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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2014.

or

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

For the transition period from                      to                     

Commission File Number: 333-199004

Nabors Red Lion Limited

(Exact name of registrant as specified in its charter)

Crown House

4 Par-La-Ville Road

Second Floor

Hamilton, HM08

Bermuda

(Address of principal executive offices)

(441) 292-1510 (Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

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 o  No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

The aggregate market value of common shares, par value $0.01 per share, held by non-affiliates of the Registrant is not applicable because all shares were held by a single affiliate. The total number of shares of the Registrant’s common shares, par value $0.01 per share, outstanding as of March 20, 2015 was 1,200,000.

The Registrant meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format for the following items of Form 10-K pursuant to General Instruction (I)(2) of Form 10-K: Item 6, Selected Financial Data; Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 10, Directors, Executive Officers and Corporate Governance; Item 11, Executive Compensation; Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; and Item 13, Certain Relationships and Related Transactions, and Director Independence.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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EXPLANATORY NOTE

We are currently a wholly owned subsidiary of Nabors Industries Ltd. (“NIL” and collectively with its consolidated subsidiaries, “Nabors”). Prior to October 1, 2014, we held substantially all of the operating subsidiaries of NIL, including the subsidiaries that operate Nabors’ completion and production services business (the “C&P Business”). In October 2014, Nabors completed a restructuring of its subsidiaries, separating the C&P Business from Nabors’ other businesses such that we continued to hold only the subsidiaries that operate the C&P Business, and the remaining businesses of Nabors, including the drilling and rig services businesses, were transferred from us to other subsidiaries of NIL. Following this restructuring, we did not retain any ownership interest in the businesses retained by NIL other than the C&P Business. We expect that, prior to the end of the first quarter of 2015, we will combine the C&P Business with C&J Energy Services, Inc. (“C&J”). Following the completion of this transaction, we will be renamed C&J Energy Services Ltd. and our common shares will be traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “CJES.”

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Form 10-K”) includes certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions that convey the uncertainty of future events or outcomes, and the negative thereof, are intended to identify forward-looking statements. Forward-looking statements, which are not generally historical in nature, include those that express a belief, expectation or intention regarding our future activities, plans and goals and our current expectations with respect to, among other things:

·                  our future revenue, income and operating performance;

·                  our ability to sustain and improve our utilization, revenue and margins;

·                  our ability to maintain acceptable pricing for our services, including through term contacts and/or pricing agreements;

·                  our operating cash flows and availability of capital;

·                  our ability to execute our long-term growth strategy, including expansion into new geographic regions and business lines;

·                  our ability to capitalize on international growth opportunities, and our ability to successfully execute and capitalize on such opportunities;

·                  our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements;

·                  the timing and success of future acquisitions and other strategic initiatives and special projects;

·                  future capital expenditures;

·                  our ability to finance equipment, working capital and capital expenditures; and

·                  our ability to consummate, the timing and success of the proposed combination with C&J.

Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes the expectations and

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assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following:

·                  the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activity and spending patterns by the oil and natural gas exploration and production industry;

·                  a decline in, or substantial volatility of, crude oil and natural gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling and production activity and therefore impacts demand for our services;

·                  a decline in demand for our services, including due to overcapacity and other competitive factors affecting our industry;

·                  pressure on pricing for our core services, including due to competition and industry and/or economic conditions including commodity pricing, which may, impact among other things, our ability to implement price increases or maintain pricing on our core services;

·                  changes in customer requirements in the markets or industries we serve;

·                  the effects of future acquisitions on our business, including our ability to successfully integrate our operations and the costs incurred in doing so;

·                  business growth outpacing the capabilities of our infrastructure;

·                  adverse weather conditions in oil or gas producing regions;

·                  the effect of environmental and other governmental regulations on our operations, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our hydraulic fracturing services;

·                  the incurrence of significant costs and liabilities resulting from our failure to comply, or our compliance with, new or existing environmental regulations or an accidental release of hazardous substances into the environment;

·                  expanding our operations overseas;

·                  the loss of, or inability to attract new, key management personnel;

·                  the loss of, or interruption or delay in operations by, one or more significant customers;

·                  the failure to pay amounts when due, or at all, by one or more significant customers;

·                  a shortage of qualified workers;

·                  the loss of, or interruption or delay in operations by, one or more of our key suppliers;

·                  operating hazards inherent in our industry, including the significant possibility of accidents resulting in personal injury or death, property damage or environmental damage;

·                  accidental damage to or malfunction of equipment;

·                  an increase in interest rates;

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·                  the potential inability to comply with the financial and other covenants in our debt agreements as a result of reduced revenue and financial performance or our inability to raise sufficient funds through assets sales or equity issuances should we need to raise funds through such methods; and

·                  the proposed combination with C&J.

For additional information regarding known material factors that could affect our operating results and performance, please read (1) “Risk Factors” in Part I, Item 1A of this Form 10-K and (2) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K. Should one or more of these known material risks occur, or should the underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statement.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.

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PART I

Item 1.                                 Business

Overview

We are a Bermuda exempted company formed on August 6, 2008.  References to “Red Lion,” the “Company,” “we,” “us” or “our” in this report are to Nabors Red Lion Limited, together with our consolidated subsidiaries.  Our principal executive offices are located at Crown House, 4 Par La-Ville Road, Second Floor, Hamilton, HM08, Bermuda, and our main telephone number at that address is (441) 292-1510.  We are currently an indirect wholly owned subsidiary of NIL. See “—Pending Transaction to Combine with C&J Energy Services, Inc.” below.

We are a leading integrated provider of technical pumping, down-hole surveying, fluid logistics and completion, production and rental tool services for major and independent oil and natural gas companies operating in the major oil and natural gas producing regions throughout North America.  We have established a leadership position based on the breadth of our services offering, the quality of our equipment and personnel and our long-standing relationships with customers.  Our assets and operations consist of the C&P Business currently conducted by Nabors.  As of December 31, 2014, the C&P Business comprised Nabors’ existing Completion and Production Services reporting segment.

We provide a broad range of services to our customers across the completion and production phases of an oil or natural gas well. The following table sets forth operating revenue with respect to our operations by geographic area:

Our business is conducted through two operating segments:

Completion Services

The Completion Services segment operated a fleet of 19 pressure pumping crews with a total of approximately 800,000 hydraulic horsepower, 82 cementing units, 42 wireline units and 15 coiled tubing units, as of December 31, 2014. We use this equipment to perform hydraulic fracturing services, a part of the well completion process in which water, sand and chemicals are injected under pressure into subsurface formations to stimulate oil and natural gas production. Other services provided by this segment include perforating the well casing in specified producing zones, stimulating and testing these zones and installing down-hole equipment. For the year ended December 31, 2014, our Completion Services segment generated 54% of our revenues.

The segment consists of the following service lines:

·                  Stimulation Services.  Our fluid-based stimulation services include fracturing and acidizing, which are designed to improve the flow of oil and natural gas from producing zones.

·                  Cementing Services. Our cementing services consist of blending high-grade cement and water with various solid and liquid additives to create a cement slurry. The additives and the properties of the slurry are designed to ensure the proper pump time, compression strength and fluid loss control and vary depending on the well depth, down-hole temperatures and pressures and formation characteristics. Our field engineers develop job design recommendations to achieve desired porosity and bonding characteristics.

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·                  Down-Hole Surveying Services. We offer two types of down-hole surveying services-logging and perforating. We supply wireline logging services primarily to open-hole markets and perforating services to cased-hole markets.

·                  Coiled Tubing Services. Coiled tubing services involve the use of a continuous metal pipe spooled on a large reel for oil and natural gas well applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, formation stimulation utilizing acid, chemical treatments and fracturing. Coiled tubing is also used for a number of horizontal well applications.

The following table sets forth the type, number and location of the completion services equipment we operated at December 31, 2014:

Production Services

The Production Services segment operated a fleet of 543 workover rigs as of December 31, 2014, which are utilized to perform well maintenance and workover services during the production phase of an oil or natural gas well. Well maintenance services are generally performed on a call-out basis and can be completed within 48 hours. The services include the repair and replacement of pumps, sucker rods, tubing and other mechanical apparatuses at the wellsite that are used to pump or lift hydrocarbons from producing wells. We also use our well service rigs to perform plugging services for wells in which the oil and natural gas has been depleted or further production has become uneconomical. Workover services can be utilized to remedy failures, modify well depth and formation penetration to capture hydrocarbons from alternative formations, clean out and recomplete a well when production has declined, repair leaks, or convert a depleted well to an injection well for secondary or enhanced recovery projects. Workovers are typically carried out with a rig that includes standard drilling accessories such as rotary drilling equipment, pumps and tanks for drilling fluids, blowout preventers and other specialized equipment for servicing rigs. The production services segment also operated a fleet of 1,460 fluid services trucks, 5,327 frac tanks and 29 salt water disposal wells as of December 31, 2014, which supply, store, remove and dispose of specialized fluids utilized in completion and workover operations and are used in daily operations for producing wells. For the year ended December 31, 2014, our production services segment generated 46% of our revenues.

The segment consists of the following service lines:

·                  Well Servicing.  We provide maintenance, workover, and plug and abandonment services on oil and gas wells.

·                  Fluid Hauling.  The fluid services truck units are used to transport water to fill frac tanks on well locations, including frac tanks provided by us and others, to transport produced salt water to disposal wells, including injection wells owned by us and to transport drilling and completion fluids to and from well locations. Following the completion of fracturing operations by customers, fluid service trucks are used to transport the flowback produced as a result of the fracturing operations from the wellsite to disposal wells.

·                  Equipment Rental.  This equipment is used by oilfield operators to store various fluids at the wellsite, including fresh water, brine and acid for frac jobs, flowback, temporary production and mud storage. Frac tanks are used during all phases of the life of a producing well.

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·                  Salt Water Disposal Wells.  We operate a network of permitted salt water disposal wells. These injection wells are licensed by state authorities and are completed in permeable formations below the fresh water table. Our transport trucks frequently transport fluids that are disposed of in these salt water disposal wells. The salt water disposal wells are strategically located in close proximity to the producing wells of our customers.

The following table sets forth the type, number and location of the production services equipment we operated at December 31, 2014:

Pursuant to and in accordance with the terms and conditions of the Separation Agreement dated as of June 25, 2014, by and between NIL and us, as amended by Amendment No. 1 to the Separation Agreement, dated as of February 6, 2015, by and between NIL and us (the “Separation Agreement”), NIL separated the C&P Business from Nabors’ other businesses, and has caused us and our subsidiaries to retain the C&P Business, while the remaining businesses of Nabors, including the drilling and rig services businesses, were transferred from us and our subsidiaries to other NIL subsidiaries (the “Separation”). The Separation occurred in October 2014, resulting in our divesting the remaining businesses of Nabors. As such, as of December 31, 2014 and currently, our operations and expenses are only associated with the C&P Business. We expect that, prior to the end of the first quarter of 2015, Nabors CJ Merger Co., a Delaware corporation and our wholly owned subsidiary (“Merger Sub”), will merge with and into C&J, with C&J surviving the merger as our wholly owned subsidiary (the “Merger”), pursuant to and in accordance with the terms and conditions of the Agreement and Plan of Merger dated as of June 25, 2014, by and among NIL, us, Merger Sub, CJ Holding Co., a Delaware corporation and our wholly owned subsidiary (“USHC”) and C&J, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of February 6, 2015, by and among NIL, us, Merger Sub, USHC and C&J (the “Merger Agreement”). In the Merger, each share of C&J common stock (other than shares owned by C&J or Merger Sub) will be converted into the right to receive one of our common shares. Upon completion of the Merger, we will be renamed C&J Energy Services Ltd., and we anticipate that our common shares will be traded on the New York Stock Exchange under the ticker symbol “CJES.” As a result, the business and financial information included in this Annual Report on Form 10-K excludes any information related to Red Lion’s drilling and rig services business, as well as any other business not owned by Red Lion following completion of the Separation, as those activities are reflected as discontinued operations.

Our Strategies

We believe that we are well-positioned to capitalize on our strengths and execute our strategy based on the following objectives:

·                  Maintain and Expand Market Leadership in Core Completion and Production Services.  We believe we are a market leader in many of the regions in which we provide services and we constantly invest in new assets and redeploy and upgrade existing assets as market demand warrants. Our growth continues to be focused towards opportunities in our North America target market, which maintain or incrementally improve our market share, margin and cash flow objectives. Our strong performance on jobs in the field often leads to expansion opportunities. Since field operating performance is one of our customers’ key decision criteria when selecting a service provider, we strive to provide services and equipment that perform at standards that exceed those of our competitors.

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·                  Expand Sales to Existing Customers.  Currently, only four of our top 10 customers use both our completion and production services operations even though all of these customers require both completion and production services. As a result, we believe we have a meaningful opportunity to increase our penetration of customers that are primarily served by only one of these two segments. Our current network of facilities gives us a market presence in the major hydrocarbon basins. As a result, by augmenting existing yards, offices, management and systems with additional service lines, we can expand our service breadth often without the time and expense normally associated with a greenfield expansion. Our services span the needs of a well from completion through end of life. The development of unconventional resources, which has been the primary focus of our customers in recent years, requires increasingly intensive stimulation and related services. In addition to services required to bring wells on production, flowing wells require periodic maintenance and potentially recompletion and workover. Once an operator decides a well is no longer economically viable, we provide the services to plug and abandon the well.

·                  Perform as an Efficient, Low-Cost Service Provider.  We maintain an organizational structure and asset base that allows us to be an efficient, low-cost service provider in the industry, which we believe allows us to maintain significant operating flexibility and maximize our earnings and cash flow over the entire business cycle. At the same time, we continue to realize benefits and expense reductions from combining the completion and production services segments under a single organization. We believe we have additional opportunities to integrate field operations and realize reductions to our costs at that level. Our broad service portfolio enables us to maintain asset utilization at higher levels than if we were operating in fewer service lines. We intend to capitalize on these capabilities to offer competitive prices to our customers, while optimizing our returns on investment by redeploying existing equipment and resources into their highest return opportunities.

Pending Transaction to Combine with C&J Energy Services, Inc.

On June 25, 2014, we entered the Merger Agreement, pursuant to which and subject to the terms thereof, Merger Sub will merge with and into C&J with C&J surviving as our wholly owned subsidiary. The transactions contemplated by the Merger Agreement, Separation Agreement and the other agreements contemplated thereby are collectively referred to as the “Pending C&J Transaction.”

In the Merger, each share of C&J common stock (other than shares owned by C&J or Merger Sub) will be converted into the right to receive one Red Lion common share. It is currently expected that, immediately following the closing of the Merger (the “Closing”), former C&J stockholders will own approximately 47% of our issued and outstanding common shares and NIL or one of its wholly owned subsidiaries will own approximately 53% of our issued and outstanding common shares. At Closing, our authorized share capital will consist of 750 million common shares and 50 million preferred shares.  When the Merger is completed, we will be renamed C&J Energy Services Ltd., and our common shares will be listed on the NYSE under the ticker symbol “CJES.”

Certain of our subsidiaries have issued intercompany notes with an aggregate face amount of approximately $938 million (the “Notes”) to other subsidiaries of NIL in connection with the Separation. Pursuant to the Separation Agreement, on March 20, 2015, Nabors contributed a portion of the Notes to us and our subsidiaries repaid a portion of the Notes, such that the remaining balance owed under the Notes following such contribution and repayment was approximately $688 million. The portion of the Notes not previously contributed to us by Nabors or paid by our subsidiaries will be repaid in connection with the Closing, resulting in a cash payment to NIL or one of its subsidiaries of approximately $688 million. C&J has obtained commitments from certain financial institutions to provide debt financing to us and/or certain of our subsidiaries in an amount sufficient to fund the repayment of the Notes at Closing.

The Closing is subject to customary closing conditions, including, among others, (1) the consummation of the Separation in accordance with the Separation Agreement (which was completed in October 2014), (2) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”, which termination occurred on July 28, 2014), (3) approval by C&J’s stockholders (which was satisfied on March 20, 2015), (4) the registration statement on Form S-4 (the “Form S-4”) used to register our common shares to be issued in the Merger being declared effective by the U.S. Securities and Exchange Commission (the “SEC”) (which effectiveness was granted on February 13, 2015), (5) the approval for listing on the

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NYSE of our common shares to be issued in the Merger (which application for listing was approved on March 19, 2015), (6) subject to specified materiality standards, the accuracy of the representations and warranties of, and the performance of all covenants in the Merger Agreement, Separation Agreement and related closing documents by, the parties thereto, (7) the absence of a material adverse effect as defined in the Merger Agreement with respect to each of C&J and us, (8) the availability of the proceeds of the debt financing to effect the repayment of the Notes, (9) the receipt of consents, approvals and other deliverables with respect to certain agreements of C&J (which have been obtained), (10) the receipt by NIL of an opinion from its counsel to the effect that certain distributions made pursuant to the Separation Agreement should qualify as distributions to which Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”) applies, subject to the application of Section 355(d) of the Code, (11) the receipt by C&J of an opinion from its counsel to the effect that it is more likely than not that (i) the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code and (ii) we qualify as a corporation within the meaning of Section 367(a) of the Code and (12) the absence of temporary restraining order, preliminary or permanent injunction or other order or judgment or any governmental authority of competent jurisdiction enjoining or prohibiting the consummation of the Merger.

We currently expect the Closing to occur in March 2015, subject to the satisfaction or waiver of the above closing conditions. There can be no assurance as to whether or when the Closing will occur.

Competition

The industry in which we operate is highly competitive due to the large number of market participants. In our geographic markets, we believe price and the availability and condition of equipment are the most significant factors in determining which contractor is awarded a job. Other factors include the availability of trained personnel possessing the required specialized skills, the overall quality of service and safety record and the ability to offer ancillary services.

Certain competitors are present in more than one of our operating regions, although no one competitor operates in all of these areas. In providing our production services, we compete with Basic Energy Services, Inc., Key Energy Services, Inc., Superior Energy Services, Inc. (formerly Complete Energy Services, Inc.), Forbes Energy Services Ltd. and numerous other competitors having smaller regional or local rig operations. In providing our completion services, we compete with large operators such as Halliburton, Baker Hughes, Weatherford International Ltd., Schlumberger Limited and FTS International Services LLC, smaller companies such as RPC, Inc. and other small and mid-sized independent contractors, and major oilfield services companies with operations outside of the United States.

Customers

Our customers include major national and independent oil and gas companies. One customer individually accounted for 11% of our consolidated revenues in 2014.  Two customers individually accounted for 14%, and 11% of our consolidated revenues in 2013.  Sales are generated by our sales force and through referral from existing customers. We monitor closely the financial condition of these customers, their capital expenditure plans and other indications of their drilling, completion and production services or delivering equipment.

Employees

As of March 19, 2015, we employed approximately 6,500 personnel.  We believe our relationship with our employees is generally good.

Seasonality

Our business in the United States is subject to seasonal variations as a result of weather conditions, holidays, and shorter daylight hours in the first and fourth quarters. In addition, our completion services located in the Appalachian, Mid-Continent and Rocky Mountain regions of the United States can be adversely affected by seasonal weather conditions, primarily in the spring, as many municipalities impose weight restrictions on the paved roads leading to our jobsites due to the muddy conditions caused by spring thaws. Our Canadian operations are subject to seasonal variations as a result of weather conditions and generally experience reduced levels of activity

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and financial results during the second quarter of each year. Our overall financial results reflect the seasonal variations experienced in these operations.

Intellectual Property

We seek patent and trademark protections for our technology when we deem it prudent, and we aggressively pursue protection of these rights. We believe our patents and trademarks are adequate for the conduct of our business and that no single patent or trademark is critical to our business. In addition, we rely to a great extent on the technical expertise and know-how of our personnel to maintain our competitive position.

Insurance

Our operations are subject to many hazards inherent in the workover, well-servicing and pressure pumping industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost equipment and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others.

Accidents may occur and we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. The occurrence of an event not fully insured or indemnified against, or the failure or inability of a customer or insurer to meet its indemnification or insurance obligations, could result in substantial losses. In addition, insurance may not be available to cover any or all of these risks. Even if available, insurance may be inadequate or insurance premiums or other costs may rise significantly in the future, making such insurance prohibitively expensive. We expect to continue to face upward pressure in our insurance renewals; our premiums and deductibles may be higher, and some insurance coverage may either be unavailable or more expensive than it has been in the past. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention. We may choose to increase the levels of deductibles (and thus assume a greater degree of risk) from time to time in order to minimize our overall costs.

Environmental and Other Regulatory Matters

We are significantly affected by stringent and complex federal, state and local laws and regulations governing the emission or discharge of substances into the environment, protection of the environment and worker health and safety. Any failure by us to comply with such environmental and occupational health and safety laws and regulations may result in governmental authorities taking actions against our business that could adversely impact our operations and financial condition, including the following:

·                  issuance of administrative, civil and criminal penalties;

·                  modification, denial or revocation of permits or other authorizations;

·                  imposition of limitations on our operations; and

·                  performance of site investigatory, remedial or other corrective actions.

As part of our business, we handle, transport and dispose of a variety of fluids and substances used by our customers in connection with their oil and natural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. Such activities are subject to strict regulation for the prevention of oil spills and release of hazardous substances, and can lead to liability for removal costs and natural resource, real or personal property and certain economic damages arising from any spills. The generation, handling, transportation and disposal of these fluids, substances and wastes are regulated by a number of laws, including the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act (“RCRA”), the Clean Water Act, the U.S. federal Safe Drinking Water Act, as amended (“SDWA”), and analogous state laws. Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to liability for governmental penalties, third-party claims, cleanup costs associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations. Moreover, certain of these

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environmental laws impose joint and several, strict liability even though our conduct in performing such activities was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties was the basis for such liability. In addition, environmental laws and regulations are subject to frequent change and if existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to make significant unanticipated capital and operating expenditures.

Changes in environmental laws and regulations may also negatively impact the operations of oil and natural gas exploration and production companies, which in turn could have an adverse effect on our business. For example, legislation has been proposed from time to time in the U.S. Congress that would reclassify some oil and natural gas production wastes as hazardous wastes under RCRA, which would make the reclassified wastes subject to more stringent and costly handling, disposal and clean-up requirements. In addition, the Outer Continental Shelf Lands Act provides the federal government with broad discretion in regulating the leasing of offshore oil and gas production sites. If existing laws, regulatory requirements or enforcement policies were to change in the future, we may be required to make significant unanticipated capital and operating expenditures.

Hydraulic Fracturing

Our completion services include hydraulic fracturing, a process sometimes used in the completion of oil and gas wells, whereby water, sand and chemicals are injected under pressure into subsurface formations to stimulate gas and oil production. Hydraulic fracturing typically is regulated by state oil and natural gas commissions; however, the U.S. Environmental Protection Agency (“EPA”) has asserted federal regulatory authority pursuant to the SDWA, over certain hydraulic fracturing activities involving the use of diesel fuel. In 2012, the EPA also promulgated new rules establishing new air emission controls for oil and gas production and natural gas processing operations. More recently, in May 2014, the EPA issued an advanced notice of proposed rulemaking regarding the agency’s intent to develop regulations under the Toxic Substances and Control Act related to the disclosure of chemicals used in hydraulic fracturing. The EPA is also conducting a study of the potential environmental impacts from hydraulic fracturing on drinking water resources and developing rules on effluent limitations for the treatment and discharge of wastewater resulting from hydraulic fracturing activities, both which are expected for publication in early 2015. In addition, the federal Bureau of Land Management finalized new regulations in March 2015 on hydraulic fracturing conducted on federal lands, including the disclosure of chemical additives used; the regulations are already subject to legal challenge. In 2011, the U.S. Department of Energy released a report on hydraulic fracturing, recommending the implementation of a variety of measures to reduce the environmental impacts from shale-gas production. In addition, there has been public opposition to hydraulic fracturing. As a result, there have been legislative initiatives to regulate hydraulic fracturing under the SDWA or under newly established legislation. From time to time, legislation has also been introduced in the U.S. Congress to provide for federal regulation of hydraulic fracturing under the SDWA and to require the disclosure of chemicals used in the hydraulic fracturing process. In addition, various states and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements and temporary or permanent bans. For example, Texas has adopted legislation that requires the public disclosure of information regarding the substances used in the hydraulic fracturing process, and, on December 17, 2014, the State of New York announced a ban on hydraulic fracturing due to public health and environmental concerns identified in its several years study. In addition, municipalities in Colorado and several other states have adopted or are in the process of adopting ordinances restricting or prohibiting hydraulic fracturing within their jurisdictions. New or further changes in laws and regulations imposing reporting obligations on, or otherwise banning or limiting, the hydraulic fracturing process could make it more difficult for our customers to complete oil and natural gas wells in shale formations, and lead to operational delays, increased costs of regulatory compliance or in exploration and production, which in turn could adversely affect our business and the demand for fracturing services.

Climate Change

In December 2009, the EPA published its findings that emissions of carbon dioxide, methane and other greenhouse gases (“GHGs”) present an endangerment to the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA adopted regulations that restrict emissions of GHGs under existing provisions of the federal Clean Air Act including one that requires a reduction in emissions of GHGs from motor vehicles and another that requires certain construction and operating permit reviews for GHG emissions from certain large stationary sources. The EPA has also adopted rules requiring the monitoring and reporting of GHGs from specified GHG emission

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sources, including, among others, certain oil and natural gas production facilities, on an annual basis. Further, the EPA recently proposed strict regulations with respect to GHG emissions from certain new and existing power plants. In addition to the EPA, the U.S. Congress has from time to time considered legislation to reduce emissions of GHGs, and almost one-half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. Future or more stringent regulation could dramatically increase operating costs for oil and natural gas companies and could reduce the market for our services by making wells and/or oilfields uneconomical to operate.

We do not currently anticipate that compliance with currently applicable environmental regulations and controls will significantly change our competitive position, capital spending or earnings during 2015. We believe we are in material compliance with applicable environmental rules and regulations, and the cost of such compliance is not material to our business or financial condition.

Safety Program

Our operations involve the operation of heavy and powerful equipment which can result in serious injuries to our employees and third parties and substantial damage to property. We have comprehensive safety and training programs designed to minimize accidents in the workplace and improve the efficiency of our operations. In addition, many of our larger customers now place greater emphasis on safety and quality management programs of their contractors. We believe that these factors will gain further importance in the future. We have directed substantial resources toward employee safety and quality management training programs as well as our employee review process.

Company-mandated policies and procedures provide the overall framework to ensure our operations minimize the hazards inherent in our work and are intended to meet regulatory requirements, while allowing our field operations to satisfy customer-mandated policies and local needs and practices.

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Item 1A.                        Risk Factors

We face many challenges and risks in the industry in which we operate. You should carefully consider each of the following risk factors and all of the other information set forth in this Form 10-K, including under the section titled “Cautionary Note Regarding Forward-Looking Statements” and our other reports we may file with the SEC from time to time, and the documents and other information incorporated by reference herein and therein, for a detailed discussion of known material factors which could materially affect our business, financial condition or future results. The risks and uncertainties described are not the only ones we face. Additional risk factors not presently known to us or which we currently consider immaterial may also adversely affect our business, financial condition or future results. If any of these risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected.

Risks Relating to Our Business

Our business is cyclical and dependent upon conditions in the oil and natural gas industry, which impact the level of exploration, development and production of oil and natural gas and capital expenditures by oil and natural gas companies. Our customers’ willingness to undertake exploration and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors which are beyond our control. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flow.

We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. If these expenditures decline, our business may suffer. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cycles and is influenced by a combination of long-term, short-term and cyclical trends. Our customers’ willingness to explore, develop and produce depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as:

·                  the supply of and demand for oil and natural gas, including current natural gas storage capacity and usage;

·                  the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil;

·                  the current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices;

·                  the supply of and demand for hydraulic fracturing and other well service equipment in the United States;

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

·                  public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate hydraulic fracturing activities;

·                  the expected rates of decline of current oil and natural gas production;

·                  lead times associated with acquiring equipment and products and availability of personnel;

·                  regulation of drilling activity;

·                  the discovery and development rates of new oil and natural gas reserves;

·                  available pipeline and other transportation capacity;

·                  weather conditions, including hurricanes, that can affect oil and natural gas operations over a wide area;

·                  political instability in oil and natural gas producing countries;

·                  domestic and worldwide economic conditions;

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·                  technical advances affecting energy consumption;

·                  the price and availability of alternative fuels; and

·                  merger and divestiture activity among oil and natural gas producers.

Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decrease) generally leads to decreased spending by our customers, which in turn negatively impacts exploration, development and production activity. In particular, the demand for new or existing field drilling and completion work is driven by available investment capital for such work. When these capital investments decline, our customers’ demand for our services declines. Because these types of services can be easily “started” and “stopped,” and oil and natural gas producers generally tend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services during periods of volatility in prices compared with demand for other types of energy services. While higher oil and natural gas prices generally lead to increased spending by our customers, sustained high energy prices can be an impediment to economic growth, and can therefore negatively impact spending by our customers. Any negative impact on the spending patterns of our customers may cause lower pricing and utilization for our core service lines, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Spending by exploration and production companies can also be impacted by conditions in the capital markets. Limitations on the availability of capital, or higher costs of capital, for financing expenditures may cause exploration and production companies to make additional reductions to capital budgets in the future even if oil and natural gas prices are higher than historical norms. Any such cuts in spending may curtail drilling programs as well as discretionary spending on well services, which may result in a reduction in the demand for our services, and the rates we can charge and the utilization of our assets. Moreover, reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could also have a material adverse impact on our business, even in a stronger oil and natural gas price environment.

We may be unable to implement price increases or maintain existing prices on our core services.

Pressure on pricing for our hydraulic fracturing and other core services, including due to competition and industry and/or economic conditions, may impact, among other things, our ability to implement price increases or maintain pricing on our core services. We operate in a very competitive industry and, as a result, we may not always be successful in raising, or maintaining our existing prices. Additionally, during periods of increased market demand, a significant amount of new service capacity, including hydraulic fracturing equipment and coiled tubing units, may enter the market, which also puts pressure on the pricing of our services and limits our ability to increase or maintain prices. Furthermore, during periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our profitability.

Volatility in oil and natural gas prices can also impact our customers’ activity levels, which may indirectly limit our ability to increase or maintain prices. Current energy prices are important contributors to cash flow for our customers and their ability to fund exploration and development activities. Over the past several months, oil prices have declined significantly due in large part to increasing supplies, weakening demand growth and the decision by OPEC not to cut production. Expectations about future prices and price volatility are important for determining future spending levels by our customers.

Even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset such rising costs. Also, we may not be able to successfully increase prices without adversely affecting our activity levels. The inability to maintain our prices or to increase our prices as costs increase could have a material adverse effect on our business, financial position and results of operations.

Delays in deliveries of key raw materials or increases in the cost of key raw materials could harm our business, results of operations and financial condition.

We have established relationships with a limited number of suppliers of our raw materials and finished products. Should any of our current suppliers be unable to provide the necessary raw materials or finished products

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or otherwise fail to deliver the products in a timely manner and in the quantities required, any resulting delays in the provision of services could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, increasing costs of certain raw materials may negatively impact demand for our services or the profitability of our business operations. In the past, our industry faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several competitors. We may not be able to mitigate any future shortages of raw materials, including proppants.

Weather conditions could materially impair our business.

Our operations may be adversely affected by severe weather events and natural disasters. Furthermore, our customers’ operations may be adversely affected by seasonal weather conditions. For example, hurricanes, tropical storms, heavy snow, ice or rain may result in customer delays and other disruptions to our services. Repercussions of severe weather conditions may include:

·                  curtailment of services;

·                  weather-related damage to facilities and equipment, resulting in suspension of operations;

·                  inability to deliver equipment, personnel and products to job sites in accordance with contract schedules;

·                  increase in the price of insurance; and

·                  loss of productivity.

These constraints could also delay our operations, reduce our revenue and materially increase our operating and capital costs.

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

The delivery of our services and products requires personnel with specialized skills and experience who can perform physically demanding work. As a result of the volatility in the energy service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a different work environment. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force. At times, demand for skilled workers in our geographic area of operations is high, and the supply is limited. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we pay, or both. If either of these events were to occur, our capacity and profitability could be diminished and our growth potential could be impaired.

Fluctuations in oil and natural gas prices could adversely affect completion and production activities by oil and natural gas companies and our revenues, cash flows and profitability.

The demand for our services depends on the level of spending by oil and gas companies for completion and production activities. Both short-term and long-term trends in oil and natural gas prices affect these levels. Oil and natural gas prices, as well as the level of completion and production activities, historically have been extremely volatile and are expected to continue to be highly volatile.  For example, within the past year, oil prices were as high as $107 per barrel and have been as low as $42 per barrel. Worldwide military, political and economic events, including initiatives by OPEC, affect both the demand for, and the supply of, oil and natural gas. Weather conditions, governmental regulation (both in the United States and elsewhere), levels of consumer demand, the availability of pipeline capacity and other factors beyond our control may also affect the supply of, demand for, and price of oil and natural gas. Lower oil and natural gas prices have caused some of our customers to terminate, seek to renegotiate or fail to honor their contracts and affected the fair market value of our rig fleet, which in turn has resulted in impairments of assets. A sustained or further decline in oil and natural gas prices could adversely impact our cash forecast models used to determine whether the carrying value of our long-lived assets exceed our future cash flows, which could result in future impairment to our long-lived assets. A prolonged period of lower oil and natural gas prices could affect our ability to retain skilled rig personnel and affect

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our ability to access capital to finance and grow our business. There can be no assurances as to the future level of demand for our services or future conditions in the oil and natural gas and oilfield services industries.

We operate in a highly competitive industry with significant excess capacity, which may adversely affect our results of operations.

The oilfield services industry is very competitive. Oilfield services companies compete primarily on a regional basis, and competition may vary significantly from region to region at any particular time. Completion and well servicing equipment, such as hydraulic fracturing fleets and workover and well-servicing rigs, can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in an oversupply of equipment in an area. In many markets where we operate, the number of rigs available for use exceeds the demand for rigs, resulting in price competition. In recent years, the ability to deliver rigs with new technology and features can determine which contractor is awarded a job, which requires continued technology advancement. The land drilling market generally is more competitive than the offshore drilling market because there are a greater number of rigs and competitors.

New technology may hurt our competitive position.

The energy service industry is subject to the introduction of new completion techniques and services using new technologies, some of which may be subject to patent protection. As competitors and others use or develop new technologies or technologies comparable to ours in the future, we may lose market share or be placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources than we do, which may allow them to gain technological advantages or implement new technologies before we can. Additionally, we may be unable to implement new technologies or products at all, on a timely basis or at an acceptable cost. Limits on our ability to effectively use or implement new technologies may have a material adverse effect on our business, financial condition and results of operations.

Our operations are subject to hazards inherent in the energy services industry. The nature of our operations presents hazards and other inherent risks of loss that could adversely affect our results of operations.

Our operations are subject to many hazards inherent in the oilfield services industry, particularly with respect to the workover, well-servicing and pressure pumping industries, including blowouts, cratering, explosions, fires, loss of well control, loss of or damage to the wellbore or underground reservoir, damaged or lost equipment and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment and facilities, suspension of operations, environmental and natural resources damage and damage to the property of others.

Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. The occurrence of an event not fully insured or indemnified against, or the failure or inability of a customer or insurer to meet its indemnification or insurance obligations, could result in substantial losses. In addition, insurance may not be available to cover any or all of these risks. Even if available, insurance may be inadequate or insurance premiums or other costs may rise significantly in the future making insurance prohibitively expensive. We expect to continue facing upward pricing pressure in our insurance renewals; our premiums and deductibles may be higher, and some insurance coverage may either be unavailable or more expensive than it has been in the past. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of a deductible or self-insured retention. We may choose to increase the levels of deductibles (and thus assume a greater degree of risk) from time to time in order to minimize our overall costs.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays as well as adversely affect demand for our support services.

Hydraulic fracturing is an important and common practice that is used to stimulate production of natural gas and/or oil from dense subsurface rock formations. The hydraulic fracturing process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. We commonly perform hydraulic fracturing services for our customers. Hydraulic fracturing typically is regulated by state oil and natural gas commissions; however, the EPA has asserted federal regulatory authority

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pursuant to the SDWA over certain hydraulic fracturing activities involving the use of diesel fuel and issued permitting guidance in February 2014 that applies to such activities. In 2012, the EPA also promulgated new rules establishing new air emission controls for oil and gas production and natural gas processing operations. Also, in May 2014, the EPA issued an advanced notice of proposed rulemaking regarding the agency’s intent to develop regulations under the Toxic Substances and Control Act related to the disclosure of chemicals used in hydraulic fracturing. The EPA is also conducting a study of the potential environmental impacts from hydraulic fracturing on drinking water resources and developing rules on effluent limitations for the treatment and discharge of wastewater resulting from hydraulic fracturing activities, both which are expected for publication in early 2015. In addition, the federal Bureau of Land Management finalized new regulations in March 2015 on hydraulic fracturing conducted on federal lands, including the disclosure of chemical additives used; the regulations are already subject to legal challenge. In 2011, the U.S. Department of Energy released a report on hydraulic fracturing, recommending the implementation of a variety of measures to reduce the environmental impacts from shale-gas production.  In addition, from time to time, legislation has been introduced before the U.S. Congress to provide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. Further, there has been public opposition to hydraulic fracturing, which could lead to legal changes and additional legislative or regulatory initiatives.

Certain governmental reviews are either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. The White House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices and the EPA is performing a study of the potential environmental effects of hydraulic fracturing on drinking water resources. The EPA’s study includes 18 separate research projects addressing topics such as water acquisition, chemical mixing, well injection, flowback and produced water and wastewater treatment and disposal. The EPA has indicated that it expects to issue its study report sometime in 2015. The EPA is also developing effluent limitations for the treatment and discharge of wastewater resulting from hydraulic fracturing activities. Other governmental agencies, including the U.S. Department of Energy and the U.S. Department of the Interior, are evaluating various other aspects of hydraulic fracturing. Depending on their results, these studies could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory programs.

In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permit requirements, operational restrictions, disclosure requirements and temporary or permanent bans on hydraulic fracturing in certain environmentally sensitive areas such as certain watersheds. For example, Texas has adopted legislation that requires the public disclosure of information regarding the substances used in the hydraulic fracturing process to the Railroad Commission of Texas and to the public, whereas, on December 17, 2014, the State of New York announced that hydraulic fracturing will be banned due to public health and environmental concerns identified in its several year study. In addition, municipalities in Colorado and several other states have adopted or are in the process of adopting ordinances restricting or prohibiting hydraulic fracturing within their jurisdictions. The widespread adoption of ordinances limiting hydraulic fracturing could adversely affect our business.

The adoption of new laws or regulations imposing reporting obligations on, or otherwise banning or limiting, the hydraulic fracturing process could make it more difficult to complete oil and natural gas wells in shale formations, increase costs of regulatory compliance and adversely affect the hydraulic fracturing services that we render for our exploration and production customers. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA or other regulatory agencies, fracturing activities could become subject to additional permitting requirements, and also to attendant permitting delays and potential increases in cost, which could adversely affect our business and results of operations.

Climate change legislation or regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for our services.

In December 2009, the EPA published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA adopted regulations that restrict emissions of GHGs under existing provisions of the federal Clean Air Act including one that requires a reduction in emissions of GHGs from motor vehicles and another that requires certain construction and operating permit reviews for GHG emissions from certain large stationary sources. The EPA has also adopted rules requiring the monitoring and reporting of GHGs from specified GHG emission sources,

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including, among others, certain oil and natural gas production facilities, on an annual basis. Further, the EPA recently proposed strict regulations with respect to GHG emissions from certain new and existing power plants. In addition to the EPA, the U.S. Congress has from time to time considered legislation to reduce emissions of GHGs, and almost one-half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs operate by requiring major sources of emissions or major producers of fuels, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall GHG emission reduction goal.

Any new federal, regional or state restrictions on emissions of GHGs that may be imposed in areas in which we conduct business could result in increased compliance costs or additional operating restrictions on our customers. Such legislation could potentially make our customers’ products more expensive and thus reduce demand for them, which could have a material adverse effect on us and demand for our services. Finally, some scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events. If any such effects were to occur, they could have an adverse effect on our results of operations.

We are subject to extensive and costly environmental and occupational health and safety laws and regulations that may require us to take actions that will adversely affect our results of operations.

We are significantly affected by stringent and complex federal, state and local laws and regulations governing the emission or discharge of substances into the environment, protection of the environment and worker health and safety. Any failure by us to comply with such environmental and occupational health and safety laws and regulations may result in governmental authorities taking actions against us that could adversely impact our operations and financial condition, including the following:

·                  issuance of administrative, civil and criminal penalties;

·                  modification, denial or revocation of permits or other authorizations;

·                  imposition of limitations on our operations; and

·                  performance of site investigatory, remedial or other corrective actions.

As part of our business, we handle, transport and dispose of a variety of fluids and substances used by our customers in connection with their oil and natural gas exploration and production activities. We also generate and dispose of nonhazardous and hazardous wastes. Such activities are subject to strict regulation for the prevention of oil spills and release of hazardous substances, and can lead to liability for removal costs and natural resource, real or personal property and certain economic damages arising from any spills. The generation, handling, transportation and disposal of these fluids, substances and wastes are regulated by a number of laws, including the Comprehensive Environmental Response, Compensation and Liability Act, the RCRA, the Clean Water Act, SDWA and analogous state laws. Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to liability for governmental penalties, third-party claims, cleanup costs associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations. Moreover, certain of these environmental laws impose joint and several strict liability, even though our conduct in performing such activities was lawful at the time it occurred or the liability was the result of the conduct of, or conditions caused by, prior operators or other third parties.

In addition, environmental laws and regulations are subject to frequent change. Changes in environmental laws may also negatively impact the operations of oil and natural gas exploration and production companies, which in turn could have an adverse effect on our business. For example, legislation has been proposed from time to time in the U.S. Congress that would reclassify some oil and natural gas production wastes as hazardous wastes under RCRA, which would make the reclassified wastes subject to more stringent and costly handling, disposal and clean-up requirements. In addition, the Outer Continental Shelf Lands Act provides the federal government with broad discretion in regulating the leasing of offshore oil and gas production sites. If existing laws, regulatory requirements

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or enforcement policies were to change in the future, we may be required to make significant unanticipated capital and operating expenditures.

More stringent trucking regulations may increase our costs and negatively impact our results of operations.

As part of the services we provide, we operate as a motor carrier and therefore we are subject to regulation by the U.S. Department of Transportation (“DOT”) and by other various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations and regulatory safety and hazardous materials labeling, placarding and marking. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. In addition, the trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive in any specific period, require on board black box recorder devices or limits on vehicle weight and size.

Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. To a large degree, intrastate motor carrier operations are subject to state safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations.

From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motor fuels, which may increase the our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted.

Legal proceedings could affect our financial condition and results of operations.

We are subject to legal proceedings and governmental investigations from time to time that include employment, tort, intellectual property and other claims and purported class action and shareholder derivative actions. From time to time, we are also subject to complaints and allegations of violations of employment-related laws by former, current or prospective employees.

Lawsuits or claims could result in decisions against us that could have an adverse effect on our financial condition or results of operations.

Our profitability could be adversely affected by turmoil in the global financial markets.

Changes in general financial and political conditions may negatively impact our business, financial condition, results of operations and cash flows in ways we cannot predict. If global markets and economic conditions deteriorate in the future, there could be a material adverse impact on our liquidity and those of our customers and other worldwide business partners.

Risks Related to the Merger

The Merger is subject to customary approvals and conditions which may adversely impact the timing of the transaction and our ability to consummate the transaction.

The Merger is subject to customary approvals and conditions, many of which are outside of our control, including, among others, the availability of the proceeds of the debt financing to effect the cash payment to NIL in connection with the Closing. We expect that the Closing will occur in March 2015 following the special meeting of C&J stockholders held on March 20, 2015; however, we cannot assure you that the Merger will be consummated within the anticipated timeframe or at all, including as the result of regulatory, market or other factors. Further, any delay in the consummation of the Merger could cause the combined company not to realize all or some of the synergies that we expect to achieve if the Merger is successfully completed within its expected timeframe and could result in additional transaction costs or other effects associated with uncertainty about the Merger, which may adversely impact our ability to realize the anticipated benefits of the transaction.

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A lawsuit has been filed challenging the Merger, and any injunctive relief or adverse judgment for rescission or money damages could delay or prevent the Merger from being completed or could have a material adverse effect on us following the Merger.

On July 30, 2014, NIL and we, along with C&J and the C&J board of directors, were sued by an alleged C&J stockholder in a putative shareholder class action filed on behalf of the C&J stockholders.  The lawsuit is styled City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, et al. v. C&J Energy Services, Inc., et al.; C.A. No. 9980-VCN, in the Court of Chancery of the State of Delaware (the “Court of Chancery”).

The plaintiff alleges that the members of the C&J board of directors breached their fiduciary duties in connection with the Merger, and that we and C&J aided and abetted these alleged breaches. The plaintiff seeks to enjoin the defendants from proceeding with or consummating the Merger and the C&J stockholder meeting for approval of the Merger and, to the extent that the Merger is completed before any relief is granted, to have the Merger rescinded. On November 10, 2014, the plaintiff filed a motion for a preliminary injunction, and, on November 24, 2014, the Court of Chancery entered a bench ruling, followed by a written order on November 25, 2014, that (i) ordered certain members of the C&J board of directors to solicit for a 30 day period alternative proposals to purchase C&J (or a controlling stake in C&J) that are superior to the Merger, and (ii) preliminarily enjoined C&J from holding its stockholder meeting until it complied with the foregoing. C&J complied with the order while it simultaneously pursued an expedited appeal of the Court of Chancery’s order to the Supreme Court of the State of Delaware (the “Delaware Supreme Court”). On December 19, 2014, the Delaware Supreme Court overturned the Court of Chancery’s judgment and vacated the order.

We cannot predict the outcome of this lawsuit or any others that might be filed in the future in connection with the Merger, nor can we predict the amount of time and expense that will be required to resolve such litigation. One of the conditions to the completion of the Merger is that no temporary restraining order, preliminary or permanent injunction or other order or judgment or any governmental authority of competent jurisdiction enjoining or prohibiting the consummation of the Merger be in effect and completion of the Merger is not illegal under any applicable law, rule, regulation or order of any governmental authority of competent jurisdiction, which condition, if not satisfied, could delay or jeopardize the consummation of the Merger. An adverse judgment granting permanent injunctive relief could indefinitely enjoin the Merger, and an adverse judgment for rescission or monetary damages could have a material adverse effect on us following the Merger.

Risks Related to Us After the Pending C&J Transaction

We participate in a capital-intensive industry, and we may not be able to finance future growth of our operations or future acquisitions.

Upon consummation of the Pending C&J Transaction, we expect to have approximately $1.1 billion in total indebtedness, and $520 million available for additional borrowings. Following the Closing, the substantial indebtedness that will be incurred in connection with the Pending C&J Transaction, could limit our operational flexibility, including our ability to finance future growth and adversely affect our operations and financial condition. Additionally, the financial and other restrictive covenants obligations contained in the agreements governing that indebtedness may restrict our operational flexibility and our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements.

The successful execution of our growth strategy depends on our ability to generate sufficient cash flows and/or raise additional capital as needed. Our ability to fund future growth depends on our performance, which is impacted by factors beyond our control, including financial, business, economic and other factors, such as potential changes in customer preferences and pressure from competitors. Although we believe we are well positioned to finance our future growth, if we are unable to generate sufficient cash flows or to obtain additional capital on favorable terms or at all, we may be unable continue growing our business or to sustain or increase our current level profitability. Our inability to grow our business may adversely impact our ability to sustain or improve our profits.

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We may not realize the anticipated cost synergies and growth opportunities.

We expect that we will realize cost synergies, growth opportunities and other financial and operating benefits as a result of the Pending C&J Transaction. Our success in realizing these cost synergies, growth opportunities and other financial and operating benefits, and the timing of this realization, depends on the successful integration of our business operations with those of C&J. Even if we are able to integrate our business with C&J’s business successfully, we cannot predict with certainty if or when these cost synergies, growth opportunities and benefits will occur, or the extent to which they actually will be achieved. For example, the benefits from the Pending C&J Transaction may be offset by costs incurred in integrating our business with C&J’s business. Realization of any benefits and cost synergies could be affected by the other risks described in “Risk Factors” and a number of factors beyond our control, including, without limitation, general economic conditions, increased operating costs, the response of competitors and regulatory developments.

As a wholly owned subsidiary of NIL, we were not required to comply with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act of 2002. As a public company with listed equity securities, such requirements may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (“SOX”), related regulations of the SEC, including compliance with the reporting requirements of the Exchange Act, and the requirements of the NYSE, which we were not previously required to comply with as a private company. Because our Form S-4 was declared effective by the SEC on February 13, 2015, we are currently subject to, and are in full compliance with, the reporting requirements of the Exchange Act and certain corporate governance provisions of SOX.  We will become subject to NYSE requirements once our common shares are listed on the NYSE upon the completion of the Merger.  Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and may significantly increase our costs and expenses. While combining C&J and our accounting and operations functions, we will need to:

·                  institute a comprehensive compliance function;

·                  design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

·                  comply with rules promulgated by the NYSE;

·                  prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

·                  establish new internal policies, such as those relating to disclosure controls and procedures and insider trading; and

·                  involve and retain to a greater degree outside counsel and accountants in the above activities.

If our profitability is adversely affected because of these additional costs, it could have a negative effect on our business and results of operations and the trading price of our common shares.

We and our subsidiaries will be required to indemnify NIL for taxes imposed as a result of certain actions taken by us if such actions adversely affect the intended tax treatment of the U.S. Distributions.

The Tax Matters Agreement to be entered into between us and NIL in connection with the Closing (the “Tax Matters Agreement”) prohibits us from taking actions that could cause the U.S. Distributions (as defined in the Tax Matters Agreement) to be taxable. In particular, for two years after the Merger (the “restriction period”), we and our subsidiaries may not take any of the following actions (each, a “restricted action”):

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·                  issue our shares, options, warrants or similar interests or such interests of any entity in the chain of Nabors Completion & Production Services Co. (“NCPS”) ownership (including NCPS) (i) to any person in connection with a public offering or a private placement, (a) if such person would be a “ten-percent shareholder” or a “coordinating group” that is treated as a ten-percent shareholder, directly or indirectly, of NCPS (in each case, as defined in U.S. Treasury Regulation Section 1.355-7(h)) or (b) which is taken into account for purposes of Section 355(e) of the Code as a result of pre-Merger actions of C&J, or (ii) as consideration to effect a merger with or acquisition of any entity (or affiliate of such entity) included on a list of entities provided by NIL (the “Prohibited Entities List”);

·                  discontinue the active conduct of our business as conducted prior to the Pending C&J Transaction, or voluntarily dissolve or liquidate (including any action that is treated as a liquidation for U.S. federal income tax purposes) us or any of our subsidiaries that conduct the C&P Business;

·                  sell or dispose of any entity that will be our subsidiary after the Merger and is or will be in the chain of ownership that includes NCPS (including NCPS); or

·                  sell, transfer or otherwise dispose of assets (including stock of subsidiaries) that constitute more than 30% of the consolidated gross assets of NCPS (subject to exceptions for, among other things, ordinary course dispositions and repayments or prepayments of our indebtedness).

If we wish to take any such restricted action, we will be required to cooperate with NIL in obtaining a ruling from the Internal Revenue Service (the “IRS”) or to provide NIL with an unqualified tax opinion, in each case that is reasonably satisfactory to NIL, unless NIL waives this requirement in writing, concluding that such action would not adversely affect the intended tax treatment of the U.S. Distributions. In addition to the foregoing restrictions, we will be required during the restriction period to consult with NIL prior to taking any of the following actions (each, a “consultation action”):

·                  issuing shares, options, warrants or similar interests (other than any such interests (i) issued to a person for the performance of services as an employee, director or independent contractor for us, C&J or any affiliate in a transaction to which Code Section 83 or 421(a) or (b) applies, (ii) that are prohibited from being issued as a restricted action described above or (iii) subject to preemptive rights under our memorandum of association or amended bye-laws);

·                  merging with, or agreeing to be acquired by, an entity that is not on the Prohibited Entities List; or

·                  amending the memorandum of association, bye-laws or certificate of incorporation, or taking any other action affecting the relative voting rights of the capital stock or common shares, of Red Lion or any entity in the chain of NCPS ownership (including NCPS).

Because of these restrictions, we may be limited in the amount of shares that we can issue to make acquisitions or raise additional capital in the two years subsequent to the completion of the Merger, which could have a material adverse effect on our liquidity and financial condition.

If we take (i) a restricted action or (ii) a consultation action that NIL has informed us has a reasonable risk of causing the U.S. Distributions to fail to achieve the intended tax treatment, we generally will be required to indemnify NIL for taxes arising as a result of our taking such restricted action or consultation action. Our obligation to indemnify NIL for taxes resulting from a restricted action is not impaired by NIL’s receipt of an IRS ruling, acceptance of our unqualified tax opinion or waiver of either of these requirements with respect to such restricted action. In addition, our indemnification obligation could discourage or prevent a third party from making a proposal to acquire us or our subsidiaries after the Merger that is or will be in the chain of ownership that includes NCPS (including NCPS) during the restriction period.

If Nabors consolidated U.S. federal income tax group were to recognize gain on the U.S. Distributions for reasons not related to our taking a restricted action or a consultation action as described in the previous paragraph, NIL would be responsible for any resulting taxes and would not be entitled to be indemnified under the Tax Matters Agreement for any taxes imposed on such gain. Pursuant to the Code and the U.S. Treasury Regulations thereunder, each member of the Nabors consolidated U.S. federal income tax group (including NCPS) would be severally liable

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for such taxes. As a result, to the extent NIL is unable to pay such taxes, the IRS may seek payment from NCPS. Under the Tax Matters Agreement, NIL is required to indemnify us if the IRS collects such taxes from NCPS. However, there can be no assurance that NIL would be able to fulfill its obligations under the Tax Matters Agreement if NIL was determined to be responsible thereunder.

The substantial indebtedness that will be incurred by us and our subsidiaries in connection with the Pending C&J Transaction could adversely affect our operations and financial condition after the Pending C&J Transaction.

We and our subsidiaries may incur up to $1.625 billion of indebtedness in connection with the Pending C&J Transaction and related financing transactions. On a pro forma basis after giving effect to the Pending C&J Transaction and the financings provided for in the new Senior Secured Credit Agreement by and among us, USHC, certain of our subsidiaries from time to time party thereto, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent (the “Senior Secured Credit Agreement”), we would have a total of approximately $1.1 billion of debt outstanding but would still have the ability to incur additional debt under our new Senior Secured Credit Agreement in the amount of $520 million.

Our and our subsidiaries’ indebtedness could have negative consequences to us after the Pending C&J Transaction, such as:

·                  requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporate purposes;

·                  limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements;

·                  increasing our vulnerability to economic downturns and changing market conditions;

·                  placing us at a competitive disadvantage relative to competitors that have less debt;

·                  to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates; and

·                  limiting our ability to buy back our common shares or pay cash dividends.

We may not be able to service our debt obligations in accordance with their terms after the Pending C&J Transaction.

Our ability to meet our expense and debt service obligations contained in the agreements governing our indebtedness will depend on our future performance, which will be affected by financial, business, economic and other factors, including potential changes in customer preferences, the success of product and marketing innovation and pressure from competitors. Should our revenues decline after the Pending C&J Transaction, we may not be able to generate sufficient cash flow to pay our debt service obligations when due. If we are unable to meet our debt service obligations after the Pending C&J Transaction or should we fail to comply with our financial and other restrictive covenants, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices or borrow more money. We may not be able to, at any given time, refinance our debt, sell assets or borrow more money on terms acceptable to us or at all. Our inability to refinance our debt or access the capital markets could have a material adverse effect on our financial condition and results from operations after the Pending C&J Transaction.

We will be subject to restrictive debt covenants after the Pending C&J Transaction, which may restrict our operational flexibility.

Under the new Senior Secured Credit Agreement, we and our subsidiaries may incur up to $1.105 billion of senior secured indebtedness. Additionally, we and our subsidiaries are expected to incur up to $520 million in senior

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unsecured bridge loans. After the Pending C&J Transaction, the agreements governing our indebtedness will contain financial and other restrictive covenants that may limit our and our subsidiaries’ ability to engage in activities that may be in our long-term best interests, including minimum interest coverage and maximum total leverage and secured leverage ratios and covenants that may limit our ability and the ability of our subsidiaries to create, incur, assume or suffer to exist liens or indebtedness, sell or otherwise dispose of their assets, make certain restricted payments and investments, enter into transactions with affiliates and prepay certain indebtedness.

Business growth could outpace the capabilities of our infrastructure.

We cannot be certain that our infrastructure will be adequate to support our operations as they expand. Future growth after the Merger could impose significant additional demands on our existing infrastructure, resulting in additional responsibilities on members of our senior management, including the need to recruit and integrate new senior level managers and executives. We cannot be certain that we will be able to recruit and retain such additional managers and executives. To the extent that we are unable to manage our growth effectively, or are unable to attract and retain additional qualified management, we may not be able to expand our operations or execute our business plan.

Business issues currently faced by one company may be imputed to the operations of the other company.

To the extent that any of C&J, NIL or we currently have or are perceived by customers to have operational challenges, such as on-time performance, safety issues or workforce issues, those challenges may raise concerns by existing customers of the other companies following the Merger, which may limit or impede our future ability to obtain additional work from those customers.

Our sales after the Merger could decrease if parties who are currently customers of both C&J and us elect to reduce their reliance on the combined company after the Merger.

We currently have some customer overlap with C&J. If any of these customers in common decreases the amount of its business with either C&J or us before the Merger or with us following the Merger to reduce its reliance on the combined company, such decrease in business could adversely impact our sales and profitability following the Merger.

Risks Related to Our Common Shares

There is no existing market for our common shares, and we do not know if one will develop to provide you with adequate liquidity to sell your common shares. The price of our common shares may fluctuate significantly, which could cause you to lose all or part of your investment.

Prior to the Pending C&J Transaction, there has not been a public market for our common shares. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on the NYSE or otherwise or how liquid that market might become after the Closing. If an active trading market does not develop, you may have difficulty selling any of our common shares that you own. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. Upon completion of the Pending C&J Transaction, current holders of C&J common stock may not be able to resell their Red Lion common shares at or above the trading price of C&J common stock immediately prior to the Merger or at all. The lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of our common shares and limit the number of investors who are able to buy our common shares.

The market price of our common shares may be influenced by many factors, many of which are beyond our control. In the event of a drop in the market price of our common shares, you could lose a substantial part or all of your investment in our common shares.

The following factors, among others, could affect the price of our common shares:

·                  our operating and financial performance, and our ability to integrate C&J and the C&P Business and to realize operational and other synergies;

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·                  quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

·                  the public reaction to our press releases, our other public announcements and our filings with the SEC;

·                  strategic actions by our competitors;

·                  changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

·                  speculation in the press or investment community;

·                  the failure of research analysts to cover our common shares, adverse changes to research analyst recommendations or the failure of our operating results to meet research analyst expectations;

·                  actions by our shareholders, including sales of our common shares by NIL or other shareholders or the perception that such sales may occur;

·                  changes in accounting principles, policies, guidance, interpretations or standards;

·                  additions or departures of key management personnel;

·                  general market conditions, including fluctuations in commodity prices;

·                  changes in tax law or interpretations thereof;

·                  domestic and international economic, legal and regulatory factors unrelated to our performance; and

·                  the realization of any risks described under “Risk Factors.”

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common shares. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs to us, divert management’s attention and resources and harm our business, operating results and financial condition.

The majority of our common shares will be held by NIL or one of its wholly owned subsidiaries, and NIL will initially be able to control most shareholder votes.

Holders of our common shares will vote together as a single class on all matters presented to our shareholders for their vote or approval, except as otherwise required by applicable law or our memorandum of association or amended bye-laws. Immediately following the Closing, NIL or one of its wholly owned subsidiaries will own approximately 53% of our issued and outstanding common shares. Although NIL will be subject to certain standstill restrictions during the period that will begin on the closing date of the Merger and end upon the earlier to occur of the five-year anniversary of the effective date of the Merger and the date that NIL beneficially owns less than 15% of our issued and outstanding common shares (the “Standstill Period”), NIL will have the right to vote its majority shares in its discretion. Further, NIL has the right to ensure that three individuals who are selected by NIL will serve on our board of directors during the Standstill Period, and such individuals may remain on our board of directors following the end of the Standstill Period. In addition, until the later to occur of the termination of the Standstill Period and the two-year anniversary of the closing date of the Merger, NIL will have preemptive rights to purchase its pro rata portion of any common shares or other equity securities issued by us. Our amended bye-laws will provide that, until the fifth anniversary of the closing date of the Merger, certain major transactions, including any sale of Red Lion or any amendment to our memorandum of association or amended bye-laws, require the approval of the holders of at least two-thirds of our issued and outstanding common shares, and in certain circumstances the approval of a specified number of the members of our board of directors. As a result, NIL may be able to prevent the approval of such matters, and therefore may be able to prevent a change in control of us

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that could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of Red Lion. The existence of significant shareholders may also have the effect of deterring a would-be acquirer of Red Lion from proposing a transaction or delaying or preventing changes in control or changes in management. In addition, NIL may be able to influence our management because of its substantial shareholding.

Under the provisions of our amended bye-laws to be in effect upon consummation of the Merger, until the end of the Standstill Period, the rights of our shareholders to change the amended bye-laws relating to the election of directors and the removal of directors are subject to restrictions.

In any of these matters, the interests of NIL may differ or conflict with the interests of our other shareholders. Moreover, this concentration of share ownership may also adversely affect the trading price of our common shares to the extent investors perceive a disadvantage in owning shares of a company with a controlling shareholder.

Under the rules of the NYSE, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the requirements that a majority of its board of directors consist of independent directors, that its board of directors’ compensation committee be comprised solely of independent directors, and that director nominees be selected or recommended to the board of directors for selection by independent directors. Although we will qualify as a “controlled company” upon completion of the Merger under the NYSE rules, we do not expect to rely on this exemption and intend to fully comply with all corporate governance requirements under the NYSE rules. However, if we were to use some or all of these exemptions, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE rules regarding corporate governance.

If NIL sells a controlling interest in us to a third party in a private transaction, our shareholders may not realize any change-of-control premium on our common shares and we may become subject to the control of a presently unknown third party.

Immediately following the Closing, NIL or one of its wholly owned subsidiaries will own approximately 53% of our issued and outstanding common shares. NIL has agreed not to transfer our common shares for 180 days following the Closing and thereafter, during the Standstill Period, to transfer our common shares only to any person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) who has not filed a Schedule 13D with regard to us and is not required to file a Schedule 13D after giving effect to such transfer. However, following the end of the Standstill Period, should it continue to own a significant equity interest in us and choose to do so, NIL may sell some or all of its Red Lion common shares in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of us. The ability of NIL to privately sell its Red Lion common shares after the end of the Standstill Period, with no requirement for a concurrent offer to be made to acquire all of the other Red Lion common shares, could prevent our shareholders from realizing any change-of-control premium on our common shares that may otherwise accrue to NIL upon its private sale of our common shares. Additionally, if NIL privately sells its significant equity interest in us, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with our other shareholders.

Future sales of our common shares in the public market could reduce its share price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.

We may issue additional common shares or convertible securities in future public offerings. We cannot predict the size of future issuances of our common shares or securities convertible into common shares or the effect, if any, that future issuances and sales of our common shares will have on the market price of its common shares. Sales of substantial amounts of our common shares (including shares issued in connection with an acquisition or employee benefit plan), or the perception that such sales could occur, may adversely affect prevailing market prices of our common shares.

Additionally, NIL or one of its wholly owned subsidiaries will own approximately 53% of our issued and outstanding common shares immediately following the Closing. While NIL has agreed not to transfer our common shares for 180 days following the Closing, subject to compliance with the restrictions on transfers by Nabors during the Standstill Period and with the Securities Act or exemptions therefrom, Nabors may

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sell such shares at any time after the expiration of the 180-day period. Any sale by Nabors of our common shares, any announcement by Nabors that it has decided to sell our common shares following the Standstill Period, or the perception by the investment community that Nabors has sold or decided to sell our common shares, could have an adverse impact on the price of our common shares.

Our memorandum of association and amended bye-laws, as well as Bermuda law, will contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common shares.

Our amended bye-laws authorize our board of directors to issue preferred shares without shareholder approval. If our board of directors elects to issue preferred shares, it could be more difficult for a third party to acquire us. In addition, some provisions of our amended bye-laws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders, including provisions which:

·                  limit the removal and replacement of directors, including provisions relating to the classified board of directors;

·                  limit the ability of shareholders to increase the number of directors;

·                  establish preemptive rights; and

·                  establish advance notice and certain information requirements for nominations for election to the Red Lion board of directors.

We may issue preferred shares on terms that could adversely affect the voting power or value of its common shares.

Our amended bye-laws authorize us to issue, without the approval of our shareholders, one or more classes or series of preferred shares having such designations, preferences, limitations and relative rights, including preferences over our common shares respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred shares could adversely affect the voting power or value of our common shares. For example, we might grant holders of preferred shares the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred shares could affect the residual value of our common shares.

Item 1B.                        Unresolved Staff Comments

None.

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Item 2.                                 Properties

Our principal executive offices are located in Hamilton, Bermuda. We lease local office space and own or lease numerous rig facilities, storage facilities, truck facilities and sales and administrative offices throughout the geographic regions in which we operates. In connection with our fluid management services, we operate a number of owned and leased saltwater disposal facilities and brine and freshwater stations. Our leased properties are subject to various lease terms and expirations.

We believe all properties that we currently occupy are suitable for their intended uses. We believe that our current facilities are sufficient to conduct our operations. We do not believe that any single property is material to our operations and, if necessary, we could readily obtain a replacement facility. However, we continue to evaluate the purchase or lease of additional properties or the consolidation of our properties, as our business requires.

Item 3.                                 Legal Proceedings

Following the June 25, 2014 announcement that C&J, NIL, and we had entered into the Merger Agreement, a purported stockholder of C&J filed a lawsuit against C&J, the C&J board of directors, NIL and us challenging the Merger. The lawsuit is styled City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, et al. v. C&J Energy Services, Inc., et al.; C.A. No. 9980-VCN, in the Court of Chancery, filed on July 30, 2014. The plaintiff generally alleges that the C&J board of directors breached fiduciary duties of loyalty, due care, good faith, candor and independence owed to C&J stockholders by allegedly approving the Merger Agreement at an unfair price and through an unfair process. The plaintiff specifically alleges that the C&J board directors, or certain of them (i) failed to fully inform themselves of the market value of C&J, maximize its value and obtain the best price reasonably available for C&J, (ii) acted in bad faith and for improper motives, (iii) erected barriers to discourage other strategic alternatives and (iv) put their personal interests ahead of the interests of C&J stockholders. The Lawsuit further alleges that C&J, NIL and we aided and abetted the alleged breaches of fiduciary duties by the C&J board of directors.

The plaintiff seeks, among other relief, to enjoin the Merger and the stockholder meeting, rescission in the event the Merger is consummated and an award of costs and disbursements, including reasonable attorneys’ and experts’ fees. On November 10, 2014, the plaintiff filed a motion for a preliminary injunction. On November 24, 2014, the Court of Chancery entered a bench ruling, followed by a written order on November 25, 2014, that (i) ordered certain members of the C&J board of directors to solicit for a period of 30 days alternative proposals to purchase C&J (or a controlling stake in C&J) that are superior to the Merger, and (ii) preliminarily enjoined C&J from holding its stockholder meeting until it had complied with the foregoing. The order provided that the solicitation of proposals consistent with the order, and any subsequent negotiations of any alternative proposal that emerges, would not constitute a breach of the Merger Agreement in any respect.

On December 19, 2014, the Delaware Supreme Court overturned the Court of Chancery’s judgment and vacated the order.

We cannot predict the outcome of this lawsuit or any others that might be filed in the future in connection with the Merger, nor can we predict the amount of time and expense that will be required to resolve such litigation. One of the conditions to the completion of the Merger is that no temporary restraining order, preliminary or permanent injunction or other order or judgment or any governmental authority of competent jurisdiction enjoining or prohibiting the consummation of the Merger be in effect and completion of the Merger is not illegal under any applicable law, rule, regulation or order of any governmental authority of competent jurisdiction, which condition, if not satisfied, could delay or jeopardize the consummation of the Merger. An adverse judgment granting permanent injunctive relief could indefinitely enjoin the Merger, and an adverse judgment for rescission or monetary damages could have a material adverse effect on us following the Merger.

Item 4.                                 Mine Safety Disclosures

Not applicable.

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PART II

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

We are a wholly owned subsidiary of NIL.  There is no established public trading market for our common shares and our common shares are privately-held and not listed for quotation on any exchange or over-the-counter market.  The number of our common shares, $0.01 par value, outstanding at March 19, 2015 was 1,200,000, all of which are held by Nabors.

Bermuda has exchange controls which apply to residents in respect of the Bermuda dollar. Red Lion has been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows it to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on its ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of its common shares.

There is no reciprocal tax treaty between Bermuda and the United States regarding withholding taxes. Under existing Bermuda law there is no Bermuda income or withholding tax on dividends paid by Nabors to its shareholders. Furthermore, no Bermuda tax is levied on the sale or transfer (including by gift and/or on the death of the shareholder) of Nabors common shares (other than by shareholders resident in Bermuda).

We and our subsidiaries may incur up to $1.625 billion of indebtedness in connection with the Pending C&J Transaction and related financing transactions. The agreements governing such indebtedness will contain financial and other restrictive covenants that may limit our ability to buy back our common shares or pay cash dividends.  See “Risk Factors—The substantial indebtedness that will be incurred by us and our subsidiaries in connection with the Pending C&J Transaction could adversely affect our operations and financial condition after the Pending C&J Transaction” above.

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Item 6.                                 Selected Financial Data

Omitted in accordance with General Instruction I of Form 10-K.

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

Omitted in accordance with General Instruction I of Form 10-K. In lieu thereof, a narrative analysis is presented.

Management’s Narrative Analysis of the Results of Operations

The following discussion and analysis of our financial condition and results of operations is intended to assist you in understanding our business and results of operations together with our present financial condition.  This section should be read in conjunction with the audited consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including, without limitation, those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A “Risk Factors” of this Form 10-K.

Overview

We are currently a wholly owned subsidiary of NIL.  We were formed as a Bermuda exempted company on August 6, 2008.  Prior to October 1, 2014, we held substantially all of the operating subsidiaries of NIL, including the subsidiaries that operate the C&P Business. Pursuant to and in accordance with the terms and conditions of the Separation Agreement, NIL separated the C&P Business from Nabors’ other businesses, and has caused us and our subsidiaries to retain the C&P Business, while the remaining businesses of Nabors, including the drilling and rig services businesses, were transferred from Red Lion and its subsidiaries to other NIL subsidiaries. The Separation occurred in October 2014, resulting in our divestment of the remaining businesses of Nabors. As such, this discussion and analysis reflects the drilling and rig services and other separated businesses as discontinued operations. Therefore, unless stated otherwise the tables and narrative discussions reflect the results of operations and expenses associated with the C&P Business only.

We are a leading integrated provider of technical pumping, down-hole surveying, fluid logistics and completion, production and rental tool services for major and independent oil and natural gas companies operating in the major oil and natural gas producing regions throughout North America. We have established a leadership position based on the breadth of our services offered, the quality of our equipment and personnel and our long-standing relationships with customers. Our assets and operations consist of the C&P Business, which comprise Nabors’ existing Completion and Production Services reporting segments.

Our business is comprised of our operations involved in the completion, life-of-well maintenance and plugging and abandonment of a well in the United States and Canada.  These services include stimulation, coiled-tubing, cementing, wireline, workover, well-servicing and fluids management.  Our business is organized into two operating segments:

·                  Completion Services. We provide a wide range of wellsite solutions to oil and natural gas companies, consisting primarily of technical pumping services, including hydraulic fracturing, a process sometimes used in the completion of oil and gas wells whereby water, sand and chemicals are injected under pressure into subsurface formations to stimulate gas and oil production, and down-hole surveying services.  The completion process may involve selectively perforating the well casing at the depth of discrete producing zones, stimulating and testing these zones and installing down-hole equipment. The completion process may take a few days to several weeks.

·                  Production Services. We operate a fleet of 543 land workover and well-servicing rigs as of December 31, 2014, which are utilized to perform well maintenance and workover services during the production phase of an oil or natural gas well.  Well maintenance services are generally performed on a

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call-out basis and can usually be completed within 48 hours.  The services include the repair and replacement of pumps, sucker rods, tubing and other mechanical apparatuses at the wellsite that are used to pump or lift hydrocarbons from producing wells.  We also utilize our well service rigs to perform plugging services for wells in which the oil and natural gas has been depleted or further production has become uneconomical.  Workover services can be utilized to remedy failures, modify well depth and formation penetration to capture hydrocarbons from alternative formations, clean out and recomplete a well when production has declined, repair leaks, or convert a depleted well to an injection well for secondary or enhanced recovery projects.  Workovers are typically carried out with a rig that includes standard drilling accessories such as rotary drilling equipment, pumps and tanks for drilling fluids, blowout preventers and other specialized equipment for servicing rigs.  We also provide equipment, including fluid service trucks, frac tanks and salt water disposal wells, to supply, store, remove and dispose of specialized fluids utilized in the completion and workover operations used in daily operations for producing wells.

Other production-related technical services include completion, production and rental tool services. Additionally, we provide fluid logistics services, including those related to the transportation, storage and disposal of fluids that are used in the drilling, development and production of hydrocarbons.

Pending Transaction to Combine with C&J Energy Services, Inc.

On June 25, 2014, we entered into the Merger Agreement, pursuant to which and subject to the terms thereof, Merger Sub will merge with and into C&J with C&J surviving as our wholly owned subsidiary.

In the Merger, each share of C&J common stock (other than shares owned by C&J or Merger Sub) will be converted into the right to receive one Red Lion common share. It is currently expected that, immediately following the Closing, former C&J stockholders will own approximately 47% of our issued and outstanding common shares and NIL or one of its wholly owned subsidiaries will own approximately 53% of our issued and outstanding common shares. At Closing, our authorized share capital will consist of 750 million common shares and 50 million preferred shares.  When the Merger is completed, we will be renamed C&J Energy Services Ltd., and our common shares will be listed on the NYSE under the ticker symbol “CJES.”

Certain of our subsidiaries have issued the Notes to other subsidiaries of NIL in connection with the Separation. Pursuant to the Separation Agreement, on March 20, 2015, Nabors contributed a portion of the Notes to us and our subsidiaries repaid a portion of the Notes, such that the remaining balance owed under the Notes following such contribution and repayment was approximately $688 million. The portion of the Notes not previously contributed to us by Nabors or paid by our subsidiaries will be repaid in connection with the Closing, resulting in a cash payment to NIL or one of its subsidiaries of approximately $688 million. C&J has obtained commitments from certain financial institutions to provide debt financing to us and/or certain of our subsidiaries in an amount sufficient to fund the repayment of the Notes at Closing.

The Closing is subject to customary closing conditions, including, among others, (1) the consummation of the Separation in accordance with the Separation Agreement (which was completed in October 2014), (2) the expiration or termination of any applicable waiting period under HSR (which termination occurred on July 28, 2014), (3) approval by C&J’s stockholders (which was satisfied on March 20, 2015), (4) the Form S-4 used to register our common shares to be issued in the Merger being declared effective by the SEC (which effectiveness was granted on February 13, 2015), (5) the approval for listing on the NYSE of our common shares to be issued in the Merger (which application for listing was approved on March 19, 2015), (6) subject to specified materiality standards, the accuracy of the representations and warranties of, and the performance of all covenants in the Merger Agreement, Separation Agreement and related closing documents by, the parties thereto, (7) the absence of a material adverse effect as defined in the Merger Agreement with respect to each of C&J and us, (8) the availability of the proceeds of the debt financing to effect the repayment of the Notes, (9) the receipt of consents, approvals and other deliverables with respect to certain agreements of C&J (which have been obtained), (10) the receipt by NIL of an opinion from its counsel to the effect that certain distributions made pursuant to the Separation Agreement should qualify as distributions to which  Section 355 of the Code applies, subject to the application of Section 355(d) of the Code, (11) the receipt by C&J of an opinion from its counsel to the effect that it is more likely than not that (i) the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code and (ii) we qualify as a corporation within the meaning of Section 367(a) of the Code and (12) the absence of temporary restraining order,

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preliminary or permanent injunction or other order or judgment or any governmental authority of competent jurisdiction enjoining or prohibiting the consummation of the Merger.

We currently expect the Closing to occur in March 2015, subject to the satisfaction or waiver of the above closing conditions. There can be no assurance as to whether or when the Closing will occur.

Outlook

The demand for our services is a function of the level of spending by oil and gas companies for exploration, development and production activities. The primary driver of customer spending is their cash flow and earnings which are largely driven by oil and natural gas prices. The oil and natural gas markets have traditionally been volatile and tend to be highly sensitive to supply and demand cycles.

The following table sets forth the 12-month daily average of oil and natural gas prices according to Bloomberg for the last three fiscal years:

During the latter part of 2014, the markets experienced a dramatic decline in oil prices which have remained depressed into 2015 due, at least in part, to an increase in global crude supply with stagnant demand. While the average oil price for 2014 appears to have remained in line with that of 2013, a significant drop was experienced in the fourth quarter of 2014 reaching a low for 2014 of $53.27 per barrel in December. Oil prices remain depressed, averaging $47.61 per barrel during the month of January 2015. Natural gas prices, which averaged $4.35 per mcf during 2014, have also experienced a recent decline in early 2015, although less severe than oil prices. Natural gas prices averaged $2.97 per mcf during the month of January 2015, down 31% from the proceeding 12-month daily average and still significantly below the 2008 average price of $8.89 for an extended period of time.

As a result of the reduced price of oil, we have experienced a decline in the demand for completion services as customers have begun reducing or curtailing their capital spending and drilling activities. We have also experienced downward pricing pressure for our services.

While the recent decline in industry conditions, as a whole, did not materially impact our operating results for fiscal year 2014, we anticipate operating results for 2015 to decrease from levels realized in 2014 given our current expectation of the continuation of lower commodity prices and the related impact on completion and well-servicing activity.

Financial Results

During 2014, our income (loss) from continuing operations was adversely affected by approximately $363.6 million in impairments and other charges. The impairments were comprised of goodwill and intangible assets attributable to our Completion Services operating segment from the acquisition of Superior Well Services, Inc. (“Superior”) in 2010.

Operating revenues and earnings from unconsolidated affiliates in 2014 totaled $2.3 billion, representing an increase of approximately $176 million, or 8% over 2013. Adjusted income derived from operating activities and net income (loss) from continuing operations for 2014 totaled $78.7 million and a loss of $339.3 million, respectively, representing decreases of 53% and 388% when compared to 2013.

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During 2013, our income (loss) from continuing operations was negatively impacted by a $20.0 million impairment to our fleet of coil-tubing units in our Production Services operating segment. Intense competition and oversupply of equipment has led to lower utilization and margins for this product line.

Operating revenues and earnings from unconsolidated affiliates in 2013 totaled $2.1 billion, representing a decrease of $378.9 million, or 15%, over 2012. Adjusted income derived from operating activities and net income (loss) from continuing operations for 2013 totaled $167.7 million and $68.6 million, respectively, representing decreases of 45% and 26% when compared to 2012.

The following tables set forth certain information with respect to our reportable segments and rig activity:

(1)          All periods exclude the operating activities of our drilling and rig services, wholly owned oil and gas businesses, our previously held equity interests in oil and gas joint ventures in Canada and Colombia, aircraft logistics operations and construction services as they are included in discontinued operations.

(2)          Includes earnings, net from unconsolidated affiliates, accounted for using the equity method, of $0.5 million, $0.4 million and $0.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.

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(3)          Adjusted income (loss) derived from operating activities is computed by subtracting the sum of direct costs, general and administrative expenses, depreciation and amortization from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. These amounts should not be used as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, because it believes that these financial measures accurately reflect our ongoing profitability. A reconciliation of this non-GAAP measure to income from continuing operations before income taxes, which is a GAAP measure, is provided in the above table.

(4)          Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.

Segment Results of Operations

Our business is comprised of two operating segments: Completion Services and Production Services. The following table presents our revenues and adjusted income by operating segment, and rig hours by geographic region, for the years ended December 31, 2014, 2013 and 2012.

Completion Services

Operating revenues increased by $150.6 million, or 14%, from 2013 to 2014 due to a significant increase in activity levels, in part due to a move toward 24 hour operations. However, adjusted income decreased from 2013 to 2014 due to lower prices for our services primarily caused by the expiration of several multi-year take-or-pay contracts at the end of 2013 and downward pricing pressure across all regions. Severe weather in our northern operating areas in the first half of the year also negatively affected operating results.

Operating revenues and adjusted income decreased by $389.6 million and $129.6 million, respectively, representing decreases of 27% and 66% from 2012 to 2013 primarily due to downward pricing pressure across all regions due to continued overcapacity in the pressure pumping market and reduced customer activity in part caused by severe weather in our northern operating areas. During 2013, we suspended some of our stimulation operations in Canada and some of our coil-tubing operations in the United States. We relocated the Canadian assets to the United States.

Production Services

Operating revenues increased by $25.8 million, or 3%, from 2013 to 2014 primarily due to incremental revenue associated with a full year’s contribution from our acquisition of KVS Transportation, Inc. and D&D Equipment Investments, LLC (collectively, “KVS”) during the fourth quarter of 2013, partially offset by reduced customer activity.  Adjusted income decreased from 2013 to 2014 due to reduced activity levels for workover rigs in California caused by a reduction in customer activity and in West Texas due to rain and wet conditions in the third quarter of the year.

Operating revenues increased slightly from 2012 to 2013 due to the increase in revenue associated with our acquisition of KVS.  Adjusted income was essentially flat to slightly down from 2012 to 2013 due to higher depreciation and other costs associated with our rig and truck fleet, as a result of capital invested over the past few years to increase those fleets. Additionally, our U.S. markets have had higher utilization and increases in rig and truck fleets as well as frac tank counts, despite continued pricing challenges.

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Other Financial Information

(1)         Number is so large that it is not meaningful.

General and administrative expenses

General and administrative expenses decreased slightly from 2013 to 2014, primarily as a result of continued cost-reduction efforts. As a percentage of operating revenues, general and administrative expenses are comparable for each period relative to fluctuations in activity levels

General and administrative expenses decreased from 2012 to 2013 primarily as a result of lower activities and cost-reduction efforts. As a percentage of operating revenues, general and administrative expenses decreased slightly. As a percentage of operating revenues, general and administrative expenses are comparable for each period relative to fluctuations in activity levels.

Depreciation and amortization

Depreciation and amortization expense increased from 2013 to 2014 as a result of the incremental depreciation expense from rig upgrades and other capital expenditures.

Depreciation and amortization expense decreased from 2012 to 2013 as a result of the retirement of rigs during 2012.

Management fee

We have historically been managed in the normal course of business by Nabors. Accordingly, certain shared costs have been allocated to us and are reflected as expenses in these financial statements. Management considers the allocation methodologies used to be reasonable; however, the expenses reflected in our consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we had operated as a separate stand-alone entity. In addition, the expenses reflected in the financial statements may not be indicative of expenses that will be incurred in the future by C&J or the combined entity after the Merger.

Allocated costs included management fees for accounting, treasury, human resources, IT and tax and legal services provided by Nabors Corporate Services, Inc. (“NCS”). These fees were determined based upon our headcount, revenues and assets relative to other Nabors subsidiaries and the Nabors corporate cost structure. During the years ended December 31, 2014, 2013 and 2012, we recognized management fees of $33.0 million, $27.2 million and $22.6 million, respectively, for these services.

Gains (losses) on sales and disposals of long-lived assets and other income (expense), net

The amount of losses on sales and disposals of long-lived assets and other expense, net for 2014 was $2.4 million, which was primarily comprised of increases to litigation reserves of $3.5 million.

The amount of losses on sales and disposals of long-lived assets and other expense, net for 2013 was $8.6 million, which was primarily comprised of net losses on sales and disposals of long-lived assets of approximately $3.9 million and increases to litigation reserves of $3.6 million.

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The amount of losses on sales and disposals of long-lived assets and other expense, net for 2012 was $0.5 million was primarily comprised of net losses on sales and disposals of long-lived assets.

Impairments and Other Charges

Goodwill impairments

During 2014, we impaired the entire goodwill balance of $335.0 million in our Completion Services operating segment related to our 2010 acquisition of Superior. This impairment was deemed necessary due to the recent decline in oil prices and the lack of certainty regarding eventual recovery in the value of these operations.

There were no goodwill impairments in 2013 and 2012.

Intangible asset impairments

During 2014, we recognized an impairment of $23.5 million primarily related to various customer relationships within our Completion Services operating segment.

During 2012, we recorded an impairment of the Superior trade name totaling $75.0 million in our Completion Services operating segment. The Superior trade name was initially classified as a ten-year intangible asset at the date of acquisition in September 2010. The impairment was a result of the decision to cease using the Superior trade name to reduce confusion in the marketplace and enhance the Nabors brand.

There were no intangible asset impairments in 2013.

Transaction costs

During 2014, we incurred $5.1 million in costs related to preparing Red Lion and the C&P Business for the Merger with C&J.

Impairments of long-lived assets

During 2013, we recognized an impairment of $20.0 million to our fleet of coil-tubing units in our Production Services operating segment. Intense competition and oversupply of equipment led to lower utilization and margins for this product line. When these factors were considered as part of our annual impairment tests on long-lived assets, the sum of the estimated future cash flows, on an undiscounted basis, was less than the carrying amount of these assets. The estimated fair values of these assets were calculated using discounted cash flow models involving assumptions based on our utilization of the assets, revenues and direct costs, capital expenditures and working capital requirements. We believe the fair value estimated for purposes of these tests represents a Level 3 fair value measurement. In 2013, we suspended our coil-tubing operations in the United States. A prolonged period of slow economic recovery could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges for other reporting units due to the potential impact on our estimate of our future operating results.

There were no long-lived asset impairments in 2014 or 2012.

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Provision for retirement of long-lived assets

During 2012, we recorded a provision for the retirement of assets of $55.6 million in our Production Services operating segment, representing the carrying value less any salvage value relating to non-core assets that had become inoperable or functionally obsolete.

There were no provisions for retirement of long-lived assets in 2014 or 2013.

Income tax rate

The change in our effective tax rate from 2013 to 2014 is primarily attributable to the tax effect related to impairments. The change in our effective tax rate from 2012 to 2013 resulted mainly from the geographic mix of pre-tax earnings and settlements of tax disputes.

Other Matters

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) relating to the reporting of discontinued operations and the disclosures related to disposals of components of an entity. The new standard addresses the question around whether the disposal represents a strategic shift, if the operations and cash flows can be clearly distinguished and continuing involvement will no longer preclude a disposal from being presented as discontinued operations. These changes are effective for interim and annual periods that begin after December 15, 2014. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In May 2014, the FASB issued an ASU relating to the revenue recognition from contracts with customers that creates a common revenue standard for GAAP and IFRS. The new standard will require recognition of revenue when promised goods are transferred or services to customers are performed in an amount that reflects the consideration, including costs incurred, to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. These changes are effective for interim and annual periods that begin after December 15, 2016. Early application is not permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In June 2014, the FASB issued an ASU relating to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The new standard will require the reporting entity to apply existing guidance in Topic 718 relating to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. These changes are effective for interim and annual periods that begin after December 15, 2015. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In February 2015, the FASB issued an ASU relating to consolidation, which eliminates the presumption that a general partner should consolidate a limited partnership. It also modifies the evaluation of whether limited partnerships are variable interest entities or voting interest entities and adds requirements that limited partnerships must meet to qualify as voting interest entities. This guidance is effective for public companies for fiscal years beginning after December 15, 2015. We are currently evaluating the impact this will have on our consolidated financial statements.

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Critical Accounting Estimates

The preparation of our financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. We analyze our estimates based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. However, actual results could differ from our estimates. The following is a discussion of our critical accounting estimates. Management considers an accounting estimate to be critical if:

·                  it requires assumptions to be made that were uncertain at the time the estimate was made; and

·                  changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated financial position or results of operations.

Financial Instruments

Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information available. Accordingly, we employ valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances utilizing a fair-value hierarchy based on the observability of those inputs. Under the fair-value hierarchy:

·                  Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market;

·                  Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and

·                  Level 3 measurements include those that are unobservable and of a highly subjective nature.

Depreciation of Property, Plant and Equipment

Depreciation on our buildings and well-servicing rigs is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings—10 to 30 years; well-servicing rigs—three to 15 years; oilfield hauling and mobile equipment and other machinery and equipment—three to 10 years).

These depreciation periods and the salvage values of our property, plant and equipment were determined through an analysis of the useful lives of our assets and based on our experience with the salvage values of these assets. Periodically, we review our depreciation periods and salvage values for reasonableness given current conditions. Depreciation of property, plant and equipment is therefore based upon estimates of the useful lives and salvage value of those assets. Estimation of these items requires significant management judgment. Accordingly, management believes that accounting estimates related to depreciation expense recorded on property, plant and equipment are critical.

There have been no factors related to the performance of our portfolio of assets, changes in technology or other factors indicating that these estimates do not continue to be appropriate. Accordingly, for each of the years ended December 31, 2014, 2013 and 2012, no significant changes have been made to the depreciation rates applied to property, plant and equipment, the underlying assumptions related to estimates of depreciation, or the methodology applied. However, certain events could occur that would materially affect our estimates and

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assumptions related to depreciation. Unforeseen changes in operations or technology could substantially alter management’s assumptions regarding our ability to realize the return on its investment in operating assets and therefore affect the useful lives and salvage values of our assets.

Impairment of Long-Lived Assets

As discussed above, the drilling, workover, well-servicing and pressure pumping industry is very capital intensive. We review our assets for impairment annually or when events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment loss is recorded in the period in which it is determined that the sum of estimated future cash flows, on an undiscounted basis, is less than the carrying amount of the long-lived asset. Impairment charges are recorded using discounted cash flows, which requires the estimation of dayrates and utilization, and such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. Significant and unanticipated changes to the assumptions could result in future impairments. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment, and an impairment of these assets could result in a material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

Assumptions made in the determination of future cash flows are made with the involvement of management personnel at the operational level where the most specific knowledge of market conditions and other operating factors exists. For each of the years 2014, 2013 and 2012, no significant changes have been made to the methodology utilized to determine future cash flows.

For an asset classified as held for sale, we consider the asset impaired when its carrying amount exceeds fair value less its cost to sell. Fair value is determined in the same manner as an impaired long-lived asset that is held and used.

Given the nature of the evaluation of future cash flows and the application to specific assets and specific times, it is not possible to reasonably quantify the impact of changes in these assumptions. A significantly prolonged period of lower oil and natural gas prices could adversely affect the demand for and prices of our services, which could result in future impairment charges.

Impairment of Goodwill and Intangible Assets.

We review goodwill and intangible assets with indefinite lives for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such goodwill and intangible assets exceed their fair value. We perform our impairment tests for goodwill for all of our reporting units within our operating segments. The impairment test involves comparing the estimated fair value of the reporting unit to its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. This second step compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess.

The fair values calculated in these impairment tests are determined using discounted cash flow models involving assumptions based on our utilization of rigs or other oil and gas service equipment, revenues and earnings from affiliates, as well as direct costs, general and administrative costs, depreciation, applicable income taxes, capital expenditures and working capital requirements. Our discounted cash flow projections for each reporting unit were based on financial forecasts. The future cash flows were discounted to present value using discount rates that are determined to be appropriate for each reporting unit. Terminal values for each reporting unit were calculated using a Gordon Growth methodology with a long-term growth rate of 3%. We believe the fair value estimated for purposes of these tests represent a Level 3 fair value measurement.

A significantly prolonged period of lower oil and natural gas prices or changes in laws and regulations could continue to adversely affect the demand for and prices of our services, which could result in future goodwill impairment charges for other reporting units due to the potential impact on our estimate of our future operating results.

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Income Taxes

We are a Bermuda exempted company and therefore are not subject to income taxes in Bermuda. Income taxes have been provided based on the tax laws and rates in effect in the countries where we operate and earn income. The income taxes in these jurisdictions vary substantially. Our worldwide effective tax rate for financial statement purposes will continue to fluctuate from year to year due to the change in the geographic mix of pre-tax earnings.

We recognize increases to our tax reserves for uncertain tax positions along with interest and penalties as an increase to other long-term liabilities.

For U.S. and other jurisdictional income tax purposes, we have net operating loss carryforwards that we are required to assess quarterly for potential valuation allowances. We consider the sufficiency of existing temporary differences and expected future earnings levels in determining the amount, if any, of valuation allowance required against such carryforwards and against deferred tax assets.

Fair Value of Assets Acquired and Liabilities Assumed

We have completed a number of acquisitions in recent years. In conjunction with our accounting for these acquisitions, it was necessary for us to estimate the values of the assets acquired and liabilities assumed in the various business combinations using various assumptions. These estimates may be affected by such factors as changing market conditions, technological advances in the industry or changes in regulations governing the industry. The most significant assumptions, and the ones requiring the most judgment, involve the estimated fair values of property, plant and equipment, and the resulting amount of goodwill, if any. Unforeseen changes in operations or technology could substantially alter management’s assumptions and could result in lower estimates of values of acquired assets or of future cash flows. This could result in impairment charges being recorded in our consolidated statements of income. As the determination of the fair value of assets acquired and liabilities assumed is subject to significant management judgment and a change in purchase price allocations could result in a material difference in amounts recorded in our consolidated financial statements, management believes that accounting estimates related to the valuation of assets acquired and liabilities assumed are critical.

The determination of the fair value of assets and liabilities is based on the market for the assets and the settlement value of the liabilities. These estimates are made by management based on our experience with similar assets and liabilities. During each of the years December 31, 2014, 2013 and 2012, no significant changes were made to the methodology utilized to value assets acquired or liabilities assumed. Our estimates of the fair values of assets acquired and liabilities assumed have proved to be reliable in the past.

Given the nature of the evaluation of the fair value of assets acquired and liabilities assumed and the application to specific assets and liabilities, it is not possible to reasonably quantify the impact of changes in these assumptions.

Item 7A.                        Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risk to which we are exposed is commodity price risk, which is the risk related to increases in the prices of fuel, materials and supplies consumed in performing our services. We are also exposed to risks related to foreign currency and customer credit.

Commodity Price Risk. Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our stimulation services such as proppants, chemicals, guar, coiled tubing and fluid supplies. Our fuel costs consist primarily of diesel fuel used by our various trucks and other motorized equipment. The prices for fuel and the raw materials (particularly guar and proppants) in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Historically, we have generally been able to pass along price increases to our customers, however, we may be unable to do so in the future. We do not engage in commodity price hedging activities.

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Foreign Currency Risk.  We conduct a portion of our business in Canadian dollars through our production services business in Canada. The exchange rate between Canadian dollars and U.S. dollars has fluctuated during the last several years.  If the value of the Canadian dollar against the U.S. dollar weakens, revenues and earnings of our Canadian operations will be reduced and the value of our Canadian net assets will decline when they are translated to U.S. dollars.  This currency risk is not material to our results of operations or financial condition.

Customer Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts.

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Item 8.           Financial Statements and Supplementary Data

Index to
Consolidated Financial Statements

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