX
Tyler, TX
Williston, ND

Number of
facilities
2
1
2
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1

Description

Leased or
Owned

Segments

Leased
Service/Distribution
Leased
Manufacturing
Leased
Service/Distribution
Leased
Service/Distribution
Leased
Manufacturing
Owned
Manufacturing/Distribution
Leased
Service/Distribution
Leased
Service/Distribution
Manufacturing
Owned
Manufacturing/Service/Distribution Leased
Manufacturing
Leased
Manufacturing/Service/Distribution Owned
Owned
Manufacturing
Leased
Manufacturing/Service
Leased
Manufacturing
Leased
Corporate/Manufacturing
Leased
Manufacturing
Leased
Service/Distribution
Leased
Service/Distribution
Leased
Service/Distribution
Owned
Manufacturing/Distribution
Leased
Manufacturing/Distribution
Leased
Service
Leased
Manufacturing/Distribution
Owned
Manufacturing
Leased
Distribution
Leased
Service/Distribution

C
C
Shared
C
D&D
Shared
D&D
D&D
D&D
Shared
Shared
P
C
C
P
Shared
C
C
C
D&D
D&D
D&D
C
P
D&D
D&D
Shared

We  believe  our  facilities  are  suitable  for  their  present  and  intended  purposes,  and  are  adequate  for  our  current  and  anticipated  level  of
operations. During 2022, the Company sold and leased back the properties located in Broussard, Louisiana; Bryan, Texas; Odessa, Texas;
and, Plantersville, Texas. Refer to the information set forth in Note 6 Property and Equipment and Note 9 Leases.

We incorporate by reference the information set forth in Item 1 and Item 7 of this Annual Report on Form 10-K and the information set forth in
Note 6 Property and Equipment, Note 9 Leases and Note 12 Commitments and Contingencies.

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Table of Contents

Item 3. Legal Proceedings

Information related to Item 3. Legal Proceedings is included in Note 12 Commitments and Contingencies,  which  is  incorporated  herein  by
reference.  In  addition  to  these  matters,  we  are  involved  in  other  legal  proceedings  incidental  to  the  conduct  of  our  business.  We  do  not
believe that any of these legal proceedings will have a material adverse effect on our financial condition, results of operation or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

Information About Our Executive Officers

The following table indicates the names, ages and positions of the executive officers of Forum as of February 24, 2023:

Name
C. Christopher Gaut
Neal Lux
D. Lyle Williams

John C. Ivascu
Michael D. Danford

Age
66
47
53

45
60

Position

Executive Chairman of the Board
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, General Counsel, Chief Compliance Officer and Corporate
Secretary
Senior Vice President and Chief Human Resources Officer

C. Christopher Gaut. Mr. Gaut currently serves as Executive Chairman of the Board, having previously served as President and Chief
Executive Officer of Forum from November 2018 until his retirement from those positions in February 2022, and as Chairman of the Board
from  December  2017.  Prior  to  that,  from  May  2017  to  December  2017,  he  served  as  Executive  Chairman  of  the  Board,  and  as  Chief
Executive  Officer  from  May  2016  to  May  2017.  From  August  2010  to  May  2016,  he  served  as  President,  Chief  Executive  Officer  and
Chairman of the Board, and as one of our directors since December 2006. He served as a consultant to SCF Partners from November 2009
to August 2010, and an industry advisor from May 2017 to November 2018. Mr. Gaut served at Halliburton Company, a leading diversified
oilfield services company, as President of the Drilling and Evaluation Division and prior to that as Chief Financial Officer, from March 2003
through April 2009. From April 2009 through November 2009, Mr. Gaut was a private investor. Prior to joining Halliburton Company in 2003,
Mr. Gaut was a Co-Chief Operating Officer of Ensco International, a provider of offshore contract drilling services. He also served as Ensco's
Chief Financial Officer from 1988 until 2003.

Neal  Lux.  Mr.  Lux  was  appointed  as  President  and  Chief  Executive  Officer  of  Forum  and  as  a  director  on  Forum's  board  of  directors
effective  February  18,  2022.  Mr.  Lux  previously  served  as  the  Company's  Executive  Vice  President  and  Chief  Operating  Officer  from
December 2020 to February 2022. From January 2009 to February 2022, Mr. Lux held various operations roles of increasing responsibility
with  the  Company  and  its  subsidiaries,  including  Executive  Vice  President  -  Operations;  Senior  Vice  President  -  Completions;  Managing
Director - Global Tubing; and President, Global Tubing. He holds a B.S. in Industrial Engineering from Purdue University.

D. Lyle Williams, Jr. Mr. Williams has served as Executive Vice President and Chief Financial Officer since June 2020. Since January
2007, Mr. Williams has held various financial and operations roles, including Senior Vice President - Operations; Vice President - Corporate
Development and Treasurer; Vice President - Operations Finance; Vice President - Finance and Accounting, Drilling and Subsea Segment;
Senior Vice President - Downhole Technologies; Vice President - Subsea Products; and Vice President - Capital Equipment. Prior to joining
Forum,  Mr.  Williams  held  various  operations  positions  with  Cooper  Cameron  Corporation,  including  Director  of  Operations  -  Engineering
Products.  He  holds  a  B.A.  in  Economics  and  English  from  Rice  University  and  an  M.B.A.  from  Harvard  University  Graduate  School  of
Business Administration.

John C. Ivascu. Mr. Ivascu has served as Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
since  June  2020.  Since  June  2011,  Mr.  Ivascu  has  held  various  legal  roles  of  increasing  responsibility,  including  Senior  Vice  President,
General Counsel, Chief Compliance Officer and Secretary; Senior Vice President, General Counsel and Secretary; Vice President, Deputy
General Counsel and Secretary; Vice President, Associate General Counsel and Assistant Secretary; and Assistant General Counsel. From
2006 to June 2011, Mr. Ivascu practiced corporate law at Vinson & Elkins L.L.P., representing public and private companies and

29

Table of Contents

investment  banking  firms  in  capital  markets  offerings,  mergers  and  acquisitions,  and  corporate  governance  and  bankruptcy  matters.  From
2004 to 2006, Mr. Ivascu served as an attorney for the U.S. Securities & Exchange Commission, Division of Enforcement. Mr. Ivascu holds a
B.B.A. from the Stephen M. Ross School of Business at the University of Michigan, and a J.D. from Brooklyn Law School.

Michael D. Danford. Mr. Danford has served as Senior Vice President and Chief Human Resources Officer since June 2020. Prior to that,
Mr. Danford served as Senior Vice President - Human Resources from February 2015 to June 2020; and Vice President - Human Resources
from  November  2007  to  February  2015.  Prior  to  joining  Forum,  from  August  2007  through  November  2007,  he  worked  at  Trico  Marine
Services  Inc.,  a  privately  held  provider  of  subsea  and  marine  support  vessels  and  services  to  the  oil  and  natural  gas  industry,  as  Vice
President  -  Human  Resources.  From  1997  through  July  2007,  Mr.  Danford  served  as  Director  of  Human  Resources  and  Vice  President  -
Human  Resources  for  Hydril  Company,  a  publicly  traded  manufacturer  of  connections  used  for  oil  and  natural  gas  drilling  and  production.
From 1991 to 1997, Mr. Danford served in various human resources roles for Baker Hughes Incorporated, a publicly traded oilfield services
company. Prior to joining Baker Hughes, from 1990 to 1991, Mr. Danford served as a recruiter and as an employee relations representative in
the human resources department for Compaq Computer, a publicly traded developer and manufacturer of computer systems. Mr. Danford
holds a B.S. degree in Computer Science from the University of Louisiana at Monroe (formerly Northeast Louisiana University).

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Table of Contents

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our  common  stock  trades  on  the  NYSE  under  the  trading  symbol  “FET.”  As  of  February  24,  2023,  there  were  approximately  36  common
stockholders  of  record.  In  calculating  the  number  of  shareholders,  we  consider  clearing  agencies  and  security  position  listings  as  one
shareholder for each agency or listing.

No dividends were declared or issued during 2022 or 2021, and we do not currently have any plans to pay cash dividends in the future. Our
future  dividend  policy  is  within  the  discretion  of  our  board  of  directors  and  will  depend  upon  various  factors,  including  our  results  of
operations, financial condition, capital requirements, investment opportunities, and restrictions under our loan agreements.

Purchase of Equity Securities

Following is a summary of our repurchases of our common stock during the three months ended December 31, 2022.

Period

October 1, 2022 - October 31, 2022
November 1, 2022 - November 30, 2022
December 1, 2022 - December 31, 2022

Total

Total number of
shares
purchased (a)

Average price
paid per share

27,925 $
— $
75,169 $
103,094 $

24.94 
— 
30.62 

29.08 

Total number of
shares purchased
as part of publicly
announced plan or
programs (a)

Maximum value of
shares that may yet
be purchased under
the plan or program
(in thousands) (a)

27,925 $
—
75,169
103,094

8,243 
8,243 
5,941 

(a) In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an
aggregate  purchase  amount  of  up  to  $10.0  million.  Shares  may  be  repurchased  under  the  program  from  time  to  time,  in  amounts  and  at
prices  that  the  company  deems  appropriate,  subject  to  market  and  business  conditions,  applicable  legal  requirements  and  other
considerations. The program may be executed using open market purchases pursuant to Rule 10b-18 under the Securities Exchange Act of
1934  (the  "Exchange  Act"),  in  privately  negotiated  agreements  or  by  way  of  issuer  tender  offers,  Rule  10b5-1  plans  or  other  transactions.
From the inception of the program through December 31, 2022, we have repurchased approximately 159 thousand shares of our common
stock for aggregate consideration of $4.1 million. Remaining authorization under this program is $5.9 million.

Item 6. [Reserved].

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Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The  following  discussion  and  analysis  of  our  financial  condition  and  results  of  operations  should  be  read  in  conjunction  with  our  financial
statements  and  related  notes  included  under  Item  8  of  this  Annual  Report  on  Form  10-K.  This  discussion  contains  forward-looking
statements  based  on  our  current  expectations,  estimates  and  projections  about  our  operations  and  the  industry  in  which  we  operate.  Our
actual  results  may  differ  materially  from  those  anticipated  in  these  forward-looking  statements  as  a  result  of  a  variety  of  risks  and
uncertainties, including those described in “Risk Factors” and “Cautionary note regarding forward-looking statements” and elsewhere in this
Annual Report on Form 10-K. We assume no obligation to update any of these forward-looking statements.

Overview

We are a global company serving the oil, natural gas, industrial and renewable energy industries. FET provides value added solutions aimed
at  improving  the  safety,  efficiency,  and  environmental  impact  of  our  customers'  operations.  We  are  an  environmentally  and  socially
responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout
the world. Our products include highly engineered capital equipment as well as consumable products. These consumable products are used
in drilling, well construction and completions activities and at processing centers and refineries. Our engineered capital products are directed
at drilling rig equipment for constructing new and upgrading existing rigs, subsea construction and development projects, pressure pumping
equipment,  the  placement  of  production  equipment  on  new  producing  wells,  downstream  capital  projects  and  capital  equipment  for
renewable energy projects. In 2022, over 68% of our revenue was derived from consumable products and activity-based equipment, while
the balance was primarily derived from capital products with a small amount from rental and other services.

We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among
others,  oil  and  natural  gas  operators,  land  and  offshore  drilling  contractors,  oilfield  service  companies,  subsea  construction  and  service
companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies.

We expect that the world's long-term energy demand will continue to rise. We also expect hydrocarbons will continue to play a vital role in
meeting the world's long-term energy needs while renewable energy sources continue to develop. As such, we remain focused on serving
our customers in both oil and natural gas as well as renewable energy applications. We are also continuing to develop products to help oil
and gas operators lower their current emissions while also deploying our existing product technologies in renewable energy applications and
seeking to develop innovative equipment.

A summary of the products and services offered by each segment is as follows:

• Drilling & Downhole. This segment designs, manufactures and supplies products and provides related services to the drilling, well
construction, artificial lift and subsea energy construction markets, including applications in oil and natural gas, renewable energy,
defense,  and  communications.  The  products  and  related  services  consist  primarily  of:  (i)  capital  equipment  and  a  broad  line  of
expendable  products  consumed  in  the  drilling  process;  (ii)  well  construction  casing  and  cementing  equipment  and  protection
products  for  artificial  lift  equipment  and  cables;  and  (iii)  subsea  remotely  operated  vehicles  and  trenchers,  submarine  rescue
vehicles, specialty components and tooling, and complementary subsea technical services.

• Completions. This  segment  designs,  manufactures  and  supplies  products  and  provides  related  services  to  the  coiled  tubing,  well
stimulation and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold
to the pressure pumping, hydraulic fracturing and flowback services markets, including hydraulic fracturing pumps, cooling systems,
high-pressure flexible hoses and flow iron as well as wireline cable and pressure control equipment used in the well completion and
intervention service markets; and (ii) coiled tubing strings and coiled line pipe and related services.

•

Production. This segment designs, manufactures and supplies products and provides related equipment and services for production
and  infrastructure  markets.  The  products  and  related  services  consist  primarily  of:  (i)  engineered  process  systems,  production
equipment, as well as specialty separation equipment; and (ii) a wide range of industrial valves focused on serving oil and natural
gas customers as well as power generation, renewable energy and other general industrial applications.

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Table of Contents

Market Conditions

Demand for our products and services is directly related to the capital and operating budgets of our customers. These budgets are heavily
influenced by current and expected energy prices. In addition, demand for our capital products is driven by the utilization of service company
equipment. Utilization is a function of equipment capacity and durability in demanding environments.

In  2021,  distribution  of  vaccines  and  reopening  of  certain  economies  led  to  an  increase  in  demand  for  oil  and  natural  gas  following  an
unprecedented decline from the COVID-19 pandemic. At the same time, the supply of oil and natural gas was impacted by ongoing capacity
constraints  by  OPEC+  and  North  American  exploration  and  production  companies.  As  a  result  of  these  supply  and  demand  factors,
commodity prices increased substantially in 2021.

During 2022, the supply of oil and natural gas was further impacted by political and social responses to the Russia and Ukraine war resulting
in  further  increases  in  energy  prices,  especially  in  Europe.  In  addition,  ongoing  COVID-19  outbreaks,  related  work  restrictions  and  other
worldwide  labor  constraints  continue  to  cause  disruptions  in  global  supply  chains.  These  disruptions,  together  with  various  governmental
responses thereto, have led to inflationary pressures. In response, the Federal Reserve raised interest rates significantly in 2022, and further
rate  increases  are  expected.  These  macroeconomic  conditions  could  lead  to  a  global  or  regional  recession,  which  may  lower  demand  for
commodities, such as oil and natural gas, and have a direct impact on commodity prices.

Our revenues are highly correlated to the U.S. drilling rig count, which has increased to 779 rigs as of the end of 2022 from a low of 244 rigs
in August 2020. The level of active hydraulic fracturing fleets also increased substantially in 2022 in order to meet increasing oil and natural
gas demand. Despite these improvements, drilling and completions activity remains below pre-pandemic levels. Publicly owned exploration
and  production  companies  in  North  America  remain  under  pressure  by  investors  to  constrain  capital  expenditures  in  order  to  generate
positive cash flows. Privately owned exploration and production companies will fluctuate their drilling and completions activity in response to
changes in oil and natural gas prices. It is generally expected that public and private exploration and production companies will continue to
make investments in a similar fashion for at least the next twelve months.

Activity  levels  have  also  increased  in  international  markets,  as  well  as  in  global  offshore  and  subsea  activity.  As  a  result,  demand  for  our
drilling and subsea offerings increased during 2022 due to an improved outlook for our international drilling and subsea customers.

The table below shows average crude oil and natural gas prices for West Texas Intermediate crude oil (“WTI”), United Kingdom Brent crude
oil (“Brent”), and Henry Hub natural gas:

Average global oil, $/bbl
West Texas Intermediate
United Kingdom Brent

Average North American Natural Gas, $/Mcf
Henry Hub

2022

2021

94.90 
100.93 

$
$

68.13 
70.86 

6.45 

$

3.89 

$
$

$

The price of oil has varied dramatically over the last three years. The spot prices for WTI and Brent fell to lows below $15.00 per barrel in
April 2020 and rebounded to $48.35 and $51.22, respectively, by December 31, 2020. Prices continued to rebound during 2021 and ended
the year up more than 50%. The first half of 2022 saw further increases with WTI and Brent prices reaching highs of $123.64 and $133.18,
respectively, before retreating during the second half of 2022 and ending the year at $80.16 and $82.82 for WTI and Brent, respectively. In
addition, average natural gas prices were 65.8% higher in 2022 compared to 2021.

33

Table of Contents

The table below shows the average number of active drilling rigs operating by geographic area and drilling for different purposes based on
the weekly rig count information published by Baker Hughes Company.

2022

2021

Active Rigs by Location
United States
Canada
International

Global Active Rigs

Land vs. Offshore Rigs
Land
Offshore

Global Active Rigs

U.S. Commodity Target
Oil
Gas
Other

Total U.S. Active Rigs

U.S. Well Path
Horizontal
Vertical
Directional

Total U.S. Active Rigs

723 
175 
851 
1,749 

1,528 
221 
1,749 

574 
147 
2 
723 

659 
25 
39 
723 

478 
132 
755 
1,365 

1,172 
193 
1,365 

379 
98 
1 
478 

431 
22 
25 
478 

A substantial portion of our revenues is impacted by the level of rig activity and the number of wells completed. The average U.S. rig count
for 2022 increased 51% as compared to 2021, while the international rig count increased 13% compared to 2021. The U.S. rig count started
2020 at 805 working rigs and fell 70% to a low of 244 rigs in August 2020. Since that time, the number of active rigs has partially recovered,
ending 2022 at 779 rigs. Despite this improvement, the U.S. drilling rig count remains below pre-pandemic levels.

The table below shows the amount of total inbound orders by segment for the years ended December 31, 2022 and 2021:

(in millions of dollars)
Orders:
Drilling & Downhole
Completions
Production

Total Orders

2022

2021

$

$

305.8  $
278.5 
196.4 
780.7  $

282.6 
207.0 
142.7 
632.3 

34

Table of Contents

Results of operations

(in thousands of dollars, except per share information)
Revenues

Year ended December 31,
2021
2022

Change

$

%

Drilling & Downhole
Completions
Production
Eliminations
Total revenues
Cost of sales

Drilling & Downhole
Completions
Production
Eliminations
Total cost of sales
Gross profit

Drilling & Downhole
Completions
Production
Total gross profit
Selling, general and administrative expenses:

Drilling & Downhole
Completions
Production
Corporate

Total selling, general and administrative expenses
Segment operating income (loss)

Drilling & Downhole
Operating margin %
Completions
Operating margin %
Production
Operating margin %
Corporate

Total segment operating income (loss)
Operating margin %
Gain on sale-leaseback transactions
Gain on disposal of assets and other
Operating income (loss)
Interest expense
Foreign exchange losses (gains) and other, net
Loss on extinguishment of debt

Total other expense
Income (loss) before income taxes

Income tax expense

Net income (loss)

Weighted average shares outstanding

Basic
Diluted

Earnings (loss) per share

Basic
Diluted

* not meaningful

64,670 
79,933 
14,809 
(567)
158,845 

36,366 
55,131 
2,730 
(567)
93,660 

28,304 
24,802 
12,079 
65,185 

852 
8,705 
(1,832)
2,860 
10,585 

27.0 %
43.2 %
12.7 %
*
29.4 %

21.3 %
37.7 %
2.7 %
*
22.4 %

40.9 %
64.0 %
79.1 %
52.8 %

1.3 %
20.1 %
(6.2)%
9.1 %
6.3 %

27,452 

578.1 %

16,097 

355.2 %

13,911 

96.9 %

(2,860)
54,600 

(7,000)
(219)
61,819 
(484)
(24,765)
(5,290)
(30,539)
92,358 
5,995 
86,363 

(9.1)%
119.9 %

*
*
138.9 %
(1.5)%
*
*
*
112.6 %
*

104.5 %

304,565 
264,951 
131,519 
(1,122)
699,913 

206,976 
201,371 
104,162 
(1,122)
511,387 

97,589 
63,580 
27,357 
188,526 

65,388 
52,015 
27,800 
34,268 
179,471 

32,201 

10.6 %

11,565 

4.4 %

(443)
(0.3)%

(34,268)
9,055 

1.3 %

(7,000)
(1,271)
17,326 
31,525 
(24,548)
— 
6,977 
10,349 
6,637 
3,712 

5,747 
5,951 

0.65 
0.62 

$

$

$

$

$

$

$

$

$

$

$

$
$

$

$

$

$

$

$

$

$

$

$

$

239,895 
185,018 
116,710 
(555)
541,068 

170,610 
146,240 
101,432 
(555)
417,727 

69,285 
38,778 
15,278 
123,341 

64,536 
43,310 
29,632 
31,408 
168,886 

4,749 

2.0 %

(4,532)

(2.4)%

(14,354)

(12.3)%

(31,408)
(45,545)

(8.4)%
— 
(1,052)
(44,493)
32,009 
217 
5,290 
37,516 
(82,009)
642 
(82,651)

5,643 
5,643 

(14.65)
(14.65)

$

$

$

$

$

$

$

$

$

$

$

$
$

35

Table of Contents

Revenues

Our revenue for the year ended December 31, 2022 was $699.9 million, an increase of $158.8 million, or 29.4%, compared to the year ended
December  31,  2021.  For  the  year  ended  December  31,  2022,  our  Drilling  &  Downhole  segment,  Completions  segment,  and  Production
segment comprised 43.5%, 37.7% and 18.8% of our total revenues, respectively, compared to 44.3%, 34.1% and 21.6%, respectively, for the
year  ended  December  31,  2021.  The  overall  increase  in  revenues  is  primarily  related  to  higher  sales  volumes  due  to  improving  market
conditions in 2022 compared to 2021 as a result of higher drilling and completions activity levels to support increasing global energy demand.
The changes in revenues by operating segment consisted of the following:

Drilling  &  Downhole  segment  —  Revenues  were  $304.6  million  for  the  year  ended  December  31,  2022,  an  increase  of  $64.7  million,  or
27.0%,  compared  to  the  year  ended  December  31,  2021.  This  increase  includes  a  $46.7  million,  or  48.3%,  increase  in  revenues  for  our
Drilling Technologies product line primarily due to higher sales volumes of consumable products and capital equipment from the 28.1% year-
over-year increase in global rig count. Revenues for our Downhole Technologies product line increased by $15.8 million, or 22.8%, primarily
due to higher sales volumes of artificial lift products due to the increase in the number of well completions and workovers in the current year
compared to prior year. Revenues for our Subsea Technologies product line were comparable with the prior year.

Completions  segment  —  Revenues  were  $265.0  million  for  the  year  ended  December  31,  2022,  an  increase  of  $79.9  million,  or  43.2%,
compared to the year ended December 31, 2021. This increase includes a $59.6 million, or 61.6%, increase in revenues for our Stimulation
and Intervention product line and a $20.3 million, or 23%, increase in revenues for our Coiled Tubing product line. The increase of revenues
in our Simulation and Intervention product line was primarily due to the higher capital equipment sales to pressure pumping customers and
increasing service company demand of wireline cable to support hydraulic fracturing activity. The increase in revenues for our Coiled Tubing
product line was driven by increasing U.S. hydraulic fracturing activity levels.

Production  segment  —  Revenues  were  $131.5  million  for  the  year  ended  December  31,  2022,  an  increase  of  $14.8  million,  or  12.7%,
compared  to  the  year  ended  December  31,  2021.  Of  the  total  segment’s  increase  in  revenues,  $8.9  million  or  14.6%  was  due  to  higher
project revenues for our processing and treatment equipment within our Production Equipment product line. The remaining $5.9 million or
10.5% of the increase is from our Valve Solutions product line due to higher sales volumes in the North America downstream market.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the year ended December 31, 2022 was $9.1 million compared to a loss of $45.5 million for the year ended
December 31, 2021. For the year ended December 31, 2022, segment operating margin percentage was 1.3% compared to (8.4)% for the
year  ended  December  31,  2021.  Segment  operating  margin  percentage  is  calculated  by  dividing  segment  operating  income  (loss)  by
revenues for the period. The change in operating income (loss) and segment operating margin percentage for each segment is explained as
follows:

Drilling & Downhole segment — Segment operating income was $32.2 million, or 10.6%, for the year ended December 31, 2022 compared to
$4.7 million, or 2.0%, for the year ended December 31, 2021. The $27.5 million improvement in segment operating results includes higher
gross profit from the 27.0% increase in revenues discussed above, partially offset by higher freight and employee related costs.

Completions segment — Segment operating income was $11.6 million, or 4.4%, for the year ended December 31, 2022 compared to a loss
of $4.5 million, or (2.4)% for the year ended December 31, 2021. The $16.1 million improvement in segment operating results includes higher
gross profit from the 43.2% increase in revenues discussed above, partially offset by higher freight and employee related costs.

Production  segment  —  Segment  operating  loss  was  $0.4  million,  or  (0.3)%,  for  the  year  ended  December  31,  2022  compared  to  $14.4
million, or (12.3)% for the year ended December 31, 2021. The $13.9 million improvement in segment operating results included the higher
gross  profit  from  the  12.7%  increase  in  revenues  discussed  above,  partially  offset  by  higher  freight  and  material  costs  as  a  result  of
inflationary pressures from global supply chains.

Corporate — Selling, general and administrative expenses for Corporate were $34.3 million for the year ended December 31, 2022, a $2.9
million increase compared to the year ended December 31, 2021. This increase was primarily related to higher variable compensation costs.
Corporate  costs  include,  among  other  items,  payroll  related  costs  for  management,  administration,  finance,  legal,  and  human  resources
personnel; professional fees for legal, accounting and related services; and marketing costs.

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Other items not included in segment operating income (loss)

Several items are not included in segment operating income (loss), but are included in the total operating income (loss). These items include
Gain  on  sale-leaseback  transactions  and  Gain  on  disposal  of  assets  and  other.  For  further  information  related  to  Gain  on  sale-leaseback
transactions, see Notes 6 Property and Equipment and 9 Leases.

Other income and expense

Other income and expense includes interest expense, loss on extinguishment of debt and foreign exchange losses.

We  incurred  $31.5  million  of  interest  expense  during  the  year  ended  December  31,  2022,  which  is  comparable  to  the  year  ended
December 31, 2021.

The foreign exchange gains and losses are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the
U.S.  dollar.  These  movements  in  exchange  rates  create  foreign  exchange  gains  or  losses  when  applied  to  monetary  assets  or  liabilities
denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables
and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar.

During  the  year  ended  December  31,  2021,  we  recognized  a  $5.3  million  loss  on  extinguishment  of  debt  from  the  repurchase  of  an
aggregate $59.9 million of principal amount of our 2025 Notes for $58.6 million. The net carrying value of the extinguished debt, including
unamortized debt discount and debt issuance costs, was $53.3 million.

Taxes

We recorded tax expense of $6.6 million for the year ended December 31, 2022 compared to a tax benefit of $0.6 million for the year ended
December 31, 2021. The estimated annual effective tax rates for the years ended December 31, 2022 and 2021 were impacted by losses in
jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to
period depending on the Company’s relative mix of earnings and losses by jurisdiction.

Liquidity and capital resources

Sources and uses of liquidity

Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the
Credit Facility and the 2025 Notes. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and
growth  capital  expenditures,  and  debt  repayments.  We  continually  monitor  other  potential  capital  sources,  including  equity  and  debt
financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to
generate positive operating cash flow and access outside sources of capital.

During the year ended December 31, 2021, we repurchased $59.9 million principal amount of our 2025 Notes and repaid the $13.1 million
outstanding under our revolving Credit Facility. We had outstanding $257.0 million principal amount of 2025 Notes and no borrowings under
our Credit Facility as of December 31, 2022 and 2021.

Subsequently  in  January  2023,  $122.8  million  principal  amount  of  the  2025  Notes  mandatorily  converted  into  approximately  4.5  million
shares of our common stock. See Note 8 Debt for further details related to the terms for our 2025 Notes and Credit Facility.

As of December 31, 2022, we had cash and cash equivalents of $51.0 million and $156.1 million of availability under our Credit Facility. We
anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues. Furthermore, availability
under our Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable
sublimits. In addition, we expect total 2023 capital expenditures to be less than $15.0 million, consisting of, among other items, replacing end
of life machinery and equipment.

We expect our available cash on-hand, cash generated by operations, and estimated availability under our Credit Facility to be adequate to
fund current operations during the next 12 months. In addition, based on existing market conditions and our expected liquidity needs, among
other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital
to reduce the principal amount of our 2025 Notes outstanding or repurchase shares of our common stock under our repurchase program.

In  November  2021,  our  board  of  directors  approved  a  program  for  the  repurchase  of  outstanding  shares  of  our  common  stock  with  an
aggregate  purchase  amount  of  up  to  $10.0  million.  Shares  may  be  repurchased  under  the  program  from  time  to  time,  in  amounts  and  at
prices that the company deems appropriate, subject to market and

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business  conditions,  applicable  legal  requirements  and  other  considerations.  In  the  fourth  quarter  of  2022,  we  repurchased  approximately
103  thousand  shares  of  our  common  stock  for  aggregate  consideration  of  approximately  $3.0  million.  Remaining  authorization  under  this
program is $5.9 million.

In the fourth quarter of 2021, we completed the acquisition of Hawker Equipment Solutions, LLC (“Hawker”) for total cash consideration of
$5.1 million, of which $3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the next five years. For
additional information, see Note 4 Acquisition. We may pursue acquisitions in the future, which may be funded with cash and/or equity. Our
ability to make significant acquisitions for cash may require us to pursue additional equity or debt financing, which we may not be able to
obtain on terms acceptable to us or at all.

Our cash flows for the years ended December 31, 2022 and 2021 are presented below (in thousands):

Net cash used in operating activities
Net cash provided by investing activities
Net cash used in financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net cash used in operating activities

Year ended December 31,
2021
2022

$

$

(17,054) $
27,139 
(5,076)
(838)
4,171  $

(15,775)
10,698 
(76,243)
(439)
(81,759)

Net cash used in operating activities was $17.1 million for the year ended December 31, 2022 compared to $15.8 million for the year ended
December 31, 2021. During the year ended December 31, 2022, net working capital cash usage was $65.1 million, primarily attributed to an
increase  in  inventory  to  meet  customer  demand,  compared  to  net  working  capital  cash  usage  of  $6.7  million  for  the  year  ended
December 31, 2021. This decline was partially offset by an improvement in net income adjusted for non-cash items which provided $48.1
million of cash for the year ended December 31, 2022 compared to using $9.1 million of cash for the year ended December 31, 2021.

Net cash provided by investing activities

Net cash provided by investing activities was $27.1 million for the year ended December 31, 2022 including $32.1 million of cash proceeds
from sale of land and buildings that were subsequently leased back, partially offset by $7.5 million of capital expenditures. Net cash provided
by investing activities for the year ended December 31, 2021 includes $10.8 million of cash received to settle a note receivable from the 2019
sale of our equity interest in Ashtead Technology and $7.0 million of proceeds from the sale of property and equipment, partially offset by
$3.4 million of cash paid for the acquisition of Hawker and $2.4 million of capital expenditures.

Net cash used in financing activities

Net  cash  used  in  financing  activities  was  $5.1  million  for  the  year  ended  December  31,  2022  including  $3.8  million  of  repurchase  of  our
common  stock  and  $1.3  million  of  repayments  of  debt.  Net  cash  used  in  financing  activities  was  $76.2  million  for  the  year  ended
December 31, 2021 including $58.6 million of cash used to repurchase 2025 Notes and $13.1 million of repayments of the revolving Credit
Facility.

Off-balance sheet arrangements

As of December 31, 2022, we had no off-balance sheet instruments or financial arrangements, other than letters of credit entered into in the
ordinary course of business. For additional information, refer to Note 12 Commitments and Contingencies.

Supplemental Guarantor Financial Information

The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The
guarantees are full and unconditional, joint and several.

The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor,
including  all  obligations  under  our  Credit  Facility;  (ii)  secured  by  certain  collateral  of  such  guarantor,  subject  to  permitted  liens  under  the
indenture governing the 2025 Notes; (iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the
collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral); and
(v) senior in right of payment to any future subordinated indebtedness of that guarantor.

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In  the  event  of  a  bankruptcy,  liquidation  or  reorganization  of  any  of  the  non-guarantor  subsidiaries  of  the  2025  Notes,  the  non-guarantor
subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to
the Company or to any guarantors.

The  2025  Notes  guarantees  shall  each  be  released  upon  (i)  any  sale  or  other  disposition  of  all  or  substantially  all  of  the  assets  of  such
guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company
or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes; (ii) any sale,
exchange or transfer (by merger, consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is
no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes; (iii)
legal  or  covenant  defeasance  or  satisfaction  and  discharge  of  the  indenture  governing  such  notes;  or  (iv)  dissolution  of  such  guarantor,
provided no default or event of default has occurred that is continuing.

The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to
all  other  contingent  and  fixed  liabilities  of  such  guarantor  (including,  without  limitation,  any  guarantees  under  the  Credit  Facility)  and  any
collections  from  or  payments  made  by  or  on  behalf  of  any  other  guarantor  in  respect  of  the  obligations  of  such  other  guarantor  under  its
guarantee  or  pursuant  to  its  contribution  obligations  under  the  applicable  indenture,  result  in  the  obligations  of  such  guarantor  under  its
guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under
applicable  law.  Nonetheless,  in  the  event  of  the  bankruptcy,  insolvency  or  financial  difficulty  of  a  guarantor,  such  guarantor’s  obligations
under  its  guarantee  may  be  subject  to  review  and  avoidance  under  applicable  fraudulent  conveyance,  fraudulent  preference,  fraudulent
transfer and insolvency laws.

We are presenting the following summarized financial information for the Company and the subsidiary guarantors (collectively referred to as
the  "Obligated  Group")  pursuant  to  Rule  13-01  of  Regulation  S-X,  Guarantors  and  Issuers  of  Guaranteed  Securities  Registered  or  Being
Registered.  For  purposes  of  the  following  summarized  financial  information,  transactions  between  the  Company  and  the  subsidiary
guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded.
Amounts  due  to  the  non-guarantor  subsidiaries  and  other  related  parties,  as  applicable,  have  been  separately  presented  within  the
summarized financial information below.

Summarized financial information was as follows (in thousands):

(in thousands)
Revenues
Cost of sales
Operating income (loss)
Net income (loss)

(in thousands)
Current assets
Noncurrent assets

Current liabilities
Payables to non-guarantor subsidiaries
Noncurrent liabilities

$

$

Year ended December 31,

2022

2021

547,256  $
417,131 
35,321 
3,712 

Year ended December 31,

2022

2021

378,812  $
279,389 

175,155 
132,839 
293,150 

401,876 
323,914 
(46,827)
(82,651)

327,281 
298,172 

144,487 
125,281 
259,622 

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Critical accounting policies and estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which
have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the  United  States  of  America.  In  preparing  our
consolidated financial statements, we make judgments, estimates and assumptions affecting the amounts reported. We base our estimates
on factors including historical experience and various assumptions that we believe are reasonable under the circumstances. These factors
form  the  basis  for  making  estimates  about  the  carrying  values  of  assets  and  liabilities  that  are  not  readily  apparent  from  other  sources.
Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different
amounts  could  have  been  reported  under  different  conditions,  or  if  different  assumptions  had  been  used.  We  evaluate  our  estimates  and
assumptions  on  a  regular  basis.  Actual  results  may  differ  from  these  estimates  and  assumptions  used  in  preparation  of  our  consolidated
financial statements.

In order to provide a better understanding of how we make judgments, and develop estimates and assumptions about future events, we have
described our most critical accounting policies and estimates used in preparation of our consolidated financial statements below.

Revenue recognition

Revenue  is  recognized  in  accordance  with  Accounting  Standards  Codification  Topic  (“ASC”)  606,  when  control  of  the  promised  goods  or
services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods
or services. For the year ended December 31, 2022, approximately 93% of our revenue was recognized from goods transferred to customers
at a point in time while 7% of our revenue was recognized from goods transferred to customers over time.

Although terms of our contracts may vary considerably, the 7% of revenues recognized over time relate to certain contracts in our Subsea
and Production Equipment product lines which are typically based on a fixed amount for the entire contract. Recognition over time for these
contracts is supported by our assessment of the products supplied as having no alternative use to us and by clauses in the contracts that
provide us with an enforceable right to payment for performance completed to date. We use the cost-to-cost method to measure progress for
these contracts because it best depicts the transfer of assets to the customer which occurs as costs are incurred on the contract. The amount
of  revenue  recognized  is  calculated  based  on  the  ratio  of  costs  incurred  to  date  compared  to  total  estimated  costs  which  requires
management  to  calculate  reasonably  dependable  estimates  of  total  contract  costs.  Whenever  revisions  of  estimated  contract  costs  and
contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is
recorded in that period. We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless
the stage of completion is insufficient to enable a reasonably certain forecast of profit to be established. In such cases, no profit is recognized
during the period.

Accounting estimates during the course of projects may change. The effect of such a change, which can be upward as well as downward, is
accounted  for  in  the  period  of  change,  and  the  cumulative  income  recognized  to  date  is  adjusted  to  reflect  the  latest  estimates.  These
revisions to estimates are accounted for on a prospective basis.

Contracts are sometimes modified to account for changes in product specifications or requirements. Most of our contract modifications are
for goods and services that are not distinct from the existing contract. As such, these modifications are accounted for as if they were part of
the existing contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance
obligation to which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis.

Inventories

Inventories, consisting of finished goods and materials and supplies held for resale, are carried at the lower of cost or net realizable value.
We evaluate our inventories based on an analysis of stocking levels, historical sales levels and future sales forecasts, to determine obsolete,
slow-moving  and  excess  inventory.  While  we  have  policies  for  calculating  and  recording  reserves  against  inventory  carrying  values,  we
exercise judgment in establishing and applying these policies.

As of December 31, 2022 and 2021, our inventory reserve balances were $39.3 million and $62.9 million, respectively. For the years ended
December 31, 2022 and 2021, we recognized inventory write downs totaling $2.7 million and $8.1 million, respectively. These charges are all
included  in  “Cost  of  sales”  in  the  consolidated  statements  of  comprehensive  income  (loss).  See  Note  5  Inventories for further information
related to these charges.

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Long-lived assets

As of December 31, 2022, our long-lived assets included property and equipment, definite lived intangibles, and operating lease right of use
assets with balances of $63.0 million, $191.5 million and $57.3 million, respectively. Key estimates related to long-lived assets include useful
lives and recoverability of carrying values and changes in such estimates could have a significant impact on financial results.

We review long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a
long-lived asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the
asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is
an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and
the estimated fair value of the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis
of discounted future cash flows based on expected utilization. The impairment loss recognized represents the excess of an assets’ carrying
value as compared to its estimated fair value.

Income taxes

We follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined
based upon temporary differences between the carrying amounts and tax bases of our assets and liabilities at the balance sheet date, and
are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. We recognize deferred tax
assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all
available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-
planning  and  recent  operating  results.  Any  changes  in  our  judgment  as  to  the  realizability  of  our  deferred  tax  assets  are  recorded  as  an
adjustment  to  the  deferred  tax  asset  valuation  allowance  in  the  period  the  change  occurs.  For  the  year  ended  December  31,  2021,  we
recognized tax expense for valuation allowances totaling $31.1 million. See Note 10 Income Taxes for further information related to these
charges.

The accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining
that the relevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than
not” recognition criteria, the accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50%
likely of being realized upon ultimate settlement. If management determines that likelihood of sustaining the realization of the tax benefit is
less than or equal to 50%, then the tax benefit is not recognized in the consolidated financial statements.

We have operations in countries other than the U.S. Consequently, we are subject to the jurisdiction of a number of taxing authorities. The
final  determination  of  tax  liabilities  involves  the  interpretation  of  local  tax  laws,  tax  treaties,  and  related  authorities  in  each  jurisdiction.
Changes  in  the  operating  environment,  including  changes  in  tax  law  or  interpretation  of  tax  law  and  currency  repatriation  controls,  could
impact the determination of our tax liabilities for a given tax year.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of
the  specified  effective  date.  Refer  to  Note  2  Summary  of  Significant  Accounting  Policies  for  information  related  to  recent  accounting
pronouncements.

Cautionary note regarding forward-looking statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of
historical fact, included in this Annual Report on Form 10-K regarding our strategy, future operations, financial position, estimated revenues
and  losses,  projected  costs,  prospects,  plans  and  objectives  of  management  are  forward-looking  statements.  When  used  in  this  Annual
Report on Form 10-K, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,”
“project”  and  similar  expressions  are  intended  to  identify  forward-looking  statements,  although  not  all  forward-looking  statements  contain
such identifying words.

All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We disclaim any obligation to update or revise
these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe
that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on
Form 10-K are reasonable, forward-

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looking  statements  are  not  guarantees  of  future  performance  and  involve  risks  and  uncertainties  that  may  cause  actual  results  to  differ
materially  from  our plans,  intentions  or  expectations.  This  may  be  the  result  of  various  factors,  including,  but  not  limited  to,  those  factors
discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in
this Annual Report on Form 10-K.

Item 7A. Quantitative and qualitative disclosures about market risk

Not required under Regulation S-K for “smaller reporting companies.”

42

Item 8. Consolidated Financial Statements and Supplementary Data

Report of independent registered public accounting firm - Deloitte & Touche LLP
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2022 and 2021
Consolidated balance sheets as of December 31, 2022 and 2021
Consolidated statements of cash flows for the years ended December 31, 2022 and 2021
Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2022 and 2021
Notes to consolidated financial statements

Page
44
46
47
48
49
50

43

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Forum Energy Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Forum Energy Technologies, Inc. and subsidiaries (the "Company") as of
December  31,  2022  and  2021,  the  related  consolidated  statements  of  comprehensive  income  (loss),  changes  in  stockholders'  equity,  and
cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial
statements").  In  our  opinion,  the  financial  statements  present  fairly,  in  all  material  respects,  the  financial  position  of  the  Company  as  of
December  31,  2022  and  2021,  and  the  results  of  its  operations  and  its  cash  flows  for  each  of  the  two  years  in  the  period  ended
December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28,
2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These  financial  statements  are  the  responsibility  of  the  Company's  management.  Our  responsibility  is  to  express  an  opinion  on  the
Company's  financial  statements  based  on  our  audits.  We  are  a  public  accounting  firm  registered  with  the  PCAOB  and  are  required  to  be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts  and  disclosures  in  the  financial  statements.  Our  audits  also  included  evaluating  the  accounting  principles  used  and  significant
estimates  made  by  management,  as  well  as  evaluating  the  overall  presentation  of  the  financial  statements.  We  believe  that  our  audits
provide a reasonable basis for our opinion.

Critical Audit Matter

The  critical  audit  matter  communicated  below  is  a  matter  arising  from  the  current-period  audit  of  the  financial  statements  that  was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the
financial  statements  and  (2)  involved  our  especially  challenging,  subjective,  or  complex  judgments.  The  communication  of  critical  audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory — Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

Inventory consists of finished goods and materials and supplies which are carried at the lower of cost or net realizable value. The Company
evaluates the net realizable values of inventories based on analysis of inventory levels including excess, obsolete and slow-moving items,
historical sales experience and future sales forecasts. The Company’s evaluation of net realizable value is performed at each location and is
based  on  information  and  assumptions  specific  to  that  location.  Changes  in  these  assumptions  could  have  a  significant  impact  on  the
recorded inventory amounts or the amount of inventory write-downs. The inventory, net balance at December 31, 2022 was $269.8 million
and the amount of inventory reserve was $39.3 million.

44

Given the significant judgments and assumptions made by management in applying the methodology used to determine net realizable value,
future  sales  forecasts,  and  the  reports  utilized  to  determine  inventory  levels  and  historical  sales  experiences,  performing  audit  procedures
required a high degree of auditor judgment and increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the net realizable value of inventory included the following, among others:

• We made inquiries of business unit managers as well as executives, sales, and operations personnel about the expected product

lifecycles and product development plans and historical usage by product.

• We  have  tested  the  forecasted  demand  by  comparing  internal  and  external  information  (e.g.  historical  usage,  contracts,
communications  with  customers,  product  development  plans,  and  macroeconomic  conditions)  with  the  Company’s  forecasted
demand.

• We evaluated management’s overall forecasted demand by comparing actual results to historical forecasts.

• We considered the existence of contradictory evidence based on reading of internal communications to management and the board
of  directors,  Company  press  releases,  and  analysts'  reports,  as  well  as  our  observations  and  inquiries  as  to  changes  within  the
business.

/s/ Deloitte & Touche LLP

Houston, Texas

February 28, 2023

We have served as the Company’s auditor since 2019.

45

Forum Energy Technologies, Inc. and subsidiaries
Consolidated statements of comprehensive income (loss)

(in thousands, except per share information)
Revenues
Cost of sales
Gross profit

Operating expenses
Selling, general and administrative expenses
Gain on sale-leaseback transactions
Gain on disposal of assets and other

Total operating expenses
Operating income (loss)

Other expense (income)
Interest expense
Loss on extinguishment of debt
Foreign exchange losses (gains) and other, net

Total other expense, net
Income (loss) before income taxes

Income tax expense
Net income (loss)

Weighted average shares outstanding

Basic
Diluted

Earnings (loss) per share

Basic
Diluted

Other comprehensive income (loss), net of tax of $0:

Net income (loss)
Change in foreign currency translation
Gain on pension liability

Comprehensive loss

The accompanying notes are an integral part of these consolidated financial statements.

46

Year ended December 31,

2022

2021

$

$

$
$

$

$

699,913  $
511,387 
188,526 

179,471 
(7,000)
(1,271)
171,200 
17,326 

31,525 
— 
(24,548)
6,977 
10,349 
6,637 
3,712  $

5,747 
5,951 

0.65  $
0.62  $

3,712  $

(28,713)
2,256 
(22,745) $

541,068 
417,727 
123,341 

168,886 
— 
(1,052)
167,834 
(44,493)

32,009 
5,290 
217 
37,516 
(82,009)
642 
(82,651)

5,643 
5,643 

(14.65)
(14.65)

(82,651)
(1,479)
840 
(83,290)

 
  
Forum Energy Technologies, Inc. and subsidiaries
Consolidated balance sheets

(in thousands, except share information)
Assets
Current assets

Cash and cash equivalents
Accounts receivable—trade, net of allowances of $10,690 and $11,114
Inventories, net
Prepaid expenses and other current assets
Costs and estimated profits in excess of billings
Accrued revenue

Total current assets

Property and equipment, net of accumulated depreciation
Operating lease assets
Deferred financing costs, net
Intangible assets, net
Deferred tax assets, net
Other long-term assets

Total assets

Liabilities and equity
Current liabilities

Current portion of long-term debt
Accounts payable—trade
Accrued liabilities
Deferred revenue
Billings in excess of costs and profits recognized

Total current liabilities

Long-term debt, net of current portion
Deferred tax liabilities, net
Operating lease liabilities
Other long-term liabilities

Total liabilities

Commitments and contingencies
Equity

Common stock, $0.01 par value, 14,800,000 shares authorized, 6,223,454 and 6,100,886
shares issued
Additional paid-in capital
Treasury stock at cost, 570,247 and 467,153 shares
Retained deficit
Accumulated other comprehensive loss

Total equity
Total liabilities and equity

The accompanying notes are an integral part of these consolidated financial statements.

47

December 31,
2022

December 31,
2021

$

$

$

$

51,029  $

154,247 
269,828 
21,957 
15,139 
665 
512,865 
62,963 
57,270 
1,166 
191,481 
184 
8,828 
834,757  $

782  $

118,261 
76,544 
14,401 
305 
210,293 
239,128 
902 
64,626 
12,773 
527,722 

46,858 
123,903 
241,740 
23,702 
8,285 
2,245 
446,733 
94,005 
25,431 
1,484 
217,405 
203 
6,075 
791,336 

860 
99,379 
58,436 
7,276 
9,705 
175,656 
232,370 
834 
34,745 
18,605 
462,210 

62 
1,253,613 
(138,560)
(680,595)
(127,485)
307,035 
834,757  $

61 
1,249,962 
(135,562)
(684,307)
(101,028)
329,126 
791,336 

 
 
 
Forum Energy Technologies, Inc. and subsidiaries
Consolidated statements of cash flows

(in thousands, except share information)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation expense
Amortization of intangible assets
Stock-based compensation expense
Inventory write downs
Provision for doubtful accounts
Deferred income taxes
Loss on extinguishment of debt
Gain on sale-leaseback transactions
Other
Changes in operating assets and liabilities

Accounts receivable—trade
Inventories
Prepaid expenses and other current assets
Cost and estimated profits in excess of billings
Accounts payable, deferred revenue and other accrued liabilities
Billings in excess of costs and profits recognized

Net cash used in operating activities

Cash flows from investing activities

Capital expenditures for property and equipment
Proceeds from sale of property and equipment
Proceeds from settlement of note receivable
Acquisition of businesses, net of cash acquired
Proceeds from sale of business
Proceeds from sale-leaseback transactions

Net cash provided by investing activities

Cash flows from financing activities

Borrowings on revolving Credit Facility
Repayments on revolving Credit Facility
Cash paid to repurchase 2025 Notes
Repurchases of stock
Payment of capital lease obligations
Deferred financing costs

Net cash used in financing activities

Effect of exchange rate changes on cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period

Supplemental cash flow disclosures

Cash paid for interest
Cash paid (refunded) for income taxes

Noncash investing and financing activities

Operating lease assets obtained in exchange for lease obligations
Finance lease assets obtained in exchange for lease obligations
Accrued purchases of property and equipment

The accompanying notes are an integral part of these consolidated financial statements.

48

Year ended December 31,

2022

2021

$

3,712  $

(82,651)

12,441 
24,537 
4,205 
2,698 
2,249 
(130)
— 
(7,000)
5,350 

(34,802)
(34,611)
590 
(7,824)
20,764 
(9,233)
(17,054)

(7,492)
3,007 
— 
(485)
— 
32,109 
27,139 

544,126 
(544,126)
— 
(3,826)
(1,250)
— 
(5,076)

(838)
4,171 
46,858 
51,029  $

25,325  $
(383)

40,516  $
2,026 
50 

17,064 
25,112 
7,594 
8,096 
2,424 
2,791 
5,290 
— 
5,210 

(44,959)
1,935 
(8,078)
84 
36,327 
7,986 
(15,775)

(2,399)
7,007 
10,784 
(3,411)
(1,283)
— 
10,698 

— 
(13,126)
(58,596)
(1,414)
(1,517)
(1,590)
(76,243)

(439)
(81,759)
128,617 
46,858 

27,068 
2,444 

2,340 
463 
— 

$

$

$

 
  
Forum Energy Technologies, Inc. and subsidiaries
Consolidated statements of changes in stockholders’ equity

(in thousands)

Common stock

Additional
paid-in
capital

Treasury stock

Retained deficit

Accumulated
other
comprehensive
income / (loss)

Total
common
stockholders’
equity

Balance at December 31, 2020

Restricted stock issuance, net of forfeitures
Stock-based compensation expense
Treasury stock
Change in pension liability
Currency translation adjustment
Net loss

Balance at December 31, 2021

Restricted stock issuance, net of forfeitures
Stock-based compensation expense
Treasury stock
Liability awards converted to share settled
Change in pension liability
Currency translation adjustment
Net income

Balance at December 31, 2022

$

$

$

60  $

1,242,720  $

(134,499) $

(601,656) $

(100,389) $

1 
— 
— 
— 
— 
— 

(352)
7,594 
— 
— 
— 
— 

— 
— 
(1,063)
— 
— 
— 

— 
— 
— 
— 
— 
(82,651)

— 
— 
— 
840 
(1,479)
— 

61  $

1,249,962  $

(135,562) $

(684,307) $

(101,028) $

1 
— 
— 
— 
— 
— 
— 

(829)
4,205 
— 
275 
— 
— 
— 

— 
— 
(2,998)
— 
— 
— 
— 

— 
— 
— 
— 
— 
— 
3,712 

— 
— 
— 
— 
2,256 
(28,713)
— 

62  $

1,253,613  $

(138,560) $

(680,595) $

(127,485) $

406,236 

(351)
7,594 
(1,063)
840 
(1,479)
(82,651)

329,126 

(828)
4,205 
(2,998)
275 
2,256 
(28,713)
3,712 

307,035 

The accompanying notes are an integral part of these consolidated financial statements.

49

 
 
 
 
 
 
 
 
 
Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements

1. Nature of Operations

Forum Energy Technologies, Inc. (the “Company,” “FET,” “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil,
natural gas, industrial and renewable energy industries. FET provides value added solutions that increase the safety and efficiency of energy
exploration  and  production.  We  are  an  environmentally  and  socially  responsible  company  headquartered  in  Houston,  Texas  with
manufacturing, distribution and service facilities strategically located throughout the world.

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”). Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries after elimination
of intercompany balances and transactions.

COVID-19 impacts

The  outbreak  of  COVID-19  in  2020  caused  significant  disruptions  in  the  U.S.  and  world  economies  which  led  to  significant  reductions  in
demand  for  crude  oil.  During  2021,  distribution  of  vaccines  resulted  in  reopening  of  certain  economies  and  increasing  demand  for  oil  and
natural  gas.  In  2022,  ongoing  COVID-19  outbreaks  and  related  work  restrictions  continued  to  disrupt  global  supply  chains  contributing  to
materials delays and inflationary pressures. The Company anticipates that future outbreaks of COVID-19, should they occur, will continue to
impact our liquidity, financial condition and future results of operations.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  and  disclosure  of  contingent  assets  and  liabilities  as  of  the  date  of  the  consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period.

In the preparation of these consolidated financial statements, estimates and assumptions have been made by management including, among
others, an assessment of percentage of completion of projects based on costs to complete contracts, the selection of useful lives of tangible
and  intangible  assets,  expected  future  cash  flows  from  long  lived  assets  to  support  impairment  tests,  provisions  necessary  for  trade
receivables, amounts of deferred taxes and income tax contingencies. Actual results could differ from these estimates.

The financial reporting of contracts depends on estimates, which are assessed continually during the term of those contracts. The amounts of
revenues and income recognized are subject to revisions as the contract progresses to completion and changes in estimates are reflected in
the period in which the facts that give rise to the revisions become known. Additional information that enhances and refines the estimating
process  that  is  obtained  after  the  balance  sheet  date,  but  before  issuance  of  the  consolidated  financial  statements,  is  reflected  in  the
consolidated financial statements.

Cash and cash equivalents

Cash  and  cash  equivalents  consist  of  cash  on  deposit  and  high  quality,  short-term  money  market  instruments  with  an  original  maturity  of
three months or less. Cash equivalents are based on quoted market prices, a Level 1 fair value measure.

50

Table of Contents

Accounts receivable-trade

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Trade accounts receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus
receivables  do  not  bear  interest,  although  a  finance  charge  may  be  applied  to  amounts  past  due.  We  maintain  an  allowance  for  doubtful
accounts for estimated losses that may result from the inability of our customers to make required payments. Such allowances are based
upon several factors including, but not limited to, credit approval practices, industry and customer historical experience as well as the current
and projected financial condition of the specific customer. Accounts receivable outstanding longer than contractual terms are considered past
due. We write-off accounts receivable to the allowance for doubtful accounts when they become uncollectible. Any payments subsequently
received on receivables previously written-off are credited to bad debt expense.

The changes in allowance for doubtful account during the years ended December 31, 2022 and 2021 were as follows (in thousands):

Period ended

December 31, 2021
December 31, 2022

Inventories

Balance at
beginning of period
9,217 
11,114 

Charged to
expense

Deductions or
other

Balance at end of
period

2,424 
2,249 

(527)
(2,673)

11,114 
10,690 

Inventories, consisting of finished goods and materials and supplies held for resale, are carried at the lower of cost or net realizable value.
For certain operations, cost, which includes the cost of raw materials and labor for finished goods, is determined using standard cost which
approximates a first-in first-out basis. For other operations, this cost is determined on an average cost, first-in first-out or specific identification
basis. Net realizable value means estimated selling price in the ordinary course of business, less reasonably predictable cost of completion,
disposal, and transportation. We continuously evaluate inventories based on an analysis of inventory levels, historical sales experience and
future sales forecasts, to determine obsolete, slow-moving and excess inventory.

For the years ended December 31, 2022 and 2021, we recognized inventory write downs totaling $2.7 million and $8.1 million, respectively.
These charges are all included in cost of sales in the consolidated statements of comprehensive income (loss). See Note 5 Inventories for
further information related to these charges.

Property and equipment

Property  and  equipment  are  stated  at  cost  less  accumulated  depreciation.  Finance  leases  of  property  and  equipment  are  stated  at  the
present value of future minimum lease payments. Expenditures for property and equipment and for items which substantially increase the
useful lives of existing assets are capitalized at cost and depreciated over their estimated useful life utilizing the straight-line method. Routine
expenditures for repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method based on the
estimated  useful  lives  of  assets,  generally  two  to  30  years.  Property  and  equipment  held  under  finance  leases  are  amortized  straight-line
over the shorter of the lease term or estimated useful life of the asset. Gains or losses resulting from the disposition of assets are recognized
in  income  with  the  related  asset  cost  and  accumulated  depreciation  removed  from  the  balance  sheet.  Assets  acquired  in  connection  with
business combinations are recorded at fair value.

We review long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a
long-lived asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the
asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is
an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and
the estimated fair value of the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis
of discounted future cash flows based on expected utilization.

51

Table of Contents

Lease obligations

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our consolidated
balance  sheets.  Leases  with  an  initial  term  greater  than  12  months  are  recognized  in  our  consolidated  balance  sheets  based  on  lease
classification as either operating or financing. Operating leases are included in operating lease assets, accrued liabilities and operating lease
liabilities. Finance leases are included in property and equipment, current portion of long-term debt, and long-term debt. Some of our lease
agreements  include  lease  and  non-lease  components  for  which  we  have  elected  to  not  separate  for  all  classes  of  underlying  assets.  Our
lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate to
third parties when we have no future use for the property.

Our  lease  portfolio  primarily  consists  of  operating  leases  for  certain  manufacturing  facilities,  warehouses,  service  facilities,  office  spaces,
equipment  and  vehicles.  Operating  lease  assets  and  operating  lease  liabilities  are  recognized  based  on  the  present  value  of  the  future
minimum  lease  payments  at  the  commencement  date.  As  most  of  our  leases  do  not  provide  an  implicit  rate,  we  use  our  incremental
borrowing  rate  based  on  the  information  available  at  the  commencement  date  in  determining  the  present  value  of  future  payments.  Our
leases have remaining terms of one to 12 years and may include options to extend or terminate the lease when it is reasonably certain that
we  will  exercise  that  option.  The  operating  lease  assets  also  include  any  upfront  lease  payments  made  and  exclude  lease  incentives  and
initial direct costs incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

We review operating lease assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of
a long-lived asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the
asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the asset, there is
an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and
the estimated fair value of the asset. The fair value is determined by means of an analysis of discounted future cash flows based on expected
utilization.

Intangible assets

Intangible  assets  with  definite  lives  are  comprised  of  customer  and  distributor  relationships,  patents  and  technology,  trade  names,
trademarks and non-compete agreements which are amortized on a straight-line basis over the life of the intangible asset, generally five to
35 years. These assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not
be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset are estimated. If the
undiscounted future cash flows are less than the carrying amount of the asset, there is an indication that the asset may be impaired. The
amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value
is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows. The impairment
loss recognized represents the excess of an asset’s carrying value as compared to its estimated fair value.

Recognition of provisions for contingencies

In the ordinary course of business, we are subject to various claims, suits and complaints. We, in consultation with internal and external legal
advisors, will provide for a contingent loss in the consolidated financial statements if, at the date of the consolidated financial statements, it is
probable that a liability has been incurred and the amount can be reasonably estimated. If it is determined that the reasonable estimate of the
loss is a range and that there is no best estimate within that range, a provision will be made for the lower amount of the range. Legal costs
are expensed as incurred.

An assessment is made of the areas where potential claims may arise under contract warranty clauses. Where a specific risk is identified,
and  the  potential  for  a  claim  is  assessed  as  probable  and  can  be  reasonably  estimated,  an  appropriate  warranty  provision  is  recorded.
Warranty  provisions  are  eliminated  at  the  end  of  the  warranty  period  except  where  warranty  claims  are  still  outstanding.  The  liability  for
product warranty is included in accrued liabilities in the consolidated balance sheets.

52

Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Revenue recognition and deferred revenue

Revenue  is  recognized  in  accordance  with  Accounting  Standards  Codification  Topic  (“ASC”)  606,  when  control  of  the  promised  goods  or
services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods
or services.

Contract Identification.  We  account  for  a  contract  when  it  is  approved,  both  parties  are  committed,  the  rights  of  the  parties  are  identified,
payment terms are defined, the contract has commercial substance and collection of consideration is probable.

Performance Obligations.  A  performance  obligation  is  a  promise  in  a  contract  to  transfer  a  distinct  good  or  service  to  the  customer  under
ASC 606. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services.
For  contracts  with  multiple  performance  obligations,  we  allocate  revenue  to  each  performance  obligation  based  on  its  relative  standalone
selling price. In accordance with ASC 606, we do not assess whether promised goods or services are performance obligations if they are
immaterial  in  the  context  of  the  contract  with  the  customer.  We  have  elected  to  apply  the  practical  expedient  to  account  for  shipping  and
handling costs associated with outbound freight after control of a product has transferred to a customer as a fulfillment cost which is included
in  cost  of  sales.  Furthermore,  since  our  customer  payment  terms  are  short-term  in  nature,  we  have  also  elected  to  apply  the  practical
expedient which allows an entity to not adjust for the effects of a significant financing component if it expects that the customer’s payment
period will be less than one year in duration.

Contract Value. Revenue is measured based on the amount of consideration specified in the contracts with our customers and excludes any
amounts collected on behalf of third parties. We have elected the practical expedient to exclude amounts collected from customers for all
sales (and other similar) taxes.

The  estimation  of  total  revenue  from  a  customer  contract  is  subject  to  elements  of  variable  consideration.  Certain  customers  may  receive
rebates  or  discounts  which  are  accounted  for  as  variable  consideration.  We  estimate  variable  consideration  as  the  most  likely  amount  to
which  we  expect  to  be  entitled,  and  we  include  estimated  amounts  in  the  transaction  price  to  the  extent  it  is  probable  that  a  significant
reversal  of  cumulative  revenue  will  not  occur  when  the  uncertainty  associated  with  the  variable  consideration  is  resolved.  Our  estimate  of
variable  consideration  and  determination  of  whether  to  include  estimated  amounts  in  the  transaction  price  are  based  largely  on  an
assessment of our anticipated performance and all information (historic, current, forecast) that is reasonably available to us.

Timing of Recognition. We recognize revenue when we satisfy a performance obligation by transferring control of a product or service to a
customer. Our performance obligations are satisfied at a point in time or over time as work progresses.

Revenue from goods transferred to customers at a point in time accounted for 93% of revenues for the year ended December 31, 2022. The
majority of this revenue is product sales, which are generally recognized when items are shipped from our facilities and title passes to the
customer. The amount of revenue recognized for products is adjusted for expected returns, which are estimated based on historical data.

Revenue  from  goods  transferred  to  customers  over  time  accounted  for  7%  of  revenues  for  the  year  ended  December  31,  2022,  which  is
related to certain contracts in our Subsea and Production Equipment product lines. Recognition over time for these contracts is supported by
our  assessment  of  the  products  supplied  as  having  no  alternative  use  to  us  and  by  clauses  in  the  contracts  that  provide  us  with  an
enforceable right to payment for performance completed to date. We use the cost-to-cost method to measure progress for these contracts
because it best depicts the transfer of assets to the customer which occurs as costs are incurred on the contract. The amount of revenue
recognized  is  calculated  based  on  the  ratio  of  costs  incurred  to-date  compared  to  total  estimated  costs  which  requires  management  to
calculate  reasonably  dependable  estimates  of  total  contract  costs.  Whenever  revisions  of  estimated  contract  costs  and  contract  values
indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that
period.  We  recognize  revenue  and  cost  of  sales  each  period  based  upon  the  advancement  of  the  work-in-progress  unless  the  stage  of
completion is insufficient to enable a reasonably certain forecast of profit to be established. In such cases, no profit is recognized during the
period.

Accounting estimates during the course of projects may change, primarily related to our remotely operated vehicles (“ROVs”) which may take
longer to manufacture. The effect of such a change, which can be upward as well as

53

Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

downward, is accounted for in the period of change, and the cumulative income recognized to date is adjusted to reflect the latest estimates.
These revisions to estimates are accounted for on a prospective basis.

Contracts are sometimes modified to account for changes in product specifications or requirements. Most of our contract modifications are
for goods and services that are not distinct from the existing contract. As such, these modifications are accounted for as if they were part of
the existing contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance
obligation to which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis. No adjustment to any one contract
was material to our consolidated financial statements for the years ended December 31, 2022 and 2021.

We  sell  our  products  through  a  number  of  channels  including  a  direct  sales  force,  marketing  representatives,  and  distributors.  We  have
elected  to  expense  sales  commissions  when  incurred  as  the  amortization  period  would  be  less  than  one  year.  These  costs  are  recorded
within cost of sales.

Portfolio Approach. We have elected to apply ASC 606 to a portfolio of contracts with similar characteristics as we reasonably expect that the
effects  on  the  financial  statements  of  applying  this  guidance  to  the  portfolio  would  not  differ  materially  from  applying  this  guidance  to  the
individual contracts within that portfolio.

Disaggregated Revenue. Refer to Note 17 Business Segments for disaggregated revenue by product line and geography.

Contract Balances. Contract  balances  are  determined  on  a  contract  by  contract  basis.  Contract  assets  represent  revenue  recognized  for
goods and services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, when
we  receive  consideration,  or  such  consideration  is  unconditionally  due,  from  a  customer  prior  to  transferring  goods  or  services  to  the
customer under the terms of a sales contract, we record a contract liability. Such contract liabilities typically result from billings in excess of
costs incurred and advance payments received on product sales.

Concentration of credit risk

Trade accounts receivable are financial instruments which potentially subject the Company to credit risk. Trade accounts receivable consist
of  uncollateralized  receivables  from  domestic  and  international  customers.  For  the  years  ended  December  31,  2022  and  2021,  no  one
customer  accounted  for  10%  or  more  of  the  total  revenue  or  10%  or  more  of  the  total  accounts  receivable  balance  at  the  end  of  the
respective period.

Stock-based compensation

We  measure  all  stock-based  compensation  awards  at  fair  value  on  the  date  they  are  granted  to  employees  and  directors,  and  recognize
compensation cost over the requisite service period for awards with only a service condition, and over a graded vesting period for awards
with service and performance or market conditions.

The  fair  value  of  stock-based  compensation  awards  with  market  conditions  is  measured  using  a  Monte  Carlo  Simulation  model  and,  in
accordance with ASC 718, is not adjusted based on actual achievement of the performance goals. The Black-Scholes option pricing model is
used to measure the fair value of options. Forfeitures are accounted for as they occur.

Income taxes

We follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined
based upon temporary differences between the carrying amounts and tax bases of our assets and liabilities at the balance sheet date, and
are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax
assets and liabilities of a change in the tax rates is recognized in income in the period in which the change occurs. We record a valuation
allowance in each reporting period when management believes that it is more likely than not that any deferred tax asset created will not be
realized. See Note 10 Income Taxes for more information on valuation allowances recognized.

Accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than not”
recognition criteria, accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of
being realized upon ultimate settlement.

54

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Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Non-U.S. local currency translation

We  have  global  operations  and  the  majority  of  our  non-U.S.  operations  have  designated  the  local  currency  as  the  functional  currency.
Realized and unrealized gains and losses resulting from re-measurements of monetary assets and liabilities denominated in a currency other
than the local entity’s functional currency are included in the consolidated statements of comprehensive income (loss) as incurred.

Financial statements of our foreign operations where the functional currency is not the U.S. dollar are translated into U.S. dollars using the
current rate method whereby assets and liabilities are translated at the balance sheet rate and income and expenses are translated at the
average exchange rates in effect during the period. The resultant translation adjustments are reported as a component of accumulated other
comprehensive loss within equity in our consolidated balance sheets.

Fair value

The  carrying  amounts  for  financial  instruments  classified  as  current  assets  and  current  liabilities  approximate  fair  value,  due  to  the  short
maturity of such instruments. The book values of other financial instruments, such as our debt related to the Credit Facility, approximates fair
value  because  interest  rates  charged  are  similar  to  other  financial  instruments  with  similar  terms  and  maturities  and  the  rates  vary  in
accordance with a market index.

For financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The established fair
value hierarchy divides fair value measurement into three broad levels:

•

•

•

Level  1  -  inputs  are  quoted  prices  (unadjusted)  in  active  markets  for  identical  assets  or  liabilities  that  the  reporting  entity  has  the
ability to access at the measurement date;

Level  2  -  inputs  other  than  quoted  prices  included  within  Level  1  that  are  observable  for  the  asset  or  liability,  either  directly  or
indirectly; and

Level 3 - inputs are unobservable for the asset or liability, which reflect the best judgment of management.

The financial assets and liabilities that are disclosed at fair value for disclosure purposes are categorized in one of the above three levels
based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 provides the most reliable measure of
fair value, whereas Level 3 generally requires significant management judgment.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of
the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not
yet effective, will not have a material impact on our consolidated financial statements upon adoption.

Accounting Standards Adopted in 2022

Convertible Debt. In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's
Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion
features being separately recognized from the host contract as compared with current GAAP. In addition, this update also makes targeted
changes  to  the  disclosures  for  convertible  instruments  and  earnings-per-share  guidance.  We  adopted  this  new  standard  as  of  January  1,
2022. The adoption of this new standard did not have a material impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Inflation Reduction Act of 2022. In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA, among other
provisions,  imposes  a  15%  corporate  alternative  minimum  tax  on  the  adjusted  financial  statement  income  of  certain  large  corporations
effective  for  tax  years  beginning  after  December  31,  2022  and  a  1%  excise  tax  on  stock  repurchases  made  by  publicly  traded  U.S.
corporations after December 31, 2022. The Company is in the process of evaluating the IRA and the impact it may have on our consolidated
financial statements.

55

3. Revenues

Disaggregated revenues

Refer to Note 17 Business Segments for disaggregated revenues by product line and geography.

Contract balances

The following table reflects the changes in our contract assets and contract liabilities balances for the years ended December 31, 2022 and
2021:

December 31,
2022

December 31,
2021

Increase / (Decrease)

$

%

Accrued revenue
Costs and estimated profits in excess of billings
Contract assets - current
Contract assets - non-current

Contract assets

Deferred revenue
Billings in excess of costs and profits recognized
Contract liabilities

$

$

$

$

665  $

15,139 
15,804 
2,638 
18,442  $

14,401  $
305 
14,706  $

2,245 
8,285 
10,530 
— 
10,530  $

7,276 
9,705 
16,981  $

7,912 

75 %

(2,275)

(13)%

During the year ended December 31, 2022, our contract assets increased by $7.9 million and our contract liabilities decreased by $2.3 million
primarily  due  to  the  timing  of  milestone  billings  in  our  Subsea  Technologies  product  line.  The  noncurrent  portion  of  contract  assets  is
recorded on the consolidated balance sheets as other Iong-term assets.

During the year ended December 31, 2022, we recognized revenue of $14.5 million that was included in the contract liability balance at the
beginning of the period.

Substantially all of our contracts are less than one year in duration. As such, we have elected to apply the practical expedient which allows
an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an
original expected duration of one year or less.

4. Acquisition

2021 acquisition of Hawker Equipment Solutions

On  December  20,  2021,  we  acquired  certain  assets  of  Hawker  Equipment  Solutions,  LLC  (“Hawker”)  for  total  cash  consideration  of  $5.1
million, of which, $3.4 million was paid in the fourth quarter of 2021 and $1.0 million paid in 2022, with the balance expected to be paid over
the next four years. Hawker is a manufacturer of hydraulic pickup and laydown units. This acquisition is included in the Drilling product line
within the Drilling & Downhole segment. The fair values of the assets acquired and liabilities assumed, as well as the pro-forma results of
operations for this acquisition, have not been presented because they are not material to the consolidated financial statements.

56

Table of Contents

5. Inventories

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

The Company’s significant components of inventories at December 31, 2022 and 2021 were as follows (in thousands):

Raw materials and parts
Work in process
Finished goods
Total Inventories
Less: inventory reserve
Inventories, net

December 31,
2022

December 31,
2021

$

$

94,182  $
27,489 
187,448 
309,119 
(39,291)
269,828  $

97,053 
24,618 
182,954 
304,625 
(62,885)
241,740 

The changes in inventory reserve during the two-year period ended December 31, 2022 were as follows (in thousands):

Period ended

December 31, 2021
December 31, 2022

6. Property and Equipment

Balance at beginning
of period

Charged to expense Deductions or other

Balance at end of
period

$

144,942  $
62,885 

8,096  $
2,698 

(90,153) $
(26,292)

62,885 
39,291 

Property and equipment consisted of the following (in thousands):

Land
Buildings and leasehold improvements
Computer equipment
Machinery & equipment
Other
Construction in progress

Less: accumulated depreciation

Property and equipment, net

Estimated useful
lives

December 31,

2022

2021

5-30
3-5
5-10
2-10

$

4,763  $

49,705 
42,545 
117,145 
15,292 
4,530 
233,980 
(171,017)

$

62,963  $

7,502 
85,810 
43,853 
124,254 
14,547 
1,960 
277,926 
(183,921)
94,005 

Depreciation expense was $12.4 million and $17.1 million for the years ended December 31, 2022 and 2021, respectively.

During  2022,  the  Company  disposed  land  and  buildings  related  to  a  sale-leaseback  transaction  with  a  net  book  value  of  approximately
$25.1 million and received net proceeds of $32.1 million. The Company recognized a gain of $7.0 million as a result, which is reported in
operating expense in the consolidated statements of comprehensive income (loss).

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Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

7. Intangible Assets

At December 31, 2022 and 2021, intangible assets consisted of the following (in thousands):

Customer relationships
Patents and technology
Non-compete agreements
Trade names
Trademark

Total intangible assets

Customer relationships
Patents and technology
Non-compete agreements
Trade names
Trademark

Total intangible assets

Cost

Accumulated
amortization

Net

Amortization
period (in years)

December 31, 2022

266,537  $
88,863 
188 
42,638 
5,089 
403,315  $

(147,496) $
(35,298)
(188)
(27,071)
(1,781)
(211,834) $

119,041 
53,565 
— 
15,567 
3,308 
191,481 

10 - 35
5 - 19
 5
7 - 19
15

Cost

Accumulated
amortization

Net

Amortization
period (in years)

December 31, 2021

269,589  $
89,449 
191 
43,125 
5,089 
407,443  $

(133,451) $
(29,785)
(173)
(25,187)
(1,442)
(190,038) $

136,138 
59,664 
18 
17,938 
3,647 
217,405 

10 - 15
5 - 19
2 - 6
7 - 19
15

$

$

$

$

Intangible  assets  with  definite  lives  are  tested  for  impairment  whenever  events  or  changes  in  circumstances  indicate  that  their  carrying
amount may not be recoverable.

Amortization  expense  was  $24.5  million  and  $25.1  million  for  the  years  ended  December  31,  2022  and  2021,  respectively.  The  estimated
future amortization expense for the next five years is as follows (in thousands):

Year ending December 31,
2023
2024
2025
2026
2027

$

Amount

24,302 
22,545 
21,405 
20,581 
19,135 

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Table of Contents

8. Debt

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Notes payable and lines of credit consisted of the following as of (in thousands):

2025 Notes
Unamortized debt discount
Debt issuance cost
Credit Facility
Other debt
Total debt
Less: current portion
Long-term debt, net of current portion

2025 Notes

December 31,
2022

December 31,
2021

$

$

256,970  $
(15,314)
(3,759)
— 
2,013 
239,910 
(782)
239,128  $

256,970 
(20,035)
(4,918)
— 
1,213 
233,230 
(860)
232,370 

In  August  2020,  we  exchanged  $315.5  million  principal  amount  of  our  previous  6.25%  unsecured  notes  due  2021  (“2021  Notes”)  for  new
9.00% convertible secured notes due August 2025 (the “2025 Notes”). The 2025 Notes pay interest at the rate of 9.00%, of which 6.25% is
payable in cash and 2.75% is payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on
substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis.
As of December 31, 2022, approximately $122.8 million principal amount of the 2025 Notes was mandatorily convertible into shares of our
common stock at a conversion rate of 37.0370 shares per $1,000 principal amount of 2025 Notes converted, equivalent to a conversion price
of $27.00 per share, subject to the condition that the average of the daily trading prices for the common stock over the preceding 20-trading
day period is at least $30.00 per share. These conditions were satisfied on December 27, 2022 and as a result, $122.8 million or 47.8% of
the  principal  amount  of  the  2025  Notes  mandatorily  converted  into  approximately  4.5  million  shares  of  common  stock,  which  settled  in
January 2023.

During 2021, we repurchased an aggregate $59.9 million of principal amount of our 2025 Notes for $58.6 million. The net carrying value of
the  extinguished  debt,  including  unamortized  debt  discount  and  debt  issuance  costs,  was  $53.3  million,  resulting  in  a  $5.3  million  loss  on
extinguishment of debt.

Credit Facility

In  September  2021,  we  amended  our  senior  secured  revolving  credit  facility  ("Credit  Facility")  to,  among  other  things,  extend  the  maturity
date to September 2026, reduce the aggregate amount of the commitment under the Credit Facility, and change the interest rate applicable
to outstanding loans. Following such amendment, our Credit Facility provides revolving credit commitments of $179.0 million (with a sublimit
of up to $45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries)
(the “U.S. Line”), of which up to $20.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a
sublimit of up to $3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).

Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada
and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Such eligible accounts receivable and eligible
inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's
other  assets.  The  amount  of  eligible  inventory  included  in  the  borrowing  base  is  restricted  to  the  lesser  of  $125.5  million  (subject  to  a
quarterly reduction of $0.5 million) and 80.0% of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced
or  eliminated,  depending  on  future  fluctuations  in  our  receivables  and  inventory.  As  of  December  31,  2022,  our  total  borrowing  base
was  $177.9  million,  of  which  no  amounts  were  drawn  and  $21.8  million  was  used  for  security  of  outstanding  letters  of  credit,  resulting  in
remaining availability of $156.1 million.

Borrowings under the U.S. line bear interest at a rate equal to, at our option, either (a) the London Interbank Offered Rate (“LIBOR”), subject
to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of

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Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

1.25%  to  1.75%,  in  each  case  based  upon  the  Company's  quarterly  total  net  leverage  ratio.  The  U.S.  line  base  rate  is  determined  by
reference to the greatest of (i) the federal funds rate plus 0.50% per annum, (ii) the one-month adjusted LIBOR plus 1.00% per annum, and
(iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor
of 0.00%.

Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the Canadian Dollar Offered Rate
(“CDOR”), subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case
based upon the Company's quarterly net leverage ratio. The Canadian line base rate is determined by reference to the greater of (i) the one-
month CDOR plus 1.00% and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters,
subject to a floor of 0.00%.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% on the unused portion of commitments if average usage
of the Credit Facility is greater than 50% and (b) 0.500% on the unused portion of commitments if average usage of the Credit Facility is less
than or equal to 50%.

If excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base and $22.4 million, we will be required to
maintain  a  fixed  charge  coverage  ratio  of  at  least  1.00:1.00  as  of  the  end  of  each  fiscal  quarter  until  excess  availability  under  the  Credit
Facility  exceeds  such  thresholds  for  at  least  60  consecutive  days.  Furthermore,  the  Credit  Facility  includes  an  obligation  to  prepay
outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.

Other Debt

Other debt consists of various finance leases of equipment.

Deferred loan costs

We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit
Facility. In connection with the September 2021 Credit Facility amendment, we deferred approximately $1.6 million of loan costs that will be
amortized over the facility's remaining life.

Future principal payments under long-term debt for each of the years ending December 31 are as follows (in thousands):

Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total future payment
Less: unamortized debt discount
Less: debt issuance cost
Less: present value discount on finance leases

Total debt

Amount

882 
635 
257,491 
148 
13 
— 
259,169 
(15,314)
(3,759)
(186)
239,910 

$

$

$

The above future payments include $122.8 million of the principal amount of the 2025 Notes mandatorily converted and settled in January
2023.

9. Leases

Our  lease  portfolio  primarily  consists  of  operating  leases  for  certain  manufacturing  facilities,  warehouses,  service  facilities,  office  spaces,
equipment  and  vehicles.  The  following  table  summarizes  the  supplemental  consolidated  balance  sheet  information  related  to  leases  as  of
December 31, 2022 and 2021 (in thousands):

60

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Classification

December 31, 2022

December 31, 2021

Table of Contents

Assets
Operating lease assets
Finance lease assets
Total lease assets

Liabilities
Current

Operating
Finance
Noncurrent

Operating
Finance

Total lease liabilities

Operating lease assets
Property and equipment, net

Accrued liabilities
Current portion of long-term debt

Operating lease liabilities
Long-term debt, net of current portion

The following table summarizes the components of lease expenses (in thousands):

Lease Cost

Operating lease cost

Finance lease cost

Amortization of leased assets
Interest on lease liabilities

Sublease income

Net lease cost

Classification
Cost of sales and Selling, general and
administrative expenses

Selling, general and administrative expenses
Interest expense
Cost of sales and Selling, general and
administrative expenses

The maturities of lease liabilities as of December 31, 2022 are as follows (in thousands):

$

$

$

$

$

$

57,270  $
2,500 
59,770  $

8,776  $
782 

64,626 
1,231 
75,415  $

25,431 
1,727 
27,158 

10,956 
860 

34,745 
353 
46,914 

Year ended December 31,

2022

2021

11,591  $

11,123 

887 
77 

(2,437)

10,118  $

1,061 
110 

(2,184)

10,110 

2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: present value discount

Present value of lease liabilities

Operating
Leases

Finance
Leases

Total

$

$

13,022  $
11,596 
10,974 
10,193 
10,018 
41,820 
97,623 
(24,221)
73,402  $

882  $
635 
521 
148 
13 
— 
2,199 
(186)
2,013  $

13,904 
12,231 
11,495 
10,341 
10,031 
41,820 
99,822 
(24,407)
75,415 

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Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

The  following  table  summarizes  the  weighted-average  remaining  term  and  weighted  average  discount  rates  related  to  leases  as  of
December 31, 2022 and 2021:

Weighted-average remaining lease term (years)

Operating leases
Financing leases

Weighted-average discount rate

Operating leases
Financing leases

December 31, 2022

December 31, 2021

8.8
2.8

6.58 %
6.43 %

6.4
1.5

6.58 %
6.58 %

The following table summarizes the supplemental cash flow information related to leases for the years ended December 31, 2022 and 2021
(in thousands):

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases

Sale-leaseback transactions

Year ended December 31,
2021
2022

$

11,518  $
78 
1,184 

13,053 
92 
1,517 

During 2022, the Company sold and leased back land and buildings for net proceeds of $32.1 million. The initial annual rent for the assets is
$2.7 million with initial term of 12 years, subject to annual increase. The transactions met the requirements of sale-leaseback accounting.
The  related  assets  were  removed  from  property  and  equipment  and  the  appropriate  operating  lease  asset  and  liabilities  of  approximately
$24.8 million were recorded in the consolidated balance sheets.

10. Income Taxes

The components of income (loss) before income taxes were as follows (in thousands):

U.S.
Non-U.S.
Income (loss) before income taxes

Year ended December 31,
2021
2022

$

$

(43,587) $
53,936 
10,349  $

(98,445)
16,436 
(82,009)

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Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

The components of income tax expense (benefit) were as follows (in thousands):

Current
U.S. federal and state
Non-U.S.

Total current

Deferred
U.S. federal and state
Non-U.S.

Total deferred
Income tax expense (benefit)

Year ended December 31,
2021
2022

$

$

196  $

6,571 
6,767 

26 
(156)
(130)
6,637  $

1,235 
(3,384)
(2,149)

(169)
2,960 
2,791 
642 

The reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to loss before income
taxes are outlined below (in thousands):

Income tax benefit at the statutory rate
State taxes, net of federal tax benefit
Non-U.S. operations
Domestic incentives
Prior year federal, non-U.S. and state tax
Nondeductible expenses
U.S. CARES Act
Valuation allowance
Other
Income tax benefit

Year ended December 31,

2022
2,173 
879 
(7,242)
166 
(591)
3,157 
— 
8,077 
18 
6,637 

21.0 % $
8.5 %
(70.0)%
1.6 %
(5.7)%
30.5 %
— %
78.0 %
0.2 %
64.1 % $

2021
(17,222)
22 
(7,594)
(264)
(7,183)
3,006 
113 
31,079 
(1,315)
642 

(21.0)%
— %
(9.3)%
(0.3)%
(8.8)%
3.7 %
0.1 %
37.9 %
(1.5)%
0.8 %

$

$

Our effective tax rate was 64.1% and 0.8% for the years ended December 31, 2022 and 2021, respectively.

The tax benefit for the years ended December 31, 2022 and 2021 includes an increase in our valuation allowance of $8.1 million and $31.1
million, respectively, consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and
Saudi Arabia as further described below under the primary components of deferred taxes.

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Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

The primary components of deferred taxes include (in thousands):

Deferred tax assets
Reserves and accruals
Operating lease liabilities
Inventories
Stock awards
Net operating loss and other tax carryforwards
Goodwill and intangible assets
Fair value discount on 2025 Notes
Property and equipment
Other

Gross deferred tax assets

Valuation allowance

Total deferred tax assets

Deferred tax liabilities
Operating lease assets
Prepaid expenses and other

Total deferred tax liabilities
Net deferred tax liabilities

December 31, 2022 December 31, 2021

$

3,940  $

17,596 
12,964 
1,862 
124,024 
26,607 
26,301 
4,570 
3,991 
221,855 
(208,139)

13,716  $

(13,989) $
(445)
(14,434)

(718) $

$

$

$

3,978 
11,176 
14,692 
2,340 
109,402 
32,513 
22,250 
6,424 
1,912 
204,687 
(198,366)
6,321 

(6,490)
(462)
(6,952)
(631)

Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by the
Company and the respective sellers at the time of acquisition.

We  have  deferred  tax  assets  related  to  net  operating  loss  and  other  tax  carryforwards  in  the  U.S.,  and  in  certain  states  and  foreign
jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

At December 31, 2022, we had $279.7 million of U.S. net operating loss carryforwards and $10.6 million of state net operating losses. Of
these losses, $44.1 million will expire no later than 2037 if they are not utilized prior to that date. The remaining $246.2 million will not expire.
We also had $200.0 million of non-U.S. net operating loss carryforwards with indefinite expiration dates. In addition to our net operating loss
carryforwards, we also had U.S. interest limitation carryforwards of $105.6 million with indefinite expiration dates. The ultimate realization of
income  tax  benefits  for  these  net  operating  loss  and  interest  limitation  carryforwards  depends  on  our  ability  to  generate  sufficient  taxable
income in the respective taxing jurisdictions. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion
of  our  domestic  net  operating  losses  may  be  limited  in  future  periods  depending  upon  future  changes  in  ownership.  Where  we  have
unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income to
offset such losses. We do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the
U.S, the U.K, Germany, Singapore, China and Saudi Arabia.

During 2022, we recognized $8.1 million of tax expense related to the increase in our valuation allowance provided against our deferred tax
assets  to  write  down  our  deferred  tax  assets  in  these  jurisdictions  to  what  is  more  likely  than  not  realizable.  We  increased  our  valuation
allowance related to our U.S. and foreign deferred tax assets by $4.6 million and $3.5 million, respectively. In making such a determination
for each of these jurisdictions, we considered all available positive and negative evidence, including our recent history of pretax losses over
the prior three year period, the goodwill and intangible asset impairments for various reporting units, the future reversals of existing taxable
temporary differences, the projected future taxable income or loss and tax-planning.

Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiaries,
referred to as outside basis differences, have not been provided for U.S. income tax purposes because we do not intend to sell, liquidate or
otherwise trigger the recognition of U.S. taxable income with

64

Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

regard to our investment in these foreign subsidiaries. Determining the amount of U.S. deferred tax liabilities associated with outside basis
differences is not practicable at this time.

We file income tax returns in the U.S. as well as in various states and non-U.S. jurisdictions. With few exceptions, we are no longer subject to
income tax examination by tax authorities in these jurisdictions prior to 2016.

We account for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a
tax  position  taken  or  expected  to  be  taken  in  a  tax  return  is  required  to  meet  before  being  recognized  in  the  financial  statements.  A
reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):

2022 Activity
Balance at January 1, 2022
Additional based on tax positions related to prior years
Additional based on tax positions related to current year
Reduction based on tax positions related to prior years
Settlement with tax authorities
Lapse of statute of limitations
Balance at December 31, 2022

Amount

8,358 
2,906 
1,478 
(822)
— 
(1,408)
10,512 

$

$

The total amount of unrecognized tax benefits at December 31, 2022 was $10.5 million, of which it is reasonably possible that $4.4 million
could  be  settled  during  the  next  twelve-month  period  as  a  result  of  the  conclusion  of  various  tax  audits  or  due  to  the  expiration  of  the
applicable  statute  of  limitations.  We  estimate  that  $7.6  million  of  the  unrecognized  tax  benefits  at  December  31,  2022,  excluding
consideration of valuation allowance, would impact our future effective income tax rate, if recognized.

We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements
of comprehensive income (loss). As of December 31, 2022 and 2021, we had accrued approximately $0.4 million and $0.5 million in interest
and  penalties,  respectively.  During  the  years  ended  December  31,  2022  and  2021,  we  recognized  no  material  change  in  the  interest  and
penalties related to uncertain tax positions.

11. Fair Value Measurements

The  Company  had  zero  outstanding  balance  under  the  Credit  Facility  at  December  31,  2022  and  December  31,  2021.  The  Credit  Facility
incurs interest at a variable interest rate and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as
a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for
those or similar instruments. At December 31, 2022, the fair value and the carrying value of the Company’s 2025 Notes approximated $272.8
million  and  $237.9  million,  respectively.  At  December  31,  2021,  the  fair  value  and  the  carrying  value  of  the  Company’s  2025  Notes
approximated $225.0 million and $232.0 million, respectively.

There were no other significant outstanding financial instruments as of December 31, 2022 and 2021 that required measuring the amounts at
fair value on a recurring basis. The Company did not change its valuation techniques associated with recurring fair value measurements from
prior periods and there were no transfers between levels of the fair value hierarchy during the years ended December 31, 2022 and 2021.

65

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Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

12. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company is, and in the future, could be involved in various pending or threatened legal actions, some
of which may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably
anticipated  costs  and  expenses  in  connection  with  such  proceedings,  and  the  availability  and  limits  of  insurance  coverage,  and  has
established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated.
The reserves accrued at December 31, 2022 and 2021 are immaterial. In the opinion of management, the Company’s ultimate liability, if any,
with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or
cash flows.

Asbestos litigation

One of our subsidiaries has been named as one of many defendants in a number of product liability claims for alleged exposure to asbestos
used in valves. These lawsuits are typically filed on behalf of plaintiffs who allege exposure to asbestos, against numerous defendants, often
forty or more, who are alleged to have manufactured or distributed products containing asbestos. The injuries alleged by plaintiffs in these
cases  range  from  mesothelioma  and  other  cancers  to  asbestosis.  The  earliest  claims  against  our  subsidiary  were  filed  in  New  Jersey  in
1998, and our subsidiary currently has active cases in Missouri, New Jersey, New York, and Illinois. These complaints do not typically include
requests for a specific amount of damages. Our subsidiary acquired the trademark for the product line in question in 1985. To date, most of
the claims against our subsidiary alleging illnesses due to asbestos have generally been based on products manufactured by the previous
owner  prior  to  1985  that  are  alleged  to  have  contained  asbestos.  Many  claimants  alleging  illnesses  due  to  asbestos  sue  on  the  basis  of
exposure prior to 1985, as by that date the hazards of asbestos exposure were well known and asbestos had begun to fall into disuse. Our
subsidiary  has  been  successful  in  obtaining  dismissals  in  most  lawsuits  without  any  cash  contribution  including  because  the  “successor
liability” law in most states does not hold a purchaser in good faith liable for the actions of the seller prior to the acquisition date unless the
purchaser contractually assumed the liabilities, which our subsidiary did not. There are exceptions to the successor liability doctrine in many
states, so there are no assurances that our subsidiary will not be found liable for the actions of its predecessor. The law in other states on so
called “successor liability” may be different or ambiguous in this regard, and could also expose our subsidiary to liability. Our subsidiary could
also be found liable should a trier of fact reject our subsidiary’s position that it is not responsible for the alleged asbestos injuries, such as in a
case where a plaintiff alleges post-1985 exposure. To date, asbestos claims have not had a material adverse effect on our business, financial
condition, results of operations, or cash flow, as our annual out-of-pocket costs over the last five years has been less than $300,000. There
were approximately forty new cases filed against our subsidiary in each of last two years, and a significant number of existing cases were
dismissed, settled or otherwise disposed of over the last year. We currently have fewer than 150 lawsuits pending against this subsidiary. Our
subsidiary has over $17 million in face amount of insurance per occurrence and over $23 million of aggregate primary insurance coverage. In
addition, our subsidiary has over $950 million in face amount of excess coverage applicable to the claims. There can be no guarantee that all
of this can be collected due to policy terms and conditions and insurer insolvencies in the past or in the future. In January 2011, we entered
into an agreement with seven of our primary insurers under which they have agreed to pay 80% of the costs of handling and settling each
asbestos claim against the affected subsidiary. The insurers’ portion of the settlements is funded by our primary insurance limits, which are
eroded  only  by  settlements  and  not  legal  fees.  Approximately  $2.0  million  in  settlements  has  been  paid  by  insurers  and  our  subsidiary  to
date, with approximately $100,000 paid over the course of the last two years. Our subsidiary and the subscribing insurers have the right to
withdraw from this agreement, but to date, no party has exercised this right or expressed an intent to do so.

66

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Tenaris litigation

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

TM

In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris,
TM
S.A.  (together  “Tenaris”)  in  the  United  States  District  Court  for  the  Southern  District  of  Texas  seeking  a  declaration  that  its  DURACOIL
products  do  not  infringe  certain  Tenaris  patents  related  to  coiled  tubing.  Tenaris  filed  counterclaims  against  Global  Tubing  alleging
DURACOIL  products infringe three patents. Tenaris seeks unspecified damages and a permanent injunction. Global Tubing is vigorously
defending itself and alleges the Tenaris patents are invalid and unenforceable. While Global Tubing believes that it will prevail in showing that
its products do not infringe on Tenaris’s patents, if Tenaris were to obtain a permanent injunction, Global Tubing may be barred from selling
certain of its DURACOIL   products.  Alternatively,  if  we  are  ordered  to  pay  money  damages  and/or  royalties  for  the  life  of  the  patents  in
question, Global Tubing’s and the Company’s financial performance may be materially adversely impacted.

TM

Portland Harbor Superfund

One of the Company’s dormant subsidiaries is one of several named defendants in a suit filed by the Port of Portland, Oregon in May 2009
seeking reimbursement of costs related to an environmental study at the Port of Portland, and in March 2010, was identified as a potentially
responsible party by the Environmental Protection Agency with respect to the Portland Harbor Superfund Site. The subsidiary is indemnified
for environmental contamination losses by a third party that has assumed responsibility and is providing a defense of the claims. Based on
information  currently  available,  the  Company  does  not  believe  that  these  matters  will  have  a  material  adverse  effect  on  the  financial
condition, results of operations, cash flows or capital expenditures of the Company.

Operating leases

The Company has operating leases for warehouses, office space, manufacturing facilities and equipment. The leases generally require the
Company to pay certain expenses including taxes, insurance, maintenance, and utilities. See Note 9 Leases for further information.

Letters of credit and guarantees

The Company executes letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to
guarantee the Company fulfilling certain performance obligations relating to certain large contracts. At December 31, 2022, the Company had
$21.8 million in letters of credit outstanding.

13. Earnings (Loss) Per Share

The reconciliation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except
per share amounts):

Net income (loss) attributable to common stockholders

Basic - weighted average shares outstanding

Dilutive effect of stock options and restricted stock
Dilutive effect of convertible 2025 Notes
Diluted - weighted average shares outstanding

Earnings (loss) per share

Basic
Diluted

Year ended December 31,
2021
2022

3,712  $

(82,651)

5,747 
204 
— 
5,951 

0.65  $
0.62  $

5,643 
— 
— 
5,643 

(14.65)
(14.65)

$

$
$

The diluted earnings per share calculation excludes approximately 84 thousand shares for 2022 because they were anti-dilutive. For the year
ended December 31, 2022, we excluded the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect
was  anti-dilutive.  For  the  year  ended  December  31,  2021,  we  excluded  all  potentially  dilutive  restricted  shares,  stock  options  and  the
assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for
the period.

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14. Employee Benefits

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

We sponsor a 401(k) savings plan for U.S. employees and similar savings plans for certain non-U.S. employees. These plans benefit eligible
employees  by  allowing  them  the  opportunity  to  make  contributions  up  to  certain  limits.  We  contribute  by  matching  a  percentage  of  each
employee’s  contributions.  In  2020,  for  certain  plans,  the  Company  temporarily  suspended  the  matching  of  contributions.  Matching
contributions were reinstated at the beginning of 2022. Subsequent to the closing of all acquisitions, employees of those acquired entities will
generally be eligible to participate in the Company’s 401(k) savings plan. We also have the discretion to provide a profit sharing contribution
to  each  participant  depending  on  the  Company’s  performance  for  the  applicable  year.  The  expense  under  the  Company’s  retirement  plan
was $3.4 million and zero for the years ended December 31, 2022 and 2021, respectively.

15. Long-Term Incentive Compensation

Stock-based compensation

In  August  2010,  we  adopted  the  2010  Stock  Incentive  Plan  (the  “2010  Plan”)  to  allow  for  employees,  directors  and  consultants  of  the
Company  and  its  subsidiaries  to  share  in  stock  ownership  in  the  Company  through  the  award  of  stock  options,  restricted  stock,  restricted
stock  units,  performance  shares  or  any  combination  thereof.  Under  the  terms  of  the  2010  Plan,  a  total  of  925  thousand  shares  were
authorized for issuance pursuant to awards.

In  connection  with  the  adoption  of  the  2016  Plan  (as  described  below),  no  further  awards  will  be  granted  under  the  2010  Plan,  but
outstanding awards under the 2010 Plan will continue to be governed by its terms. In May 2016, we adopted a new 2016 Stock and Incentive
Plan (the “2016 Plan”), under which we initially reserved a total of 285 thousand shares. Our stockholders approved amendments to the 2016
Plan  in  May  2019,  May  2020  and  May  2022,  increasing  the  shares  authorized  for  issuance  thereunder  to  605  thousand  shares.
Approximately 326 thousand shares remained available under the 2016 Plan for future grants as of December 31, 2022.

The total amount of stock based compensation expense recorded was $4.2 million and $7.6 million for the years ended December 31, 2022
and 2021, respectively. As of December 31, 2022, the Company expects to record stock based compensation expense of approximately $2.9
million over a weighted average remaining term of approximately two years. Future grants will result in additional compensation expense.

Stock options

The exercise price of each option is based on the fair market value of the Company’s stock at the date of grant. Options generally have a ten-
year  life  and  vest  annually  in  equal  increments  over  four  years.  Our  policy  for  issuing  stock  upon  a  stock  option  exercise  is  to  issue  new
shares.  Compensation  expense  is  recognized  on  a  straight  line  basis  over  the  vesting  period.  The  following  table  provides  additional
information related to stock options:

2022 Activity
Outstanding at December 31, 2021
Granted
Exercised
Forfeited/expired
Outstanding at December 31, 2022
Exercisable at December 31, 2022

Number of shares 
(in thousands)

Weighted average
exercise price

75  $
—  $
—  $
(22) $
53  $
53  $

357.34 
— 
— 
377.42 
349.07 
349.07 

Weighted average
remaining term (in
years)
3.2

2.5
2.5

Aggregate
intrinsic value
(in millions)

$

$
$

— 

— 
— 

The  intrinsic  value  is  the  amount  by  which  the  fair  value  of  the  underlying  share  exceeds  the  exercise  price  of  the  stock  option.  No  stock
options were exercised in 2022 or 2021.

As  of  December  31,  2022  and  2021,  the  share  price  of  the  Company  was  less  than  the  exercise  price  for  all  outstanding  stock  options.
Therefore, the intrinsic value for stock options outstanding and exercisable was zero as of each such date. No stock options were granted in
2022 or 2021.

68

 
 
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Restricted stock

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

Restricted stock generally vests over a period of one to four years from the date of grant. The following table provides additional information
related to our restricted stock:

2022 Activity
Nonvested at December 31, 2021
Granted
Vested

Nonvested at December 31, 2022

Restricted stock units

Restricted stock (shares in
thousands)

10 
— 
(10)
— 

Restricted  stock  units  generally  vest  over  a  three  or  four  year  period  from  the  date  of  grant.  The  following  table  provides  additional
information related to our restricted stock units:

2022 Activity
Nonvested at December 31, 2021
Granted
Vested
Forfeited

Nonvested at December 31, 2022

Restricted stock units
(shares in thousands)
356 
202 
(138)
(8)
412 

Of the restricted stock units granted during 2022, 101 thousand shares vest ratably over three years. The remaining 101 thousand shares
granted  during  2022  vest  ratably  over  three  years  dependent  upon  achieving  a  minimum  stock  price  of  $23.68  for  20  trading  days  during
each  of  three  different  3-year,  2-year  and  1-year  performance  periods.  These  awards  were  originally  classified  as  cash-settled  liability
awards. In May 2022, the Company’s shareholders approved an additional 400 thousand shares to be added to the 2016 Plan and the fair
value of the awards was remeasured. In connection with the remeasurement, the Company determined that the awards would be settled in
shares instead of cash and they were classified as equity.

The  weighted  average  grant  date  fair  value  of  the  restricted  stock  units  was  $18.94  and  $18.20  per  share  during  the  years  ended
December 31, 2022, and 2021, respectively. The total grant date fair value of units vested was $4.3 million and $5.3 million during 2022 and
2021, respectively.

Liability-classified awards

During 2022, 33 thousand cash-settled phantom stock units were issued to employees that vest ratably over two years. These awards have a
maximum payout that is calculated based on five times the stock price on the date of grant.

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Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

16. Related Party Transactions

The  Company  has  sold  and  purchased  inventory,  services  and  fixed  assets  to  and  from  affiliates  of  certain  directors.  The  dollar  amounts
related to these related party activities are not significant to our consolidated financial statements.

17. Business Segments

The Company reports results of operations in the following three reporting segments: Drilling & Downhole, Completions and Production. The
amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments.

The Drilling & Downhole segment designs and manufactures products and provides related services to the drilling, well construction, artificial
lift  and  subsea  energy  construction  and  services  markets,  including  applications  in  oil  and  natural  gas,  renewable  energy,  defense,  and
communications. The Completions segment designs, manufactures and supplies products and provides related services to the coiled tubing,
well  stimulation  and  intervention  markets.  The  Production  segment  designs,  manufactures  and  supplies  products,  and  provides  related
equipment and services for production and infrastructure markets.

The Company’s reportable segments are strategic units that offer distinct products and services. They are managed separately since each
business segment requires different marketing strategies. Operating segments have not been aggregated as part of a reportable segment.
The Company evaluates the performance of its reportable segments based on operating income. This segmentation is representative of the
manner  in  which  our  Chief  Operating  Decision  Maker  and  our  board  of  directors  view  the  business.  We  consider  the  Chief  Operating
Decision Maker to be the Chief Executive Officer.

Summary financial data by reportable segment follows (in thousands):

Revenues

Drilling & Downhole
Completions
Production
Eliminations

Total revenues

Segment operating income (loss)

Drilling & Downhole
Completions
Production
Corporate

Total segment operating income (loss)
Gain on sale-leaseback transactions
Gain on disposal of assets and other

Operating income (loss)

Depreciation and amortization

Drilling & Downhole
Completions
Production
Corporate

Total depreciation and amortization

Year ended December 31,

2022

2021

$

$

$

$

$

$

304,565 
264,951 
131,519 
(1,122)
699,913 

32,201 
11,565 
(443)
(34,268)
9,055 
(7,000)
(1,271)
17,326 

11,872 
21,866 
2,906 
334 
36,978 

$

$

$

$

$

$

239,895 
185,018 
116,710 
(555)
541,068 

4,749 
(4,532)
(14,354)
(31,408)
(45,545)
— 
(1,052)
(44,493)

14,536 
22,568 
4,769 
303 
42,176 

70

Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

A summary of capital expenditures by reportable segment is as follows (in thousands):

Capital expenditures
Drilling & Downhole
Completions
Production
Corporate

Total capital expenditures

A summary of consolidated assets by reportable segment is as follows (in thousands):

Assets

Drilling & Downhole
Completions
Production
Corporate

Total assets

Corporate assets primarily include cash, certain prepaid expenses and deferred loan costs.

A summary of long-lived assets by geography is as follows (in thousands):

Long-lived assets

United States
Europe
Canada
Asia-Pacific
Middle East
Latin America

Total long-lived assets

$

$

$

$

$

$

Year ended December 31,

2022

2021

1,462  $
5,145 
510 
375 
7,492  $

Year ended December 31,

2022

2021

340,819  $
366,771 
95,089 
32,078 
834,757  $

1,476 
512 
411 
— 
2,399 

313,493 
351,908 
83,150 
42,785 
791,336 

December 31,
2022

December 31,
2021

279,390  $
26,962 
11,659 
20 
3,806 
55 

321,892  $

The following table presents our revenues disaggregated by geography based on shipping destination (in thousands):

Revenues

United States
Canada
Europe & Africa
Middle East
Asia-Pacific
Latin America

Total Revenues

Year ended December 31,

2022

2021

$
470,765 
48,279 
57,533 
51,891 
36,832 
34,613 
699,913 

$

$

%

67.3 % $

6.9 %
8.2 %
7.4 %
5.3 %
4.9 %
100.0 % $

$
324,376 
41,822 
59,207 
48,352 
36,641 
30,670 
541,068 

71

298,171 
25,956 
14,977 
221 
4,412 
866 
344,603 

%

60.0 %
7.7 %
10.9 %
8.9 %
6.8 %
5.7 %
100.0 %

 
 
Table of Contents

Forum Energy Technologies, Inc. and subsidiaries
Notes to consolidated financial statements (continued)

The following table presents our revenues disaggregated by product line (in thousands):

Revenues

Drilling Technologies
Downhole Technologies
Subsea Technologies
Stimulation and Intervention
Coiled Tubing
Production Equipment
Valve Solutions
Eliminations

Total revenues

Year ended December 31,

2022

$
143,389 
84,987 
76,189 
156,331 
108,620 
69,914 
61,605 
(1,122)
699,913 

%
20.6 % $
12.1 %
10.9 %
22.3 %
15.5 %
10.0 %
8.8 %
(0.2)%
100.0 % $

2021

$

96,680 
69,215 
74,000 
96,731 
88,287 
60,981 
55,729 
(555)
541,068 

%
17.8 %
12.8 %
13.7 %
17.9 %
16.3 %
11.3 %
10.3 %
(0.1)%
100.0 %

$

$

72

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We  maintain  disclosure  controls  and  procedures  (as  defined  under  Rules  13a-15(e)  and  15d-15(e)  of  the  Exchange  Act).  The  Company’s
disclosure  controls  and  procedures  have  been  designed  to  provide  reasonable  assurance  that  information  required  to  be  disclosed  in  our
reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
SEC’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to provide reasonable assurance
that  information  required  to  be  disclosed  in  reports  filed  or  submitted  under  the  Exchange  Act  is  accumulated  and  communicated  to  our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated
the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of December 31, 2022. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective
at the reasonable assurance level as of December 31, 2022.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over
financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.

Our management performed an assessment of the overall effectiveness of our internal control over financial reporting as of December 31,
2022,  utilizing  the  criteria  established  in  Internal  Control  -  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring
Organizations  of  the  Treadway  Commission.  Based  on  this  assessment,  management  has  concluded  that  the  Company’s  internal  control
over financial reporting is effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended December 31, 2022 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Forum Energy Technologies, Inc.

Opinion on Internal Control over Financial Reporting

We  have  audited  the  internal  control  over  financial  reporting  of  Forum  Energy  Technologies,  Inc.  and  subsidiaries  (the  “Company”)  as  of
December  31,  2022,  based  on  criteria  established  in  Internal  Control  —  Integrated  Framework  (2013)  issued  by  the  Committee  of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework
(2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 28, 2023
expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness  of  internal  control  over  financial  reporting,  included  in  the  accompanying  Management’s  Report  on  Internal  Control  Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the

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Table of Contents

U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We  conducted  our  audit  in  accordance  with  the  standards  of  the  PCAOB.  Those  standards  require  that  we  plan  and  perform  the  audit  to
obtain  reasonable  assurance  about  whether  effective  internal  control  over  financial  reporting  was  maintained  in  all  material  respects.  Our
audit  included  obtaining  an  understanding  of  internal  control  over  financial  reporting,  assessing  the  risk  that  a  material  weakness  exists,
testing  and  evaluating  the  design  and  operating  effectiveness  of  internal  control  based  on  the  assessed  risk,  and  performing  such  other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A  company’s  internal  control  over  financial  reporting  is  a  process  designed  to  provide  reasonable  assurance  regarding  the  reliability  of
financial  reporting  and  the  preparation  of  financial  statements  for  external  purposes  in  accordance  with  generally  accepted  accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and  dispositions  of  the  assets  of  the  company;  (2)  provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Houston, Texas

February 28, 2023

Item 9B. Other information

None.

Item 10. Directors, executive officers and corporate governance

Information required by this item is incorporated herein by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders.

Code of Ethics

We have adopted a Financial Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer (or other principal financial
officer), Chief Accounting Officer (or other principal accounting officer) and other senior financial officers. We have posted a copy of the code
under “Corporate Governance” in the “Investors” section of our website at www.f-e-t.com. Copies of the code may be obtained free of charge
on our website. Any waivers of the code must be approved by our board of directors or a designated committee of our board of directors. Any
change  to,  or  waiver  from,  the  Code  of  Ethics  will  be  promptly  disclosed  as  required  by  applicable  U.S.  federal  securities  laws  and  the
corporate governance rules of the NYSE.

Item 11. Executive compensation

Information required by this item is incorporated herein by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders.

Item 12. Security ownership of certain beneficial owners and management and related stockholder matters

Information required by this item is incorporated herein by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item is incorporated herein by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders.

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Table of Contents

Item 14. Principal accountant fees and services

Our independent registered public accounting firm is Deloitte & Touche LLP, Houston, Texas, PCAOB ID No. 34.

Information required by this item is incorporated herein by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders.

Item 15. Exhibits

(a) The following documents are filed as part of this Annual Report on Form 10-K:

1. Financial Statements filed as part of this report

Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders’ Equity
Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Page

44
46
47
48
49
50

All financial statement schedules have been omitted since the required information is not applicable or is not present in amounts sufficient to
require  submission  of  the  schedule,  or  because  the  information  required  is  included  on  the  Consolidated  Financial  Statements  and  Notes
thereto.

3. Exhibits

Index to Exhibits

Exhibit
Number
3.1*

3.2*

3.3*

4.1*

4.2*

4.3*

4.4*

10.1*#

10.2*#

10.3*#

DESCRIPTION
Third Amended and Restated Certificate of Incorporation of Forum Energy Technologies, Inc. dated March
28,  2011  (incorporated  herein  by  reference  to  Exhibit  3.2  to  Amendment  No.  5  to  the  Registration
Statement, filed on March 29, 2012) (File No. 333-180676).

Amendment to the Third Amended and Restated Certificate of Incorporation of Forum Energy Technologies,
Inc., effective November 9, 2020 (incorporated herein by reference to Exhibit 3.1 on the Company’s Current
Report on Form 8-K, filed on November 9, 2020).

Second  Amended  and  Restated  Bylaws  of  Forum  Energy  Technologies,  Inc.  dated  April  17,  2012
(incorporated  herein  by  reference  to  Exhibit  3.1  on  the  Company’s  Current  Report  on  Form  8-K,  filed  on
April 17, 2012) (File No. 1-35504).

Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to
the Registration Statement, filed on December 29, 2011) (File No. 333-180676).

Indenture, dated as of August 4, 2020, among the Company, the subsidiary guarantors party thereto and the
Trustee  and  Collateral  Agent.  (incorporated  herein  by  reference  to  Exhibit  4.1  to  the  Company’s  Current
Report on 8-K, filed on August 5, 2020).

Form of 9.000% convertible senior secured notes due 2025 (incorporated herein by reference to Exhibit 4.1
to the Company’s Current Report on 8-K, filed on August 5, 2020).

Description  of  Securities  Registered  Pursuant  to  Section  12  of  the  Securities  Exchange  Act  of  1934
(incorporated  herein  by  reference  to  Exhibit  4.5  to  the  Company’s  Annual  Report  on  Form  10-K,  filed
February 25, 2020).

Form  of  Nonstatutory  Stock  Option  Agreement  (Employees  and  Consultants)(incorporated  herein  by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2013).

Form  of  Nonstatutory  Stock  Option  Agreement  (Employees  and  Consultants)  (incorporated  herein  by
reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed on April 29, 2014).

Form  of  Nonstatutory  Stock  Option  Agreement  (Employees  and  Consultants)  (incorporated  herein  by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 1, 2015).

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Table of Contents

10.4*#

10.5*#

10.6*#

10.7*#

10.8*#

10.9*#

10.10*#

10.11*#

10.12*#

10.13*#

10.14*#

10.15*#

10.16*#

10.17*

10.18*

10.19*

10.20*

Form  of  Nonstatutory  Stock  Option  Agreement  -  Three  Year  Cliff  Vesting  (Employees  and  Consultants)
(incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on
October 30, 2015).

Indemnification  Agreement  dated  as  of  August  2,  2010  between  Forum  Energy  Technologies  and  C.
Christopher  Gaut  (incorporated  herein  by  reference  to  Exhibit  10.9  to  the  Registration  Statement,  filed  on
August 31, 2011) (File No. 333-180676).

Form  of  Indemnification  Agreement  between  Forum  Energy  Technologies,  Inc.  and  the  executive  officers
identified  on  Annex  A  thereto  (incorporated  herein  by  reference  to  Exhibit  10.10  to  the  Registration
Statement, filed on August 31, 2011) (File No. 333-180676).

Form  of  Indemnification  Agreement  between  Forum  Energy  Technologies  and  each  of  the  non-SCF
directors identified on Annex A thereto (incorporated herein by reference to Exhibit 10.11 to the Registration
Statement, filed on August 31, 2011) (File No. 333-180676).

Forum Energy Technologies, Inc. Severance Plan (incorporated herein by reference to Exhibit 10.15 to the
Registration Statement, filed on August 31, 2011) (File No. 333-180676).

Forum Energy Technologies, Inc. 2010 Stock Incentive Plan (as amended and restated effective August 15,
2012) (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 10- Q,
filed November 6, 2012) (File No. 1-35504).

Severance  Agreement  dated  as  of  February  16,  2018  between  Forum  Energy  Technologies,  Inc.  and
Michael D. Danford (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K, filed on February 21, 2018).

Severance Agreement dated as of December 19, 2018 between Forum Energy Technologies, Inc. and C.
Christopher  Gaut  (incorporated  herein  by  reference  to  Exhibit  10.1  to  the  Company’s  Current  Report  on
Form 8-K/A, filed on December 21, 2018).

Severance  Agreement  dated  as  of  September  1,  2018  between  Forum  Energy  Technologies,  Inc.  and  D.
Lyle Williams (Incorporate herein by reference to Exhibit 10.26 to the Company’s Annual Report on Form
10-K, filed on February 28, 2019).

Form  of  Nonstatutory  Stock  Option  Agreement  (Employees  and  Consultants)  (incorporated  herein  by
reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2017).

Amended and Restated Employee Stock Purchase Plan, dated as of July 1, 2017 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on August 1, 2017).

Form  of  Nonstatutory  Stock  Option  Agreement  (Employees  and  Consultants)  (incorporated  herein  by
reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2018).

Severance Agreement dated as of February 15, 2019 between Forum Energy Technologies, Inc. and John
C. Ivascu (incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-
Q, filed on May 1, 2019).

Amendment  No.  2  to  the  Registration  Rights  Agreement,  dated  as  of  August  25,  2017,  by  and  among
Forum Energy Technologies and the other parties thereto (incorporated herein by reference to Exhibit 10.2
to the Company’s Current Report on Form 8-K, filed on August 28, 2017).

Registration Rights Agreement, dated as of October 2, 2017, by and between Forum Energy Technologies,
Inc.  and  Q-GT  (V)  Investment  Partners,  LLC  (incorporated  herein  by  reference  to  Exhibit  10.1  to  the
Company’s Current Report on Form 8-K, filed on October 3, 2017).

Third  Amended  and  Restated  Credit  Agreement,  dated  as  of  October  30,  2017,  by  and  among  Forum
Energy Technologies, Inc., Forum Canada ULC, Wells Fargo Bank, National Association, as administrative
agent,  and  the  lenders  party  thereto  (incorporated  herein  by  reference  to  Exhibit  10.1  to  the  Company’s
Current Report on Form 8-K, filed on November 2, 2017).

Amendment  No.  1  to  the  Third  Amended  and  Restated  Credit  Agreement,  dated  as  of  February  3,  2020,
among Forum Energy Technologies, Inc., the lenders party thereto, Wells Fargo Bank, National Association,
as  Administrative  Agent,  and  the  other  borrowers  and  guarantors  party  thereto  (incorporate  herein  by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2020).

10.21*#

Form of Restricted Stock Unit Agreement (Employees and Consultants) (incorporated herein by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10.Q, filed on May 8, 2020).

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Table of Contents

10.22*#

10.23*

10.24*

10.25*#

10.26*

10.27*#

10.28*#

10.29*#

10.30*#

10.31*#

10.32*#

10.33*#

10.34*#

10.35*#

10.36*#

10.37*

Form  of  Performance  Share  Award  Agreement  (Employees  and  Consultants)  (incorporated  herein  by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 8, 2020).

Credit  Agreement  Amendment,  dated  as  of  September  8,  2021,  among  the  Company,  as  borrower,  the
other  borrowers  party  thereto,  the  guarantors  party  thereto,  the  lenders  party  thereto,  Wells  Fargo  Bank,
National Association, as Administrative Agent, and the other parties named therein (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 8, 2021).

Forum  Energy  Technologies,  Inc.  Second  Amended  and  Restated  2016  Stock  and  Incentive  Plan
(incorporated by reference to Appendix B to the Company’s Proxy Statement on Schedule 14A filed on April
2, 2020).

First  Amendment  to  Forum  Energy  Technologies,  Inc.  Second  Amended  and  Restated  2016  Stock  and
Incentive Plan (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form
S-8, filed on May 13, 2022).

Registration Rights Agreement, dated as of August 4, 2020, among the Company and holders of New Notes
party  thereto.  (incorporated  by  referenced  to  Exhibit  10.2  to  the  Company’s  Current  Report  on  Form  8-K,
filed on August 5, 2020).

Form  of  Form  of  Performance  Restricted  Stock  Unit  Agreement  (Employees  and  Consultants).  Restricted
Stock Unit Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q, filed on November 6, 2020).

Form of Special Performance Restricted Stock Unit Agreement (Employees and Consultants) (incorporated
herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed on November 6,
2020).

Form of Special Performance Restricted Stock Unit Agreement (Employees and Consultants) (incorporated
herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 7, 2021).

Form of 2021 Performance Restricted Stock Unit Agreement (Chief Executive Officer) (incorporated herein
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 7, 2021).

Form  of  2021  Performance  Phantom  Unit  Agreement  (Executive  Management).(incorporated  herein  by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed on May 7, 2021).

Form of 2021 Restricted Stock Unit Agreement (Executive Management) (incorporated herein by reference
to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 7, 2021)

Form of 2022 Restricted Stock Unit Agreement (Executive Management) (incorporated herein by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 6, 2022).

Form of 2022 Performance Restricted Stock Unit Agreement (Executive Management) (incorporated herein
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 6, 2022).

Forum  Energy  Technologies,  Inc.  Amended  and  Restated  2021  Phantom  Unit  Agreement  between  Mr.  C.
Christopher  Gaut  and  the  Company  (incorporated  herein  by  reference  to  Exhibit  10.4  to  the  Company’s
Quarterly Report on Form 10-Q, filed on May 6, 2022).

Forum Energy Technologies, Inc. 2022 Phantom Unit Agreement between Mr. C. Christopher Gaut and the
Company(incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-
Q, filed on May 6, 2022).

Asset Purchase Agreement, dated December 31, 2020, by and among Forum US, Inc., Anvil International,
LLC and, for the limited purposes set forth therein, Forum Energy Technologies, Inc. (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 4, 2021).

10.38*#

Letter  Agreement  between  Mr.  C.  Christopher  Gaut  and  Forum  Energy  Technologies  (incorporated  herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 22, 2022).

21.1**

22.1**

Subsidiaries of Forum Energy Technologies, Inc.

Subsidiary guarantors of the Company's Convertible Secured Notes due 2025.

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Table of Contents

23.1**

31.1**

31.2**

32.1**

32.2**

Consent of Deloitte & Touche LLP.

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

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

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS** XBRL Instance Document.

101.SCH** XBRL Taxonomy Extension Schema Document.

101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB** XBRL Taxonomy Extension Label Linkbase Document.

101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF** XBRL Taxonomy Extension Definition Linkbase Document.

104**

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Previously filed.

** Filed herewith.

# Identifies management contracts and compensatory plans or arrangements.

Item 16. Form 10-K Summary

None.

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Table of Contents

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

SIGNATURES

February 28, 2023

FORUM ENERGY TECHNOLOGIES, INC. 
By:

/s/ D. Lyle Williams, Jr.
D. Lyle Williams, Jr.
Executive Vice President and Chief Financial Officer
(As Duly Authorized Officer and Principal Financial Officer)

February 28, 2023

By:

/s/ Katherine C. Keller
Katherine C. Keller
Vice President and Principal Accounting Officer
(As Duly Authorized Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

Signature

/s/ Neal Lux
Neal Lux

/s/ D. Lyle Williams, Jr.
D. Lyle Williams, Jr.

/s/ Katherine C. Keller
Katherine C. Keller

/s/ C. Cristopher Gaut
C. Cristopher Gaut

/s/ Evelyn M. Angelle
Evelyn M. Angelle

/s/ John A. Carrig
John A. Carrig

/s/ Michael McShane
Michael McShane

/s/ Louis A. Raspino
Louis A. Raspino

/s/ Emily Reichert, Ph.D.
Emily Reichert, Ph.D.

/s/ Paul E. Rowsey III
Paul E. Rowsey III

/s/ John Schmitz
John Schmitz

Title

President and Chief Executive Officer
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Vice President and Chief Accounting Officer
(Principal Accounting Officer)

Chairman of the Board

Director

Director

Director

Director

Director

Director

Director

79

Date

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

February 28, 2023

 
 
 
Exhibit 21.1

List of Subsidiaries of Forum Energy Technologies, Inc.

Name
Forum B+V Oil Tools GmbH
FET Global L.P.
FET Global Holdings Limited
FET Holdings LLC
FET Worldwide L.P.
Forum Global Tubing L.P.
Forum Global Tubing LLC
Forum International Holdings, Inc.
Forum US, Inc.
Forum Worldwide Holdings Limited
Global Tubing LLC

Jurisdiction
Germany
United Kingdom
United Kingdom
Delaware
United Kingdom
Delaware
Delaware
Delaware
Delaware
United Kingdom
Delaware

 
 
 
 
 
 
 
 
 
 
Exhibit 22.1

The following subsidiaries of Forum Energy Technologies, Inc. (the “Company”) were, as of December 31, 2022, guarantors of the
Company’s 9.00% Notes due October 2025:

Forum Energy Technologies, Inc.
List of Issuer and Guarantors

Name of Subsidiary
Forum Energy Technologies, Inc.
FET Holdings, LLC
Forum Energy Services, Inc.
Forum Global Holdings, LLC
Forum Global Tubing LLC
Forum Global Tubing LP
Forum International Holdings, Inc.
Forum US, Inc.
Global Tubing LLC
Z Explorations, Inc.
Global Flow Technologies, Inc.
Z Resources, Inc.
Zy-Tech Global Industries, Inc.
Houston Global Heat Transfer LLC

Jurisdiction of Formation
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware

Role
Issuer
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We  consent  to  the  incorporation  by  reference  in  Registration  Statements  on  Form  S-8  (Nos.  333-213158,  333-231525,  333-239257,  333-
264934)  of  our  report  dated  February  28,  2023  relating  to  the  financial  statements  of  Forum  Energy  Technologies,  Incorporated  and
subsidiaries (“the Company”) and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report
on Form 10-K for the year ended December 31, 2022.

/s/ Deloitte & Touche LLP

Houston, Texas
February 28, 2023

Exhibit 31.1

I, Neal Lux, certify that:

Forum Energy Technologies, Inc.
Certification

1.

I have reviewed this Annual Report on Form 10-K of Forum Energy Technologies, Inc.;

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

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material

respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as

defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our

supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about

the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s

most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial

reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):

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

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s

internal control over financial reporting.

Date:  February 28, 2023

By: /s/ Neal Lux
Neal Lux
President and Chief Executive Officer

 
 
Exhibit 31.2

Forum Energy Technologies, Inc.
Certification

I, D. Lyle Williams, Jr., certify that:

1.

I have reviewed this Annual Report on Form 10-K of Forum Energy Technologies, Inc.;

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

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material

respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as

defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our

supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about

the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s

most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial

reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):

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

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s

internal control over financial reporting.

Date:  February 28, 2023

By: _/s/ D. Lyle Williams, Jr._________________

D. Lyle Williams, Jr.
Executive Vice President and Chief Financial Officer

 
 
Certification Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

Exhibit 32.1

In connection with the Annual Report on Form 10-K of Forum Energy Technologies, Inc. (the “Company”) for the year ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Neal Lux, as Chief Executive
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended

(the "Exchange Act"); and

    (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated:   February 28, 2023

By: /s/ Neal Lux
Neal Lux
President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the

Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of § 18 of the Exchange Act.

 
 
Certification Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

Exhibit 32.2

In connection with the Annual Report on Form 10-K of Forum Energy Technologies, Inc. (the “Company”) for the year ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), D. Lyle Williams, Jr., as Chief
Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of
2002, that, to the best of his knowledge:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended

(the "Exchange Act"); and

    (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated:   February 28, 2023

By: /s/ D. Lyle Williams, Jr.
D. Lyle Williams, Jr.
Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the

Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of § 18 of the Exchange Act.