KLX Energy Services Holdings (KLXE) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01Our business depends on domestic capital spending by the oil and natural gas industry, and reductions in capital spending could have a material adverse effect on our business, financial condition and results of operations
2. 02The volatility of oil and natural gas prices may adversely affect the demand for our services and negatively impact our results of operations
3. 03This, in turn, could lead to lower demand for our services and may cause lower utilization of our assets. We have experienced, and may in the future experience, significant fluctuations in operating results as a result of the reactions of our customers to changes in oil and natural gas prices
4. 04Our business may be adversely affected by a deterioration in general economic conditions or a weakening of the broader energy industry
5. 05The industry in which we operate has undergone and may continue to undergo consolidation
6. 06We may be adversely affected by the effects of inflation
7. 07We may be unable to maintain existing prices or implement price increases on our services
8. 08We have been expanding our available products and services in recent periods. Our inability to properly manage or support future expansion of our business may have a material adverse effect on our business, financial condition, and results of operations and could cause the market value of our Common Stock to decline
9. 09If we lose significant customers, significant customers materially reduce their purchase orders or significant programs on which we rely are delayed, scaled back or eliminated, our business, financial condition and results of operations may be adversely affected
10. 10We may be unable to effectively and efficiently manage our equipment fleet as we expand our business, which could have an adverse effect on our business, financial condition and results of operations
11. 11Our past acquisition activity and any future acquisitions may not be successful in delivering expected performance post-acquisition, which could have a material adverse effect on our business, financial condition and results of operations
12. 12effectively identify attractive businesses, access financing sources on acceptable terms, negotiate favorable transaction terms and successfully integrate any businesses we acquire, achieve cost efficiencies and manage these businesses as part of our company
13. 13Global pandemics have previously, may continue to, and may in the future adversely impact our business

Risks Relating to Our Industry

1. 14Conservation measures and technological advances could reduce demand for oil and natural gas
2. 15Our business involves many hazards and operational risks that could adversely affect our business, financial condition and results of operations
3. 16Competition among oilfield service and equipment providers is affected by each provider’s reputation for safety and quality
4. 17Increased labor costs, the unavailability of skilled workers or labor-related litigation could hurt our business, financial condition and results of operations
5. 18We operate in highly competitive markets and our failure to compete effectively may negatively impact our business, financial condition and results of operations
6. 19Seasonal and adverse weather conditions adversely affect demand for services and operations

Risks Relating to Financial Considerations

1. 20We have operated at a loss, and there is no assurance of our profitability in the future
2. 21Our assets require capital for maintenance, upgrades and refurbishment, and we may require capital expenditures for new equipment
3. 22We have substantial indebtedness, and our ability to repay such indebtedness as it becomes due will depend on our future operating performance
4. 23who hold debt that we fail to service or on which we otherwise default could also accelerate amounts due, which could in such an instance potentially trigger a default or acceleration of other debt we may incur
5. 24make us vulnerable to increases in interest rates with respect to the outstanding 2030 Senior Notes and amounts borrowed under our New ABL Facility
6. 25test periods ending March 31, 2028 through December 31, 2028, and 2.50 to 1.0 for each test period thereafter and (ii) restrictions on making net capital expenditures in any test period in excess of the greater of (x) $65.0 in the aggregate or (y) 7% of revenues during such test period
7. 26We may experience future impairment charges
8. 27Customer payment delays of outstanding receivables and customer bankruptcies could have a material adverse effect on our liquidity, results of operations, and consolidated financial condition

Risks Relating to Third Parties

1. 28Shortages or increases in the costs of the equipment we use in our operations could adversely affect our operations in the future
2. 29We are dependent on a small number of suppliers for key goods and services that we use in our operations
3. 30We rely on a limited number of third parties for sand, proppant and chemicals, and delays in deliveries of such materials, increases in the cost of such materials or our contractual obligations to pay for materials that we ultimately do not require could harm our business, results of operations and financial condition
4. 31If suppliers are unable to supply us with the products used in our operations in a timely manner, in adequate quantities and/or at a reasonable cost, we may be unable to meet the demands of our customers, which could have a material adverse effect on our business, financial condition and results of operations

Risks Relating to Technology and Intellectual Property

1. 32Our inability to develop, obtain, maintain or implement new technology may cause us to become less competitive
2. 33Our success may be affected by our ability to use and protect our proprietary technology as well as our ability to enter into license agreements
3. 34We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights is uncertain

Risks Relating to Government Regulation and Legal Matters

1. 35Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party’s indemnification of us
2. 36Changes in trucking regulations may increase our transportation costs and negatively impact our business, financial condition and results of operations
3. 37Legal requirements relating to hydraulic fracturing could increase our customers’ costs of doing business, limit the areas in which our customers can operate and reduce oil and natural gas production by our customers, which could adversely impact our business, financial condition and results of operations
4. 38We and our customers are subject to environmental and occupational health and safety laws and regulations that could increase our or our customers’ costs of doing business and adversely impact our business, financial condition and results of operations
5. 39Increasing attention to ESG matters may impact our business
6. 40We may be required to assume responsibility for environmental and other liabilities of companies we have acquired or will acquire
7. 41We face risks from increasing activism against, and negative investor sentiment towards the oil and gas industry, which may adversely impact our business
8. 42Restrictions, delays or cancellations imposed by governmental authorities in issuing permits or leases for our or our customers’ operations could impair our business
9. 43Silica-related legal requirements, including compliance with OSHA regulations relating to respirable crystalline silica or litigation, could have a material adverse effect on our business, financial condition, results of operation and reputation
10. 44Explosive incidents arising out of dangerous materials used in our business could disrupt operations and result in bodily injuries and property damages, which occurrences could have a material adverse effect our business, results of operations and financial conditions
11. 45The ESA and comparable laws intended to protect certain species of wildlife govern our and our oil and natural gas E&P customers’ operations, which constraints could have an adverse impact on our ability to expand some of our existing operations or limit our customers’ ability to develop new oil and natural gas wells
12. 46We may be subject to claims for personal injury and property damage or other litigation, which could materially adversely affect our business, financial condition and results of operations
13. 47Tariffs and other trade measures could adversely affect our business, results of operations, financial position, and cash flows

Risks Relating to Our Common Stock

1. 48Future sales of our Common Stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership interest
2. 49During the year ended December 31, 2023, we did not engage in any debt-for-equity exchanges
3. 50We cannot assure you that we will pay dividends on our Common Stock, and our indebtedness could limit our ability to pay dividends on our Common Stock
4. 51Certain provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, and certain provisions of Delaware law may prevent or delay an acquisition of our company or other strategic transactions, which could decrease the trading price of our Common Stock
5. 52If securities or industry analysts do not publish research reports or publish unfavorable research about our business, the price and trading volume of our Common Stock could decline

General Risks

1. 53We may be unable to attract or retain personnel who are key to our operations