SEC Filing | Superior Energy Services

Item 6. Exhibits

Registrant’s telephone number, including area code: (713) 654-2200

Second quarter 2019 revenue in our Drilling Products and Services segment remained flat at $100.7 million. U.S. land revenue decreased 2% sequentially to $47.3 million and U.S. offshore revenue decreased 3% sequentially to $28.1 million primarily due to decrease in rentals of premium drill pipe and accommodation units during the quarter. These decreases were partially offset by an increase in international revenue, which increased 6% to $25.3 million primarily due to an increase in rentals of premium drill pipe.

Comparison of the Results of Operations for the Three Months Ended June 30, 2019 and 2018

Comparison of the Results of Operations for the Six Months Ended June 30, 2019 and June 30, 2018

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spn-20190630x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



	FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

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

For the Transition Period from to

Commission File No. 001-34037

Commission Company Name: SUPERIOR ENERGY SERVICES INC

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)


	Delaware		75-2379388
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification No.)

	1001 Louisiana Street, Suite 2900		77002
	Houston, TX		(Zip Code)
	(Address of principal executive offices)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $.001 par value	SPN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x 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 x		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company ¨
		Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding on July 19, 2019 was 156,573,160.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for

the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements and Notes	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION

Item 1	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 6.	Exhibits	32

‎

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements and Notes



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)

	June 30, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	234,132	$	158,050
Accounts receivable, net of allowance for doubtful accounts of $13,217 and
$12,080 at June 30, 2019 and December 31, 2018, respectively		369,834		447,353
Prepaid expenses		61,989		45,802
Inventory and other current assets		133,815		121,700
Total current assets		799,770		772,905

Property, plant and equipment, net of accumulated depreciation and depletion of ‎$2,618,764 and $2,640,344 at June 30, 2019 and December 31, 2018, respectively		940,933		1,109,126
Operating lease right-of-use assets		99,004		-
Goodwill		136,787		136,788
Notes receivable		66,010		63,993
Restricted cash		2,739		5,698
Intangible and other long-term assets, net of accumulated amortization of $23,037 ‎and $76,358 at June 30, 2019 and December 31, 2018, respectively		101,054		127,452
Total assets	$	2,146,297	$	2,215,962

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	95,894	$	139,325
Accrued expenses		218,882		219,180
Income taxes payable		3,734		734
Current portion of decommissioning liabilities		3,593		3,538
Total current liabilities		322,103		362,777

Long-term debt, net		1,284,814		1,282,921
Decommissioning liabilities		129,604		126,558
Operating lease liabilities		78,973		-
Other long-term liabilities		150,412		152,967

Stockholders’ equity:
Preferred stock of $0.01 par value. Authorized - 5,000,000 shares; none issued		-		-
Common stock of $0.001 par value
Authorized - 250,000,000, Issued and Outstanding - 156,573,160 at June 30, 2019 ‎Authorized - 250,000,000, Issued and Outstanding - 154,885,418 at December 31, 2018		157		155
Additional paid in capital		2,744,373		2,735,125
Accumulated other comprehensive loss, net		(74,020)		(73,177)
Retained deficit		(2,490,119)		(2,371,364)
Total stockholders’ equity		180,391		290,739
Total liabilities and stockholders’ equity	$	2,146,297	$	2,215,962

See accompanying notes to condensed consolidated financial statements.



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues:
Services	$	344,304	$	446,812	$	720,443	$	846,580
Rentals		92,011		88,736		183,048		171,286
Total revenues		436,315		535,548		903,491		1,017,866
Costs and expenses:
Cost of services (exclusive of depreciation, depletion, amortization and accretion)		257,578		333,126		546,132		644,265
Cost of rentals (exclusive of depreciation, depletion, amortization and accretion)		38,850		36,684		80,459		69,005
Depreciation, depletion, amortization and accretion - services		59,423		81,740		126,199		169,487
Depreciation, depletion, amortization and accretion - rentals		15,795		16,233		31,458		34,205
General and administrative expenses		71,984		69,896		145,829		145,716
Reduction in value of assets		31,381		-		31,381		-
Loss from operations		(38,696)		(2,131)		(57,967)		(44,812)

Other expense:
Interest expense, net		(24,650)		(24,894)		(49,771)		(49,781)
Other income (expense)		490		(2,382)		(1,122)		(4,117)
Loss from continuing operations before income taxes		(62,856)		(29,407)		(108,860)		(98,710)
Income taxes		8,194		(3,970)		9,895		(13,325)
Net loss from continuing operations		(71,050)		(25,437)		(118,755)		(85,385)
Loss from discontinued operations, net of income tax		-		(953)		-		(729)
Net loss	$	(71,050)	$	(26,390)	$	(118,755)	$	(86,114)

Basic and diluted loss per share:
Net loss from continuing operations	$	(0.46)	$	(0.16)	$	(0.76)	$	(0.56)
Loss from discontinued operations		-		(0.01)		-		-
Net loss	$	(0.46)	$	(0.17)	$	(0.76)	$	(0.56)

Weighted average shares outstanding		155,997		154,278		155,383		153,728


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net loss	$	(71,050)	$	(26,390)	$	(118,755)	$	(86,114)
Change in cumulative translation adjustment, net of tax		(1,916)		(7,053)		(843)		(2,665)
Comprehensive loss	$	(72,966)	$	(33,443)	$	(119,598)	$	(88,779)

See accompanying notes to condensed consolidated financial statements.


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Six Months Ended June 30,
	2019		2018
Cash flows from operating activities:
Net loss	$	(118,755)	$	(86,114)
Adjustments to reconcile net loss to net cash provided by operating ‎ activities:
Depreciation, depletion, amortization and accretion		157,657		203,692
Deferred income taxes		-		(19,300)
Reduction in value of assets		31,381		-
Right-of-use assets amortization		11,286		-
Stock based compensation expense		13,507		16,552
Other reconciling items, net		(7,005)		(2,595)
Changes in operating assets and liabilities:
Accounts receivable		67,506		(44,415)
Prepaid expenses		(16,953)		(862)
Inventory and other current assets		(13,680)		(24,854)
Accounts payable		(21,931)		32,852
Accrued expenses		(28,089)		(35,729)
Other, net		(6,094)		188
Net cash provided by operating activities		68,830		39,415

Cash flows from investing activities:
Payments for capital expenditures		(79,136)		(119,841)
Proceeds from sales of assets		84,557		23,297
Net cash provided by (used in) investing activities		5,421		(96,544)

Cash flows from financing activities:
Tax withholding for vested restricted stock units		(1,677)		(5,183)
Other		651		1,283
Net cash used in financing activities		(1,026)		(3,900)
Effect of exchange rate changes on cash		(102)		(1,311)
Net change in cash, cash equivalents, and restricted cash		73,123		(62,340)
Cash, cash equivalents, and restricted cash at beginning of period		163,748		192,483
Cash, cash equivalents, and restricted cash at end of period	$	236,871	$	130,143

See accompanying notes to condensed consolidated financial statements.



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Six Months Ended June 30, 2019
(in thousands, except share data)
(unaudited)

						Accumulated
	Common			Additional		other
	stock	Common		paid-in		comprehensive		Retained
	shares	stock		capital		loss, net		deficit		Total
Balances, December 31, 2018	154,885,418	$	155	$	2,735,125	$	(73,177)	$	(2,371,364)	$	290,739
Net loss	-		-		-		-		(47,705)		(47,705)
Foreign currency translation adjustment	-		-		-		1,073		-		1,073
Stock-based compensation expense,
net of forfeitures	-		-		5,625		-		-		5,625
Transactions under stock plans	1,071,182		1		(1,667)		-		-		(1,666)
Balances, March 31, 2019	155,956,600	$	156	$	2,739,083	$	(72,104)	$	(2,419,069)	$	248,066

Net loss	-		-		-		-		(71,050)		(71,050)
Foreign currency translation adjustment	-		-		-		(1,916)		-		(1,916)
Stock-based compensation expense,
net of forfeitures	-		-		4,650		-		-		4,650
Transactions under stock plans	116,374		-		(10)		-		-		(10)
Shares issued under Employee Stock Purchase Plan	500,186		1		650		-		-		651
Balances, June 30, 2019	156,573,160	$	157	$	2,744,373	$	(74,020)	$	(2,490,119)	$	180,391


See accompanying notes to condensed consolidated financial statements.


SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Six Months Ended June 30, 2018
(in thousands, except share data)
(unaudited)

						Accumulated
	Common			Additional		other
	stock	Common		paid-in		comprehensive		Retained
	shares	stock		capital		loss, net		deficit		Total
Balances, December 31, 2017	153,263,097	$	153	$	2,713,161	$	(67,427)	$	(1,513,458)	$	1,132,429
Net loss	-		-		-		-		(59,724)		(59,724)
Foreign currency translation adjustment	-		-		-		4,388		-		4,388
Stock-based compensation expense,
net of forfeitures	-		-		6,229		-		-		6,229
Transactions under stock plans	974,165		1		(5,154)		-		-		(5,153)
Balances, March 31, 2018	154,237,262	$	154	$	2,714,236	$	(63,039)	$	(1,573,182)	$	1,078,169

Net loss	-		-		-		-		(26,390)		(26,390)
Foreign currency translation adjustment	-		-		-		(7,053)		-		(7,053)
Stock-based compensation expense,
net of forfeitures	-		-		6,113		-		-		6,113
Transactions under stock plans	90,535		-		(30)		-		-		(30)
Shares issued under Employee Stock Purchase Plan	197,830		1		1,905		-		-		1,906
Balances, June 30, 2018	154,525,627	$	155	$	2,722,224	$	(70,092)	$	(1,599,572)	$	1,052,715


See accompanying notes to condensed consolidated financial statements.

‎

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30, 2019

(1)Basis of Presentation

Certain information and footnote disclosures normally in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC); however, management believes the disclosures that are made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Superior Energy Services, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, and Management’s Discussion and Analysis of Financial Condition and Results of Operations herein.

The financial information of Superior Energy Services, Inc. and its subsidiaries (the Company) for the three and six months ended June 30, 2019 and 2018 has not been audited. However, in the opinion of management, all adjustments necessary to present fairly the results of operations for the periods presented have been included therein. The results of operations for the first six months of the year are not necessarily indicative of the results of operations that might be expected for the entire year.

The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure. Based on the evaluation, the Company determined that there were no material subsequent events for recognition or disclosure.

(2)Revenue

Revenue Recognition

Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered or rentals provided. Taxes collected from customers and remitted to governmental authorities and revenues are reported on a net basis in the Company’s financial statements.

Performance Obligations

A performance obligation arises under contracts with customers to render services or provide rentals, and is the unit of account under Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The Company accounts for services rendered and rentals provided separately if they are distinct and the service or rental is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered or rentals provided on its own or with other resources that are readily available to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A contract’s standalone selling prices are determined based on the prices that the Company charges for its services rendered and rentals provided. The majority of the Company’s performance obligations are satisfied over time, which is generally represented by a period of 30 days or less. The Company’s payment terms vary by the type of products or services offered. The term between invoicing and when the payment is due is typically 30 days.

Services revenue primarily represents amounts charged to customers for the completion of services rendered, including labor, products and supplies necessary to perform the service. Rates for these services vary depending on the type of services provided and can be based on a per job, per hour or per day basis.

Rentals revenue is, primarily priced on a per day, per man hour or similar basis and consists of fees charged to customers for use of the Company’s rental equipment over the term of the rental period, which is generally less than twelve months.

The Company expenses sales commissions when incurred because the amortization period would have been one year or less.

Disaggregation of revenue

The following table presents the Company’s revenues by segment disaggregated by geography (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
U.S. land
Drilling Products and Services	$	47,267	$	43,394	$	95,483	$	84,111
Onshore Completion and Workover Services		163,495		276,242		368,533		507,731
Production Services		38,808		47,944		79,475		100,401
Technical Solutions		13,385		7,858		25,307		14,691
Total U.S. land	$	262,955	$	375,438	$	568,798	$	706,934

U.S. offshore
Drilling Products and Services	$	28,085	$	23,261	$	57,153	$	44,250
Onshore Completion and Workover Services		-		-		-		-
Production Services		21,410		13,634		40,682		31,134
Technical Solutions		33,492		35,333		54,424		72,895
Total U.S. offshore	$	82,987	$	72,228	$	152,259	$	148,279

International
Drilling Products and Services	$	25,330	$	27,378	$	49,125	$	50,874
Onshore Completion and Workover Services		-		-		-		-
Production Services		42,784		40,426		86,295		71,186
Technical Solutions		22,259		20,078		47,014		40,593
Total International	$	90,373	$	87,882	$	182,434	$	162,653
Total Revenues	$	436,315	$	535,548	$	903,491	$	1,017,866

The following table presents the Company’s revenues by segment disaggregated by type (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
Services
Drilling Products and Services	$	28,046	$	27,461	$	59,169	$	51,466
Onshore Completion and Workover Services		154,395		266,071		348,812		487,418
Production Services		95,752		93,678		190,600		188,292
Technical Solutions		66,111		59,602		121,862		119,404
Total services	$	344,304	$	446,812	$	720,443	$	846,580

Rentals
Drilling Products and Services	$	72,636	$	66,572	$	142,592	$	127,769
Onshore Completion and Workover Services		9,100		10,171		19,721		20,313
Production Services		7,250		8,326		15,852		14,429
Technical Solutions		3,025		3,667		4,883		8,775
Total rentals	$	92,011	$	88,736	$	183,048	$	171,286
Total Revenues	$	436,315	$	535,548	$	903,491	$	1,017,866

Impact of adoption of ASU 2016-02, Leases (Topic 842)

Services revenue:

In connection with its adoption of Topic 842, the Company determined that certain of its services revenue contracts contain a lease component. The Company elected to adopt a practical expedient option available to lessors, which allows the Company to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. Therefore, the Company combined the lease and service components for certain of the Company’s service

contracts and continues to account for the combined component under ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

Rentals revenue:

The Company determined that its rentals revenue contracts represent short-term operating leases. Therefore, the adoption of the ASU 2016-02 did not result in any changes in the timing or method of revenue recognition for the Company’s rental revenues.

(3)Inventory

Inventories are stated at the lower of cost or net realizable value. The Company applies net realizable value and obsolescence to the gross value of the inventory. Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and work-in-process. Supplies and consumables primarily consist of products used in our services provided to customers. The components of the inventory balances are as follows (in thousands):



	June 30, 2019		December 31, 2018
Finished goods	$	60,425	$	54,144
Raw materials		15,802		16,795
Work-in-process		11,089		5,544
Supplies and consumables		33,663		30,822
Total	$	120,979	$	107,305

(4)Notes Receivable

Notes receivable consist of a commitment from the seller of an oil and gas property acquired by the Company related to costs associated with the abandonment of the acquired property. Pursuant to an agreement with the seller, the Company will invoice the seller an agreed upon amount at the completion of certain decommissioning activities. The gross amount of this obligation totals $115.0 million and is recorded at present value using an effective interest rate of 6.58%. The related discount is amortized to interest income based on the expected timing of completion of the decommissioning activities. The Company recorded interest income related to notes receivable of $2.0 million for each of the six months ended June 30, 2019 and 2018.

(5)Debt

The Company’s outstanding debt is as follows (in thousands):



		June 30, 2019		December 31, 2018
	Stated Interest Rate (%)	Long-term
Senior unsecured notes due September 2024	7.750	$	500,000	$	500,000
Senior unsecured notes due December 2021	7.125		800,000		800,000
Total debt, gross			1,300,000		1,300,000
Unamortized debt issuance costs			(15,186)		(17,079)
Total debt, net		$	1,284,814	$	1,282,921

Credit Facility

The Company has an asset-based revolving credit facility which matures in October 2022. The borrowing base under the credit facility is calculated based on a formula referencing the borrower’s and the subsidiary guarantors’ eligible accounts receivable, eligible inventory and eligible premium rental drill pipe less reserves. Availability under the credit facility is the lesser of (i) the commitments, (ii) the borrowing base and (iii) the highest principal amount permitted to be secured under the indenture governing the senior unsecured notes due 2021. At June 30, 2019, the borrowing base was $231.7 million and the Company had $70.9 million of letters of credit outstanding that reduced its borrowing availability under the revolving credit facility. The credit agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, merger, consolidations, dispositions of assets and other provisions customary in similar types of agreements.

Senior Unsecured Notes

The Company has outstanding $500 million of senior unsecured notes due September 2024. The indenture governing the 7.75% senior unsecured notes due 2024 requires semi-annual interest payments on March 15 and September 15 of each year through the maturity date of September 15, 2024.

The Company also has outstanding $800 million of senior unsecured notes due December 2021. The indenture governing the 7.125% senior unsecured notes due 2021 requires semi-annual interest payments on June 15 and December 15of each year through the maturity date of December 15, 2021.

(6)Decommissioning Liabilities

The Company’s decommissioning liabilities associated with an oil and gas property and its related assets include liabilities related to the plugging of wells, removal of the related platform and equipment, and site restoration. The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows and/or relating timing needed to satisfy the liability have changed materially. The Company had decommissioning liabilities of $133.2 million and $130.1 million at June 30, 2019 and December 31, 2018, respectively.

(7) Leases

Adoption of ASU 2016-02, Leases

The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Therefore, prior period financial information has not been adjusted and continues to be reflected in accordance with the Company’s historical accounting policy. The standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients,” which, among other things, allows the Company to carry forward its historical lease classification.

The adoption of this standard resulted in the recording of operating lease assets and operating lease liabilities of approximately $100.0 million as of January 1, 2019, with no related impact on the Company’s condensed consolidated statement of equity or condensed consolidated statement of operations. Short-term leases have not been recorded on the balance sheet.

Accounting Policy for Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are operating leases and are included in ROU assets, accounts payable and operating lease liabilities in the condensed consolidated balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease.

Overview

The Company’s operating leases are primarily for real estate, machinery and equipment, and vehicles. The terms and conditions for these leases vary by the type of underlying asset. Total operating lease expense was as follows (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Long-term fixed lease expense	$	9,821	$	19,328
Long-term variable lease expense		505		1,330
Short-term lease expense		4,628		10,001
Total operating lease expense	$	14,954	$	30,659

For the three and six months ended June 30, 2018, total operating lease expense was $13.5 million and $27.0 million, respectively.

Supplemental Balance Sheet Information

Operating leases at June 30, 2019 were as follows (in thousands):



	June 30, 2019
Operating lease ROU assets	$	99,004

Accrued expenses	$	26,959
Operating lease liabilities		78,973
Total operating lease liabilities	$	105,932

Cash paid for operating leases	$	17,435
ROU assets obtained in exchange for lease obligations	$	16,150

Weighted average remaining lease term		9 years
Weighted average discount rate		6.75%

Maturities of operating lease liabilities at June 30, 2019 are as follows (in thousands):



Remainder of 2019	$ 16,989
2020	28,098
2021	20,451
2022	12,653
2023	9,549
Thereafter	53,750
Total lease payments	141,490
Less imputed interest	(35,558)
Total	$ 105,932

At December 31, 2018, future minimum lease payments under long-term leases for the five years ending December 31, 2019 through 2023 and thereafter are as follows: $30.8 million, $24.3 million, $16.6 million, $9.8 million and $6.9 million and $37.8 million, respectively.

(8) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. The three input levels of the fair value hierarchy are as follows.

Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2: Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; or model-derived valuations or other inputs that can be corroborated by observable market data.

Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following tables provide a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):




	Fair Value at June 30, 2019
	Level 1		Level 2		Level 3		Total
Intangible and other long-term assets, net:
Non-qualified deferred compensation assets	$	-	$	14,686	$	-	$	14,686
Accounts payable:
Non-qualified deferred compensation liabilities	$	-	$	1,224	$	-	$	1,224
Other long-term liabilities:
Non-qualified deferred compensation liabilities	$	-	$	21,974	$	-	$	21,974
Total debt	$	885,500	$	-	$	-	$	885,500

	Fair Value at December 31, 2018
	Level 1		Level 2		Level 3		Total
Intangible and other long-term assets, net:
Non-qualified deferred compensation assets	$	376	$	12,930	$	-	$	13,306
Accounts payable:
Non-qualified deferred compensation liabilities	$	-	$	1,138	$	-	$	1,138
Other long-term liabilities:
Non-qualified deferred compensation liabilities	$	-	$	19,766	$	-	$	19,766
Total debt	$	1,084,711	$	-	$	-	$	1,084,711

The Company’s non-qualified deferred compensation plans allow officers, certain highly compensated employees and non-employee directors to defer receipt of a portion of their compensation and contribute such amounts to one or more hypothetical investment funds. These investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent Levels 1 and 2, respectively, in the fair value hierarchy.

The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued expenses, as reflected in the condensed consolidated balance sheets, approximates fair value due to the short maturities. The fair value of the debt instruments is determined by reference to the market value of the instrument as quoted in an over-the-counter market.

The following table reflects the fair value measurements used in testing the impairment of long-lived assets (in thousands):

Fair value is measured as of impairment date using Level 3 inputs. See note 10 for a discussion of the reduction in value of assets recorded during the six months ended June 30, 2019.

(9) Segment Information

Business Segments

The Drilling Products and Services segment rents and sells premium drill pipe, bottom hole assemblies, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. It also provides on-site accommodations and machining services. The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a variety of well completion, workover and maintenance services. The Production Services segment provides intervention services such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services. The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well containment systems, stimulation and sand control services, well plug and abandonment services and the production and sale of oil and gas.

The Company evaluates the performance of its reportable segments based on income or loss from operations excluding corporate expenses. The segment measure is calculated as follows: segment revenues less segment operating expenses, depreciation, depletion, amortization and accretion expense and reduction in value of assets. The Company uses this segment measure to evaluate its reportable segments because it is the measure that is most consistent with how the Company organizes and manages its business operations. Corporate and other costs primarily include expenses related to support functions, salaries and benefits for corporate employees and stock-based compensation expense.

Summarized financial information for the Company’s segments is as follows (in thousands):



Three Months Ended June 30, 2019

			Onshore
	Drilling		Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total
Revenues	$	100,682	$	163,495	$	103,002	$	69,136	$	-	$	436,315
Cost of services and rentals (exclusive of
depreciation, depletion, amortization and accretion)		37,864		140,984		78,418		39,162		-		296,428
Depreciation, depletion, amortization
and accretion		21,490		33,387		13,172		5,979		1,190		75,218
General and administrative expenses		15,241		9,005		7,970		15,522		24,246		71,984
Reduction in value of assets		-		31,381		-		-		-		31,381
Income (loss) from operations		26,087		(51,262)		3,442		8,473		(25,436)		(38,696)
Interest income (expense), net		-		-		-		1,035		(25,685)		(24,650)
Other income		-		-		-		-		490		490
Income (loss) from continuing operations
before income taxes	$	26,087	$	(51,262)	$	3,442	$	9,508	$	(50,631)	$	(62,856)



Three Months Ended June 30, 2018

			Onshore
	Drilling		Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total
Revenues	$	94,033	$	276,242	$	102,004	$	63,269	$	-	$	535,548
Cost of services and rentals (exclusive of
depreciation, depletion, amortization and accretion)		36,599		210,206		85,129		37,876		-		369,810
Depreciation, depletion, amortization
and accretion		28,590		47,423		14,303		6,273		1,384		97,973
General and administrative expenses		13,843		11,102		9,696		13,323		21,932		69,896
Income (loss) from operations		15,001		7,511		(7,124)		5,797		(23,316)		(2,131)
Interest income (expense), net		-		-		-		971		(25,865)		(24,894)
Other expense		-		-		-		-		(2,382)		(2,382)
Income (loss) from continuing operations
before income taxes	$	15,001	$	7,511	$	(7,124)	$	6,768	$	(51,563)	$	(29,407)



Six Months Ended June 30, 2019

			Onshore
	Drilling		Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total
Revenues	$	201,761	$	368,533	$	206,452	$	126,745	$	-	$	903,491
Cost of services and rentals (exclusive of
depreciation, depletion, amortization and accretion)		80,069		312,783		158,299		75,440		-		626,591
Depreciation, depletion, amortization
and accretion		44,516		71,130		27,312		12,289		2,410		157,657
General and administrative expenses		29,810		19,580		15,782		31,459		49,198		145,829
Reduction in value of assets		-		31,381		-		-		-		31,381
Income/(loss) from operations		47,366		(66,341)		5,059		7,557		(51,608)		(57,967)
Interest income (expense), net		-		-		-		2,053		(51,824)		(49,771)
Other expense		-		-		-		-		(1,122)		(1,122)
Income/(loss) from continuing operations
before income taxes	$	47,366	$	(66,341)	$	5,059	$	9,610	$	(104,554)	$	(108,860)



Six Months Ended June 30, 2018

			Onshore
	Drilling		Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total
Revenues	$	179,235	$	507,731	$	202,721	$	128,179	$	-	$	1,017,866
Cost of services and rentals (exclusive of
depreciation, depletion, amortization and accretion)		71,669		390,857		171,065		79,679		-		713,270
Depreciation, depletion, amortization
and accretion		58,231		95,078		33,583		14,003		2,797		203,692
General and administrative expenses		26,367		24,328		19,289		27,383		48,349		145,716
Income (loss) from operations		22,968		(2,532)		(21,216)		7,114		(51,146)		(44,812)
Interest income (expense), net		-		-		-		1,927		(51,708)		(49,781)
Other expense		-		-		-		-		(4,117)		(4,117)
Income (loss) from continuing operations
before income taxes	$	22,968	$	(2,532)	$	(21,216)	$	9,041	$	(106,971)	$	(98,710)



Identifiable Assets
			Onshore
	Drilling		Completion
	Products and		and Workover		Production		Technical		Corporate and		Consolidated
	Services		Services		Services		Solutions		Other		Total
June 30, 2019	$	633,898	$	684,551	$	398,441	$	360,056	$	69,351	$	2,146,297
December 31, 2018	$	587,264	$	808,037	$	434,430	$	340,161	$	46,070	$	2,215,962

During the six months ended June 30, 2019, the Company sold its drilling rigs service line, which was previously included in the Onshore Completion and Workover Services segment. This service line included twelve active U.S. land based drilling rigs and associated equipment with a carrying value of $66.2 million. The Company received $74.0 million in cash proceeds during the quarter at closing and recognized a $0.2 million loss on sale of assets. In addition, the Company recorded a $7.5 million impairment of the intangibles associated with the disposed assets.

Geographic Segments

The Company attributes revenue to various countries based on the location of where services are performed or the destination of the drilling products or equipment sold or rented. Long-lived assets consist primarily of property, plant and equipment and are attributed to various countries based on the physical location of the asset at the end of a period. The Company’s revenue attributed to the U.S. and to other countries and the value of its long-lived assets by those locations are as follows (in thousands):



Revenues
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
United States	$	345,942	$	447,666	$	721,057	$	855,213
Other countries		90,373		87,882		182,434		162,653
Total	$	436,315	$	535,548	$	903,491	$	1,017,866

Long-Lived Assets

	June 30, 2019		December 31, 2018
United States	$	756,345	$	903,520
Other countries		184,588		205,606
Total	$	940,933	$	1,109,126

(10)Reduction in Value of Assets

Long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of such assets to their fair value calculated, in part, by the estimated undiscounted future cash flows expected to be generated by the assets. Cash flow estimates are based upon, among other things, historical results adjusted to reflect the best estimate of future market rates, utilization levels, and operating performance. Estimates of cash flows may differ from actual cash flows due to, among other things, changes in economic conditions or changes in an asset’s operating performance. The Company’s assets are grouped by line of business or division for the impairment testing, which represent the lowest level of identifiable cash flows. If the asset grouping’s fair value is less than the carrying amount of the asset grouping, impairment losses are recorded in the amount by which the carrying amount of asset grouping exceeds the fair value. The estimate of fair value represents the Company’s best estimate based on industry trends and reference to market transactions and is subject to variability.

During the six months ended June 30, 2019, the Company recorded an estimated $31.4 million in connection with the reduction in value of its long-lived assets. The reduction in value of assets was primarily related to reduction in value of certain intangibles in the Onshore Completion and Workover Services segment.

(11)Stock-Based Compensation Plans

The Company maintains various stock incentive plans that provide long-term incentives to the Company’s key employees, including officers, directors, consultants and advisors (Eligible Participants). Under the stock incentive plans, the Company may grant incentive stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards or any combination thereof to Eligible Participants. The Company’s total compensation expense related to these plans was approximately $13.4 million and $16.3 million for the six months ended June 30, 2019 and 2018, respectively, which is reflected in general and administrative expenses.

(12) Income Taxes

The Company had $30.6 million of unrecorded tax benefits as of June 30, 2019 and December 31, 2018, all of which would impact the Company’s effective tax rate if recognized. It is the Company’s policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

(13) Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that

the denominator is increased to include the number of additional common shares that could have been outstanding assuming the exercise of stock options and the conversion of restricted stock units.

The Company incurred a loss from continuing operations for the six months ended June 30, 2019 and 2018; therefore the impact of any incremental shares would be anti-dilutive.

(14) Contingencies

Due to the nature of the Company’s business, the Company is involved, from time to time, in routine litigation or subject to disputes or claims regarding its business activities. Legal costs related to these matters are expensed as incurred. In management’s opinion, none of the pending litigation, disputes or claims is expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

A subsidiary of the Company is involved in legal proceedings with two employees regarding the payment of royalties for a patentable product developed by them. The employees filed a lawsuit in the Harris County District Court alleging that the royalty payments they had received since 2010 should have been higher. In May 2019, the jury issued a verdict in favor of the plaintiffs. The Company strongly disagrees with the verdict and believes the district court committed several legal errors that should result in a reversal or remand of the case by the Court of Appeals. The ultimate resolution of this matter could result in a loss of up to $10.0 million in excess of amounts accrued.

(15) Supplemental Guarantor Information

SESI, L.L.C. (the Issuer), a 100% owned subsidiary of Superior Energy Services, Inc. (Parent), has $500 million of 7.75% senior unsecured notes due 2024. The Parent, along with certain of its 100% owned domestic subsidiaries, fully and unconditionally guaranteed such senior unsecured notes, and such guarantees are joint and several.

‎



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
June 30, 2019
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	-	$	171,636	$	1,383	$	61,113	$	-	$	234,132
Accounts receivable, net		-		53		282,845		86,936		-		369,834
Intercompany accounts receivable		-		16,634		74,813		4,623		(96,070)		-
Other current assets		-		10,753		129,111		55,940		-		195,804
Total current assets		-		199,076		488,152		208,612		(96,070)		799,770

Property, plant and equipment, net		-		11,485		767,468		161,980		-		940,933
Operating lease right-of-use assets		-		22,970		61,325		14,709		-		99,004
Goodwill		-		-		80,544		56,243		-		136,787
Notes receivable		-		-		66,010		-		-		66,010
Long-term intercompany accounts receivable		2,252,636		-		2,296,357		186,844		(4,735,837)		-
Intercompany notes receivable		-		600		-		6,000		(6,600)		-
Equity investments of consolidated subsidiaries		(2,072,245)		3,709,645		6,668		-		(1,644,068)		-
Restricted cash		-		-		2,694		45		-		2,739
Intangible and other long-term assets, net		-		19,439		74,397		7,218		-		101,054
Total assets	$	180,391	$	3,963,215	$	3,843,615	$	641,651	$	(6,482,575)	$	2,146,297

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	-	$	7,220	$	64,473	$	24,201	$	-	$	95,894
Accrued expenses		-		86,167		96,837		35,878		-		218,882
Income taxes payable		-		(126)		-		3,860		-		3,734
Intercompany accounts payable		-		753		8,762		86,555		(96,070)		-
Current portion of decommissioning liabilities		-		-		-		3,593		-		3,593
Total current liabilities		-		94,014		170,072		154,087		(96,070)		322,103

Long-term debt, net		-		1,284,814		-		-		-		1,284,814
Deferred income taxes		-		(156,259)		152,305		3,954		-		-
Decommissioning liabilities		-		-		129,604		-		-		129,604
Operating lease liabilities		-		23,564		44,875		10,534		-		78,973
Long-term intercompany accounts payable		-		4,735,837		-		-		(4,735,837)		-
Intercompany notes payable		-		6,000		-		600		(6,600)		-
Other long-term liabilities		-		47,490		76,722		26,200		-		150,412
Total stockholders' equity (deficit)		180,391		(2,072,245)		3,270,037		446,276		(1,644,068)		180,391
Total liabilities and stockholders' equity	$	180,391	$	3,963,215	$	3,843,615	$	641,651	$	(6,482,575)	$	2,146,297



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
December 31, 2018
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	-	$	102,224	$	707	$	55,119	$	-	$	158,050
Accounts receivable, net		-		160		367,497		79,696		-		447,353
Intercompany accounts receivable		-		12,279		74,906		3,489		(90,674)		-
Other current assets		-		12,805		111,560		43,137		-		167,502
Total current assets		-		127,468		554,670		181,441		(90,674)		772,905

Property, plant and equipment, net		-		10,129		920,978		178,019		-		1,109,126
Goodwill		-		-		80,544		56,244		-		136,788
Notes receivable		-		-		63,993		-		-		63,993
Long-term intercompany accounts receivable		2,243,431		-		1,991,912		182,284		(4,417,627)		-
Equity investments of consolidated subsidiaries		(1,952,647)		3,754,887		5,992		-		(1,808,232)		-
Restricted cash		-		-		5,653		45		-		5,698
Intangible and other long-term assets, net		-		19,255		100,847		7,350		-		127,452
Total assets	$	290,784	$	3,911,739	$	3,724,589	$	605,383	$	(6,316,533)	$	2,215,962

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	-	$	8,807	$	109,903	$	20,615	$	-	$	139,325
Accrued expenses		45		102,845		86,926		29,364		-		219,180
Income taxes payable		-		1,237		-		(503)		-		734
Intercompany accounts payable		-		724		6,869		83,081		(90,674)		-
Current portion of decommissioning liabilities		-		-		-		3,538		-		3,538
Total current liabilities		45		113,613		203,698		136,095		(90,674)		362,777

Long-term debt, net		-		1,282,921		-		-		-		1,282,921
Decommissioning liabilities		-		-		126,558		-		-		126,558
Long-term intercompany accounts payable		-		4,417,627		-		-		(4,417,627)		-
Other long-term liabilities		-		50,225		76,543		26,199		-		152,967
Total stockholders' equity (deficit)		290,739		(1,952,647)		3,317,790		443,089		(1,808,232)		290,739
Total liabilities and stockholders' equity	$	290,784	$	3,911,739	$	3,724,589	$	605,383	$	(6,316,533)	$	2,215,962



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2019
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Revenues	$	-	$	-	$	365,091		76,237		(5,013)	$	436,315
Cost of services and rentals (exclusive of depreciation,
depletion, amortization and accretion)		-		(6,052)		257,675		49,818		(5,013)		296,428
Depreciation, depletion, amortization and
accretion		-		923		64,797		9,498		-		75,218
General and administrative expenses		-		23,416		35,247		13,321		-		71,984
Reduction in value of assets		-		-		31,381		-		-		31,381
Income (loss) from operations		-		(18,287)		(24,009)		3,600		-		(38,696)

Other income (expense):
Interest income (expense), net		-		(25,902)		1,245		7		-		(24,650)
Intercompany interest income (expense)		-		(25)		-		25		-		-
Other income (expense)		-		(284)		(1,308)		2,082		-		490
Equity in losses of consolidated subsidiaries		(71,050)		(36,551)		(5)		-		107,606		-
Income (loss) from operations before income taxes		(71,050)		(81,049)		(24,077)		5,714		107,606		(62,856)
Income taxes		-		(9,999)		14,703		3,490		-		8,194
Net income (loss)		(71,050)		(71,050)		(38,780)		2,224		107,606		(71,050)




SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2019
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Net income (loss)	$	(71,050)	$	(71,050)	$	(38,780)	$	2,224	$	107,606	$	(71,050)
Change in cumulative translation adjustment, net of tax		(1,916)		(1,916)		-		(1,916)		3,832		(1,916)
Comprehensive loss	$	(72,966)	$	(72,966)	$	(38,780)	$	308	$	111,438	$	(72,966)



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2018
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Revenues	$	-	$	-	$	473,724	$	73,289	$	(11,465)	$	535,548
Cost of services and rentals (exclusive of depreciation,
depletion, amortization and accretion)		-		(2,963)		334,169		50,069		(11,465)		369,810
Depreciation, depletion, amortization and
accretion		-		990		85,501		11,482		-		97,973
General and administrative expenses		-		21,098		35,668		13,130		-		69,896
Income (loss) from operations		-		(19,125)		18,386		(1,392)		-		(2,131)

Other income (expense):
Interest income (expense), net		-		(25,884)		980		10		-		(24,894)
Other income (expense)		-		(186)		264		(2,460)		-		(2,382)
Equity in earnings (losses) of consolidated subsidiaries		(26,390)		11,361		(200)		-		15,229		-
Income (loss) from continuing operations before income taxes		(26,390)		(33,834)		19,430		(3,842)		15,229		(29,407)
Income taxes		-		(7,444)		3,001		473		-		(3,970)
Net income (loss) from continuing operations		(26,390)		(26,390)		16,429		(4,315)		15,229		(25,437)
Loss from discontinued operations, net of income tax		-		-		-		(953)		-		(953)
Net income (loss)	$	(26,390)	$	(26,390)	$	16,429	$	(5,268)	$	15,229	$	(26,390)




SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2018
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Net income (loss)	$	(26,390)	$	(26,390)	$	16,429	$	(5,268)	$	15,229	$	(26,390)
Change in cumulative translation adjustment, net of tax		(7,053)		(7,053)		-		(7,053)		14,106		(7,053)
Comprehensive income (loss)	$	(33,443)	$	(33,443)	$	16,429	$	(12,321)	$	29,335	$	(33,443)



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Six Months Ended June 30, 2019
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Revenues	$	-	$	-	$	756,483	$	158,136	$	(11,128)	$	903,491
Cost of services and rentals (exclusive of depreciation,
depletion, amortization and accretion)		-		(6,871)		538,653		105,937		(11,128)		626,591
Depreciation, depletion, amortization and
accretion		-		1,873		136,360		19,424		-		157,657
General and administrative expenses		-		47,738		74,663		23,428		-		145,829
Reduction in value of assets		-		-		31,381		-		-		31,381
Income (loss) from operations		-		(42,740)		(24,574)		9,347		-		(57,967)

Other income (expense):
Interest income (expense), net		-		(52,284)		2,472		41		-		(49,771)
Intercompany interest income (expense)				(25)		-		25
Other income (expense)		-		(1,075)		(1,210)		1,163		-		(1,122)
Equity in earnings (losses) of consolidated subsidiaries		(118,755)		(44,399)		724		-		162,430		-
Income (loss) from continuing operations before income taxes		(118,755)		(140,523)		(22,588)		10,576		162,430		(108,860)
Income taxes		-		(21,768)		25,162		6,501		-		9,895
Net income (loss)	$	(118,755)	$	(118,755)	$	(47,750)	$	4,075	$	162,430	$	(118,755)




SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2019
(in thousands)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Net income (loss)	$	(118,755)	$	(118,755)	$	(47,750)	$	4,075	$	162,430	$	(118,755)
Change in cumulative translation adjustment, net of tax		(843)		(843)		-		(843)		1,686		(843)
Comprehensive income (loss)	$	(119,598)	$	(119,598)	$	(47,750)	$	3,232	$	164,116	$	(119,598)



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Six Months Ended June 30, 2018
(in thousands)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Revenues	$	-	$	-	$	908,858	$	126,548	$	(17,540)	$	1,017,866
Cost of services and rentals (exclusive of depreciation,
depletion, amortization and accretion)		-		(5,589)		645,233		91,166		(17,540)		713,270
Depreciation, depletion, amortization and
accretion		-		2,009		178,215		23,468		-		203,692
General and administrative expenses		-		46,762		74,357		24,597		-		145,716
Loss from operations		-		(43,182)		11,053		(12,683)		-		(44,812)

Other income (expense):
Interest expense, net		-		(51,754)		1,947		26		-		(49,781)
Other income (expense)		-		(252)		538		(4,403)		-		(4,117)
Equity in losses of consolidated subsidiaries		(86,114)		(6,109)		(368)		-		92,591		-
Loss from continuing operations before income taxes		(86,114)		(101,297)		13,170		(17,060)		92,591		(98,710)
Income taxes		-		(15,183)		1,925		(67)		-		(13,325)
Net loss from continuing operations		(86,114)		(86,114)		11,245		(16,993)		92,591		(85,385)
Loss from discontinued operations, net of income tax		-		-		-		(729)		-		(729)
Net loss	$	(86,114)	$	(86,114)	$	11,245	$	(17,722)	$	92,591	$	(86,114)




SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2018
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Net income (loss)	$	(86,114)	$	(86,114)	$	11,245	$	(17,722)	$	92,591	$	(86,114)
Change in cumulative translation adjustment, net of tax		(2,665)		(2,665)		-		(2,665)		5,330		(2,665)
Comprehensive income (loss)	$	(88,779)	$	(88,779)	$	11,245	$	(20,387)	$	97,921	$	(88,779)



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2019
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	10,232	$	(246,583)	$	288,600	$	16,581	$	68,830

Cash flows from investing activities:
Payments for capital expenditures		-		(3,290)		(72,981)		(2,865)		(79,136)
Proceeds from sales of assets		-		-		84,557		-		84,557
Net cash provided by (used in) investing activities		-		(3,290)		11,576		(2,865)		5,421

Cash flows from financing activities:
Changes in notes with affiliated companies, net		(9,206)		319,285		(302,459)		(7,620)		-
Other		(1,026)		-		-		-		(1,026)
Net cash provided by (used in) financing activities		(10,232)		319,285		(302,459)		(7,620)		(1,026)
Effect of exchange rate changes on cash		-		-		-		(102)		(102)
Net change in cash, cash equivalents, and restricted cash		-		69,412		(2,283)		5,994		73,123

Cash, cash equivalents, and restricted cash at beginning of period		-		102,224		6,360		55,164		163,748
Cash, cash equivalents, and restricted cash at end of period	$	-	$	171,636	$	4,077	$	61,158	$	236,871



SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2018
(in thousands)
(unaudited)
	Parent		Issuer		Guarantor ‎Subsidiaries		Non- ‎Guarantor ‎Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	12,342	$	(91,600)	$	131,729	$	(1,787)	$	(11,269)	$	39,415

Cash flows from investing activities:
Payments for capital expenditures		-		(549)		(114,360)		(4,932)		-		(119,841)
Proceeds from sales of assets		-		-		10,150		13,147		-		23,297
Net cash provided by (used in) investing activities		-		(549)		(104,210)		8,215		-		(96,544)

Cash flows from financing activities:
Intercompany dividends		-		-		-		(11,269)		11,269		-
Changes in notes with affiliated companies, net		(8,834)		34,815		(35,613)		9,632		-		-
Other		(3,508)		(392)		-		-		-		(3,900)
Net cash provided by (used in) financing activities		(12,342)		34,423		(35,613)		(1,637)		11,269		(3,900)
Effect of exchange rate changes on cash		-		-		-		(1,311)		-		(1,311)
Net change in cash, cash equivalents, and restricted cash		-		(57,726)		(8,094)		3,480		-		(62,340)

Cash, cash equivalents, and restricted cash at beginning of period		-		126,533		20,923		45,027		-		192,483
Cash, cash equivalents, and restricted cash at end of period	$	-	$	68,807	$	12,829	$	48,507	$	-	$	130,143

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q and other documents filed by us with the SEC contain, and future oral or written statements or press releases by us and our management may contain, forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking statements, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q or such other materials regarding our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to: the conditions in the oil and gas industry, especially oil and natural gas prices and capital expenditures by oil and gas companies; our outstanding debt obligations and the potential effect of limiting our ability to fund future growth and operations and increasing our exposure to risk during adverse economic conditions; necessary capital financing may not be available at economic rates or at all; volatility of our common stock; operating hazards, including the significant possibility of accidents resulting in personal injury or death, property damage or environmental damage for which we may have limited or no insurance coverage or indemnification rights; we may not be fully indemnified against losses incurred due to catastrophic events; claims, litigation or other proceedings that require cash payments or could impair financial condition; credit risk associated with our customer base; the effect of regulatory programs (including regarding worker health and safety laws) and environmental matters on our operations or prospects, including the risk that future changes in the regulation of hydraulic fracturing could reduce demand for our pressure pumping and fluid management services, or that future changes in climate change legislation could result in increased operating costs or reduced commodity demand globally; the impact that unfavorable or unusual weather conditions could have on our operations; the potential inability to retain key employees and skilled workers; political, legal, economic and other risks and uncertainties associated with our international operations; laws, regulations or practices in foreign countries could materially restrict our operations or expose us to additional risks; potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results; changes in competitive and technological factors affecting our operations; risks associated with the uncertainty of macroeconomic and business conditions worldwide; not realizing the benefits of acquisitions or divestitures; our operations may be subject to cyber-attacks that could have an adverse effect on our business operations; counterparty risks associated with reliance on key suppliers; challenges with estimating our potential liabilities related to our oil and natural gas property; and risks associated with potential changes of Bureau of Ocean Energy Management security and bonding requirements for offshore platforms. These risks and other uncertainties related to our business are described in detail in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason and, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Executive Summary

General

We provide a wide variety of services and products to the energy industry. We serve major, national and independent oil and natural gas exploration and production companies around the world and offer products and services with respect to the various phases of a well’s economic life cycle. We report our operating results in four business segments: Drilling Products and Services; Onshore Completion and Workover Services; Production Services; and Technical Solutions.

Industry Trends

The oil and gas industry is both cyclical and seasonal. The level of spending by oil and gas companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies. Our financial performance is significantly affected by the rig count in the U.S. land and offshore market areas as well as oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.



	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018		% Change	2019		2018		% Change
Worldwide Rig Count ⁽¹⁾
U.S.:
Land		967		1,021	-5%		995		986	1%
Offshore		23		18	28%		22		17	29%
Total		990		1,039	-5%		1,017		1,003	1%
International ⁽²⁾		1,109		968	15%		1,069		969	10%
Worldwide Total		2,099		2,007	5%		2,086		1,972	6%

Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	59.87	$	68.07	-12%	$	57.40	$	65.55	-12%
Natural Gas (Henry Hub)	$	2.57	$	2.85	-10%	$	2.74	$	2.96	-7%

⁽¹⁾ Estimate of drilling activity as measured by the average active drilling rigs based on Baker Hughes, a GE company, rig count information.

⁽²⁾ Excludes Canadian Rig Count.

Comparison of the Results of Operations for the Three Months Ended June 30, 2019 and March 31, 2019

For the second quarter of 2019, our revenue was $436.3 million and the net loss was $71.1 million, or a $0.46 loss per share. This compares to net loss of $47.7 million, or a $0.31 loss per share, for the first quarter of 2019, on revenue of $467.2 million. Included in the results for the three months ended June 30, 2019 was a pre-tax charge of $31.4 million primarily related to the reduction in value of intangible assets.

Second quarter 2019 revenue in our Onshore Completion and Workover Services segment decreased 20% sequentially to $163.5 million, as compared to $205.0 million for the first quarter of 2019. The decrease in revenue is primarily attributable to decreased activity in our pressure pumping business. During the first half of 2019, the overcapacity of the available pressure pumping horsepower in the market contributed to the downward pressure on pricing and utilization for our services. In response to the unfavorable market conditions, we have reduced the number of pressure pumping fleets deployed in the field and curtailed our operations.

Second quarter 2019 revenue in our Production Services segment remained flat at $103.0 million. U.S. offshore revenue increased 11% to $21.4 million primarily due to an increase in hydraulic workover and snubbing activities. This increase was partially offset by a decrease in revenue in U.S. land and international market areas. U.S. land revenue decreased 5% to $38.8 million and international revenue decreased 2% to $42.8 million, primarily due to a decrease in hydraulic workover and snubbing activities.

Second quarter 2019 revenue in our Technical Solutions segment increased 20% sequentially to $69.1 million, as compared to $57.6 million in the first quarter of 2019. U.S. land revenue increased 13% sequentially to $13.4 million, primarily due to an increase in demand for well control services. U.S. offshore revenue increased 60% sequentially to $33.5 million due to an increase in demand for completion tools and products. These increases were partially offset by a decrease in international revenue, which decreased 10% sequentially to $22.2 million primarily due to a decrease in subsea intervention services.

During the second quarter of 2019, we divested our drilling rigs service line, which was previously included in our Onshore Completion and Workover Services segment. This service line included twelve active U.S. land based drilling rigs and associated equipment for which we received $74.0 million in cash proceeds at closing. For the six months ended June 30, 2019, this service line contributed $32.8 million to our consolidated revenues and incurred $2.6 million in operating losses.

For the three months ended June 30, 2019, our revenue was $436.3 million, a decrease of $99.2 million or 19%, as compared to the same period in 2018. Net loss was $71.1 million, or a $0.46 loss per share. Included in the results for the three months ended June 30, 2019 was a pre-tax charge of $31.4 million related to the reduction in value of assets. This compares to a net loss for the three months ended June 30, 2018 of $26.4 million, or a $0.17 loss per share.

The following table compares our operating results for the three months ended June 30, 2019 and 2018 (in thousands, except percentages). Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments.



	Revenue							Cost of Services and Rentals
	2019		2018		Change		%	2019		%	2018		%	Change
Drilling Products and
Services	$	100,682	$	94,033	$	6,649	7%	$	37,864	38%	$	36,599	39%	$	1,265
Onshore Completion and
Workover Services		163,495		276,242		(112,747)	-41%		140,984	86%		210,206	76%		(69,222)
Production Services		103,002		102,004		998	1%		78,418	76%		85,129	83%		(6,711)
Technical Solutions		69,136		63,269		5,867	9%		39,162	57%		37,876	60%		1,286
Total	$	436,315	$	535,548	$	(99,233)	-19%	$	296,428	68%	$	369,810	69%	$	(73,382)

Operating Segments:

Drilling Products and Services Segment

Revenue from our Drilling Products and Services segment increased 7% to $100.7 million for the three months ended June 30, 2019, as compared to $94.0 million for the same period in 2018. Cost of services and rentals as a percentage of revenue decreased to 38% of segment revenue for the three months ended June 30, 2019, as compared to 39% for the same period in 2018. Revenue from the U.S. land market areas increased 9% as a result of increases in revenue from rentals of premium drill pipe. Revenue from the U.S. offshore market area increased 21% primarily due to an increase in revenue from rentals of premium drill pipe and bottom hole assemblies, as demand for these rental products increased along with the increase in U.S. offshore rig count. Revenue from the international market areas decreased 8%, primarily due to decrease in demand for premium drill pipe rentals.

Onshore Completion and Workover Services Segment

Revenue from our Onshore Completion and Workover Services segment decreased 41% to $163.5 million for the three months ended June 30, 2019, as compared to $276.2 million for the same period in 2018. All of this segment’s revenue is derived from the U.S. land market area. Cost of services and rentals as a percentage of revenue increased to 86% of segment revenue for the three months ended June 30, 2019, as compared to 76% for the same period in 2018. The decrease in revenue is primarily attributable to decreased activity in our pressure pumping and well services businesses. During the first half of 2019, the overcapacity of the available pressure pumping horsepower in the market contributed to the downward pressure on pricing and utilization for our services. In response to the unfavorable market conditions, we have reduced the number of pressure pumping fleets deployed in the field and curtailed our operations. During the three months ended June 30, 2019, we recorded $31.4 million in reduction in value of assets.

Production Services Segment

Revenue from our Production Services segment for the three months ended June 30, 2019 increased by 1% to $103.0 million, as compared to $102.0 million for the same period in 2018. Cost of services and rentals as a percentage of revenue decreased to 76% of segment revenue for the three months ended June 30, 2019, as compared to 83% for the same period in 2018. Revenue from the U.S. land market area decreased 19%, primarily due to a decrease in coiled tubing activities. Revenue from the international market areas increased 6%, primarily due to an increase in hydraulic workover and snubbing activities. Revenue from the U.S. offshore market area increased 57%, primarily due to an increase in hydraulic workover and snubbing activities.

Technical Solutions Segment

Revenue from our Technical Solutions segment increased 9% to $69.1 million for the three months ended June 30, 2019, as compared to $63.3 million for the same period in 2018. Cost of services and rentals as a percentage of revenue decreased to 57% of segment revenue for the three months ended June 30, 2019, as compared to 60% for the same period in 2018. Revenue from the U.S. land market area increased 70%, primarily due to an increase in well control services. Revenue from the international market areas increased 11%, primarily due to an increase in demand for subsea intervention services. Revenue derived from the U.S. offshore market area decreased 5%, primarily due to a decrease in demand for well control and subsea intervention services.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion decreased to $75.2 million during the three months ended June 30, 2019 from $98.0 million during the same period in 2018. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $7.1 million, or 25%; for our Onshore Completion and Workover Services segment by $14.0 million, or 30%; for our Production Services segment by $1.1 million, or 8%; and for our Technical Solutions segment by $0.3 million, or 5%. Depreciation expense for Corporate and Other remained flat. The decrease in depreciation, depletion, amortization and accretion is primarily due to assets becoming fully depreciated.

Reduction in Value of Assets

The reduction in value of assets recorded during the three months ended June 30, 2019 included $31.4 million primarily related to the reduction in value of long-lived assets within the Onshore Completion and Workover Services segment.

Income Taxes

Our effective income tax rate for the three months ended June 30, 2019 was a 13% expense compared to a 13% benefit for the same period in 2018. The change in the effective income tax rate was primarily impacted by a deferred tax assets valuation allowance recorded during the three months ended June 30, 2019.

For the six months ended June 30, 2019, our revenue was $903.5 million, a decrease of $114.4 million or 11%, as compared to the same period in 2018. Net loss was $118.8 million, or a $0.76 loss per share. This compares to a net loss for the six months ended June 30, 2018 of $86.1 million, or a $0.56 loss per share. Included in the results for the six months ended June 30, 2019 was a pre-tax charge of $31.4 million related to the reduction in value of assets.

The following table compares our operating results for the six months ended June 30, 2019 and June 30, 2018 (in thousands, except percentages). Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments.


	Revenue							Cost of Services and Rentals
	2019		2018		Change		%	2019		%	2018		%	Change

Drilling Products and
Services	$	201,761	$	179,235	$	22,526	13%	$	80,069	40%	$	71,669	40%	$	8,400
Onshore Completion and
Workover Services		368,533		507,731		(139,198)	-27%		312,783	85%		390,857	77%		(78,074)
Production Services		206,452		202,721		3,731	2%		158,299	77%		171,065	84%		(12,766)
Technical Solutions		126,745		128,179		(1,434)	-1%		75,440	60%		79,679	62%		(4,239)
Total	$	903,491	$	1,017,866	$	(114,375)	-11%	$	626,591	69%	$	713,270	70%	$	(86,679)

Operating Segments:

Drilling Products and Services Segment

Revenue from our Drilling Products and Services segment increased 13% to $201.8 million for the six months ended June 30, 2019, as compared to $179.2 million for the same period in 2018. Cost of services and rentals as a percentage of revenue remained flat at 40% of segment revenue for the six months ended June 30, 2019. Revenue from the U.S. land market areas increased 14% as a result of increases in revenue from rentals of premium drill pipe and bottom hole assemblies. Revenue from the U.S. offshore market area increased 29% primarily due to an increase in revenue from rentals of premium drill pipe and bottom hole assemblies. Revenue from the international market areas decreased 3% due to a decrease in rentals of premium drill pipe and accommodation units .

Onshore Completion and Workover Services Segment

Revenue from our Onshore Completion and Workover Services segment decreased 27% to $368.5 million for the six months ended June 30, 2019 months, as compared to $507.7 million for the same period in 2018. All of this segment’s revenue is derived from the U.S. land market area. Cost of services and rentals as a percentage of revenue increased to 85% of segment revenue for the six months ended June 30, 2019, as compared to 77% for the same period in 2018. The decrease in revenue is primarily attributable to decreased activity in our pressure pumping and well services businesses. During the first half of 2019, the overcapacity of the available pressure

pumping horsepower in the market contributed to the downward pressure on pricing and utilization for our services. In response to the unfavorable market conditions, we have reduced the number of pressure pumping fleets deployed in the field and curtailed our operations. During the six months ended June 30, 2019, we recorded $31.4 million in reduction in value of assets.

Production Services Segment

Revenue from our Production Services segment for the six months ended June 30, 2019 increased by 2% to $206.5 million, as compared to $202.7 million for the same period in 2018. Cost of services and rentals as a percentage of revenue decreased to 77% of segment revenue for the six months ended June 30, 2019, as compared to 84% for the same period in 2018. Revenue from the U.S. land market area decreased 21%, primarily due to a decrease in coiled tubing activities. Revenue from the international market areas increased 21%, primarily due to an increase in hydraulic workover and snubbing activities. Revenue from the U.S. offshore market area increased 31%, primarily due to an increase in hydraulic workover and snubbing and pressure control activities.

Technical Solutions Segment

Revenue from our Technical Solutions segment decreased 1% to $126.7 million for the six months ended June 30, 2019, as compared to $128.2 million for the same period in 2018. Cost of services and rentals as a percentage of revenue decreased to 60% of segment revenue for the six months ended June 30, 2019, as compared to 62% for the same period in 2018. Revenue from the U.S. land market area increased 72%, primarily due to an increase in well control services. Revenue from the international market areas increased 16%, primarily due to an increase in demand for well control services and completion tools and products. Revenue derived from the U.S. offshore market area decreased 25%, primarily due to a decrease in demand for completion tools and products.

Depreciation, Depletion, Amortization and Accretion

Depreciation, depletion, amortization and accretion decreased to $157.7 million during the six months ended June 30, 2019 from $203.7 million during the same period in 2018. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $13.7 million, or 24%; for our Onshore Completion and Workover Services segment by $23.9 million, or 25%; for our Production Services segment by $6.3 million, or 19%; and for our Technical Solutions segment by $1.7 million, or 12%. Depreciation expense for Corporate and Other remained flat. The decrease in depreciation, depletion, amortization and accretion is primarily due to assets becoming fully depreciated.

Reduction in Value of Assets

The reduction in value of assets recorded during the six months ended June 30, 2019 included $31.4 million related to the reduction in value of long-lived assets within the Onshore Completion and Workover segment.

Income Taxes

Our effective income tax rate for the six months ended June 30, 2019 was a 9% expense compared to a 14% benefit for the same period in 2018. The change in the effective income tax rate was primarily impacted by a deferred tax assets valuation allowance recorded during the six months ended June 30, 2019.

Liquidity and Capital Resources

For the six months ended June 30, 2019, we generated net cash from operating activities of $68.8 million, as compared to $39.4 million of cash generated by operating activities in the same period of 2018. Our primary liquidity needs during the next twelve months are for working capital and capital expenditures. Our primary sources of liquidity are cash flows from operations and available borrowings under our credit facility. We had cash and cash equivalents of $234.1 million at June 30, 2019, compared to $158.1 million at December 31, 2018. During the second quarter of 2019, we sold our drilling rigs service line and received $74.0 million in cash proceeds upon closing. Subsequent to the quarter end, we received an additional $4.4 million relating to the collection of excess working capital.

We spent $79.1 million of cash on capital expenditures during the six months ended June 30, 2019. Capital expenditures of $39.0 million primarily related to the expansion and maintenance of our equipment inventory at our Drilling Products and Services segment and the remaining capital expenditures related to ongoing maintenance of our equipment across all other segments. During 2019, we intend to limit capital spending within our operational cash flow levels to generate free cash flow and allocate capital to businesses with higher returns on invested capital.

We have an asset-based revolving credit facility which matures in October 2022. The borrowing base under the credit facility is calculated based on a formula referencing the borrower’s and the subsidiary guarantors’ eligible accounts receivable, eligible inventory and eligible premium rental drill pipe less reserves. Availability under the credit facility is the lesser of (i) the commitments, (ii) the borrowing base and (iii) the highest principal amount permitted to be secured under the indenture governing the 7.125% senior unsecured notes due 2021. At June 30, 2019, the borrowing base was $231.7 million and we had $70.9 million of letters of credit outstanding that

reduced our borrowing availability under the revolving credit facility. The credit agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, merger, consolidations, dispositions of assets and other provisions customary in similar types of agreements. At June 30, 2019, we were in compliance with all such covenants.

We have outstanding $500 million of 7.75% senior unsecured notes due September 2024. The indenture governing the 7.75% senior unsecured notes due 2024 requires semi-annual interest payments on March 15 and September 15 of each year through the maturity date of September 15, 2024. The indenture contains customary events of default and requires that we satisfy various covenants. At June 30, 2019, we were in compliance with all such covenants.

We also have outstanding $800 million of 7.125% senior unsecured notes due December 2021. The indenture governing the 7.125% senior notes due 2021 requires semi-annual interest payments on June 15 and December 15of each year through the maturity date of December 15, 2021. The indenture contains customary events of default and requires that we satisfy various covenants. At June 30, 2019, we were in compliance with all such covenants.

Other Matters

Off-Balance Sheet Arrangements and Hedging Activities

At June 30, 2019, we had no off-balance sheet arrangements and no hedging contracts.

Recently Adopted Accounting Guidance

See Part I, Item 1, “Financial Statements – Note 7 – Leases.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks associated with foreign currency fluctuations and changes in interest rates. A discussion of our market risk exposure in financial instruments follows.

Foreign Currency Exchange Rates Risk

Because we operate in a number of countries throughout the world, we conduct a portion of our business in currencies other than the U.S. dollar. The functional currency for our international operations, other than certain operations in the United Kingdom and Europe, is the U.S. dollar, but a portion of the revenues from our international operations is paid in foreign currencies. The effects of foreign currency fluctuations are partly mitigated because local expenses of such international operations are also generally denominated in the same currency. We continually monitor the currency exchange risks associated with all contracts not denominated in the U.S. dollar.

Assets and liabilities of certain subsidiaries in the United Kingdom and Europe are translated at end of period exchange rates, while income and expenses are translated at average rates for the period. Translation gains and losses are reported as the foreign currency translation component of accumulated other comprehensive loss in stockholders’ equity.

We do not hold derivatives for trading purposes or use derivatives with complex features. When we believe prudent, we enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. We do not enter into forward foreign exchange contracts for trading or speculative purposes. At June 30, 2019, we had no outstanding foreign currency forward contracts.

Interest Rate Risk

At June 30, 2019, we had no variable rate debt outstanding.

Commodity Price Risk

Our revenues and profitability significantly depend upon the market prices of oil and natural gas.

For additional discussion, see Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Item 4. Controls and Procedures

(a)	Evaluation of disclosure controls and procedures. As of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation, that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)	Changes in internal control. Effective January 1, 2019, we adopted Topic 842, Leases. The adoption of this standard resulted in recording of operating lease assets and operating lease liabilities, with no related impact on our condensed consolidated statement of equity or condensed consolidated statement of operations for the six months ended June 30, 2019. In connection with the adoption of the new standard, we implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard. There were no other changes in our internal control over financial reporting that occurred during the three months ended June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal actions incidental to our business. The outcome of these proceedings is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on our financial position, results of operations or cash flows. See Part I, Item 1, “Financial Statements – Note 14 – Contingencies.”

Item 1A. Risk Factors

For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Six Months Ended June 30, 2019

Impairment

Fair Value

Long-lived assets

(a) The following exhibits are filed with this Form 10-Q:


Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Superior Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Quarterly Report on Form 10-Q filed August 7, 2013 (File No. 001-34037)).
3.2	Amended and Restated Bylaws of Superior Energy Services, Inc. (as amended through March 7, 2012) (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed March 12, 2012 (File No. 001-34037))
31.1*	Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Officer’s certification 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

*Filed herein
‎

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SUPERIOR ENERGY SERVICES, INC.



		By:	/s/ Westervelt T. Ballard, Jr.
			Westervelt T. Ballard, Jr. Executive Vice President, Chief Financial Officer and Treasurer


		By:	/s/ James W. Spexarth
			James W. Spexarth
			Chief Accounting Officer

Date:	July 24, 2019

Exhibit 31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, David D. Dunlap, President and Chief Executive Officer of Superior Energy Services, Inc., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Superior Energy Services, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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 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: July 24, 2019
			/s/ David. D. Dunlap
			David D. Dunlap
			President and Chief Executive Officer
			Superior Energy Services, Inc.

Exhibit 31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Westervelt T. Ballard, Jr., Executive Vice President, Chief Financial Officer and Treasurer of Superior Energy Services, Inc., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Superior Energy Services, Inc.;

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: July 24, 2019
			/s/ Westervelt T. Ballard, Jr.
			Westervelt T. Ballard, Jr.
			Executive Vice President, Chief Financial Officer and Treasurer
			Superior Energy Services, Inc.

Exhibit 32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 1350 OF TITLE 18 OF THE U.S. CODE

I, David D. Dunlap, President and Chief Executive Officer of Superior Energy Services, Inc. (the “Company”), certify, pursuant to Section 1350 of Title 18 of the U.S. Code, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

1.the quarterly report on Form 10-Q of the Company for the quarter ended June 30, 2019 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report or as a separate disclosure document.


Date: July 24, 2019
			/s/ David D. Dunlap
			David D. Dunlap
			President and Chief Executive Officer
			Superior Energy Services, Inc.

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.

Exhibit 32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 1350 OF TITLE 18 OF THE U.S. CODE

I, Westervelt T. Ballard, Jr., Executive Vice President, Chief Financial Officer and Treasurer of Superior Energy Services, Inc. (the “Company”), certify, pursuant to Section 1350 of Title 18 of the U.S. Code, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report or as a separate disclosure document.


Date: July 24, 2019
			/s/ Westervelt T. Ballard, Jr.
			Westervelt T. Ballard, Jr.
			Executive Vice President, Chief Financial Officer and Treasurer
			Superior Energy Services, Inc.