Oil States International Inc.

10/30/2026 | Press release | Distributed by Public on 10/30/2026 12:27

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read together with our condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and notes to those statements included in our 2025 Annual Report on Form 10-K, as amended by our 2025 Annual Report on Form 10-K/A, in order to understand factors, such as charges and credits, which may impact comparability of the selected financial data.
We provide a broad range of manufactured products and services to customers in the energy, military and industrial sectors through our Offshore Manufactured Products, Completion and Production Services and Downhole Technologies segments. Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry, particularly our customers' willingness to invest capital in the exploration for and development of crude oil and natural gas reserves. Our customers' capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices, making demand for our products and services sensitive to expectations regarding future crude oil and natural gas prices, as well as economic growth, commodity demand and estimates of resource production and regulatory pressures.
Recent Developments
Brent and WTI crude oil and natural gas pricing trends were as follows:
Average Price(1) for quarter ended
Average Price(1) for year ended December 31
Year March 31 June 30 September 30 December 31
Brent Crude (per bbl)
2026(2)
$ 80.72 $ 102.63 $ 96.30
2025 75.87 68.07 69.03 $ 63.65 $ 69.14
WTI Crude (per bbl)
2026(2)
$ 72.74 $ 95.65 $ 87.12
2025 71.78 64.57 65.78 $ 59.62 $ 65.39
Henry Hub Natural Gas (per MMBtu)
2026 $ 4.71 $ 2.95 $ 2.87
2025 4.14 3.19 3.03 $ 3.73 $ 3.52
________________
(1)Source: U.S. Energy Information Administration (spot prices).
(2)On October 23, 2026, the spot price per barrel of Brent and WTI crude oil closed at $128.30 and $109.72, respectively.
The spot price per barrel of Brent crude oil averaged $96 in the third quarter of 2026, an increase of $33, or 51%, from the fourth quarter of 2025 following the escalation of military actions in the Middle East in late-February 2026. Despite the increases in crude oil prices, these evolving military actions have resulted in customer delays in project awards, cost increases and supply-chain and logistical constraints in the Middle East region, which have negatively impacted demand for our products and services in the area and limited our access to and increased the price of certain raw materials and other products used in our operations during the first nine months of 2026. The conflict has also resulted in damage to crude oil refining and storage facilities and severely limited tanker access to the region, causing operators to shut in or limit crude oil production. Continuation or expansion of these military hostilities and export constraints in the Middle East will likely negatively impact our results of operations over the balance of 2026 and beyond. As a major oil producer, Iran's involvement has heightened concerns over potential supply disruptions and transportation risks, contributing to significant volatility in global oil and natural gas prices. In particular, the restriction or cessation of maritime traffic through the Strait of Hormuz has significantly depressed the global supply of oil and natural gas, resulting in increased volatility and overall elevated prices, as well as causing overall disruptions in global commodities markets. While the ultimate impact and magnitude of these disruptions is currently unknown, a prolonged interruption to the global commodities markets has the potential to materially adversely affect our business and operations and those of our suppliers and customers. Further, in April 2026, the United Arab Emirates ("UAE") announced that it was withdrawing from OPEC, and as a result, would no longer be subject to OPEC imposed production controls. While no other countries have yet followed the UAE in leaving OPEC, increased oil and gas production from the UAE, along with any other country that may leave OPEC, could increase global oil and gas supply, resulting in lower oil and gas prices.
In addition, the imposition of broad-based trade tariffs by the United States has led to ongoing uncertainty regarding the future effect of reciprocal and other trade tariffs on the global economy. These factors have negatively impacted the demand for and pricing of our products and services provided to the U.S. land-based market and have increased the cost of certain products we manufacture in the United States.
We implemented certain initiatives in 2025, which have continued into 2026, to optimize our operations and improve future returns. These actions were concentrated in our U.S. land-focused service operations and included: the consolidation, relocation and exit of certain operating locations; the exit of certain service offerings; the exit of previously closed facilities; and reductions in our U.S. workforce. We also assessed the carrying value of certain long-lived and other assets based on the industry outlook regarding overall demand for and pricing of our products and services, market competitiveness and management decisions. As a result of these events, actions and assessments, our reported pre-tax results for the first nine months of 2026 included $6.3 million of costs associated primarily with facility exits as well as $1.4 million in non-cash asset impairment charges.
On January 28, 2026, we entered into an amended and restated cash-flow based credit agreement (the "Cash Flow Credit Agreement") providing for original aggregate lender commitments of up to: $75.0 million under a revolving credit facility (the "Revolving Credit Facility") and $50.0 million under a multi-draw term loan facility, which was available for a six-month period (the "Term Loan Facility"). The Cash Flow Credit Agreement replaced our existing asset-based credit agreement (the "ABL Agreement"). In July 2026, we borrowed $20.0 million under the Term Loan Facility, and the remaining lender commitments under the Term Loan Facility lapsed. See Note 4, "Long-Term Debt," to the Unaudited Condensed
Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the Cash Flow Credit Agreement.
On April 1, 2026, we retired $52.7 million of outstanding principal of our 4.75% convertible senior notes (the "2026 Notes") with a combination of $50.5 million of cash and the issuance of 529,428 shares of our common stock. With the election by substantially all holders of the outstanding 2026 Notes to convert the instruments into shares of our common stock at maturity, we recognized a pre-tax loss of $3.6 million on the extinguishment of the 2026 Notes at a premium in the second quarter of 2026.
During the first nine months of 2026, we purchased 1,053,670 shares of our common stock at a total cost of $9.1 million under a Board of Director authorized stock repurchase program, which expired October 24, 2026. On October 29, 2026, our Board of Directors authorized a new $50 million common stock repurchase program, which expires in October 2028.
Overview
Current and expected future pricing for crude oil and natural gas, inflationary and tariff-driven cost increases, and expectations regarding the regulatory environment in the regions in which we operate are factors that will continue to influence our customers' willingness to invest capital in their businesses. Expectations for the longer-term price for Brent crude oil will continue to influence our customers' spending related to global offshore and international drilling and development and, thus, a significant portion of the activity of our Offshore Manufactured Products segment.
Crude oil and natural gas prices and levels of demand for crude oil and natural gas are likely to remain highly volatile due to numerous factors, including, but not limited to: geopolitical conflicts in the Middle East and Europe, along with associated international tensions; the moderate perceived risk of a global economic recession; the levels of domestic or international crude oil and natural gas production; technological advancements; consolidation of oil and gas producers; changes in governmental rules and regulations; sanctions; tariffs; the willingness of operators to invest capital in the exploration for and development of resources; use of alternative fuels; improved vehicle fuel efficiency; timing of capital investments in alternative energy sources; a more sustained movement to electric vehicles; and the potential for ongoing supply/demand imbalances.
Our Offshore Manufactured Products segment provides technology-driven, highly-engineered products and services for offshore oil and natural gas drilling, completion and production systems and facilities globally, as well as certain products and services to the military and industrial markets. This segment is particularly influenced by global spending on deepwater drilling and production, which is primarily driven by our customers' longer-term commodity demand forecasts and outlook for crude oil and natural gas prices. Approximately 90% of our Offshore Manufactured Products segment's sales in the first nine months of 2026 were driven by our customers' capital spending for products and services used in exploratory and developmental drilling, greenfield offshore production infrastructure, and subsea pipeline tie-in and repair system applications, along with upgraded equipment for existing offshore drilling rigs and other vessels (referred to herein as "project-driven products and services"). Deepwater oil and gas development projects typically involve significant capital investments and multi-year development plans. Such projects are generally undertaken by larger exploration, field development and production companies (primarily international oil companies and state-run national oil companies) using relatively conservative crude oil and natural gas pricing assumptions. Given the long lead times associated with field development, we believe some of these deepwater projects, once approved for development, are generally less susceptible to change based on short-term fluctuations in the price of crude oil and natural gas. Deepwater oil and gas development projects may also be impacted by federal legislative and regulatory actions, including the OBBBA, which mandates that the Bureau of Ocean Energy Management conduct at least two offshore lease sales annually, of a minimum of 80 million acres (if available), in the Central and Western Gulf of America Planning Areas for the next 15 years. Additionally, we are investing in research and product development (and have been awarded select contracts and are bidding on additional projects) to facilitate the development of alternative energy sources, including offshore wind and deep-sea mineral gathering opportunities.
Backlog reported by our Offshore Manufactured Products segment increased to $482 million as of September 30, 2026 from $435 million as of December 31, 2025. Bookings totaled $135 million in the third quarter of 2026, yielding a quarterly book-to-bill ratio of 1.3x (1.2x year-to-date). The following table sets forth backlog as of the dates indicated (in millions).
Backlog as of
Year March 31 June 30 September 30 December 31
2026 $ 430 $ 451 $ 482 -
2025 357 363 399 $ 435
2024 305 300 313 311
Our Completion and Production Services segment provides services in the United States (including the Gulf of America) and internationally. Over recent years, the segment has exited the majority of its U.S. land-based service operations in response to reductions in activity levels and highly competitive market conditions. The Completion and Production Services segment's results, are sensitive to near-term fluctuations in commodity prices, particularly crude oil prices, given the short-term, call-out nature of its operations. We primarily supply rental equipment and service personnel utilized in the completion of, and initial production from, new and recompleted wells in our operations.
Our Downhole Technologies segment provides oil and gas perforation systems, downhole tools and services in support of completion, intervention, wireline and well abandonment operations. This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies. Product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools. This expertise has led to the optimization of perforation hole size, depth, and quality of tunnels, which are key factors for maximizing the effectiveness of hydraulic fracturing. Additional offerings include frac plugs, toe valves and other elastomer products, which are focused on zonal isolation for hydraulic fracturing of horizontal wells, and a broad range of consumable products, such as setting tools and bridge plugs, that are used in completion, intervention and decommissioning applications. Hydraulic fracturing activity, and, in turn, our Downhole Technologies segment's results, are sensitive to commodity prices, particularly WTI crude oil prices, given that lower activity may result in reduced demand for our consumable products. Demand drivers for the Downhole Technologies segment include continued trends toward longer lateral lengths, increased frac stages and more perforation clusters to target increased unconventional well productivity.
Demand for our completion-related products and services within our Downhole Technologies segment and our Completion and Production Services segment are impacted by numerous factors, including changes in the total number of wells drilled in the United States, total footage drilled, the number of drilled wells that are completed and changes in the completion ("frac") count. The following table sets forth a summary of the U.S. drilling rig count, as measured by Baker Hughes Company, as of and for the periods indicated.
As of October 23, 2026
Average for the
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
United States Rig Count:
Land - Oil 447 438 403 413 441
Land - Natural gas and other 142 138 121 136 110
Offshore 14 13 16 15 15
603 589 540 564 566
The U.S. energy industry is primarily focused on crude oil and liquids-rich exploration and development activities in U.S. shale plays utilizing horizontal drilling and completion techniques.
We use a variety of domestically produced and imported raw materials and component products, including steel, in the manufacture of our products. Beginning in the first quarter of 2025, the United States imposed new or additional tariffs, through executive orders, on a variety of imported raw materials and products, including steel and aluminum. In response to the U.S. tariffs on steel and aluminum, the European Union and several other countries, including Canada and China, have threatened and/or imposed retaliatory tariffs. In the first quarter of 2026, the U.S. Supreme Court struck down broad tariffs previously imposed through executive orders under the International Emergency Economic Powers Act of 1977 on a wide range of imported goods. In response, President Trump implemented a 10% import surcharge on a broad range of goods under Section 122 of the Trade Act of 1974, which expired on July 24, 2026 pursuant to the statute's 150-day limitation. President Trump also implemented 10% to 12.5% tariffs on imports from sixty economies under Section 301 of the Trade Act of 1974. These tariffs, effective July 24, 2026, target various categories of imports, including certain raw materials used in our operations, such as steel, aluminum and copper. We continue to monitor the effects of the ever-evolving global trade landscape, including with respect to sanctions, tariffs, Chinese export restrictions on tungsten-related and other products used by us, existing trade agreements, anti-dumping and countervailing duty regulations and more.
We cannot predict with certainty the duration of tariffs currently in place, the impact of any new or increased tariffs, or the impact of any retaliatory tariffs. If we encounter difficulty in procuring raw materials and component products, or if the prices we pay for these products remain at current levels or increase and we are unable to pass corresponding cost increases on to our customers, our financial position, cash flows and results of operations would be adversely affected. Furthermore, uncertainty with respect to potential costs in the drilling and completion of oil and gas wells could cause our customers to delay or cancel planned projects which, if this occurred, would adversely affect our financial position, cash flows and results of operations.
Other factors that can affect our business and financial results include but are not limited to: the general global economic environment; competitive pricing pressures; customer consolidations; labor market constraints; supply chain and logistic disruptions; inflation in wages, materials, parts, equipment and other costs; climate-related and other regulatory changes; geopolitical conflicts and tensions; management's implementation of strategic decisions; public health crises; natural disasters; industrial accidents; trade restrictions; adoption of new or increases in tariffs; and changes in tax laws in the United States and in the international markets in which we operate. We continue to monitor the global economy, the prices of and demand for crude oil and natural gas, and the resultant impact on the capital spending plans and operations of our customers in order to plan and manage our business.
Human Capital
For more information on our health and safety policy and other workforce policies, please see "Part I, Item 1. Business - Human Capital" in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended by our Annual Report filed on Form 10-K/A.
Selected Financial Data
This selected financial data should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes included in "Part I, Item 1. Financial Statements" of this Quarterly Report on Form 10-Q and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and related notes included in "Part II, Item 8. Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2025, as amended by our Annual Report on Form 10-K/A, in order to understand factors, such as charges and credits, which may impact comparability of the selected financial data.
Unaudited Consolidated Results of Operations
The following summarizes our consolidated results of operations for the three and nine months ended September 30, 2026 and 2025 (in thousands, except per share amounts):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 Variance 2026 2025 Variance
Revenues:
Products $ 109,845 $ 106,492 $ 3,353 $ 301,178 $ 314,385 $ (13,207)
Services 59,919 58,688 1,231 170,608 176,139 (5,531)
169,764 165,180 4,584 471,786 490,524 (18,738)
Costs and expenses:
Product costs 88,639 85,561 3,078 240,730 249,826 (9,096)
Service costs 41,435 43,085 (1,650) 118,884 126,837 (7,953)
Cost of revenues (exclusive of depreciation and amortization expense presented below)
130,074 128,646 1,428 359,614 376,663 (17,049)
Selling, general and administrative expenses
23,994 20,756 3,238 67,145 66,267 878
Depreciation and amortization expense 8,046 12,128 (4,082) 24,296 36,051 (11,755)
Impairments of operating lease assets - - - - 1,358 (1,358)
Impairments of assets held for sale - - - 1,384 - 1,384
Other operating income, net 1,315 (1,098) 2,413 (2,978) (5,479) 2,501
163,429 160,432 2,997 449,461 474,860 (25,399)
Operating income 6,335 4,748 1,587 22,325 15,664 6,661
Interest expense, net (1,308) (1,773) 465 (2,991) (5,043) 2,052
Other income (expense), net 226 362 (136) (2,907) 1,136 (4,043)
Income before income taxes 5,253 3,337 1,916 16,427 11,757 4,670
Income tax provision (2,137) (1,437) (700) (6,293) (3,888) (2,405)
Net income $ 3,116 $ 1,900 $ 1,216 $ 10,134 $ 7,869 $ 2,265
Net income per share:
Basic
$ 0.05 $ 0.03 $ 0.17 $ 0.13
Diluted
0.05 0.03 0.17 0.13
Weighted average number of common shares outstanding:
Basic
58,079 57,946 58,114 59,089
Diluted
58,249 58,016 58,452 59,144
Unaudited Segment Results of Operations
We manage and measure our business performance in three operating segments: Offshore Manufactured Products, Completion and Production Services and Downhole Technologies. Supplemental financial information by operating segment for the three and nine months ended September 30, 2026 and 2025 is summarized below (in thousands):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 Variance 2026 2025 Variance
Revenues:
Offshore Manufactured Products
Project-driven:
Products $ 57,725 $ 67,729 $ (10,004) $ 161,566 $ 195,506 $ (33,940)
Services 34,594 30,172 4,422 97,724 82,503 15,221
92,319 97,901 (5,582) 259,290 278,009 (18,719)
Military and other products 12,065 10,726 1,339 29,237 29,800 (563)
104,384 108,627 (4,243) 288,527 307,809 (19,282)
Completion and Production Services 23,159 27,525 (4,366) 68,931 91,468 (22,537)
Downhole Technologies 42,221 29,028 13,193 114,328 91,247 23,081
$ 169,764 $ 165,180 $ 4,584 $ 471,786 $ 490,524 $ (18,738)
Operating income (loss):
Offshore Manufactured Products(1)
$ 14,795 $ 17,603 $ (2,808) $ 43,143 $ 48,868 $ (5,725)
Completion and Production Services(2)
3,530 948 2,582 10,937 6,328 4,609
Downhole Technologies(3)
2,145 (4,667) 6,812 4,437 (10,783) 15,220
Corporate(4)
(14,135) (9,136) (4,999) (36,192) (28,749) (7,443)
$ 6,335 $ 4,748 $ 1,587 $ 22,325 $ 15,664 $ 6,661
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(1)During the three and nine months ended September 30, 2025, we recognized charges of $0.6 million and $0.8 million, respectively, within the Offshore Manufactured Products segment, associated primarily with the consolidation and relocation of certain manufacturing and service locations.
(2)During the three and nine months ended September 30, 2025, we recognized charges of $2.7 million and $5.8 million, respectively, within the Completion and Production Services segment, associated primarily with the exit of service locations.
(3)During the nine months ended September 30, 2025, we recognized charges of $1.2 million within the Downhole Technologies segment, associated primarily with the exit of a leased facility.
(4)During the three and nine months ended September 30, 2026, we recognized: facility exit and other charges of $2.2 million and $6.1 million, respectively, primarily associated with assets held for sale; and $3.3 million and $5.0 million, respectively, of executive transition costs associated with the pending retirement of our former President and Chief Executive Officer. Additionally, during the nine months ended September 30, 2026, we recognized a non-cash impairment charge of $1.4 million associated with assets held for sale and a $4.1 million gain associated with the sale of a previously idled facility. During the three and nine months ended September 30, 2025, we recognized severance charges of $0.3 million within Corporate operations
For further discussion of charges and credits recognized during the three and nine months ended September 30, 2026 and 2025, see Note 2, "Charges and Credits," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
We reported net income for the three months ended September 30, 2026 of $3.1 million, or $0.05 per share. The reported third quarter net income included net charges of $5.5 million ($5.4 million after tax, or $0.09 per share) associated primarily with executive transition and the continued exit of U.S. land-based facilities. These results compare to net income for the three months ended September 30, 2025 of $1.9 million, or $0.03 per share, which included charges of $3.6 million ($2.8 million after tax, or $0.05 per share) associated primarily with the exit of U.S. land-based facilities and personnel reductions.
Our results of operations for the third quarter of 2026 reflect the impact of delays in capital investments by our offshore and international customers, disruptions resulting from the military conflict in Iran and management's decisions to exit certain land-based locations and service offerings in the United States.
Revenues. Consolidated total revenues in the third quarter of 2026 increased $4.6 million, or 3%, from the third quarter of 2025 due primarily to higher customer demand for perforating and completion products partially offset by lower project-driven product sales and our exit of underperforming service offerings and facilities over the past 15 months. Excluding the impact of exited operations, consolidated revenues increased $6.9 million, or 4%, year-over-year.
Consolidated product revenues in the third quarter of 2026 increased $3.4 million, or 3%, from the third quarter of 2025, with the impact of higher customer demand for perforating and completion products substantially offset by lower project-driven product sales. Consolidated service revenues in the third quarter of 2026 increased $1.2 million, or 2%, from the third quarter of 2025, with higher project-driven service activity substantially offset by the impact of our exit of certain underperforming U.S. land-based service offerings and lower customer activity in the Middle East.
The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended September 30, 2026 and 2025 (in thousands):
Offshore Manufactured Products Completion and Production Services Downhole Technologies Total
Three Months Ended September 30 2026 2025 2026 2025 2026 2025 2026 2025
Project-driven:
Products $ 57,725 $ 67,729 $ - $ - $ - $ - $ 57,725 $ 67,729
Services 34,594 30,172 - - - - 34,594 30,172
Total project-driven 92,319 97,901 - - - - 92,319 97,901
Military and other products 12,065 10,726 - - - - 12,065 10,726
Short-cycle:
Products - - - - 40,055 28,037 40,055 28,037
Services - - 23,159 27,525 2,166 991 25,325 28,516
Total short-cycle - - 23,159 27,525 42,221 29,028 65,380 56,553
$ 104,384 $ 108,627 $ 23,159 $ 27,525 $ 42,221 $ 29,028 $ 169,764 $ 165,180
By destination:
Offshore and international $ 98,625 $ 102,660 $ 12,632 $ 12,984 $ 10,495 $ 7,712 $ 121,752 $ 123,356
U.S. land 5,759 5,967 10,527 14,541 31,726 21,316 48,012 41,824
$ 104,384 $ 108,627 $ 23,159 $ 27,525 $ 42,221 $ 29,028 $ 169,764 $ 165,180
As a percentage of total:
Offshore and international 72 % 75 %
U.S. land 28 % 25 %
Cost of Revenues (exclusive of Depreciation and Amortization Expense). Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) in the third quarter of 2026 increased $1.4 million, or 1%, compared to the level reported in the third quarter of 2025.
Consolidated product costs in the third quarter of 2026 increased $3.1 million, or 4%, from the third quarter of 2025 due to the increase in revenues and a shift in product mix. Consolidated service costs in the third quarter of 2026 decreased $1.7 million, or 4%, from the third quarter of 2025, due primarily to strategic actions implemented in our U.S. land-based operations to improve reported results.
Selling, General and Administrative Expense. Selling, general and administrative expense was $24.0 million in the third quarter of 2026, which included $3.3 million of executive transition costs associated with the pending retirement of our former President and Chief Executive Officer. This compares to an expense of $20.8 million in the third quarter of 2025. See Note 2, "Charges and Credits," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion of executive transition costs.
Depreciation and Amortization Expense. Depreciation and amortization expense decreased $4.1 million, or 34%, in the third quarter of 2026 compared to the prior-year quarter due primarily to the impact of asset impairments recorded in the fourth quarter of 2025. Note 10, "Segments and Related Information," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q presents depreciation and amortization expense by segment.
Other Operating Income, Net. Other operating income, net primarily includes gains and losses recognized on the sale of property and equipment and costs related to assets held for sale within Corporate in 2026. In the third quarter of 2026, we recognized $2.2 million of costs primarily related to the continued exit of facilities offset by gains totaling $0.9 million recognized in connection with the disposal of assets held for sale. During the third quarter of 2025, we recognized gains of $1.4 million associated with the sale of assets.
Operating Income (Loss). Our consolidated operating income was $6.3 million in the third quarter of 2026, which included $3.3 million in executive transition costs and $2.2 million in charges primarily associated with the continued exit of facilities. This compares to third quarter 2025 consolidated operating income of $4.7 million, which included $3.6 million of charges associated with facility exits and other management actions. Excluding these charges, operating income increased by $3.5 million year-over-year, driven primarily by a $4.1 million decrease in depreciation and amortization expense partially offset by a $0.6 million reduction in gains on the sale of assets.
Interest Expense, Net. Net interest expense decreased $0.5 million in the third quarter of 2026, compared to the same period of 2025, driven primarily by the reduction in the level of outstanding debt.
Income Tax. For the three months ended September 30, 2026, our income tax provision was $2.1 million, which included the impact of changes in valuation allowances recorded against deferred tax assets, certain discrete tax items and other non-deductible expenses, on pre-tax income of $5.3 million. This compares to an income tax provision of $1.4 million, which included the impact of changes in valuation allowances recorded against deferred tax assets, certain discrete tax items and other non-deductible expenses, on pre-tax income of $3.3 million for the three months ended September 30, 2025.
Other Comprehensive Loss. Reported comprehensive income is the sum of reported net income and other comprehensive loss. Other comprehensive loss was $0.6 million in the third quarter of 2026 compared to other comprehensive loss of $1.3 million in the third quarter of 2025 due to fluctuations in currency exchange rates compared to the U.S. dollar which are used to translate certain of the international operations of our operating segments. For the three months ended September 30, 2026 and 2025, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil. During the third quarter of 2026, the exchange rate for the British pound was flat compared to the U.S. dollar while the Brazilian real weakened compared to the U.S. dollar. In the third quarter of 2025, the exchange rate for the British pound weakened compared to the U.S. dollar while the Brazilian real strengthened compared to the U.S. dollar.
Segment Operating Results
Offshore Manufactured Products
Revenues. Our Offshore Manufactured Products segment revenues decreased $4.2 million, or 4%, in the third quarter of 2026 compared to the third quarter of 2025 due to lower project-driven product sales, partially offset by the impact of a $4.4 million increase in service activity.
Operating Income. Our Offshore Manufactured Products segment reported operating income of $14.8 million in the third quarter of 2026. This compares to operating income in the third quarter of 2025 of $17.6 million. The $2.8 million decline in operating income was driven primarily by the revenue decline and an unfavorable shift in product and service mix.
Backlog. Backlog in our Offshore Manufactured Products segment totaled $482 million as of September 30, 2026, with third quarter 2026 bookings of $135 million and a quarterly book-to-bill ratio of 1.3x.
Completion and Production Services
Revenues. Our Completion and Production Services segment revenues decreased $4.4 million, or 16%, in the third quarter of 2026 compared to the prior-year period, driven primarily by the exit of underperforming U.S. land-based service offerings and facilities and lower customer activity in the Middle East. Excluding the impact of exited operations, revenues declined $2.1 million, or 8%, year-over-year.
Operating Income. Our Completion and Production Services segment reported operating income of $3.5 million in the third quarter of 2026. This compares to operating income of $0.9 million in the third quarter of 2025, which included charges totaling $2.7 million associated primarily with the exit of service locations. Excluding these 2025 charges, the Completion and Production Services segment's operating income declined $0.1 million from the prior-year period, with a $1.7 million reduction in depreciation and amortization expense, substantially offset by a $1.4 million reduction in gains on the sale of assets.
Downhole Technologies
Revenues. Our Downhole Technologies segment revenues increased $13.2 million, or 45%, in the third quarter of 2026 from the prior-year period, driven by higher demand for perforating and completion products - due in part to recent product introductions.
Operating Income (Loss). Our Downhole Technologies segment reported operating income of $2.1 million in the third quarter of 2026. This compares to an operating loss of $4.7 million in the third quarter of 2025. The $6.8 million year-over-year improvement was driven primarily by the reported increase in revenues and a $2.5 million reduction in depreciation and amortization expense.
Corporate
Operating Loss. Corporate expenses totaled $14.1 million in the third quarter of 2026, which included $3.3 million of executive transition costs and $1.6 million in charges associated primarily with ongoing actions to monetize assets held for sale. This compares to Corporate expenses of $9.1 million in the third quarter of 2025 which included $0.3 million of severance charges. Excluding charges, Corporate expenses were comparable to the prior-year period.
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
We reported net income for the nine months ended September 30, 2026 of $10.1 million, or $0.17 per share. The reported net income included net charges of $12.1 million ($11.9 million after tax, or $0.21 per share) associated primarily with the continued exit of certain of our U.S. land-based facilities, executive transition and debt extinguishment, partially offset by a gain on facility disposal. These results compare to net income for the nine months ended September 30, 2025 of $7.9 million, or $0.13 per share, which included net charges of $7.8 million ($6.1 million after tax, or $0.10 per share) associated with the restructuring of certain of our U.S. land-based operations, facility consolidations and closures, and personnel reductions, partially offset by gains associated with debt extinguishment.
Our results of operations for the first nine months of 2026 reflect the impact of management's decisions to exit certain land-based locations and service offerings in the United States, delays in capital investments by our offshore and international customers, disruptions resulting from the military conflict in Iran and increased U.S. trade tariffs.
Revenues. Consolidated total revenues in the first nine months of 2026 decreased $18.7 million, or 4%, from the first nine months of 2025 driven primarily by our exit of underperforming service offerings and locations in 2025. Excluding the impact of exited operations, consolidated revenues increased $1.3 million.
Consolidated product revenues in the first nine months of 2026 decreased $13.2 million, or 4%, from the first nine months of 2025, due to lower project-driven crane, connector, drilling and valve product sales partially offset by higher perforating and completion product revenues. Consolidated service revenues in the first nine months of 2026 decreased $5.5 million, or 3%, from the first nine months of 2025. This decrease was driven by the exit of underperforming U.S. land-based service offerings and lower customer activity in the Middle East, partially offset by higher project-driven service activity. Excluding the impact of exited operations, consolidated service revenues increased $14.5 million, or 9%, year-over-year.
The following table provides supplemental disaggregated revenue from contracts with customers by operating segment for the nine months ended September 30, 2026 and 2025 (in thousands):
Offshore Manufactured Products Completion and Production Services Downhole Technologies Total
Nine Months Ended September 30 2026 2025 2026 2025 2026 2025 2026 2025
Project-driven:
Products $ 161,566 $ 195,506 $ - $ - $ - $ - $ 161,566 $ 195,506
Services 97,724 82,503 - - - - 97,724 82,503
Total project-driven 259,290 278,009 - - - - 259,290 278,009
Military and other products 29,237 29,800 - - - - 29,237 29,800
Short-cycle:
Products - - - - 110,375 89,079 110,375 89,079
Services - - 68,931 91,468 3,953 2,168 72,884 93,636
Total short-cycle - - 68,931 91,468 114,328 91,247 183,259 182,715
$ 288,527 $ 307,809 $ 68,931 $ 91,468 $ 114,328 $ 91,247 $ 471,786 $ 490,524
By destination:
Offshore and international $ 269,636 $ 287,521 $ 35,832 $ 37,852 $ 32,551 $ 23,334 $ 338,019 $ 348,707
U.S. land 18,891 20,288 33,099 53,616 81,777 67,913 133,767 141,817
$ 288,527 $ 307,809 $ 68,931 $ 91,468 $ 114,328 $ 91,247 $ 471,786 $ 490,524
As a percentage of total:
Offshore and international 72 % 71 %
U.S. land 28 % 29 %
Cost of Revenues (exclusive of Depreciation and Amortization Expense). Our consolidated total cost of revenues (exclusive of depreciation and amortization expense) in the first nine months of 2026 decreased $17.0 million, or 5%, compared to the first nine months of 2025.
Consolidated product costs in the first nine months of 2026 decreased $9.1 million, or 4%, compared to the first nine months of 2025 due primarily to reduction in revenues. Consolidated service costs in the first nine months of 2026 decreased $8.0 million, or 6%, compared to the first nine months of 2025, due to lower revenue levels and the strategic actions implemented in our U.S. land-based operations to improve reported results.
Selling, General and Administrative Expense. Selling, general and administrative expense totaled $67.1 million in the first nine months of 2026, which compares to expense of $66.3 million in the first nine months of 2025. This year-over-year increase is primarily associated with the $5.0 million in executive transition costs recognized in 2026 partially offset by reduced personnel levels and commissions.
Depreciation and Amortization Expense. Depreciation and amortization expense in the first nine months of 2026 decreased $11.8 million, or 33%, compared to the prior-year period due primarily to the impact of asset impairments recorded in the fourth quarter of 2025. Note 10, "Segments and Related Information," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q presents depreciation and amortization expense by segment.
Impairment of Operating Lease Assets. In the first nine months of 2025, management continued its restructuring efforts to reduce costs in its U.S. land-based operations. As a result of these decisions, our Completion and Production Services and Downhole Technologies segments recognized non-cash impairment charges totaling $1.4 million in connection with its exit of leased locations. See Note 2, "Charges and Credits," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.
Impairment of Assets Held for Sale. During the first nine months of 2026, management made a decision to sell additional equipment, which was reclassified to assets held for sale. The carrying value of these assets held for sale were reduced to their estimated fair value, resulting in the recognition of a $1.4 million non-cash impairment charge. See Note 2, "Charges and Credits," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.
Other Operating Income, Net. Other operating income, net primarily includes gains and losses recognized on the sale of property and equipment and costs related to assets classified as held for sale within Corporate in 2026. During the first nine months of 2026, we recognized $6.3 million of costs primarily related to the continued exit of facilities. Gains recognized on the sale of assets during the first nine months of 2026 and 2025 totaled $5.7 million and $6.2 million, respectively.
Operating Income. Our consolidated operating income was $22.3 million in the first nine months of 2026, which included charges totaling $6.3 million primarily associated with the continued exit of facilities, $5.0 million of executive transition costs and $1.4 million in non-cash asset impairment charges. This compares to a consolidated operating income of $15.7 million in the first nine months of 2025, which included $1.4 million in operating lease asset impairment charges as well as charges totaling $6.8 million associated with facility consolidations and exits and other management actions. Excluding these charges, operating results improved by $11.2 million year-over-year, driven by an $11.8 million decrease in depreciation and amortization expense and implemented cost reduction measures, partially offset by the impact of the decline in revenue.
Interest Expense, Net. Net interest expense totaled $3.0 million in the first nine months of 2026, which compares to $5.0 million in the first nine months of 2025. The year-over-year decline in net interest expense was driven primarily by the 2026 reduction in the average level of debt outstanding.
Other Income (Expense), Net. On April 1, 2026, we retired $52.7 million of outstanding principal of the 2026 Notes with a combination of $50.5 million in cash and the issuance of 529,428 shares of our common stock. With the election by substantially all holders of the outstanding 2026 Notes to convert the instruments into shares of our common stock at maturity, we recognized a pre-tax loss of $3.6 million associated with the extinguishment of the 2026 Notes at a premium in the second quarter of 2026. See Note 4, "Long-Term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the extinguishment of the 2026 Notes.
Income Tax. For the first nine months of 2026, our income tax provision was $6.3 million, which included the impact of changes in valuation allowances recorded against deferred tax assets, certain discrete tax items and other non-deductible expenses, on pre-tax income of $16.4 million. This compares to an income tax provision of $3.9 million, which included the impact of certain discrete tax items and other non-deductible expenses, on pre-tax income of $11.8 million for the first nine months of 2025.
Other Comprehensive Income (Loss). Reported comprehensive income is the sum of reported net income and other comprehensive income (loss). Other comprehensive loss was $1.1 million in the first nine months of 2026 compared to other comprehensive income of $13.3 million in the first nine months of 2025 due to fluctuations in foreign currency exchange rates compared to the U.S. dollar for certain of the international operations of our operating segments. For the first nine months of 2026 and 2025, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil. During the first nine months of 2026, the exchange rate for the British pound weakened compared to the U.S. dollar while the Brazilian real strengthened compared to the U.S. dollar. This compares to the first nine months of 2025, when the exchange rates for both the British pound and the Brazilian real strengthened compared to the U.S. dollar.
Segment Operating Results
Offshore Manufactured Products
Revenues. Our Offshore Manufactured Products segment revenues declined $19.3 million, or 6%, in the first nine months of 2026 compared to the first nine months of 2025 due primarily to lower sales of project-driven crane, connector, drilling and valve products, partially offset by a $15.2 million increase in service activity.
Operating Income. Our Offshore Manufactured Products segment reported operating income of $43.1 million in the first nine months of 2026. This compares to operating income of $48.9 million in the first nine months of 2025. The $5.7 million decline in operating income was driven primarily by the revenue decline and an unfavorable shift in sales mix.
Backlog. Backlog in our Offshore Manufactured Products segment totaled $482 million as of September 30, 2026 compared to $435 million as of December 31, 2025. Bookings during the first nine months of 2026 were $334 million, yielding a book-to-bill ratio of 1.2x.
Completion and Production Services
Revenues. Our Completion and Production Services segment revenues decreased $22.5 million, or 25%, in the first nine months of 2026 compared to the first nine months of 2025, driven primarily by the exit of underperforming U.S. land-based service offerings and facilities. Excluding the impact of exited operations, revenues decreased $2.5 million year-over-year.
Operating Income. Our Completion and Production Services segment reported operating income of $10.9 million in the first nine months of 2026. This compares to operating income of $6.3 million in the first nine months of 2025, which included charges totaling $5.8 million primarily associated with the exit of service locations and personnel reductions. Excluding the 2025 charges, the Completion and Production Services segment's operating results declined $1.2 million from the prior-year period, due primarily to a $5.5 million reduction in gains on the sale of assets, partially offset by a $5.1 million reduction in depreciation and amortization expense.
Downhole Technologies
Revenues. Our Downhole Technologies segment revenues increased $23.1 million, or 25%, in the first nine months of 2026 from the first nine months of 2025, driven by higher demand for perforating and completion products following our new product introductions.
Operating Income (Loss). Our Downhole Technologies segment reported an operating income of $4.4 million in the first nine months of 2026. This compares to an operating loss of $10.8 million reported in the first nine months of 2025, which included charges totaling $1.2 million primarily associated with the exit of a leased facility. Excluding the 2025 charges, the Downhole Technologies segment operating results improved $14.0 million year-over-year, driven by a $7.5 million reduction in depreciation and amortization expense and contributions from the revenue increase.
Corporate
Operating Loss. Corporate expenses totaled $36.2 million in the first nine months of 2026, which included gains of $5.0 million recognized on the sale of previously idled assets, costs totaling $6.1 million primarily associated with ongoing actions to monetize assets held for sale, $5.0 million of executive transition costs and a $1.4 million impairment of assets held for sale. This compares to Corporate expenses of $28.7 million in the first nine months of 2025, which included $0.3 million of severance charges. Excluding these items, Corporate expenses were comparable year-over-year.
Liquidity, Capital Resources and Other Matters
Our primary liquidity needs are to fund operating and capital expenditures, new product development, general working capital needs and debt repayment. In addition, capital has been used to fund share repurchases and strategic business acquisitions. Our primary sources of funds are cash on-hand, cash flow from operations and proceeds from borrowings under our Cash Flow Credit Agreement, and, less frequently, capital markets transactions and additional contributions from asset sales.
Operating Activities
Cash flows used in operations totaled $2.8 million during the first nine months of 2026, compared to $55.0 million generated by operations during the first nine months of 2025.
During the first nine months of 2026, $44.2 million was used to fund net working capital increases, primarily due to an increase in inventories and a decrease in deferred revenue, partially offset by the favorable impact of decreases in income tax and customer receivables. During the first nine months of 2025, $9.9 million was provided by net working capital decreases, which includes increases in deferred revenues, accounts payable and accrued liabilities, partially offset by the unfavorable impact of increases in inventory and accounts receivable.
Investing Activities
Net cash provided by investing activities during the first nine months of 2026 totaled $1.7 million, compared to $14.5 million used in investing activities during the first nine months of 2025, with proceeds from asset sales more than offsetting capital expenditures in 2026.
Capital expenditures totaled $10.4 million and $28.2 million during the first nine months of 2026 and 2025, respectively. These investments were offset by proceeds from the sale of property, equipment and assets held for sale of $13.1 million and $13.8 million during the first nine months of 2026 and 2025, respectively.
Financing Activities
On January 28, 2026, we entered into the Cash Flow Credit Agreement (further discussed below), which replaced our existing ABL Agreement.
During the first nine months of 2026, net cash of $46.3 million was used in financing activities, which included the use of $50.5 million in cash to retire our 2026 Notes, net borrowings of $19.8 million under our Cash Flow Credit Agreement, the purchase of 1,053,670 shares of our common stock for $9.1 million, shares added to treasury stock as a result of net share settlements associated with the vesting of stock awards and payment of financing cost related to the Cash Flow Credit Agreement. This compares to $39.4 million of cash used in financing activities during the first nine months of 2025, which included the purchase of $20.8 million principal amount of our outstanding 2026 Notes for $20.3 million in cash, the repurchase of $16.2 million of our common stock and shares added to treasury stock as a result of net share settlements associated with the vesting of stock awards.
As of September 30, 2026, we had cash and cash equivalents totaling $22.9 million, $19.8 million in borrowings outstanding under our Cash Flow Credit Agreement and other debt of $1.9 million. Our reported interest expense included amortization of debt issuance costs of $1.5 million during the first nine months of 2026. For the first nine months of 2026, our contractual cash interest expense was $2.0 million, or approximately 8% of the average principal balance of debt outstanding.
We believe that cash on-hand, cash flow from operations and borrowing capacity available under the Cash Flow Credit Agreement will be sufficient to meet our liquidity needs in the coming twelve months. If our plans or assumptions change, or are inaccurate, we may need to raise additional capital from other sources. Our ability to obtain capital to repay debt, for general liquidity needs and for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global banking and financial markets and other factors, many of which are beyond our control. For companies like ours that support the energy industry, disruptions affecting the availability of capital have in the past and may in the future negatively impact the value of our common stock and may reduce our ability to access capital in the bank and capital markets or result in such capital being available on less favorable terms, which could negatively affect our liquidity.
Stock Repurchase Program. In October 2024, our Board of Directors authorized $50.0 million for repurchases of our common stock, par value $0.01 per share, through October 24, 2026. During the nine months ended September 30, 2026, $9.1 million in repurchases of common stock were made under this program.
On October 29, 2026, our Board of Directors authorized a new $50 million common stock repurchase program, which expires in October 2028. Subject to applicable securities laws, such purchases will be at such times and in such amounts as we deem appropriate.
Revolving Credit and Term Loan Facilities. On January 28, 2026, we entered into an amended and restated cash-flow based credit agreement with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto. This Cash Flow Credit Agreement provides for aggregate lender commitments of up to: $75.0 million under the Revolving Credit Facility and $50.0 million under the multi-draw Term Loan Facility, which was available for a six-month period. In July 2026, we borrowed $20.0 million under the Term Loan Facility and the remaining lender commitments under the Term Loan Facility lapsed. The Cash Flow Credit Agreement replaced the ABL Agreement discussed below and matures in January 2030. See Note 4, "Long-Term Debt," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding the Cash Flow Credit Agreement.
Prior to entering into the Cash Flow Credit Agreement, our senior secured credit facility (the "ABL Agreement") provided for a $100.0 million asset-based revolving credit facility under which credit availability was subject to a borrowing base calculation.
As of September 30, 2026, we had $19.8 million in borrowings outstanding under the Cash Flow Credit Agreement and $17.0 million of outstanding letters of credit, leaving $58.0 million available to be drawn.
As of September 30, 2026, the Company was in compliance with the financial covenants and restrictions under the Cash Flow Credit Agreement.
2026 Notes. We issued $135.0 million aggregate principal amount of the 2026 Notes pursuant to an indenture, dated as of March 19, 2021. On April 1, 2026, we retired $52.7 million of outstanding principal of the 2026 Notes, with a combination of $50.5 million of cash and the issuance of 529,428 shares of our common stock (with a fair value of $5.9 million). With the election by substantially all holders of the outstanding 2026 Notes to convert the instruments into shares of our common stock at maturity, we recognized a pre-tax loss of $3.6 million associated with the extinguishment of the 2026 Notes at a premium in the second quarter of 2026.
Our total debt represented 3% and 9% of our combined total debt and stockholders' equity as of September 30, 2026 and December 31, 2025, respectively.
Contingencies and Other Obligations. We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters.
See Note 11, "Commitments and Contingencies," to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion.
Off-Balance Sheet Arrangements. As of September 30, 2026, we had no off-balance sheet arrangements.
Critical Accounting Policies
For a discussion of the critical accounting policies and estimates that we use in the preparation of our condensed consolidated financial statements, see "Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection, and disclosure of these critical accounting policies and estimates with the audit committee of our Board of Directors. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which are adopted by us as of the specified effective date. 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.
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